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TMI Blog2019 (10) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... amount involved in relation to each of the financial year/assessment year and the corresponding cases are all tabulated below : Financial Year/ (Assessment Year) CC.No. Unremitted TDS Amount (Rs.) Interest Amount (Rs.) Total Amount (Rs.) 2014 - 2015 (2015-2016) 235/2018 17,39,64,450 2,06,13,906 19,45,78,356 2015-2016 (2016-2017) 236/2018 6,39,39,954 - 2013-2014 (2014-2015) 237/2018 15,40,39,638 - 1.2 The petitioners are arrayed as accused on the allegation that they are the Directors of the first accused company. Broadly, their defense is that that they were all Non-Executive Directors appointed to the Board of the first accused company and that they did not partake in the actual management/functioning of the company. On this allegation, the petitioners have laid separate petitions under Section 482 Cr.P.C. for quashing each of the criminal cases in which they have been arrayed: Name of the Petitioner/ Rank in CC.Nos. Crl.OP.No. C.C.No. K.Ramakrishnan (A6 in all CC.Nos.) 16082/2018 16083/2018 16084/2018 235/2018 237/2018 236/2018 V.T.Bharadwaj (A5 in all CC.Nos) 12553/2018 12554/2018 12555/2018 235/2018 236/2018 237/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned from the Board of the first accused. As to the rest, his contentions are substantially the same. C. Thiru. V.T.Bharatwaj (5th accused): 4. He was the Managing director of M/s Sequoia Capital India Advisors Private Ltd., Sometime, in 2009, the Sequoia Capital India Growth Investments I, and the Sequoia Capital India Investment Holdings III, had invested in the first accused company. The petitioner was therefore inducted to the Board of the first accused, as the nominee of the investors as a Nominee Non-Executive Director, Vide resolution of the first accused's Board dated 18-12-2009 . And, on 18-11-2015 he resigned from the Board of the first accused. And he is in the same club as the other two petitioners. 5. The complainant/respondent had preferred its counter to all the petitions except in Crl.O.P.s 16082 of 2018 to Crl.O.P.16084 of 2018 (filed by Ramakrishnan) The quintessential contentions of the respondent as disclosed in the counter are: Though the petitioners were the Non-Executive Directors of the first accused company, yet they did have played a role, and the extent of their role would be known only after due trial. Secondly, under 278 E of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... humilan Syntex Ltd., & Another Vs Union of India & Another [(2007)11 SCC 297], Kalanithi Maran Vs Union of India [CDJ 2018 MHC 2663], Kanarath Payattiyath Balrajh Vs Raja Arora [2017 SCC OnLine 7418 (Delhi HC)], S.N.P. Punj Vs Deputy Commissioner of Income Tax [(2008) 301 ITR 76 : 2006 SCC OnLine Del 1439] Homi Phiroz Ranina & Others Vs State of maharashtra & Others [2003(3) Mh.LJ 34], Sri Kunnasagaran Chinniah Vs the Income Tax Department & another [of Karnataka High Court in Crl. Petition 6577/2014, dated 01-10-2015]. 8. The response of the counsel for the respondent was more along predictable and classical lines: That the role of the petitioners could be known only when the cases against them go for trial. VI Discussion & Decision: 9. Let the statement made by the respondent in defense of the petitioners' case be scanned for its merit: Notwithstanding the fact that the petitioners are Nominee Non-Executive Directors in the Board of the first accused, their role in non-remittance of the TDS by the first accused could be known only if the matter goes for trial. This is the statement. It presupposes that they have a responsibility in the commission of the alleged offense. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. It requires little homework on the part of an official - Complainant to fix criminal liability on a Nominee director, for, to prosecute one without foundation poses a threat to their right to the dignified existence under Article 21 of the Constitution. 12. Who then is criminally liable under Sec.278B of the Income Tax. As already indicated, both Sec. 278B of the Income Tax Act and Sec. 141 of the Negotiable Instruments Act are worded almost identically. This is compared below: Section 278B of the Income Tax Act, 1961 Section 141 of the Negotiable Instruments Act, 1881 Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in subsection shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due dilligence to prevent the commission of such offence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution, or shareholders of a company have a duty to, or responsibility to be, in charge of the affairs of the company, depends on the terms of contract or any legal provisions on the basis of which such nominee director came to be nominated. This cannot be left to any unfounded belief of the Complainant, or to his random statement that a nominee director is the Principal Officer of the company. 14. In Pooja Ravinder Devidasani case [(2014) 16 SCC 1], the Hon'ble supreme Court has held (in the context of the offense under sec.138 of the Negotiable Instruments Act by a Company), has held: "There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Nonexecutive Director is no doubt a custodian of the governance of the company but is not involved in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the company, one who actively looks after the day-to-day activities of the company and is particularly responsible for the condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em from criminal prosecution under sec.278B of the I.T. Act, for an offence of non remitting the TDS (exactly the same offence for which the petitioners herein are sought to be prosecuted), the Honble Supreme Court declined to grant relief to the Directors of the company, because they happened to be Directors, and proceeded to hold that their actual role via-a-vis, the company is a matter for trial. As indicated earlier, that was a case involving the Directors of the company, and not Nominee Directors. It must however, be added that the Supreme Court did not omit to emphasis that a criminal prosecution under Sec.278B of the Income Tax can lie only against those who are in charge of the affairs of, or, responsible for the business of the company. 16. This court has little hesitation to conclude that there is nothing in the complaint, that the petitioners, even as Nominee Directors were in charge of the affairs of the companym and consequently they cannot be made liable to face criminal prosecution. 17. In the result, this Court allows all the petitions and quashes the complaints in C.C.No.235 of 2018, C.C.No.237 of 2018 and C.C.No.236 of 2018, pending on the file of Judicial Magis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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