ASSERTION THROUGH THE LENS OF STATUTE COUPLED WITH ESTABLISHED CRIMINAL INTENT SACROSANCT FOR EFFECTUATING ATTENDANCE OF CHAIRMAN AND DIRECTOR

 

CASE DIARY
Name of the case	Ravindranatha Bajpe v. Mangalore Special Economic Zone Ltd. & Others Etc.
Application Ref.	Criminal Appeal Nos. 1047-1048/2021
Appellant	Ravindranatha Bajpe
Respondent (comprising of multiple parties and collectively referred as “Respondent”)	Mangalore Special Economic Zone Ltd. & Others Etc.
Judiciary	Supreme Court of India
Bench	·         Hon’ble Justice M R Shah ·         Hon’ble Justice A S Bopanna
Date of judgment	Sept. 27, 2021

PART - A: OVERVIEW

·      The Apex Court on the 27^th day of September 2021 rendered its judgment in an appeal preferred by the Appellant in the jurisdiction of the Hon’ble Supreme Court against the order passed by a bench of Hon’ble Karnataka High Court which upheld the order passed by a Sessions Court, wherein the Sessions Court quashed the summons issued by Magistrate enforcing attendance of Chairman and Directors (viz. Managing Director and Executive Director with specific emphasis) in an alleged case of criminal trespassing.

·   The highest judiciary vehemently contemplated on the fact whether Magistrate has exceeded his exercise of jurisdiction through endowing summons to the officials of a Company in the absence of twin factors for consideration prior to mandating the attendance of the Respondent viz. the affirmation flowing through from the statute for bestowing vicarious liability and satisfaction of presence of criminal intention under Section 34 of the Indian Penal Code.

 

PART – B: FACTS OF THE CASE

·    The Appellant held immovable property situated that Malavur Bajpe Village of Mangalore Taluk comprised in Sy.No. 56/2, measuring 7.50 acres, Sy. No, 178/2C measuring 1.76 acres, Sy. No. 50/6B measuring 1.15 acres with trees embedded therein (this is an undisputed by the parties and emanates from the submissions made by the Appellant).

·     The Respondent comprise of two Companies (viz. C1 and C2 respectively for the purpose of easier identification under this case along with their Chairman, Directors and other officials) registered and incorporated under the provisions of the Companies Act, wherein C1 engaged C2 through contract basis, wherein the consent of this contract work was affirmed by the Chairman of C1, for laying water pipeline by the side of Mangalore-Bajpe Old Airport Road, wherein the said area for laying pipeline shared common boundary with the immovable property of the Appellant.

·      The contract work bagged by C2, was affirmed through its Chairman and Executive Director and the project was delegated further to certain other officials. In this regard, C1 had obtained necessary permissions from Department of Public Works, Mangalore.

·    The said project was undertaken at the time when the Appellant was not in the city wherein his immovable property was situated. The pipeline was laid, which also affected the immovable property of the Appellant as the pipeline was laid down beneath the immovable property and the compound wall which protected the said property was destroyed thereby establishing that trespassing had transpired.

·    The Appellant upon returning and finding out the same, filed a compliant before the SHO, Bajpe Police Station against which appropriate action was not taken, which lead to the Appellant approach the Magistrate.

·     The Magistrate examined the Appellant on an oath and ordered for registering a case against C1 and C2 including its Chairman, Directors (viz. Managing and Executive Directors) and other officials under Sections 427, 447, 506 and 120B read with Section 34 of the Indian Penal Code and consequently issued summons to the Respondent for adjudicating the compliant made by the Appellant.

·    Feeling aggrieved, the Respondent preferred a criminal revision petition against the order of the Magistrate, before the Sessions Court. The Sessions Court admitted the petition filed by the Respondent and quashed the order passed by the Magistrate and the charges framed therein.

·   The Appellant filed criminal revision petition before the jurisdiction of Hon’ble Karnataka High Court, against the order passed by Sessions Court quashing the order of Magistrate. The High Court dismissed the petition invoked by the Appellant against the order of the Sessions Court.

·       The Appellant preferred an appeal to the Apex Court against the order passed by the Karnataka High Court.

PART - C: CONTENTION OF THE PARTIES

C.1. CONTENTIONS OF THE APPELLANT

The Appellant during the course of appeal to the Apex Court made the following submissions:

·    The High Court and Sessions Court has materially erred in brushing aside the order passed by the Magistrate charging the Respondent under Sections 427, 447, 506 and 120B read with Section 34 of the Indian Penal Code.

·     The Appellant at the first instance approached the police and consequent to no action on their part, was constrained to approach the Magistrate for instituting action against the Respondent.

·    The Magistrate has examined the Appellant on oath, framed charges and issued summons to the Respondent considering material evidences on record, which was unjustly overruled by the Sessions Court.

·     At the time of issuance of summons, the relevant point to be considered is whether a prima facie case is made out against the Respondent which the Magistrate did satisfy. Hence the interference from Sessions Court was not warranted.

·     The executives of C1 and C2 are vicariously liable along with the Company for criminal trespassing and damaging the property of the Appellant, which was undertaken without any statutory autonomy from the law.

·    Prayed for restoring the order passed by Magistrate and quashing the order issued by High Court upholding the order passed by the Sessions Court.

C.2. CONTENTIONS OF THE RESPONDENT

The Respondent during the course of appeal to the Apex Court relied on the following submissions:

·     On perusal of the compliant made, there are no specific allegations against the executives of the Company nor there is any role specifically attributed against each individuals for the alleged conduct. There are bald allegations and the Sessions Court was justified in setting aside the order passed by the Magistrate.

·       Issue of summons is construed to be a serious matter and unless specific roles to the Respondent are established, the issue of summons is void.

·    The Chairman and Directors along with executives of C1 and C2 were stationed at Hyderabad during the commissioning the offence and the complaint by Appellant does not align the fact that the said individuals were present at the site when the offence transpired.

·     Reliance is placed on the decisions in cases of 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 in order to supplement the above contentions.

PART – D: QUESTION OF LAW INVOLVED

The perusal of the case by different levels of judiciary in the case under consideration has raised the following questions of law involved:

a.     Is the Magistrate justified in prosecuting the officials of the Company in the present case?

b.   Does absence of an express provision in the Indian Penal Code and the Criminal Procedure Code embody vicarious liability on the Chairman and Directors of the Company?

c.     Is ‘mens rea’ a decisive factor in criminal cases involving Companies?

PART – E: RULING BY THE APEX COURT

·     Upon perusal of complaint made by the Appellant, it is observed that there are no specific allegations made out against the executives of the Companies specifically except for the fact that the Companies conspired with each other to lay pipeline beneath the property of the Appellant which was yet unsubstantiated and trespassed the property.

·     The Appellant has not alleged through his complaint that the trespassing into his property and demolition of his compound wall was orchestrated through command of the Chairman and Directors of the C1 and C2.

·     Without bestowing a specific responsibility on the part of each individual, collective allegation is vague and the Magistrate has erred while charging the executives of the Company under the Indian Penal Code and issuing summons thereof.

·       It is imperative that in criminal jurisprudence, specifically in context of Companies, unless the statute carves out specifically, vicarious liability cannot be bestowed upon the Chairman and the Directors of the Company. However so, that does not amount to a permanent immunity to the officials of the Company. There are certain qualifying factors that are to be accounted for, in order to comprehend criminal liability on the part of executives of the Company, in the absence of which, the interest of justice would not be met.

·    Following are the necessary ingredients to satisfy prosecution of the officials/executives of the Company along with the Company itself in criminal cases:

a.      Mens rea on the part of the executives of the Company

b.      Evidence on the role of executives

c.       Establishment of criminal intention

·     In criminal law, automatic liability on the part of the executives of the Company does not emanate unless materially established through evidences though the criminal law is silent on the same.

·      Prior to framing charges and affirming the same through summons, the Magistrate ought to have to establish whether a case is made out on the part of the Appellant, which was absent. The Magistrate while examining the Appellant on oath is required to apply his mind and convince in the interest of justice whether a prima facie case is carved out.

·      A Company being an artificial person acts through its Chairman, Directors and other executives. It is imperative that for every act of the Company, unless there is an established role of specific individual found, every person cannot be made liable which would be fundamentally incorrect.

·       The Magistrate has to accord satisfaction prior to issue of summons. Invoking summons against the officials of the C1 and C2 is a serious matter considering the sensitivity and cardinal principles of criminal law.

·     In the absence of specific averments against the executives of the C1 and C2 and considering the principles of criminal law, the order passed by the Karnataka High Court is upheld.

·     Reliance emphasised on Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609, Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668, Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 and GHCL Employees Stock Option Trust v. India Infoline Limited, (2013) 4 SCC 505 to supplement the above justifications of the Court.

PART – F: ANALYSIS

·     The operative part of decision in this case, in the context of Companies adjoins with the substantive proposition of law that the Indian Penal Code read with Code of Criminal Procedure is oblivion on casting vicarious liability on the officials of C1 and C2.

·      The crux of this case is levy of joint liability on the officials of C1 and C2 along with the Company including Chairman and Directors of the respective companies by the Appellant and the common order passed by the Magistrate.

·     In the present context, the invocation of Section 34 of the Indian Penal Code and its satisfaction is imperative prior to the levy of charge. Section 34 is the charging section which aids to establish constructive liability. Section 34 of the Penal Code speaks about the onus of offence contravened by each individual, in a collaborated conduct of any activity by a group of people after common consensus, which has affected the some other party, wherein the intent of the individuals involved is found to be criminal in nature. In such scenario, though the act is undertaken by a group of individuals, each person is deemed to do such criminal act in his/her individual capacity.

·    The Allahabad High Court in Virendra Pal Singh v. Jt. Director of Education & Ors. (Civil Miscellaneous Writ Petition No. 13862 of 2004) opined that “Section 34 IPC stipulates that the act must have been done in furtherance of the common intention. In order to incur joint liability for an offence there must be a pre-arranged and pre-meditated concert between the accused persons for doing the act actually done.” The Appellant has resorted to aid of Section 34 of Penal Code. However, there is no substance on his part to demonstrate that the act of both Companies were pre-arranged or pre-mediate to browbeat the Appellant. The matrix of conspiracy by the individuals in this case is failed to be established.

·     Further, the application of Section 34 of the Penal Code is not on cemented basis or on pre-decided cases, but rather consciously considering the present circumstances of the case. The Apex Court in Yashwant & Ors. v. State of Maharashtra (AIR 1936 P. C. 289) postulated that “the applicability of Section 34 I.P.C. to a case depends upon the particular fact 8 and circumstances of the case. Therefore, we have to scrutinize and pronounce upon the particular facts of the case before us.”

·      Further, C1 has engaged C2 for laying pipeline through a defined stretch of area, a part of which is considered to be in possession of the Appellant. It is clear that the intent was just to lay pipeline and at the time of consideration of the approval of project, a criminal intent was not even a part of the discussion.

·    Taking a step further, even so keeping the application of Section 34 at abeyance, there are no evidences furnished by the Appellant against the Respondent in order to substantiate the case in his favor. The Appellant has made blanket allegations against the Respondent and no specific liability on any individual is cultivated. The officials were at the jurisdiction of Hyderabad at the time of offence which is not denied by the Appellant either. The Apex Court in S.M.S. Pharmaceuticals Limited v. Neeta Bhalla and Another (2005) 8 SCC 89 emphasised that “The liability of a Director must be determined on the date on which the offence is committed.”

·      On the other hand, the statute through its lens does not impound vicarious liability on executives of a Company in the case of criminal trespassing and breach of trust. The Penal Code and the Code of Criminal Procedure observes a strange oblivion on the same.

·      The fundamental principle that has flown down since time is that the statute that creates the space for dealing in criminal matters ought to have self-contained provisions for slapping vicarious liability for Companies and its officials in criminal cases. It is of utmost importance to note the contemplation of the Apex Court in Sunder v. State of Haryana (AIR 1992 SC 1333), the judicial sanctity of which reiterated by the Madras High Court B. Jagadeesh v. The Deputy Superintendent of Police (Crl. O.P. No.6419 of 2007) wherein the High Court cited that “The penal provisions must be strictly construed in the first place. Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold.”

·     The affirmation on rule of criminal liability on Directors of the Company was also supplied by the Delhi High Court in Manish Parwani v. The National Capital Territory of Delhi (Crl. M.C. No. 450/2010) wherein it was held that “The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another.”

·    Coming to the other aspect of the case relating to conduct of Magistrate in framing charges and issuing summons. The Magistrate has undoubtedly intended to follow the provisions laid down under Chapter XV of the Criminal Procedure Code i.e. dealing with Sections 200 to 203 of the said code.

·     Section 200 of the Code of Criminal Procedure mandates that the Magistrate shall on the receipt of compliant, examine the complainant and witness on an oath and satisfy the role of the opposite party in alleged commissioning of an offence prior to reducing the same in writing. The term ‘examine’ has a wider import in criminal law. The Magistrate in other words is to ensure whether the allegation is competent in the eyes of law to be taken cognizance off.

·    Further, Section 203 read with Section 204 of Code of Criminal Procedure mandates that the Magistrate is empowered to either dismiss the complaint or proceed further to conduct an inquiry on the complaint given by the complainant only if sufficient grounds for the same are made out. The Kerala High Court in N. Harihara Iyer v. State of Kerala (2000 CriLJ 1251) expounded that “The Section obligates the Magistrate to examine upon oath the complainant and the witnesses present, if any. The object of such examination is to ascertain whether there is a prima facie case and sufficient ground for proceeding.”

·     There must be a proper view accorded by the Magistrate which can be further supplemented by an inquiry or investigation by the Magistrate himself or a police official under Section 202 of the Code of Criminal Procedure, consequent to which a charge could have been framed and the case could have been proceeded further. (Emphasis on Biju Purushothaman v. The State of Kerala (Crl. Rev. Pet. No. 1255 of 2008))

·      To subserve justice, criminal conduct of the executives of the Company along with the Company are to be examined and punished for the respective criminal offences which are dealt in criminal law. The settled position is that the law does not embody permanent immunity but rather the intent is to bring out the responsible individuals in a Company to the eyes of the law rather than browbeating a group of individuals in a Company, who may have connected roles and responsibilities, however are not involved in the offence. Casual liability on everybody is not expected to serve the interest of justice.

·      The cardinal principle of criminal law in context of allegations against a Company and its officials is that the complaint produced by the complainant to the Magistrate has to be specific on the roles and responsibilities of the accused and absolute established role of each accused in alleged crime, which was to be further examined and affirmed by the Magistrate under Section 200 of the Code of Criminal Procedure. In National Small Industries Corp. Ltd. v. Harmeet Singh Paintal & Anr. (Criminal Appeal No. 320-336 of 2010), the Apex Court held that “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. Vicarious liability on the part of a person must be pleaded and proved and not inferred. If accused is Managing Director or 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.”

·   To further supplement, the Delhi High Court in B.T. Gokhale v. State & Anr. (CRL. M.C. No.1345/2008 & CRL.M.A. No.5049/2008) while reiterating the stand by the Apex Court in N.K. Wahi v. Shekhar Singh (AIR 2007 SC 1454) observed that “To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear.”

·       In the present case, the Appellant has failed to make out specific allegations against the officials and executives of C1 and C2 respectively which discharges the aspect of bestowing vicarious liability considering the above judgments. The complaint is vague, unclear and yet the Magistrate has erred by taking the same into cognizance without clearly establishing what are the sufficient material grounds that prompted the Magistrate to continue the issue process, which is in contra to Sections 200 and 204 of the Code of Criminal Procedure.

·     Further, the principle of mens rea on the part of the Chairman, Directors and other officials who are alleged by the Appellant to have committed criminal conduct with common intention is also not present/established, thereby deeming that the compliant by the Appellant and the cognizance by the Magistrate is null.

The Judgment can be accessed at:

https://main.sci.gov.in/supremecourt/2016/6009/6009_2016_43_1501_30333_Judgement_27-Sep-2021.pdf

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