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TMI Blog2022 (6) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... section 209A and 240(3) of the Companies Act, 1956. 2. The case of the petitioner is that the respondent is Serious Fraud Investigation (officer herein referred as SFIO) filed complaint under section 200 of Cr.P.C against the petitioner for violation of Section 240 (3) of Companies Act, alleging that they issued summons to the petitioner on 16.06.2011 and he has not replied to the notice. Again one more summons issued on 20.06.2011 to be appeared on 28.06.2011 and it is also alleged the final summons was issued on 01.07.2011 to appear before them on 07.07.2011 and he has not appeared and he has sent a reply that he was not employed as Auditor of the Company. Therefore private complaint came to be filed and the trial court took the cogniza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 239 of Companies Act, they have to furnish the details requested by the investigating agency, in view of the powers of this Section 239 of Companies Act. Therefore, the petitioner has been appointed as Auditor with eligibility criteria of Chartered Accountant, he is responsible person to submit the information to the investigating agency, failure to furnish the information, he has to be prosecuted. Therefore, the petitioner is liable to be prosecuted for the offence punishable under Section 240 (3) of Companies Act, 1956. Therefore the special counsel prayed for dismissal. 5. The learned counsel for the petitioner, in support of his arguments relied upon the following judgments: 1. Central Bureau of Investigation, Hyderabad Vs. K. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isqualification of auditors which is read as under: "226. Qualifications and disqualifications of auditors. A person shall not be qualified for appointment as Auditor of the Company unless he is Chartered Accountant within the meaning of Chartered Accountant Act 1949 (38 of 1949) provided that a firm, all of their partners practicing in India are qualified for appointment as aforesaid may be appointed by its firm name, to be auditor of the company in which case any partner so practicing may act in the name of the firm." 9. Admittedly the petitioner is a Chartered Accountant and he is running firm in the name of N.D.S. & Co., as Chartered Accountant. The resolution of the Company where the petitioner was appointed as an auditor in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of the Hon'ble Supreme Court has been followed by the various High Courts and Supreme Court in many cases and it is well settled that without making Company as accused the Directors or the Managing Directors are not vicariously held liable for the offence committed by the company. 11. In CBI Vs. K. Narayana Rao case, the Hon'ble Supreme Court has held, the advocate who gave an advice as legal advice or opinion he cannot be prosecuted. In this regard the respondent counsel has contended the advocate who has given opinion based upon the document cannot be considered as employee of the Company as per Section 240 of Companies Act. Therefore on that context Supreme Court quashed the criminal proceedings. But here in this case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has vicarious liability. But here in this case, petitioner who is Chartered Accountant is running a firm in the name of N.D.S. & Co., but in literal meaning N.D.S. & Co., is not a company registered under the company's act, where the company is a legal entity having its Managing Director, Director and others shareholders but the petitioner-N.D.S. & Co., is a firm. Admittedly the Mega City (Bangalore), Developers by their resolution have appointed the firm of the petitioner as it's Auditor and admittedly for appointing an Auditor the eligibility criteria is Chartered Accountant. The firm though appointed as a Chartered Accountant the proviso of Section 226 reveals "the person who is in charge in India as a partners have signed the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ona and this has several important legal consequences in the relationship between the parties all rights and duties only exist between the parties, inter se the right and duties of the partnership are the rights and duties of the partners for as per the partnership deed. Therefore, a partner cannot be bifurcated from a firm, for example for a firm minimum two partners are required, if one partner is retired either by resignation or by death, the firm becomes a proprietorship. Therefore, merely the petitioner running a firm in the name of N.D.S. & CO., but it is not a legal entity and it cannot be placed on par with the companies which is registered under the Companies Act. A partnership firm is not a separate legal entity distinct from its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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