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TMI Blog1963 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase or a diesel engine. The letter also stated that the diesel engine, when purchased, would be filled to the Company's bus No. BYY-610, and that bus would then be transferred in the name of the complainant and would be run by the Company on hire purchase agreement till the satisfaction of the advance of ₹ 11,000/-. Accordingly, the complainant agreed to advance ₹ 11,000/- and paid that amount in cash to the share holder Manohar. After obtaining the amount, a diesel engine was purchased but it was fitted to another bus of the Company and the bus No. BYY-610 was not transferred to the complainant. On these facts, the complainant prosecuted the Company, its Managing Director, its other directors and the shareholder Manohar for alleged offences under Section 420 and 406 or 403 of the Indian Penal Code. The trial Magistrate passed a separate order discharging the directors and framed charges under Section 420, Indian Penal Code against the Company, its Managing Director Chintaman, another director Harinarayan and the shareholder Manohar. The Company went up in revision to the Sessions Court, Nagpur with a request to quash the proceedings against it. Accepting this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. 4. Sections 2 and 11 of the Indian Penal Code are in the following words: "Section 2. Every person shall be liable to punishment under this Code and not otherwise for every act or omission contrary to the provisions thereof, of which he shall be guilty within India". "Section 11. The word "person" includes any Company or Association, or body of persons, whether incorporated or not." A plain reading of these two sections together would show that a company or a corporate body shall be liable for indictment for all kinds of offences. It is not disputed that there are several offences which could be committed only by an individual human being, for instance, murder, treason, bigamy, rape, perjury etc. A company which does not act by or for itself but acts through some agent or servant would obviously not be capable of commission of the aforesaid offences and would therefore, not be liable for indictment for such offences. Again, there are certain other offences which necessarily entail the consequences of corporal punishment or imprisonment. A body corporate or a company cannot be subjected to such corporal punishment of imprisonment. Prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cannot be prosecuted for that offence, mandatorily involving a punishment of imprisonment. He, therefore, conceded that the reference will have to be accepted so far as the charge of cheating under Section 420, Indian Penal Code was concerned. 7. Mr. Hardas, however, submitted that barring offences which could only be committed by an individual or which mandatorily entailed punishments of imprisonment, a company or a corporate body was indictable for all other offences involving mens rea on the basis that the mens rea of the authorized agents or servants, who purport to act for it could be attributed to the company. According to him, the complainant was also prosecuting the company for alleged offences of criminal breach of trust or dishonest misappropriation of property under Sections 406 and 403 of the Indian Penal Code, in the alternative, and these offences did not prescribe a compulsory punishment of imprisonment and, therefore, the Magistrate ought to be directed to proceed against the company under those sections in the alternative. Mr. Mandpe for the company was contending, on the other hand, that though these offences did not necessarily involve a punishment of imprison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th cheating. The bank is a person, but it is a juridical person and not an actual person. The bank is such that it cannot be said to have the mens rea requisite for the offence of cheating. The bank, as such, cannot be punished for cheating because it has no physical body". In that decision also the question was not considered at any length. Thus, the three Indian decisions cited above are of little help for the decision of the question at issue. The learned advocates for the parties stated at the bar that there was no other reported Indian decision on this point. They wanted to rely on English cases in support of their respective view points. I would consider those cases at some length. 9. Mr. Hardas was relying on Director of Public Prosecutions v. Kent and Sussex Contractors Ltd. 1944 1 K. B. 146 which had held that a limited company could be convicted of offences under the Defence (General) Regulations, 1939. In that case, officials of that company had made use of a document which was false in material particulars and statements, which the Manager knew to be false in material particulars were made. In this case Viscount Caldecote C.J. made the following observations: & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make it indictable, but that ruling does not purport to lay down generally, as Mr. Hardas wanted to say, that in every case the mens rea of the directors would be attributable to the company. 10. Mr. Hardas was then relying on certain other English cases in support of his view that a company would be indictable for the acts of its agents and directors. Mr. Mandpe, on the other hand, was relying on some other English cases in which indictments for offences involving mens rea were quashed. I do not think it necessary to discuss those cases at any length because they have been fully considered in the latest English ruling on the point, which I would mention in the next paragraph. Suffice it to say that in the cases relied on by Mr. Hardas, either the question of mens rea was not involved or the statutory under which the prosecutions were launched had made corporate bodies vicariously liable for the acts of its servants and agents. In the case relied on by Mr. Mandpe the Judge had not advanced any reasons of his own for quashing the indictment. 11. The matter bad come up for consideration before the King's Bench Division again in Rex v. I. C. R. Haulage, Ltd. 1944 1 KB 551. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdict of guilty is returned, no effective order by way of sentence can be made. In our judgment these contentions of the Crown are substantially sound, and the existence of these exceptions, and it may be that there are others, is by no means inconsistent with the general rule". 13. Stable J. then went on to consider several authorities which were cited at the bar. After quoting the views of Lord Caldecote C. J. and Lord Macnaghten J. in 1944 1 K. B. 146, which I have quoted above, the final decision was given in the following words at page 559: "...............With both the decision in that case and the reasoning on which it rests, we agree." In our judgment, both on principle and in accordance with the balance of authority, the present indictment was properly laid against the company, and the learned commissioner rightly refused to quash. We are not deciding that in every, case where an agent of a limited company acting in its business commits a crime the company is automatically to be held criminally responsible. Our decision only goes to the invalidity of the indictment on the face of it, an objection which is taken before any evidence is led and irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the corporation and the other relevant facts and circumstances of the case". Similar views on this point are expressed in Russell on Crime, Eleventh Edition, Volume I, 1958. 15. A perusal of the decision in 1944 1 KB 551 would show how the law on the point has been undergoing a change in England. Section 2 of the Interpretation Act, 1889 (52 and 53 Vict. c. 63) was in the following terms: "in the construction of every enactment relating to an offence, punishable on indictment, the expression person shall, unless a contrary intention appears, include a body corporate." Despite that provision which made bodies corporate, like any other person or individual, liable for an indictment, corporations were ordinarily not indicted for any serious offences or offences involving mens rea. Corporations were prosecuted only in cases involving breaches of bye-laws or rules or entailing minor sentences of fines. Later on, they were indicted under statutes which made corporations vicariously liable for the acts committed by their agents or directors. That was when corporation were far and few between. The society, however, was developing and the ideas of corporate activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the human agency of their directors or officers and authorised agents. They reap all the advantages flowing from the acts of their directors, servants or authorized agents and there seems to be no reason to exempt them from liability for crimes committed by their agents or servants while purporting to act for or on behalf of the corporate bodies. The ordinary citizen is now very much exposed to the activities of persons acting, in the name of corporate bodies, to his detriment. Even in our country, now in the words of Russell quoted above, "the point is being reached where what is called for is a comprehensive statement of principles formulated to meet the needs of modern life in granting the fullest possible protection of criminal law to persons exposed to the action of the many powerful associations which surround them". 17. In my view, therefore, "the scope within which criminal proceedings can be brought against institutions which has been become so prominent a feature of everyday affairs" ought to be widened so as to make corporate bodies indictable for offences flowing from the acts or omissions of their human agents. Ordinarily, a corporate body li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is argument. 19. Even if the argument could be considered, the merits of the allegations in the complaint would not warrant any direction to the Magistrate to proceed against the company under Section 406 or 403, Indian Penal Code in the alternative. The complaint did not allege that the managing director or board of directors had made the dishonest representation or had received the monies or had authorised the shareholder Manohar to make such a representation or to receive the amount. On the contrary, the allegations in the complaint only showed that the alleged dishonest representation and the alleged receipt of the amount was by a mere shareholder who was only a stranger so far as the administration of the company was concerned. There was no warrant in the allegations in the complaint for the claim of Mr. Hardas that Manohar was acting on the authority given to him by the managing director. There was also nothing to show that the board of directors had passed any resolution authorising Manohar to make such a dishonest representation or to receive the amount. The allegations in the complaint clearly indicated that the shareholder Manohar purported to act on his own, but in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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