1998 JTR(SC) 122
2000 10 SCC 529 ; 2001 SCC(Cri) 1502 ; 2000 KHC 1663 ; 1998 1 KLT(Online) 1191
SUPREME COURT OF INDIA
K.T.Thomas : M.Srinivasan
P.Rajarathinam
Versus
State Of Maharashtra
Case No. : 925 of 1997, 926 of 1997
Date of Decision : 1/28/98
The vicarious liability of company officers under Section 141 of the Negotiable Instruments Act should be determined at the stage of framing the charge, as it requires a factual record established through pre-charge evidence to identify the responsible persons.
Act
Referred
:CRIMINAL PROCEDURE CODE
: S.482
(A) Negotiable Instruments Act - Section 141 - Offences by companies - Vicarious liability of officers - Determination of liability of directors and officers of a company prosecuted under Special Acts - A bare reading of the provision mandates that certain facts must be on record to determine who should answer the charge - Pre-charge evidence is essential for the complainant to establish the case and for the accused to extricate themselves - The appropriate stage for the court to decide on the liability of specific officers is during the framing of the charge. (Para 4)
Facts of the case:
A company and its directors were arraigned as accused in a complaint. One of the directors sought the quashing of proceedings, arguing that it should be identified at the outset who among the accused should face prosecution.
Findings of Court:
The court found that resolving the conflict regarding vicarious liability at the preliminary stage would be premature and any ratio deduced might be obiter.
Issues: Whether the vicarious liability of company officers should be determined at the initial stage of the proceedings or at the time of framing the charge.
Ratio Decidendi: The court held that since the determination of liability under Section 141 of the Negotiable Instruments Act depends on factual evidence regarding who was in charge of and responsible for the conduct of the business, such a decision should be deferred until the stage of framing the charge.
Result: Appeals disposed of.
Facts of the case:
A company and its directors were arraigned as accused in a complaint. One of the directors sought the quashing of proceedings, arguing that it should be identified at the outset who among the accused should face prosecution.
Findings of Court:
The court found that resolving the conflict regarding vicarious liability at the preliminary stage would be premature and any ratio deduced might be obiter.
Issues: Whether the vicarious liability of company officers should be determined at the initial stage of the proceedings or at the time of framing the charge.
Ratio Decidendi: The court held that since the determination of liability under Section 141 of the Negotiable Instruments Act depends on factual evidence regarding who was in charge of and responsible for the conduct of the business, such a decision should be deferred until the stage of framing the charge.
Result: Appeals disposed of.
VicariousLiability - General reference to the referred judgements in the context of resolving a conflict regarding vicarious liability of company officers.
VicariousLiability - Referred to as one of the two conflicting judgments on the vicarious liability of company officers under special acts, which the court found premature to resolve.
VicariousLiability - Referred to as one of the two conflicting judgments on the vicarious liability of company officers under special acts, which the court found premature to resolve.
Quashing - Mentioned as the jurisdiction under which the High Court was approached for quashing of proceedings.
Vicarious-liability - Mentioned as one of the two conflicting judgments regarding the vicarious liability of company officers under Special Acts.
(1) THESE appeals stand placed before us in order to resolve an apparent conflict between the judgments of this Court in Municipal Corpn. of Delhi v. Ram Kishan Rohtagi and U.P. Pollution Control Board v. Modi Distillery both having been rendered by two-Judge Benches. The necessity to resolve the conflict is to discern the vicarious liability, if any, of officers of a Company, being prosecuted under Special Acts where the Company is the offender.
(2) BEFORE us is a complaint in which the Company and its Directors have been arraigned as accused and one of them has approached us for quashing of proceedings, having unsuccessfully tried for such relief before the High Court in jurisdiction under Section 482 of the Code of Criminal Procedure. It has been urged that at the very outset it be identified as to who out of the arraigned persons is to face the prosecution.
(3) SECTION 141 of the Negotiable Instruments Act which covers the topic "Offences by Companies" reads as follows:
"141. Offences by companies.(1) If the person committing an offence under Section 138 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 that nothing contained in this sub-section shall render any person liable to punishment 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. (2) Notwithstanding anything contained in sub-section (1), where any 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 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."
(4) A bare reading of the provision mandates that some facts must come on the record in order to figure as to who should answer the charge ultimately. Necessarily, pre-charge evidence assumes importance. The complainant will have to put his side of the case as given out in the complaint and the persons summoned would have to put on the record all what is material to extricate themselves out. In any case, the crucial time would be when framing charge whereat a decision in that respect would be required to be made by the court. Presently, it appears to us premature to be resolving the conflict and the ratio deduced thereby, may turn out to be obiter. Therefore, we think that we need not resolve such conflict at present and leave it to the court concerned to pass appropriate orders at the time of framing of charge. In this manner, we dispose of these appeals.