2022 (1) TMI 1461 - HC - Indian Laws

Offences under Sections 45QA, 58B (4 AAA) 58C of the Reserve Bank of India Act, 1934 - limited present petitioner's role in the company - maintainability of prosecution initiated against the petitioner - HELD THAT - The private complaint itself filed for violation of the orders of the Company Law Board passed on 01.12.1998. The order has been passed pursuant to the default committed by the Company in repaying the amount to various depositors totalling more than Rs.20 crores at the relevant point of time. Therefore, the Company Law Board has passed an order directing the Company and its Directors to repay to the depositors by stipulating time limits and mode of payments to various depositors. This Court is of the view that the contention of the learned counsel cannot be countenanced. Whether or not the petitioner was incharge and responsible to the conduct of the business of the company or whether or not he has purposely resigned to avoid the directions of the Company Law Board is a matter of evidence. Therefore, at this stage, this Court is not inclined to quash the proceedings. This Court holds that there is prima facie material to proceed against this petitioner also and the present Criminal Original Petition is liable to be dismissed - this Criminal Original Petition is dismissed.

Summary

Issues:
1. Quashing of private complaint under Sections 45QA, 58B (4 AAA) & 58C of RBI Act, 1934.
2. Interpretation of Company Law Board order and liability of directors for non-compliance.
3. Responsibility of directors for repayment of deposits and prosecution under RBI Act.
4. Effect of director's appointment and resignation on liability for non-compliance.
5. Consideration of evidence and prima facie case for proceeding with prosecution.

Analysis:
The petitioner sought to quash a private complaint alleging violations under Sections 45QA, 58B (4 AAA) & 58C of the RBI Act, 1934. The complaint was based on a Company Law Board order directing the company and its directors to repay deposits. The petitioner, inducted as a director after the order, argued lack of responsibility due to timing. The respondent contended that all directors are liable regardless of appointment timing or resignation, emphasizing the order's enforcement objective.

The Court noted the Company Law Board's order's clear directive for repayment and the liability of directors for non-compliance under the RBI Act. Despite the petitioner's directorship post-order, the responsibility to honor the directive was emphasized. The Court held that mere resignation does not absolve directors of their obligations, as all directors are equally responsible for compliance. The petitioner's contention of lack of responsibility was deemed untenable at this stage.

The Court highlighted the importance of evidence regarding the petitioner's role and resignation motive. It referenced a previous case where co-accused failed to secure discharge due to prima facie evidence, affirming the decision to proceed with prosecution. Consequently, the Court found prima facie material to proceed against the petitioner and dismissed the Criminal Original Petition, aligning with the decision in the previous case.

In conclusion, the Court upheld the prosecution proceedings against the petitioner, emphasizing the collective responsibility of directors for compliance with regulatory orders. The decision was based on the interpretation of the Company Law Board order, the directors' obligations under the RBI Act, and the need for evidence to determine liability in such cases.