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SECURITIES AND EXCHANGE BOARD OF INDIA
Shampa Dutt (Paul), J
Pranab Kumar Roy – Appellant
Versus
The Securities and Exchange Board of India – Respondent
CRR 773 of 2021
For the Appellants/Petitioners: Mr. Debrup Bhattacharjee, Mr. Tirthankar Dey
For the Respondents: Mr. Sandipan Ganguly, Sr. Adv., Mr. Sudip Kumar Dutta
Liability of directors continues only if they were in charge during the commission of the offence; absence of evidence against the director led to quashing of charges.
Headnote:(A) Companies Act, 1956 - Sections 56, 60, 70, and 73 - Securities and Exchange Board of India Act, 1992 - Sections 24 and 27 - Quashing of criminal proceedings against a director not involved in day-to-day operations during the relevant period - No evidence of his involvement in illegal activities was provided at trial. (Paras 36, 34)
(B) Continuing liability - The court emphasized that the liability of directors must be clear and evident, with proof that they were in charge when the offence occurred. (Paras 8, 19)
Facts of the case:
The petitioner was a director of a company accused of violating provisions during the public issue of debentures, but had joined after the allotment took place. He resigned and his name was not officially removed from corporate records.
Findings of Court:
The court found insufficient evidence to prosecute the petitioner, noting the continuing liability of directors based on their involvement at the time of the alleged offence.
Issues: Whether the petitioner could be held liable for actions taken prior to his appointment as a director and whether the proceedings were maliciously instituted.
Ratio Decidendi: The court ruled that without clear evidence of involvement or responsibility during the unlawful acts, the proceedings were unwarranted and should be quashed.
Result: The petitioner's prayer for discharge was granted and the proceedings were quashed.
| Table of Content |
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| 1. public issue violated companies act provisions. (Para 1 , 3 , 19) |
| 2. the timing of director's appointment affects liability. (Para 2 , 12 , 15 , 20) |
| 3. directors must be in charge to hold liability. (Para 6 , 14 , 16) |
| 4. insufficient evidence requires quashing proceedings. (Para 10 , 18 , 36) |
Shampa Dutt (Paul), J.:
1. The present revision has been preferred praying for quashing of the proceeding being Special Case No. SEBI/27/2017 under Sections 56 , 60 and 70 read with Section 56 , 60 read with Sections 2(36), 73 of the Companies Act, 1956 read with Section 465 of the Companies Act, 2013 read with SEBI (issue of Capital and Disclosure Requirements) Regulations, 2009 (the ICDR Regulations) Section 117B of the Companies Act, 1956 read with Section 465 of the Companies Act, 2013 and the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (the ILDS Regulations) and Section 12(1) of the SEBI Act, 1992 read with Regulation 7 of the SEBI (Debenture Trustees Regulations 1993, which are punishable under Section 24 and 27 of the Securities and Exchange Board of India Act, 1992 pending before the Learned Judge-in-Charge, 5th Special Court, Kolkata and all orders passed therein including the order dated 29th July, 2019 qua the petitioner herein.
2. The petitioner’s case is that the petitioner along with others have been arraigned as an accused along with others on the basis of a written complaint filed by the opposite party before the Learned 5th Special Court, Kolkata in Special Case No. SEBI/27/2017 as stated above.
3. The prosecution case, in short, is that the accused no.1 company, made a public issue of debentures without filing any offer document in violation of Section 56 of the Companies Act, 1956 nor did the accused persons file any statement instead of the prospectus. The accused persons also failed to file the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India and violated the provisions of Section 73 of the Companies Act, 1956 , and have also not complied with the aforesaid provisions for public issue of shares and thereby violated provisions of Sections 56 , 60 and 70 read with Sections 56 , 60 read with Sections 2(36), 73 of the companies Act, 1956 read with Section 465 of the Companies Act, 2013 read with SEBI (issue of Capital and Disclosure Requirements) Regulations, 2009 (the ICDR Regulations) Section 117B of the Companies Act, 1956 read with Section 465 of the Companies Act, 2013 and the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (the ILDS Regulations) and Section 12(1) of the SEBI Act, 1992 read with Regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993.
4. The petitioner entered appearance in the said proceedings and thereafter at a later stage preferred an application under Section 239 of the Code of Criminal Procedure, 1973 praying for discharge.
5. It is stated by the petitioner that the Learned Judge, upon purported consideration of materials on record, and after hearing the rival contentions advanced on behalf of the petitioner and the prosecution, by an order dated 29.07.2019 was pleased to reject such application preferred by the petitioner and was further pleased to fix the next date for framing of charge.
6. It is submitted that the Learned Judge failed to appreciate that the allotment of the Non-Convertible Debentures (NCD) took place during the Financial Year 2012-2013 which is calculated from 1st April 2012 to 31st March, 2013.
7. The petitioner states that the following facts are necessary for proper adjudication of the instant case :-
I. The petitioner joined the company namely Chakra Infrastructure Limited being the accused no.1 before the Learned Court Trial, in the Month of November 2012 as an advisor to the company for a monthly remuneration of Rs. 20,000/- per month.
II. Sometime in the month of June 2013 at the request of the Managing Director of the accused no. 1 company, the petitioner joined the accused no. 1/company
