Criminal revision seeking quashing of proceedings in a fraud case where a former director of a company is charged. The court held that vicarious liability cannot be imputed to directors without specific statutory provision and quashed proceedings against the petitioner.
The proceeding in G.R. Case no. 4525 of 2011 qua petitioner Lav Jhingan is quashed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT AT CALCUTTA (CRIMINAL REVISIONAL JURISDICTION)
PRESENT:
THE HON’BLE JUSTICE SIDDHARTHA ROY CHOWDHURY
CRR 415 of 2012
LAV JHINGAN
VS.
THE STATE OF WEST BENGAL & ANR.
| For the Petitioner | : Mr. Sandipan Ganguly, Sr. Adv. Mr. Sourav Chatterjee, Adv. Mr. Debopratim Guha, Adv. |
|---|---|
| For the State | : Mr. Narayan Prasad Agarwal, Adv. Mr. Pratick Bose, Adv. |
| Hearing concluded on | : 22ndSeptember, 2023 |
| Judgement on | : 13thOctober, 2023 |
Siddhartha Roy Chowdhury, J.:
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Limited a subsidiary of M/s Caritt Moran and Company Private Limited. At the time of retirement of the petitioner and other coemployees from M/s Caritt Moran and Company Private Limited, the accused persons enticed them to deposit their terminal benefit which the employees received after retirement on superannuation, with M/s TSAI Enterprises Private Limited. They were given to understand that the said amount would fetch 18% interest per annum which would be much higher than any other deposit and the petitioner and other coemployees would be at liberty to withdraw the money so deposited, whenever they wished to withdraw the deposit.
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“16. The Penal Code, save and except some provisions specifically providing therefor, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence.”
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Metropolitan Magistrate failed to appreciate the fact that the provision of Section 154(1) and 154(2) were not complied with. According to Mr. Ganguly, the proceeding is manifestation of abuse of process of law.
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Code, save and except same provision specifically providing therefor, does not contemplate any vicarious liability. If company commits any offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company and it would be more so, when the allegation is of a criminal conspiracy. But when the company is an offender vicarious liability of the directors cannot be imputed automatically in the absence of any statutory provision to this effect. In this regard we can rely upon the judgement of Hon’ble Apex Court in Sunil BHARTI MITTAL VS. CENTRAL BUREAU OF INVESTIGATION reported in (2015) 4 SCC 609 wherein it is held :-
“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. xxxx
44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada (supra), the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is,
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therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction namely where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.”
(SIDDHARTHA ROY CHOWDHURY, J.)
3 issues framed by the court
Whether criminal proceedings should be quashed on the ground of abuse of process of law due to lack of prosecutible vicarious liability of a former director.
Whether vicarious liability can be imputed to the director of a company for offences committed by a corporate entity in absence of specific statutory provision.
Whether the charge sheet against the director is maintainable when the company is the accused and not the director.
Colour shows how this judgement treated each authority
S.K. Alagh vs. State of U.P. & Ors.Referred¶19
S.K. ALAGH VS. STATE OF U.P. & ORS. (2008) 5 SCC 662 · Who else cites this
Sunil Bharti Mittal vs. Central Bureau of InvestigationReferred¶28
Sunil BHARTI MITTAL VS. CENTRAL BUREAU OF INVESTIGATION (2015) 4 SCC 609 · Who else cites this
3 provisions across 2 enactments
Lav Jhingan
The State of West Bengal
Siddhartha Roy Chowdhury
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
