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of <h1>Court Quashes Cases Against MD, Emphasizes Prosecution Focus on Companies</h1> <h3>VB. Sivalingam Chettiar Versus Labour Officer, Nellore</h3> VB. Sivalingam Chettiar Versus Labour Officer, Nellore - [1986] 59 COMP. CAS. 701 (AP) Issues:Prosecution against an individual instead of the company under the Payment of Bonus Act. Allegations against the Managing Director of a company for failure to maintain registers. Legal liability of directors in cases of offences by companies.Analysis:The judgment involves the quashing of two Summary Trial Cases (S.T.C. Nos. 3365 and 3366 of 1984) filed against the Managing Director of a company under the Payment of Bonus Act. The complaints alleged that the petitioner failed to maintain required registers for the accounting years 1980-81 and 1981-82. The key issue raised was the prosecution of an individual director instead of the company itself, despite the offence being primarily against the company for non-compliance with register maintenance obligations.The Payment of Bonus Act mandates employers to maintain specific registers, as outlined in sections 26 and 28 of the Act. Section 29 deals with offences by companies, holding both the company and responsible individuals liable. The judgment emphasized that in cases where the company is the primary offender, prosecution should be directed at the company itself. The court highlighted that without prosecuting the company, individual directors cannot be held solely responsible, citing legal precedents to support this principle.The judgment referenced previous cases such as Krishna Trading Co. v. State of Bihar and State of Madras v. C. V. Parekh, which established that liability of persons in charge can only arise when the contravention is by the company itself. It was further emphasized that in cases of offences by companies, the company must be charge-sheeted, and prosecution without involving the company directly is flawed. The court stressed that technical violations in criminal proceedings should benefit the accused, and allegations against directors must be clearly pleaded to establish liability.Additionally, the judgment considered the time lapse between the alleged offences in 1980-81 and 1981-82 and the proceedings in 1985, leading to the quashing of the cases. The court concluded that the complaints against the Managing Director lacked the necessary foundation and failed to establish his direct responsibility for the company's conduct of business. Consequently, the petitions were allowed, and the Summary Trial Cases were quashed, highlighting the importance of proper legal procedures and adherence to statutory requirements in prosecuting offences by companies.
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