Madhya Pradesh High Court
Pramod Kishore Shrivastava vs The Union Of India on 7 December, 2022
Author: Anand Pathak
Bench: Anand Pathak
1
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ANAND PATHAK
MISC. CRIMINAL CASE No. 42303 OF 2022
BETWEEN:-
PRAMOD KISHORE SHRIVASTAVA S/O SHRI
OM PRAKASH SHRIVASTAVA, AGED 43 YEARS,
OCCUPATION SERVICE, R/O 706- HEAVENS
APARTMENTS, GRANDE EXOTICA, BICHIOLI
MARDANA, INDORE- 452016 (MADHYA
PRADESH)
.....PETITIONER
(BY SHRI PRAVEEN SURANGE AND SHRI N.K.DAVE - ADVOCATES )
AND
1. THE UNION OF INDIA, THROUGH
SECRETARY, MINISTRY OF CORPORATE
AFFAIRS, 'A' WING, SHASTRI BHAWAN,
RAJENDRA PRASAD, ROAD, NEW DELHI
2. REGISTRAR OF COMPANIES, MADHYA
PRADESH, 3RD FLOOR, 'A' BLOCK, SANJAY
COMPLEX, JAYENDRA GANJ, LASHKAR,
GWALIOR 474009 (MADHYA PRADESH).
.....RESPONDENTS
( BY SHRI PRAVEEN KUMAR NEWASKAR - DEPUTY SOLICITOR
GENERAL)
............................................................................................................
Reserved on : 1/11/2022
Pronounced on : 07/12/2022
................................................................................................
2
This petition having been heard and reserved for order,
coming on for pronouncement this day, this Court passed the
following:
ORDER
Present petition is preferred by the petitioner under Section 482 of Cr.P.C. seeking quashment of order dated 28/7/2022 passed in Criminal Case No. SC/128/2016 (Annexure P/1) whereby, application preferred by petitioner under Section 317 read with Section 205 of Cr.P.C. has been rejected. Petitioner has taken exception to the complaint filed by respondent No. 2 and seeks quashment of the complaint so far as it relates to the petitioner.
2. Reliefs as sought by petitioner are in following manner:-
"A. The impugned Order dated 28/07/2022 passed in Criminal Case No. SC/128/2016 titled as "Registrar of Companies Vs. M/s. Plethico Pharmaceutical Limited and Others" by Learned IX Additional Sessions Judge, Gwalior/ Special Court (Companies Act, 2013), Gwalior, Madhya Pradesh and B. By quashing the criminal proceedings pending before Learned IX Additional Sessions Judge, Gwalior/Special Court (Companies Act, 2013), Gwalior, Madhya Pradesh in Criminal Complaint No. SC/128/2016 titled as "Registrar of Companies Vs. M/s. Plethico Pharmaceutical Limited and Others" so in far as related to the present Petitioner in the interest of justice. Or II. The petitioner further prays to grant any other relief 3 which the Hon'ble Court deems fit and proper in the facts and circumstances of the present case to secure the ends of Justice."
3. Precisely stated facts of the case are that on 4/12/1991 M/s. Plethico Pharmaceuticals Private Limited (hereinafter shall be referred to as "Company") was incorporated as private limited company under companies Act, 1956. Later on it got converted into a Limited Company and it continued to be so. Petitioner as submitted was appointed as Additional Director in the category of Non-executive Independent Director in the Company w.e.f. 29/11/2006 pursuant to Section 263 of Companies Act, 1956. As the Company was listed Company, pursuant to clause 49 of Listing Agreement, it was required in the composition of Board to have minimum two Directors in the category of Non-executive Independent Directors.
4. The said Company invited deposits from public at large as per Section 58-A of Companies Act, 1956 and accordingly the Company issued invitation for acceptance of deposits vide advertisement dated 14/2/2011. In the said advertisement, petitioner was shown as Independent Director. In response to the said invitation, the said Company received deposits which were to be paid back after a specified time. Board of Directors specifically authorized Chairman cum Managing Director, CEO cum Whole-time Director of the Company to repay the deposits and for necessary compliance related to the said deposits accepted by the Company.
5. When the petitioner came to know about the fact of non repayment of deposits by the Company to the depositors then the petitioner as alleged, tried to raise objections and ultimately he resigned from the 4 Company on 16/4/2015 as per Form DIR-11 showing the resignation of petitioner w.e.f. 31/03/2015. It further appears that Company filed an application seeking extension of time to repay the deposits before Learned Company Law Board, Mumbai and said Board vide order dated 11/3/2015 directed the Managing Director of the Company to make immediate payment to respective fixed deposit holders.
6. Meanwhile, show cause notices were received by petitioner dated 4/2/2015 and 13/2/2015 which were issued by Assistant Registrar of Companies, Madhya Pradesh at Gwalior alleging therein non-compliance of Section 58-A(9) of Companies Act, 1956 and 74(2) of the Companies Act, 2013, required the petitioner to explain why the prosecution should not be launched against him in the Court of law under Section 58-A(10) of Companies Act, 1956 and Section 74(3) of Companies Act, 2013.
7. Meanwhile, a petition for winding up of the Company was filed by Citibank under Section 433(e)(f) read with Section 434 of Companies Act, 1956 which was registered as Company Petition No. 35/2013; wherein, Coordinate Bench of this Court at Indore vide order dated 7/4/2015 appointed Official Liquidator as Provisional Liquidator.
8. After getting requisite permission from the Ministry of Corporate Affairs, respondent No. 2 filed a complaint before CJM, Gwalior against the Company, its Managing Director, Whole Time Director, Key Managerial Personnel, Company Secretary and also against the petitioner as Independent director and same was registered as Criminal Complaint No. 1627/2015 in which CJM issued summons to the petitioner.
9. Aggrieved by issuance of said summons, petitioner filed a petition under Section 482 of Cr.P.C. before this Court vide M.Cr.C.No. 6465/2015. This Court after hearing the parties, passed an order dated 5 16/7/2015 by which petition was disposed of with a direction to the petitioner to prefer appropriate application raising the question of want of jurisdiction before the learned Magistrate within a period of 30 working days from the date of order and the same was directed to be decided by learned Magistrate. Meanwhile, interim protection was given to the petitioner.
10. After passing of order dated 16/7/2015, on 1/10/2016 application for jurisdiction was heard by learned CJM, Gwalior and fixed the date 3/10/2016 for pronouncement of order. On that date, learned CJM, Gwalior returned the complaint under Section 201 of Cr.P.C. to complainant (respondent No. 2 herein) on the ground that as per the memorandum dated 25/7/2016, Special Court was constituted under Section 435 of Companies Act, 2013 to entertain, hear and decide the prosecution under Companies Act and therefore, the Court of CJM had no jurisdiction to even decide the issue of jurisdiction as per direction of this Court vide order dated 16/7/2015.
11. It appears that on 14/10/2016, respondent No. 2 filed a complaint before the Special Judge (under Companies Act, 2013); wherein, present petitioner has been arrayed as accused No. 4, upon which Court below registered the complaint under Section 74(3) of Companies Act, 2013 and directed all the accused named therein to appear before the Court. Pursuant to order dated 14/10/2016, petitioner did not appear before the learned Special Court and marked his presence through his counsel only. Petitioner again moved an application dated 18/8/2017 before learned Special Judge (trial Court) for termination of proceedings against the petitioner raising specific grounds contained therein, based on Section 2(60)(V) and Section 149(12) of the Companies Act, 2013 and in light of 6 Master Circular No. 1 of 2011 issued by respondent No. 1.
12. Petitioner also filed an application under Section 227 of Cr.P.C. for discharge on the basis of subsequent event i.e. circular dated 2/3/2020 issued by MCA (respondent No. 1). The said application remained pending since then. One application filed under Section 317 read with Section 205 of Cr.P.C. is being dismissed by the learned Special Judge. Other arguments including the question of jurisdiction were also considered by the Court below and decided the point of jurisdiction and found the Special Court within its jurisdiction to take cognizance. All accused were called to appear on bailable warrant in the sum of Rs. 20,000/-. Against the issuance of such bailable warrant, against rejection of application by Court below and taking exception to the criminal complaint as a whole, the instant petition has been preferred by petitioner under Section 482 of Cr.P.C.
13. It is the submission of learned counsel for the petitioner that status of petitioner in the Company was as Non-executive Independent Director, therefore, he was not involved in day to day working of the Company and therefore, he cannot be fastened with any liability just like regular Directors of the Company.
14. According to learned counsel for the petitioner, learned Court below did not consider the impact of Section 2 (60) (Officer who is in default) of the Companies Act, 2013 and Section 149(12) of the Companies Act, 2013 and caused illegality. Section 2 (60) of the Act of 2013 provides list of Officers who may be treated as Officer in default and clause (5) of Section 2 (60) does not include present petition into its ambit, because petitioner was an Independent Director. Case deserves to be filed only against Company and its Managing Directors, Whole Time Director, 7 Company Secretary and not against the petitioner, who was Non- executive Independent Director and who had no role to play in day to day affairs of the Company in general and in compliance of provisions of Companies (Acceptance of Deposits) Rules, 2014, in particular.
15. Since, petitioner is not an Officer in default which is a sine qua non for prosecuting the petitioner, therefore, from various provisions of the Companies Act, 2013 it is clear that prosecution against the petitioner is without any factual or legal basis.
16. From the language of Section 74(3) of the Companies Act, 2013, it appears that every officer of Company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty five lakh rupees but which may extend to two crore rupees, or with both.
17. Petitioner also referred Section 2 (51) of Companies Act, 2013 "Key Managerial Personnel" to submit that he was neither Key Managerial Personnel nor Officer who is in default, therefore, cognizance is bad in law.
18. On the other hand, learned counsel for respondents opposed the prayer and prayed for dismissal of the petition on the ground that petitioner as accused No. 4 was appointed as Additional Director for period 29/11/2006 to 30/03/2007. Thereafter, accused Company filed Form 32, through which the complainant, Registrar of Companies, was informed that there has been a change in designation of petitioner from Additional Director to Director w.e.f. 30/3/2007. Therefore, he worked for eight years as Director of Company. Therefore, petition is based on incorrect facts and false submissions and therefore, is misconceived.
19. Since, petitioner -Pramod Kishore Shrivastava was a Director in the 8 Company having full knowledge of all decisions/actions taken through Board process, is equally liable for all the cause of Company including criminal liability for violation of provisions of Section 74 of Companies act, 2013. Trial would decide the respective roles of accused persons and at this stage, no case is made out for interference. He prayed for dismissal of the petitioner.
20. Heard learned counsel for the parties at length and perused the documents appended thereto.
21. This is a case where raison d' etre of petitioner's submissions is his status in the Company as Non-executive Independent Director. According to the petitioner, he was appointed as Non-executive Independent Director in the Company since 29/11/2006 and worked till 31/3/2015 in same capacity, therefore, submission advanced on behalf of petitioner was that the petitioner was neither Key Managerial Personnel as per Section 2 (51) nor he was Officer in Default as per Section 2 (60) of the Companies Act, 2013.
22. However, on close scrutiny and reply filed by the respondents, it is clearly established that although initially petitioner was appointed as Additional Director in the Company but thereafter Company filed Form 32 through which petitioner's designation has been changed from Additional Director to Director w.e.f. 30/3/2007. After becoming Director of the Company, Company raised the deposits in year 2011, therefore, petitioner was well within the knowledge of all the activities / decisions taken by the Company and he was privy to it. Reply filed by respondents was not rebutted by petitioner. Even minutes of the meeting of Board of Directors of M/s. Plethico Pharmaceutical Limited held on 29/11/2006 indicate that petitioner was appointed as Additional Director of the 9 Company and minutes of meeting of Board of Directors of M/s. Plethico Pharmaceutical Limited held on 14/2/2011 indicates the status of petitioner as Director. In the said meeting, decision of inviting deposits was taken. Not only this, Form No. DIR-11 filed by the petitioner as part of Annexure P/6 also indicates that his designation was Director.
23. In sum and substance, petitioner was Director in the Company and even if any doubt exists in respect of his status in the Company whether as Additional Director, Independent Director or Director then it can only be decided on the anvil of evidence to be led by the parties before the trial Court and not invoking the extra ordinary jurisdiction under Section 482 of Cr.P.C. Even otherwise, Section 2(51) of the Companies Act, 2013 defines Key Ministerial Personnel in relation to Company and it provides an exhaustive list of Officers. Same is reproduced for ready reference:-
"2. Definitions.-
(51) "key managerial personnel", in relation to a company, means-
(i) the Chief Executive Officer of the managing director or manager;
(ii) the company secretary;
(iii) the whole time director;
(iv) the Chief Financial Officer;
(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and
(vi) such other officer as may be prescribed."
24. Similarly, Section 2 (60) of the Companies Act, 2013 defined "Officer who is in default" and it also provides an exhaustive list. Same 10 is reproduced hereinbelow for ready reference:-
"2. Definition.-
(60) "officer who is in default", for the purpose of any provision in this Act which enacts that an officer of the company who is default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:-
(i) whole-time director;
(ii) key managerial personnel'
(iii) where there is no key managerial personnel, such director or directors as specified by the board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;
(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution or accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
(v) any person in accordance with whose advice, directions or instructions the Board of directors of the company is accustomed to act other than a person who gives advice to the Board in a professional capacity;
(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any 11 proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;"
25. Scope of Section 2 (51) (vi) is to be tested on the anvil of evidence.
26. Similarly, Section 2 (60)(v) provides a broad mechanism under which any person related to the Company's affairs can be included. Here it is to be noted that in sub-section (iv) and (v) of Section 2 (60) word person has been used, ergo, it expands the spectrum / scope of "Officer who is in default". Sub-section (iv) and (v) defines exhaustive list of participants in different manner. Therefore, on this count also, case of petitioner lacks merits.
27. In the cumulative analysis, no error of law has been made by Court below while passing the impugned order and rightly taken cognizance against the petitioner.
28. The judgments cited by learned counsel for the petitioner move in different factual realm as here in the instant case respondents established the fact that petitioner was Director in the company, therefore, same are not applicable in the facts and circumstances of the instant case.
29. Petitioner is always at liberty to plead and prove his part of innocence before the trial Court at appropriate stage by raising evidence in his support in accordance with law.
30. Even otherwise, scope of petition under Section 482 of Cr.P.C. is very limited specially when facts as narrated by the petitioner are 12 outrightly disputed by respondents and documents also support the cause of respondents in continuation of prosecution before the trial Court, therefore, it is not such exceptional case where this court can show indulgence.
31. Resultantly, petition sans merits and is hereby dismissed. Observations made in discussion are for arriving to the conclusion, prima facie. However, it is made clear that trial shall be proceeded on its own merits, without being influenced by any observation of this Court.
(Anand Pathak) Judge jps/-
JAI PRAKASH Digitally signed by JAI PRAKASH SOLANKI DN: c=IN, o=HIGH COURT OF MADHYA PRADESH BENCH GWALIOR, ou=HIGH COURT OF MADHYA PRADESH BENCH GWALIOR, postalCode=474001, st=Madhya Pradesh, 2.5.4.20=287738d30aabaeda9b10cecdf179cec865c7633f4cfb9e38ce14fcb SOLANKI b05b9522a, pseudonym=560BC50AD082B9BE54EE290EC8CB2193780D8357, serialNumber=8D6BC1C9FCE36623D0BD6B8072A2D8C01433EBD48AE4F6 09F108CA8F8DE6B522, cn=JAI PRAKASH SOLANKI Date: 2022.12.07 17:34:11 +05'30'