Vicarious liability is attracted when offence is committed with the consent , connivance or neglect on the part of the director, manager , secretary or other officer of the company.
The Supreme Court observed that the company being a juristic person cannot be imprisoned, but it can be subjected to fine, which in itself is a punishment.
The Hon’ble Supreme Court of India gave huge relief to the appellant by quashing the summoning order and the proceedings against the appellant because of lack of clear averment regarding the active role played by the accused and the extent of their liability. He was an accused alongwith one other in the criminal complaint filed by the Labour Enforcement Officer before the Chief Judicial Magistrate under Section 22A of the Minimum Wages Act, 1948. The Court also entitled the co-accused the benefit of the quashing order.
The accused persons are the director and zonal head manager,
Madhya Pradesh of a company called M/s. Writer Safeguard Pvt. Ltd. engaged in the business of maintenance and
upkeep of ATMs. At the relevant time, the Labour Enforcement Officer inspected
the State Bank India’s ATM at Madhya
Pradesh, pursuant to which the Labour
Officer sent a notice over non-compliance with the provisions of the Minimum wages Act
and Minimum Wages (Central) Rules, 1950.
Subsequently the Officer filed a criminal complaint against
the two accused under Section 22A of the Minimum Wages Act without the company
being enlisted as an accused, after
which the Magistrate took cognizance and issued bailable warrant against the
appellant and Manager.
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”.
As a matter right, the Petitioner/accused filed a petition
under Section 482 of the Code of Criminal Procedure, 1973 before the High Court
of Madhya Pradesh, but by the impugned order, dismissed the petition as sans
merit.
The appeal was preferred in the Supreme Court where it observed, that more than the invocation of Section 22A in the present case, Section 22C is of more relevance which provides the offences by company, which goes on to say that 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 shall be liable to be proceeded against and punished accordingly provided such person shall not be liable to punishment 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.
The Supreme Court also observed the applicability of vicarious
liability of the company by reiterating a numbers of previous judgments like the case of National Small Industries Corporation
Limited Vs. Harmeet Singh Paintal and Another
(2010) 3 SCC 330 in which the following principles were emerged:
1. 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.
2. 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.
3. 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 ad by virtue of their position they
are liable to be proceeded with.
4. Vicarious
liability on the part of a person must be pleaded and proved and not inferred.
5. If
the accused is the Managing Director or a Joint Managing Director then it is
not necessary to make specific averment in the complaint and by virtue of their
position they are liable to be proceeded with.
6. 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.
7. 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.
The Supreme Court also took note of
the fact that the 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.
Thus according to the view of the Supreme Court, in the present case, the complainant does not
satisfy the provision of Section 22C(1) as there are no assertions or averments
that the appellant before this Court was in-charge of and responsible to the
company. So in the absence of any specific averment, the prosecution in the
present case does not and cannot rely on Section 22C(2) of the Minimum Wages
Act.
There is another reason that the Supreme Court gave relief to
the Appellant, the director of the company, that the company has not been made
accused or even summoned to be tried for the offence.
The Court observed that the company being a juristic person
cannot be imprisoned, but it can be subjected to fine, which in itself is a
punishment. Every punishment has adverse consequence, 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.
Taking the old case of
Hindustan
Steel Ltd. vs State of Orissa 1969 (2)
SCC 627, the Court highlighted the rule that the discretion that vest
with the prosecuting agencies is paired with the duty to be thoughtful in case
of technical , venial breaches and genuine and honest belief, and be firmly unforgiving
in case of deceitful and mendacious conduct.
In the present case the complaint is bereft and silent on the
nature of activity and involvement of the Company’s workers at the ATM site mandating
compliance at the site – Supreme Court
The Hon’ble Supreme Court viewed that the authorities is empowered to
ensure compliance and obedience of the rules by taking stringent penal action but at the
same time initiation of prosecution has adverse and harsh consequence. The Hon’ble Court referred to the case of Directorate
of Revenue and Another Vs. Mohammed
Nisar Holia 2008 (2) SCC 370, which held that right not to be disturbed
without sufficient grounds is right mandated in 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.
Also the Apex Court giving
weight on a number of previous decisions, said 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 defense
and anxiety of uncertain times. Criminal law should not be set into motion as a
matter of course 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.
Equally it is the duty of the Court, 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 Cr.P.C gets frustrated. It is 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.
For the above
reasons, the appeal by the appellant was allowed for quashing the summon order
and the proceedings against him.
Case: Dayle
De’Souza versus Government of India through Deputy Chief Labour Commissioner
(C) and Another
Coram: Justice
R. Subhash Reddy and Justice Sanjiv Khanna.
Date of
Judgment: 29.10.2021
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