Court rules that former director cannot be compelled to represent the company in money laundering proceedings
In a significant judgment, the Calcutta High Court has overturned a previous order by the CBI Court, Bichar Bhavan, which had compelled Suman Chattopadhyay, a former director of M/s Disha Production & Media Pvt. Ltd., to represent the company in an ongoing case under the Prevention of Money Laundering Act, 2002 (PMLA). The judgment, delivered by Justice Dr. Ajoy Kumar Mukherjee, highlights the autonomy of juristic entities in criminal proceedings and clarifies the role of directors post-resignation.
The case arose from a complaint filed by the Enforcement Directorate (ED) against Chattopadhyay and others, alleging involvement in laundering proceeds from the Sarada Group of Companies. Despite Chattopadhyay's resignation from the directorship of M/s Disha Production & Media Pvt. Ltd. in 2013, the trial court had insisted that he represent the company, which was named as an accused in the proceedings.
Justice Mukherjee emphasized that a company, being a separate legal entity, must appoint its own representative during trials as per Section 305 of the Code of Criminal Procedure (Cr.P.C.). He ruled that the trial court's reliance on Chattopadhyay's previous role was misplaced, as he had severed ties with the company long before the proceedings commenced.
The judgment underscores the importance of proper representation in legal proceedings involving companies, noting that the company itself should nominate a representative to act on its behalf. The High Court directed the lower court to issue a fresh summons to the registered office of M/s Disha Production & Media Pvt. Ltd., allowing it to appoint a representative. If the company fails to do so, the trial court is empowered to proceed under Section 305(4) of the Cr.P.C.
This ruling aligns with several precedents, including those set by the Bombay High Court and Madras High Court, which assert that neither the prosecution nor the court can compel an individual to represent a company without its authorization. The decision further clarifies that the liability of a director for offenses committed by a company remains intact under the PMLA, but representation during trial should be through an authorized individual chosen by the company.
Legal experts view this judgment as a reaffirmation of procedural fairness in corporate criminal liability cases, especially under specialized statutes like the PMLA. It ensures that former directors are not unduly burdened by past affiliations unless explicitly authorized by the company.
Bottom Line:
Representation of a company during inquiry or trial under PMLA must align with Section 305 of Cr.P.C. A complainant cannot compel an unwilling director, who has resigned long back, to represent the company.
Statutory provision(s):
- Prevention of Money Laundering Act, 2002 Sections 3, 17, 70, 65, 71
- Code of Criminal Procedure, 1973 Sections 305, 63, 246(2), 311, 207
Suman Chattopadhyay v. Enforcement Directorate, (Calcutta) : Law Finder Doc Id # 2815939
