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TMI Blog2024 (9) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... int are that in the year 2013, respondent Nos. 3 to 5 approached the complainant company/respondent No. 2 to avail the loan facility. Accordingly, respondent No. 2 agreed to provide the loan facility to respondent No. 3/accused company. It is the case of the respondent No. 2 that Respondent No. 4 & 5 approached it and represented themselves and others as Directors, Authorized Signatories and responsible persons for managing the day-to-day affairs of the accused company/respondent No. 3. Respondent No. 2 provided a loan of Rs. 1,75,00,000/- on 22.04.2013 in the name of respondent No. 3 for a period of 30 months vide Cheque No. 361758 dated 22.04.2013, drawn on State Bank of India, Netaji Subhash Place, Pitampura, New Delhi which was duly accepted and admitted by the accused. In the month of April 2021, Respondent Nos. 4 & 5 along with the petitioner approached respondent No. 2 and requested for extension of time of another 12 months to make the repayment of the loan amount which was agreed by respondent No. 2 with the condition that there will be an interest on the loan amount @ 15 % per annum. That against the above stated and in discharge of their liability respondent Nos. 4, 5 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 3, it can be seen that in all 9 Board Meetings held during the financial year 2020-21, and the Annual General Meeting held on 31.12.2020, none was attended by the petitioner which reflects that he was not involved in day to day affairs of the company. 6. De hors the aforesaid submission, it is also contended that the petitioner is neither signatory of cheque nor privy to any transaction and as such no liability accrues towards the petitioner. It is submitted that since the bank account from where the alleged cheque has been issued is not held in the name of the petitioner and the petitioner was infact not served with the legal notice dated 02.05.2022, the basic requisite ingredient of Section 138 NI Act has not been fulfilled, hence the complaint case is liable to be quashed. 7. The petition is contested by learned counsel of respondent No. 2 by contending that the complaint has the necessary averments and consequently, a trial would be required to determine the liability of the petitioner. 8. I have heard learned counsels for the parties and have also perused the material placed on record. 9. The criminal complaint has been filed under Section 138 read with Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed : (SCC p. 336, paras 13-14) "13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Section 141." xxx" 12. Most recently, the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j Kumar v. Arun Kapoor & Ors. while taking note of the Master Circular issued by the Reserve Bank of India observed: - "xxx the Reserve Bank of India issued a Master Circular no. RBI/2012-13/43 dated 02.07.2012 on "Willful Defaulters" with respect to reporting of names of Directors and the position regarding independent and nominee Directors. The said circular came to be challenged before a Division Bench of the Gujarat High Court in the case of Ionic Metalliks v. Union of India reported as 2014 SCC OnLine Guj 10066. The court while upholding the legality and validity of the circular, noted the categories of Directors under the Companies Act and the "Listing Agreement" prescribed by Securities and Exchange Board of India as under: - "A. Classification under the Companies Act Categories of Directors The Companies Act refers to the following two specific categories of Directors: 1. Managing Directors; and 2. Whole-time Directors. A Managing Director is a Director who has substantial powers of 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble as a Director of the company, unless he or she is giving advice in his or her professional capacity. Thus, such a 'shadow' Director may be treated as an 'officer in default' under the Companies Act. 6. De facto Director: Where a person who is not actually appointed as a Director, but acts as a Director and is held out by the company as such, such person is considered as a de facto Director. Unlike a 'shadow' Director, a de facto Director purports to act, and is seen to the outside world as acting, as a Director of the company. Such a de facto Director is liable as a Director under the Companies Act. 7. Rotational Directors: At least two-thirds of the Directors of a public company or of a private company subsidiary of a public company have to retire by rotation and the term "rotational Director" refers to such Directors who have to retire (and may, subject to the Articles, be eligible for re-appointment) at the end of his or her tenure. 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 mismanagemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director. Clause 49 of the Agreement prescribes that the Board shall have an optimum combination of executive and non-executive Directors, with not less than fifty percent (50%) of the Board comprising non-executive Directors. Where the Chairman of the Board is a non-executive Director, at least one-third of the Board should comprise independent Directors and in case he is an executive Director, at least half of the Board should comprise independent Directors. Where the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of independent Directors. Independent Directors The Agreement defines an "Independent Director" as a non-executive Director of the company who: a. apart from receiving Director's remuneration, does not have material pecuniary 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 occupy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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