Jammu and Kashmir and Ladakh High Court

Jammu and Kashmir and Ladakh High Court: While deciding the instant petition for quashment wherein the issue arose that whether employees of a company alone can be prosecuted and held liable without arraignment of the company as an accused, the bench of Rajesh Sekhri*, J., held that when the company is an offender, vicarious liability of its directors can be imputed in terms of the provisions of a statue, making it a deeming fiction.

The petitioners are the employees of Agro Care Organic Farm Private Limited Company involved in manufacturing of fertilizers, including Bio Fertilizers such as Vermicompost. Petitioners sent an intimation to the respondents for taking samples of Vermicompost received on 28-02-2016. It was alleged by the petitioners that the respondent did not take the sample for analysis in accordance with the procedure provided by Fertilizers Control Order (hereinafter FCO), 1985. Thereafter, the respondent seized the fertilizer from godowns of the Company. A complaint was filed by the respondent against the petitioners under FCO, 1985 read with Section 7 of the Essential Commodities Act, 1955.

The petitioners questioned the respondent’s actions on the ground that in the absence of company being an accused in the complaint, they cannot be prosecuted and held liable in their individual capacity in terms of Section 10 of Essential Commodities Act. According to the petitioners, they cannot be held responsible for the acts of the Company as there is nothing in the complaint to show that they were in charge and responsible for the conduct of the business of the company.

Upon perusal of the facts and contentions, the Court identified the afore-stated issue and observed that one cannot draw a presumption that Managing Director of a Company or the Directors or officers or employees for that matter are responsible for all acts committed by or on behalf of the company. It depends upon the respective roles assigned to the officers or employees of a company.

The Court further observed that Companies are changed with mens rea offences, thus they require guilty mind as the said offences are not strict liability offences. “The thrust of this legal position is that it is the “human agency” in the accused companies who can be held responsible”.

Referring to a plethora of precedents which included Supreme Court of India decisions as well as that of foreign courts, the Court pointed out that that if a group of persons, responsible for the business of the company, commit an offence, the criminal intent of the said group of persons is imputed to the company and Directors/Proprietors of the said company are “alter ego” of the company.

The Court further pointed out that, “It is trite that when law requires a particular thing to be done in a particular manner, it must be done in that fashion only and in none other. There is no provision in the Penal Code to attach vicarious liability on Managing Director or Directors or employees of a Company”.

The Court noted that in the instant case, a bare perusal of the respondent’s complaint makes it clear that there is nothing to suggest that petitioners at any point of time, were responsible for the acts committed on behalf of the Company or were responsible for the business of the company.

Furthermore, noting that Section 10 of Essential Commodities Act clearly postulates that who all would be held liable when a company commits an offence, the Court allowed the instant petition for quashment.

[Reema Arora v. Department of Agriculture, CRM(M) No. 156/2021, decided on 10-03-2023]

*Judgement was written by Justice Rajesh Sekhri.

Advocates who appeared in this case :

Petitioner- Areeb Kawoosa, Adv. With Aatir Kawoosa, Adv.;

Respondents- Faheem Nisar Shah, GA.

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