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Rajasthan High Court · body

2015 DIGILAW 1131 (RAJ)

Virendra Kumar v. State of Rajasthan

2015-05-25

PRASHANT KUMAR AGARWAL

body2015
Hon'ble AGARWAL, J.—Heard learned counsel for the parties. 2. The accused-petitioner has filed this Criminal Misc.Petition under Section 482 Cr.P.C. with a prayer to quash and set aside the criminal proceedings pending in the form of Criminal Case No.30/2011 in the Court of Additional Chief Judicial Magistrate No.2, Srimadhopur (District Sikar) for the offence under Section 18/54 (e) read with Section 54-D of the Rajasthan Excise Act, 1950 (hereinafter to be referred as 'the Act') to his extend and also the warrant of arrest issued for his appearance before the trial Court. 3. Brief relevant facts for the disposal of this petition are that FIR No.12/2010-2011 came to be registered at Abkari Circle, Srimadhopur against a registered company M/s HSB Agro Industries Pvt. Ltd. and others on the premise that in pursuance of the criminal conspiracy by using fake and forged export permit and other relevant documents, 40,000 bulk litre of ENA (Extra Natural Alcohol) was exported by the company and, therefore, excise duty has been evaded. After investigation charge-sheet was filed against five accused persons and investigation was kept pending against eighteen persons including the petitioner. The petitioner has been made an accused on the premise that he is one of the Directors of the aforesaid company. Vide order dated 8.10.2013, the trial Court ordered to issue warrant of arrest against the petitioner under Section 37 of the Police Act. 4. It was contended on behalf of the petitioner that although the petitioner is also one of the Directors of the company, but he is having only 0.75% shareholding in it and has attended only a few meetings of the Board of Directors of the company and petitioner was never entrusted with the control and management of the company and the petitioner is not responsible for the day to day affairs of the same and, therefore, he cannot be made an accused merely by the reason that he happens to be one of the Directors of the company. It was further submitted that it is well settled legal position that Director of a company cannot be vicariously held liable for the offence committed by the company more particularly in view of the fact that the Act does not provide for vicarious liability of the Directors of a company like many others special statutes wherein in certain circumstances Directors of the company are vicariously liable for the offence committed by the company. It was also submitted that unless there is clear and specific provision in the statute, a Director or other officer of the company cannot be made liable for the offence committed by the company. Apart from that, there must be clear allegation and specific role of the Director in the commission of the offence, if the prosecution wants to prosecute him as an accused, but in the present case neither such allegation has been made nor any specific role has been attributed to the petitioner. 5. In support of his submissions, learned counsel for the petitioner relied upon the cases of National Small Industries Corporation Limited vs. Harmeet Singh Paintal & Anr. reported in (2010) 3 SCC 330 , S.M.S.Pharmaceuticals Ltd. vs. Neeta Bhalla & Amr. reported in (2005) 8 SCC 89 , R.Kalyani vs. Janak C.Mehta & Ors. reported in (2009) 1 SCC, 516 and Maksud Saiyed vs. State of Gujarat & Ors. repoted in (2008) 5 SCC 668 . 6. On the other hand, it was submitted by the learned Public Prosecutor that after investigation it has been found that the Directors of the company including the petitioner, other officers of the company and some other private persons entered into criminal conspiracy and in pursuance of the same, several fake and forged documents were prepared and by using them, 40,000 bulk litre ENA was exported illegally and excise duty was evaded. It was further submitted that as per Sec. 54(e) of the Act, whoever, in contravention of the Act exports excisable article, is liable to be punished for the sentence prescribed in it. It was further submitted that as per Sec. 54(e) of the Act, whoever, in contravention of the Act exports excisable article, is liable to be punished for the sentence prescribed in it. According to the learned Public Prosecutor the word "whoever" includes a juristic person like a company and all its Directors also and, therefore, the petitioner cannot escape from its liability by saying that he has mere 0.75% shares in the company or he was not entrusted with the business of the company or was not involved in the day to day affairs of the same. It was also contended that each and every Director of a company is vicariously liable for the offence committed by the company. It was further submitted that the question whether the petitioner was entrusted with the business of the company or not or whether he was involved in the day to day affairs of the company is a question of fact and it can, at the most, be defence of the petitioner which can be considered and decided after trial on the basis of evidence made available on record and not at this preliminary stage of the proceedings. It was also submitted that it is well settled legal position that the discretion conferred upon the High Court u/Sec. 482 Cr.P.C. can be exercised for quashing FIR or criminal proceedings only when the allegations made, even if they are taken on their face value and accepted in their entirety, do not prima facie constitutes any offence or make out a case against the accused, but if in a case where there is sufficient evidence against the accused which may establish the charge against him, the proceedings cannot be quashed. It was further submitted that in the present case after investigation charge-sheet has already been filed, prosecution must be accorded opportunity to establish the charge and the ends of justice would be defeated if the proceedings qua the petitioner are quashed at this preliminary stage. 7. In support of his submissions, learned Public Prosecutor relied upon the case of Gunmala Sales Pvt. Ltd. vs. Anu Mehta reported in AIR SCW 6238. 8. I have considered the submissions made on behalf of the respective parties and the material made available on record as well as the relevant legal provisions and the case law relied upon on behalf of the respective parties. 9. 8. I have considered the submissions made on behalf of the respective parties and the material made available on record as well as the relevant legal provisions and the case law relied upon on behalf of the respective parties. 9. The material made available on record shows that the FIR came to be registered on the premise that the aforesaid company in pursuance of the criminal conspiracy entered with some other persons exported 40,000 bulk litre of ENA by using fake and forged export permit and other documents. During investigation evidence was collected and it was found that an application for export of 40,000 bulk litre of ENA was submitted on behalf of the company by its Production Manager-Shri Bhawani Singh Shekhawat on 29.7.2010 before the District Excise Officer, Sikar and alongwith the application some forged and fabricated documents were filed and on the basis of which the requisite export permit was issued. It was further found that on the basis of some more forged and false documents the aforesaid excisable article was exported and disposed of and the fact of forged and fabricated documents came into the knowledge of the department only when a letter was received from the Joint Commissioner (Excise) Meghalaya, Shilong. It was found that the above company was incorporated with effect from 15.7.2003 under the provisions of the Companies Act, 1956 and the present petitioner came on the Board of Directors as a Director w.e.f. 20.02.2008. Although, in the charge-sheet specific role of some of the accused has been attributed and found, but so far as the petitioner is concerned, no specific role has been attributed to him in the commission of the offence and he has been arrayed as an accused merely because he happens to be one of the Directors of the company. It is not even the case of the prosecution that the petitioner, being the Director of the Company, was entrusted with the control and management of the company and he was responsible for the day to day affairs of the company. It is not even the case of the prosecution that the petitioner, being the Director of the Company, was entrusted with the control and management of the company and he was responsible for the day to day affairs of the company. It is to be noted that one of the accused-Shri Bhagwan Singh Shekhawat was, at the relevant time, Production Manager and authorized signatory of the company and on his interrogation he stated that he acted on the instruction of one of the Directors-Shri Prakash Choudhary, Business Director-Shri Sanjay Choudhary and Managing Director of the company-Shri Lalit Kumar Sualka, but he did not name the petitioner in any manner. The main allegation against the accused is in respect of violation of clause (e) of Sec. 54 of the Act which provides that whoever in contravention of the Act or any Rule or the order made or any licence, permit or pass granted, removes any excisable article from any distillery etc. established or licenced under the Act shall be punished for the sentence provided in the provision. If for the sake of arguments, it is conceded at this stage of the proceedings that the word “whoever” includes a company also and an offence under this provision can be committed by it also, but the question is whether a Director of such a company can be made an accused and prosecuted for such an offence merely because he happens to be one of the Directors without anything more. It is an admitted fact that there is no specific provision in the Act making a Director of a company criminally vicariously liable for the act or omission of the company. 10. The legal position appears to be that a company being a juristic person, all its deeds and functions are the result of acts of others. The officers responsible for conducting the affairs of companies are generally referred to as Directors, Managers, Secretaries, Managing Directors etc. A perusal of relevant provisions of the Companies Act shows that a Board of Director is empowered to do in relation to a particular company depends upon the roles and functions assigned to Directors as per the memorandum of articles of association of the company. There is nothing which suggests that simply by being a Director of the company, one is supposed to discharge particular function on behalf of the company. There is nothing which suggests that simply by being a Director of the company, one is supposed to discharge particular function on behalf of the company. It happens that a person may be a Director of a company, but he may not know anything about the day to day functioning of the company. As a Director he may be attending meetings of the Board of Directors of the company where usually they decide the policy matters and guide the course of business of a company. What emerges from this, is that the role of a Director in a company is a question of fact depending on the particular facts in each case. There is no universal rule that a Director of a company is in charge of its everyday affairs. It is also legal position that every person connected with the company shall not be liable for the act committed by the company. 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 and was not responsible for the conduct of business of the company at the relevant time, will not be liable. 11. It is also well settled legal position that vicarious liability can be fastened only by reason of provision of a statute and not otherwise. For the said purpose, a legal fiction has to be created. Even under a special statute that the vicarious criminal liability is fastened on a person on the premise that he was in charge of the affairs of the company and responsible to it, all the ingredients laid down under the statute must be fulfilled. A legal fiction must be confined to the object and purport for which it has been created. Statutes must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant/prosecution to make requisite allegations which would attract the provisions constituting vicarious liability. An individual who has perpetuated the commission of an offence on behalf of the company can be made accused alongwith the company if there is sufficient evidence of his active role coupled with criminal intent. An individual who has perpetuated the commission of an offence on behalf of the company can be made accused alongwith the company if there is sufficient evidence of his active role coupled with criminal intent. 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. Thus, the normal rule in the cases involving criminal liability is against vicarious liability, that is no one is to be held criminally liable for an act of another. Directors of the company, thus, cannot be said to have committed an offence only because they are holders of office. 12. In the present case, as already said, it has not been found by the prosecution that the petitioner was entrusted with the management and control of the company and he was responsible for the conduct of day to day business of the company. In the present case, the petitioner has been arrayed as an accused only by the reason that he happens to be one of the Directors of the company. In the light of the aforesaid well settled legal position, I am of the view that the petitioner cannot be made an accused for the offence allegedly committed by the company. 13. Consequently, the misc. petition is allowed and the criminal proceedings pending in the form of Criminal Case No.30/2011 arising out of FIR No.12/2010-11 registered at Abkari Circle, Srimadhopur (District Sikar) to the extent of the petitioner are quashed and set aside and as a consequence thereof, the warrant of arrest issued against him is also set aside. The stay application also stands dismissed.