Former Director Cannot Be Compelled To Represent Accused Company Under PMLA: Calcutta High Court
The High Court held that even in prosecutions under the Prevention of Money Laundering Act, 2002, a company, being a distinct juristic person, must appoint its own authorised representative for trial.
Justice Dr. Ajoy Kumar Mukherjee, Calcutta High Court
The Calcutta High Court has held that Section 70 of the Prevention of Money Laundering Act, 2002, does not empower the prosecution or the court to compel a particular individual to represent an accused company during trial, merely because such an individual was formerly associated with the company or has been arrayed as an accused in his personal capacity.
The Court clarified that representation of a company in criminal proceedings is governed by Section 305 of the Code of Criminal Procedure, 1973, which preserves the autonomy of a juristic entity to appoint a representative of its choice.
A Bench comprising Justice Ajoy Kumar Mukherjee observed: “The argument advanced on behalf of ED that PMLA is special statue and it provides for independent prosecution and property attachment therefore, such act has precedence over other laws and therefore under the PMLA, court can compel an unwilling Director, even if he has resigned from the company long back to represent company irrespective of the fact that he has been separately prosecuted in his individual capacity, does not hold water. Section 70 of the PMLA is no way in conflict with section 305 of Cr.P.C. or section 141 of N.I. Act. It is the corporation within the meaning of section 305 Cr.P.C. and as such the said company alone can appoint a representative for facing the prosecution”.
Advocate Somopriya Chowdhury represented the petitioner, while Advocate Debjani Roy represented the respondents.
Background
The petitioner was arraigned as an accused in a complaint case initiated under Sections 3 and 4 of the PMLA. Two private limited companies were also arrayed as accused.
In the cause title of the complaint, both companies were described as being “represented by” the petitioner, who had earlier served as a director. The petitioner contended that while he was separately prosecuted in his individual capacity, he could not be compelled to represent either of the two companies, particularly when he had resigned from one of them in March 2013 and had no subsisting connection with it.
The petitioner approached the Special Court seeking the expunging of his name as the representative of the Accused Companies. The Special Court rejected the prayer, observing that the issue could be considered at a later stage and not at the time of compliance with Section 207 CrPC.
Aggrieved, the petitioner approached the High Court by way of criminal revision.
Court’s Observation
The Court began by examining the statutory framework governing the issue. Referring to Section 65 of the PMLA, the Court noted that the provisions of the Code of Criminal Procedure apply to proceedings under the Act insofar as they are not inconsistent with its provisions.
The Court then analysed Section 70 of the PMLA, which deals with offences by companies. It observed that the provision creates a legal fiction to fasten liability upon three categories: the company itself; persons who were in charge of and responsible for the conduct of the business at the time of commission of the offence; and directors, managers, or officers whose consent, connivance, or neglect led to the commission of the offence.
However, the Court emphasised that Section 70 is concerned with criminal liability, not with procedural representation of a juristic entity during trial. Distinguishing liability and representation, the Court observed that the phrase “as well as the company” in Section 70 signifies that while liability may be extended to individuals, the company continues to remain a separate legal person incapable of acting except through an authorised human agency.
The Court held that representation of a company in criminal proceedings is squarely governed by Section 305 CrPC, which provides that it is for the corporation to appoint its representative for inquiry or trial. Neither the prosecution nor the court can nominate or impose such a representative.
The Court found fault with the trial court’s view that the issue of representation need not be examined at the stage of Section 207 CrPC. It held that proceedings cannot lawfully advance at any stage without proper representation of a corporate accused, and compelling an unwilling individual to act as such a representative causes prejudice.
The Court relied upon the Supreme Court’s decision in RC Cooper v. Union of India, reiterating that a company is a distinct legal entity, separate from its shareholders and directors. It further referred to Standard Chartered Bank v. Directorate of Enforcement, which recognised that companies can be prosecuted, but only through legally permissible modes of representation.
The Court also relied on decisions of the Madras High Court and Bombay High Court holding that neither the prosecution nor the court can insist upon a particular individual representing a corporate accused, even in special statutes such as the PMLA or the Negotiable Instruments Act.
Rejecting the Enforcement Directorate’s contention that the overriding nature of the PMLA permitted compulsion of a former director to represent the company, the Court held that Section 70 of the PMLA is not in conflict with Section 305 CrPC, and that both provisions operate in distinct spheres.
Conclusion
Allowing the criminal revision, the Calcutta High Court set aside the impugned order of the Special Court insofar as it rejected the petitioner’s prayer for expunging his name as the representative of the company.
The Court directed the trial court to invoke Section 63 CrPC and issue summons to the registered office of the accused company, calling upon it to appoint a representative of its choice. It further directed that if the company fails to appoint a representative, the trial court shall proceed in accordance with Section 305(4) CrPC, without insisting upon the petitioner to act as such representative.
The Court clarified that its decision does not affect the petitioner’s individual criminal liability, which shall be determined independently in accordance with the law.
Case Title: Suman Chattopadhyay v. Enforcement Directorate (Neutral Citation: 2025:CHC-AS:2169)
Appearances
Petitioner: Advocates Somopriya Chowdhury, Koushik Dey, Iram Hassan, S. Sarawgi, M. Majumder
Respondents: Advocates Debjani Roy, Steven S. Biswas