9911796707
|
Home
Issues:
Quashing of criminal proceedings under sections 73(2B) and 113(2) of the Companies Act, 1956 based on the liability of directors as officers in default. Analysis: The petition under section 482 Code of Criminal Procedure sought the quashing of proceedings in C.C. No. 16 of 1998 concerning contravention of sections 73(2B) and 113(2) of the Companies Act, 1956. The petitioners, directors of the company, argued that liability for criminal offenses attributed to the company cannot be assigned to ordinary directors if there is a managing director or other specified officers. The respondents contended that liability depends on the facts of the case and should be determined during trial, not at the quashing stage. The company in question had floated a public issue of shares in 1992 and allegedly defaulted in refunding excess share application money and delivering share certificates to allottees, contravening sections 73(2B) and 113(2) of the Companies Act. The complaint named the company as A-1, with A-2 as the managing director and A-3 to A-6 as directors. Sections 73(2B) and 113(2) provide for fines and imprisonment for contraventions, with liability extending to officers defined as 'Officer in default' under section 5. Section 5 defines 'Officer in default' to include managing directors, whole-time directors, managers, secretaries, and others involved in the company's operations. Notably, section 5(g) specifies that where a company lacks officers mentioned in clauses (a) to (c), all directors may be held liable. Since the company had a managing director (A-2), ordinary directors (A-3 to A-6) could not be held criminally liable for the company's actions. Therefore, the petitioners, being mere directors, were not liable under the Act, and quashing the proceedings against them was justified to prevent an abuse of the legal process. In conclusion, the petition was allowed, and the criminal proceedings in C.C. No. 16 of 1998 were quashed for the petitioners (A-3 to A-6) based on the absence of liability as ordinary directors when a managing director was in place. The judgment clarified the specific circumstances under which directors can be held liable under the Companies Act, emphasizing the importance of the defined roles within a company's hierarchy in determining individual liability for corporate offenses.
|
