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TMI Blog2023 (1) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... and explanation in its report on every reservation, qualification or adverse remark contained in Auditor's report. That, upon scrutiny of the Balance-sheet and other documents as on 31st March, 2014 it was found that the Board of Directors did not furnish fullest information and explanation in their Director's report with respect to the Auditors in their report on Balance Sheet for the year ending on 31st March, 2014. In the Auditor's Report for the year ending on 31st March, 2014, the auditor has mentioned that there are no dues of Service Tax, VAT, Provident Fund, ESIC which had been deposited on account of any dispute except disputed amount of WBST/VAT of Rs 49.24 Lakhs under the Commercial Tax Party and Revision Board and CST 11.13 Lakhs. This has resulted in violation of provisions of Section 217(3) of the Companies Act, 1956 and the said violation was pointed out to the Directors of the company vide Show Cause dated 30th May, 2016. However, the reply which has been received was not satisfactory and hence, the competent authority has issued instruction to launch prosecution for the aforesaid violation vide their letter dated 28th March, 2016. The petitioner herein has been ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te for the petitioner has submitted that:- (a) The petitioner was requested to join the Board of Directors of M/s. Mani Square Limited as an "independent director" on 2nd May, 2014. (b) The petitioner gave his consent to join as an "independent director" of the said company on 6th May, 2014 and the formal consent in prescribed form, DIR-2 was given to act as an independent director on 17th May, 2014. (c) The said consent was acted upon by the company and the petitioner joined as an independent director on the Board of the said company since 2nd June, 2014 and prescribed Form DIR-12 was duly filed with the Registrar of Companies on 8th June, 2014. (d) The petitioner resigned from the Board of the said company on 31st December, 2016 by submitting Form DIR-11 evidencing such resignation. Mr. Ganguly, has further submitted that the alleged violation mentioned in the impugned petition of complaint pertained to the financial year ending on 31st March, 2014 and the petitioner was not director of the company as on 31st March, 2014 and therefore, under no stretch of imagination, the prosecution could be allowed to be continued against the petitioner. That according to the Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een categorically stated that upon scrutiny of Balance Sheet and other related documents in the XBRL format as at 31.03.2014, it was found that Board of Directors did not furnish fullest information and explanation in the Directors' report with respect to the Auditors in their report on Balance Sheet for the year ending 31.03.2014 have raised the following reservations/qualification/adverse remark :- "The Board's report as per Section 217(2A) of the Companies Act, 1956 read with Companies (particular of employees) Rule, 1975, shall contain the following particulars, namely of the employees:- (a) Designation of the employee. (b) Remuneration received. (c) Nature of employment, whether contractual or otherwise. (d) Other terms and conditions. (e) Nature of duties of the employee. (f) Qualifications and experience of the employee. (g) Date of commencement of employment. (h) The age of the employee. (i) The last employment held by such employee before joining the company. (j) The percentage of equity held by the employee in the company within the meaning of sub-clause (iii) of clause (a) of sub-section (2A) of section 217 of the Act. But the Board's Report attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consent to only act as an independent director of the board. Section 161 (1) of the Companies Act 1956 governs appointment of additional director, alternate director and nominee director. The above provision clearly states that any person appointed by the Board of Directors should always be appointed as an additional director. It is only the shareholders in the general meeting who can appoint a regular director irrespective of the director being an independent director/alternate director/any other Director, the appointment can only be as additional director. Hence the interpretation of the RoC that the petitioner was additional and not Independent Director is wrong and misinterpreted. The said DIR 12 on page 23 under the column designation it is stated "Additional Director" because this is the requirement of the Act that any director appointed by the Board has to be appointed as Additional Director, however the next column below the said column designation i.e. category, states in the said form DIR 12 as "independent". The RoC has deliberately suppressed to mention in its report the second column category which establishes the fact that the petitioner has been appointed as Inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the portal as "Additional Director /Director" the petitioner did not lodge any complaint with the Ministry about the alleged wrong information. There is no case that the petitioner had filed any objection to the said wrong information (as alleged) on the portal. Point No. 2. The board report for the financial year 2013-2014 was filed on 5th September, 2014. From the records it is seen that the petitioner was then an "Additional Director" of the Company. Admittedly the other accused persons have pleaded guilty. The main contention of the petitioner is that he was not attached to the company in the financial year 2013-2014 and as such he is not liable in any manner what so ever. The case of the opposite party is that the board report of the financial year 2013-2014 was filed on 5th September 2014 when the petitioner was an "Additional Director" and as such prima facie becomes liable for the said offences, as filed in this case. The difference between Directors and Additional directors:- Basis Director Additional Director Section A director is appointed as per provisions of Section 152 of the Companies Act, 2013. Section 161 contains the provisions for appointment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Kumar Jatia vs. State of NCT of Delhi, Criminal Appeal nos. 1263, 1264 and 1265-1267 of 2019, held:- "27. The liability of the Directors /the controlling authorities of company, in a corporate criminal liability is elaborately considered by this Court in the case of Sunil Bharti Mittal. In the aforesaid case, while considering the circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an accused person, this Court has held, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. At the same time it is observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the Statute specifically provides for. It is further held by this Court, an individual who has perpetrated the commission of an offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. In absence of specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned." In the present case the petitioner as seen from the documents was an Additional Director on the date the board report was filed. To counter the same evidence is required to be adduced during trial so also to decide as to whether the petitioner at the relevant time of filing the report was a Director, Additional Director or an Independent Director. The responsibility of an Additional Director being the same as that of a director (but difficult from an independent director) they remain responsible, as the statute provides for the same. Thus to quash the proceedings by exercising this Courts inherent powers would amount to an abuse of the process of Court and would also amount to serious miscarriage of justice. CRR 1752 of 2020 is thus dismissed. There will be no order as to costs. All connected Application stand disposed of. Interim order if any stands vacated. Copy of this judgment be sent to the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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