Case Note & Summary
The appellant, M/s. P.M. Granites Exports Pvt. Ltd., filed a complaint under Section 452 of the Companies Act, 2013 against the respondent, T. Manoharan, alleging that the respondent, as a director of the company, had committed an offence under the Act. The Special Court for Economic Offences, Bengaluru, acquitted the respondent on the ground that the complaint did not specifically allege that the respondent was in charge of and responsible for the conduct of the business of the company. The appellant challenged this acquittal before the High Court of Karnataka. The High Court, after hearing the parties, set aside the acquittal and remanded the matter back to the trial court for fresh consideration on merits. The court held that the trial court had erred in acquitting the respondent without considering the complaint on merits and without giving the complainant an opportunity to prove its case. The court also observed that the trial court had not properly appreciated the provisions of Section 452 of the Companies Act, which requires that a director can be prosecuted only if there is a specific allegation of consent, connivance, or neglect. Since the complaint did not contain such an allegation, the trial court's acquittal was not sustainable. The High Court directed the trial court to proceed with the case in accordance with law and dispose it of within six months.
Headnote
A) Criminal Law - Companies Act - Section 452 - Vicarious Liability of Directors - The court held that under Section 452 of the Companies Act, 2013, a director can be prosecuted for an offence committed by the company only if there is a specific allegation of consent, connivance, or neglect. In the absence of such allegation, the director cannot be held vicariously liable. The trial court's acquittal was set aside because the complaint did not contain any averment that the accused director was in charge of or responsible for the conduct of the business of the company. (Paras 5-8) B) Criminal Procedure Code - Section 378(4) - Appeal Against Acquittal - The High Court, while hearing an appeal against acquittal under Section 378(4) Cr.P.C., can interfere if the trial court's judgment is perverse or based on erroneous appreciation of evidence. The court found that the trial court had not considered the complaint on merits and had erroneously acquitted the accused. (Para 9)
Issue of Consideration
Whether the Special Court for Economic Offences was justified in acquitting the accused under Section 452 of the Companies Act, 2013 without trial on merits, solely on the ground that the complainant did not prosecute the director personally?
Final Decision
Appeal allowed. The judgment of acquittal dated 18.03.2019 passed by the Special Court for Economic Offences, Bengaluru in C.C.No.236/2017 is set aside. The matter is remanded back to the trial court for fresh consideration on merits. The trial court is directed to dispose of the case within six months from the date of receipt of the order.
Law Points
- Section 452 of Companies Act
- 2013
- vicarious liability of directors
- acquittal without trial
- non-prosecution of director
