2022 (4) TMI 922 - HC - Indian Laws

Corporate Liability: Company Must Be Party in Proceedings

The High Court held that proceedings against an individual employee of a company must involve the company as a party to be maintainable, emphasizing ... Maintainability of petition - initiation of proceedings against the petitioner alone who is an employee of the Company - party to the proceedings or not - it is contended that the Company which ran the chit fund is not made a party to these proceedings and unless, the Company is a party, the petition would not be maintainable - HELD THAT:- Petitioners are accused Nos. 1 and 2 in the very same Spl.C.C. No. 96/2016, which has been quashed by this Court for the reasons rendered therein. The petition is allowed and Spl.C.C. No. 96/2016 dated 22.02.2016 passed by the Principal City Civil and Sessions Judge, Bengaluru (CCH-1) stands quashed in the same terms as is directed in SRI SUDEEP SRINIVAS (REPRESENTED BY HIS GPA HOLDER SMT. PUSHPALATHA G., SMT. PREETHI RAMAMOHAN (REPRESENTED BY HER GPA HOLDER SMT. SHUBHA RAMMOHAN VERSUS STATE OF KARNATAKA BY THE STATE OF KARNATAKA REPRESENTED BY MALLESHWARAM, POLICE STATION, SATISH KUMAR B.P. [2021 (9) TMI 1373 - KARNATAKA HIGH COURT] where it was held that The complaint itself was not maintainable without the corporate entity being made as a party but having brought only the Board of Directors or the officers of the Company as accused. Petition disposed off. Issues:1. Whether the proceedings could be initiated against an individual employee of a company without making the company a partyRs.2. Whether the complaints filed against an individual without the corporate entity being made a party were maintainableRs.3. Whether the impugned orders passed by the learned Magistrate without involving the company were maintainableRs.Analysis:1. The High Court examined whether proceedings could be initiated against an individual employee of a company without involving the company as a party. Citing the judgment of the Apex Court in ANEETA HADA v. GODFATHER TRAVELS AND TOURS PRIVATE LIMITED, the Court emphasized the corporate criminal liability and vicarious liability of a person in charge of the company. The Court held that unless the company is made a party, the proceedings would not be maintainable, as per the legal provisions under Section 141 of the Act.2. The Court further analyzed the maintainability of complaints filed against an individual without the corporate entity being made a party. Referring to the case of MR. ARVIND MEDIRATTA v. STATE OF KARNATAKA, the Court reiterated the requirement for the company to be involved in such proceedings. The Court highlighted the importance of strict construction and the need for the commission of an offense by the company as a condition precedent to attract vicarious liability of others. Without the company being arraigned as a party, prosecution solely against an individual was deemed not maintainable.3. Lastly, the Court reviewed the impugned orders passed by the learned Magistrate without involving the company in the proceedings. Relying on previous judgments and legal principles, the Court emphasized the necessity of including the corporate entity in such cases. The Court reiterated that an individual being described as a Director in a company does not satisfy the legal requirements, and prosecution initiated only against an individual without the company being made a member was not maintainable. Therefore, the Court quashed the impugned orders and directed the respondent-State to take appropriate action in accordance with the law.In conclusion, the High Court's judgment emphasized the importance of including the company as a party in proceedings involving corporate criminal liability and vicarious liability. The Court's decision was based on legal precedents and the strict interpretation of relevant legal provisions, ensuring that prosecutions are conducted in accordance with the law.