Criminal Revision Application No.634 of 2009

6th August, 2010

Petitioner Counsel: Mr. MAHESH JETHMALANI,Mr. GAURAV BELOSAY, SANDEEP AOLE, NIKHIL S. DAVARE,Udwadia and Udeshi
Respondent Counsel: Shri. SHIRISH GUPTE,Ms. ZAKIRA SHAIKH,Ms. S. V. GAJARE

Cases Cited:
Tejram s/o. Mahadeorao Gaikwad Vs. Sunanda w/o. Tejram Gaikwad, 1996 Cri.L.J. 172 [Para 7]
Padmanabh Keshav Kamat Vs. Anup R. Kantak, 1998 ALL MR (Cri) 1577=1999 Cri.L.J. 122 [Para 7]
Cerena D'Souza Vs. State of Maharashtra, 2002 ALL MR (Cri) 1474=2002 Cri.L.J. 4196 [Para 7]
Mohanlal Nandram Choudhari Vs. State of Maharashtra, 2007 ALL MR (Cri) 3138=2007 Cri.L.J. 4656 [Para 7]
Tirupati Balaji Developers (P) Ltd. Vs. State of Bihar, (2004)5 SCC 1 [Para 8]
Madhavlal Narayanlal Pittie Vs. Chandrashekhaar Chaturvedi, 1975 BLR Vol.77 page 633 [Para 9]
S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, 2007 ALL MR (Cri) 870 (S.C.)=(2007)4 SCC 70 [Para 18]
Ashok Chaturvedi Vs. Shitul H. Chanchani, (1998)7 SCC 698 [Para 18]
National Small Industries Vs. Harmeet Singh Paintal, 2010 ALL MR (Cri) 921 (S.C.)=(2010)3 SCC 330 [Para 18]

JUDGMENT

JUDGMENT :- Rule. Rule made returnable forthwith. Heard the learned Counsel for the parties.

2. Reserve Bank of India, who is the original complainant, has filed this Revision Application against the order dated 3.8.2009 passed by the Metropolitan Magistrate, 29th Court, Dadar, Mumbai. whereby he refused to issue process against the accused Nos.2 to 10 and accused No.12 in Criminal Case No.59/SW/2009, who are respondent Nos.1 to 10 in this Revision Application.

3. To state in brief, the accused No.1 - Memon Co-operative Bank is a registered Multi-State Co-op. Society carrying on banking business. Accused No.2 is the Chairman of the said Bank. Accused No.3 is the Vice-Chairman. Accused Nos.4 to 9 are the Directors. Accused No.10 is the Expert Director. Accused No.11 is a General Manager and Chief Executive Officer and accused No.12 is the Special Adviser to the Board of the Directors. Accused No.1, a Co-operative Bank, is entitled to carry on banking business which includes acceptance of deposits from the public and advance of loans. As such, it is governed by the provisions of Banking Regulation Act, 1949 as applicable to Co-operative Societies and the provisions of Multi-State Co-operative Societies Act, 2002. It is the contention of RBI - complainant that under Section 29 of the Banking Regulation Act, the accused No.1 - Bank is required to prepare a balance-sheet and profit and loss account on the last working day of each financial year. The balance sheet and profit and loss account is required to be signed where there are more than 3 directors of the company by at least 3 of its directors. The profit and loss account and the balance sheet prepared under Sec.29 and the audit report under Sec.30 are required to be published in the prescribed manner and 3 copies of such accounts and balance sheet together with auditors' report are to be furnished as returns to the Reserve Bank of India within 3 months from the last date of period to which they refer. It is contended that the respondent No.1 Bank submitted the balance sheet and profit and loss accounts for the years ending March, 2006, March, 2007 and March 2008 showing the profit of Rs.13.34 lakhs, Rs.5.95 lakh and Rs.5.77 lakh respectively. However, as directed by Reserve Bank of India, the accused No.1 Bank got the accounts audited by a statutory auditor. The statutory auditor's report revealed that the Bank had actually incurred loss of Rs.5409.52 lakh during the year ending 31.3.2006, loss of Rs.7493.65 lakh during the year ending 31.3.2007 and loss of Rs.9153.12 lakh for the year ending 31.3.2008. In view of the discrepancy in the returns submitted by the Bank and the statutory auditor's report, RBI got the accounts inspected and it was revealed that the accused No.1 had actually suffered loss of Rs.12818.41 lakh, Rs.16111.38 lakh and Rs.11880.52 lakh during the years ending 31.3.2006, 31.3.2007 and 31.3.2008 respectively. In view of these facts, RBI found that the accused No.1 Bank , and all its Directors, Special Adviser and CEO had committed offence punishable under Section 46 of the Banking Regulation Act because they had willfully made false statements in the returns of the said 3 years. It was contended that accused Nos.2 to 12 holding various posts in the accused No.1 Bank were in charge and were responsible to the accused No.1 for the conduct of business at the time of failure to comply with the provisions of Sec.31 of the Banking Regulation Act. Accordingly, the complaint was filed.

4. However, the learned Magistrate, by the impugned order, issued process against accuse No.1 Bank and accused No.11 - Chief Executive Officer of the Bank, but dismissed the complaint against accused Nos.2 to 10 and accused No.12 on the ground that they were not responsible for submission of false returns to the RBI.

5. Mr. Gupte, the learned Senior Counsel for the respondents/accused, at the outset, raised an objection to the tenability of the Revision Application before this Court directly without first approaching the Sessions Court where the said order could be challenged in revision under Sec.397, Cr.P.C. The learned Senior Counsel contended that as the complainant/Applicant can approach the Sessions Court by filing Revision Application, this Court should not entertain the Revision Application. According to the learned Senior Counsel, there are no special or exceptional grounds to entertain this Revision Application.

6. On the other hand, Mr. Jethmalani, the learned Senior Counsel for the applicant, contended that the High Court and the Sessions Court have the concurrent jurisdiction and powers of revision under the provisions of Secs.397 and 401, Cr.P.C. and it is the choice of the applicant to approach either of the Courts subject to the limit that once a party has approached any of the two Courts in revisional jurisdiction, it cannot approach another Court for the same relief again. Before proceeding with the merits of the case, about issuance of process against the accused/respondents, it will be necessary to deal with the question of tenability of the Revision Application.

7. Mr. Gupte, the learned Senior Counsel for the respondents placed reliance on several authorities rendered by the Single Judges of this Court. They include Tejram s/o. Mahadeorao Gaikwad Vs. Sunanda w/o. Tejram Gaikwad & Ors., 1996 Cri.L.J. 172; Padmanabh Keshav Kamat Vs. Anup R. Kantak, 1999 Cri.L.J. 122 : [1998 ALL MR (Cri) 1577]; Cerena D'Souza Vs. State of Maharashtra & Ors., 2002 Cri.L.J. 4196 : [2002 ALL MR (Cri) 1474] and Mohanlal Nandram Choudhari Vs. State of Maharashtra, 2007 Cri.L.J. 4656 : [2007 ALL MR (Cri) 3138].

In Tejram Vs. Sunanda Tejram Gaikwad & Ors., the learned Single Judge of this Court observed as follows in para 4 :-

"4. First of all the application deserves to be dismissed on the ground that the applicant has not filed the criminal revision before the Sessions Judge, having jurisdiction over the matter. It is undoubtedly true that S.397 of the Code of criminal Procedure confers jurisdiction of revision concurrently on the Court of Sessions as well as the High Court, but it is equally true that where the jurisdiction is conferred on two courts, the aggrieved party should ordinarily first approach the inferior of the two Courts unless exceptional grounds for taking the matter directly before the superior Court is made out. Since the applicant has come directly to the High Court, though he could have filed the revision before the Sessions Judge and there are no exceptional reasons, the revision application deserves to be dismissed on this count alone. This Court does not encourage filing of revision application under S.397 of the Code of Criminal Procedure directly before this Court if it could be challenged in revision before the Sessions Court having jurisdiction of revision over the matter."

The same view was taken in the other cases also and in several cases, the Single Judges of this Court have taken the view that though under Sec.397, Cr.P.C. concurrent jurisdiction is conferred on the Court of Sessions as well as the High Court, the aggrieved party should ordinarily first approach the inferior of the two courts unless exceptional grounds for taking the matter directly before the superior Court are made out. Thus, it was held that if there are exceptional grounds to entertain the revision, the High Court may entertain the revision application directly even though the aggrieved party had not approached the Sessions Court.

8. Mr. Gupte, the learned Senior Counsel also placed reliance upon Tirupati Balaji Developers (P) Ltd. & Ors. Vs. State of Bihar & Ors., (2004)5 SCC 1, wherein the Supreme Court observed thus in para 31 :-

"31. Though, the jurisdiction conferred on the Supreme Court under Article 136 is very wide and no technicality can prevent or hinder the effective exercise of such jurisdiction yet as a rule of prudence and self-imposed discipline the superior forum refuses to exercise its jurisdiction in the first instance if the grievance raised is capable of being taken care of by any lower forum competent to do so."

It may be stated that the above observations made by the Supreme Court were general in nature and the Supreme Court was not called upon to decide the question of revisional jurisdiction of the High Court and Sessions Court as the facts of that case were totally different. However, the principles laid down in the said observations may be applicable to all the matters in which two Courts have concurrent jurisdiction.

9. On the other hand, Mr. Jethmalani vehemently contended that the Division Bench of this Court in Madhavlal Narayanlal Pittie Vs. Chandrashekhaar Chaturvedi, 1975 BLR Vol.77 page 633 had considered the question of revisional jurisdiction of the Sessions Court and the High Court and it held that the aggrieved party cannot be deprived of approaching the High Court in revisional jurisdiction, if it so desires, because after the Criminal Procedure Code, 1973 came in to force the aggrieved party cannot file second revision application before the High Court after rejection of his revision application by the Sessions Court. Therefore, if the party is not allowed to file revision application before the High Court at first instance, he is permanently deprived of approaching the High Court for that relief. In Madhavlal Pittie, the Division Bench of this Court considered the provisions about revisional jurisdiction in the Criminal Procedure Code, 1898 as well as in the Criminal Procedure Code, 1973. After having considered the provisions under both the Codes, the Division Bench observed thus :-

"Reverting to S.397, it appears to us that the High Court as well as the Sessions Judge have been given co-ordinate powers to call for and examine the record of any proceedings before any inferior criminal Court. It may, no doubt, be said that a party has no right of revision as such, but any party can move a Court, whether High Court or a Sessions Judge, for calling for the record of any proceedings of any inferior Court and examine the same, for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order. It, therefore, appears on the plain reading of this section that it is either the High Court or the Sessions Judge which may by itself or himself suo motu call for and examine the record, or any irregularity or illegality in the proceedings may be brought to the notice of the High Court or the Sessions Judge by any person including a party to a proceeding before inferior criminal Court. However, once any of these two Courts have entertained the case then the other Court will refrain from taking any action in the same matter, as provided by sub-S.(3) of S.397. Sub-section (3) of S.397 clearly lays down that once an application under S.397 has been made to any of the two Courts, then no further application by the same person shall be entertained by the other Court.

On the reading of these provisions, it would appear that both the High Court and the Sessions Judge have got the power to go into the record and have jurisdiction to pass the necessary orders after examining the record of any proceeding. It is not, therefore, that either the High Court or the Sessions Judge, has no jurisdiction to go through the record or to entertain an application if made by any person and to pass the necessary orders thereon. It does appear and particularly on the reading of sub-S.(3) of S.397, that any person interested can move the Court, either the High Court or the Sessions Judge by making an application for revising the order of the inferior Court. It is for that Court before whom an application has been made to entertain it or not. That, however, is a different question. But the jurisdiction of the Court is not barred if the Court is inclined to exercise the powers vested in it or him. If, as is contended, the high Court has no jurisdiction to entertain a revision application then that is likely to cause prejudice to one of the parties and that party will be put to a disadvantage. If the contention raised on behalf of the State is accepted then in that case every revision application against an order of a Magistrate must be made to the Sessions Judge and can never be made to the High Court. If that is so, then the High Court will not be in a position to entertain a further application at the instance of that party and the order which is passed by the Sessions Judge would be a final order, as provided in sub-S.(3) of S.399 of the new Code. Under the old Code, both the High Court as well as the Sessions Judge excluding the matters in Greater Bombay, had concurrent jurisdiction and powers to entertain revision applications. The revision application could be filed either before the Sessions Judge in the mofussil or before the High Court direct and there was nothing to prevent the High Court in entertaining such a revision application and disposing it of but as a matter of practice, the high Court had laid down for itself certain guidelines and had also made a rule to the effect that ordinarily where the Sessions Judge as well as the High Court have got concurrent jurisdiction, the revision application should be filed first before a Court of lower jurisdiction namely the Sessions Judge and then the order of the Sessions Judge, if necessary could be revised by the High Court in further revision application. Rule 14 of Chapter XXVI of the Bombay High Court (Appellate Side) Rules provided that in the absence of special circumstances, the High Court will not entertain an application for revision where an application for revision might have, but has not, been made to a lower revisional Court. There are also decisions of this High Court where it has been laid down that except in exceptional circumstances the high Court will not directly entertain a revision application from the order of a Magistrate. It would thus appear that under the old Code if the revision application filed by a party before the Sessions Judge was rejected, then that party had a further opportunity of revision before the High Court and the High Court could give, if it was found necessary, a relief to the party concerned. That opportunity is now taken away by the new Code if a revision application were to be filed before the Sessions Judge. Once the revision application filed by a party before the Sessions Judge is rejected then under the new Code by virtue of provisions of sub-s.(3) of s.399, that order becomes final and that party whose revision has been rejected by the Sessions Judge cannot further move the High Court for the revision of the said order though the opponent can file a revision application if the revision were allowed. Thus the party who approaches the Sessions Judge in revision against an order of the Magistrate under the new Code is deprived of the advantage of the order of the High Court in a revision under the new Code and has to be satisfied with the order of the Sessions Judge unless his application under Art.227 of the Constitution were entertained by the High Court. That is, however, an exceptional and purely discretionary remedy and there may or may not be any interference. If the High Court's jurisdiction to entertain a revision application directly from the order of the Magistrate was to be barred a specific provision to that effect could have been made in the Code itself. On the contrary we find in s.397 that the power has been given to both the Courts simultaneously and on the wording of s.397, a party is not precluded from invoking the powers of any of them. It is left to the party concerned to avail of any of the two remedies but he cannot however avail of both the remedies once he has chosen his course." (emphasis supplied)

10. Mr. Jethmalani contended that there is no Division Bench or any authority of the Supreme Court taking a contrary view from the view taken by he Division Bench in Madhavlal in 1975 and the learned Senior Counsel for the respondents could not point out any such authority. It is thus settled position of law that revision is not the right of a party, but that is the power of the Court and it is upto the concerned Court to entertain or not to entertain the revision but it is upto concerned party whether to approach the High Court or the Sessions Court. Therefore, no objection can be taken to tenability of the Revision Application. Taking into consideration the facts of the present case, I find that it will be in the interest of justice, to entertain the revision application.

11. To appreciate the facts of the present case, it will be necessary to go through certain provisions of the Banking Regulation Act and Multi-State Co-op. Societies Act. Section 29 of the Banking Regulation Act provides that at the expiration of each calendar year every banking company incorporated in India in respect of all business transacted by it, and every banking company incorporated outside India in respect of business transacted through its branches in India shall prepare with reference to that year, a balance sheet and profit and loss account on the last working day of that year in the form set out in the Third schedule. Sub-section (2) of Section 29 requires that the balance-sheet and profit and loss account shall be signed in the case of a banking company incorporated in India by the manager or the principal officer of the company and where there are more than 3 directors of the company, by at least 3 of those directors, or where there are not more than 3 directors, by all the directors. Section 30 requires that the balance sheet and profit and loss account prepared in accordance with section 29 shall be audited by a person duly qualified under the law. Sub-section (1-B) of Sec.30 requires that without prejudice to anything contained in the Companies Act, 1956 or any other law for the time being in force, where the Reserve Bank is of opinion that it is necessary in the public interest or in the interest of the banking company or its depositors so to do, it may at any time by order direct a special audit of the banking company's accounts for any such transaction or class of transactions or for such period or periods as may be specified in the order. Under Sub-section (3)(d) of section 30 the auditor is required to state in his report, in the case of a banking company, as to whether the profit and loss account shows a true balance of the profit or loss for the period covered by such period. These provisions indicate that the balance-sheet and profit and loss account prepared under Sec.29 are expected to be true and to show the true balance of profit or loss for the period concerned. In case the Reserve Bank of India is of opinion that it is necessary in the public interest or in the interest of banking company or its depositors, it may direct special audit to find out the truth.

12. Section 31 provides that the accounts and the balance sheet referred to in Section 29 together with the auditor's report shall be published in prescribed manner and 3 copies thereof shall be furnished as returns to the Reserve Bank of India within 3 months from the end of the financial year. Sec. 32 requires copies of balance sheets and accounts to be sent to the Registrar of Companies. From these provisions, it becomes clear that the accounts and balance sheets of the company are required to be published for the information of the public, who may be investors, depositors or otherwise interested in the company. The copies of the said balance-sheet and profit and loss account with the auditor's report are to be submitted to the Reserve Bank of India as returns.

13. Sub-Sections (1), (5) and (6) of Sec.46 are relevant. They read as follows :-

"46. Penalties - (1) Whoever in any return, balance-sheet or other document [or in any information required or furnished] by or under or for the purposes of any provision of this Act, willfully makes a statement which is false in any material particular, knowing it to be false, or willfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

(5) Where a contravention or default has been committed by a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly.

(6) Notwithstanding anything contained in sub-section (5), where a contravention or default has been committed by a company, and it is proved that the same was committed with the consent or connivance of, or is attributable to any gross negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that contravention or default and shall be liable to be proceeded against and punished accordingly."

From sub-section (1) it becomes clear that whoever in any return, balance-sheet or other document, which also include the profit and loss account, willfully makes a statement which is false in any material particular, knowing it to be false or willfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine. Under sub-sec.(5) where a contravention or default has been committed by a company, every person who at the time the contravention or default was committed, was in charge of or otherwise responsible to the company, for the conduct of the business of the company as well as the company shall be deemed to be guilty of the contravention or default. However, sub-sec.(6) also declares that notwithstanding anything contained in sub-section (5) where a contravention or default has been committed by a company and it is proved that the same was committed with the consent or connivance of or is attributable to any gross negligence on the part of any director, manager, secretary, or other officer, such director, manager, secretary or other officer shall also be deemed to be guilty of that contravention.

14. Now it will be useful to refer certain provisions of the Multi-State Co-operative Societies Act, 2002. Section 41 of the Act provides for constitution of Board of Directors. Section 49 provides for powers and functions of the Board of Directors. Section 51 provides for appointment of the Chief Executive Officer as the full-time employee of such Multi-State Co-op. Society. Section 52 provides for powers and functions of the Chief Executive. As per clause (a) of Section 52, the Chief Executive shall exercise the powers and discharge the functions pertaining to the day-to-day management of the business of the Multi-State Co-op. Society under the general superintendence, direction and control of the Board. Clause (j) requires him to present the draft annual report and financial statement for the approval of the board within 30 days of closure of the financial year. Section 49(2), specifically mentions certain powers and functions of the Board of Directors. They include the power, (c) to make periodic appraisal of operations, (f) to place the annual report, annual financial statements, annual plan and budget for the approval of the general body and (g) to consider audit and compliance report and place the same before the general body. If the provisions of Sections 49 and 52 are read together, it appears that the day-to-day management of the business is to be carried out by the Chief Executive. He is not the authority to finalise the annual report and the financial statement including the balance sheet and the profit and loss account. His authority is only to prepare and present draft annual report and financial statement for the approval of the board of directors and in view of the provisions of clauses (f) and (g) of Sec.49(2), it is the power and function of the board of directors includes to consider such draft annual report and financial statement with audit and compliance report and then to place the annual report, annual financial statements, annual plan as well as audit and compliance report before the general body. Thus, the Board of Directors is the body which is responsible for approval of the annual report and financial statements and after such approval balance-sheet and profit and loss account are required to be signed not only by the manager or the principal officer of the company or chief executive in the case of Multi-State Co-op. Society, but also by its directors in view of Section 29(2)(a) of Banking Regulation Act. It provides that when there are more than three directors, at least three directors of the company shall sign the balance sheet and profit and loss account and where there are not more than 3 directors, they are to be signed by all the directors. Thus, when the balance sheet and profit and loss account are approved by the board of directors, and then signed by the principal officer of the company as well as directors, they are to be published. Three copies of the same are to be sent to the Reserve Bank of India as returns under Sec.31. If all these provisions are read together, it becomes clear that the responsibility of approval of the balance sheet and profit and loss account and the publication and submission of returns is of the Board of Directors. The Directors are also responsible to put signatures on the balance sheet and profit and loss account subject to the provisions of Section 29(2)(a). The preparation, finalization, approval, signing and publication of the balance sheet and profit and loss account cannot be compared with conduct of day to day business of the company. While the Chief Executive is responsible not only for the day-to-day business of the society and in charge of and is responsible to the company for the conduct of the business of the company, the directors cannot escape their responsibility as far as the preparation, approval, signing and publication of the annual financial reports, including the balance sheet and profit and loss account. That is basically the responsibility of the board of directors. These are the special powers and functions of the board of directors in view of the provisions of Section 49 of the Multi-State Co-op. Society read with Sections 29 and 31 of the Banking Regulation Act.

15. Facts of the present case are noted earlier. In the complaint filed by Reserve Bank, it is made clear that while in the statement of accounts submitted and published by the Bank, the profit was shown for the three financial years ending with 31.3.2006, 31.3.2007 and 31.3.2008. The statutory audit report prepared by the auditor appointed by the accused No.1 Bank, as per directions of the Reserve Bank under Sec.30, loss of Rs.5,409.52 lakhs, Rs.7,493.65 lakhs and Rs.9,153.12 lakhs for those 3 years was disclosed. However, inspection undertaken by Reserve Bank of India by virtue of powers under Section 35 of the Banking Regulation Act revealed net loss was of Rs.12,818.41 lakhs, Rs.16,111.38 lakhs and Rs.11,880.52 lakhs for the said three financial years. In view of this, according to the complainant RBI, willful false statements were made in the said balance-sheet and profit and loss account of the Bank for the said 3 years and therefore, offence under Section 46(1) was committed.

16. Looking to the relevant provisions of the Banking Regulation Act and the Multi-State Co-op. Societies Act, as stated above, it is clear that it was the responsibility of the Board of Directors and as such each of its directors to publish and submit the true balance sheet and profit and loss account and there is reason to believe that they had willfully given false information in the said balance-sheet and the profit and loss account and at least, prima facie, there is scope to believe that the offence was committed with the consent of and at least it may be attributable to gross negligence on the part of the directors.

17. The complaint revealed, and it is supported by 43rd Annual Report for the year 2007-2008 published by the accused No.1 with authority of the Board of Directors, that accused Nos.2 and 3 were Chairman and Vice-Chairman respectively of the accused No.1 Bank and accused Nos.4 to 9 were the Directors, accused No.10 was the Expert Director and accused No.12 was the Special Advisor to the Board of Directors and it appears that he is also the brother of accused No.2, who is Chairman of the Bank. Taking into consideration the facts and legal position, prima facie, it appears that each of the accused had committed offence punishable under section 46(1) of the Banking Regulation Act and therefore, process should have been issued against each of them.

18. Before concluding, it may be noted that Mr. Gupte, the learned Senior Counsel for the respondents placed reliance on certain authorities to show that only such directors as were in charge of and were responsible to the company for the conduct of the business of the company at the time of contravention would be responsible for the offence under Section 46(1). Similar provisions are to be seen in Section 141 of the Negotiable Instruments Act. The authorities relied upon by the learned Senior Counsel pertain to the cases under the Negotiable Instruments Act. In S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, (2007)4 SCC 70 : [2007 ALL MR (Cri) 870 (S.C.)]; Ashok Chaturvedi & Ors. Vs. Shitul H. Chanchani and Anr., (1998)7 SCC 698; National Small Industries Vs. Harmeet Singh Paintal & Anr., (2010)3 SCC 330 : [2010 ALL MR (Cri) 921 (S.C.)] and several others, it has been laid down by the Supreme Court that when a liability under Section 141, M.I. Act is sought to be fastened vicariously on a person connected with the company, the principal accused being company itself, a clear case should be spelt out in the complaint against the person sought to be made liable and it has to be shown that the said person was in fact in charge of and was responsible to the company for the conduct of the business of the company at the time of the alleged contravention or commission of offence. Similar provisions are made in Section 46(5) of the Banking Regulation Act. However, sub-section (6) of Sec.46 cannot be ignored. Looking to the other provisions of the Banking Regulation Act as well as Multi-State Co-op. Societies Act, and as discussed earlier, there remains no doubt that all the directors are personally responsible for willful false statements or for omissions therein. The directors can be held guilty of the offence u/s. 46(1) even where commission of offence is attributable to any gross negligence on their part. The false statement in the balance sheet and profit and loss account of a banking company is serious offence because large number of depositors and investors may be misled by such false statements and may invest or deposit money with such bank presuming that it is being properly managed and it is running profitably while in fact, it is running into huge losses. If the loss would be made public, naturally, the people would be averse to making investment or deposits in such banks. The possibility of such banks running into huge losses and going into liquidation cannot be ruled out and if such bank comes into liquidation, large number of depositors may lose their hard earned money and it may adversely affect the whole banking system. It is impossible to accept that for all the frauds played by the Accused No.1 Bank, its Chief Officer, who is only a paid employee would be responsible while the Chairman, Vice-Chairman and other directors and Special Adviser would go scot free while in fact they may be the real culprits for commission of such offence. These aspects were completely overlooked by the learned Magistrate while dismissing the complaint as against accused Nos.2 to 10 and 12. Therefore, it must be held that the impugned order is perverse and illegal and needs to be set aside.

19. For the aforesaid reasons, the Revision Application is allowed. The impugned order is hereby set aside and the learned Magistrate is hereby directed to issue process against accused Nos.2 to 10 and accused No.12 also.

Revision Application allowed.