TaxTMI 
TaxTMI 
2026 (2) TMI 479
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....orporated under the Companies Act, 1956. The petitioner's name was inducted as a director of the aforesaid company on and from 14th June, 2001. However, she had no role to play in the day-to-day business affairs of the said company. Her name was incorporated as a director only for statutory compliance. 3. One Prakash Kumar Ray had lodged a complaint against the Marco Polo Restaurant. Based on such complaint, a notice was issued against the said company on 4th October, 2018 and on the basis of the reply given by the company dated 26th November, 2018, contravention of Section 129 of the Companies Act, 2013 along with Section 448 of the said Act was found to the effect that the company did not make disclosures in accordance with Schedule-III of the Companies Act, 2013 notified on 30th March, 2017 regarding Specified Bank Notes (SBN) which was transacted upon during 8th November, 2016 to 30th December, 2016. 4. Moreover, in respect of the balance sheet relevant to the period ending on 31st March, 2017, "borrowings" are shown to the extent of Rs. 80,50,450/-. However, the company did not disclose any related party transactions as prescribed in Accounting Standard 18, violating Sec....
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.... of Companies and he is the complainant who sought for dispensation of personal attendance which was exempted and application was allowed. No record of any authorization on behalf of Registrar of Companies is recorded in the said order. The exemption granted under Section 256 of CrPC read with Section 439(3) of Companies Act, 2013 is different from authorization necessary under the other provision. 10. It was further submitted that before arraigning the petitioner as an accused, the company must be entangled in the present case otherwise whole complaint is not maintainable in law. It is settled law declared by the Hon'ble Supreme Court in the decision of Santosh Kumar Lahoti vs. Registrar of Companies, West Bengal 2024 SCC Online Cal 3220 (para 52, 53 and 54) and decision of this Hon'ble Court in Raj Sahai vs. The State of West Bengal & Anr. CRR No. 100 of 2020 dated 2nd February, 2024, which held that no vicarious liability can be attributed on the Directors in any criminal proceedings unless the Company is made an accused. Further reliance is also placed on the judgment of Sunil Bharti Mittal vs. Central Bureau of Investigation (2015) 2 SCC (Cri) 687 and Daily De'S....
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....he application under Section 447 of the Companies Act. For such provision to apply the Complaint has to be supported by any finding of fraud, guilty mind or mens rea, but in the present case, no such case is made out, as the complaint proceeds on the basis of inability to disclose specified bank notes, for which offenses, related to fraud, cannot be ex facie made applicable on account of the provisions of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 notified on 27th February, 2017. 18. In the aforesaid contentions raised by the Petitioner, the said complaint is not maintainable on multiple grounds. In any event, the purported grounds in the complaint, as alleged by the Opposite Party, are also not maintainable on the respective submissions. 19. The case of the opposite party in respect of contravention of the financial statement is two-folds:- 20. Firstly, at paragraph 3.1, it relates to the action of the Auditor for not making disclosure of specified bank notes but holds the Petitioner/Directors liable as accused without any finding of guilt or mens rea. Preparation of the balance sheet as per statutory norms is a responsibility of the Auditors; therefore....
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....e Petitioner is not implicated as per paragraph 3.4. 28. No case of suppression of Specified Bank Notes is made out as the Balance Sheet suffers from mere non-disclosure, and it cannot be construed as suppression of Specified Bank Notes in respect of a notification which was affected retrospectively. In reply, the Petitioner relied upon a certificate from its Bankers regarding the disclosure of Specified Bank Notes to the Registrar of Companies, which neither violates the accounting standards nor The Specified Bank Notes (Cessation of Liabilities) Act, 2017, notified on 27th February, 2017. 29. Since the ambit of its offence is restricted by a Special law, provisions of section 448 of Companies Act cannot be attracted in such case. 30. It was further submitted that due to demonetization declared on 8th November, 2016 and the world pandemic in the year 2020, there was almost no cash transaction whatsoever left as the cash reserve was deposited in the account of the company. The petitioner and her husband were the only directors of the company. The learned court below wrongly failed to consider that without making company as an accused, issued process against the present pet....
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....able on Ministry of Corporate Affairs portal, the violations of sections 129 and 448 of the Companies Act, 2013 have been observed by the Opposite Party. 35. The Learned counsel representing the opposite party submitted the following points as are appended herein below: - a) In the present case, the opposite party had received information about the company that the company is carrying on business for a fraudulent or unlawful purpose or not in compliance with the provisions of the Act, which entitled him to serve a notice under section 206(4) of the Companies Act, 2013 upon the petitioner. The petitioner was given a reasonable opportunity of being heard and in pursuance thereto, a summon was issued upon the petitioner under Section 207(3) of the Companies Act. b) Upon enquiry, it was found that the financial statements furnished by the company do not give a true and fair view of the state of affairs of the company. Furthermore, it has been revealed that the petitioner, while filing the financial statement, omitted material facts knowing it to be material for the purposes of this Act. Thus, the petitioner has committed fraud which tantamount to omission and/or co....
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....3.2017, i.e. after conclusion of the relevant financial year, only in that instance the said notification can be said to be retrospective in operation. Since the aforesaid notification has been published on 30.03.2017, it applies to the relevant financial year in its entirety, which is permissible in law. f) It has also been alleged by the petitioner that the instant complaint case is bad in law since the company itself has not been arraigned as an accused. In this context, the Opposite Party intends to rely on a Judgment in the case of Sunil Bharti Mittal (Supra) at paragraph 39, wherein it has been held that, the directors can be implicated in those cases where the statutory regime itself attract the doctrine of Vicarious Liability by specifically incorporating such a provision and when the company is the offender, the Vicarious Liability of the directors cannot be imputed automatically. From the perusal of the section 129 (7) of the Companies Act, 2013, it culls down that the Companies Act being a special statute specifically enumerates that when the company contravenes any of the provisions of this section the Vicarious Liability under this Act is cast upon the directo....
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.... should be dismissed in limine. FINDINGS AND ANALYSIS OF THIS COURT:- 36. This Court has carefully heard the arguments and submissions made by the learned counsels appearing on behalf of the respective parties and upon perusal of the complaint, the principal questions which arise for consideration are as follows:- i. Whether the complaint filed by the Deputy Registrar of Companies is maintainable in view of section 439(2) of the Companies Act, 2013? ii. Whether the complaint is barred by limitation? iii. Whether the alleged contraventions of Section 129 read with Section 448 of the Companies Act, 2013 are prima facie made out? iv. Whether the prosecution against the petitioner/Director is sustainable in the absence of the company being arraigned as an accused? 37. This Court finds that the present petitioner is one of the directors of the company, namely, M/S Marco Polo Restaurant Pvt. Ltd. She became a director and was inducted with the aforesaid company on and from 14th June, 2001. 38. The allegation of the Deputy Registrar in the written complaint before the Trial Court with regards to offence committed by the directors for contrav....
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....l Government in that behalf: Provided that the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India: Provided further that nothing in this sub-section shall apply to a prosecution by a company of any of its officers." 43. In the instant case, it is not disputed that the complaint has been filed by Deputy Registrar of Companies (Vineet Rai), which is not a complaint in writing filed by the Registrar, a shareholder or a member of the company, or of a person authorised by the Central Government. However, as per section 2(75) of the Companies Act 2013, the term "registrar" means a registrar, an additional registrar, a joint registrar, a deputy registrar or an assistant registrar having the duty of registering companies and discharging various functions under the Act. Therefore, since the terminology and definition of the term 'registrar' means and includes a Deputy Registrar as well, it can be conclusively said that he is accordingly duly empowered to file the instant complaint case before the Court of the Learne....
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....ccused in the present case. Only the directors and the statutory Auditor have been made out as the accused in the instant case. 49. The petitioner is one of the directors of the company, namely, M/s Marco Polo Restaurant Pvt. Ltd. Whatsoever, alleged offence has committed by the company and its director. Without making the company as an accused, how its director will be liable for punishment. The allegation of commission of offence under section 129 or 448 of the Companies Act, 2013 is not an offence committed by an individual. The alleged offence is related with the disclosure of true account is concerned with the company affairs rather than individual. Without making the company as an accused, how its directors will be liable for commission of offence and/or punishment. No vicarious liability can be imposed on the directors in any criminal proceedings unless the company is an accused. In the present proceedings, company has not made an accused. The complaint is bad in law as it suffers from non-joinder and misjoinder of the company being the primary accused being arraigned as a party in the present proceedings. 50. It is a settled principle of criminal jurisprudence that vi....
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....e with applicable accounting standards, which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2): Provided that the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries in such form as may be prescribed: Provided further that the Central Government may provide for the consolidation of accounts of companies in such manner as may be prescribed. Explanation. -For the purposes of this sub-section, the word "subsidiary" shall include associate company and joint venture. (4) The provisions of this Act applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements referred to in sub-section (3). (5) Without prejudice to sub-section (1), where the financial statements of a company do not comply with the accounting standards referred to in sub-section (1), the company shall disclose in its financial statements, the deviation from the....
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....-time director in charge of finance, Chief Financial Officer or any other person charged with the duty of compliance. However, such a provision presupposes contravention by the company. In the absence of the company being arraigned, fastening criminal liability solely upon the directors runs contrary to the settled position of law. 56. This Court finds substance in the submission of the petitioner that the complaint suffers from a fundamental defect of non-joinder of the principal offender. 57. It is settled law by the Hon'ble Supreme Court in judgment in the case of Santosh Kumar Lahoti vs. Registrar of Companies, West Bengal 2024 SCC OnLine Cal 3220 (paragraphs 52, 53 and 54) and decision of this Hon'ble Court in Raj Sahai vs. The State of West Bengal & Anr. CRR No. 100 of 2020 dated 2nd February, 2024 which holds that no vicarious liability can be imposed on the Directors in any criminal proceedings unless the Company is an accused. Further reliance is also placed on the judgment of Sunil Bharti Mittal vs. Central Bureau of Investigation (2015) 2 SCC (Cri) 687 and Daily De'Souza vs. Government of India (2021) 20 SCC 135. 58. In addition, no specific allegati....