2000 (4) TMI 763 - HC - Companies Law

Summary

Issues:
1. Revision petitions filed against the order declining to issue process against the respondent.

Analysis:
The petitioner filed two revision petitions challenging the order of the Metropolitan Magistrate declining to issue process against the respondent in complaints alleging an offence under section 58B of the Reserve Bank of India Act, 1934. The Magistrate took cognizance of the offence but excluded the respondent from the process, citing lack of documentary evidence showing the respondent's role as Executive Director of the company. The petitioner contended that the order was illegal and unjust, emphasizing that the complaint's averments implicated the respondent under section 58C of the Act. The legal issue revolved around whether the Magistrate erred in not considering the complaint's contentions and supporting documents. The court highlighted section 58C, which deems individuals in charge of a company's business, including directors, liable for contraventions or defaults committed by the company.

The court analyzed the provisions of section 58C, emphasizing that three categories of persons could be held liable: the company itself, individuals in charge of the company's business, and other officers whose neglect or connivance led to the company's offence. The legal fiction created by the section made these individuals offenders alongside the company. The court stressed that during the process of issuing summonses, the focus should be on whether the complaint's allegations implicate the respondent, an executive director, when the company is accused of an offence under section 58B. The complaint explicitly named the respondent as the Executive Director responsible for the company's affairs, supported by an audit report detailing the respondent's significant role in financial matters.

The court referred to a recent Supreme Court decision to establish that directors of an offending company can be prosecuted for the company's offences. The court concluded that the complaint, along with supporting documents, established a prima facie case for summoning the respondent. The Magistrate's decision to dismiss the complaints against the respondent was overturned, ordering the respondent to be summoned and tried according to the law. The judgment clarified that evidence against the respondent would be determined during the trial, emphasizing that the complaint's contentions were sufficient to implicate the respondent at the summoning stage.