Can additional director be prosecuted when full-time director present? Bombay High Court to decide

The Bombay High Court recently issued notice in a clutch of petitions raising a common question of law - whether an additional director can be prosecuted on behalf of a company when the full time director is present? (Sanjeev Mansotra v. Union of India & Ors and 9 connected petitions)

. The issue arose in applications filed under Section 482 of the Code of Criminal Procedure (CrPC) for quashing of the complaint filed by the Serious Fraud Investigation Officer (SFIO) against the applicant, Sanjeev Mansotra.

Mansotra, the former Additional Director of Soundcraft Industries, was accused of violating Section 211 of the Companies Act, which pertains to forms of balance sheet and profit and loss accounts, while he was working in the company.

. In his petition, Mansotra stated that he had been hired by the company for a project pertaining to the waste management project. He was appointed as Additional Director of the company and his role was to be limited to the technical aspect of the project.

. During the year 2000, the company started facing severe adversities, owing to which it had to discontinue many projects, including the waste management project. Mansotra resigned from his post as a consequence.

He submitted that during his 11-month tenure as the Additional Director, he neither attended the Board of Directors meetings nor was involved in the day-to-day functioning of the company.

. In 2006, SFIO filed a complaint against Mansotra and other, in which process was issued by the Metropolitan Magistrate. Despite the order being of April 2007, he was never issued any summons till date.

. In April 2021, a police officer visited the residential address of Mansotra with a warrant. Mansotra had moved base to the UAE since 2009. After obtaining certified copies of the proceedings, Mansotra found out about the case and that process had been issued in the same.

. Mansotra thus filed a petition challenging each charge that had been alleged against him. He stated that the allegations against him were baseless and hence sought for quashing of the complaint.

. After issuing notice in 10 petitions, Justice Sandeep K Shinde framed a common question of law for his consideration - "Whether the applicant - an additional director of Soundcraft Industries could be prosecuted for violations of provisions of the Companies Act as an 'officer in default' when there was a whole-time director of the company?"

. The Court also granted Mansotra interim relief in terms of staying the proceedings before the Metropolitan Magistrate, pending the disposal of this plea.

. Mansotra was represented by Advocate Bhavesh Parmar, A Vivekanand and Devmani Shukla, along with Rahul Gaikwad and Gauri Govilkar of Gravitas Legal.

Advocates Shriram Shirsat, Amandeep Singh and Aakash Pathare appeared for the Centre.

. [Read order]

Can additional director be prosecuted when full-time director present? Bombay High Court to decide

Neha Joshi

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