Excise prosecution, public servant status, and vicarious liability: prior conciliation directions and sanction requirements did not bar the complaint.

Prior in-house conciliation directions for Government bodies and public sector undertakings do not bar criminal prosecution under excise law, because they were meant for inter se civil or monetary disputes and not for penal proceedings based on alleged suppression and evasion of duty. A Managing Director of a Government company is not automatically a public servant for Section 197 CrPC; the decisive test is whether the person is employed in connection with the affairs of the Union or State, and that test was not met on the facts. Personal prosecution of the company officer was maintainable because the excise statute created vicarious liability and the complaint contained specific allegations of responsibility and gross negligence.

---

---

Issues: (i) Whether the directions issued for prior in-house conciliation between Government departments and public sector undertakings applied to the criminal prosecution under the excise law; (ii) whether the second accused, as Managing Director of a Government company, was a public servant so as to attract the requirement of prior sanction under Section 197 of the Code of Criminal Procedure, 1973; (iii) whether the complaint could proceed against the second accused personally for offences alleged against the company and whether the allegations against her were sufficient to sustain the prosecution.

Issue (i): Whether the directions issued for prior in-house conciliation between Government departments and public sector undertakings applied to the criminal prosecution under the excise law.

Analysis: The directions relied on were intended to prevent inter-se civil or monetary disputes between Government bodies and public sector undertakings from reaching court without prior conciliation. They were not framed for criminal proceedings founded on specific penal provisions. The complaint alleged suppression of facts and evasion of excise duty, and the prosecution was launched under the penal provisions of the excise statute.

Conclusion: The directions did not bar the criminal prosecution.

Issue (ii): Whether the second accused, as Managing Director of a Government company, was a public servant so as to attract the requirement of prior sanction under Section 197 of the Code of Criminal Procedure, 1973.

Analysis: Although the company answered the description of a Government company, the second accused was paid by the company and was governed by its service rules. The controlling test was whether she was employed in connection with the affairs of the Union or the State. On the facts, her function as Managing Director of the company did not amount to discharging the affairs of the State, and the Supreme Court's interpretation of the relevant definition of public servant was treated as binding.

Conclusion: Prior sanction under Section 197 of the Code of Criminal Procedure, 1973 was not required.

Issue (iii): Whether the complaint could proceed against the second accused personally for offences alleged against the company and whether the allegations against her were sufficient to sustain the prosecution.

Analysis: A company's officers can be made liable where the statute creates vicarious liability. The excise law contained such a provision, and the complaint contained specific allegations that the second accused was responsible for ensuring proper compliance and had been grossly negligent in relation to payment of duty. These allegations were sufficient at the threshold stage to justify continuation of the prosecution.

Conclusion: The prosecution against the second accused was maintainable.

Final Conclusion: The revision failed on all material grounds and the prosecution was allowed to continue against the second accused.

Ratio Decidendi: Directions for inter se conciliation between Government bodies do not apply to criminal prosecutions under penal fiscal statutes, and an officer of a Government company is not automatically a public servant for the purposes of sanction unless the statutory test of employment in connection with the affairs of the Union or State is satisfied.

---