TMI Blog2021 (11) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ligence 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. 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. A company being a juristic person cannot be imprisoned, but it can be subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing non-compliance with the provisions of the Minimum Wages Act, 1948 (for short, the Act ) and Minimum Wages (Central) Rules, 1950 (for short, the Rules ) at the ATM. On 02nd April 2014, the Company responded claiming that they neither manage nor work at the ATM. After more than four months, the Labour Enforcement Officer (Central), by letter dated 08th August 2014, informed the appellant and Vinod Singh that they were required to appear in the court on 14th August 2014. On 14th August 2014, the Labour Enforcement Officer (Central) filed a criminal complaint before the Court of the Chief Judicial Magistrate, Sagar, Madhya Pradesh, under Section 22A of the Act. We shall refer to the contents of the complaint later. 3. On the date of presentation of the complaint, that is, 14th August 2014, the Judicial Magistrate, First Class, Sagar, Madhya Pradesh took cognisance of the offence and issued a bailable warrant against the appellant and Vinod Singh in Criminal Case No. 3398/2014. On 01st August 2015, the Company submitted a detailed representation to the Deputy Chief Labour Commissioner (Central), Marhatal, Jabalpur, Madhya Pradesh denying the contents of the notice dated 06th Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, 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 offence 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 offence and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, 1971 (3) SCC 189 has held: 6. What then does the expression a person in-charge and responsible for the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms 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, 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 the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention by them would not fasten responsibility on the 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. (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 interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect 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. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate analysis, we are of the considered opinion that the High Court should 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. (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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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, 1969 (2) SCC 627 this Court threw light on the aspect of invocation of penalty provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Edition, Part VI at Page No. 371 . 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 the summoning order, it has been emphasised that the initiation of prosecution and summoning of an accused to stand trial has serious consequences See Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others, (1998) 5 SCC 749; GHCL Employees Stock Option Trust v. Indian Infoline Ltd. and Others, (2013) 4 SCC 505; Krishna Lal Chawla and Others v. State of Uttar Pradesh and Another, (2021) 5 SCC 435 . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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