VICARIOUS LIABILITY

 

VICARIOUS LIABILITY

 Offence by Company--Summoning of Directors--Vicarious liability cannot be fastened upon any Director automatically in the absence of legislative mandate merely because they had occupied certain positions in the Company at the relevant time

Death by Negligence--Vicarious Liability--Potholes of the National Highway Road--All the Directors of Road Construction Company which was responsible for repair and maintenance of the road in question were summoned--Summoning Orders quashed

(A) Indian Penal Code, 1860, S.304-A--Criminal Procedure Code, 1973, S.482--Death by Negligence--Potholes of the National Highway Road--Quashing of Summoning Orders--Liability of Directors--All the Directors of Road Construction Company which was responsible for repair and maintenance of the road in question were summoned--Held;

(i) Impugned supplementary chargesheet do not contain any specific allegations with regard to the role played by the petitioners.

(ii) Petitioners cannot be implicated in the absence of any specific allegations indicating their specific role in commission of the crime.

(iii) There is no provision in the IPC for fastening the vicarious liability upon the Directors of the Company for offences listed in it.

(iv) Criminal liability upon the Directors of the Company cannot be imposed merely because of the positions they hold in the Company at the relevant time, by applying the principle of vicarious liability--There is no other allegation against the petitioners to indicate their complicity except for being members of the Board of Directors of the Company.

(v) Impugned summoning orders against all Directors of the Company quashed. (Para28)

 

(B) Indian Penal Code, 1860--Vicarious Liability--Offence by Company--Summoning of Directors--Legal Principles summarized--Held;

(i) A Company and its Directors are not immune from criminal prosecution but it has to be established that the said offence has been committed with their consent or in connivance with them--These persons cannot be arrayed as accused in the absence of their active participation and attribution of a specific role played in commission of the alleged offence with criminal intent.

(ii) Vicarious liability cannot be fastened upon any Director automatically in the absence of legislative mandate merely because they had occupied certain positions in the Company at the relevant time.

(iii) For summoning the Directors of a Company for commission of an offence under the IPC, the conventional rule of existence of mens rea is to be followed--[Act us non facit reum nisi mens sit rea-an act does not make the defendant guilty unless it is done with a guilty intent].

(iv) Summoning the accused in a criminal case requires recording of prima facie satisfaction about the involvement of the accused, as a bare minimum--The summoning order must satisfy the objective standards of reason and justice. (Para26)

 

A two Judge Bench of the Hon’ble Supreme Court in HDFC Securities Ltd. Vs. State of Maharashtra AIR 2017 (SC) 61, speaking through Justice Pinaki Chandra Ghose, has authoritatively held that IPC does not provide for vicarious liability for any offence alleged to have been committed by a Company. If such liability was sought to be imputed by the legislature by creating a legal fiction, the same would have been specifically provided in the statute as is the case with the Negotiable Instruments Act. Further, a two Judge Bench of the Hon’ble Supreme Court in Sharad Kumar Sanghi Vs. Sangat Rane (2015) 12 SCC 781,speaking through Justice Dipak Mishra, has held that when a complainant intends to rope in the Managing Director or any officer of the Company, it is essential to make the requisite specific allegations to constitute the vicarious liability. A two Judge Bench of the Hon’ble Supreme Court in GHCL Employee Stock Option Trust Vs. Nimesh Ramesh Mehta (2013) 4SCC 505, speaking through Justice M.Y. Eqbal, has held that criminal law machinery cannot be set into motion as a matter of course. The summoning order passed by the Magistrate must reflect application of mind to the facts of the case.

(C) Doctrine of Law

Doctrine of Alter Ego--If a group of persons responsible for the conduct of business of the company has a criminal intent, the same can be imputed to the body corporate and not vice versa--Therefore, such person, who had committed the offence on behalf of the Company can be made an accused along with the Company only if there is specific attribution of his active participation with culpable intent. (Para 23)

(D) Doctrine of Law

Doctrine of Vicarious Liability--It is a civil concept and its applicability in criminal cases is an exception rather than the rule--In the Indian context, a person can be held liable for the actions of another, with the aid of provisions contained in Section 34,120-B and 149 of the IPC--As such, in criminal law, in certain cases, a person may beheld liable even though the act us reus was committed by another person. (Para 20)

2024(2) Law Herald (P&H) 1028