Page 21 - Banking Finance August 2022

LEGAL UPDATE

Legal

Independent directors not they were never at the helm of the and chairman. It is the cardinal prin-
affairs of the company or actively par- ciple of criminal jurisprudence that
liable for acts of company:
ticipating in the same. The Court said where there are allegations of vicari-
HC that every person connected with the ous liability, there has to be sufficient
company cannot be held to be liable for evidence of the active role of each di-
The Bombay High Court has ruled that
the acts of the company and quashed rector," the Court said.
independent and non-executive direc-
the earlier order passed by the Met-
tors of companies cannot be held re-
ropolitan Magistrate.
sponsible for acts of the company if Is the 'beneficial owner'
they are not involved in the daily affairs In another case, Justices KR Shriram
also a 'related party'?
of running the company. and Milind Jadhav quashed multiple
Close on the heels of the Supreme
orders of the Joint Director General of
In two different orders passed this
Court's verdict in the now-famous 'PTC
Foreign Trade which imposed penalties
month, the Court observed that simply
Financial' case, the Bombay High Court
on TPI India, including its directors and
because a person is a director of a
has said, in World Crest Advisors LLP Vs
ex-directors,including the non-execu-
company does not make him liable
Yes Bank, that if a financial company
tive director, Anand Bhatt, who was
under the NI (Negotiable Instrument)
transfers to itself shares pledged by a
Act. Only those persons who are in also a practising advocate associated
creditor, the financial company indeed
charge and responsible for the conduct with the law firm, Wadia Ghandy & Co.
becomes the beneficial owner of the
of the business of the company at the Bhatt's wife approached the court in
shares.
time of the commission of the offence 2009, a year after he passed away in
In the World Crest vs Yes Bank case, a
will be liable for criminal action.
a terrorist attack in Hotel Oberoi, on
division bench of the Bombay High
Justice Prakash D Naik quashed crimi- November 26, 2008.
Court, headed by Justice GS Patel, al-
nal proceedings for cheque bounce Quashing the penalty levied by the
lowed Yes Bank to vote in the Dish TV
under Section 138 of the Negotiable Joint Director General of Foreign
AGM, overruling the objections of
Instruments (NI) Act against Satvinder Trade, the High Court observed that
World Crest.
Jeet Singh Sodhi and Sakti Kumar there was nothing in the impugned
These two cases relating to pledge
Banerjee who were independent non- orders as to what the role of each di-
shares have an interesting echo-in the
executive directors. rector was and how Bhatt was a direct-
Insolvency and Bankruptcy Code.
ing mind or will of TPI.
While the prosecution urged that
But first, the World Crest vs Yes Bank
there was sufficient evidence to indi- "No doubt, a corporate entity is an
case.
cate the role of the accused in the artificial person which acts through its
case, the applicants contended that officers, directors, managing director, World Crest pledged its shares in Dish
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