ORDER Heard learned counsel for the petitioner and learned counsel for the State. No one has appeared on behalf of opposite party no.2 even after proper service of notice. 2. This application has been filed for quashing the order dated 20.8.2002 passed in Complaint Case No.240© of 2002 by the Special Judge, Economic Offence, Patna by which he has taken cognizance against the petitioner under Sections 63, 68 and 628 of the Companies Act, 1956 (hereinafter referred to as ‘the Act’) and also for quashing the subsequent proceeding. 3. Registrar of the Company filed a complaint case vide Complaint Case No.240 © of 2002 where altogether eleven persons have been made accused and the petitioner is accused no.10 as one of the Director of the Company. In nut shell allegation has been made in the complaint petition that a prospectus was issued by the Company for public issue of Rs. 49,49,000.00 which was filed with the office of the Company on 6.8.1990 where the statements were made by the Company for the said public issue are as follows:– (a) Commercial production is expected to commence by the Ist Quarter 1991. (b) Company will be in a position to earn sufficient profit and declare dividend within a reasonable time from the start of commercial production. (c) Most of machinery has already been installed, erection of Gas Plant has been completed. The construction of Tunnel Kiln is near completion and commercial production is expected to start by November 1990. From the examination of the latest balance sheet as on 31.3.1991 filed by the Company, it is inferred that (i) That the Company has not started any production and failed in its statements made in the prospectus for public issue. (ii) The Company has also not declared any dividend as promised. (iii) The Company has not filed any balance sheet with this office after the balance sheet as at 31.3.1993 and the utilization of public funds could not be analyzed nor ascertained. (iv) The Company has utterly failed in its promise made in the prospectus. And consequently, the accused rendered themselves liable for punishment as provided under Sections 63, 68 and 628 of the Act. It has been further stated that in the complaint petition that a show-cause notice no. (iv) The Company has utterly failed in its promise made in the prospectus. And consequently, the accused rendered themselves liable for punishment as provided under Sections 63, 68 and 628 of the Act. It has been further stated that in the complaint petition that a show-cause notice no. ROC/PAT/CONV./56 to 65 dated 22nd April 2002 was issued to all the accused by the complainant under certificate of posting and reply was received from accused no.2 but their show-cause were returned back with the postal remark ‘not found’. In the reply it has been mentioned that the promoter BSPCDC was not able to help the Company to arrange the working capital and to run the factory was found not to be satisfactory. It has further been alleged that above violation was brought to the notice of the complainant and was advised to launch the prosecution against all the accused persons including the petitioner. 4. On the basis of the complaint petition the court below took cognizance under Sections 63, 68 and 628 of the Act. 5. Learned counsel for the petitioner submits that the petitioner was nominated as a Director by the State of Bihar and basically he was an employee of the State Government. He further submits that initially he was appointed as Senior Assistant Director (Scientist EII) in the Government of India Organization and later on he joined as Director, Technical Development by virtue of his appointment through Bihar Public Service Commission on 15th March, 1982. The petitioner was nominated as one of the nominee Director by the Government of Bihar which are running under the joint sector. It has been further submitted that the prospectus was issued by the Company on 6th August, 1990 when the petitioner was not even a nominee Director of the Company nor he was in any way connected with the affairs of the Company. The said prospectus was issued on 6.8.1990 and the name of the petitioner does not find place in the list of the Directors. It has further been submitted that the petitioner had superannuated from service on 31st March, 1997, accordingly he had already vacated the quarter which was allotted in his favour. 6. The said prospectus was issued on 6.8.1990 and the name of the petitioner does not find place in the list of the Directors. It has further been submitted that the petitioner had superannuated from service on 31st March, 1997, accordingly he had already vacated the quarter which was allotted in his favour. 6. The point has been taken, the petitioner was mere a Director and there is nothing in the complaint petition to show, he has authorized to issue prospectus as on the date of its publication he was not in the Board of Director. He has further submitted that as per the provision under Section 63 of the Act which provides that the person who authorized for issuance of the prospectus may be treated to have violated the provisions of the Act. Section 68 of the Act provides that any person who either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into or to offer to enter into:– (a) any agreement for, or with view to acquiring, disposing of, subscribing for, or underwriting shares or debentures; or (b) any agreement the purpose of pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures. Section 628 of the Act provides that if in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purpose of any of the provisions of this Act, any person makes a statement which is false in any material particular, knowing it to be false or which omits any material fact knowing it to be material, he shall, save as otherwise expressly provided in this Act be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine. 7. Learned counsel for the petitioner submits that the petitioner was only one of the Director and he can not be added as an accused, reason is that the prospectus was issued in the year 1990 whereas the petitioner was nominated as a Director on 12.6.1991 and as such any statement or declaration made in the prospectus cannot be treated as statement made by the petitioner. He further submits that nowhere in the complaint petition it has been mentioned that the petitioner has authorized to issue prospectus or the petitioner made a false and deceptive statement as mentioned in the prospectus and as such the primary averment which can be based for implicating the petitioner in this case is not available in the complaint petition. It has further been submitted that the statement that has been made in the complaint petition cannot be said that any false and deceptive statement has been made by the Company. So much so by the petitioner whatever statement made in the prospectus was an expectation by the Board of Director. The cause of filing of this case is that the Company utterly failed to keep promise that was made in the prospectus was a future statement which was dependent on the many factors and also on financial help extended to the Company and it is apparently clear from the complaint petition itself that on reply to the show-cause the reason for non-functioning of the Company has been given for lack of financial assistance by one of the promoter BSPCDC. He has further submitted that at the relevant time the petitioner was a Government servant and as such before filing the complaint petition sanction from the competent authority was sine quo non and in absence of the same cognizance is completely not permissible in law. 8. As no one appears on behalf of the Registrar of the Company this Court has no other way to decide the case but on the basis of the material and averment made by the petitioner. 9. It is relevant for deciding this case to consider the scope of Sections 63, 68 and 628 of the Act which are as follows:– “63. Criminal liability for mis-statements in prospectus.–(1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorized the issue of the prospectus, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to [fifty thousand rupees], or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did, up to the time of the issue of the prospectus, believe, that the statement was true. (2) A person shall not be deemed for the purposes of this section to have authorized the issue of a prospectus by reason only of his having given- (a) the consent required by Section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or (b) the consent required by sub-section (3) of section 60. 68. Penalty for fraudulently inducing persons to invest money.–Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into- (a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares of debentures; or (b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures; shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to [one lakh rupees], or with both. [68-A. Personation for acquisition, etc., of shares.–(1) Any person who- (a) makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or (b) otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years (2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by the company and in every form of application for shares which is issued by the company to any person] [68-B. Initial offer of securities to be in dematerialized form in certain cases.–Notwithstanding anything contained in any other provisions of this Act, every listed public company, making initial public offer of any security for a sum of rupees ten crores or more, shall issue the same only in dematerialized form by complying with the requisite provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.] 628. Penalty for false statements.– If in any return, report, certificate balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement- (a) which is false in any material particular, knowing it to be false; or (b) which omits any material fact knowing it to be material; He shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to two years, and shall also be liable to fine.” 10. Section 63 which specifically mentions that the person who authorized the issue of the prospectus can be a person to have violated the Company law whereas in Section 68 of the Act it has been coached with the word the person who is knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading can be added as an accused. Similarly Section 628 of the Act also provides to make the person as an accused when that person has made statement. 11. In this case there is no averment whatsoever in the complaint petition which any way shows that the petitioner had authorized for issuance of prospectus or he has made statement in the prospectus as nowhere it shows that prospectus which was filed before the Registrar of the Company bearing signature of the petitioner. Every person or every Director of the Company cannot be made an accused in a case of vicarious liability unless there is a statement to that effect mentioned in the complaint petition. Admittedly altogether ten persons have been made accused and against this petitioner, no such allegation has been made in the complaint petition. In a similar situation the Hon’ble Supreme Court while deciding the case under the Drugs and Cosmetics Act, 1940 where one of the Director was made an accused and the Hon’ble Supreme Court in the case of State of Haryana Vs. Brij Lal Mittal and others, reported in (1998) 5 SCC 343 took a view that vicarious liability of a person for being prosecuted for an offence committed under the Act by a Company arises if at the material time he was in-charge of and was also responsible to the company for the conduct of its business. Brij Lal Mittal and others, reported in (1998) 5 SCC 343 took a view that vicarious liability of a person for being prosecuted for an offence committed under the Act by a Company arises if at the material time he was in-charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the Company for the conduct of its business. It will be apt to quote paragraph 9 of the said Judgment:– “9.In Municipal Corpn. Of Delhi Vs. Ram Kishan Rohtagi while dealing with the applicability of Section 17(1) of the Prevention of Food Adulteration Act, 1954, which is in pari materia with section 34(1) of the Act, on similar facts, this Court observed as under: (SCC p.7, para 15) 15. So far as the Manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the Directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the Directors (Accused 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed.” 12. The Hon’ble Supreme Court in the same and similar situation under the Negotiable Instruments Act in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another, reported in (2010)3 SCC 330 where similar type of issue was raised as the cheque of the Company was dishonoured and Directors were made accused. The Hon’ble Supreme Court in the same and similar situation under the Negotiable Instruments Act in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another, reported in (2010)3 SCC 330 where similar type of issue was raised as the cheque of the Company was dishonoured and Directors were made accused. The Hon?ble Supreme Court has held that in making the person vicarious liability for criminal offence it is required that the person responsible for the Act of the Company in the conduct of business of the Company can be added as an accused. Only those persons who were in charge of and responsible for the conduct of business of the Company at the time of commission will be liable for criminal action, Director of the Company who was not in charge of and not responsible for the conduct of the business of the Company at the relevant time will not be liable for the criminal offence. This judgment has considered large number of earlier cases. Paragraph no.39 of the said judgment has culled out the principle dealing with the case of vicarious liability. “39. From the above discussion, the following principles emerge:–(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statement, which are required to be averred in the complaint/petition are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.” 13. From the averment made in the complaint petition and from the above judgment, it is very clear that each and every Director is not responsible for the statement made in the prospectus unless there is specific averment made in the complaint petition that he authorized the person for issuance of said prospectus or said prospectus was bearing his signature but contradictory fact is available on record that the petitioner was not Director in the year 1990 where as he was nominated as a Director in 1991 and for the prospectus issued in 1990 the petitioner cannot be held responsible and the statements made in the prospectus was an expectation of the Board of Director depending on several factors cannot be a subject matter of the criminal offence as nowhere it has been stated that this statement made in the prospectus was made with ulterior motive. 14. In this view of the matter, the order of cognizance dated 20.8.2002 against the petitioner is quashed. Accordingly this application is allowed.