Calcutta High Court (Appellete Side)
M/S Digvijay Finlease Ltd. And Ors vs State Of West Bengal And Anr on 8 May, 2025
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
Present:-
HON'BLE JUSTICE CHAITALI CHATTERJEE DAS.
CRR/1049/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
WITH
CRR/1618/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
WITH
IA NO: CRAN/1/2011 (OLD No: CRAN/1325/2011),
CRAN/2/2011 ( OLD No. CRAN/2032/2011)
IA NO: CRAN/1/2011(OLD NO: CRAN/1325/2011),
CRAN/2/2011( OLD No: CRAN/2032/2011)
WITH
CRR/1619/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1326/2011),
CRAN/2/2011 (OLD No: CRAN/2033/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1326/2011),
CRAN/2/2011 (OLD No: CRAN/2033/2011)
WITH
CRR/1620/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1327/2011),
CRAN/2/2011 (OLD No: CRAN/2031/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1327/2011),
CRAN/2/2011 (OLD No: CRAN/2031/2011)
WITH
CRR/1621/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1328/2011),
CRAN/2/2011 (OLD No: CRAN/2036/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1328/2011),
Page 1 of 15
CRAN/2/2011 (OLD No: CRAN/2036/2011)
WITH
CRR/1622/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1329/2011),
CRAN/2/2011 (OLD No: CRAN/2030/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1329/2011),
CRAN/2/2011 (OLD No: CRAN/2030/2011)
WITH
CRR/1623/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1330/2011),
CRAN/2/2011 (OLD No: CRAN/2035/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1330/2011),
CRAN/2/2011 (OLD No: CRAN/2035/2011)
WITH
CRR/1624/2011
M/S DIGVIJAY FINLEASE LTD. AND ORS.
VS
STATE OF WEST BENGAL AND ANR.
IA NO: CRAN/1/2011(OLD No: CRAN/1331/2011),
CRAN/2/2011 (OLD No: CRAN/2037/2011)
IA NO: CRAN/1/2011 (OLD No: CRAN/1331/2011),
CRAN/2/2011 (OLD No: RAN/2037/2011)
For the Petitioners : Mr. Somopriyo Chowdhury, Adv.
Mr. Rajshree Kajaria, Adv.
Last heard on : 02.04.2025
Judgement on : 08.05.2025
CHAITALI CHATTERJEE DAS, J.:-
1. The instant application has been filed under Section 482 of the code of
Criminal Procedure 1973 for quashing of proceedings in case no C-9493 of
2006 pending before the Learned Metropolitan Magistrate 10th court at
Calcutta under Section 301 (4) read with Section 301 (1) of the Companies
Page 2 of 15
Act 1956 and all orders passed there in including the order dated 5th
September 2006.
2. The fact pertains to filing of this application is a complaint was lodged by
the de-facto complainant being the Deputy Registrar of Companies Mr.
Goutam Mukherjee against the present petitioners under Section 301 (4) of
the Companies Act 1956 read with Section 301 (I) of the Act. The De-facto
complainant came to know about the alleged violation on 24.6.2005 after he
received the letter from the Regional Director vide his letter dated 24.6.2005
directing him to launch the prosecution for and such violation .Accordingly
the complaint was lodged by the Inspecting Officer duly authorized by the
Central Government under Section 209 A of the Act.
3. The contravention of the aforesaid provisions as pointed out that in course
of inspection it was pointed out that it has been noticed that as per minute
book of the Board of Directors dated 13.3.2001 the company has taken loan
of Rs. 1 lakh from M/S Rambha Investment Pvt. in which Sri R.N Mundra
is a director in both the companies .Further as per Board of director's
minutes dated 31.3.2001 the company has taken loan of Rs. 1 lakh from
Mannakrishan Investment ltd in which Sri Sandip Kanoria is a Director in
both the companies .The refund of loan which has been taken from
Mannakrishna Investment Ltd has been recorded in page 3 in the general
Registrar date 31.3.2002 .Thereby provisions of section 301 were violated
and consequently the accused rendered themselves liable for punishment as
provided under section 301,940 of the Act .
4. Hence the provision of section 301(1) of the Act has been contravened and
therefore the accused are liable to punish under section 301(4) of the Act.
Page 3 of 15
A show cause notice dated 17.11.2005 was issued to all the accused by the
complainant through Registered Post with A/D and the reply to the same
was given on 31st November, 2005 which according to the de-facto
complainant was not maintainable under the law on examination. It was the
contention of the complainant that he took steps to ascertain the identity
under Section 470 (3) of the Cr.Pc and thus the present petitioners/accused
persons found themselves liable for punishment under Section 301(4.) The
accused persons never intended to file the compounding petition under
Section 621(A) of the Act despite giving opportunity and the complaint was
filed within the period of limitation as under Section 468/469 of the Code of
Criminal Procedure. He has relied upon a decision reported in (1981) 3
SCC,34 (State of Punjab versus Sarwan Singh) where it was held that 'The
object which the statutes seek to subserve is clearly in consonance with the
concept of fairness of trial as enshrined in Article 21 of the constitution of
India. It is therefore of the utmost importance that any prosecution, whether
by the state or a private complainant must abide by the letter of law or take
the risk of the prosecution failing on the ground of limitation. 'The prosecution
against the respondent being barred by limitation the conviction as also the
sentence of the respondent as also the entire proceedings culminating in the conviction of the respondent here in become nonest".
5. The Learned Advocate appearing on behalf of the petitioner argues that even if a bundle of facts mentioned in the petition of complaint are taken of their face value and are believed to be true, same do not fulfill the criteria to Page 4 of 15 make out the essential ingredients to constitute the offence punishable under Section 301 (4) of the Companies Act, 1956. It is the contention of the Learned Advocate that since Section 301(4) of the Companies Act 1956 prescribed for a sentence of fine, the period of limitation for taking cognizance of the said offence would be six months from the date of the offence in view of the mandatory provision engrafted in Section 468 of the Code of Criminal Procedure. Furthermore even if the allegations made in the petition of complaint are taken to be true the alleged violation took place on 15th November, 2002 which came to the knowledge of the complainant Opposite Party No. 2 on 24th June, 2005 but the petition was filed on 5th September, 2006 that is after a lapse of one year two months from the date of knowledge of the alleged violation and therefore barred by limitation. Further submission of the Learned Advocate is that the present petitioner no. 2, 3, 4 are the Directors of the petitioner no 1 company and are not in charge of and responsible to the conduct of the business. Moreover there is no averment regarding the roles attributed by the petitioner no 3 and 4 in the running of the Company and in absence thereof they cannot be prosecuted for alleged violation as in the case. It is further argued that the most important factor is that the petitioner no 3 and 4 were not even the Directors of the petitioner no. 1 Company at the time of alleged default as they have been appointed as Directors on and from 30th January ,2004 and 13th August ,2004 respectively. No specific averments against the above persons excepting that the petitioner no 2 to 4 were in control of the aforesaid two companies. It is further argued that it is trite law that penal statute and/or the provisions do not presume vicarious liability unless the Page 5 of 15 statute specifically provides for the same and even if so the complaint never contained any aspersion against those persons. The Learned Advocate has relied upon the decision of Hon'ble Supreme Court reported in (2004) 16 SCC (Puja Ravinder Devi Dasani versus State of Maharashtra and another) in support of his contention regarding vicarious liability ,where it was observed by the Hon'ble Court' that merely arraying a Director of Company as an accused in the complaint and making bald or cursory statement without attributing any specific role that the Director is responsible in the conduct of the business ,would not make a case of vicarious liability against the Director of the Company under Section 141 of the NI Act' .Another judgement cited by the Learned Advocate as reported in (2016) 14 SCC 430 (Securities and Exchange Board of India versus Gourav Varshney and another where it was held that mere mention of the statutory provision, namely, Section 12 (1)-(B) of the SEBI Act would not amount to disclosing to the accused the particulars of the offence of which they were accused .Further more Section 251 Cr.pc would not remedy the defect and deficiency in the complaint.
6. Furthermore The Learned Court failed to apply his judicial mind while issuing process against the petitioner no 3 and 4 in absence of any specific averment against them.
Accordingly prayed for quashing the impugned proceeding.
7. In this case none appeared on behalf of the state respondent and the Opposite Parties though the administrative notice was issued which was duly served upon the Opposite Party no 2.
8. Heard the submissions of the Learned Advocate.
Page 6 of 15 The germane of this revisional application rests of on the petition of complaint as lodged before the Learned Chief Metropolitan Magistrate under Section 301 (4) of the Companies Act 1956 read with Section 301(1) of the Act on 5th Day of September, 2006. It transpires that the Opposite Party no. 1 Company was incorporated in the State of Gujrat as Private Limited Company under the Companies Act 1956 and the Company shifted it's Registered office as on 5.11.2001 and at present said office is situated at 21 Strand Road, Calcutta . The petitioner no 2 to 4 were the Directors of the Company at the relevant point of time when the complaint was lodged. Pursuant to Section 301 of the Act every Company shall keep one or more Registrars in which particulars of all the contracts or arrangement to which Section 297 or Section 299 applies including the particulars of the date of contract arrangements, name of the parties thereto, the principal terms and conditions thereof, in the case of a contract to which Sub Section 297 applies or in the case of a contract or arrangement to which sub section (2) of the Section 299 applies, the date on which it was placed before the Board, the name of Directors voting for and against the contract or arrangement and the name of those remaining neutral will have to be entered . In this case an inspection of the books of account and other records of the Company was carried out by Inspecting Officer under Section 209 (A) of the Act and he pointed out the contravention of the above provisions in course of inspection which revealed that as per General ledger page no. 24 the company has withdrawn the amount of Rs 1,69,00,000/- on 23.3.2001 and deposited the same in Standard Chartered bank . On the next day the said amount was paid to NBI Industrial Finance Company Limited towards loan Page 7 of 15 @ 14% per annum. Again company has given loan of Rs 50 lakhs on 30th March 2001 and RS 50 lcs on 31st March, 2001 to NBI Industrial Finance Company Private Ltd.It is a diversion of the company's fund in which Sri R.N Mundra was the director in both the companies .The NBI Industrial Finance Company Limited and Digvijay Finlease Ltd are still under the controlling of Sri Hari Mohan Bangur. Hence the provision of section 301(1) of the Act has been contravened and therefore the accused are liable to punish under section 301(4) of the Act.
9. A show cause notice was issued dated 17.11.2005 however according to the complainant the reply was not according to the relevant provision and therefore not maintainable under the law on examination. The De-facto complainant for the alleged violation of the Act prayed for issuance of summons under Section 301(4) of the Act to the accused persons and also to dispense with the personal attendance of the complainant and at the time of imposing fine the learned Court to direct whole or part there of as may be deemed fit be applied in or towards payment of cost of this proceedings under Section 626 of the Act. The complaint was received by the learned court on 5th day of September 2006 and directed the summons to be issued upon the present petitioners.
Being aggrieved thereby the instant application has been filed under Section 482 to quash the entire proceeding.
10. The Learned Advocate has annexed the particulars of appointment of Directors and Manager along with this revisional application at page 23,24,25,26 which reveals that one Prasant Bangur that is petitioner No 4 Page 8 of 15 was appointed on 13th August 2004 as a Director of Company as Jagadish Chandra N. Mundra resigned from Directorship on 13th August, 2004. A Form No .29 dated 13th August,2004 was submitted before the Registrar of Company with the name of the present petitioner no 4 pursuant to Section 264/2/ 266 (i) (a) and 266(1) (b)(iii) of the Company's Act . On 23rd February, 2004 the Company submitted Form No. 32 wherefrom the date of appointment of the present petitioner no 3 Gopal Daga as Director of the Company on 30th January ,2004 is found to be recorded . Form No. 29 was submitted according to Section 303(2) of the Companies Act, Form no 29 under Section 264(2)/266 (i) (a) and 266(1) (b)(iii) was submitted before the Registrar of Companies giving the name of Benu Gopal Bangur as Director and these documents contains the ROC cash counter receipt from office of the Registrar of Companies . Therefore, from the above documents which are the documents filed with the Registrar of companies to provide information regarding appointment of Directors etc. and any changes took place. it is clear that the present petitioner no 3 and 4 were appointed as director only with effect from 13.08.2004 and 30.01.2004 when they were named as an accused person in the written complaint pursuant to the alleged violation as on 24th January 2001 as appeared from the Board of director's meeting.
11. So admittedly those two persons were not even the Director of the said Company as alleged at the relevant point of time and on the face of it the complaint is not maintainable against them. The Learned Magistrate did not consider the involvement of these two persons or the absence of specific allegation against them when their names have been incorporated Page 9 of 15 in a written complaint. Therefore the court is to consider whether any specific allegation or aspersion has been made by the Complainant against the petitioner No. 2 It is a settled law that the Directors are not responsible for the everyday business. The Hon'ble Supreme Court in Pooja Ravinder Devadasani (supra) which pertains to N.I Act observed that there must be specific averments against the Director showing as to how and in what manner he/she was in charge of and was responsible for conducting the business of the company .This is a case under companies Act and violation of section 301 (1) which made it mandatory for the company to keep the Registrar particulars of such contracts or arrangement to which subsection (2) of section 299 applies shall be entered in to. Section 299 deals with the disclosure of interest by the Director so possibly the facts and circumstances are not similar with his case .However issue of summon is a serious matter and therefore there must be very specific incriminating materials against the persons against whom the summons are being issued. As discussed the PetitionerNo.2 and 4 can never be summoned as they were not the Directors at the relevant point of time which the Learned Magistrate failed to consider. The petition of complaint specifically said that Sri Ram Narayan Mundra was in control of both NBI Industrial Finance Company limited and the petitioner No. 1 and violated the provision under section 301 (1) of the companies Act 1956 which speaks of maintaining a register of contracts ,companies and firms in which directors are interested. This Register is to track the details of the contract or arrangements covered under section 297/299 of the Act. Section 299 deals with disclosure of interest by the Director and in case of non-compliance Page 10 of 15 every Director who fails to comply shall be punishable with fine with fine which may extent to Rs.50,000/- . Nothing has come to show that he was not the Director at the relevant point of time and nor relied upon their show cause reply. So let me consider the Further point taken pertaining to limitation as raised by the petitioner .The provision enumerated under Section 301of the companies Act 1956 deals with inspection of the Register and in default by the company and every officer of the company shall be punishable with fine which may extend to Rs. 500/-however after amendment in the year 2000 the said amount has been enhanced to 50,000/-. Pursuant to section 468 of the code of criminal procedure there is a bar in taking cognizance after lapse of the period of limitation in some category of offences and the period of limitation depends on the punishment prescribed for the offense. In a five Judge Bench in (2014)1 SCC (Cri) 721 in Sarah Mathew vs Institute of cardio Vascular Diseases after considering a catena of decisions and few legal Maxim ,held as follows;
'We hold that for the purpose of computing the period of limitation under section 468 Cr.Pc the relevant date is the date of filing the complaint or the date of institution of prosecution and not the date on which the Magistrate takes the cognizance."
12. Section 469 of the code deals with the commencement of the period of limitation and it has been provided that the period of offence of limitation in relation to an offender shall commence,-
a) on the date of offence; or Page 11 of 15
b) where the commission of offence was not known to the person aggrieved by the offence or to any police officer ,the first day on which such offence comes to the knowledge of such person or to any police officer whichever is earlier or; or
c) where it is not known by whom the offence was committed, the first day on which the identity of the offender is known to the person aggrieved by the offence or to the police officer making investigation into the offence, whichever is earlier.
(2) In computing the said period, the day from which such period is to be computed shall be excluded.
13. In this case allegedly the violation took place on 24th January ,2004 which came to the knowledge on 24th June, 2005 and the complaint was filed on 5th September, 2006 ,so the complaint was filed more than a year after the date of knowledge and thereby the Learned Magistrate should not have taken the cognizance without considering this aspect. The offence came to the knowledge when the Deputy Registrar of the Companies received a letter from the Regional Director vide his letter dated 24th June 2005 with a direction to launch the prosecution for the aforesaid violation and the complaint was lodged on 5th Day of September 2006 .In the complaint itself no reason has been assigned while the reply to show cause dated 30th November ,2005 of the petitioner was considered as not maintainable under law on examination, by the de-facto complainant. Moreover admittedly such reply was dated 30/11/2005 as stated in the complaint .Therefore the point of limitation cannot be ignored. The complaint and the date of cognizance Page 12 of 15 was much before the date of amendment of the quantum of fine and hence the bar under 468 Cr.Pc remains.
14. It is the settled principal of law that the Learned Magistrate before issuance of summon which is considered to be a serious one as the person summoned is to be portrayed as an accused, ought to have applied his judicial mind instead of mechanically pass the order directing to issue direct to issue the summons. It has been categorically observed by the Hon'ble court in several judicial pronouncements that a wide discretion has been given to grant or refusal of process and it must be judicially exercised. A person ought not to be dragged into court merely because a complaint has been filed .If a prima facie case has been made out ,the Magistrate ought to issue process and it cannot be refused merely because he thinks that it is unlikely to result in a conviction.'
15. The learned Magistrate failed to apply his mind in this case since the process was issued against the persons who were not the Director of the company nor any specific averments were there against them in the complaint, the issue of limitation was not considered and most importantly failed to see whether any vicarious liability is involved in this case an therefore mechanically issued the process. Hence the proceeding is liable to be quashed. In a decision as relied upon by the petitioner Reported in (2014) 16 SCC 1 in Securities and Exchange Board of India vs Gaurav Varshney & Anr.with SEBI vs Pravesh versnay with Major P.C Thakur vs SEBI, it was observed by the Hon'ble Supreme Court that the liability arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not Page 13 of 15 on the basis of merely holding a designation or office in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a Director or manager or secretary was enough to cast a criminal liability ,the section would have say so .Instead of every person the section would have say every director ,manager or secretary in a company is liable etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned .Therefore only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.
16. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of the person and not merely on account of holding an office or a position in a company .Therefore in order to bring a case within section 141 of the Act the complaint must disclose the necessary facts which make a person liable. So by no stretch of imagination the complaint can be said to be maintainable against the petitioner no 2 to 4 and hence the proceeding as pending before the learned court is liable to be quashed.
17. The instant CRR stands allowed. In view of that the connected applications if any are also disposed of.
18. The entire proceeding pending before the Court of Learned court of Metropolitan Magistrate 10th Court being C-9493 of 2006 is hereby quashed. Page 14 of 15
19. Let a copy of this order be sent to the Learned Court for information and taking necessary action.
20. Urgent Photostat copy of this Judgement, if applied for be supplied to the applicant upon compliance of all formalities.
(CHAITALI CHATTERJEE DAS, J.) Page 15 of 15