# DAYLE DE'SOUZA v. GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF LABOUR COMMISSIONER (C) AND ANOTHER

- **Citation:** [2021] 11 S.C.R. 511
- **Court:** Supreme Court of India
- **Decided:** 2021-10-29
- **Case number:** Criminal Appeal No. 1319 of 2021
- **Bench:** R. Subhash Reddy, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dayle-de-souza-v-government-of-india-through-deputy-chief-labour-commissioner-c-34762
- **Pages:** 30

## Headnote

Minimum Wages Act, 1948: s.22A, s.22C(1) and (2) - Appellant
is director of WS Company which had entered into an agreement
for servicing of ATMs with another company - The latter company
had entered into agreement with State Bank for maintenance and
upkeep of all their ATMs - A notice was issued to the appellant and
the head of WS company (accused no.2) by Labour Enforcement
Officer alleging non-compliance of provisions of 1948 Act - WS
company responded that they neither manage the ATMs nor work
at the ATMs - Criminal complaints filed against the appellant and
the head of WS company under s.22A - WS Company was not enlisted
as an accused in the complaint and was not summoned to stand
trial - Appellant-director filed s.482 CrPC petition which was
dismissed by High Court - On appeal, held: s.22A of the Act 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..."- Subsection (1) to s.22C states that where an offence is committed by a
company, every person who at the time the offence was committed
was in-charge of and was responsible to the company for the conduct
of the business, as well as the company itself shall be deemed to be
guilty of the offence - By necessary implication, it follows that a
person who do not bear out the requirements is not vicariously liable
under s.22C(1) of the Act - The proviso, which is in the nature of
an exception, states that a person who is liable under sub-section
(1) shall not be punished if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to
prevent the commission of such offence - The onus to satisfy the
requirements to take benefit of the proviso is on the accused, but it
does not displace or extricate the initial onus and burden on the
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prosecution to first establish the requirements of sub-section (1) to
s.22C of the Act - Sub-section (2) states that notwithstanding
anything contained in sub-section (1), where any offence under the
Act has been committed by a company, and it is proved that such
offence has been committed with the consent or connivance of, or
is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, then such director,
manager, secretary or other officer of the company shall also be
deemed to be guilty of that offence and shall be liable to be
proceeded against - 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 - The
necessities of sub-section (2) to s.22C of the Act are different from
sub-section (1) to s.22C of the Act - Vicarious liability under subsection (2) to s.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 - In the factual context of this case, it is crystal
clear that the complaint does not satisfy the mandate of sub-section
(1) to s.22C of the Act as there are no assertions or averments that
the appellant was in-charge of and responsible to WS company -
The proviso to sub-section (1) in the present case would not apply -
It is an exception that would be applicable and come into operation
only when the conditions of sub-section (1) to s.2

## Text

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[2021] 11 S.C.R. 511
511
DAYLE DE'SOUZA
v.
GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANOTHER
(Criminal Appeal No. 1319 of 2021)
OCTOBER 29, 2021
[R. SUBHASH REDDY AND SANJIV KHANNA, JJ.]
Minimum Wages Act, 1948: s.22A, s.22C(1) and (2) - Appellant
is director of WS Company which had entered into an agreement
for servicing of ATMs with another company - The latter company
had entered into agreement with State Bank for maintenance and
upkeep of all their ATMs - A notice was issued to the appellant and
the head of WS company (accused no.2) by Labour Enforcement
Officer alleging non-compliance of provisions of 1948 Act - WS
company responded that they neither manage the ATMs nor work
at the ATMs - Criminal complaints filed against the appellant and
the head of WS company under s.22A - WS Company was not enlisted
as an accused in the complaint and was not summoned to stand
trial - Appellant-director filed s.482 CrPC petition which was
dismissed by High Court - On appeal, held: s.22A of the Act 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..."- Subsection (1) to s.22C states that where an offence is committed by a
company, every person who at the time the offence was committed
was in-charge of and was responsible to the company for the conduct
of the business, as well as the company itself shall be deemed to be
guilty of the offence - By necessary implication, it follows that a
person who do not bear out the requirements is not vicariously liable
under s.22C(1) of the Act - The proviso, which is in the nature of
an exception, states that a person who is liable under sub-section
(1) shall not be punished if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to
prevent the commission of such offence - The onus to satisfy the
requirements to take benefit of the proviso is on the accused, but it
does not displace or extricate the initial onus and burden on the
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prosecution to first establish the requirements of sub-section (1) to
s.22C of the Act - Sub-section (2) states that notwithstanding
anything contained in sub-section (1), where any offence under the
Act has been committed by a company, and it is proved that such
offence has been committed with the consent or connivance of, or
is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, then such director,
manager, secretary or other officer of the company shall also be
deemed to be guilty of that offence and shall be liable to be
proceeded against - 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 - The
necessities of sub-section (2) to s.22C of the Act are different from
sub-section (1) to s.22C of the Act - Vicarious liability under subsection (2) to s.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 - In the factual context of this case, it is crystal
clear that the complaint does not satisfy the mandate of sub-section
(1) to s.22C of the Act as there are no assertions or averments that
the appellant was in-charge of and responsible to WS company -
The proviso to sub-section (1) in the present case would not apply -
It is an exception that would be applicable and come into operation
only when the conditions of sub-section (1) to s.22C are satisfied -
In the absence of any specific averment, the prosecution in the
instant case does not and cannot rely on s.22C(2) of the Act - Thus,
proceedings initiated against the appellant and also against accused
no.2 are quashed.
Liability: Vicarious liability - A company being a juristic
person cannot be imprisoned, but it can be subjected to a fine,
which in itself is a punishment - Every punishment has adverse
consequences, and therefore, prosecution of the company is
mandatory - Minimum Wages Act, 1948.
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Allowing the appeal, the Court
HELD: 1. Section 22A of the Act, the provision 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". Sub-section (1) to Section 22C
states that where an offence is committed by a company, every
person who at the time the offence was committed was in-charge
of and was responsible to the company for the conduct of the
business, as well as the company itself shall be deemed to be
guilty of the offence. By necessary implication, it follows that a
person who do not bear out the requirements is not vicariously
liable under Section 22C(1) of the Act. The proviso, which is in
the nature of an exception, states that a person who is liable under
sub-section (1) shall not be punished if he proves that the offence
was committed without his knowledge or that he had exercised
all due diligence to prevent the commission of such offence. The
onus to satisfy the requirements to take benefit of the proviso is
on the accused, but it does not displace or extricate the initial
onus and burden on the prosecution to first establish the
requirements of sub-section (1) to Section 22C of the Act. The
proviso is to give immunity to a person who is vicariously liable
under sub-section (1) to section 22C of the Act. The proviso being
an exception cannot be made a justification or a ground to launch
and initiate prosecution without the satisfaction of conditions
under sub-section (1) of Section 22C of the Act. The proviso that
places the onus to prove the exception on the accused, does not
reverse the onus under the main provision, namely Section
22C(1) of the Act, which remains on the prosecution and not on
the person being prosecuted. [Paras 8, 10][521-B-C; 522-C-F;
523-G-H; 524-A]
S.M.S. Pharmaceuticals Ltd.v. Neeta Bhalla and
Another (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371;
Aneeta Hada v. Godfather Travels and Tours Private
Limited (2012) 5 SCC 661 : [2012] 5 SCR 503 - relied
on.
DAYLE DE'SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANR.
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2. Sub-section (2) states that notwithstanding anything
contained in sub-section (1), where any offence under the Act
has been committed by a company, and it is proved that such
offence has been committed with the consent or connivance of,
or is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, then such
director, manager, secretary or other officer of the company shall
also be deemed to be guilty of that offence and shall be liable to
be proceeded against and punished accordingly. Without much
ado, it is clear from a reading 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.
[Para 11][524-B-D]
3. 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.
[Para 12][524-E-F]
Girdhari Lal Gupta v. D.H. Mehta and Another 1971
(3) SCC 189: [1971] 3 SCR 748 : [1971] 3 SCR 748;
State of Karnataka v. Pratap Chand and Others. (1981)
2 SCC 335 : [1981] 3 SCR 200; Municipal Corporation
of Delhi v. Purshotam Dass Jhunjunwala and Others
(1983) 1 SCC 9 : [ 1983] 1 SCR 895; National Small
Industries Corporation Limited v. Harmeet Singh Paintal
and Another (2010) 3 SCC 330 : [2010] 2 SCR 805 -
relied on.
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Municipal Corporation of Delhi v. Ram Kishan Rohtagi
and Others 1983 (1) SCC 1 : [1983] 1 SCR 884 -
referred to.
4. 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.
[Para 17][529-C-D]
5. In the factual context present, it is crystal clear that the
complaint does not satisfy the mandate of sub-section (1) to Section
22C of the Act as there are no assertions or averments that the
appellant before this Court was in-charge of and responsible to
WS company in the manner as interpreted by this Court in the
cases mentioned above. The proviso to sub-section (1) in this
case would not apply. It is an exception that would be applicable
and come into operation only when the conditions of sub-section
(1) to Section 22C are satisfied. Notably, in the absence of any
specific averment, the prosecution in the present case does not
and cannot rely on Section 22C(2) of the Act. [Para 18][529-E-G]
State of Madras v. C.V. Parekh and Another (1970) 3
SCC 491; Sharad Kumar Sanghi v. Sangita Rane (2015)
12 SCC 781 : [2015] 2 SCR 145; Himanshu v. B.
Shivamurthy and Another (2019) 3 SCC 797 : [2019] 1
SCR 991 - relied on.
Sheoratan Agarwal and Another v. State of Madhya
Pradesh (1984) 4 SCC 352 : [1985] 1 SCR 719; Anil
Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5
Suppl. SCR 6; Anil Gupta v. Star India Private Limited
and Another (2014) 10 SCC 373 : [2014] 8 SCR 183;
Hindustan Unilever Limited v. State of Madhya Pradesh
(2020) 10 SCC 751 - referred to.
DAYLE DE'SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANR.
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6. A company being a juristic person cannot be imprisoned,
but it can be subjected to a fine, which in itself is a punishment.
Every punishment has adverse consequences, and therefore,
prosecution of the company is mandatory. The exception would
possibly be when the company itself has ceased to exist or cannot
be prosecuted due to a statutory bar. However, such exceptions
are of no relevance in the present case. Thus, the present
prosecution must fail for this reason as well. [Para 27][536-D-E]
7. The complaint refers to the violation as certain notices
were not displayed and certain registers and forms were not kept
at the 'worksite'. A response to the show-cause-cum-compliance
notice in the form of a short reply states that the Company neither
manages the ATM nor works at the ATM and that the ATM site
was managed by the respective banks and, therefore, the volitional
as alleged do not apply to them. The complaint does not state
why 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.
[Para 28][536-F-H; 537-A-B]
8. 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. [Para 29][537-B-C]
Directorate of Revenue and Another v. Mohammed
Nisar Holia 2008 (2) SCC 370 : [2007] 12 SCR 906 -
referred to.
9. Almost every statute confer operational power to enforce
and penalise, which power is to be exercised consistently from
case to case, but adapted to facts of an individual case. The
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passage from Hindustan Steel Ltd. highlights the rule that the
discretion that vests with the prosecuting agencies is paired with
the duty to be thoughtful in cases of technical, venial breaches
and genuine and 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. 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.
[Para 30][538-C-F]
M/s. Hindustan Steel Ltd. v. State of Orrisa 1969 (2)
SCC 627 : [1970] 1 SCR 753 - relied on.
10. The initiation of prosecution and summoning of an
accused to stand trial has serious consequences. They extend
from monetary loss to humiliation and disrepute in society,
sacrifice of time and effort to prepare defence and anxiety of
uncertain times. Criminal law should not be set into motion as a
matter of course or without adequate and necessary investigation
of facts on mere suspicion, or when the violation of law is doubtful.
It is the duty and responsibility of the public officer to proceed
responsibly and ascertain the true and correct facts. Execution
of law without appropriate acquaintance with legal provisions and
comprehensive sense of their application may result in an innocent
being prosecuted. [Para 31][538-G; 539-A-B]
11. Equally, it is the court's duty not to issue summons in a
mechanical and routine manner. If done so, the entire purpose of
laying down a detailed procedure under Chapter XV of the 1973
Code gets frustrated. Under the proviso (a) to Section 200 of the
1973 Code, there may lie an exemption from recording
DAYLE DE'SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANR.
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pre-summoning evidence when a private complaint is filed by a
public servant in discharge of his official duties; however, it is
the duty of the Magistrate to apply his mind to see whether on
the basis of the allegations made and the evidence, a prima facie
case for taking cognizance and summoning the accused is made
out or not. [Para 32][539-C-D]
National Small Industries Corporation Limited v. State
(NCT of Delhi) and Others (2009) 1 SCC 407 : [2008]
16 SCR 83 - relied on.
12. The issue of process resulting in summons is a judicial
process that carries with it a sanctity and a promise of legal
propriety. [Para 32][539-H]
Case Law Reference
[2005] 3 Suppl. SCR 371
relied on
Para10
[2012] 5 SCR 503
relied on
Para 10
[1971] 3 SCR 748
relied on
Para 12
[1981] 3 SCR 200
relied on
Para 13
[1983] 1 SCR 884
referred to
Para 14
[1983] 1 SCR 895
relied on
Para 15
[2010] 2 SCR 805
relied on
Para 16
(1970) 3 SCC 491
relied on
Para 19
[1985] 1 SCR 719
referred to
Para 20
[1999] 5 Suppl. SCR 6
referred to
Para 21
[2012] 5 SCR 503
referred to
Para 22
[2014] 8 SCR 183
referred to
Para 23
[2015] 2 SCR 145
relied on
Para 24
[2019] 1 SCR 991
relied on
Para 25
(2020) 10 SCC 751
referred to
Para 26
[2007] 12 SCR 906
referred to
Para 30
[1970] 1 SCR 753
relied on
Para 30
[2008] 16 SCR 83
relied on
Para 32
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CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No.1319 of 2021.
From the Judgment and Order dated 20.01.2020 of the High Court
of Madhya Pradesh at Jabalpur in M. Cr. C. No.846 of 2016.
Siddharth Luthra, Sr. Adv., Samsher Garud, Sandeep Sudhakar
Deshmukh, Ms. Subhangi Jain, Pankaj Singhal, Advs. for the Appellant.
Vikramjit Banerjee, ASG, Subhranshu Padhi, P. V. Yogeswaran,
Amrish Kumar, Advs. for the Respondents.
The Judgment of the Court was delivered by
SANJIV KHANNA, J.
1. Leave granted.
2. The appellant, Dayle De'Souza, is a director of M/s. Writer
Safeguard Pvt. Ltd. (hereinafter referred to as 'the Company'). In 2009,
the Company had entered into an agreement titled "Agreement for
Servicing and Replenishment of Automated Teller Machines" with M/s.
NCR Corporation India Private Ltd., the latter having earlier entered
into an agreement with the State Bank of India for maintenance and
upkeep of the State Bank of India's ATMs. On 19th February 2014, the
Labour Enforcement Officer (Central) had inspected the State Bank of
India's ATM at AST, Komal Chand Petrol Pump, Civil Lines, Sagar,
Madhya Pradesh (hereinafter referred to as 'the ATM'). On 06th March
2014, 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
DAYLE DE'SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANR.
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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 submitted a detailed representation to the
Deputy Chief Labour Commissioner (Central), Marhatal, Jabalpur,
Madhya Pradesh denying the contents of the notice dated 06th March
2014.
4. Thereafter, on 01st August 2015, the appellant filed a petition
M.Cr.C. No. 846/2016 under Section 482 of the Code of Criminal
Procedure, 1973 ('the Code', for short) before the High Court of Madhya
Pradesh at its Principal Seat at Jabalpur for quashing the complaint in
Criminal Case No. 3398/2014. By the impugned order in M.Cr.C. No.
846/2016 dated 20th January 2020, the High Court dismissed the petition
as sans merit. Hence, the present appeal.
5. Upon perusal of the complaint in question, which is placed on
record, we note that two individuals have been enlisted as accused,
namely: (i) Dayle De'Souza - the appellant before us, who as per the
cause-title is stated to be a director of M/s. Writer Safeguard Pvt. Ltd.
and resident of Writer House located in Mumbai, Maharashtra; and (ii)
Vinod Singh, who it is stated is the Madhya Pradesh head of M/s. Writer
Safeguard Pvt. Ltd. and a resident of Bhopal, Madhya Pradesh. The
Company is not enlisted as an accused in the complaint and has not been
summoned to stand trial.
6. The complaint, with reference to the two accused, in paragraph
3 states:
"(3) That the accused persons are Contractor who were getting
work of cash loading and security of cash through labours and
they are responsible for employment and payment of labours
employed in said work under said Act, who is Employer under
Part 2 (E) of the Minimum Wages Act, 1948."
It is also alleged in the complaint:
"(4) That the work of said Employer is regulated under Notification
No.- S.O. 1284 (E) dated 20.05.2009 of the Government of India
and they are Scheduled Employer under Minimum Wages Act,
1948 and Minimum Wages (Central) Rules, 1950."
7. The complaint states that the inspection on 19th February 2014
had revealed violation of Rules 21(4), 22, 25(2), 26(1) and 26(5) on
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account of failure to keep and display, as the case may be, the Fine
Register Form-1, Register Form-2, the notice of minimum wages, Rule,
and abstract of the Act, name of Inspectors with address in Hindi and
English at the worksite, overtime register, wages payment register and
attendance register at the worksite or at any adjoining place(s).
8. Section 22A of the Act, the provision 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". Subsection (2) to Section 22B, insofar as it relates to Section 22A, vide subclause (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 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 and shall be liable to
be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render
any such person liable to any punishment provided in this Act if he
proves that the offence was committed without his knowledge or
that he exercised all due diligence to prevent the commission of
such offence.
(2) Notwithstanding anything contained in sub-section (1), where
an offence under this Act has been committed by a company and
it is proved that the offence has been committed with the consent
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or connivance of, or is attributable to any neglect on the part of,
any director, manager, secretary or other officer of the company,
such director, manager, secretary or other officer of the company
shall also be deemed to be guilty of that offence and shall be liable
to be proceeded against and punished accordingly.
Explanation. - For the purposes of this section -
(a) "company" means any 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."
10. Sub-section (1) to Section 22C states that where an offence
is committed by a company, every person who at the time the offence
was committed was in-charge of and was responsible to the company
for the conduct of the business, as well as the company itself shall be
deemed to be guilty of the offence. By necessary implication, it follows
that a person who do not bear out the requirements is not vicariously
liable under Section 22C(1) of the Act. The proviso, which is in the
nature of an exception, states that a person who is liable under subsection (1) shall not be punished if he proves that the offence was
committed without his knowledge or that he had exercised all due
diligence to prevent the commission of such offence. The onus to satisfy
the requirements to take benefit of the proviso is on the accused, but it
does not displace or extricate the initial onus and burden on the prosecution
to first establish the requirements of sub-section (1) to Section 22C of
the Act. The proviso is to give immunity to a person who is vicariously
liable under sub-section (1) to section 22C of the Act. In S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and Another,1 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.
1 (2005) 8 SCC 89.
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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.
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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
responsible for the conduct of the business of the company. In
order to escape liability such persons may have to bring their case
within the proviso to Section 141(1), that is, they will have to prove
that when the offence was committed they had no knowledge of
the offence or that they exercised all due diligence to prevent the
commission of the offence."
(Emphasis added)
In Aneeta Hada v. Godfather Travels and Tours Private
Limited,2 this Court had reiterated that the proviso to general vicarious
liability under Section 141 of the Negotiable Instruments Act, 1881, applies
as an exception, by observing:
"22. On a reading of the said provision, it is plain as day that if a
person who commits the offence under Section 138 of the Act is
a company, the company as well as every person in charge of and
responsible to the company for the conduct of business of the
company at the time of commission of offence is deemed to be
guilty of the offence. The first proviso carves out under what
circumstances the criminal liability would not be fastened. Subsection (2) enlarges the criminal liability by incorporating the
concepts of connivance, negligence and consent that engulfs many
categories of officers. It is worth noting that in both the provisions,
there is a "deemed" concept of criminal liability."
(Emphasis added)
The proviso being an exception cannot be made a justification or
a ground to launch and initiate prosecution without the satisfaction of
conditions under sub-section (1) of Section 22C of the Act. The proviso
that places the onus to prove the exception on the accused, does not
2 (2012) 5 SCC 661.
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reverse the onus under the main provision, namely Section 22C(1) of the
Act, which remains on the prosecution and not on the person being
prosecuted.
11. Sub-section (2) states that notwithstanding anything contained
in sub-section (1), where any offence under the Act has been committed
by a company, and it is proved that such offence has been committed
with the consent or connivance of, or is attributable to any neglect on the
part of, any director, manager, secretary or other officer of the company,
then such director, manager, secretary or other officer of the company
shall also be deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly. Without much ado, it is
clear from a reading 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-C(1) and 23-C(2) of the Foreign Exchange Regulation Act,
1947, this Court in Girdhari Lal Gupta v. D.H. Mehta and Another,3
has held:
"6. What then does the expression "a person in-charge and
responsible for the conduct of the affairs of a company" mean? It
will be noticed that the word "company" includes a firm or other
association, and the same test must apply to a director in-charge
and a partner of a firm in-charge of a business. It seems to us that
3 1971 (3) SCC 189.
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in the context a person "in-charge" must mean that the person
should be in over-all control of the day to day business of the
company or firm. This inference follows from the wording of
Section 23-C(2). It mentions director, who may be a party to the
policy being followed by a company and yet not be in-charge of
the business of the company. Further it mentions manager, who
usually is in charge of the business but not in over-all charge.
Similarly, the other officers may be in-charge of only some part of
business.
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8. In R.K. Khandelwal v. State D.S. Mathur, J., in construing
Section 27 of the Drugs Act, 1940, a provision similar to the one
we are concerned with, observed:
"There can be directors who merely lay down the policy and
are not concerned with the day to day working of the company.
Consequently, the mere fact that the accused person is a
partner or director of the Company, shall not make him
criminally liable for the offence committed by the Company
unless the other ingredients are established which make him
criminally liable.""
Those not in overall control of the day to day business of the
company or the firm are not deemed to be constructively liable under
Section 23-C(1) of the Foreign Exchange Regulation Act, 1947.
13. This exposition on the meaning of the term 'in-charge and
responsible for' was referred to with approval in State of Karnataka v.
Pratap Chand and Others.4 This decision relates to the prosecution of
the partner of a firm under the Drugs and Cosmetics Act, 1940. The
judgment referred to the explanation to Section 34 in the said Act (which
is pari materia with the explanation in Section 22C of the Minimum
Wages Act, 1948) to observe that for the purpose of imposing liability on
the company under the said Section, a company includes a body corporate,
a firm or an association of individuals. 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
4 (1981) 2 SCC 335.
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"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,5 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 was vague. The use of the words "as such" in the complaint
indicated that the complainant had merely presumed that the directors
must be guilty because they held the office of the director. The Court
opined that such presumptive accusations against the directors without
any specific averment or criminal attribution being made in the complaint
would be insufficient. Thereafter, reference was made to Section 319 of
the Code of Criminal Procedure, 1973 which empowers the Court to
take cognisance of and proceed against a person who is not an accused
before it and try him along with others. Upholding the reasoning of the
High Court quashing the proceedings against the directors, it was
highlighted:
"12.......The main clause of the complaint which is the subjectmatter of the dispute is clause 5 which may be extracted thus:
5. That accused 3 is the Manager, of accused 2 and accused 4
to 7 are the Directors of accused 2 and as such they were
incharge of and responsible for the conduct of business of
accused 2 at the time of sampling.
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14. Reliance has been placed on the words "as such" in order to
argue that because (sic) the complaint does not attribute any
criminal responsibility to Accused 4 to 7 except that they were
incharge of and responsible for the conduct of the business of the
Company. It is true that there is no clear averment of the fact that
5 1983 (1) SCC 1.
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the Directors were really incharge of the manufacture and
responsible for the conduct of business but the words "as such"
indicate that the complainant has merely presumed that the
Directors of the Company must be guilty because they are holding
a particular office. This argument found favour with the High
Court which quashed the proceedings against the Directors as
also against the Manager, Respondent 1."
 However, the initiation of a prosecution and the summoning order
against the manager in the factual context was held to be proper.
15. In another decision by the same Bench titled Municipal
Corporation of Delhi v. Purshotam Dass Jhunjunwala and Others,6
the assertions were that the individual accused, namely the chairman,
managing director and directors of the company, were "in-charge of and
responsible to it for the conduct of its business at the time of commission
of the offence". The words "as such" were missing. This Court,
therefore, 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.
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 5. In the instant case, a clear averment has been made regarding
the active role played by the respondents and the extent of their
liability. In this view of the matter, it cannot be said that para 5 of
6 (1983) 1 SCC 9
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the complaint is vague and does not implicate Respondents 1 to
11. As to what would be the evidence against the respondents is
not a matter to be considered at this stage and would have to be
proved at the trial. We have already held that for the purpose of
quashing the proceedings only the allegations set forth in the
complaint have to be seen and nothing further."
16. The legal position has undergone further elucidation in a number
of judgments.7 However, for the present decision, we would refer to the
summarisation in National Small Industries Corporation Limited v.
Harmeet Singh Paintal and Another,8 to the following effect:
"39. From the above discussion, the following principles emerge:
(i)
The primary responsibility is on the complainant to make
specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that
every Director knows about the transaction.
(ii)
Section 141 does not make all the Directors liable for the
offence.