Directors can only be held vicariously liable for corporate misconduct if directly involved in company operations; otherwise, proceedings against them will be quashed.

JUDGMENT

(CommonPrayer: Criminal Original Petitions filed under Section 482 of the Code of Criminal Procedure, to call for the records in E.O.C.C.No.173 of 2016, on the file of the Additional Chief Metropolitan Magistrate, (E.O.- I) Egmore, Allikulam Complex, Chennai and quash the same.)

Common Order

1. Seeking to quash the proceedings in E.O.C.C.No.173 of 2016, pending on the file of the learned Additional Chief Metropolitan Magistrate, Egmore, Chennai, the petitioners are before this Court with these petitions.

2. Since the issue involved in both the Criminal Original Petitions are one and the same, both the petitions were taken together and a common order is being passed.

3. The facts, which are absolutely necessary for deciding the present petitions, are as follows:-

(i) The Respondent lodged a private complaint against the Petitioners/A5 and A10 and other accused before the learned Additional Chief Metropolitan Magistrate, Chennai, on 14.12.2016, for offences under Sections 68, 628 r/w 211, 211(3C) and 211(1) r/w AS-1,2,18,19,26 & Schedule VI of the COMPANIES ACT and Sections 2 12, 217(2), 217(2AA) and 217(3) and Sections 2 53 and 266A of COMPANIES ACT 1956 and under Sections 177 , 187, 34, 227, 233, 403, 405, 406, 409, 420, 464, 465, 471 and 120B of IPC.

(ii) The Serious Fraud Investigation Office (in short, ''the SFIO''), during investigation, analyzed the Tri-partite Agreements (i.e.) Share Holders Agreement(SHA) and Share Subscription Agreement(SSA) executed between the Paramount Airways Pvt. Ltd (in short, ''PAPL''), Promoter Group of PAPL and Kotak Mahindra Bank Limited, on behalf of investors India Growth Fund (IGF). As per the agreement, the promoters of PAPL promised the investors that PAPL would incur marginal loss during first year of operations (i.e.) 2005-06 and PAPL would earn profits from the second year onwards and the entire operations would be met with a total equity investment of Rs.71.20 Crore. The PAPL would be generating sufficient cash to meet the operational requirements. PAPL would be going for credit facilities only for the acquisition of aircraft or purchase of fixed assets. PAPL and its Directors promised the investors a minimum return of Internal Rate of Return ( IRR) 12% on their investments during the year 2009-2010. Based on the promises made, the investors, through the investment Manager, Kotak Mahindra Bank Limited, agreed to invest a sum of Rs.50 Crores in PAPL by subscribing to 1.25 Crore of preference shares of face value Rs.10.00, at a premium of Rs.30.00 per share. PAPL, the promoters and the promoter group entered into Similar Shareholders'' Agreement(SHA) with the other Investor viz., Bennnett, Coleman and Company Limited (in short, ''BCCL'') on 25.01.2006, promising minimum return of IRR 12% per annum on the equity Investments made by them and agreed to repurchase the shares. Believing on the projections, BCCL agreed to invest a sum of Rs. 6.00 Crore into the equity of PAPL and subscribe to 3,06,140 shares of face value Rs.10/- at a premium of Rs. 186/- per share.

(iii) The Promoter Group made many commitments to the investors on the conduct of business and submission of financial projections, performance and the resu