Case Law Details
Rajendra Shah S/o. Ambalal Shah Vs State of Maharashtra & Anr. (Bombay High Court)
The petitioner had not signed the books of accounts but he has signed the balance sheet. The submissions of the learned Senior Counsel that the said balance sheet was signed in a routine manner as the signature of the Managing Director and the chairman were appearing, carries substance. Thus on the basis of only signature, it cannot be said that there is enough material to show the knowledge of the petitioner of disbursement of the loan without prior approval. A significant circumstance also to be addressed to is that the accused Nos.1 and 2 are the Directors of those companies in whose favour the loans were disbursed. Thus, the accused Nos.1 and 2 had direct interest in the disbursement of loan. There is nothing to show that the petitioner has any interest or any connection with the other two companies. In view of these facts and the submissions of the learned Counsel for both the parties, I hold that no case is made out to issue process under section 295 (4) of the Companies Act, 1956 is made out to swaddle the vicarious liability on the petitioner.
Full text of the high court order
1. Respondents waive notice through their respective Counsel. By consent of the parties, the Petition is heard finally at the stage of admission.
2. The petitioner, the original accused No.6, challenges the order of issuance of process dated 24.5.2002 and the issuance of summons dated 3.11.2015 and prays that all proceedings and the orders are to be set aside in Criminal Case No.3847/SS/15 from the Court of Metropolitan Magistrate, 18th Court, Girgaum, Mumbai. Respondent No.2, the Registrar of Companies, has filed this complaint under section 295 (4) of the Companies Act, 1956 for contravention of section 295 (4) of the Companies Act (for short, hereinafter referred to as ‘the Act’). U/s 295(4) of the Act, a company needs to take prior sanction for giving loans to the other parties. However, there is a violation of the provisions under section 295 of the Act as the loans were disbursed by accused No.1 company to its sister concern. Accused Nos.7 and 8 are the companies to whom the loan is disbursed by the company, namely, M/s.Baron International Ltd. of which accused Nos.1 to 6 are the Directors. During inspection of the company’s books of accounts and the records taken on 3.11.1999 by the concerned officer from the Office of the Registrar of Companies, it was found that this disbursement of loans to accused Nos.7 and 8 was without prior sanction of the Registrar of Companies and therefore, criminal complaint is lodged on 24.5.2002.
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