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High Court of Judicature at Bombay
THE HONOURABLE MR. JUSTICE J.H. BHATIA
Reserve Bank of India
Versus
Imran Ashraf Furniturewala Chairman & Others
CRIMINAL REVISION APPLICATION NO. 634 OF 2009
Decided on: 06-08-2010
Before concluding, it may be noted that the senior counsel for the respondents placed reliance on certain authorities to show that only such Directors as were in charge of and were responsible to the company for the conduct of the business of the company at the time of contravention would be responsible for the offence under Section 46(1). Similar provisions are to be seen in Section 141 of the Negotiable Instruments Act. The authorities relied upon by the learned Senior Counsel pertain to the cases under he Negotiable Instruments Act. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, 2007 (1) Bom CR (Cri) 642 : 2007 DGIS (Soft) 159 : 2007 DGLS (Cri) Soft 326 : (2007) 4 SCC 70; Ashok Chaturvedi and others v. Shitul H. Chanchani and another, 1998 DGLS (Soft) 753 : 1998 DGLS (Cri) Soft 363 : 1998 7 SCC 698; National Small Industries v. Harmeet Singh Paintal and another, 2010 DGLS (Soft) 92 : (2010) 3 SCC 330 and several others, it has been laid down by the Supreme Court that when a liability under Section 141, M.I. Act is sought to be fastened vicariously on a person in connection with the company, the principal accused being company itself a clear case should be spelt out in the complaint against the person sought to be made liable and it has to be shown that the said person was in fact in charge of and was responsible to the company for the conduct of the business of the company at the time of the alleged contravention or commission of offence. Similar provisions are made in Section 46(5) of the Banking Regulation Act. However, sub-section (6) of Section 46 cannot be ignored. Looking to the other provisions of the Banking Regulation Act as well as Multi State Co-op. Societies Act and as discussed earlier, there remains no doubt that all the Directors are personally responsible for willful false statements or for omissions therein. The Directors can be held guilty of the offence under Section 46(1) even where commission of offence is attributable to any gross negligence on their part. The false statement in the balance sheet and profit and loss account of a banking company is serious offence because large number of depositors and investors may be misled by such false statements and may invest or deposit money with such bank presuming that it is being properly managed and it is running profitably while in fact, it is running into huge losses. If the loss would be made public, naturally, the people would be averse to making investment or deposits in such banks. The possibility of such banks running into huge losses and going into liquidation cannot be ruled out and if such bank comes into liquidation, large number of depositors may lose their hard earned money and it may adversely affect the whole banking system. It is impossible to accept that for all the frauds played by the accused No. 1 Bank its Chief Officer who is only a paid employee would be responsible while the Chairman, Vice-Chairman and other Directors and Special Adviser would go soot free while in fact they may be the real culprits for commission of such offence. These aspects were completely overlooked by the learned Magistrate while dismissing the complaint as against accused Nos. 2 to 10 and 12. Therefore, it must be held that the impugned order is perverse and illegal and needs to be set aside.
For the aforesaid reasons, the Revision Application is allowed. The impugned order is hereby set aside and the learned Magistrate is hereby directed to issue process against accused Nos. 2 to 10 and accused No. 12 also.
Criminal Procedure Code, 1973 - Section 397 - Revision - Filed directly before High Court - Maintainability of - Held - Revision, not a right of party - It is a power of Court - Discretion of Court to entertain or not to entertain revision - But it is upto concerned party whether to approach High Court or Sessions Court - No objection can be taken to tenability of revision application. - It is thus settled position of law that revision is not the right of a party, but that is the power of the Court and it is upto the concerned Court to entertain or not to entertain the revision but it is upto concerned party whether to approach the High Court or the Sessions Court. Therefore no objection can be taken to tenability of the revision application. Taking into consideration the facts of the present case Court finds that it will be in the interest of justice, to entertain the revision application.
1. Rule. Rule made returnable forthwith. Heard the learned Counsel for the parties.
2. Reserve Bank of India, who is the original complainant, has filed this Revision Application against the order dated 3.8.2009 passed by the Metropolitan Magistrate, 29th Court, Dadar, Mumbai. Whereby he refused to issue process against the accused Nos.2 to 10 and accused No.12 in Criminal Case No. 59/SW/2009, who are respondent Nos. 1 to 10 in this Revision Application.
3. To state in brief, the accused No.1 - Memon Co-operative Bank is a registered Multi-State Co-op. Society carrying on banking business. Accused No.2 is the Chairman of the said Bank. Accused No.3 is the Vice-Chairman. Accused Nos.4 to 9 are the Directors. Accused No.10 is the Expert Director. Accused No.11 is a General Manager and Chief Executive Officer and accused No.12 is the Special Adviser to the Board of the Directors. Accused No.1, a Cooperative Bank, is entitled to carry on banking business which includes acceptance of deposits from the public and advance of loans. As such, it is governed by the provisions of Banking Regulation Act, 1949 as applicable to Co-operative Societies and the provisions of Multi-State Co-operative Societies Act, 2002. It is the contention of RBI -complainant that under Section 29 of the Banking Regulation Act, the accused No.1 -Bank is required to prepare a balance sheet and profit and loss account on the last working day of each financial year. The balance sheet and profit and loss account is required to be signed where there are more than 3 directors of the company by at least 3 of its directors. The profit and loss account and the balance sheet prepared under Sec. 29 and the audit report under Sec. 30 are required to be published in the prescribed manner and 3 copies of such accounts and balance sheet together with auditors' report are to be furnished as returns to the Reserve Bank of India within 3 months from the last date of period to which they refer. It is contended that the respondent No.1 Bank submitted the balance sheet and profit and loss accounts for the years ending March, 2006, March 2007 and March 2008 showing the profit of Rs. 13.34 lakh, Rs.5.95 lakh and Rs.5.77 lakh respectively. However, as directed by Reserve Bank of India, the accused No.1 Bank got the accounts audited by a statutory auditor. The statutory auditor's report revealed that the Bank had actually incurred loss of Rs.5409.52 lakh during the year ending 31.3.2006, loss of Rs.7493.65 lakh during the year ending 31.3.2007 and loss of Rs.9153.12 lakh for the year ending 31.3.2008. In view of the discrepancy in the returns submitted by the Bank and the statutory auditor's report, RBI got the accounts inspected and it was revealed that the accused No.1 had actually suffered loss of Rs.12818.41 lakh, Rs. 16111.38 lakh and Rs.11880.52 lakh during the years ending 31.3.2006, 31.3.2007 and 31.3.2008 respectively. In view of these facts, RBI found that the accused No. 1 Bank , and all its Directors, Special Adviser and CEO had committed offence punishable under Section 46 of the Banking Regulation Act because they had willfully made false statements in the returns of the said 3 years. It was contended that accused Nos. 2 to 12 holding various posts in the accused No.1 Bank were in charge and were responsible to the accused No.1 for the conduct of business at the time of failure to comply with the provisions of Sec. 31 of the Banking Regulation Act. Accordingly, the complaint was filed.
4. However, the learned Magistrate, by the impugned order, issued process against accuse No.1 Bank and accused No.11 -Chief Executive Officer of the Bank, but dismissed the complaint against accused Nos. 2 to 10 and accused No.12 on the ground that they were not responsible for submission of false returns to the RBI.
5. Mr. Gupte, the learned Senior Counsel for the respondents/accused, at the outset, raised an objection to the tenability of the Revision Application befo
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