2023 (1) TMI 154 - HC - Companies Law

Vicarious liability of Additional Director - Non-executive Independent Directors or not - Officer in default - non repayment of deposits by the Company to the depositors - alleged violation of section 74 of Companies Act - HELD THAT - This is a case where raison d' etre of petitioner's submissions is his status in the Company as Non-executive Independent Director. According to the petitioner, he was appointed as Non-executive Independent Director in the Company since 29/11/2006 and worked till 31/3/2015 in same capacity, therefore, submission advanced on behalf of petitioner was that the petitioner was neither Key Managerial Personnel as per Section 2 (51) nor he was Officer in Default as per Section 2 (60) of the Companies Act, 2013. The petitioner was Director in the Company and even if any doubt exists in respect of his status in the Company whether as Additional Director, Independent Director or Director then it can only be decided on the anvil of evidence to be led by the parties before the trial Court and not invoking the extra ordinary jurisdiction under Section 482 of Cr.P.C. Even otherwise, Section 2(51) of the Companies Act, 2013 defines Key Ministerial Personnel in relation to Company and it provides an exhaustive list of Officers - Section 2 (60)(v) provides a broad mechanism under which any person related to the Company's affairs can be included. Here it is to be noted that in sub-section (iv) and (v) of Section 2 (60) word person has been used, ergo, it expands the spectrum / scope of Officer who is in default . Sub-section (iv) and (v) defines exhaustive list of participants in different manner. Therefore, on this count also, case of petitioner lacks merits. In the cumulative analysis, no error of law has been made by Court below while passing the impugned order and rightly taken cognizance against the petitioner. Petition dismissed.

Issues Involved:
1. Quashment of the order dated 28/7/2022 in Criminal Case No. SC/128/2016.
2. Quashment of the criminal proceedings in Criminal Complaint No. SC/128/2016.
3. Determination of the petitioner's status as Non-executive Independent Director and its implications.
4. Jurisdiction of the Special Court under the Companies Act, 2013.
5. Applicability of Sections 2(60), 2(51), 149(12), and 74(3) of the Companies Act, 2013.
6. Scope of Section 482 of Cr.P.C.

Detailed Analysis:

1. Quashment of the Order Dated 28/7/2022 in Criminal Case No. SC/128/2016:
The petitioner sought the quashment of the order dated 28/7/2022, which rejected his application under Section 317 read with Section 205 of Cr.P.C. The Court found no error in the lower court's decision and upheld the rejection of the application, indicating that the petitioner's presence was required in the proceedings.

2. Quashment of the Criminal Proceedings in Criminal Complaint No. SC/128/2016:
The petitioner sought to quash the criminal proceedings against him, arguing that he was a Non-executive Independent Director and not liable for the company's defaults. The Court dismissed this plea, stating that the petitioner was indeed a Director and had knowledge of the company's activities, including the acceptance of deposits.

3. Determination of the Petitioner's Status as Non-executive Independent Director and Its Implications:
The petitioner claimed he was a Non-executive Independent Director and thus not liable for the company's defaults. However, the Court found that the petitioner's designation had been changed from Additional Director to Director, making him aware of the company's activities. The Court noted that the petitioner's status could only be conclusively determined through evidence presented at trial.

4. Jurisdiction of the Special Court under the Companies Act, 2013:
The Court addressed the issue of jurisdiction, noting that the Special Court under Section 435 of the Companies Act, 2013, was constituted to entertain and decide prosecutions under the Act. The CJM had returned the complaint to the complainant due to the Special Court's jurisdiction, and the Special Court subsequently took cognizance of the complaint.

5. Applicability of Sections 2(60), 2(51), 149(12), and 74(3) of the Companies Act, 2013:
The petitioner argued that he was not an "Officer who is in default" under Section 2(60) and not a Key Managerial Personnel under Section 2(51). The Court found that the petitioner, as a Director, fell within the scope of Section 2(60) and was liable under Section 74(3) for the company's defaults. The Court emphasized that the determination of the petitioner's liability required a detailed examination of evidence at trial.

6. Scope of Section 482 of Cr.P.C.:
The Court highlighted the limited scope of Section 482 of Cr.P.C., particularly when the facts were disputed. The Court noted that the petitioner's claims were outrightly disputed by the respondents and supported by documents. Therefore, it was not an exceptional case warranting interference under Section 482.

Conclusion:
The Court dismissed the petition, stating that the petitioner's status and liability should be determined at trial. The observations made were for arriving at a prima facie conclusion and should not influence the trial proceedings. The petition was found to lack merit, and the trial was to proceed on its own merits.

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