1997 (11) TMI 114 - HC - Central Excise

Court Dismisses Revision; Directors Liable for Company Offences

The court dismissed the revision, holding that the Supreme Court's directions for in-house conciliation do not impede criminal proceedings for offences ... Prosecution Issues Involved:1. Applicability of Supreme Court directions for in-house conciliation.2. Necessity of sanction under Section 197 Cr. P.C. for prosecution.3. Liability of the company versus its employees for offences.4. Requirement of sanction for acts done in discharge of official duties.Detailed Analysis:Point No. (i): Applicability of Supreme Court Directions for In-House ConciliationThe petitioner argued that the Supreme Court's directions in Civil Appeal Nos. 2058-59 of 1988, which mandated in-house conciliation for disputes between government ministries and public sector undertakings, should apply. However, the court clarified that these directions pertain only to civil disputes and monetary claims, not to criminal complaints filed under penal provisions like those in the Central Excises and Salt Act, 1944. The court emphasized that the allegations involved suppression of accounts and evasion of excise duty, which necessitate prosecution. Therefore, the Supreme Court's directions do not impede the current criminal proceedings.Point No. (ii): Necessity of Sanction Under Section 197 Cr. P.C. for ProsecutionThe petitioner contended that she was a public servant as defined under Section 21 I.P.C. and argued that her prosecution required prior sanction under Section 197 Cr. P.C. The court examined various judgments, including those from the Andhra Pradesh High Court and the Supreme Court, to determine whether an employee of a government company qualifies as a public servant. It was concluded that although the first accused company is a government company, the petitioner, as its Managing Director, was not discharging duties connected with the affairs of the State. The court referenced the Supreme Court's interpretation in S.S. Dhanoa v. Delhi Municipality, which distinguished between statutory bodies and companies incorporated under the Companies Act. Consequently, the petitioner did not qualify as a public servant requiring sanction under Section 197 Cr. P.C.Point No. (iii): Liability of the Company Versus Its Employees for OffencesThe petitioner argued that only the company, and not its employees, should be liable for the offences. The court referred to Section 9AA of the Central Excises and Salt Act, 1944, which provides for vicarious liability of certain persons for offences committed by a company. Citing judgments from the Supreme Court, the court held that managers and directors of companies could be prosecuted if they were in charge of and responsible for the conduct of the business at the time of the offence. The complaint contained specific allegations against the petitioner for gross negligence and failure to ensure proper payment of excise duty, thus sustaining the prosecution against her.Point No. (iv): Requirement of Sanction for Acts Done in Discharge of Official DutiesThe petitioner cited several judgments to argue that sanction is necessary for acts done in the discharge of official duties, including dereliction of duty. However, the court reiterated its finding that the petitioner was not a public servant under Section 21(12) I.P.C. and was not discharging any affairs of the State. Therefore, the requirement of sanction under Section 197 Cr. P.C. did not apply, making it unnecessary to examine this point further.ConclusionThe court dismissed the revision, holding that there were no merits in the points raised by the petitioner. Consequently, the connected Crl. M.P. was also dismissed.