Page 21 - Banking Finance December 2021

LEGAL UPDATE

Legal

News

Directors can't be booked in charge of, and was responsible to, law should not be set into motion as a
the company for the conduct of the matter of course or without adequate
just because firm violated business of the company as well as the and necessary investigation of facts on

law: SC company shall be deemed to be guilty mere suspicion, or when the violation
of the offence and shall be liable to be of law is doubtful," the bench said.
The Supreme Court has asked investi-
proceeded against and punished ac-
gating and prosecuting agencies not to "It is the duty and responsibility of the
cordingly".
proceed mechanically against directors public officer to proceed responsibly
of erring companies merely because of It said the exact role of the officer pro- and ascertain the true and correct
the post held and said such avoidable ceeded against must be delineated by facts. Execution of law without appro-
prosecution leads to humiliation and the prosecution. The SC said vicarious priate acquaintance with legal provi-
loss of reputation in the society. liability would be attracted only when sions and comprehensive sense of their
the offence was committed with the application may result in an innocent
Quashing prosecution and summons
consent, connivance, or is attributable being prosecuted," it said.
issued to a director of a company
to the neglect on the part of a direc-
which allegedly failed to pay minimum tor, manager, secretary, or other of-
wages to some workmen, a bench of SC: Declare purpose or no
ficer of the company and not merely
Justices R S Reddy and Sanjiv Khanna because the person holds a responsible foreign funds for NGOs
said, "A person cannot be prosecuted post in the company. The Supreme Court said NGOs should
and punished merely because of their
Justices Reddy and Khanna said that not be allowed to receive foreign funds
status or position as a director, man-
arresting directors and officers of a if the donor did not declare the pur-
ager, secretary or any other officer, in
company, without them having even pose for which the money is to be spent
a company unless the offence in ques- and said the Centre has diluted the
tion was committed with their consent any remote role in the perpetration of
the alleged violation of law by the intent of Foreign Contribution Regula-
or connivance or is attributable to any company, is fraught with serious con- tion Act (FCRA) by not insisting on such
neglect on their part."
sequences and must be avoided at all a provision.
The important clarification will offer costs. A bench of Justices A M Khanwilkar,
relief to persons holding these posi-
"Initiation of prosecution and summon- Dinesh Maheshwari and C T Ravikumar
tions.
ing of an accused to stand trial has said as per Section 8 of the Act, disclo-
Section 22C of the Minimum Wages serious consequences. They extend sure has to be made at the outset re-
Act provided that "if the person com- from monetary loss to humiliation and garding the purpose for which a con-
mitting any offence under this Act is a disrepute in society, sacrifice of time tribution has been made and asked the
company, every person who at the and effort to prepare defence and Centre to make its stand clear on the
time the offence was committed, was anxiety of uncertain times. Criminal issue.

BANKING FINANCE | DECEMBER | 2021 | 21