21.09. 2020

Dr. Rajesh Kumar Yaduvanshi (Petitioner)

vs.

Serious Fraud Investigation Office
(SFIO) & Anr. (Respondents)

Delhi High Court
CRL. REV. P. 1308/2019 and CRL. M.A. Nos. 43209/2019,
3644/2020, 7626/2020, 7627/2020 & 10502/2020
Justice Vibhu Bakhru

Fact of the case

The petitioner has filed the present petition impugning a summoning order dated August 16, 2019 issued by the learned ASJ in Complaint Case No. 770/2019 captioned “Serious Fraud Investigation Office (SFIO) vs.Bhushan Steel Limited and Ors.”, to the limited extent that it directs issuance of summons to the petitioner. The learned Court had found that there was sufficient material placed on record against the petitioner for him to face prosecution in respect of offences under Sections 128, 129, 448 read with Section 447 of the Companies Act, 2013. The petitioner was Punjab National Bank Limited’s nominee on the Board of Directors of Bhushan Steel Limited (‘BSL’) at the material time.

Issue:
The principal issue that arises for consideration is:
• whether the petitioner can be prosecuted for the alleged fraud committed by BSL and/or promoters solely for the reason that the petitioner was a director of BSL and,
• Whether there is any material on record to indicate that the petitioner was complicit in the commission of the alleged offence.
The Petitioner submitted that there is no specific allegation in the SFIO report that the petitioner was even remotely connected or aware of the same and, therefore, his name does not feature as being involved in the fraudulent routing of funds. Further, it was submitted that merely mentioning the petitioner’s name as being one of the persons who is allegedly liable to be prosecuted under Sections 128, 129 and 448 of the Companies Act, 2013, without ascribing any specific role or pointing out any culpable conduct would not constitute sufficient material to persuade any Court to issue summons. Hence, there was no allegation in the complaint that the petitioner has connived with the Promoters or any other person to falsify the accounts and, therefore, the impugned order is wholly erroneous.

Judgement
Delhi High Court observed that there is no allegation that the petitioner was involved in the affairs of BSL except in his capacity as a Nominee Director of PNB. In such capacity, he was not assigned any executive work of BSL but was merely required to attend and participate in the Board Meetings of BSL.
Even, SFIO investigation report does not contain any specific allegations against the Petitioner of being complicit or having acted in bad faith. There is a material difference between the allegation that a Nominee Director has been negligent or has failed to discharge his responsibility and an allegation that he has connived or has been complicit in approving financial statements, which he knows to be false or conceal material information. While the latter may constitute an offence under Section 448 of the Companies Act, 2013, the former does not constitute any such offence.
Hence, the reasoning of the learned Trial Court that the petitioner had connived with the Promoters and is liable to be proceeded against, is clearly unsustainable and not supported by the allegations made in the complaint or the SFIO Investigation Report. Hence, the impugned summons issued to the petitioner and the impugned order, to the limited extent that it directs issuance of summons to the petitioner, are set aside.

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Fact of the case:
The petition was filed seeking quashing of five complaint cases initiated against the Petitioner. These complaint cases are primarily grounded on the return of five cheques which were issued on behalf of the Respondent No.2 company for a total amount of Rs. 45 Lakhs. Petitioner submitted that he ceased to be the Director of the Respondent No.2 company w.e.f. 27. 10. 2010, at least eight years prior to the issuance of the cheques in question and the resignation of the Petitioner was also notified to the Registrar of Companies by the Respondent No.2 by filing Form 32 dated 04. 01.2011, which is a public document.

The Petitioner contended that he was not the Director when the underlying contract was executed between the Respondent No.1 and Respondent No.2, nor when the cheques were issued and when they were presented.

According to the Respondent, the Petitioner was involved in the discussion before an agreement was executed between the Respondent No.1 and the Respondent No.2. Further, the Petitioner being a responsible Director of accused Respondent No.2 Company participated in meetings and assisted the officials of the Respondent No.1 who had visited the Respondent No.2 for verification of its financial and physical status.

Issue:
The contention of the Petitioner was: Whether Director of the Company after resignation is still held responsible for daily affairs of Company including Cheques issued and dishonoured?

Judgement
Delhi High Court held that, in cases where the accused has resigned from the Company and Form 32 has also been submitted with the Registrar of Companies then in such cases if the cheques are subsequently issued and dishonoured, it cannot be said that such an accused is in-charge of and responsible for the conduct of the day-to-day affairs of the Company, as contemplated in Section 141 of the NI Act. Thus, Petitioner after his resignation cannot continue to be held responsible for the actions of the Company including the issuance of cheques and dishonour of the same. Hence, complaint cases filed under Section 138 of the NI Act, against the petitioner are quashed.

In this case, Alibaba Nabibasha (Petitioner) vs. Small Farmers Agri- Business Consortium & Ors.(Respondents).

Delhi High Court CRL. M.C. 1602/2020, CRL. M.A. 9935/2020

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