TMI Blog2018 (1) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... .M.P.Nos.11 & 12 of 2017 - - - Dated:- 21-12-2017 - M. S. Ramesh, J. For the Petitioner : Mr.A.L.Somaiyaji, Sr. Counsel for Mrs.Dakshyani Reddy For the Respondent : Mr. V. Sundareswaran ORDER The proceedings impugned in the present Criminal Original Petition is a private complaint filed for offences alleged to have been committed under Sections 9 and 9(AA) of the Central Excise Act, 1944. The petitioner herein has been arrayed as second accused in the said proceedings. 2.The brief facts of the case is that pursuant to the resolution of the Board of Directors of M/s.Visaka Industries Limited, the petitioner was appointed as Managing Director of the said Company with effect from 24.06.2009. The present impugned complaint is in connection with excise duty liability on asbestos cement sheets for the years 2003-04 and 2004-05, wherein a demand of ₹ 13,23,85,374/- came to be confirmed by the commission of Central Excise, Salem on 06.05.2009. As against the said order, an appeal came to be preferred by the Company before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as CESTAT). By an order dated 08.12.2011, CESTAT had directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the complaint, wherein the petitioner herein was categorically implicated in her capacity as the managing director in the light of Section 9AA of the Act read with the guidelines of the Central Board of Excise and Customs and submitted that the complaint as against the petitioner herein is liable to be quashed. 5.Mr.V.Sundareswaran, learned Senior Standing counsel for the respondents on the other hand submitted that mere using of the term 'Managing Director' will not absolve the petitioner's liability since she was holding the post of directorship in the company and the issue as to whether she was actively involved in her capacity as a director during the relevant period has to be determined only during the course of trial and quashing of the proceedings at this stage is unwarranted. 6.I have given careful consideration to the submissions made by the respective counsels. 7.It is not in dispute that the petitioner herein was not the Managing Director of the Company during the years 2003-04 and 2004-05. This position is ratified from Form 32 of the Companies Act which evidences that the petitioner became the Managing Director of the Company with effect from 26.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies:(1) 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 comapnay, 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 this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence 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 offence and shall be liable to be proceeded against and punished accordingly. Guidelines: Person liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed mes rea (guilty mind) which would indicate his guilt. It follows, therefore, that in the case of public limited companies, prosecution should not be launched indiscriminately against all the Directors of the company but it should be restricted to only against persons who were in charge of day-to-day operations of the factory and have taken active part in committing the duty/tax evasion or had connived at it. 10.Under Section 9(AA) of the Act, the persons who would be deemed to be guilty of an offence by a company are such persons who at the time of commission of the offence was in-charge of and was responsible to the day-to-day affairs of the company and to the conduct of the business of the company can be proceeded with and punished. The provision has been clarified in the guidelines. In fact, the guidelines is more of a warning to the prosecution to refrain from indiscriminately launching complaints against all the directors of the company and issues a warning that sanction for such prosecution should be carefully assessed on the basis of evidences or should be adequate to establish the offence beyond reasonable doubt that the person had an intention to commit the offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verred as a fact as there is no deemed liability of a director in such cases. c)The answer to question (c ) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. 13.Admittedly, the petitioner is not a Managing Director of the Company during the relevant period and the consequence of prosecuting such a person was the facts of a case before the Bombay High Court in Sharadchandra Shripad Marthe Vs. Gurushant Gangadhar Kamble and another reported in 1987 (11) ECC 166. The facts of the said case is almost identical to the facts in hand and the findings therein reads as follows: 23.To my mind the present case is such where I would be justified in invoking the inherent powers of this Court. I am satisfied from the undisputed averments that the petitioner joined the company as a Director only on 19th November 1985, a few days before the raid was effected and had not participated in any of the earlier proceedings leading to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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