TMI Blog2017 (2) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are not part of the complaints - Admittedly, the petitioner is not the Managing Director of Vasan Health Care nor the signatory to the cheque. He is also not the person responsible for day-to-day functioning of Vasan Health Care. No vicarious liability can be fastened on the petitioner in the absence of specific role being attributed to the petitioner. Petition allowed. - CRL.M.C. 2760, 4268, 4269, 4270, 4271, 4272, 4273, 4274, 4275, 4276, 4277, 4278 To 3289/2016 & Crl.M.A. 11755, 17792, 17795, 17797, 17799, 17801, 17803, 17805, 17807, 17809, 17811, 17813 To 13992/2016 - - - Dated:- 23-2-2017 - MS. Mukta Gupta, J. Ms. Rebecca M. John, Sr. Adv. with Ms. Parul Kumar, Mr. Shalin Arthwan, Mr. Nikhil Ahuja, Advs. For The Petitioner. Ms. Pearl Bindra, Adv. For The Respondent. JUDGMENT Mukta gupta, 1. Petitioner by way of Crl.M.C.Nos. 3252/20016, 3279/2016, 3280/2016, 3281/2016, 3282/2016, 3283/2016, 3284/2016, 3285/2016, 3286/2016, 3287/2016, 3288/2016 and 3289/2016 challenges the order dated 9th May, 2016 summoning him for offence punishable under Sections 138 read with 142 of the Negotiable Instruments Act (in short t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner is the non-executive nominee independent director. Contention of learned counsel for the respondent is that the petitioner is the Director of Sequoia India Investment Holding which finances Vasan Health Care, hence is a nominee director of Vasan Health Care. Since he is responsible for the finances of the company he is vicariously liable. 5. The vicarious liability in case of a company or firm under Section 141, NI Act would arise if a person is in charge and responsible for the conduct of the business of the company or the firm. The Hon'ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, held as under: 10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are 'every person'. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words-- '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelt out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. 6. Further in K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 Supreme Court summarizing the legal position qua the vicarious liability of the officers of a company held: 27. The position under Section 141 of the Negotiable Instruments Act, 1881 can be summarized thus-- (i) If the accused is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 as per the Form DIR-12. 8. The Reserve Bank of India vide its Master Circular No RBI/2012- 13/43 dated 2nd July, 2012 on 'Wilful Defaulters' issued directions with respect to the reporting of names of Directors and the position regarding Independent and Nominee Directors. Relevant Paras 5.1 and 5.2 of the Circular read as under: 5.1 Need for Ensuring Accuracy RBI/Credit Information Companies disseminate information on non-suit filed and suit filed accounts respectively, as reported to them by the banks/FIs and responsibility for reporting correct information and also accuracy of facts and figures rests with the concerned banks and financial institutions. Therefore, banks and financial institutions should take immediate steps to update their records and ensure that the names of current directors are reported. In addition to reporting the names of current directors, it is necessary to furnish information about directors who were associated with the company at the time the account was classified as defaulter, to put the other banks and financial institutions on guard. Banks and FIs may also ensure the facts about directors, wherever possible, by cross-che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than Five Crore rupees (₹ 5,00,00,000/-) must have a Managing or Whole-time Director or a Manager. Further classification of Directors Based on the circumstances surrounding their appointment, the Companies Act recognizes the following further types of Directors: 1. First Directors: Subject to any regulations in the Articles of a company, the subscribers to the Memorandum of Association, or the company's charter or constitution ( Memorandum ), shall be deemed to be the Directors of the company, until such time when Directors are duly appointed in the annual general meeting ( AGM ). 2. Casual vacancies: Where a Director appointed at the AGM vacates office before his or her term of office expires in the normal course, the resulting vacancy may, subject to the Articles, be filled by the Board. Such person so appointed shall hold office up to the time which the Director who vacated office would have held office if he or she had not so vacated such office. 3. Additional Directors: If the Articles specifically so provide or enable, the Board has the discretion, where it feels it necessary and expedient, to appoint Additional Directors who will hold o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or bank. However, nominee Directors must be particularly careful not to act only in the interests of their nominators, but must act in the best interests of the company and its shareholders as a whole. The fixing of liabilities on nominee Directors in India does not turn on the circumstances of their appointment or, indeed, who nominated them as Directors. Chapter 4 and Chapter 5 that follow set out certain duties and liabilities that apply to, or can be affixed on, Directors in general. Whether nominee Directors are required by law to discharge such duties or bear such liabilities will depend on the application of the legal provisions in question, the fiduciary duties involved and whether such nominee Director is to be regarded as being in control or in charge of the company and its activities. This determination ultimately turns on the specific facts and circumstances involved in each case. B. Classification under the Listing Agreement The Securities Contracts (Regulation) Act, 1956, read with the rules and regulations made thereunder, requires every company desirous of listing its shares on a recognized Indian stock exchange, to execute a listing agreement ( Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. is not a partner or an executive or was not a partner or an executive during the preceding three (3) years, of any of the following: i. the statutory audit firm or the internal audit firm that is associated with the company, and ii. the legal firms and consulting firms that have a material association with the company; e. is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect the independence of the Director; or f. he is not a substantial shareholder of the company, i.e, owning two percent (2%) or more of the block of voting shares; and g. he is not less than twenty-one (21) years of age. Nominee directors appointed by an institution that has invested in, or lent money to, the company are also treated as independent Directors. 10. The Companies Act, 2013 recognizes different categories of directors and creates a distinction in the status of independent and nominee directors. Section 2(47) defines an independent director as one referred to in sub section 6 of section 149. 11. Section 149 sub-section 6 of the Companies Act 2013 prescribes the qualification of an independent dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vasan Health Care. Even otherwise the contentions now raised during the course of arguments and in the reply affidavits are not part of the complaints. In the complaints it is merely stated that accused No.2 to 8 are the directors of the company and have been actively participating in day-to-day affairs of the company and take all the decisions for the company. Admittedly, the petitioner is not the Managing Director of Vasan Health Care nor the signatory to the cheque. He is also not the person responsible for day-to-day functioning of Vasan Health Care. No vicarious liability can be fastened on the petitioner in the absence of specific role being attributed to the petitioner. 16. In view of the legal position noted above, the petitions are allowed. The impugned orders to the extent issuing summons to the petitioner in the Complaint Cases No. 32/1/16, 36/1/16, 28/1/16, 26/1/16, 25/1/16, 30/1/16, 27/1/16, 34/1/16, 29/1/16, 31/1/16, 35/1/16, 33/1/16, 24/1/16, 23/1/16, 6/1/16, 8/1/16, 18/1/16, 19/1/16, 7/1/16, 9/1/16, 12/1/16, 13/1/16, 11/1/16, 17/1/16, 16/1/16 and 15/1/16 are quashed. 17. Petitions and applications are disposed of. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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