2010 (7) TMI 283 - SC - Companies Law

Specific Allegations Required to Establish Vicarious Liability; Court Dismisses Appeal

The Supreme Court upheld the High Court's decision to quash the summons issued by the trial court due to the absence of specific allegations against the ... Officer who is in default - Held that:- It is imperative to specifically aver in the complaint that the accused was in charge of and was responsible for the conduct of business of the company. Unless clear averments are specifically incorporated in the complaint, the respondent cannot be compelled to face the rigmarole of a criminal trial. Issues Involved:1. Quashing of summons issued by the trial court.2. Application of Section 33 of the Insecticides Act, 1968.3. Vicarious liability of the respondent.4. Requirements for specific averments in the complaint.5. Legal precedents on vicarious liability and specific averments.Detailed Analysis:1. Quashing of Summons Issued by the Trial Court:The appeal was filed by the appellant, the State of National Capital Territory of Delhi, against the judgment of the High Court of Delhi which quashed the summons issued by the trial court. The High Court's decision was based on the absence of specific allegations against the respondent.2. Application of Section 33 of the Insecticides Act, 1968:The appellant argued that under Section 33 of the Insecticides Act, 1968, the respondent, who was the Regional Technical Director handling quality control, was responsible for the quality of the product. Section 33 stipulates that every person in charge of or responsible for the conduct of the business of the company at the time of the offence is deemed guilty.3. Vicarious Liability of the Respondent:The respondent contended that liability under Section 33 cannot be fastened on him as he was not responsible or in charge of the company's affairs. The respondent argued that the offence, if any, was committed by the company, and the company continues to face prosecution. The respondent emphasized that the Magistrate must ensure that the process is issued only against those with specific allegations in the complaint.4. Requirements for Specific Averments in the Complaint:The respondent relied on several judgments, including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which held that it is necessary to specifically aver in a complaint that the accused was in charge of and responsible for the conduct of the business of the company. Without such averments, the requirements of Section 141 of the Negotiable Instruments Act, 1881, which is pari materia to Section 33 of the Insecticides Act, 1968, are not satisfied.5. Legal Precedents on Vicarious Liability and Specific Averments:The respondent cited multiple precedents to support his argument:- Municipal Corpn. of Delhi v. Ram Kishan Rohtagi: The High Court quashed proceedings due to the absence of specific allegations.- State of Haryana v. Brij Lal Mittal: Vicarious liability arises if a person was in charge of and responsible for the conduct of the company's business at the material time.- K.P.G. Nair v. Jindal Menthol India Ltd.: The complaint must make specific allegations about the accused's responsibility at the time of the offence.- Sabitha Ramamurthy v. R.B.S. Channabasavaradhya: Absence of requisite averments in the complaint led to its quashing.- K.K. Ahuja v. V.K. Vora: Summarized the requirements under Section 141, emphasizing the need for specific averments regarding the accused's role and responsibilities.The court observed that the trauma and hardship of criminal proceedings could be more severe than the punishment itself, making it improper to subject individuals to such proceedings without fulfilling the legal requirements.Conclusion:The Supreme Court upheld the High Court's decision, emphasizing the need for specific averments in the complaint to establish vicarious liability. The court found no infirmity in the High Court's judgment and dismissed the appeal, reiterating that clear legal positions must be maintained to avoid unnecessary criminal trials.