TMI Blog2020 (5) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount for encashment of the cheques in question. Also, the petition is not only highly belated, but also filed only with a view to delay the trial. In view of the aforesaid discussions and especially the observation of the Supreme Court in GUNMALA SALES (P.) LTD. VERSUS ANU MEHTA, NAVKAR INFRA PROJECTS PVT. LTD. AND OTHERS [ 2014 (12) TMI 1116 - SUPREME COURT] , where in similar circumstances, the petition was dismissed for not placing on record any material of impeccable nature to prove that the accused had resigned, the present petition is dismissed along with the pending application with a cost of ₹ 25,000/- to be paid to PM Cares Relief Fund in Account no. 2121PM20202 maintained with the SBI, New Delhi Main Branch within a period of two weeks from the passing of this judgment. Petition disposed off. - CRL.M.C. 3864/2018 & CRL.M.A. 29159/2018 - - - Dated:- 4-5-2020 - HON'BLE MR. JUSTICE MANOJ KUMAR OHRI Petitioner Through: Mr. Amarjeet Sahni and Ms. Aishwarya Agarwal, Advocates Respondents Through: Mr. Shivam Goel and Mr. Surender Gupta, Advocates MANOJ KUMAR OHRI, J. 1. The present proceedings impugn order dated 21.01.2014 whereby the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient funds . 6. A perusal of the Petitioner s Form 32 placed on record shows that contrary to both the pleadings as well as the submission of the learned counsel for the petitioner, the petitioner was appointed as an Executive Director in the category of Promoter on 20.09.2011. It is the case of the petitioner that he resigned from the company on 30.11.2013. 7. Section 2(k) of the Companies (Specification of Definitions Details) Rules, 2014 published in the Gazette of India dated 31.03.2014, defines Executive Director as follows: - Executive Director means a whole time Director as defined in Clause (94) of Section 2 of the Act. 8. Section 2(69) of the Companies Act, 2013 defines Promoter as follows: - Promoter means a person- (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Provided that nothing in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other Directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business. 21. A combined reading of Sections 5 and 291 of the Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company: (a) the Managing Director(s); (b) the whole-time Director(s); (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf to the Board); and (g) where any company does not have any of the officers specified in clauses (a) to (c), any Director or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a Director and that he is in charge of and is responsible to the company for the conduct of the business of the company, duly affirmed in the sworn statement, may be sufficient for the purpose of issuing summons to him. But if the accused is not one of the persons who falls under the category of persons who are responsible to the company for the conduct of the business of the company (listed in para 21 above), then merely by stating that he was in charge of the business of the company or by stating that he was in charge of the day-to-day management of the company or by stating that he was in charge of, and was responsible to the company for the conduct of the business of the company , he cannot be made vicariously liable under Section 141(1) of the Act. xxx xxx xxx 27. The position under Section 141 of the Act can be summarised thus: (i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. 34.3. In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y acceptable circumstances. It is merely stated that Sidharth Mehta had resigned from the directorship of the Company on 30-9-2010 but no incontrovertible or unimpeachable evidence was produced before the High Court as was done in Anita Malhotra to show that he had, in fact, resigned long before the cheques in question were issued. Similar is the case with Kanhaiya Lal Mehta and Anu Mehta.. (Emphasis added) 14. Subsequently in Standard Chartered Bank v. State of Maharashtra and Ors., reported as (2016) 6 SCC 62 , while setting aside the order of High Court of quashing the summoning order with respect to whole-time Director and Executive Director, the Supreme Court held as follows: - 33. Thus, considering the totality of assertions made in the complaint and also taking note of the averments put forth relating to the Respondents 2 and 3 herein that they are whole-time Director and Executive Director and they were in charge of day-to-day affairs of the Company, we are of the considered opinion that the High Court has fallen into grave error by coming to the conclusion that there are no specific averments in the complaint for issuance of summons against the said accus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management of the affairs of the company subject to the superintendence, control and direction of the Board in question. A Whole-time Director includes a Director who is in the whole- time employment of the company, devotes his whole-time of working hours to the company in question and has a significant personal interest in the company as his source of income. Every public company and private company, which is a subsidiary of a public company, having a share capital of more 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 te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Nominee Directors: They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement. The extent of a nominee Director's rights and the scope of supervision by the shareholders, is contained in the contract that enables such appointments, or (as appropriate) the relevant statutes applicable to such public financial institution 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry relationships or transactions with the company, its promoters, its Directors, its senior management, or its holding company, its subsidiaries, and associates which may affect independence of the Director; b. is not related to promoters or persons occupying management positions at the board level or at one level below the board; c. has not been an executive of the company in the immediately preceding three (3) financial years; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deletion of his name from the array of the parties and/or for recalling of summoning order. In the said application, it was interalia pleaded that the petitioner was merely one of the Directors of accused No.7. It was also submitted that the petitioner joined the accused no.7 on 20.9.2011 and he had resigned on 30.11.2013 from the said company. It was specifically pleaded that the petitioner was never incharge of affairs of 'company and was never responsible to the company for conduct of the business and was merely a non executive Director. 21. Also, the petition is not only highly belated, but also filed only with a view to delay the trial. In view of the aforesaid discussions and especially the observation of the Supreme Court in Gunmala Sales (Supra), where in similar circumstances, the petition was dismissed for not placing on record any material of impeccable nature to prove that the accused had resigned, the present petition is dismissed along with the pending application with a cost of ₹ 25,000/- to be paid to PM Cares Relief Fund in Account no. 2121PM20202 maintained with the SBI, New Delhi Main Branch within a period of two weeks from the passing of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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