The Delhi High Court quashed the summoning order by the ASJ to the limited extent that it directs issuance of summons to the petitioner, Dr. Rajesh Kumar Yaduvanshi, for alleged fraud committed by BSL.
The petitioner was Punjab National Bank (PNB) Limited’s nominee on the Board of Directors of Bhushan Steel Limited (BSL) at the material time. The principal issue that arises for consideration in this case is whether the petitioner can be prosecuted for the alleged fraud committed by BSL and/or promoters solely for the reason that the petitioner was a director of BSL and, whether there is any material on record to indicate that the petitioner was complicit in the commission of the alleged offence.
The petitioner was directed by the competent authority of PNB to be inducted on the Board of BSL as PNB’s Nominee Director. He was, thereafter appointed as a Director in BSL and continued to hold the said office till October 8, 2017.
Admittedly, the petitioner did not share any executive responsibilities of BSL and his role was that of a Non-Executive Director. The petitioner continued to function as a whole-time employee of PNB and at the material time, he was working as an Executive Director of the said bank.
The petitioner claims that during the period that he held the office of a nominated director on the Board of BSL, he acted in good faith and there is no material to even prima facie conclude that the petitioner is guilty of any offence under Sections 128, 129 and 448 of the Companies Act. The petitioner contends that the impugned summoning order is ex facie erroneous and without application of mind.
The Trial Court has issued summons on the reasoning that it is alleged that the petitioner has connived with the Promoters. However, it is seen that there is no such allegation either in the complaint or in the Investigation Report furnished by the SFIO. Thus, in the given circumstances, this Court does not consider it apposite to relegate the petitioner to approach the Trial Court for seeking a discharge.
The scope of the present petition is limited to examining whether there is sufficient material on record against the petitioner for him to be proceeded against for the offence under Section 128, 129, 448 read with Section 447 of the Companies Act.
The single judge bench of Justice Vibhu Bakhru noted that there is no allegation that the petitioner was involved in the affairs of BSL except in his capacity as a Nominee Director of PNB. In such a capacity, he was not assigned any executive work of BSL but was merely required to attend and participate in the Board Meetings of BSL. The petitioner is, essentially, being prosecuted on account of the financial statements approved during the Board Meetings, in which, the petitioner was present.
The court in the light of Section 16A(2)(b) of the Banking Companies (Acquisition and Transfer of Undertakings) Act which says that a Nominee Director would not incur any obligation or any liability by reason only of his being a director or for anything done or omitted to be done in good faith in discharge of his duties as a director or anything in relation thereto.
“In view of the above, the impugned summons issued to the petitioner and the impugned order, to the limited extent that it directs issuance of summons to the petitioner, are set aside,” the court said.Subscribe Taxscan AdFree to view the Judgment