The Supreme Court in Ravindranatha Bajpe Versus Mangalore Special Economic Zone Ltd. & Others Etc.¹ recently had the opportunity to once again deal with the liability of Directors of an Accused Company under the Indian Penal Code, 1860 and reiterated that they cannot be held vicariously liable without any specific role attributed to them.

Facts

• The Appellant had filed a private complaint against 13 Accused in the Court of the Learned Judicial Magistrate, First Class, Mangalore alleging that they conspired and with common intention, criminally intimidated the Appellant and committed criminal breach of trust, cheating, mischief and criminal trespass.
• The Appellant alleged that he is the absolute owner and in possession and enjoyment of immovable properties which had a stone wall as a boundary. The scheduled properties are abutting Mangalore-Bajpe Old Airport Road and there were valuable trees on the properties.
• It was contended that the Accused No.1 is a Company incorporated under the Companies Act, Accused No. 2 the Chairman, Accused No. 3 the Managing Director, Accused No. 4 the Deputy General Manager and Accused No. 5 was the planner and executor of the project work of Accused No. 1.
• It was stated that Accused No. 6 is also a Company incorporated under Companies Act. Accused No. 7 was its chairman, Accused No 8 was the Executive Director, Accused No. 9 was the Site supervisor of Accused No.6, Accused No.10 was the sub-contractor under Accused No.6 and Accused Nos. 11 to 13 were the employees of Accused No.10.
• It was contended by the Appellant that Accused No.1 intended to lay water pipeline by the side of Mangalore-Bajpe Old Airport Road abutting the scheduled properties. In that regard, he had obtained permission from the Department of Public Works, Mangalore.
• Accused No.2 on behalf of Accused No.1 appointed Accused No.6 as a contractor for execution of the said project of laying the water pipe line.
• Accused No. 6 in turn authorized Accused Nos. 7 and 8 to execute and oversee the said work.
• They in turn had appointed Accused No. 9 as site supervisor and the Accused No. 10 being the sub-contractor engaged Accused Nos. 11 to 13 as labourers.
• Accused Nos. 4 and 5 were entrusted the work of supervision and overseeing the pipeline works carried out by Accused Nos. 6, 7 and 8 through Accused Nos. 9 and 10 to 13. Accused Nos. 6 to 8 had put into service heavy machineries and excavators and their vehicles for carrying out the work.
• It was contended that Accused Nos. 2 to 5 and 7 to 13 had conspired with common intention to lay the pipeline beneath the properties belonging to the Appellant without any lawful authority and right whatsoever. In furtherance thereof, they had trespassed over the properties and demolished the compound wall. They had cut and destroyed 100 valuable trees and laid pipeline beneath the schedule properties and caused pecuniary loss of more than Rs. 27 Lakhs to the Appellant. Thus, it was contended that all the Accused are jointly and severally liable to make good the loss to the complainant.
• Basis these facts, the Learned Judicial Magistrate, First Class, Mangalore issued process and summoned all the Accused for an offence punishable under Sections 427, 447, 506 and 120B read with Section 34 IPC.

Background

• Feeling aggrieved and dissatisfied with the summoning order passed by the Learned Judicial Magistrate, First Class, Mangalore, Accused Nos. 1 to 9 approached the Hon'ble Sessions Court which was pleased to quash and set aside the issue of summons order as against Accused Nos. 1 to 8.
• The Appellant challenged the Revision Order before the Hon'ble High Court which upheld the Order passed by the Learned Sessions Court. Hence, the present appeal by the original complainant.

Held

• It was not even the case on behalf of the Appellant that at the time when the compound wall was demolished and trees were cut, Accused Nos. 2 to 5 and 7 and 8 were present. Except for the bald statement that Accused Nos. 2 to 5 and 7 and 8 have conspired with common intention to lay the pipeline within the schedule properties belonging to the Appellant, without any lawful authority and right whatsoever and in furtherance they have committed trespass into the schedule properties of the Appellant and demolished the compound wall, there are no other allegations that at that time that they were present.
• There are no further allegations that at the command of Accused Nos. 2 to 5 and 7 and 8, the demolition of the compound wall has taken place. All of them are arrayed as Accused as Chairman, Managing Director, Deputy General Manager, Planner & Executor, Chairman and Executive Director respectively. In absence of any specific allegations and the specific role attributed to them, the Learned Magistrate was not justified in issuing process against Accused Nos. 1 to 8 for the offences punishable under Sections 427, 447, 506 and 120B read with Section 34 of the Indian Penal Code, 1860.
• Placing reliance on the case of Sunil Bharti Mittal, the Supreme Court reiterated as under:
  • "(iii) Circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an accused person
    
    42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
    
    43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
• The Indian Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the company. The Learned Magistrate failed to satisfy himself with the question as to whether the complaint, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the Respondents herein were personally liable for any offence.
• The Learned Magistrate has to record his satisfaction about a prima facie case against the Accused who are Directors of a company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them.
• Merely because they are Chairman, Managing Director/Executive Director and/or Deputy General Manager and/or Planner/Supervisor of Accused Companies, without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as Accused, more particularly they cannot be held vicariously liable for the offences committed by the Accused companies under the Indian Penal Code, 1860.

By - Lakshmi Raman