Karnataka High Court
Priyatosh Ranjan vs State Of Karnataka on 25 September, 2024
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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CRL.P No. 10043 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF SEPTEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 10043 OF 2024
1. PRIYATOSH RANJAN,
S/O N.K. PRASAD,
AGED ABOUT 47 YEARS,
HAVING OFFICE AT NO.289,
6TH MAIN ROAD, DEFENCE COLONY,
HAL 2ND STAGE, INDIRANAGAR,
BANGALORE - 560 038.
2. TAJU ABRAHAM,
S/O PT ABRAHAM,
AGED ABOUT 48 YEARS,
HAVING OFFICE AT NO.289,
6TH MAIN ROAD, DEFENCE COLONY,
HAL 2ND STAGE, INDIRANAGAR,
BANGALORE - 560 038.
Digitally signed ...PETITIONERS
by NAGAVENI
Location: HIGH (BY SRI. AAKASH RAMAN SINHA, ADVOCATE)
COURT OF
KARNATAKA AND:
STATE OF KARNATAKA,
THROUGH SENIOR LABOUR INSPECTOR,
19TH CIRCLE, BENGALURU,
KARKIMA BHAVAN, BANNERGHATTA ROAD,
BENGALURU - 560 029.
...RESPONDENT
(BY SRI. B.N. JAGADEESHA, ADDL. SPP)
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CRL.P No. 10043 of 2024
THIS CRL.P IS FILED U/S.482(FILED U/S.528 BNNS) OF
CR.P.C PRAYING TO QUASH THE IMPUGNED COMPLIANT
DATED 12.10.2023 AT ANNEXURE A IN SO FAR AS THE
PETITIONER ARE CONCERNED, IMPUGNED PROCEEDINGS IN
C.C.NO.33721/2023 AT ANNEXURE B AND THE IMPUGNED
ORDER OF THE HONBLE MAGISTRATE DATED 26.10.2023 IN
ISSUING SUMMONS TO THE PETITIONERS FOR THE OFFENCE
P/US/ 22-A OF THE MINIMUM WAGES ACT, 1948 AND
DIRECTING THE OFFICE TO REGISTER THE CRIMINAL CASE
AGAINST THE PETITIONER HEREIN ALSO AT ANNEXURE B
PENDING ON THE FILE OF THE METROPOLITAN MAGISTRATE,
TRAFFIC COURT I MAYO HALL M.G.ROAD, BENGALURU AND TO
ACQUIT THE PETITIONER CONCERNED HEREIN FROM THE
ALLEGED OFFENCE.I.A.NO.1/2024 FOR STAY.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE M.NAGAPRASANNA
ORAL ORDER
Petitioner is before this Court calling in question
proceedings in C.C.No.33721/2023 pending on the file of
Metropolitan Magistrate, Traffic Court -I, Mayo Hall, M.G.
Road, Bengaluru for offences punishable under Section
22A of the Minimum Wages Act, 1948.
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2. Heard learned counsel Sri. Aakash Raman
Sinha, appearing for the petitioners and Sri. B.N.
Jagadeesha learned Additional State Public Prosecutor
appearing for respondent.
3. The petitioners moved the matter on the score
that NBW is issued against these petitioners,
notwithstanding the fact that the company which ought to
have been made as an accused is not an accused in the
case at hand.
4. This Court on 21.09.2022 in
W.P.No.15522/2022 and connected matters had held as
follows:
“3. Learned counsel for the petitioners would
urge a solitary contention that the Company is not
made as an accused, for the offences to be
punishable under Section 22A of the Act, 1948. The
company ought to have made as an accused and not
only the directors.
4. Learned High Court Government Pleader
would further seek to justify the registration of the
complaints to contend that the directors are said to
be representing the Company and though the
Company is not made as an accused, the directors
who are responsible for the affairs of the company
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CRL.P No. 10043 of 2024are made as accused and therefore, the complaints
are in tune with the law.
5. The issue is with regard to the fact
that the company is not made as an
accused for an offence to be punishable
under Sections 22A, 22B and 22C of the
Act, 1948.
6. The issue is no longer res integra
as the Apex court in the case of DAYLE
DE’SOUZA V. GOVERNMENT OF INDIA
THROUGH DEPUTY CHIEF LABOUR
COMMISSIONER (C) AND OTHERS
reported in Criminal Appeal
No.1319/2021 disposed on
29.10.2021, while interpreting Sections
22A, 22B and 22C of the Minimum Wages
Act, 1948 has held as follows:
“6. The complaint, with reference to
the two accused, in paragraph 3 states:
(3) That the accused persons are
Contractor who were getting work of
cash loading and security of cash
through labours and they are
responsible for employment and
payment of labours employed in said
work under said Act, who is Employer
under Part 2 (E) of the Minimum
Wages Act, 1948.
It is also alleged in the complaint:
(4) That the work of said Employer is
regulated under Notification No.- S.O.
1284 (E) dated 20.05.2009 of the
Government of India and they are
Scheduled Employer under Minimum
Wages Act, 1948 and Minimum Wages
(Central) Rules, 1950.
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7. The complaint states that the
inspection on 19th February 2014 had revealed
violation of Rules 21(4), 22, 25(2), 26(1) and
26(5) on account of failure to keep and
display, as the case may be, the Fine Register
Form-1, Register Form-2, the notice of
minimum wages, Rule, and abstract of the
Act, name of Inspectors with address in Hindi
and English at the worksite, overtime register,
wages payment register and attendance
register at the worksite or at any adjoining
place(s).
8. Section 22A of the Act, the provision
invoked, is a ‘General provision for
punishment of other offences’ where “any
employer who contravenes any provision of
this Act or of any rule or order made
thereunder shall, if no other penalty is
provided for such contravention by this Act,
be punishable with fine which may extend to
five hundred rupees”. Clause (b) of sub-
section (1) to Section 22B with the heading
“Cognizance of offences” states that “No court
shall take cognisance of a complaint against
any person for an offence – under clause (b)
of section 22 or under section 22A, except on
a complaint made by, or with the sanction of,
an Inspector”. Sub-section (2) to Section 22B,
insofar as it relates to Section 22A, vide sub-
clause (b) states that “No Court shall take
cognisance of an offence – under Section 22A,
unless complaint thereof is made within six
months of the date on which the offence is
alleged to have been committed.”
9. However, in the context of the
present appeal, it is Section 22C of the Act
which is of more relevance which reads thus:
22C. Offences by companies. —
(1) If the person committing any
offence under this Act is a company,
every person who at the time the
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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 provided in this Act if he
proves that the offence was committed
without his knowledge or that he 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 of the company shall also be deemed to be
guilty of that offence and shall be liable to be proceeded
against and punished accordingly.
Explanation. — For the purposes of this section —
(a) “company” means any body corporate and includes a
firm or other association of individuals; and
(b) “director” in relation to a firm means a partner in the
firm.”
10. Sub-section (1) to Section 22C states
that where an offence is 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, as
well as the company itself shall be deemed to be
guilty of the offence. By necessary implication, it
follows that a person who do not bear out the
requirements is not vicariously liable under Section
22C(1) of the Act. The proviso, which is in the
nature of an exception, states that a person who is
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liable under sub-section (1) shall not be punished 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. The onus to satisfy the requirements to
take benefit of the proviso is on the accused, but it
does not displace or extricate the initial onus and
burden on the prosecution to first establish the
requirements of sub-section (1) to Section 22C of
the Act. The proviso is to give immunity to a person
who is vicariously liable under sub-section (1) to
section 22C of the Act. In S.M.S. Pharmaceuticals
Ltd. v. Neeta Bhalla and Another,1 in relation to
pari materia proviso in Section 141 of the
Negotiable Instruments Act, 1881, this Court
observed:
4… A company being a juristic person, all its
deeds and functions are the result of acts of
others. Therefore, officers of a company who
are responsible for acts done in the name of
the company are sought to be made
personally liable for acts which result in
criminal action being taken against the
company. It makes every person who, at the
time the offence was committed, was in
charge of, and was responsible to the
company for the conduct of business of the
company, as well as the company, liable for
the offence. The proviso to the sub-section
contains an escape route for persons who are
able to prove that the offence was committed
without their knowledge or that they had
exercised all due diligence to prevent
commission of the offence.
xx xx xx
9. The position of a managing director or
a joint managing director in a company may
be different. These persons, as the
designation of their office suggests, are in
charge of a company and are responsible for
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the conduct of the business of the company.
In order to escape liability such persons may
have to bring their case within the proviso to
Section 141(1), that is, they will have to
prove that when the offence was committed
they had no knowledge of the offence or that
they exercised all due diligence to prevent the
commission of the offence.
(Emphasis added)
In Aneeta Hada v. Godfather Travels and Tours Private
Limited MANU/SC/0335/2012: (2012) 5 SCC 661, this Court
had reiterated that the proviso to general vicarious liability
under Section 141 of the Negotiable Instruments Act, 1881,
applies as an exception, by observing:
22. On a reading of the said provision, it is plain as day
that if a person who commits the offence under
Section 138 of the Act is a company, the company as
well as every person in charge of and responsible to
the company for the conduct of business of the
company at the time of commission of offence is
deemed to be guilty of the offence. The first proviso
carves out under what circumstances the criminal
liability would not be fastened. Sub-section (2) enlarges
the criminal liability by incorporating the concepts of
connivance, negligence and consent that engulfs many
categories of officers. It is worth noting that in both the
provisions, there is a “deemed” concept of criminal
liability.
(Emphasis added)
The proviso being an exception cannot be
made a justification or a ground to launch and
initiate prosecution without the satisfaction of
conditions under sub-section (1) of Section 22C of
the Act. The proviso that places the onus to prove
the exception on the accused, does not reverse the
onus under the main provision, namely Section
22C(1) of the Act, which remains on the
prosecution and not on the person being
prosecuted.
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11. Sub-section (2) states that
notwithstanding anything contained in sub-section
(1), where any offence under the Act has been
committed by a company, and it is proved that
such 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, then such director,
manager, secretary or other officer of the company
shall also be deemed to be guilty of that offence
and shall be liable to be proceeded against and
punished accordingly. Without much ado, it is clear
from a reading of sub-section (2) to Section 22C of
the Act that a person cannot be prosecuted and
punished merely because of their status or position
as a director, manager, secretary or any other
officer, unless the offence in question was
committed with their consent or connivance or is
attributable to any neglect on their part. The onus
under sub-section (2) to Section 22C is on the
prosecution and not on the person being
prosecuted.
12. Unlike sub-section (2) to Section 22C,
sub-section (1) conspicuously does not use the
term ‘director, manager, secretary or other officer
of the company’ to bring them within the ambit of
the vicarious liability provision, albeit every person
in-charge of and responsible to the company for the
conduct of its business at the time of the
commission of the offence in question is deemed to
be additionally liable. The words ‘in-charge of the
company’ and ‘responsible to the company’ are
pivotal to sub-section (1). This requirement has to
be satisfied for the deeming effect of sub-section
(1) to apply and for rendering the person liable to
be proceeded against and, on such position being
proved, punished. Interpreting an identical
expression used in Sections 23-C(1) and 23-C(2) of
the Foreign Exchange Regulation Act, 1947, this
Court in Girdhari Lal Gupta v. D.H. Mehta and
Another,MANU/SC/0487/1971:1971(3)SCC 189,
has held:
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6. What then does the expression “a person
in-charge and responsible for the conduct of
the affairs of a company” mean? It will be
noticed that the word “company” includes a
firm or other association, and
the same test must apply to a director in-
charge and a partner of a firm in-charge of a
business. It seems to us that in the context a
person “in-charge” must mean that the
person should be in over-all control of the
day to day business of the company or firm.
This inference follows from the wording of
Section 23-C(2). It mentions director, who
may be a party to the policy being followed
by a company and yet not be in-charge of
the business of the company. Further it
mentions manager, who usually is in charge
of the business but not in over-all charge.
Similarly, the other officers may be in-charge
of only some part of business.
xx xx xx
8. In R.K. Khandelwal v. State D.S. Mathur,
J., in construing Section 27 of the Drugs Act, 1940,
a provision similar to the one we are concerned
with,observed:
There can be directors who merely lay down the
policy and are not concerned with the day to day
working of the company. Consequently, the mere
fact that the accused person is a partner or
director of the Company, shall not make him
criminally liable for the offence committed by the
Company unless the other ingredients are
established which make him criminally liable.
Those not in overall control of the day to day
business of the company or the firm are not
deemed to be constructively liable under Section
23-C(1) of the Foreign Exchange Regulation Act,
1947.
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13. This exposition on the meaning of the
term ‘in-charge and responsible for’ was referred to
with approval in State of Karnataka v. Pratap
Chand and Ors. MANU/SC/0237/1981: (1981) 2
SCC 335. This decision relates to the prosecution of
the partner of a firm under the Drugs and
Cosmetics Act, 1940. The judgment referred to the
explanation to Section 34 in the said Act (which is
pari materia with the explanation in Section 22C of
the Minimum Wages Act, 1948) to observe that for
the purpose of imposing liability on the company
under the said Section, a company includes a body
corporate, a firm or an association of individuals. A
director in relation to a firm means a partner in that
firm. Therefore, even in the case of partners, when
a firm commits an offence, the requirement of
either sub-section (1) or sub-section (2) to Section
22C must be satisfied. This means that in terms of
sub-section (1), the partner should be “in-charge
of” and “responsible to” the firm for the conduct of
its business as per the dictum in Girdhari Lal Gupta
(supra). Further, as per sub-section (2), a partner
may also be liable, just as a director is liable for the
conduct of the business of a company, if the
offence is committed with the consent or
connivance of, or is attributable to any neglect on
the part of the partner concerned.
14. Way back in 1982, in Municipal
Corporation of Delhi v. Ram Kishan Rohtagi and
Others, MANU/SC/0094/1982:1983 (1) SCC 1 this
Court had quashed criminal proceedings under the
Prevention of Food Adulteration Act, 1954 against
the directors of a manufacturing company at the
summoning stage, observing that the presumptive
assertion made
in the complaint that the directors of the Accused
Company ‘as such’ were in-charge of and
responsible for the conduct of the business of the
company at the time of sampling was vague. The
use of the words “as such” in the complaint
indicated that the complainant had merely
presumed that the directors must be guilty because
they held the office of the director. The Court
opined that such presumptive accusations against
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the directors without any specific averment or
criminal attribution being made in the complaint
would be insufficient. Thereafter, reference was
made to Section 319 of the Code of Criminal
Procedure, 1973 which empowers the Court to take
cognisance of and proceed against a person who is
not an accused before it and try him along with
others. Upholding the reasoning of the High Court
quashing the proceedings against the directors, it
was highlighted:
“12…….The main clause of the
complaint which is the subject-matter of the
dispute is clause 5 which may be extracted
thus:
5. That accused 3 is the Manager,
of Accused 2 and Accused 4 to 7 are the
Directors of accused 2 and as such they
were incharge of and responsible for the
conduct of business of accused 2 at the
time of sampling.
xx xx xx
14. Reliance has been placed on the words “as
such” in order to argue that because (sic) the
complaint does not attribute any criminal
responsibility to Accused 4 to 7 except that they
were incharge of and responsible for the conduct of
the business of the Company. It is true that there is
no clear averment of the fact that the Directors
were really incharge of the manufacture and
responsible for the conduct of business but the
words “as such” indicate that the complainant has
merely presumed that the Directors of the
Company must be guilty because they are holding a
particular office. This argument found favour with
the High Court which quashed the proceedings
against the Directors as also against the Manager,
Respondent 1.”
However, the initiation of a prosecution and
the summoning order against the manager in the
factual context was held to be proper.
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15. In another decision by the same Bench
titled Municipal Corporation of Delhi v. Purshotam
Dass Jhunjunwala and Others,
MANU/SC/0093/1982 : (1983) 1 SCC 9 the
assertions were that the individual accused, namely
the chairman, managing director and directors of
the company,were “in-charge of and responsible to
it for the conduct of its business at the time of
commission of the offence”. The words “as such”
were missing. This Court, therefore, concluded that
the directors of the company were not being
prosecuted merely because of their official position
but because of the assertion that they were “in-
charge of and responsible for the conduct of the
business at the time of commission of the offence”.
There was a clear averment regarding the active
role played by the Accused and the extent of their
liability. Accordingly, restoring the order passed by
the Metropolitan Magistrate by which the directors
etc. were summoned for trial in accordance with
the law and setting aside the order of the High
Court quashing the prosecution against them, this
Court has held:
“3…..The relevant allegations against the
Accused-Respondents are to be found in para 5
of the complaint which may be extracted thus:
5. That Accused Ram Kishan Bajaj is the
Chairman, Accused R.P. Neyatia is the
Managing Director and Accused 7 to 12 are the
Directors of the Hindustan Sugar Mills Ltd. and
were incharge of and responsible to it for the
conduct of its business at the time of
commission of offence.
xx xx xx
5. In the instant case, a clear averment has been
made regarding the active role played by the
Respondents and the extent of their liability. In this
view of the matter, it cannot be said that para 5 of the
complaint is vague and does not implicate
Respondents 1 to 11. As to what would be the
evidence against the Respondents is not a matter to
be considered at this stage and would have to be
proved at the trial. We have already held that for the
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purpose of quashing the proceedings only the
allegations set forth in the complaint have to be seen
and nothing further.
16. The legal position has undergone further
elucidation in a number of judgments. However, for
the present decision, we would refer to the
summarisation in National Small Industries
Corporation Limited v. Harmeet Singh Paintal and
Another, MANU/SC/0112/2010 : (2010) 3 SCC 330 to
the following effect:
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
statements, 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.
(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
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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.
17. The necessities of sub-section (2) to
Section 22C of the Act are different from sub-
section (1) to Section 22C of the Act. Vicarious
liability under sub-section (2) to Section 22C can
arise because of the director, manager, secretary,
or other officer’s personal conduct, functional or
transactional role, notwithstanding that the person
was not in overall control of the day to day
business of the company when the offence was
committed. Vicarious liability is attracted when the
offence is committed with the consent, connivance,
or is attributable to the neglect on the part of a
director, manager, secretary, or other officer of the
company.
18. In the factual context present before us it
is crystal clear that the complaint does not satisfy
the mandate of sub-section (1) to Section 22C of
the Act as there are no assertions or averments
that the Appellant before this Court was in-charge
of and responsible to the company M/s. Writer
Safeguard Pvt. Ltd. in the manner as interpreted by
this Court in the cases mentioned above. The
proviso to sub-section (1) in the present case
would not apply. It is an exception that would be
applicable and come into operation only when the
conditions of sub-section (1) to Section 22C are
satisfied. Notably, in the absence of any specific
averment, the prosecution in the present case does
not and cannot rely on Section 22C(2) of the Act.
19. There is yet another difficulty for the
prosecution in the present case as the Company
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has not been made an Accused or even summoned
to be tried for the offence. The position of law as
propounded in State of Madras v. C.V. Parekh and
Another: MANU/SC/0195/1970 : (1970) 3 SCC 491,
reads:
3. Learned Counsel for the Appellant,
however, sought conviction of the two
Respondents on the basis of Section 10 of the
Essential Commodities Act under which, if the
person contravening an order made under
Section 3 (which covers an order under the Iron
and Steel Control Order, 1956), is a company,
every person who, at the time the contravention
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
contravention and shall be liable to be
proceeded against and punished accordingly. It
was urged that the two Respondents were in
charge of, and were responsible to, the
Company for the conduct of the business of the
Company and, consequently, they must be held
responsible for the sale and for thus
contravening the provisions of Clause (5) of the
Iron and Steel Control Order. This argument
cannot be accepted, because it ignores the first
condition for the applicability of Section 10 to
the effect that the person contravening the
order must be a company itself. In the present
case, there is no finding either by the Magistrate
or by the High Court that the sale in
contravention of Clause (5) of the Iron and Steel
Control Order was made by the Company. In
fact, the Company was not charged with the
offence at all. The liability of the persons in
charge of the Company only arises when the
contravention is by the Company itself. Since, in
this case, there is no evidence and no finding
that the Company contravened Clause (5) of the
Iron and Steel Control Order, the two
Respondents could not be held responsible. The
actual contravention was by Kamdar and
Vallabhdas Thacker and any contravention by
them would not fasten responsibility on the
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Respondents. The acquittal of the Respondents
is, therefore, fully justified. The appeal fails and
is dismissed.
20. However, this proposition was later
deviated from in Sheoratan Agarwal and Another v.
State of Madhya Pradesh. MANU/SC/0112/1984 :
(1984) 4 SCC 352. This case pertained to the pari
materia provision Under Section 10 of the Essential
Commodities Act, 1955. The court held that anyone
among: the company itself; every person in-charge
of and responsible to the company for the conduct
of the business; or any director, manager,
secretary or other officer of the company with
whose consent or connivance or because of whose
neglect offence had been committed, could be
prosecuted alone. However, the person-in-charge
or an officer of the company could be held guilty in
that capacity only after it has been established that
there has been a contravention by the company as
well. However, this will not mean that the person-
in-charge or an officer of the company must be
arraigned simultaneously along with the company if
he is to be found guilty and punished.
21. Relying upon the reasoning in Sheoratan
Agarwal (supra) and limiting the interpretation of
C.V. Parekh (supra), this Court in Anil Hada v.
Indian Acrylic Ltd. MANU/SC/0736/1999 :
(2000) 1 SCC 1 had held that:
13. If the offence was committed by a
company it can be punished only if the
company is prosecuted. But instead of
prosecuting the company if a payee opts to
prosecute only the persons falling within the
second or third category the payee can
succeed in the case only if he succeeds in
showing that the offence was
actually committed by the company. In such
a prosecution the Accused can show that the
company has not committed the offence,
though such company is not made an
Accused, and hence the prosecuted Accused
is not liable to be punished. The provisions
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do not contain a condition that prosecution of
the company is sine qua non for prosecution
of the other persons who fall within the
second and the third categories mentioned
above. No doubt a finding that the offence
was committed by the company is sine qua
non for convicting those other persons. But if
a company is not prosecuted due to any legal
snag or otherwise, the other prosecuted
persons cannot, on that score alone, escape
from the penal liability created through the
legal fiction envisaged in Section 141 of the
Act.
22. However, subsequent decisions of this
Court have emphasised that the provision imposes
vicarious liability by way of deeming fiction which
presupposes and requires the commission of the
offence by the company itself as it is a separate
juristic entity. Therefore, unless the company as a
principal Accused has committed the offence, the
persons mentioned in sub-section (1) would not be
liable and cannot be prosecuted. Section 141(1) the
Negotiable Instruments Act, extends vicarious
criminal liability to the officers of a company by
deeming fiction, which arises only when the offence
is committed by the company itself and not
otherwise. Overruling Sheoratan Agarwal and Anil
Hada, in Aneeta Hada v. Godfather Travels and
Tours Private Limited, MANU/SC/0335/2012 :
(2012) 5 SCC 661, a 3-judge bench of this Court
expounding on the vicarious liability under Section
141 of the Negotiable Instruments Act, has held:
51. We have already opined that the decision
in Sheoratan Agarwal runs counter to the ratio laid
down in C.V. Parekh which is by a larger Bench and
hence, is a binding precedent. On the aforesaid
ratiocination, the decision in Anil Hada has to be
treated as not laying down the correct law as far as
it states that the Director or any other officer can
be prosecuted without impleadment of the
company. Needless to emphasise, the matter
would stand on a different footing where there is
some legal impediment and the doctrine of lex non
cogit ad impossibilia gets attracted.
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xx xx xx
59. In view of our aforesaid analysis, we
arrive at the irresistible conclusion that for
maintaining the prosecution under Section
141 of the Act, arraigning of a company as
an Accused is imperative. The other
categories of offenders can only be brought
in the drag-net on the touchstone of
vicarious liability as the same has been
stipulated in the provision itself. We say so
on the basis of the ratio laid down in C.V.
Parekh which is a three-Judge Bench
decision. Thus, the view expressed in
Sheoratan Agarwal does not\ correctly lay
down the law and, accordingly, is hereby
overruled. The decision in Anil Hada is
overruled with the qualifier as stated in para
51. The decision in Modi Distillery has to be
treated to be restricted to its own facts as
has been explained by us hereinabove.
23. The proposition of law laid down in Aneeta
Hada (supra) was relied upon by this Court in Anil Gupta
v. Star India Private Limited and Another:
MANU/SC/0589/2014 : (2014) 10 SCC 373
13. In the present case, the High Court
by the impugned judgment dated 13-8-2007
[Visionaries Media Network v. Star India (P)
Ltd., Criminal Misc. Case No. 2380 of 2004,
decided on 13-8-2007 (Del)] held that the
complaint against Respondent 2 Company
was not maintainable and quashed the
summons issued by the trial court against
Respondent 2 Company. Thereby, the
Company being not a party to the
proceedings under Section 138 read with
Section 141 of the Act and in view of the fact
that part of the judgment referred to by the
High Court in Anil Hada has been overruled
by a three-Judge Bench of this Court in
Aneeta Hada, we have no other option but to
set aside the rest part of the impugned
judgment [Visionaries Media Network v. Star
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India (P) Ltd., Criminal Misc. Case No. 2380
of 2004, decided on 13-8-2007 (Del)]
whereby the High Court held that the
proceedings against the appellant can be
continued even in absence of the Company.
We, accordingly, set aside that part of the
impugned judgment dated 13-8-2007
[Visionaries Media Network v. Star India (P)
Ltd., Criminal Misc. Case No. 2380 of 2004,
decided on 13-8-2007 (Del)] passed by the
High Court so far as it relates to the
Appellant and quash the summons and
proceeding pursuant to Complaint Case No.
698 of 2001 qua the appellant.
24. In Sharad Kumar Sanghi v. Sangita
Rane, MANU/SC/0205/2015 : (2015) 12 SCC 781,
this Court observed that:
11. In the case at hand as the
complainant’s initial
statement would reflect, the allegations are
against the Company, the Company has not
been made a party and, therefore, the
allegations are restricted to the Managing
Director. As we have noted earlier,
allegations are vague and in fact, principally
theallegations are against the Company.
There is nospecific allegation against the
Managing Director.When a company has not
been arrayed as a party, no proceeding can
be initiated against it even where vicarious
liability is fastened under certain statutes. It
has been so held by a three-Judge Bench in
Aneeta Hada v. Godfather Travels and Tours
(P) Ltd. in the context of the Negotiable
Instruments Act, 1881.
xx xx xx
13. When the company has not been arraigned
as an Accused, such an order could not have been
passed. We have said so for the sake of
completeness. In the ultimate analysis, we are of
the considered opinion that the High Court should
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have been well advised to quash the criminal
proceedings initiated against the
appellant and that having not been done, the
order is sensitively vulnerable and accordingly we
set aside the same and quash the criminal
proceedings initiated by the respondent against
the appellant.
25. This position was again clarified and
reiterated by this Court in Himanshu v. B.
Shivamurthy and Another MANU/SC/0072/2019 :
(2019) 3 SCC 797. The relevant portion of the
judgment reads thus
6. The judgment of the High Court has been
questioned on two grounds. The learned counsel
appearing on behalf of the appellant submits that
firstly, the appellant could not be prosecuted
without the company being named as an accused.
The cheque was issued by the company and was
signed by the Appellant as its Director. Secondly,
it was urged that the observation of the High Court
that the company can now be proceeded against in
the complaint is misconceived. The learned
counsel submitted that the offence under Section
138 is complete only upon the issuance of a notice
of demand and the failure of payment within the
prescribed period. In absence of compliance with
the requirements of Section 138, it is asserted, the
direction of the High Court that the company could
be impleaded/arraigned at this stage is erroneous.
7. The first submission on behalf of the
appellant is no longer res integra. A decision of a
three-Judge Bench of this Court in Aneeta Hada v.
Godfather Travels & Tours (P) Ltd. governs the
area of dispute. The issue which fell for
consideration was whether an authorised signatory
of a company would be liable for prosecution
under Section 138 of the Negotiable Instruments
Act, 1881 without the company being arraigned as
an accused. The three-Judge Bench held thus:
(SCC p. 688, para 58)
58. Applying the doctrine of strict construction, we
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are of the considered opinion that commission of
offence by the company is an express condition
precedent to attract the vicarious liability of
others. Thus, the words “as well as the company”
appearing in the section make it absolutely
unmistakably clear that when the company can be
prosecuted, then only the persons mentioned in
the other categories could be vicariously liable for
the offence subject to the averments in the
petition and proof thereof. One cannot be
oblivious of the fact that the company is a juristic
person and it has its own respectability. If a
finding is recorded against it, it would create a
concavity in its reputation. There can be situations
when the corporate reputation is affected when a
Director is indicted.
In similar terms, the Court further held: (SCC p. 688,
para 59)
59. In view of our aforesaid analysis, we
arrive at the irresistible conclusion that for
maintaining the prosecution under Section
141 of the Act, arraigning of a company as
an accused is imperative. The other
categories of offenders can only be brought
in the drag-net on the touchstone of
vicarious liability as the same has been
stipulated in the provision itself.
xxxxxx
12. The provisions of Section 141
postulate that if the person committing an
offence under Section 138 is a
company, every person, who at the time
when the offence was committed was in
charge of or 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.
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13. In the absence of the company being
arraigned as an accused, a complaint
against the appellant was therefore not
maintainable. The appellant had signed the
cheque as a Director of the company and
for and on its behalf. Moreover, in the
absence of a notice of demand being served
on the company and without compliance
with the proviso to Section 138, the High
Court was in error in holding that the
company could now be arraigned as an
Accused.”
26. Applying the same proposition of law as
laid down in Aneeta Hada (supra), this Court in
Hindustan Unilever Limited v. State of Madhya
Pradesh MANU/SC/0844/2020 : (2020) 10 SCC 751
applying pari materia provision in
Prevention of Food Adulteration Act, 1954, held
that:
23. Clause (a) of sub-section (1) of Section
17 of the Act makes the person nominated to
be in charge of and responsible to the
company for the conduct of business and the
company shall be guilty of the offences under
clause (b) of sub-section (1) of Section 17 of
the Act. Therefore, there is no material
distinction between Section 141 of the NI Act
and Section 17 of the Act which makes the
company as well as the nominated person to
be held guilty of the offences and/or liable to
be proceeded and punished accordingly.
Clauses (a) and (b) are not in the alternative
but conjoint. Therefore, in the absence of the
company, the nominated person cannot be
convicted or vice versa. Since the Company
was not convicted by the trial court, we find
that the finding of the High Court to revisit
the judgment will be unfair to the appellant-
nominated person who has been facing trial
for more than last 30 years. Therefore, the
order of remand to the trial court to fill up
the lacuna is not a fair option exercised by
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the High Court as the failure of the trial court
to convict the Company renders the entire
conviction of the nominated person as
unsustainable.
27. In terms of the ratio above, a
company being a juristic person cannot be
imprisoned, but it can be subjected to a fine,
which in itself is a punishment. Every
punishment has adverse consequences, and
therefore, prosecution of the company is
mandatory. The exception would possibly be
when the company itself has ceased to exist
or cannot be prosecuted due to a statutory
bar. However, such exceptions are of no
relevance in the present case. Thus, the
present prosecution must fail for this reason
as well.
28. There is also another aspect which
requires our attention. We have noted in some
detail the contents of the complaint, which refers to
the violation as certain notices were not displayed
and certain registers and forms were not kept at
the ‘worksite’, namely, ATM of the SBI at AST,
Komal Chand Petrol Pump, Civil Lines, Sagar,
District Sagar. A response to the show-cause-cum-
compliance notice in the form of a short reply by
the authorised signatory of M/s. Writer Safeguard
Pvt. Ltd. on 02nd April, 2014, which factum though
accepted, has not been adverted to in the
complaint. This short reply states that the Company
neither manages the ATM nor works at the ATM and
that the ATM site was managed by the respective
banks and, therefore, the volitional as alleged do
not apply to them. The complaint does not state
why the reply was deficient or indicate even briefly
as to the
nature of activity and involvement of the
Company’s workers at the ATM site of the State
Bank of India mandating compliance at the site in
question. We are not ruling on merits, albeit
highlighting the complaint being bereft and silent
on these aspects and whether the authorities
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considered the legal provisions in the context of the
factual background before initiating prosecution.
29. The authorities bestowed with the duty to
confirm compliance are often empowered to take
stringent including penal action to ensure
observance and check defiance. There cannot also
be any quarrel on the need to enforce obedience of
the Rules as the beneficial legislation protects the
worker’s basic right to receive minimum wages.
The rulebook makes sure that the workers are
made aware of their rights and paid their dues as
per law without unnecessary disputes or allegations
as to absence, overtime payment, deductions, etc.
30. At the same time, initiation of prosecution
has adverse and harsh consequences for the persons
named as accused. In Directorate of Revenue and
Another v. Mohammed Nisar Holia,
MANU/SC/8167/2007 : 2008 (2) SCC 370, this Court
explicitly recognises the right to not to be disturbed
without sufficient grounds as one of the underlying
mandates of Article 21 of the Constitution. Thus, the
requirement and need to balance the law
enforcement power and protection of citizens from
injustice and harassment must be maintained. Earlier
in M/s. Hindustan Steel Ltd. v. State of Orrisa
MANU/SC/0418/1969 : 1969 (2) SCC 627, this Court
threw light on the aspect of invocation of penalty
provisions in a mechanical manner by authorities to
observe:
8. Under the Act penalty may be imposed for
failure to register as a dealer — Section 9(1) read
with Section 25(1)(a) of the Act. But the liability to
pay penalty does not arise merely upon proof of
default in registering as a dealer. An order
imposing penalty for failure to carryout a statutory
obligation is the result of a quasi-criminal
proceeding, and penalty will not ordinarily be
imposed unless the party obliged either acted
deliberately in defiance of law or was guilty of
conduct contumacious or dishonest, or acted in
conscious disregard of its obligation. Penalty will
not also be imposed merely because it is lawful to
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do so. Whether penalty should be imposed for
failure to perform a statutory obligation is a matter
of discretion of the authority to be exercised
judicially and on a consideration of all the relevant
circumstances. Even if a minimum penalty is
prescribed, the authority competent to impose the
penalty will be justified in refusing to impose
penalty, when there is a technical or venial breach
of the provisions of the Act or where the breach
flows from a bona fide belief that the offender is
not liable to act in the manner prescribed by the
statute. Those in charge of the affairs of the
Company in failing to register the Company as a
dealer acted in the honest and genuine belief that
the Company was not a dealer. Granting that they
erred, no case for imposing penalty was made out.
Almost every statute confer operational
power to enforce and penalise, which power is to be
exercised consistently from case to case, but
adapted to facts of an individual case. The passage
from Hindustan Steel Ltd. (supra) highlights the
rule that the discretion that vests with the
prosecuting agencies is paired with the duty to be
thoughtful in cases of technical, venial breaches
and genuine and honest belief, and be firmly
unforgiving in cases of deceitful and mendacious
conduct. Sometimes legal provisions are worded in
great detail to give an expansive reach given the
variables and complexities involved, and also to
avoid omission and check subterfuges. However,
legal meaning of the provision is not determined in
abstract, but only when applied to the relevant
facts of the case. Therefore, it is necessary that the
discretion conferred on the authorities is applied
fairly and judiciously avoiding specious,
unanticipated or unreasonable results. The intent,
objective and purpose of the enactment should
guide the exercise of discretion, as the presumption
is that the makers did not anticipate anomalous or
unworkable consequences. The intention should
not be to target and penalise an unintentional
defaulter who is in essence law-abiding.
31. There are a number of decisions of this
Court in which, with reference to the importance of
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the summoning order, it has been emphasised that
the initiation of prosecution and summoning of an
accused to stand trial has serious consequences.
They extend from monetary loss to humiliation and
disrepute in society, sacrifice of time and effort to
prepare defence and anxiety of uncertain times.
Criminal law should not be set into motion as a
matter of course or without adequate and
necessary investigation of facts on mere suspicion,
or when the violation of law is doubtful. It is the
duty and responsibility of the public officer to
proceed responsibly and ascertain the true and
correct facts. Execution of law without appropriate
acquaintance with legal provisions and
comprehensive sense of their application may
result in an innocent being prosecuted.
32. Equally, it is the court’s duty not to issue
summons in a mechanical and routine manner. If
done so, the entire purpose of laying down a
detailed procedure under Chapter XV of the 1973
Code gets frustrated. Under the proviso (a) to
Section 200 of the 1973 Code, there may lie an
exemption from recording pre-summoning evidence
when a private complaint is filed by a public
servant in discharge of his official duties; however,
it is the duty of the Magistrate to apply his mind to
see whether on the basis of the allegations made
and the evidence, a prima facie case for taking
cognizance and summoning the accused is made
out or not. This Court explained the reasoning
behind this exemption in National Small Industries
Corporation Limited v. State (NCT of Delhi) and
Others MANU/SC/4845/2008 : (2009) 1 SCC 407.
12. The object of Section 200 of the
Code requiring the complainant and the
witnesses to be examined, is to find out
whether there are sufficient grounds for
proceeding against the accused and to
prevent issue of process on complaints which
are false or vexatious or intended to harass
the persons arrayed as accused. (See
Nirmaljit Singh Hoon v. State of W.B.) Where
the complainant is a public servant or court,
clause (a) of the proviso to Section 200 of
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the Code raises an implied statutory
presumption that the complaint has been
made responsibly and bona fide and not
falsely or vexatiously. On account of such
implied presumption, where the complainant
is a public servant, the statute exempts
examination of the complainant and the
witnesses, before issuing process.
The issue of process resulting in summons is
a judicial process that carries with it a sanctity and
a promise of legal propriety.”
(Emphasis supplied)
The Apex Court in the afore-extracted
judgment, was interpreting Sections 22A, 22B and
22C of the Act, by following the judgment rendered
in the case of ANEETA HADA v. GODFATHER
TRAVELS AND TOURS PRIVATE LIMITED
reported in (2012) 5 SCC 661, and has held that
when company is not made as an accused, the
complaint itself would not be maintainable. Only on
the ground that the company is not made as an
accused and in the light of the judgments of the
Apex Court as afore-quoted, the petitions deserve to
succeed with liberty being reserved to the State
Government to file such complaint in accordance
with the law.
7. For the reasons aforesaid, I pass the following:
ORDER
(i) The Writ Petitions and the Criminal
Petition are allowed.
(ii) The impugned proceedings in
C.C.Nos.169/2020 and 170/2020,
pending before the IV MMTC, Bengaluru,
in all these writ petitions and proceedings
in C.C.No.1274/2019 pending before the
Principal Civil Judge and JMFC,
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Kanakapura, impugned in
Crl.P.No.6992/2022, stand quashed.
(iii) The State Government is at liberty to file
complaint in accordance with law.”
5. The reasons rendered in W.P.No.15522/2022,
would squarely become applicable to the case at hand.
Therefore, the following:
ORDER
(i) Criminal Petition is allowed.
(ii) The impugned proceedings in
C.C.Nos.33721/2023, pending before the
Metropolitan Magistrate, Traffic Court -I, Mayo
Hall, M.G. Road, Bengaluru, stand quashed.
Sd/-
(M.NAGAPRASANNA)
JUDGE
BVK
List No.: 2 Sl No.: 5
CT: BHK