The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK CRLA NO.313 OF 2021 (From the order dated 2nd January, 2021 passed by the learned Presiding Officer, Designated Court under OPID Act, Cuttack in C.T. Case No.5/2020) Akshay Kumar Choudhury … Appellant -versus- State of Odisha(EOW) … Respondent Advocates appeared in the case through hybrid mode: For Appellant : Mr.D.P.Dhal, Sr. Advocate Mr. S.Mohanty, Advocate -versus- For Respondent: Mr.Bibekananda Bhuyan, Advocate (OPID) --------------------------------------------------------------------------- CORAM: JUSTICE SASHIKANTA MISHRA JUDGMENT 05.01.2023. Sashikanta Mishra,J. The Appellant had originally filed this appeal challenging the order dated 2nd January, 2021 passed CRLA No.313 of 2021 Page 1 of 18 by learned Presiding Officer, Designated Court under OPID Act, Cuttack in taking cognizance of the offences under Sections 467/468/471/420/406/120-B of I.P.C. and Section 6 of the Odisha Protection of Interests of Depositors (in Financial Establishments) (OPID) Act in C.T. Case No.5/2021. However, he was permitted to amend the appeal to challenge order dated 03.1.2022 passed by the Court below during pendency of this appeal. 2. The facts of the case are that an F.I.R. was lodged before the Superintendent of Police, EOW, CID CB, Bhubaneswar on 26th August, 2020 by the Inspector of Police EOW, Bhubaneswar alleging therein that M/s. Keshari Estates Private Limited had received a sum of Rs.5.16 crores from different customers for providing Duplex/Triplex houses, but the same were not delivered even after long lapse of time. It is stated that the company launched a new residential project namely, Keshari Plaza, Phase-II at Jadupur in the year 2013 and allotted Duplex/Triplex Apartments to the CRLA No.313 of 2021 Page 2 of 18 prospective buyers, who had earlier booked the housing units in Pokhariput. The Project was approved by the BDA in 2013. The Company represented through its Managing Director entered into fresh agreements with the customers for completion of the project and delivery of possession within three years. The Company however defaulted in completing the construction work within the stipulated period i.e.by 2016. As such, it was held that the Directors of the Company and the Company represented through its Managing Director/Directors and others have cheated the buyers to the tune of crores of rupees in pursuance of criminal conspiracy and misappropriated the invested money. Accordingly, EOW Bhubaneswar P.S. Case No.6/2020 was registered followed by investigation. 3. Upon completion of investigation charge sheet was submitted on 31st December, 2020 against the company represented by its Director, Akshay Kumar Choudhury (Appellant). The Court below took CRLA No.313 of 2021 Page 3 of 18 cognizance of the offences as aforesaid by order date 2nd January, 2021. Feeling aggrieved, the Petitioner
Legal Reasoning
approached this Court in the present appeal. 4. During pendency of the appeal, on contention being raised on behalf of the Appellant that he was no longer the Director as on the date of submission of the charge sheet having resigned on 19th December, 2020, this Court by order dated 10th December, 2021 passed the following order :- to to the notice the appellant “In view of the submission made by the learned counsel for the respective parties, while keeping this appeal pending, liberty is to move an granted appropriate application before the learned trial Court bringing the documents in Annexures-18, 19 and 20 and if such an application along with such documents is filed within one week from today, the learned trial Court after heating the learned counsel for the parties shall pass necessary orders in accordance with law within a period of two weeks thereafter without being influenced by its earlier order dated 21.10.2021. Needless to say that if the prayer of the appellant is not accepted by the learned trial Court, the appellant, if so likes, can pray for making necessary in amendment of challenging the said order. The learned trial Court shall not proceed with the trial till this appeal memo CRLA No.313 of 2021 Page 4 of 18 a decision application.” is taken on the aforesaid 5. Pursuant to such order, the Appellant filed appropriate application before the Court below to remove his name from representing the company in the case. After hearing the parties, the Court below by order dated 3rd January, 2022 rejected the petition by holding that the accused-Appellant being the Director was looking after the business and affairs of the Company prior to his resignation as its Director. The Appellant thereafter amended the memorandum of appeal as permitted to impugn the aforesaid order of the Court below. 6. Heard Mr. D.P.Dhal, learned Senior counsel with Mr. S.Mohanty, learned counsel for the Appellant and Mr. Bibekananda Bhuyan, learned counsel for the OPID. 7. Mr. Dhal would argue that law permits prosecution of a person, who is responsible for the management of the affairs of the company. In the CRLA No.313 of 2021 Page 5 of 18 instant case, one Ajaya Kumar Chaudhury is the Managing Director of the financial establishment and his son Alok Chaudhury is a Director. In so far as the Appellant is concerned, undoubtedly he was one of the Directors, but he has resigned on 19.12.2022. The charge sheet was submitted on 31st December, 2020. Thus, as on the date of submission of the charge sheet the Appellant was no longer a Director of the Company and therefore, in the absence of any authorization he cannot be made to represent the Company by the prosecution. It is also fairly submitted by Mr. Dhal that theoretically the Appellant can be prosecuted in his individual capacity, but he cannot be made to represent the Company when admittedly the Company has its Managing Director as well as other Directors. To fortify his contentions Mr. Dhal has referred to several case laws, which would be discussed at the appropriate stage. 8. Per contra, Mr. Bibekananda Bhuyan has argued that the language employed in the statute i.e. CRLA No.313 of 2021 Page 6 of 18 Section 6 of the OPID Act is clear to the extent that every person, who was responsible for the management of the affairs of the company would be liable for punishment. At the relevant time, the Appellant was a Director and had played an active role in collection of deposits from the customers and had also signed on balance sheets and other relevant documents of the Company. Therefore, simply by resigning after initiation of the case, he cannot wriggle out of his liability. Several witnesses have stated about the role played by the Appellant, which clearly reveals that he was in-charge of the Company and looking after the business of the Company and therefore, he has been rightly prosecuted both in his individual capacity as well as as representative of the Company. 9. From the rival contentions, it evident that the sole point for determination in the present appeal is; “Whether an Ex-Director of a Financial Establishment (Company) can be made to represent the Company in a criminal CRLA No.313 of 2021 Page 7 of 18 proceeding for the offences allegedly committed by the Company”. In this regard, Mr. Dhal has relied upon several decisions to buttress his contention that the Appellant being an Ex-Director cannot be made vicariously liable for any offence committed by the Company. The following decisions have been relied upon:- “(i) (2007) 3 SCC 693, Saroj Kumar Poddar v. State NCT of Delhi and Ors. (ii) (2009) SCC 48; K.K. Ahuja v. V.K.Vora and another (iii) (2010) 3 SCC 330 (National Small Industries Corp. Ltd. v. Harmeet Singh Paintal) (iv) (2012) 5 SCC 661, Aneeta Hada and Ors v. Godfrather Travels and Tours Pvt. Ltd. and Ors. (v) (2014) 16 SCC 1 (Pooja Ravinder Devidasani v. State of Maharashtra) (vi) (2015) 4 SCC 609; Sunil Bharati Mittal v. CBI (vii) (2016) 6 SCC 62; Standard Chartered Bank v. State of Maharashtra and Ors.; and CRLA No.313 of 2021 Page 8 of 18 (viii) 2018 (II) OLR 597; Gajanan Property Dealer & Construction Pvt. Ltd. v. State of Orissa.” 10. Reading of these decisions reveal that all of them were rendered in relation to the provision under Section 141 of the Negotiable Instruments Act. Secondly, in all such cases the question whether the accused persons therein could be made vicariously liable in the absence of any specific allegation of wrong doing against them was the issue. Such is not the issue here inasmuch as it has been fairly submitted by learned Senior counsel that the Appellant can be prosecuted in his individual capacity, but not in representative capacity. The question of representation of the Company in a criminal proceeding was not specifically raised or decided in any of the cited cases and therefore, no purpose would be served by referring to the same. It has been further argued that charge sheet was submitted against the Appellant and the Company represented through the Appellant. Mr. Dhal has argued that the Court below committed an illegality in treating the appellant as a representative of CRLA No.313 of 2021 Page 9 of 18 the Company while taking cognizance as by such time he was no longer a Director of the Company. 11. In order to appreciate the contentions as above, it would be apposite to refer to the relevant statutory provision at the outset. Section 6 of the Odisha Protection of Interests of Depositors (in Financial Establishments) (OPID) Act runs as follows; interests honouring “6. Default in Repayment of deposits the and commitment–Notwithstanding anything contained in section 3, where any the Financial Establishment defaults return of the deposit or defaults the payment of interest on the deposit or fails to return in any kind or fails to render service for which the deposit have been made, every person responsible for the the management of Financial be Establishment punished with imprisonment for a term which may extend to ten years and with fine which may extend to ten lakh rupees and such Financial Establishment is also liable for a fine which may extend to one crore rupees.” the affairs of shall Thus, the statute provides for making every person, who is responsible for management of the affairs of the Company liable for punishment and so CRLA No.313 of 2021 Page 10 of 18 also the company, which shall be liable for fine. Section 15 of the OPID Act provides as under; and powers “15.Procedure of Designated Court regarding offences- (1)The Designated Court may take cognizance of the offence without the accused being committed to it for trial and in trying the accused person, shall follow the procedure prescribed in the Code of Criminal Procedure, 1973 for the trial of warrant cases by Magistrates. (2)The provisions of the Code of Criminal Procedure, 1973 shall, so far as may be, the proceedings before a apply Designated Court and for the purposes of the said provisions, a Designated Court shall be deemed to be a Magistrate.” to Thus, the procedure prescribed in the Code of Criminal Procedure is applicable to the proceedings before the designated Court. Section 63 of the Cr.P.C. runs as follows; “63. Service of summons on corporate bodies and societies.- Service of a summons on a corporation may be effected by serving it on the secretary, local manager or other principal officer of the corporation, or by letter sent by registered post, addressed to the chief officer of the corporation in India, in which case the service shall be deemed to have been effected when the letter would arrive in ordinary course of post.” CRLA No.313 of 2021 Page 11 of 18 It is submitted by Mr. Dhal that the Court cannot decide who is to represent the Company and going by the language of Section 63 of Cr.P.C., process ought to have been served upon the Managing Director or even any other Director of the Company but not on the Appellant who, admittedly is no longer a Director. 12. In the instant case, it is seen that by order dated 02.1.2021, the Court below took cognizance of the offences and held that there are sufficient grounds to proceed against the accused persons, namely (1) Akshay Kumar Choudhury and (2) M/s. Keshari Estates Pvt. Ltd. represented by its Director Akshay Kumar Choudhury. By such time, the appellant having been arrested, was on interim bail granted by this Court and therefore, the Court below fixed a date for supply of police papers and for surrender of the appellant as per direction of this Court. Thus, process as such was never issued against him as he having been already in custody, the Court presumed that he is the representative of the second accused i.e., the CRLA No.313 of 2021 Page 12 of 18 Company also. This, according to the considered view of this Court, is where the mistake has crept in as the Court may have been justified in directing to supply police papers to the appellant as the first accused but it ought to have issued process to the second accused i.e., the Company in terms of Section 63 of Cr.P.C. It would also be useful at this stage to refer to the provision under Section 305 of Cr.P.C., which reads as under; “305. Procedure when corporation or registered society is an accused.- includes a (1) In this section," corporation" means an incorporated company or other body corporate, and society registered under the Societies Registration Act, 1860 (21 of 1860 ). (2) Where a corporation is the accused person or one of the accused persons in an inquiry or trial, it may appoint a representative for the purpose of the inquiry or trial and such appointment need not be under the seal of the corporation. (3) Where a corporation appears, any requirement of this Code that anything shall be done in the presence of the accused or shall be the read or stated or explained accused, shall be construed as a requirement that that thing shall be done representative of to a CRLA No.313 of 2021 Page 13 of 18 a to of representative in the presence of the representative or read or stated or explained the representative, and any requirement that the accused shall be examined shall be construed as a requirement that the representative shall be examined. (4) Where a corporation does not appear, any such requirement as is referred to in sub- section (3) shall not apply. (5) Where a in writing statement purporting to be signed by the managing director of the corporation or by any person (by whatever name called) having, or being one of the persons having the management of the corporation to the effect that the person the statement has been named appointed as the representative of the corporation this section, is filed, the Court shall, unless the contrary is proved, presume that such person has been so appointed. (6) If a question arises as to whether any person, appearing as the representative of a corporation in an inquiry or trial is not such before a Court representative, the question shall be determined by the Court.” the purposes of the affairs of is or for in Thus, it is for the Company to appoint a representative for the purpose of the case and not for the prosecution or the Court to suo motu treat any person as the Company’s representative. The Gauhati High Court had the occasion to deal with a similar issue in the case of Ram Narayan Sharma and CRLA No.313 of 2021 Page 14 of 18 others v. State of Assam and another; reported in 2017 SC OnLine Gau 1004, wherein it was held as under; in section 63, Cr.P.C., “A conjoint reading of section 63 and section 305 of Cr.P.C. would show that after the process is served in the manner provided the Corporation may appoint a representative for the purpose of the inquiry or trial as provided in section 305 (2), Cr.P.C. It is, thus, evident that when the accused is a corporate body it is not for the court to decide who shall represent the Corporate Body. The court can issue the process in the manner as provided under section 63, Cr.P.C. and the representative will be appointed by the Corporate body for the purpose of representing the Corporate Body during trial.” 13. This is therefore, a case where summons under Section 63 of Cr.P.C. ought to have been issued against the Company leaving it to the Company to decide as to who shall represent it in the case instead of proceeding against the appellant on the presumption that he is such representative. Further, since in the instant case, the appellant disputes the above, it was incumbent upon the Court to determine as to who shall be the representative of the Company CRLA No.313 of 2021 Page 15 of 18 in terms of sub-section (6) of Section 305 of Cr.P.C. Similar view was taken by this Court in the case of Food Inspector, Cuttack Municipality, Cuttack v. M/s. B.P. Oil Mills Ltd.; reported in 1995 SCC OnLine Ori 313 wherein it was held under Paragraph-5 as follows; “A presumption arises under Section 305 that a person has been appointed as representative of the corporation where a statement in writing is made by the managing director of the corporation, or by any person (by whatever name called) having, or being one of the persons having the management of the affairs of the corporation, to the effect that the person named in the statement has been appointed as the representative of the corporation, unless contrary is proved. In case there is dispute whether a person is the question shall be representative, determined in terms of sub-section (6) of Section 305 of the Code.” It was also held in the aforesaid decision that it is always open to the prosecutor to request the Court to direct the Company to aid it in coming to a conclusion as to on whom liability is to be fixed in case the Company is found guilty. Section 6 of the Act, as already stated, contemplates fixing liability also on the CRLA No.313 of 2021 Page 16 of 18 Company and therefore, it is necessary to determine as to who shall represent the Company in such regard so as to give effect to any order that may be passed under Section 6 of the Act against the Company. 14. Reading of the impugned order suggests that the Court below has not considered the matter in the proper perspective at all and has proceeded as if the question of individual liability of the Appellant was being challenged. As has already been discussed in detail hereinbefore, it is not so much a question relating to the individual liability of the Appellant but to his liability in a representative capacity that is involved in the present case. These are two different things inasmuch as only because a person is held to be individually liable cannot, ipso facto, lead to the conclusion that he is also the representative of the Company. In such view of the matter, the impugned order cannot be sustained in the eye of law. 15. For the foregoing reasons therefore, the impugned order is set aside. The matter is remitted to CRLA No.313 of 2021 Page 17 of 18 the Court below to act in terms of Sections 63 read with 305(6) of the Cr.P.C. to determine as to who shall represent the Company in the proceeding. It is made clear that this order shall be confined only to determine the above issue and shall not in any manner affect the order of cognizance of offences taken and the alleged liability of the Appellant in his individual capacity.
Decision
16. The CRLA is accordingly, disposed of. …………….…….……….. (Sashikanta Mishra) Judge Ashok Kumar Behera CRLA No.313 of 2021 Page 18 of 18 CRLA No.313 of 2021 Page 19 of 18 CRLA No.313 of 2021 Page 20 of 18 CRLA No.313 of 2021 Page 21 of 18