[Cites 22, Cited by 0]
Madhya Pradesh High Court
Ajitha Kumar vs Union Of India on 26 March, 2026
Author: Anuradha Shukla
Bench: Anuradha Shukla
1 MCRC-50215-2024
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SMT. JUSTICE ANURADHA SHUKLA
ON THE 26th OF MARCH, 2026
MISC. CRIMINAL CASE No. 50218 of 2024
AJITH KUMAR KANDAMPULLY APPU
Versus
UNION OF INDIA
Appearance:
Shri Shivansh Soni - Advocate for the petitioner (through Video Conferencing)
Shri Harpreet Singh Gupta - Advocate for the respondent
WITH
MISC. CRIMINAL CASE No. 50205 of 2024
AJITHAKUMAR
Versus
UNION OF INDIA
Appearance:
Shri Shivansh Soni - Advocate for the petitioner (through Video Conferencing)
Shri Harpreet Singh Gupta - Advocate for the respondent
MISC. CRIMINAL CASE No. 50215 of 2024
AJITHA KUMAR
Versus
UNION OF INDIA
Appearance:
Shri Shivansh Soni - Advocate for the petitioner (through Video Conferencing)
Shri Harpreet Singh Gupta - Advocate for the respondent
Reserved on : 30.01.2026
Pronounced on: 26.03.2026
Signature Not Verified
Signed by: PRASHANT
SHRIVASTAVA
Signing time: 28-03-2026
12:23:04
2 MCRC-50215-2024
ORDER
These three petitions, under Section 528 of Bhartiya Nagarik
Suraksha Sanhita, 2023 (BNSS), have been filed for seeking to drop off
the criminal proceedings registered against applicant in Complaint
Cases No.RCT/9967/2018, RCT/9991/2018 and RCT/10010/2018
respectively, by impleading him as one of the accused of the offence of
Section 276-B and 278-BB of the Income Tax Act, 1961.
2. (i) Facts may be summed up in brief that GEI Power Limited (in
short, "accused company"), executed a loan agreement on 23.08.2011 with
IDBI Bank and applicant, who was a full-time employee of IDBI Bank, was
appointed as a Nominee Director on the Board of accused company with
effect from 30.11.2012, under the terms of agreement. It is alleged that for
the financial years from 2011-14, the accused company deducted taxes in the
amount of Rs.2,28,53,618/- for TDS and Rs.1,80,135/- for TCS but these
amounts were not credited to the Central Government for over one year and,
thus, the permissible timeline for crediting the amount was violated. Deputy
Commissioner of Income Tax (TDS), Bhopal, issued a show-cause notice
requiring the accused company to confirm that deducted tax was credited to
the Central Government. To this a reply was filed by accused company, but
still the payment was not made within the given time frame. Its contended by
applicant that no notice was personally served upon him under Section 2(35)
(b) of the Income Tax Act. It is further submitted that no such notice could
even be served upon applicant for the reason that he was only a nominee
director appointed by his employer for a limited purpose of ensuring proper
3 MCRC-50215-2024
utilization of funds advanced by IDBI Bank. He had no role or involvement
in the day-to-day operations, financial management, statutory compliances or
tax matters (including TDS and deposit) of the accused company. The
statutory protection provided in Section 149(12) of the Companies Act, 2013
to non-executive directors (including nominee directors) is also claimed by
applicant. Reliance was also placed on the General Circular No.1/2020, dated
02.03.2020, issued by the Ministry of Corporate Affairs, wherein
clarification on prosecuting independent directors, non-promoters non-
executive directors, etc. was issued and it was advised that civil and criminal
proceedings shall not be unnecessarily initiated against them unless
sufficient evidence exists to the contrary.
2 (ii) The institution of criminal proceedings has been challenged
by applicant by claiming that respondent has failed to show that applicant
was in-charge for the conduct of business of the accused company or the
contravention of law had taken place with the consent or connivance of
applicant nor was he the principal officer as defined in Section 2(35) of
Income Tax Act. Thus, submitting that the institution of criminal proceeding
against applicant is not only in violation of fundamental, legal and equitable
rights of applicant but also against the principle of natural justice. Applicant
is arrayed as accused only on mechanical context without any application of
mind. Accordingly, citing various case laws, it is requested that interest of
applicant need to be shielded under the provision of Section 528 of BNSS by
saving him from the plight of facing \ trials based on a false complaints.
Accordingly, prayer is made for removal of applicant's name from the
4 MCRC-50215-2024
pending complaint cases.
3. Respondent has submitted an elaborate reply and in sum and
substance its contention is that where an offence under the Income Tax Act is
committed by a company, every person, who was, at the time of offence, in
charge of and was responsible to, the company for the conduct of the
business of the company as well as the company itself shall be deemed to be
guilty of the offence as per Section 276-B and 276-BB of the Income Tax
Act. Here, the applicant was on the Board of Directors in the accused
company, under a nomination, enjoying all remunerations payable by the
accused company and attending the meetings of Board. Further submission
is, involvement of applicant in the company's day-to-day operations is a
matter of trial and cannot be adjudicated at this preliminary stage. The
resignation letter, submitted later by applicant, itself reflects that applicant
was at the time of commission of offence enjoying all the facilities and
benefits of Director in the accused company and his subsequent resignation
would not exonerate him from the liability of violations committed during
his tenure. The reliance placed by applicant on various judgements is
misconceived as those judgements are distinguishable on facts and provide
no protection to the applicant. The final submission is that the matter has to
go on trial with full opportunity to applicant to submit his contentions and
defence, therefore, at this premature stage no petition under Section 528 of
BNSS, 2023 should be entertained.
4. Parties have been heard at length and records of the trial Court and
also the documents placed on record of this Court have been examined.
5 MCRC-50215-2024
5. Applicant is facing trial for the offence of Section 276-B and 276-
BB of the Income Tax Act, which read as under:
"276B. Failure to pay tax to the credit of Central Government
under Chapter XIID or XVIIB.--If a person fails to (a) pay to the
credit of the Central Government, the tax deducted at source by
him as required by or under the provisions of Chapter XVIIB; or
(b) pay tax or ensure payment of tax to the credit of the Central
Government, as required by or under-- (i) sub-section (2) of
section 115-O; (ii) the proviso to section 194B; (iii) the first
proviso to sub-section (1) of section 194R; (iv) the proviso to sub-
section (1) of section 194S; or (v) sub-section (2) of section
194BA, he shall be punishable with rigorous imprisonment for a
term which shall not be less than three months but which may
extend to seven years and with fine."
"276BB. Failure to pay the tax collected at source.--If a person
fails to pay to the credit of the Central Government, the tax
collected by him as required under the provisions of section 206C,
he shall be punishable with rigorous imprisonment for a term
which shall not be less than three months but which may extend to
seven years and with fine."
6. Under both the referred sections, the criminal liability is fastened
on "a person who fails to pay to the credit of Central Government". It is a
very generic term admitting all inclusive and pervasive interpretations.
Applicant's argument is that both these provisions should be read in
conjunction with Section 192(1) of the Income Tax Act. Countering that
argument the counsel for respondent submits that if we go by this approach
of restricted interpretation then only an accountant of a company can be
6 MCRC-50215-2024
prosecuted under aforesaid provisions as he alone is responsible at the time
of paying salary to deduct chargeable income tax. This court is in agreement
with the argument advanced on behalf of respondent that any restricted or
linear interpretation can not be adopted.
7. Further, Section 278-B of the Income Tax Act gives strength to
the submission made by counsel for respondent as it reads in following
terms:
"278B. Offences by companies.--(1) Where an offence under this
Act has been committed by a company, every person who, at the
time the offence 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 offence and shall be liable to be proceeded against and
punished accordingly:
Provided that nothing contained in this sub-section shall render
any such person liable to any punishment if he proves that the
offence was committed without his knowledge or that he had
exercised all due diligence to prevent the commission of such
offence."
(2) Notwithstanding anything contained in sub-section (1), where
an offence under this Act has been committed by a company and it
is proved that the offence has been committed with the consent or
connivance of, or is attributable to any neglect 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 offence and shall be liable to be proceeded
against and punished accordingly.
(3)......."
8. From the reading of aforesaid provisions, it is understood that
every person who was in charge of and was responsible to the company for
7 MCRC-50215-2024
the conduct of business and if it is proved that the offence was committed
with the consent or connivance of or is attributable to any neglect on the part
of, any director, manager, secretary or other officer of the company they all
shall be deemed to be guilty of the offence. It again reinforces the argument
against limited interpretation of the words "a person" as given in Section
192(1) of the Income Tax Act, by confirming its wider applicability here.
9. Admittedly, applicant was the nominee director in the accused
company at the alleged time of commission of office. As discussed earlier,
provision of Section 278-B of Income Tax Act includes, within its canvas,
any director, which includes even a nominee director, if the alleged offence
was committed with the consent or connivance of or is attributable to any
neglect on the part of such director. The question of deciding the nature of
the consensual, conniving, neglectful or innocent act of a director is a purely
fact based question and cannot be answered unless a trial is held to ascertain
the liabilities of individuals involved in the commission of crime. Therefore,
this Court is of the view that trial should not be stifled at this preliminary
stage unless an opportunity to prove the liabilities of alleged accused persons
is given to the respondent. The judgement of K. Ramakrishna v. The Income
Tax Department, The Commissioner of Income Tax (TDS), 2019
Supreme(Mad) 3055 has been relied upon by the applicant himself and,
discussing the role of nominee directors, it observes that:
"whether nominee directors are required by law to discharge such
duties or bear such liabilities will depend on the application of
legal provisions in question, the fiduciary duties involved, and
8 MCRC-50215-2024
whether such nominee director is to be regarded as being in
control or in-charge of the company and its activities".
10. This determination ultimately shifts on the specific facts and
circumstances involved in each case and this is exactly what is being
submitted by respondent that the roles and duties assigned to applicant
cannot be decided in this petition for quashing the complaint qua applicant.
His participation in the day-to-day affairs of the accused company, his
authority to take decisions on behalf of company by being one of its directors
(nominee) and his specific responsibilities towards the alleged acts of the
nature of violation of law, need to be decided only after holding a
comprehensive trial. Thus, trial is implicitly warranted instead of discarding
the allegations at a preliminary stage.
11. Applicant has also placed reliance on Section 149(12) of the
Companies Act, 2013, which gives an explicit statutory protection to non-
executive directors (including nominee directors) and it reads as under:
"Notwithstanding anything contained in this Act-(i) an
independent director; (ii) a non-executive director, not
being promoter or key managerial personnel, shall be
held liable only in respect of such acts of omission or
commission by a company which had occurred with his
knowledge attributable through Board processes, and
with his consent or connivance or where he had not
acted diligently."
12. Applicant is seeking protection from criminal prosecution on the
basis of terms of his appointment mentioned in appointment letter (Annexure
9 MCRC-50215-2024
A-2) but entire content of that letter does not reveal what duties were
assigned to applicant while working in the capacity of nominee director of
the accused company. Thus, under the limited information given in
Annexure A-2, it cannot be assumed that applicant was only a dummy
director having no role at the helm of affairs of the company regarding its
management
13. Applicant has placed heavy reliance on the decision of Madras
High Court in the case of Dr. A.M. Arun and others v. Income Tax
Department, The Commissioner of Income Tax (TDS) Coimbatore , CRL
OP(MD) No.13535/2013 passed on 14.09.2022 , but that judgement after
making substantial reference to the case of Madhu Milan Syntex Limited and
others v. Union of India and another (2007) 11 SCC 297 distinguished it on
the fact that regular directors of the accused company were seeking discharge
before the Apex Court while the nominee director was before the Madras
High Court for same relief. It is already discussed that Section 278-B of the
Income Tax Act, which deals with the offences by companies, does not make
any distinction between a regular director and a nominee director and offence
of Section 276-B and 276-BB of the Income Tax Act provides that every
person is liable to punishment if he violates the legal requirements provided
in both these sections. Here, we do not find reference to the terms "regular
director", "nominee director" or a "principal officer". Thus, this Court finds
that the decision of Hon'ble Apex Court given in the case of Madhu Milan
(supra) equally applies to a nominee director, if the facts warrant so. The
Apex Court held in that case:
10 MCRC-50215-2024
"It is clear from the cases referred to above that where
necessary averments have been made in the complaint,
initiation of criminal proceedings, issuance of summons
or framing of charges cannot be held illegal and the
Court would not inquire into or decide correctness or
otherwise of the allegations levelled or averments made
by the complainant. It is a matter of evidence and an
appropriate order can be passed at the trial."
14. The other citations relied upon by applicant are the cases of K.
K. Ahuja v. B. K. Vora and another (2009) 10 SCC 48, Sunita Palita and
others v. Panchmi Stone Quary (2022) 10 SCC 152 and S.M.S.
Pharmaceuticals Ltd v. Neeta Bhalla and another (2005) 8 SCC 89 . They all
relate to the interpretations and implications of the provisions of Section 138
and other provisions of Negotiable Instruments Act, but here the dispute does
not involve the provisions of said act. The case of Meena Anand Suryadutt
Bhatt v. Union of India, through the Ministry of Law, Justice and Company
affairs, and another 2022 SCC Online Bombay 1505, came to be decided
when nine orders imposing penalty were challenged. Its obvious that penalty
was imposed after ascertaining the merits of the case and not at any
preliminary stage. Here, that exercise is still to be undertaken. The last
judgment B. Selvaraj v. Reserve Bank of India and others, 2019 SCC Online
Madras 38930, has primarily been referred to in context of Section 149(12)
of the Companies Act but, as discussed earlier, that provision does not
completely absolves the nominee director from the criminal liability nor it
provides that factual aspects of criminal liability need not to be examined if
alleged criminal act was done by a nominee director.
11 MCRC-50215-2024
15. On the basis of facts of the cases under consideration and the law
applicable therein, this Court has a resolute opinion that applicant has to
undergo the criminal trials and he may summit all the objections raised in the
petitions under consideration before the trial Court as part of his impeccable
defence.
16. All the three petitions are accordingly dismissed.
17. Let a copy of this order along with the record of the court below
be send back for information and necessary compliance.
(ANURADHA SHUKLA)
JUDGE
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