TMI Blog2019 (10) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... ponsibility to be, in charge of the affairs of the company, depends on the terms of contract or any legal provisions on the basis of which such nominee director came to be nominated. This cannot be left to any unfounded belief of the Complainant, or to his random statement that a nominee director is the Principal Officer of the company. In Madhumilan Syntex case [ 2007 (3) TMI 670 - SUPREME COURT ] a case where the accused, who are the Directors of the company (and not Nominee directors) approached the Court seeking to exclude them from criminal prosecution under sec.278B of the I.T. Act, for an offence of non remitting the TDS (exactly the same offence for which the petitioners herein are sought to be prosecuted), the Honble Supreme Court declined to grant relief to the Directors of the company, because they happened to be Directors, and proceeded to hold that their actual role via-a-vis, the company is a matter for trial. As indicated earlier, that was a case involving the Directors of the company, and not Nominee Directors. This court has little hesitation to conclude that there is nothing in the complaint, that the petitioners, even as Nominee Directors were in charge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 482 Cr.P.C. for quashing each of the criminal cases in which they have been arrayed: Name of the Petitioner/ Rank in CC.Nos. Crl.OP.No. C.C.No. K.Ramakrishnan (A6 in all CC.Nos.) 16082/2018 16083/2018 16084/2018 235/2018 237/2018 236/2018 V.T.Bharadwaj (A5 in all CC.Nos) 12553/2018 12554/2018 12555/2018 235/2018 236/2018 237/2018 K.P.Balaraj (A4 in all CC.Nos) 11644/2018 11645/2018 11646/2018 235/2018 236/2018 237/2018 II THE FACTUAL DETAILS: A. Thiru. Ramakrishnan (A-6 in all the cases) 2.1 About 2008, he was functioning as an Executive Director of M/s Sparks Capital. At the request of the first respondent Company, namely Vasan Health Care Pvt. Ltd., Trichy, Sparks Capital helped it in identifying potential and prospective investors in it. Two major investors that Sparks Capital helped the first accused to obtain investments are: (a)M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Executive Director, Vide resolution of the first accused's Board dated 18-12-2009 . And, on 18-11-2015 he resigned from the Board of the first accused. And he is in the same club as the other two petitioners. 5. The complainant/respondent had preferred its counter to all the petitions except in Crl.O.P.s 16082 of 2018 to Crl.O.P.16084 of 2018 (filed by Ramakrishnan) The quintessential contentions of the respondent as disclosed in the counter are: Though the petitioners were the Non-Executive Directors of the first accused company, yet they did have played a role, and the extent of their role would be known only after due trial. Secondly, under 278 E of the Income Tax Act, the existence of mensrea required for commission of the offense shall have to be presumed by the court, and the burden is on the accused to rebut it. Thirdly, in terms of sec.278-B of the Income Tax Act, besides imprisonment or imposition of fine on one who is convicted of an offence under the Act, every person , referred to in Sec.278-B(1) such as the Director of the company, Manager, Secretary, or other officer of the company, referred to in Sec.278B(2) shall be liable to be proceeded against. III Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01-10-2015]. 8. The response of the counsel for the respondent was more along predictable and classical lines: That the role of the petitioners could be known only when the cases against them go for trial. VI Discussion Decision: 9. Let the statement made by the respondent in defense of the petitioners' case be scanned for its merit: Notwithstanding the fact that the petitioners are Nominee Non-Executive Directors in the Board of the first accused, their role in non-remittance of the TDS by the first accused could be known only if the matter goes for trial. This is the statement. It presupposes that they have a responsibility in the commission of the alleged offense. And, this presupposition is founded on the statement of the respondent where it declares that it considers the petitioners as the Principal Officer in charge of the affairs of the company. But, is this basic premise, (this supposition of the respondent) itself is a fact which reality supports, or, is it yet another presupposition, that feed another supposition, and that feed cause for prosecution? This requires an understanding of who a Nominee Non-Executive Director. 10. In Ionic Metalliks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 278B of the Income Tax Act, 1961 Section 141 of the Negotiable Instruments Act, 1881 Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in subsection shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due dilligence to prevent the commission of such offence. (2)Notwithstanding anything contained in sub-section(1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Officer of the company. 14. In Pooja Ravinder Devidasani case [(2014) 16 SCC 1], the Hon'ble supreme Court has held (in the context of the offense under sec.138 of the Negotiable Instruments Act by a Company), has held: There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Nonexecutive Director is no doubt a custodian of the governance of the company but is not involved in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the company, one who actively looks after the day-to-day activities of the company and is particularly responsible for the conduct of it business. Simply because a person is a Director of a company, does not make him liable under the NI Act. Every person connected with the company will not fall into the ambit the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X
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