Vicarious liability for company offences requires the company to be arraigned as an accused before Directors can be prosecuted.

Vicarious liability under the Income-tax Act requires the company to be arraigned as an accused before liability can be fastened on its Directors or officers. Where prosecution is founded on a company's alleged tax offence and the company is omitted from the array of accused, the omission goes to the root of the matter and is not a curable technical defect. On that basis, the complaints and summoning orders were unsustainable and the proceedings against the Directors were quashed.

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Issues: Whether Directors alone can be prosecuted for offences attributed to a company when the company is not arraigned as an accused.

Analysis: The prosecution was founded on the company's tax liability and the alleged transfer of a company asset, and the petitioners were proceeded against only in their capacity as Directors. Section 278B of the Income-tax Act, 1961 creates vicarious liability where an offence is committed by a company, but the liability of officers in charge arises only when the company itself is made an accused. The legal position that arraignment of the company is imperative was applied from the settled line of authority on vicarious liability, and the omission to implead the company was treated as going to the root of the matter rather than as a curable technical defect.

Conclusion: Directors alone could not be prosecuted in the absence of the company being arraigned as an accused, and the prosecution was unsustainable.

Final Conclusion: The complaints and the summoning orders could not be sustained and the proceedings against the petitioners were quashed.

Ratio Decidendi: In a prosecution based on a company's offence under a vicarious liability provision, the company must be impleaded as an accused before liability can be fastened on its Directors or officers.

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