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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ASHUTOSH SHASTRI, J.
RAJESH JASHWANTLAL PARIKH – Appellant
Versus
CENTRAL BUREAU OF INVESTIGATION – Respondent
Criminal Misc. Application No. 12908 of 2013, Criminal Misc. Application (For Stay) No. 1 of 2022
Decided On : 17-02-2023
ABUSE OF PROCESS - CRIMINAL PROCEDURE - Section 482 - [KEYWORD] - Businessman accused of financial irregularities seeks to quash FIR and proceedings - Court finds petitioner resigned from company before alleged transactions, had no role in financial assistance, and was not signatory to any application - Court quashes complaint and proceedings against petitioner
Fact of the Case:
Petitioner, a businessman, seeks to quash FIR and proceedings related to alleged financial irregularities. Petitioner resigned from the company before the alleged transactions, had no role in financial assistance, and was not a signatory to any application.
Finding of the Court:
Court finds no prima facie case against petitioner and quashes the complaint and proceedings against the petitioner.
Issues: Whether the petitioner can be held responsible for the alleged financial irregularities despite resigning from the company and having no role in the transactions.
Ratio Decidendi: The court held that the petitioner, having resigned from the company before the alleged transactions and having no role in the financial assistance, cannot be held responsible for the alleged financial irregularities.
Final Decision: The court quashes the complaint and proceedings against the petitioner.
JUDGMENT :
ASHUTOSH SHASTRI, J.
1. By way of present Criminal Misc. Application under Section 482 of the Code of Criminal Procedure, petitioner has prayed for following reliefs:
(A) This Hon'ble Court may be pleased to pass appropriate orders and/or directions to quash and set aside the First Information Report being C.R. No. 15(A)/2002 GNR (at Annexure-A) and proceedings of Special C.B.I. Case No. 23/2004 (at Annexure-B) pending in the Court of Learned City Sessions and Special Judge (First Court) at Ahmedabad pursuant to charge-sheet filed by the Respondent No. 1 in respect of the Petitioner only being accused No. 18.
(B) Pending hearing and final disposal of the present Petition, further proceedings of Criminal Case being Special C.B.I. Case No. 23/2004 pending before the Learned City Sessions and Special Judge (First Court) at Ahmedabad may be stayed in respect of the Petitioner and the Respondent No. 1 may be restrained from taking any coercive action against the Petitioner.
(C) Such other and further reliefs as may deem just and proper by this Hon'ble Court and in the interest of justice, may be granted.
2. The case of the petitioner is that petitioner is a businessman and carrying on business in Mumbai since about 25 years by now and same business is in the name and style of A.C. Enterprise as Karta, dealing in pharmaceuticals and cosmetics packaging materials as well as also a Proprietor of A.C. Pharmachem which is also dealing in pharmaceutical packaging materials and commission agent. Neither petitioner nor proprietary concerns have taken any loan till date from any bank or financial institution and business particularly is being done over a period of more than 25 years. One Mr. Manoj V. Patel, the then Director of Phar East was known to the petitioner and on account of personal relationship, petitioner was taken as non-functioning Director in the said Phar East and the company was situated in Godhra, District Panchmahal in State of Gujarat. On account of petitioner being in Mumbai, it was not possible for him to attend a single meeting of Board of Directors nor petitioner had taken any remuneration out of the said company as a director and as such he was not in day-to-day functioning and affairs of the company nor in charge of administration of Phar East. Petitioner on account of such situation then had resigned on 14.7.1995 as Director of the said company and necessary forms before the Registrar of Companies have also been filled, precisely form No. 32, and his resignation has been recognized. It is the case of petitioner that respondent No. 2 lodged a written complaint on 3.7.2002 before Superintendent of Police, CBI, SPE at Gandhinagar alleging various transactions entered into by Phar East and its sister concerns namely M/s. Patson Pharma Ltd. and M/s. Haloes Manufacturing & Marketing Pvt. Ltd. Petitioner is neither concerned with transactions related to Phar East company nor was concerned with aforesaid two sister concerns, except mere director, petitioner was not connected with any activity of the company. It has been alleged that transactions have taken place during the period commencing from 7.12.1994 to 12.6.1997 and respondent No. 2 during the aforesaid period gave financial assistance under RMA scheme (Raw Material Assistance). Under the said scheme, benefits were provided in the form of financial assistance to the company. On the basis of written complaint, respondent No. 1 has registered a First Information Report (FIR) on or before 6.7.2002 in which name of the petitioner has been mentioned as accused since petitioner had no role to play in the alleged commission of crime.
3. It is further case of the petitioner that subsequently, charge-sheet came to be filed by respondent No. 1 in the jurisdictional Court and at that time, for the first time, name of petitioner has been mentioned as accused No. 18. Even during the course of investigation and upon submission of the charge-sheet, relevant statements with rega
AI
Directors cannot be held responsible for alleged financial irregularities if they had resigned from the company before the transactions and had no role in the financial assistance.
Vicarious liability cannot be imposed on a company's directors under IPC unless there is specific statutory provision; direct involvement must be established.
Liability under Section 141 of NI Act depends on the role in the conduct of the company's affairs, not just the designation, and the burden of proof lies on the accused to establish lack of knowledge....
Vicarious liability cannot be imposed on company Directors without specific statutory provisions; mere designation does not imply culpability without evidence of involvement.
A director can only be held liable under Section 138 of the Negotiable Instruments Act if actively involved in the company's affairs at the time the alleged offence occurred.
Vicarious liability under Section 141(1) of the NI Act must be strictly construed, and the complaint should provide specific averments to establish the accused's responsibility for the company's cond....
The main legal point established in the judgment is that a former director of a company cannot be held liable for a dishonoured cheque issued after their resignation from the directorship, and the im....
A director who resigns before the cheque issuance cannot be held liable under Sections 138 and 141 of the NI Act, evidenced by credible documents demonstrating resignation.
Sufficient averments in a complaint against a director fulfill requirements of Section 141 of the NI Act for vicarious liability. Failure to respond to statutory notices under Section 138 infers liab....
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