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TMI Blog2023 (5) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of his appointment as additional director. So, following regularization DIR 12 is not required to be filed, which is absolutely a wrong understanding. Since he is now a director, and not an additional director. Therefore, ROC must be informed by filing a new DIR 12 that the additional director has been regularized as a director in the Company - Moreover, additional directors are on equal footing, in terms of, of power, rights, duties, and responsibilities, as other directors are. Yet, tenure of additional director is up to the date of forthcoming AGM unlike directors which are duly appointed by shareholders in the general meeting. If the company wishes to continue with an additional director beyond the AGM, then it will have to go for his/her regularization. In the present case the petitioner as seen from the documents was an Additional Director on the date the board report was filed. To counter the same evidence is required to be adduced during trial so also to decide as to whether the petitioner at the relevant time of filing the report was a Director, Additional Director or an Independent Director. The responsibility of an Additional Director being the same as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt authority has issued instruction to launch prosecution for the aforesaid violation vide their letter dated 28th March, 2016. The petitioner herein has been arraigned along with others as a director of Mani Square Limited. But the opposite party deliberately chose to overlook the fact that the purported violation is in respect of the financial year ending on 31st March, 2014 and not the periods subsequent thereto when the petitioner was appointed as an independent director of M/s Mani Square Limited with effect from 2nd June, 2014 and therefore, the liability which was attempted to be thrust on the petitioner by the opposite party is totally untenable inasmuch as the petitioner did not have any connection with the said Mani Square Limited prior to 2nd June, 2014. Based on the complaint of the opposite parties, the learned Chief Metropolitan Magistrate, Kolkata by his order dated 6th September, 2016 was pleased to take cognizance. On 21st December, 2016, after receiving the file of the case, the learned Metropolitan Magistrate, 10th Court, Kolkata was pleased to issue summons against the petitioner and other accused persons. That the rest of the accused persons on 10th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company as on 31st March, 2014 and therefore, under no stretch of imagination, the prosecution could be allowed to be continued against the petitioner. That according to the General Circular No. 1/2020- F.No.16/1/2020/Legal, Government of India, Ministry of Corporate Affairs dated 2nd March, 2020 wherein it has been categorically directed by the appropriate authority of the Government of India that unnecessary Criminal Proceedings should not be initiated against the independent directors and non-executive directors, Non-KMP (Non-Key Managerial Personnel) and non-promoters. The Learned Magistrate failed to consider the aforesaid submissions in proper perspective and rejected the petition mechanically by simply stating that he has no authority to direct discharge of the petitioner. That in the light of the facts and circumstances of the case and the legal submissions made the impugned prosecution against the petitioner cannot be allowed to continue any further and is liable to be quashed. The initiation and/or continuation of the impugned proceedings, has amounted to gross abuse of process of Court and as such is liable to be quashed. It is further submitted that it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he materials on record including the documents relied upon it is seen that the invitation to the petitioner dated 02.05.2014 clearly shows that the petitioner was invited to join the board of directors of the company Mani Square Limited as a Director and his consent was solicited (Annexure B ). Annexure C is the petitioner s reply dated 6th May, 2014 there to stating that he has given his consent to act as an Independent Director on the board of the company. Form DIR 12 shows that the petitioner has been holding the designation of Additional Director and category independent . The designated partner details in the Ministry of Corporate Affairs shows the petitioner as a Director of Mani Square Limited. Form no. DIR-11 is notice of resignation of a director to the registrar and it is shown in the said form that the petitioner was a director of Mani Square Limited from 30th September, 2014 to 31st December, 2016. Annexure G is a notification of the Government of India, Ministry of Corporate Affairs regarding clarification on prosecutions filed or internal adjudication proceedings initiated against independent directors, non promoters and non KMP non-Executive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the signatory to the report were Mr. Sanjay Jhunjhunwala and Mr. Srikant Jhunjhunwala and the petitioner had never signed any such report. Counter to the reply has been filed by the opposite party. That the attachment to the DIR 12 Form on behalf of Company- Mani Square Limited where petitioner joined as director, clearly states in its resolution dated 2nd June, 2014 that petitioner was appointed as an Additional Director and not as Independent Director. As per Board s Report along with balance sheet for financial year 2013-2014, it has been mentioned that the petitioner has been appointed as Additional Director with effect from 2nd June, 2014. Therefore at time of scrutiny of Balance Sheet of the company, the petitioner s name was reflected as additional director of the company as per records fetched from MCA portal website. That for prosecution under Section 217(3) of Companies Act, 1956, all members of the Board at that point of time ought to have exercised due diligence when the balance sheet was approved. Whether absence of the petitioner from Board s meeting would be falling within the exceptions provided in Section 217(5) of 1956 Act or whether his case is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Term of Office Generally 5 years unless the contrary is provided. Up to the date of the Annual General Meeting or the Last date upto which AGM should have been held. That an Additional Director is a director having the same powers, responsibilities and duties as other directors. The only difference between them is regards to their appointing authority and their term of office. Powers and obligations Though appointed on a temporary basis, an additional director is vested with the same powers of a director. Moreover, they are subject to all obligations and limitations of a director. They are also entitled to seek appointment as a permanent director at the Annual General Meeting. The additional director must utilize his/her powers in the best interest of the company and the shareholders. Additional Director-Section 161 Section 161(1) provides that the articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trine of vicarious liability, by specifically incorporating such a provision. 29. By applying the ratio laid down by this Court in the case of Sunil Bharti Mittal it is clear that an individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused. Further in the case of Maksud Saiyed vs. State of Gujarat Ors. this Court has examined the vicarious liability of Directors for the charges levelled against the Company. In the aforesaid judgment this Court has held that, the Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company, when the accused is a Company. It is held that vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the Statute. It is further held that Statutes indisputably must provide fixing such vicarious liability. It is also held that, even for the said purpose, it is obligatory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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