The Supreme Court has reiterated that Chairman, Managing Director/Executive Director etc., of a company cannot be summoned in a criminal case if specific allegations about their particular role is not alleged in the complaint, as they cannot be vicariously held liable for the criminal acts.
A bench of Justices M R Shah and A S Bopanna said that “Issuing summons/process by the Court is a very serious matter and therefore unless there are specific allegations and the role attributed to each accused more than the bald statement, the Magistrate ought not to have issued the process,”
In this case, a private complaint was lodged by a person against the company Mangalore Special Economic Zone Ltd and its contractor company alleging that they had trespassed into the complainant’s property and had demolished his compound wall while laying down a pipe line.
The complainant had also arrayed the directors and other functionaries of the company alleging offences punishable under Sections 406 (criminal breach of trust), 418 (Cheating with knowledge that wrongful loss), 420 (cheating), 427 ( Mischief causing damage to the amount of fifty rupees), 447 (criminal trespass), 506 ( criminal intimidation) and 120B (criminal conspiracy) read with Section 34 (common intention) of Indian Penal Code.
The trial court issued the process against the accused. Later, the sessions court set aside the order, and the same was upheld by the High Court.
In appeal, the complainant contended that at the stage of summoning the accused, what is required to be considered is whether a prima facie case is made out on the basis of the statement of the complainant on oath and the material produced at this stage and the detailed examination on merits is not required. On behalf of the accused, it was contended that that issuing summons/process by the Court is a very serious matter and therefore unless there are specific allegations and the role attributed to each accused more than the bald statement, the Magistrate ought not to have issued the process.
“Therefore, as such, in absence of any specific allegations and the specific role attributed to them, the learned Magistrate was not justified in issuing process against accused nos. 1 to 8 for the offences punishable 12 under Sections 427, 447, 506 and 120B read with Section 34 IPC.”
The Court held that issuing summons/process by the Court is a very serious matter and therefore unless there are specific allegations and the role attributed to each accused more than the bald statement, the Magistrate ought not to have issued the process.
The bench noticed that except the bald statement that accused nos. 2 to 5 and 7 & 8 have conspired with common intention to lay the pipeline within the schedule properties belonging to the complainant, without any lawful authority and right whatsoever and in furtherance they have committed to trespass into the schedule properties of the complainant and demolished the compound wall, there were no other allegations that at that time they were present. There were no further allegations that at the command of A2 to A5 and A7 & A8, the demolition of the compound wall has taken place. All of them are merely arrayed as an accused as Chairman, Managing Director, Deputy General Manager (Civil & Env.), Planner & Executor, Chairman and Executive Director respectively.
The court also noticed the observations made in judgments viz. Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 GHCL Employees Stock Option Trust v. India Infoline Limited, (2013) 4 SCC 505; and Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609.
Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668
“13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the company. The learned Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.”
Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749
“28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the 14 Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused.”
GHCL Employees Stock Option Trust v. India Infoline Limited, (2013) 4 SCC 505
In the order issuing summons, the learned Magistrate has to record his satisfaction about a prima facie case against the accused who are Managing Director, the Company Secretary and the Directors of the Company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them.
Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609
“No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so. (…) When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect.”
The bench of Justices MR Shah and AS Bopanna observed that Criminal Law cannot be set into motion as a matter of course and that magistrate while ordering summons has to record his satisfaction about a prima facie case against the accused.
The Hon’ble court while dismissing the appeal said that, “The learned Magistrate has to record his satisfaction about a prima facie case against the accused who are Managing Director, the Company Secretary and the Directors of the Company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them. Looking to the averments and the allegations in the complaint, there are no specific allegations and/or averments with respect to role played by them in their capacity as Chairman, Managing Director, Executive Director, Deputy General Manager and Planner & Executor. Merely because they are Chairman, Managing Director/Executive Director and/or Deputy General Manager and/or Planner/Supervisor of A1 & A6, without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as an accused, more particularly they cannot be held vicariously liable for the offences committed by A1 & A6.”.
Citation: LL 2021 SC 505
Case no.| Date: CrA 1047-1048/2021 | 27 September 2021
Case: Ravindranatha Bajpe VS Mangalore Special Economic Zone Ltd.
Coram: Justices MR Shah and AS Bopanna
Counsel: Adv Shailesh Madiyal for appellant, Adv Nishanth Patil for Respondent