TaxTMI 
TaxTMI 
2016 (7) TMI 1705
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....Prabhat Agri Biotech Limited Shri Murali Krishnan, Authorised Representative for Pravardhan Seeds Private Limited Shri P. Shiva Rao, Advocate alongwith Shri M. Tulasirah, A.O. for Department of Agriculture and Cooperatives, Government of Telangana Shri Vaibhav Gaggar, Advocate alongwith Ms. Neha Mishra, Advocate, Shri Saksham Daingra, Advocate, Shri Nirawank Kollipara, G.C. Member and Shri Kalyan B. Goswani, E.D. for National Seeds Association of India Shri Ramji Srinivasan, Senior Advocate alongwith Shri Rajshekhar Rao, Advocate, Shri Naval Satarawala Chopra, Advocate, Shri Aman Singh Sethi, Advocate, Ms. Nitika Dwivedi, Advocate and Shri Tushar, Advocate for Opposite Party No. 1 and Opposite Party No. 2 Shri Abdullah Hussain, Advocate alongwith Ms. Kanika Chowdhary Nayar, Advocate for Opposite Party No. 3 Shri Anandh Venkataraman, Advocate alongwith Ms. Smitha Murthy, Authorised Representative (Legal) and Shri Sharad Kumar, Authorised Representative (Legal) for Opposite Party No. 4 ORDER 1. By this common order, the Commission proposes to dispose of the six applications listed hereunder moved by the different parties, in Reference Cases No. 02/ 2015 ....
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.... matter and to complete the investigation within a period of 60 days from the date of receipt of this order. In case, the DG finds that the OPs have acted in contravention of the provisions of Act, the DG shall also investigate the role of the officials/persons who at the time of such contravention were in-charge of and responsible for the conduct of their business." (emphasis added) 3. By virtue of these applications, the Applicants (the Opposite Parties in the cases) seek to challenge the directions of the Commission to investigate the role of the officers/ persons in-charge of the company, which has been underlined above; in view of the subsequent judgement of the Hon'ble Competition Appellate Tribunal (the Tribunal) in A.N. Mohana Kurup and Others vs. Competition Commission of India and Others, primarily on the ground that it was not permissible for the Commission to issue any directions to the DG to look into the role of the persons in-charge of and responsible for the conduct of business of the OP companies at this stage before returning the finding of contravention against the OPs as envisaged under Section 27 read with Section 48 of the Act. 4. The Applicants have tri....
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....nsequent orders being passed; and f) Once a finding of contravention, as mentioned above, is recorded by this Hon'ble Commission, against a company, this Hon'ble Commission may proceed against relevant officers of the company under Section 48 of the Competition Act. However, in the present case, proceedings have been commenced against individuals pending the conclusion of proceedings detailed above, which is ultra vires the powers vested in the Hon'ble Commission and the DG and will gravely prejudice the interest of the Applicant." 5. Shri Ramji Srinivasan, learned Senior Counsel for the Applicants urges that if the DG investigates the roles of the individuals in the absence of a finding of contravention against the company, the same would render the words "shall be liable to be proceeded against", as used in Section 48 of the Act redundant and otiose. 6. The learned Senior Counsel, referring to the judgment of the Hon'ble Tribunal in A.N. Mohana Kurup (supra) has urged that the Hon'ble Tribunal has held that the direction of the Commission to investigate the role of the persons who were in-charge of and responsible for the conduct of business of the company, at the ....
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....s are equally complicit in the practices being carried on and the decisions being taken by Respondent No. 5, which were found to be contrary to the provisions of the Act. This exercise was ex facie contrary to the plain language of Section 48 of the Act." 7. The learned Senior Counsel urges that it is now well settled that vicarious liability of a person in-charge of and responsible for the conduct of business of a company can be fastened only when the company is first prosecuted and found to have contravened the provisions of the relevant law. The learned Senior Counsel relies upon the judgment in Aneeta Hada vs. M/s Godfather Travels and Tours Private Limited (2012) 5 SCC 661 to buttress his argument that proof of contravention of a particular statute by a company is a condition precedent to attract vicarious liability of the person in-charge of and responsible for the conduct of business of the company. He refers to Para 42 of the report wherein it was observed as under: "42. ... Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability ....
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....s a condition precedent. It is contended that however, for violation of the various statutory provisions under the above referred Acts also containing similar provisions for vicarious liability of the officers of the Company, the prosecution of the company as well as of the officer sought to be made vicariously liable may be carried out simultaneously and the order of acquittal or conviction against them, whatsoever, as the case may be, may also passed at the same time. 10. Mr. Vaibhav Gaggar, the learned counsel for the non-Applicants relies on the order dated 26.02.2010 of the Hon'ble Delhi High Court in Pran Mehra vs. Competition Commission of India and Others (Writ Petitions No. 6258/ 2014, 6259/ 2014 and 6669/ 2014) to urge that the contention raised by the Applicants in the instant applications that the prosecution against an officer of the company can only be initiated after a finding of contravention is returned against the company is incorrect and the same was negated by the Delhi High Court in the relied upon case by holding that there cannot be two separate proceedings in respect of the company and its key persons. 11. The learned counsel for the non-Applicants has....
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....r, manager, secretary or other officer shall also be deemed to be guilty of that contravention and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section,- a) "company" means a body corporate and includes a firm or other association of individuals; and b) "director", in relation to a firm, means a partner in the firm." 14. A plain reading of the above quoted Section clearly shows that a company, upon whose Directors vicarious liability can be fastened includes a firm as well as any other association of individuals. Similarly, it is also clear that a Director in relation to such firm means a partner in the firm. 15. Various statutes under Indian law, as mentioned in Para 9 hereinbefore, and numerous other Acts have pari materia provisions in respect of offences by companies imposing vicarious liability for the acts of the company upon its Directors and other officers occupying key managerial positions. Similar provision is also there under Section 17 of the Prevention of Food Adulteration Act, 1954 with only a slight difference being there, that in case where a person has been expressly nominat....
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.... Steel Controller of Rs. 250/- per tonne. The act of sale by the company amounted to violation of Sections 6 and 8 of the Essential Commodities Act, 1955. The Magistrate convicted the two Respondents while placing reliance on Section 10 of the Essential Commodities Act, 1955. On appeal, the two Respondents were acquitted by the Hon'ble Madras High Court. On further appeal, the Hon'ble Supreme Court laid down that the liability of the person in-charge of and responsible for the company is binding when a contravention is by the company. However, since the company was not prosecuted at all, it was held that the Respondents could not be fastened with the liability. 17. Subsequently in Sheoratan Agarwal and Another vs. State of Madhya Pradesh (1984) 4 SCC 352, the decision in C.V. Parekh (supra) was sought to be explained by a two judge bench of the Hon'ble Supreme Court. It was held that the company alone or the person in-charge of and responsible for the conduct of business of the company alone, may be prosecuted for the acts of the company as there is no statutory requirement that such person cannot be prosecuted unless the company is also arraigned as an accused alongside him. ....
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....other hand, the Commission has perused a number of judgments under various statutes where the company and its officer in-charge have been simultaneously prosecuted and convicted/ acquitted. In fact, the same was also clearly spelt out in Para 58 of Aneeta Hada (Second Case) extracted above. 22. In Vasu Tech Limited and Others vs. Ratna Commercial Enterprises Limited (2009) 160 DLT 591, the Directors, who were in-charge of and responsible for the conduct of the business of the company were prosecuted under Section 138 of Negotiable Instruments Act, 1881 read with Section 420 of the Indian Penal Code, 1860 by virtue of provisions under Section 141 of the Act along with the company. The directors moved the Hon'ble Delhi High Court under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C.) for quashing of the summoning orders issued against them. However, their prayer was declined and their petition dismissed. In other words, prosecution of the Directors, the persons in-charge of and responsible for the conduct of the business of the company simultaneously along with the company was upheld. 23. Further, in Dilip S. Dhanukar vs. Air Force Group Insurance Society (2007) IL....
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....eturned against the company VeriFone India Sales Private Limited. The Hon'ble Delhi High Court negated the said contention holding that there cannot be two separate proceedings, one in respect of the company VeriFone India Sales Private Limited and other against its key persons. Relying on Aneeta Hada (Second Case), the Hon'ble Delhi High Court are held as under: "6.... I am in agreement with the submissions of Mr. Chandhiok that there cannot be two separate proceedings in respect of the company (i.e. VeriFone) and the key-persons as the scheme of the Act, to my mind, does not contemplate such a procedure. The procedure suggested by Mr. Ramji Srinivasan is both inefficacious and inexpedient. As in every such matter, including the proceedings under Section 138 of the Negotiable Instruments Act, 1881 (in short N.I. Act), a procedure of the kind suggested is not contemplated. The judgment of the Supreme Court in the case Aneeta Hada dealt with proceedings under Section 138 of the N.I. Act. The judgment does not deal with issue at hand, which is whether adjudication in two parts, as contended by Mr. Ramji Srinivasan, is permissible. The judgment, in my opinion is distinguishab....
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....o had nothing to do with the matter need not be roped in. 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. 8. The officers responsible for conducting the affairs of companies are generally referred to as directors, managers, secretaries, managing directors, etc. What is required to be considered is: Is it sufficient to simply state in a complaint that a particular person was a director of the company at the time the offence was committed and nothing more is required to be said. ...What emerg....
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.... analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: "Who, at the time the offence was committed, was in-charge of, and 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, etc." What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in-charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in-charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in-charge of an....
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....hout saying that when an inquiry is held under Section 26 of the Act, the finding of contravention has to be first recorded against the company and if the company is held liable, then the question of who was the officer in-charge of and responsible for the conduct of the business of the company at the relevant time and his liability will be gone into; however, in the same order. The Commission is therefore, unable to agree with the contention raised by Shri Ramji Srinivasan, learned Senior Counsel for the Applicants that the Commission has to first return a finding of contravention under Section 27 of the Act against the company and then only can the Commission again refer the matter to the DG to investigate as to who are the officers in-charge of and responsible for the conduct of business of the company or with whose connivance or consent the contravention was committed. 31. In view of this, with due reverence to the Hon'ble Tribunal, its order in M/s Alkem Laboratories Limited vs. Competition Commission of India and Another (Appeal No. 09/ 2016) cannot be taken as a precedent. 32. The above practice, the precedence and the jurisprudence so far are based on sound reasoning.....
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....ition Commission of India vs. Steel Authority of India Limited, (2010) 10 SCC 744). 34. If the proposition canvassed by the Applicants that a company is to be first held guilty of contravention of provisions of Sections 3 or 4, or both, of the Act, and only then investigation can be initiated against the persons who were in-charge of and responsible for the conduct of the business of the company at the relevant time, is accepted, it would render such person defenseless. This is most likely scenario, if the company is handicapped to defend itself. The company could be non-existent or could have become defunct. Or, the person who was in the know of things and had a role in a particular conduct of the company at the relevant time might have left the company. Or, the person who has in possession some material which demonstrates the non-contravention of the provisions of the Act by the company might be posted in some other department now and not involved in defending the company. If the company fails to defend itself properly for whatsoever reason, and as a consequence, it is found guilty, the person concerned would be left with no option but to suffer consequences under Section 48 o....