S. 278B : Offences by companies-Prosecution of directors without impleading company-Not maintainable-Arraignment of company is a condition precedent for prosecuting its directors-Company being the principal offender must first be made an accused-Proceedings against directors alone quashed. [S. 276, 281, Cr PC, 1973, S. 482 BNSS, Act, 2023, S. 528, Negotiable Instruments Act, 1881, S. 141]
Allowing the petition to quash the prosecution proceedings the Court held that where prosecution was initiated against the directors of a company for transfer of an asset during pendency of tax recovery proceedings, without arraying the company as an accused, the Delhi High Court held that such prosecution is not maintainable. The Court observed that under section 278B of the Income-tax Act, when an offence is committed by a company, both the company and the persons in charge of it shall be deemed guilty. Arraignment of the company is, therefore, a sine qua non for imposing vicarious liability upon its directors. Relying on Aneeta Hada v. Godfather Travels & Tours (2012) 5 SCC 661, Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781 and Sushil Sethi v. State of Arunachal Pradesh (2020) 3 SCC 240, the Court held that the omission to implead the company goes to the root of jurisdiction and is not a mere technical defect. Consequently, complaints filed only against the directors under section 276 were quashed. However, the Department was given liberty to pursue other remedies in accordance with law. (SJ )[CRL.M.C. 8535/2024 & 8536/2024, dt. 09-10-2025)
Nilesh Agarwal v. ITO (Delhi)(HC) www.itatonline.org
Rakesh Agarwal v. ITO (Delhi)(HC) www.itatonline.org
[Coram : Hon’ble Mr. Justice Ravinder Dudeja]