Director Cannot Be Prosecuted Without Making Company an Accused: Calcutta High Court

“No Vicarious Liability Without Company as Principal Offender – Complaint Against Director Alone is Legally Unsustainable”, Calcutta High Court quashed a criminal complaint filed solely against a director of a company for alleged non-disclosure of Specified Bank Notes (SBNs) and related party transactions. Justice Ajay Kumar Gupta held that “no vicarious liability can be imposed on a director in criminal proceedings unless the company is arraigned as an accused”, firmly applying the settled legal principle laid down by the Supreme Court in Sunil Bharti Mittal v. CBI and Santosh Kumar Lahoti v. ROC, West Bengal.

The judgment underscores the necessity of impleading the company as the principal offender in offences relating to financial misstatements, failure of disclosure, or statutory violations under the Companies Act, 2013. The complaint, lodged under Sections 129 and 448 of the Companies Act, was found to be defective for non-joinder of the company and for making vague and generalized allegations lacking specific attribution of mens rea or fraudulent intent to the director.

“Without Prosecuting the Company, Directors Alone Cannot Be Criminally Liable” – High Court Reinforces Legal Mandate Under Section 129(7) of Companies Act

The dispute arose from Complaint Case No. 44/2019 pending before the 2nd Special Judge at Kolkata. The complaint was initiated by the Deputy Registrar of Companies alleging that M/s Marco Polo Restaurant Pvt. Ltd. failed to disclose dealings in Specified Bank Notes during the demonetization period of November–December 2016, and also failed to report related party transactions involving unsecured borrowings of ₹80,50,450 in the balance sheet as on March 31, 2017.

However, the complaint did not name the company as an accused—only its directors and auditor were arrayed. The petitioner, Apurba Mookerjee, a director since 2001, sought quashing of the proceedings under Section 482 CrPC, contending that she played no role in the company’s daily affairs, that the complaint lacked specific allegations, and that it failed to establish the requisite elements of mens rea under Section 448.

The Court agreed.

“Without making the company as an accused, how its directors will be liable for commission of offence and/or punishment? The complaint is bad in law as it suffers from non-joinder and misjoinder of the company being the primary accused...” observed Justice Gupta [Para 49].

The Court reaffirmed that Section 129(7), which penalizes non-compliance with accounting standards in financial statements, presupposes “contravention by the company.” Absent prosecution of the company itself, directors cannot be prosecuted in isolation.

Complaint Based on Vague Allegations, No Mens Rea Alleged – Quashing Justified to Prevent Abuse of Process

Justice Gupta also noted that the complaint made “no specific allegation that the petitioner made any false statement knowingly”, which is a necessary ingredient under Section 448 of the Companies Act. At best, the case was one of alleged omission or non-disclosure—not falsification or fabrication of records.

“Section 448 contemplates punishment for ‘false statement’, which necessarily imports an element of deliberate falsity and mens rea. From the complaint and materials placed, this Court does not find any specific allegation that the petitioner made any statement knowing it to be false...” [Para 47].

The Court also found the complaint bereft of particulars, with no overt act or specific responsibility attributed to the petitioner. Additionally, it took judicial notice of the fact that another Coordinate Bench of the High Court had quashed identical complaints involving similarly placed directors, including her husband, in CRR No. 4526 of 2024 (Arup Mookerjee v. ROC). That decision had attained finality and no appeal was filed.

The Registrar’s argument that Section 129(7) permits prosecution of directors without necessarily prosecuting the company was rejected. The Court emphasized: “Vicarious liability can be fastened upon directors only when the statute specifically provides so and when the primary offender i.e., the company is before the Court” [Para 50].

Deputy Registrar Held Competent to File Complaint – Section 439(2) Read with Section 2(75) Interpreted Harmoniously

On the issue of maintainability, the Court clarified that Deputy Registrar was duly authorized under the Companies Act to file a complaint. The petitioner had argued that the complaint violated Section 439(2), which allows only the Registrar, a shareholder, or a government-authorized person to initiate prosecution. However, the Court held that the term “Registrar” under Section 2(75) includes the Deputy Registrar.

“Since the terminology and definition of the term ‘Registrar’ includes a Deputy Registrar as well, it can be conclusively said that he is accordingly duly empowered to file the instant complaint case” [Para 43].

Limitation Under Section 468 CrPC Not Applicable – Offence Punishable With Imprisonment Up to 10 Years

The Court further dismissed the petitioner’s argument that the complaint was barred by limitation under Section 468 CrPC, noting that offences under Sections 129 and 448, read with Section 447, are punishable with imprisonment of up to 10 years, and therefore fall outside the bar of limitation.

“The period of limitation for instituting the case is not at all barred under Section 468 of the CrPC” [Para 44].

Quashing of Complaint Secures Ends of Justice – Criminal Revision Allowed

Holding that continuation of proceedings against the petitioner would be oppressive, and that the possibility of conviction was “remote and bleak”, the Court concluded that the complaint was a clear abuse of process.

“Continuation of criminal cases would put the accused to great oppression and prejudice and extreme injustice would be caused to her by not quashing the criminal case” [Para 58].

Accordingly, the Court allowed the criminal revision, quashing Complaint Case No. 44/2019 and all consequential orders against the petitioner. It also vacated all interim orders.

Date of Decision: 04 February 2026