TaxTMI 
TaxTMI 
2021 (11) TMI 67
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....4, a notice was issued by the Labour Enforcement Officer (Central) to the appellant and one Vinod Singh, Madhya Pradesh head of M/s. Writer Safeguard Pvt. Ltd. alleging non-compliance with the provisions of the Minimum Wages Act, 1948 (for short, 'the Act') and Minimum Wages (Central) Rules, 1950 (for short, 'the Rules') at the ATM. On 02nd April 2014, the Company responded claiming that they neither manage nor work at the ATM. After more than four months, the Labour Enforcement Officer (Central), by letter dated 08th August 2014, informed the appellant and Vinod Singh that they were required to appear in the court on 14th August 2014. On 14th August 2014, the Labour Enforcement Officer (Central) filed a criminal complaint before the Court of the Chief Judicial Magistrate, Sagar, Madhya Pradesh, under Section 22A of the Act. We shall refer to the contents of the complaint later. 3. On the date of presentation of the complaint, that is, 14th August 2014, the Judicial Magistrate, First Class, Sagar, Madhya Pradesh took cognisance of the offence and issued a bailable warrant against the appellant and Vinod Singh in Criminal Case No. 3398/2014. On 01st August 2015, the Company submi....
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....n invoked, is a 'General provision for punishment of other offences' where "any employer who contravenes any provision of this Act or of any rule or order made thereunder shall, if no other penalty is provided for such contravention by this Act, be punishable with fine which may extend to five hundred rupees". Clause (b) of sub-section (1) to Section 22B with the heading "Cognizance of offences" states that "No court shall take cognisance of a complaint against any person for an offence - under clause (b) of section 22 or under section 22A, except on a complaint made by, or with the sanction of, an Inspector". Sub-section (2) to Section 22B, insofar as it relates to Section 22A, vide sub-clause (b) states that "No Court shall take cognisance of an offence - under Section 22A, unless complaint thereof is made within six months of the date on which the offence is alleged to have been committed." 9. However, in the context of the present appeal, it is Section 22C of the Act which is of more relevance which reads thus: "22C. Offences by companies. - (1) If the person committing any offence under this Act is a company, every person who at the time the offence was co....
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.... the Act. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another, (2005) 8 SCC 89 in relation to pari materia proviso in Section 141 of the Negotiable Instruments Act, 1881, this Court observed: "4... A company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offence. The proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence. xx xx xx 9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are res....
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....of sub-section (2) to Section 22C of the Act that a person cannot be prosecuted and punished merely because of their status or position as a director, manager, secretary or any other officer, unless the offence in question was committed with their consent or connivance or is attributable to any neglect on their part. The onus under sub-section (2) to Section 22C is on the prosecution and not on the person being prosecuted. 12. Unlike sub-section (2) to Section 22C, sub-section (1) conspicuously does not use the term 'director, manager, secretary or other officer of the company' to bring them within the ambit of the vicarious liability provision, albeit every person in-charge of and responsible to the company for the conduct of its business at the time of the commission of the offence in question is deemed to be additionally liable. The words 'in-charge of the company' and 'responsible to the company' are pivotal to sub-section (1). This requirement has to be satisfied for the deeming effect of sub-section (1) to apply and for rendering the person liable to be proceeded against and, on such position being proved, punished. Interpreting an identical expression used in Sections 23-....
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....uals. A director in relation to a firm means a partner in that firm. Therefore, even in the case of partners, when a firm commits an offence, the requirement of either sub-section (1) or sub-section (2) to Section 22C must be satisfied. This means that in terms of sub-section (1), the partner should be "in-charge of" and "responsible to" the firm for the conduct of its business as per the dictum in Girdhari Lal Gupta (supra). Further, as per sub-section (2), a partner may also be liable, just as a director is liable for the conduct of the business of a company, if the offence is committed with the consent or connivance of, or is attributable to any neglect on the part of the partner concerned. 14. Way back in 1982, in Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Others, 1983 (1) SCC 1 this Court had quashed criminal proceedings under the Prevention of Food Adulteration Act, 1954 against the directors of a manufacturing company at the summoning stage, observing that the presumptive assertion made in the complaint that the directors of the accused company 'as such' were in-charge of and responsible for the conduct of the business of the company at the time of sampling ....
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....efore, concluded that the directors of the company were not being prosecuted merely because of their official position but because of the assertion that they were "in-charge of and responsible for the conduct of the business at the time of commission of the offence". There was a clear averment regarding the active role played by the accused and the extent of their liability. Accordingly, restoring the order passed by the Metropolitan Magistrate by which the directors etc. were summoned for trial in accordance with the law and setting aside the order of the High Court quashing the prosecution against them, this Court has held: "3.....The relevant allegations against the accused-respondents are to be found in para 5 of the complaint which may be extracted thus: 5. That accused Ram Kishan Bajaj is the Chairman, accused R.P. Neyatia is the Managing Director and Accused 7 to 12 are the Directors of the Hindustan Sugar Mills Ltd. and were incharge of and responsible to it for the conduct of its business at the time of commission of offence. xx xx xx 5. In the instant case, a clear averment has been made regarding the active role playe....
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....verment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases." 17. The necessities of sub-section (2) to Section 22C of the Act are different from sub-section (1) to Section 22C of the Act. Vicarious liability under sub-section (2) to Section 22C can arise because of the director, manager, secretary, or other officer's personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day to day business of the company when the offence was committed. Vicarious liability is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company. 18.....
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....n charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The actual contravention was by Kamdar and Vallabhdas Thacker and any contravention by them would not fasten responsibility on the respondents. The acquittal of the respondents is, therefore, fully justified. The appeal fails and is dismissed." 20. However, this proposition was later deviated from in Sheoratan Agarwal and Another v. State of Madhya Pradesh. (1984) 4 SCC 352 This case pertained to the pari materia provision under Section 10 of the Essential Commodities Act, 1955. The court held that anyone among: the company itself; every person in-charge of and responsible to the company for the conduct of the business; or any director, manager, secretary or other officer of the company with whose consent or connivance or because of whose neglect offence had been committed, could be prosecuted alone. However, the person-in-charge or an officer of the company could be held guilty in that capacity only after it has ....
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....y under Section 141 of the Negotiable Instruments Act, has held: "51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted. xx xx xx 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan....
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....ty is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881. xx xx xx 13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vulnerable and accordingly we set aside the same and quash the criminal proceedings initiated by the respondent against the appellant." 25. This position was again clarified and reiterated by this Court in Himanshu v. B. Shivamurthy and Another. (2019) 3 SCC 797 The relevant portion of the judgment reads thus: "6. The judgment of the High Court has been questioned on two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, the appellant could not be prosecuted without the company being named as an accused. The cheque was issued by ....
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....on 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused." 26. Applying the same proposition of law as laid down in Aneeta Hada (supra), this Court in Hindustan Unilever Limited v. State of Madhya Pradesh (2020) 10 SCC 751 applying pari materia provision in Prevention of Food Adulteration Act, 1954, held that: "23. Clause (a) of sub-section (1) of Section 17 of the Act makes the person nominated to be in charge....
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....hy the reply was deficient or indicate even briefly as to the nature of activity and involvement of the Company's workers at the ATM site of the State Bank of India mandating compliance at the site in question. We are not ruling on merits, albeit highlighting the complaint being bereft and silent on these aspects and whether the authorities considered the legal provisions in the context of the factual background before initiating prosecution. 29. The authorities bestowed with the duty to confirm compliance are often empowered to take stringent including penal action to ensure observance and check defiance. There cannot also be any quarrel on the need to enforce obedience of the rules as the beneficial legislation protects the worker's basic right to receive minimum wages. The rulebook makes sure that the workers are made aware of their rights and paid their dues as per law without unnecessary disputes or allegations as to absence, overtime payment, deductions, etc. 30. At the same time, initiation of prosecution has adverse and harsh consequences for the persons named as accused. In Directorate of Revenue and Another v. Mohammed Nisar Holia, 2008 (2) SCC 370 this Court ex....
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....nd honest belief, and be firmly unforgiving in cases of deceitful and mendacious conduct. Sometimes legal provisions are worded in great detail to give an expansive reach given the variables and complexities involved, and also to avoid omission and check subterfuges. However, legal meaning of the provision is not determined in abstract, but only when applied to the relevant facts of the case See Bennion On Statutory Interpretation, Sixth Edition, Part VI at Page No. 371. Therefore, it is necessary that the discretion conferred on the authorities is applied fairly and judiciously avoiding specious, unanticipated or unreasonable results. The intent, objective and purpose of the enactment should guide the exercise of discretion, as the presumption is that the makers did not anticipate anomalous or unworkable consequences. The intention should not be to target and penalise an unintentional defaulter who is in essence law-abiding. 31. There are a number of decisions of this Court in which, with reference to the importance of the summoning order, it has been emphasised that the initiation of prosecution and summoning of an accused to stand trial has serious consequences See - Pepsi Fo....