2021 (11) TMI 67 - SC - Indian Laws

Court emphasizes company's inclusion in prosecution to establish vicarious liability & responsible prosecutorial discretion.

DAYLE DE’SOUZA Versus GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF LABOUR COMMISSIONER (C) AND ANOTHER

The court quashed the summoning order and proceedings against the appellant and Vinod Singh due to the failure to prosecute the company as the principal ... Dishonor of Cheque - work of Employer is regulated under Notification No.- S.O. 1284 (E) dated 20.05.2009 of the Government of India or not - Scheduled Employer under Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950 - Cognizance of offences - vicarious liability under sub-section (1) to section 22C of NI Act - HELD THAT:- Sub-section (1) to Section 22C states that where an offence is committed by a company, every person who at the time the offence was committed was in-charge of and was responsible to the company for the conduct of the business, as well as the company itself shall be deemed to be guilty of the offence. By necessary implication, it follows that a person who do not bear out the requirements is not vicariously liable under Section 22C(1) of the Act. The proviso, which is in the nature of an exception, states that a person who is liable under sub-section (1) shall not be punished if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. The onus to satisfy the requirements to take benefit of the proviso is on the accused, but it does not displace or extricate the initial onus and burden on the prosecution to first establish the requirements of sub-section (1) to Section 22C of the Act. The proviso is to give immunity to a person who is vicariously liable under sub-section (1) to section 22C of the Act. It is crystal clear that the complaint does not satisfy the mandate of sub-section (1) to Section 22C of the Act as there are no assertions or averments that the appellant before this Court was in-charge of and responsible to the company M/s. Writer Safeguard Pvt. Ltd. in the manner as interpreted by this Court in the cases mentioned above. The proviso to sub-section (1) in the present case would not apply. It is an exception that would be applicable and come into operation only when the conditions of sub-section (1) to Section 22C are satisfied. Notably, in the absence of any specific averment, the prosecution in the present case does not and cannot rely on Section 22C(2) of the Act. A company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well. It is the court's duty not to issue summons in a mechanical and routine manner. If done so, the entire purpose of laying down a detailed procedure under Chapter XV of the 1973 Code gets frustrated. Under the proviso (a) to Section 200 of the 1973 Code, there may lie an exemption from recording pre-summoning evidence when a private complaint is filed by a public servant in discharge of his official duties; however, it is the duty of the Magistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking cognizance and summoning the accused is made out or not - the issue of process resulting in summons is a judicial process that carries with it a sanctity and a promise of legal propriety. The summoning order and the proceedings against the present appellant is quashed - appeal allowed. Issues Involved:1. Non-compliance with the Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950.2. Vicarious liability under Section 22C of the Minimum Wages Act, 1948.3. Necessity of prosecuting the company along with its directors or officers.4. Judicial discretion in issuing summons and initiating prosecution.Detailed Analysis:Non-compliance with the Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950:The case originated from an inspection by the Labour Enforcement Officer (Central) on 19th February 2014, which revealed violations of Rules 21(4), 22, 25(2), 26(1), and 26(5) due to the absence of required registers and notices at the ATM site. A notice was issued to the appellant and Vinod Singh on 6th March 2014, followed by a criminal complaint on 14th August 2014, under Section 22A of the Act for non-compliance.Vicarious liability under Section 22C of the Minimum Wages Act, 1948:Section 22C(1) states that if an offence is committed by a company, every person in charge of and responsible to the company for the conduct of its business, as well as the company, shall be deemed guilty. The proviso allows such a person to escape liability if they prove the offence was committed without their knowledge or despite due diligence. Section 22C(2) extends liability to directors, managers, secretaries, or other officers if the offence was committed with their consent, connivance, or due to their neglect.The court emphasized that the complaint must specifically aver that the accused was in charge of and responsible for the conduct of the company's business. Mere status as a director or officer is insufficient for vicarious liability. The court cited precedents like S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another and Aneeta Hada v. Godfather Travels and Tours Private Limited to underline that vicarious liability requires specific allegations and proof of the individual's role in the offence.Necessity of prosecuting the company along with its directors or officers:The court reiterated that for vicarious liability to be invoked under Section 22C, the company must be prosecuted as the principal offender. This principle was established in State of Madras v. C.V. Parekh and Another and reaffirmed in Aneeta Hada v. Godfather Travels and Tours Private Limited. The court held that without prosecuting the company, the prosecution of its directors or officers cannot be sustained. The company, M/s. Writer Safeguard Pvt. Ltd., was not made an accused or summoned in this case, leading to the quashing of the proceedings against the appellant and Vinod Singh.Judicial discretion in issuing summons and initiating prosecution:The court highlighted the importance of judicial discretion in issuing summons and initiating prosecution, emphasizing that such actions should not be taken mechanically or without adequate investigation. The court referred to the principles laid down in Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others and GHCL Employees Stock Option Trust v. Indian Infoline Ltd. and Others, which stress that summoning an accused has serious consequences and should be based on sufficient grounds and proper examination of facts.In this case, the complaint lacked specific averments regarding the appellant's role and responsibility in the alleged offence, and the authorities did not adequately consider the company's response denying involvement in the ATM's management. The court underscored the need for responsible and judicious exercise of prosecutorial discretion to avoid unjust prosecution.Conclusion:The court allowed the appeal, quashing the summoning order and proceedings against the appellant and Vinod Singh, emphasizing the necessity of prosecuting the company along with its directors or officers and the importance of specific allegations and judicial discretion in initiating prosecution.