Housewives, domestic help made company directors in early 2000s: Delhi High Court junks bank fraud case against two women

Taking note of a time when mushrooming private limited companies appointed homemakers, domestic helps and other individuals as directors, the Delhi High Court on Wednesday quashed criminal proceedings against two women accused by the Central Bureau of Investigation (CBI) of bank fraud [Kabita Ghosh & Anr v. CBI]..Justice Asha Menon found it a “fit case” for exercising the Court’s inherent powers in favour of the petitioners. “Judicial note could be taken of the first decade of the new millennium, when there was a spurt in the formation of private limited companies, be it investment companies or plantation companies, with much ease by ordinary people,” the order underlined..The Court was hearing a case in which various persons at the helm of a company were found to have defrauded the Vasant Vihar branch of Corporation Bank in New Delhi. It came on record that the company was incorporated on September 26, 2000, with one Chanchal Ghosh and some others who subsequently resigned. Ghosh had inducted his sisters, the petitioners, as directors on October 16, 2010.A chargesheet was filed against seven accused persons, including the petitioners. In January 2020, they were summoned to face trial by the trial court..Seeking quashing of criminal proceedings against the women, counsel for the petitioners submitted that his clients were made directors of a private limited company called M/s Unitrack Logistics Private Limited, while in reality, they were homemakers.Therefore, he argued that there were no grounds to summon them in a conspiracy of accused Ghosh, who along with the accused bank officials, was alleged to have siphoned off the bank’s funds.The special public prosecutor appearing for the CBI sought dismissal of the petition, stressing that the trial court had rightly observed that the petitioners were the only directors of the company which obtained the loan from Corporation Bank. They had also furnished guarantees, as a result of which it could not be said that they were not liable for the defrauding of the bank, he argued..After hearing the parties, Justice Menon observed that during the early 2000s, individuals such as, “housewives, gardeners, domestic helps, etc”, were observed to have been inducted and appointed as directors with no understanding of the legal consequences.“Invariably, one man or a few men ran the affairs of such companies, to collect money and the others were completely unaware of the conduct of the affairs of the companies,” the Court noted.The Court notice a similar pattern in the present case, where the petitioners were homemakers and sisters of Ghosh, who was purportedly the one who played the main role in the conspiracy. The two women were stated to have been “conveniently inducted as directors, after all others had resigned, and due to their naivety, have been now summoned as co-conspirators”.Reference to the Supreme Court judgment in State of Haryana v. Bhajan Lal was made to underscore that in the absence of any criminal intent or active role being directly attributed to the petitioners, at best, only civil action could be taken against them.“This Court is of the view that the petitioners need not be subjected to the rigors of a criminal trial,” the order held, quashing the criminal proceedings against the petitioners..[Read Order]