Prima Facie Record Shows Accused Was Company Director; Discharge Cannot Be Sought on Mere Denial: Kerala High Court Declines Relief in Chit Fund Fraud Case

“Liberty Reserved to Seek Quashing If Registrar Finds Name Was Wrongly Included”, Kerala High Court refused to interfere with an order passed by the Judicial First Class Magistrate Court, Mavelikkara, declining to discharge one of the accused in a high-value economic offence involving unauthorised public deposit collection and fraudulent chitty operations. In Criminal Revision Petition No. 989 of 2017, filed by Remesan Mathiyeri, the 11th accused in C.C. No. 459/2015, Justice G. Girish dismissed the plea, holding that documentary material showing him as a Director of the company during the relevant period was sufficient to proceed with trial.

The Court reiterated that at the discharge stage under Sections 227 and 239 of the CrPC, the court is not required to conduct a roving enquiry or assess the defence, but only ascertain whether a prima facie case exists based on the materials produced by the prosecution.

Accused Named as Director in ROC Records During Offence Period: Magistrate’s Finding Based on Valid Materials

The case arises out of a CB-CID Economic Offences Wing investigation, which led to the filing of a charge sheet alleging offences under Sections 406 and 420 read with Section 34 of the IPC, along with violations of the Reserve Bank of India Act, 1934 (Sections 58(b), 4A, and 58(c)) and the Kerala Chitties Act, 1977 (Section 3).

The allegation pertains to the unauthorised collection of over ₹14 crores from the public by M/s Business India Shares & Insurances Pvt. Ltd., a company allegedly operating a chit fund scheme without the requisite licence or registration.

Remesan Mathiyeri sought discharge from the proceedings claiming he was neither a Director nor a shareholder of the accused company during the relevant period. However, the Magistrate, while dismissing his discharge application (C.M.P. No. 196/2017), had specifically noted that:

“The relevant records procured from the Registrar of Companies revealed that accused Nos.11 (petitioner herein), 12, 13, 15, 16 & 22 were shown as Directors of the company by name ‘M/s Business India Shares & Insurances Pvt. Ltd.’” [Para 5]

The Magistrate also referred to findings in Company Petition No. 41 of 2009, which noted that the said company was part of the larger ‘Business India Group’ accused of defrauding depositors.

Pending ROC Enquiry Not a Ground for Discharge Absent Proof of Exoneration

The petitioner relied heavily on an earlier judgment of the High Court in W.P.(C) No. 27452 of 2016, where the Registrar of Companies was directed to scrutinise how his name came to be shown as Director and to rectify the records if a mistake had occurred. The petitioner argued that this direction, and the possibility that his name was wrongly recorded, should be a ground for discharge.

However, Justice Girish firmly rejected that contention, stating:

“The mere fact that this Court issued a direction... to conduct an enquiry and to make corrections in the relevant records... cannot be a reason to claim discharge from the criminal prosecution... unless it is shown that he was not a Director... during the relevant period.” [Para 6]

The Court observed that no material was placed on record to show that the enquiry concluded in his favour, or that the Registrar had rectified the records to remove his name.

Director’s Criminal Liability in Economic Offences: Company’s Articles Impose Management Responsibility

The Court also emphasized that in cases of economic offences committed by companies, directors named during the relevant period cannot claim immunity at the threshold. The Articles of Association of the company specifically vested management powers with the Directors. As such, the presence of the petitioner’s name in the Registrar of Companies (ROC) records was enough to proceed to trial.

“When records show accused as Director during relevant period, criminal liability cannot be ruled out at threshold.” [Headnotes]

Scope of Revisional Jurisdiction in Discharge Orders: No Illegality or Perversity Found

Reaffirming the limited scope of revisional jurisdiction under Section 397 CrPC, the Court held that the Magistrate had rightly considered the records and relevant legal principles before refusing discharge.

“The prayer of discharge of the petitioner could be considered if only it is shown that he was not a Director... Having failed to establish the above primary requirement, the impugned order... cannot be interfered with in this revision.” [Para 6]

The Court held that there was no illegality, perversity or procedural impropriety in the Magistrate’s order warranting interference.

Liberty Reserved for Future Quashing if ROC Clears Petitioner

Though the revision was dismissed, the High Court granted limited liberty to the petitioner, noting that:

“The petitioner would be having the liberty to approach this Court to quash the proceedings against him, if he is able to show that the enquiry... revealed that the petitioner’s name happened to be wrongly shown as one of the Directors.” [Final Para]

This preserves the petitioner’s right to seek quashment under Section 482 CrPC in the future, provided he obtains a favourable finding from the ROC.

Date of Decision: 05/01/2026