HIGH COURT OF DELHI
Daewoo Motors India Ltd.
versus
H.D. Talwani
CRL.O.(CO.) 5 OF 2008
co. a. no. 2137 of 2010
JULY 4, 2012
JUDGMENT
CO. A. No. 2137/2010 in CRL.O.(CO.) 5/2008
1. This is an application filed under Rule 9 of the Companies (Court) Rules, 1959 (hereinafter referred to as the ‘said Rules’) read with Section 482 of the Code of Criminal Procedure by Ms. Radhika S. Minocha seeking a discharge in complaint i.e. Crl. O. (CO.) 5/2008 wherein she has been summoned under the provisions of Section 454 of the Companies Act, 1956 (hereinafter referred to as the ‘said Act) for not filing a statement of affairs. The contention of the applicant is that being an employee of the ICICI Bank Ltd. (hereinafter referred to as the ‘Bank’) she had been appointed as a nominee director on the Board of M/s Daewoo Motors (India) Ltd. (in liquidation) (hereafter referred to as the ‘Company’) to watch and secure the interest of the Bank who was a lender to the Company. Her contention is that in 1999 she had resigned from the company and had consequently migrated to the USA where she is presently residing.
2. Certain dates are relevant which are also undisputed. The applicant had given her letter seeking resignation from the bank on 25.10.1999 which was accepted by the Board of Directors on 30.10.1999. Form 32 had been filed by the company before the Registrar of Companies (ROC) on 26.11.1999 wherein a perusal of the Form shows that herein also the applicant has been described as a nominee director. The winding up proceedings of the company were initiated on 24.11.2003 and the company was finally wound up on 28.07.2004. Admittedly on the ‘relevant date’ i.e. on the date of winding up order which was on 28.07.2004 and even on the date of filing of the winding up petition which was on 24.11.2003, the applicant Ms Radhika S. Minocha was not a Director of the company; her resignation having been accepted by the company on 30.10.1999.
3. Relevant would it be to state that a similar application had been filed by the applicant which was Co. Application. No. 902/2010 seeking a discharge on the same ground but since Form 32 had not been filed at that stage and the Court having noted this fact, her application seeking discharge was declined on 27.09.2010.
4. Learned counsel for the applicant submits that the applicant not being a director on the ‘relevant date’, no criminal liability can be fastened upon her; admittedly she was only a nominee director and she not having taken part in the formation of the company at any stage (which again is an undisputed fact), criminal proceedings which had been initiated against her are liable to be dropped. Further undisputed submission being that the statement of the applicant has already been recorded before the Official Liquidator under Rule 130 of the said Rules on 22.03.2012. Attention has been drawn to the said statement wherein a specific query has been put to the applicant where she has admittedly been described as a nominee director; her answer to the queries all along being that she only had a nominal role which was non-executive and which was to watch the interest of the company; she had never signed any document on behalf of the company and having resigned from the company in October, 1999 and the statutory Form 32 also having been filed much prior to the date of liquidation of the company, she is not liable to be prosecuted under Section 454 of the said Act.
5. Counsel for the petitioner has drawn attention of this Court to a Circular of the Government of India, Ministry of Corporate Affairs (general circular No 08/2011) No. 2/13/2003/CL-V which is addressed to the ROC and the Official Liquidator wherein the ROC’s have been directed to make a proper application of mind in deciding whether a person can be implicated as ‘an officer in default’ within the meaning of Section 5 of the said Act. Subsequent circular dated 29.07.2011 of the Government of India, Ministry of Corporate Affairs (Master Circular No. 1/2011) No. 3/57/2011/CL-II had also noted that penal actions which are initiated against the directors who are not charged with the responsibility including nominee directors nominated by Financial Institutions and Banks to the Board of certain companies have to be examined; this circular has again reiterated that there should be a proper application of mind on the part of the ROC in deciding whether a person to be implicated ‘as an officer in default’ and this can be answered after examining the annual return, Form 32(s) and DIN Database available in the Registry; wrongful prosecutions should be avoided.
6. Learned counsel for the petitioner has placed reliance upon a judgment of the Karnataka High Court in Mother Care (India) Ltd. v. Prof. Ramaswamy P. Aiyar [2004] 51 SCL 243 as also another judgment of the Kerala High Court K. Subramony Kerala Financial Corpn. v. D.L. Malabar Phyto Chemicals Ltd. [Co. Appeal nos. 4 to 9 of 2004, dated 2-1-2009] submission being that directors appointed by the Financial Institutions to the Board of directors of a liquidated company and their appointment being only to protect the interest of the Financial Institution which has advanced funds to the company, such a nominee director has no role in the filing of the statement of affairs before the Official Liquidator. To support this same submission, reliance has also been placed upon a judgment of this Court dated 07.03.2012 Crl. O. CO. No. 13/2008 titled Phoenix Fine Chem (P.) Ltd. v. Samir Omesh Karnik.
7. Submissions have been countered by the learned counsel for the respondent; attention has been drawn to the language of Section 454 of the said Act and particular emphasis has been laid on Section 454(2)(a) of the said Act; arguments have been predicated on the submission that all persons who have been officers of the company at any point of time are liable to file their statement of affairs and even otherwise the said Act having made no distinction between a working director and a non-working director, technical director and a nominee director, all persons/officers who were at any stage working in the company are liable for prosecution under the aforestated provision of law.
8. Learned counsel for the Official Liquidator has relied upon a judgment of a Bench of this Court in Technical Consultancy House (P.) Ltd. v. Kuldip Raj Narang [1989] 66 Comp. Cas. 410 as also another judgment of Andhra Pradesh High Court in Official Liquidator v. Koganti Krishna Kumar [1997] 89 Comp. Cas. 672 (AP) submission being that it is the each and every director of the company who has to explain as to why he should not be responsible for filing the statement of affairs on behalf of the company; the applicant in no manner is entitled to a discharge.
9. Arguments have been heard and submissions have been noted. Relevant would it be to first extract the provisions of Section 454 of the said Act; they read as under:-
“454. Statement of affairs to be made to Official Liquidator.
