Calcutta High Court (Appellete Side)
M/S Digvijay Finlease Ltd. And Ors vs State Of West Bengal And Anr on 8 May, 2025
2025:CHC-AS:842
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
2025:CHC-AS:842
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
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Act 1956 and all orders passed there including the order dated 5th
September 2006.
2. 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 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 which inter alia arrayed the accused no 2 to 4 being the
Directors of the company at the relevant point of time, and the company has
brought and came for Right issue. An amount of 1, 86, 44,280 was
collected in UTI Bank limited, for 18,64,428 equity shares. 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 @ 14% per annum. Again company has
given loan of Rs.50 lakhs on 30th March 2001 and Rs. 50 lacs 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
along with the other company .The NBI Industrial Finance Company Limited
and Digvijay Finlease Ltd. are still under the controlling of Sri Hari Mohan
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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.
4. 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.)
5. 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 sub serve 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”.
6. 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
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their face value and are believed to be true, same do not fulfill the criteria to
make out the essential ingredients to constitute the offence punishable
under Section 301 (4) of the Companies Act, 1956.
7. It is the further 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 long back in the year 2001 as appears from
the date of granting loan which came to the knowledge of the complainant
Opposite Party No. 2 on 24th June, 2005 but the petition of complaint 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.
8. 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
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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
statute specifically provides for the same and even if so the complaint never
contained any aspersion against those persons.
9. 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.
10. 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.
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11. 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.
12. Heard the submissions of the Learned Advocate.
The germane of this revisional application rests 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 its
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.
13. 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 .
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14. 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 @ 14% per annum. Again company has given loan of Rs. 50 lakhs on
30th March 2001 and RS 50 lacs on 31st March, 2001 to NBI Industrial
Finance Company Private Ltd. This diversion of the company’s fund took
place when Sri R.N Mundra was the director in both the companies .The
NBI Industrial Finance Company Limited and Digvijay Finlease Ltd. are
control 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.
15. 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. Learned court on 5th day of
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September 2006 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.
16. The particulars of appointment of Directors and Manager can be seen from
the Form annexed with this revisional application at page 23,24,25,26
which reveals that one Prasant Bangur the petitioner No 4 was appointed
on 13th August 2004 as a Director of Company and 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 .
17. 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 also 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
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complaint with an allegation of the above provision, on 24 January 2001
th
as appeared from the Board of director’s meeting.
18. 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
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
19. 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)in connection with a matter under 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 when 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
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not the Directors at the relevant point of time which the Learned Magistrate
failed to consider.
20. 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 Company 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. under Section 299 in case of non-
compliance every Director who fails to comply shall be punishable with fine
which may extent to Rs.500/- subsequently amended to. Nothing has
come to show that R.N. Mundra was not the Director at the relevant point
of time and as Director he was responsible to comply with the provision.
21. The Further point taken pertaining to limitation, 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
becomes liable to be punished with fine which may extend to Rs.500 which
after amendment in the year 2000 was 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 where punishment is only fine. The period of limitation depends
on the punishment prescribed for the offence.
22. 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;
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‘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.”
23. 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
b) or 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
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.
24. 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 hence the Learned Magistrate should not have
taken the cognizance without considering this aspect.
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25. 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 was much before the date of
amendment of the quantum of fine and hence the bar under 468 Cr.Pc is
squarely applicable in this case.
26. 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 to
issue the summons .. It has been categorically observed by the Hon’ble
court in several judicial pronouncement 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.’
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27. 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 and
mechanically issued the process. 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 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.
28. 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
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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.
29. The instant CRR stands allowed. In view of that the connected applications
if any are also disposed of.
30. The entire proceeding pending before the Court of Metropolitan Magistrate
10th Court being C-9493/06 is hereby quashed.
31. Let a copy of this order be sent to the Learned Court for information and
taking necessary action.
32. Urgent Photostat copy of this Judgement, if applied for be supplied to the
applicant upon compliance of all formalities.
(CHAITALI CHATTERJEE DAS, J.)
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