TaxTMI 
TaxTMI 
2025 (8) TMI 81
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....1 Negotiable Instruments Act (NI Act). 2. Briefly stated, the Complainant/Kotak Mahindra Bank Ltd. has its registered office at BKC, Bandra, Mumbai. Mr. Pranav Kumar, has been authorized, vide letter dated 24.08.2016, by the Board of Directors of the Bank to sign, verify and file on behalf of the Complainant. 3. According to the Complainant, Accused No. 1 M/s Ballarpur Industries Ltd through its Directors No. 4 to 12 and its authorised signatories Accused no. 2/Mr. Mahajan Ram Rana and Accused no. 3/Mr. Nakul Khanna, approached the Complainant requesting for funding facilities and agreed to abide by the terms and conditions for all such facilities. After a series of discussions, the Complainant acceded to the request of the Accused and agreed to sanction Financial Facilities in the form of WCDL and other related facilities. 4. Loan Agreement was signed and executed by Accused No. 1 in respect of the said Facilities confirming the terms and conditions mentioned therein. All the accused persons also executed various other Loan documents. Further, it is averred that all the Members of the Board of Accused No. 1 were fully aware of and were kept abreast of all such facilities,....
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.... Accused No. 1/M/s Ballarpur Industries Ltd, Accused no. 2/ Mr. Mahajan Ram Rana, Accused no. 3/ Mr. Nakul Khanna, Accused no. 5/Mr Sanjay Mohan Labroo, Accused no. 6/Mr. Rajeev Ranjan Vederah, Accused no. 7/Mr. Gautam Thapar, Accused no. 8/Mr. Bhuthalingam Hariharan, Accused no. 10/Mr. Amarjit Singh Dulat, Accused no. 11/Mr. Amaarendra Pratap Singh, and Accused no. 12/Mr. Bhaskaran Nayar Venugopal, vide Order dated 09.08.2017. 14. In Crl. M.C. 4373/2018, the Petitioner no. 1/Mr. Amarjit Singh Dulat (Accused no. 10), Petitioner 2/Mr. Sanjay Mohan Labroo (Accused No. 5) & Petitioner no. 3/Mr. Amaarendra Pratap Singh (Accused no. 11) have claimed that they are independent Directors in the Company. 15. Petitioner No. 4/Mr. Rajeev Ranjan Vederah (Accused no. 6) & Petitioner no. 5/Mr. Gautam Thapar (Accused no. 7) have asserted to be non-Executive directors. 16. Further, Petitioner no. 6/Mr. Bhaskaran Nayar Venugopal (Accused no. 12), was LIC's Nominee Director who ceased to be Director w.e.f. 03.04.2018. 17. The Petitioners, aggrieved by the filing of the Complaint and the summons issued, have sought to challenge the summoning Order on the ground that the Ld. MM failed to a....
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.... as accused only because he was one of the Directors of BILT and for no other reason. 23. Further, despite the fact that all the Petitioners/Accused are residing outside the territorial jurisdiction of the Ld. MM., the Impugned Order was passed without following the procedure established under Section 202 Cr.P.C. 24. The Respondent/Kotak Mahindra Bank Limited in its Reply has submitted that at all relevant times from granting of financial facilities to disbursement to execution of various loan documents till the loan account of Company became irregular, it was always represented to the Bank that all the persons as mentioned herein above along with Petitioners herein, are the persons in charge of and responsible for conducting the day-to-day affairs, management, activities and functioning of the Company. 25. The Bank sanctioned Financial Facilities from time to time amounting to Rs. 157.36 Crores and the Bank also issued a Sanction Letter dated 11.02.2016 setting the terms and conditions on which the said Facilities were granted, extended and accepted by signing and acknowledging on the copy of the same. Loan Agreement was signed and executed by the Company in respect of th....
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....of Directors and the position regarding independent and nominee Directors. and the "Listing Agreement" prescribed by Securities and Exchange Board of India as under:- "A. Classification under the Companies Act Categories of Directors The Companies Act refers to the following two specific categories of Directors: 1. Managing Directors; and 2. Whole-time Directors. A Managing Director is a Director who has substantial powers of management of the affairs of the company subject to the superintendence, control and direction of the Board in question. A Whole-time Director includes a Director who is in the whole-time employment of the company, devotes his whole-time of working hours to the company in question and has a significant personal interest in the company as his source of income. Every public company and private company, which is a subsidiary of a public company, having a share capital of more than Five Crore rupees (Rs. 5,00,00,000/-) must have a Managing or Whole-time Director or a Manager. Further classification of Directors based on the circumstances surrounding their appointment, the Companies Act recognizes the following ....
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....r of the company. Such a de facto Director is liable as a Director under the Companies Act. 7. Rotational Directors: At least two-thirds of the Directors of a public company or of a private company subsidiary of a public company have to retire by rotation and the term rotational Director refers to such Directors who have to retire (and may, subject to the Articles, be eligible for re-appointment) at the end of his or her tenure. 8. Nominee Directors: They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement. The extent of a nominee Directors rights and the scope of supervision by the shareholders, is contained in the contract that enables such appointments, or (as appropriate) the relevant statutes applicable to such public financial institution or bank. However, nominee Directors must be particularly careful not to act only in the interests of their nominators but must act in the best interests of the company and its shareholders as a whole. The fixing of liabilities on nominee Directors in India does not turn on the circumstan....
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....the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of independent Directors. Independent Directors The Agreement defines an "Independent Director" as a non-executive Director of the company who" a. apart from receiving Directors remuneration, does not have material pecuniary relationships or transactions with the company, its promoters, its Directors, its senior management, or its holding company, its subsidiaries, and associates which may affect independence of the Director; b. is not related to promoters or persons occupying management positions at the board level or at one level below the board; c. has not been an executive of the company in the immediately preceding three (3) financial years; d. is not a partner or an executive or was not a partner or an executive during the preceding three (3) years, of any of the following: i. the statutory audit firm or the internal audit firm that is associated with the company, and ii....
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....ed that at all relevant times Accused No. 1 has represented that Accused No. 2 and 3 are the authorized signatories and accused No. 4 to 12 are directors and also the Authorized Signatories of M/s Ballarpur Industries Ltd., i.e. Accused No. 1. It is further stated that Accused No. 2 & 3 are the Signatories of the At-par Cheques. 4. That the Accused Nos.2 to 3 are the Authorized Signatories and Representatives and 4 to 12 are Directors & Authorized Signatories and Representatives were at all the relevant times, and presently are the persons in charge of and responsible for conducting the day-to-day affairs, management, activities functioning of Accused No. 1. That all the accused are jointly and / or severally responsible for the acts of omission and commission committed by Accused No. 1, as Directors and Authorized Signatories were actively involved in the entire transaction right from the inception i.e. from time of approaching complainant for sanctioning and availing various facilities and as also during the time that accused's loan account was irregular when several discussions and meetings were held between complainant and all the accused. .... 13....
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....tely preceding financial years or during the current financial year: Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed; (ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; (iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or (iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent or more of its gross turnover or total income singly or in combination w....
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....Petitioners, being an independent Directors, were in charge of day to day affairs of the Company as well as the conduct of its business, but nothing of this nature can be made out from the Complaint. 47. In view of Section 141 NI Act and Section 149 of Companies Act, 2013, Petitioners could have been held vicariously liable only if it was shown that they were in charge of and were responsible for the conduct of the business of the Company at the time of commission of Offence, and not otherwise. 48. They are therefore, entitled to be discharged. Non-Executive Directors: 49. Petitioner No. 4/Mr. Rajeev Ranjan Vederah (Accused no. 6) & Petitioner no. 5/Mr. Gautam Thapar (Accused no. 7) have asserted that they are Non-Executive Directors. Petitioner No. 4 has proved his designation by way of FORM DIR-12 wherein he is categorised as a "Professional Director" within the class of "Non-executive Directors". Petitioner no. 5/Mr. Gautam Thapar has proved his designation by way of FORM DIR-32 wherein he is categorised as a "Promoter Director" within the class of "Non-executive Directors" and "Chairman". 50. In the judgment of Apex Court in Pooja Ravinder Devidasani vs. State of Ma....
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....s and the scope of supervision by the shareholders, is contained in the contract that enables such appointments, or (as appropriate) the relevant statutes applicable to such public financial institution or bank. However, nominee Directors must be particularly careful not to act only in the interests of their nominators but must act in the best interests of the company and its shareholders as a whole. The fixing of liabilities on nominee Directors in India does not turn on the circumstances of their appointment or, indeed, who nominated them as Directors. Chapter 4 and Chapter 5 that follow set out certain duties and liabilities that apply to, or can be affixed on, Directors in general. Whether nominee Directors are required by law to discharge such duties or bear such liabilities will depend on the application of the legal provisions in question, the fiduciary duties involved and whether such nominee Director is to be regarded as being in control or in charge of the company and its activities. This determination ultimately turns on the specific facts and circumstances involved in each case." 57. From the above description, it becomes clear that the role of the ....
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....le simply because they are holding that position. It needs to be shown that the Director being made liable should be in charge of and responsible for the conduct of the business of the Company at the time of committing the offence. Further, that the persons holding the office of "Managing Director" or "Joint Managing Director", by virtue of the very nature of their role, renders them in charge of and responsible for the conduct of the business of the Company, and liable under Section 141. 64. Further, the Apex Court in Sunita Palita vs. M/s Panchami Stone Quarry, in SLP (Crl.) No. 10396 of 2019 decided on 01.08.2022, has reiterated the importance of specific averments with regard to the Directors' role in the pleadings, and has held that no such specific averment with regard to the role is needed when the person has the term "Managing" affixed to their position as Director, as it would be clear that they are in charge of and responsible for the Company. 65. The role of Accused no. 8/Mr. Bhuthalingam Hariharan, the Petitioner herein, as a Director of the Company thus, needs to be seen in the context that there are no other eligible Persons who had control over the affairs of t....
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....nly to the Corporate Debtor while the natural persons mentioned in Section 141 NI Act, continue to be statutorily liable under Section 138 N.I. Act. 72. Two aspects emerged from this judgment of P. Mohanraj & Ors. (supra); firstly, that once the proceedings have been commenced under IBC, no proceedings under Section 138 of N.I. Act, can be commenced or continued against the Corporate debtor/Company. The second aspect is that the proceedings under Section 138 N.I. Act may be continued against the natural persons mentioned in Section 141 N.I. Act. 73. In the present case, BILT has undergone CIRP, as National Company Law Tribunal, Mumbai vide Order dated 17.01.2020, has admitted the Application of a Financial Creditor of the Accused Company/BILT for appointment of an Interim Resolution Professional (IRP) to administer the Accused Company. Complainant/Bank had availed the remedy under the IBC and filed its claim before the IRP, which now forms part of the Resolution Plan of the Accused Company, which came to be approved by NCLT on 31.03.2023. The Complainant/Bank would, therefore, be paid in terms of the Approved Resolution Plan. 74. However, the Cheques and Complaint pertain ....