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2019 (11) TMI 1492 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHGrant of immunity to the newly appointed Directors - section 242(4) of the Companies Act, 2013,R/w Rule 11 of the NCLT Rules, 2016 - HELD THAT:- The responsibilities/duties of Nominated Directors would arise from the date they have assumed their respective charges. The investigation conducted by SFIO has indicted the erstwhile management of the Company, which ultimately led to their removal and appointing the Nominated Directors in question. Various Civil and Criminal cases filed by and against the Company would continue to progress in respective Courts. However, personal liability still would lie against the erstwhile Management which includes its Directors, and not against Nominee Directors. It is settled position of law that a Company, which is duly incorporated as per law, is a Juristic Person, which can sue or be sued as per law. But normally it has no criminal liability and all the people, who are managing the affairs of a Company are liable to be prosecuted for the offence/violations committed in the name of a Company during the course of affairs of the Company. Therefore, fundamental duty cast upon the nominated Directors is to protect the interest of the Company and to carry out their statutory duties. It is not their legal duty of Nominated Directors to defend Civil/criminal cases instituted against the erstwhile Directors of the Company, as demanded by the erstwhile Directors in their letter dated 21st August, 2018 addressed to the Nominated Directors. The alleged frauds, committed by erstwhile Directors and other connected people, are prima facie proved during the investigation conducted by SFIO as per their report, are personal in nature and thus they have to defend those cases, as they are solely responsible for those offences and the Nominee Directors are not liable for those actions/offences. As per the extant provisions of Companies Act, 2013, and the Insolvency Bankruptcy Code, 2016 (Code), anybody aggrieved by actions taken on behalf of a Company, can approach the Authorities (NCLT) established under the above Acts, by seeking appropriate remedy rather than any other Court/Tribunal. An aggrieved party can file an Application/Petition before Adjudicating Authority constituted under extant provisions of Code, by seeking to initiate CIRP, which includes liquidation of the Company, on the ground that it has become commercially insolvent. In case, proceedings are initiated under the Code, the Adjudicating Authority (NCLT) is empowered to impose moratorium against initiation of any case(s) before any Court/forum. Even the Nominated Directors can file an appropriate Application/Petition under the provisions of Code, if the facts of case justify liquidating the Company, in order to avoid multiplicity of litigations against the Company. The Nominee Directors are not liable for any civil/Criminal action(s) for offence committed by the erstwhile management, which include removed Directors. Therefore, as the cases are filed against the Company and its erstwhile Directors, the nominee Directors are not proper and necessary parties to be impleaded. Since the matter falls under jurisdiction of the Tribunal, no Civil Court including Consumer Court can normally entertain any Suit or Petition in respect of the affairs of the Company. However, aggrieved parties can proceed against the erstwhile management which includes removed Directors and the Staffs, who are responsible for the offences and mismanagement committed by them. In Criminal cases too, the erstwhile Directors are liable for action but not the Nominee Directors in question The Nominee Directors cannot be impleaded or replace the erstwhile Directors of the Company in cases already filed or to be filed against the Company or its erstwhile Directors, and thus they cannot be called to appear in person before those courts and it is responsibility of the erstwhile Staff (which includes Directors) to defend their cases. However, the Nominee Directors are under legal responsibility to prosecute the cases filed by the Company, in order to protect the interest of Company - Petition disposed off.
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