Criminal Liability Archives

Madras High Court| Directors cannot escape criminal liability on the ground that they are not directly involved in the production of sub-standard Pharma products

Madras High Court: In a petition filed under Section 482 of Code of Criminal Procedure (CrPC) to quash the criminal complaint filed by the Drugs Inspector under Section 32 of Drugs and Cosmetics Act, 1940, for the contravention of Section 18(a)(1) of Drugs and Cosmetics Act, 1940, (‘D&C Act’) which is punishable under Section 37(d) of the Act, alleging that the directors of the drug company (Sunrise International Labs Ltd.), are not manufacturing standard quality ‘Carbimazole’ tablets, G. Jayachandran, J. has held that the contention of the petitioners that they are not directly involved in the product of the drugs, when the decision to production of the drugs, itself is the outcome of their decision, is wholly unsustainable, and if the said preposition is accepted it will go against the object and reasons of the legislations namely Drugs and Cosmetics Act. Further, applying the interpretation of Section 141 of Negotiable Instruments Act, 1881 (‘NI Act’) to the other Acts, ignoring the nature of the offence charged will lead to miscarriage of justice.

The issue in this case is whether the petitioners can wriggle out from the criminal liability on the ground that they are not directly involved in the production of sub-standard Pharma products, and if any sub-standard products are sold to public by the Company, it is only the person responsible for its production to be held liable and others cannot be held vicariously liable.

The respondent submitted that the strict interpretation of vicarious liability of the Company has explained by the Courts in respect of Section 141 of NI Act or any other statute involving offence against property should not be extended to the offence against the persons.

The Court referred to the decision in S. Mohan Lal v. R. Kondiah, (1979) 2 SCC 616 , wherein it was held that “it is not a sound principle of construction to interpret expressions used in one Act with reference to their use in another Act; more so, if the two Acts in which the same word is used are not cognate Acts” , and observed that the interpretation of the expressions used in Section 141 of N.I Act, cannot be applied to Section 34 of D&C Act, though if read in isolation they look in ‘pari materia’. Further, when the offences are not related, then the enabling section to prosecute the Company as a juristic body must be necessarily read along with the offence charged. Thus, applying the interpretation of Section 141 NI Act to the other Acts, ignoring the nature of the offence charged will lead to miscarriage of justice.

The Court observed that the offence in this case is manufacturing and distribution of sub-standard drugs by a Company which is managed by its board of directors and the decision to manufacture the drugs is the collective decision of the board. Therefore, the directors cannot claim that they are not directly involved in production of the drugs, when the decision to produce the drugs, itself is the outcome of their decision. Therefore, the case of directors signing the cheque on behalf of the Company and the case of directors participating in the decision to produce sub-standard drugs are not one and the same, to hold that these petitioners are not involved in day-to-day affairs of the Company. Thus, the petitioners are vicariously liable for producing sub-standard drugs.

[Vikas Rambal v. State of Madras, 2022 SCC OnLine Mad 4822, decided on 12.10.2022]

Advocates who appeared in this case :

For Petitioners: Advocate B. Kumar;

Advocate Kiruthika Gokulakrishnan;

For Respondent: Government Advocate N.S. Suganthan.

Case Briefs Supreme Court

Explained| Dishonour of Cheques: Can non-executive Directors of the accused company be held vicariously liable under Section 141 NI Act?

Supreme Court: In an appeal against a judgment passed by the Calcutta High Court dismissing the Criminal Revision Application filed by the appellants for quashing the proceedings under Sections 138 and 141 of the Negotiable Instruments (NI) Act,1881, the division bench of Indira Banerjee* and J.K. Maheshwari has held that the requirement of Section 141 of the NI Act is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company and specific averments must be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company. Thus, the Court set aside the High Court's Judgment and quashed the Criminal Case against the appellants i.e., independent non-executive Directors of the accused company, under Sections 138 and 141 of the NI Act.

In this case the accused company placed orders on the respondent (PSQ) on different dates for purchase of Stone Dust and Stone Aggregate, specifying the materials required to be supplied, along with the rates and quantity. Further, pursuant to the aforesaid purchase orders, PSQ supplied materials to the accused Company, and raised bills totaling Rs.2,31,60,674/- on the accused company. In discharge of its liability against the bills the accused company had issued an account payee cheque dated 15.03.2017 for a sum of Rs.1,71,08, 512/-.Alleging that the accused company had not paid the amount of the dishonoured cheque to PSQ within the time stipulated, PSQ filed the aforesaid complaint under Section 138 read with Section 141 of the NI Act. Thereafter, the appellants filed petitions under Sections 205 and 305 of the CrPC, however, the Court in their absence rejected the said petitions.

Further, the appellants filed a Criminal Revision Application in the High Court under Section 482 of the Code of Criminal Procedure (CrPC) for quashing the said proceedings, claiming that they are independent non-executive Directors of the accused company, who are in no way responsible for the day-to-day affairs of the company. However, the High Court rejected the said application.

The Court noted that the appellants have submitted that Section 205 of the CrPC confers discretion on the Court to exempt personal appearance of an accused, till such time as his appearance may be considered necessary, and Section 305 of the Cr.P.C. provides how a body corporate, made accused in a criminal case, can be represented; and how the Magistrate overlooked the fact that the accused company was being represented by an authorized officer. It further submitted that Section 141 of the NI Act must be strictly construed, as it is a penal provision creating vicarious liability.

The Court took note of the ruling in K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48 , wherein the Court discussed the principles of the vicarious liability of the officers of a company in respect of dishonour of a cheque and held that “if the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company”. Further, the director of the company who signed the cheque renders himself liable in case of dishonour and other officers of a company can be made liable only under sub-section (2) of Section 141 of the NI Act by averring in the complaint, their position and duties in the company, and their role regarding the issue and dishonour of the cheque, disclosing consent, connivance or negligence.

Further, it also took note of the ruling in Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1, wherein the Court held that “Section 141 is a penal provision creating vicarious liability and must be strictly construed. Thus, it is not sufficient to make a bald cursory statement in a complaint that the director is in charge of and responsible for the conduct of the business of the company, but the complaint should spell out as to how and in what manner the respondent was in charge of or was responsible to the accused company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability”

The Court further noted that the National Company Law Tribunal (NCLT) admitted the application of a Financial Creditor of the accused company for appointment of an Interim Resolution Professional (IRP) to administer the accused company, as a result of which the appellants were suspended by operation of law. Thus, when statutory notice of dishonour was sent to the appellants, the management of the accused company had been taken over by the IRP.

The Court observed that it is true that inherent jurisdiction under Section 482 should be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specially laid down in Section and when the interest of justice so requires. It was also observed that the High Court rightly held that when a complaint was filed against the Director of a company, a specific averment that such person was in charge of and responsible for the conduct of business of the company was an essential requirement of Section 141 of the NI Act and merely being a Director of the company is not sufficient to make the person liable under the said Section.

Further, it was observed that the High Court rightly held that the Managing Director or Joint Managing Director would admittedly be in charge of the company and responsible to the company for the conduct of its business by virtue of the office they hold, also a signatory of a cheque is clearly liable under Sections 138, 141 of the NI Act, however, the High Court failed to note that none of these appellants were Managing Director or Joint Managing Director of the accused company nor were they signatories of the cheque which was dishonoured.

Moreover, the Court viewed that the High Court was right in holding that neither a hyper technical approach should be adopted, to quash complaint, nor it must be read with a pedantically hyper technical approach to deny relief under Section 482 of the CrPC to those impleaded as accused, who do not have any criminal liability in respect of the offence alleged in the complaint. Further, it was viewed that there can be no doubt that in deciding a Criminal Revision Application under Section 482 of the CrPC for quashing a proceeding under Sections 138, 141 of the NI Act, the laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of the said Sections must be borne in mind. Further, the said provisions of the NI Act create a statutory presumption of dishonesty on the part of the signatory of the cheque, and when the cheque is issued on behalf of a company, also those persons in charge of or responsible for the company or the business of the company and every person connected with the company does not fall within the ambit of Section 141 of the NI Act.

Placing reliance on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 , the Court observed that a director of a company who was not in charge or responsible for the conduct of the business of the company at the relevant time, will not be liable under those provisions and the liability depends on the role one plays in the affairs of a company and not on designation or status alone. It also took note of the decision in Pooja Ravinder Devidasani (Supra) and observed that when a complaint is filed against a director of the company, who is not the signatory of the dishonoured cheque, specific averments must be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company, unless such director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and its business.

The Court viewed that the High Court was correct in observing that three categories of persons were covered by Section 141 of the NI Act — the company who committed the offence as alleged; everyone who was in-charge of or was responsible for the business of the company and any other person who was a Director or a Manager or a Secretary or Officer of the Company with whose connivance or due to whose neglect the company had committed the offence.

However, while the High Court deprecated the adoption of a hyper technical approach in construing pleadings and to quash criminal proceeding, it adopted a hyper technical approach in rejecting the application under Section 482 of the CrPC, on a cursory reading of the formalistic pleadings in the complaint, endorsing the contents of Section 141 of the NI Act, without any particulars and it overlooked the contention of these appellants that they were non-Executive Independent Directors of the accused company, based on unimpeachable materials on record.

The Court referred to the decision in the National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 , and Pooja Ravinder Devidasani (Supra) wherein the Court held that the impleadment of all Directors of an accused company based on a statement that they are in charge of and responsible for the conduct of the business of the company, without anything more, does not fulfil the requirements of Section 141 of the NI Act. Further, it placed reliance on the ruling in Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 and observed that there could be no justification for not dispensing with the personal appearance of the appellants, when the Company had entered appearance through an authorized officer. Thus, the Court set aside the High Court's Judgment and quashed the Criminal Case.

[Sunita Palita v. Panchami Stone Quarry, 2022 SCC OnLine SC 945 , decided on 1.09.2022]

Judgment by: *Justice Indira Banerjee

Op Eds OP. ED.

Whether the Defence of Grave and Sudden Provocation be Applied in the Cases of Prolonged Provocation

Introduction

The doctrine of provocation is a well-established principle recognised in Exception 1 to Section 300¹ IPC, 1860. This principle is used to reduce the criminal liability of the accused from murder to culpable homicide not amounting to murder in cases of intentional killing, which was a reaction towards the grave and sudden provocation. Grave and sudden provocation gain its rationale mainly from two principles; where one suggests for reduction of criminal liability as the accused was provoked to the extent where he was impaired with his ability to reason, and the other indicates that the liability should be reduced as the deceased was the one who provoked him to that extent.

Theoretical framework

Exception 1 to Section 300² reads as:

300. Murder. — * * *

Exception 1. —When culpable homicide is not murder. —Culpable homicide is not murder if the offender, whilst deprived of the power of self-control by grave and sudden provocation, causes the death of the person who gave the provocation or causes the death of any other person by mistake or accident.

This Exception talks about a situation of an irresistible impulse where the accused was deprived of his power to self-control and, out of extreme anger, caused the person's death. An essential requisite in this condition is that the provocation must be grave and sudden, rendering a person incapable of reasoning. Through this Exception, the accused does not get full defence rather this is a case of diminished responsibility.³

In this Exception, the importance of “sudden” is that if the provocation is not sudden, the impact will not be as much upon the mind as to make him lose his self-control. As the time gap after the provocation increases, the chances of regaining the power of self-control will increase. In other words, the accused will have a more significant cooling-off period.

The leading authority of this principle is K.M. Nanavati v. State of Maharashtra⁴ which lays down that:

85. … The fatal blow should be clearly traced to the influence of passion arising from the provocation and not after the provocation which had cooled down by lapse of time or otherwise giving room or scope for premeditation and calculation.

While talking about grave and sudden provocation, it is empirical to talk about R. v. Duffy⁵ where Devlin, J. gave the classic definition, which was recognised in this case. He explained provocation as an act or a series of acts that might include spoken words, which would make any reasonable man a sudden and temporary loss of self-control. That loss of self-control renders him so subject to the passion that he is, for that moment, not the master of his mind.

Where this case clearly lays down a presumption, which in fact is still in practice, that the lapse of time might give room for premeditated and calculated murder and invalidate the causal link between the loss of control and provocation. The question is whether the lapse of time can result in an opposite impact of cooling down, giving rise to negative provocation? And whether the objectivity test holds ground in every situation where this defence is attracted?

Battered Wife Syndrome

Battered wife syndrome is a psychological tool to understand the mental state of battered wives which is a term given to wives who, after enduring severe torture for a prolonged period, kill their batterers because of the psychological impact or end the cycle of prolonged violence.

If we go by the Exception under Section 300 and as per the test laid down by Lord Devlin in R. v. Duffy⁶, the wife can only claim the defence if she committed the act in “sudden and temporary loss of self-control” which is contentious with the current situation.

The question in these situations is whether the person has the requisite mens rea that the law requires for the commission of offence? The psychological state of the defendant plays a crucial role in such situations as the mental state of the defendant negates the requisite mens rea required to commit the offence, which should work as a legal defence as per the Penal Code.⁷ It is assumed that where there is a prolonged series of torture and provocation is an ongoing process, there might be a delayed reaction towards the torture when the person’s tolerance reaches its peak.

Similarly, it was held in R. v. Ahluwalia⁸:

That women who have been subjected frequently over a period to violent treatment may react to the final act or words by what he calls a “slow-burn” reaction rather than by an immediate loss of self-control. We accept that the subjective element in the defence of provocation would not as a matter of law be negatived simply because of the delayed reaction in such cases, provided that there was at the time of the killing a “sudden and temporary loss of self-control” caused by the alleged provocation. However, the longer the delay and the stronger the evidence of deliberation on the part of the defendant, the more likely it will be that the prosecution will negative provocation.

This case gave a new terminology to the negative provocation, which is that the torture might lead to the effect of a slow burn rather than an immediate loss of self-control. It also talked about how the long delay and stronger evidence of deliberation make it more likely for the defendant to have negative provocation.

In Manju Lakra v. State of Assam⁹ the Indian court for the first time extensively dealt with the question of battered wife syndrome and allowed the accused to take the defence of the Exception to Section 300 as she endured a long series of torture.

The objectivity test applied in several cases is whether a reasonable man placed under similar circumstances would be rendered so provoked that he would opt to cause the death of the deceased. The factor considered in the objectivity test is whether the final act committed by the deceased was so potent and rendered the accused in such an irresistible impulse that they lost their power of self-control. What this test fails to accomplish is the account of subjectivity and the experience of the accused, which developed through the course of time, making the accused reach a point where her tolerance breaks that might or might not be associated with the final act committed by the deceased.

Provocation works very differently in cases of battery as it is a long-term and continuous process, and it is very difficult to analyse a specific trigger point that resulted in the commission of the offence. This is a case of sustained provocation. That is why these cases cannot be measured strictly by the objectivity test, as it goes against the principle of equity, natural justice, and good conscience.

Sustained provocation and Indian court

There are many cases in foreign jurisdiction that talk about sustained provocation and how it should be read, with the exception of provocation. In R v. Chhay¹⁰ which was passed by an Australian court. A Bench headed by the then Chief Justice who heard the matter acknowledged that a person might lose his or her self-control when the abuse has been continued for a lengthy period of time, even when there was no specific event that triggered the commission of the offence. The Court also acknowledged the subjective experience and held that the trigger might not happen at the immediacy of threat but on cyclical violence.¹¹

Though battered women syndrome has not yet been recognised by the Penal Code, the psychological impact it holds on the defendant has been considered while deciding upon the cases.¹² Though, the question now arises whether the defence of sustained provocation is only available to battered wives and not any other relationship?

The Indian courts have acknowledged the principle of sustained provocation in many cases and not just for battered women. It is imperative to note what the Madras High Court said in Suyambukkani, In re¹³ where they judicially recognised the concept of sustained provocation in force as they believed the framers of the Penal Code envisioned this. They pointed out a cardinal difference between the Exception engraved in Section 300 and sustained provocation, as while the Exception talks about grave and sudden provocation, sustained provocation is a series of grave acts, grave in nature, endured over a certain period of time. Sustained provocation cannot be equated to sudden loss of impulse; rather, it must be understood how the final act worked like the last straw breaking the camel's back. It was provided that sustained precaution was ejusdem generis with the other exceptions as ill-will and premeditation are absent.¹⁴

Poovammal v. State¹⁵ is another landmark judgment on the said issue which efficiently pointed out the essence of time in such matters. They opined that there might be times when the offender does not react at that particular time, but it lingers in his mind and continuously torment the person, which leads it all to erupt and, at one point, lose his self-control which might lead to the commission of the offence. It is that breaking point of the accused that makes him commit the murder of the deceased.

When it comes to identifying whether the provocation was grave enough to push the accused at that stage, the previous acts committed by the deceased must be measured to understand whether they held the gravity to hold a negative impact on the accused or not.¹⁶ The defence should be allowed as the trigger and loss of self-control cannot be viewed independently; for that the acts which led up to the provocation must be taken into account.¹⁷

Need to reform the law with changing time

While countries like the United Kingdom, Australia, and the United States have acknowledged the issue of prolonged provocation, the Penal Code is far from addressing the issue. Some courts in India, though, have incorporated the same in some cases, but the proper recognition of the matter remains untouched. Through this article, we tried to understand the gravity of the subject. Like any other exception in the Penal Code, the prolonged provocation must be incorporated as a defence because the requisite mens rea required to commit the offence is absent. The need for such incorporation is that because of a lack of explicit defence lower courts are reluctant to grant such defence to the accused, which is unjust, unreasonable, and inequitable.

To that end, it is proposed that it would be expedient in the interest of justice if another Exception of sustained provocation is added under Section 300 of the Penal Code.

* 4th year student, BALLB, Jamia Hamdard, deemed to be University, New Delhi. Author can be reached at <itsme.nidhipandey@gmail.com>.

1. Penal Code, 1860, S. 300 Exception 1.

2. Penal Code, 1860, S. 300 Exception 1.

3. R. v. Ahluwalia, (1992) 4 ALL ER 889.

4. AIR 1962 SC 605.

5. (1949) 1 All ER 932.

6. (1949) 1 All ER 932, 935.

7. Battered woman syndrome dilutes the requisite mens rea as the continues torture led her to commit the act not the guilty mind. The accused lacks the required mens rea to be held liable for commission of the offence that is why they should be charged of an offence of lesser degree than the one initially charged of. See Sharan K. Suri, “A Matter of Principle and Consistency: Understanding the Battered Woman and Cultural Defences”, 7 (1) Michigan Journal of Gender and Law, pp. 107-139, at p. 111 (2000).

8. (1992) 4 ALL ER 889.

9. 2013 SCC OnLine Gau 207.

10. (1994) 72 A Crim R 1, 2.

11. Runjanjic v. R., (1991) 56 SASR 114.

12. Manju Lakra v. State of Assam, 2013 SCC OnLine Gau 207; State v. Hari Prashad, 2016 SCC OnLine Del 751; the Delhi High Court pronounced punishment on the accused when he was acquitted of the charges of Ss. 306 and 498-A IPC on the grounds that the deceased was not subjected to cruelty right before her death and the High Court considered battered wife syndrome to prosecute the accused under the said charges.

13. 1989 SCC OnLine Mad 481, para 21.

14. Suyambukkani, In re, 1989 SCC OnLine Mad 481, para 22.

15. 2012 SCC OnLine Mad 489, para 30.

16. Chervirala Narayan, In re, 1957 SCC OnLine AP 242, paras 16-19.

17. Rajendran v. State of T.N., 1997 SCC OnLine Mad 191, para 38.

Case Briefs High Courts

Vicarious Liability of Directors of Company for offences committed under S. 138 NI Act: Person claiming to not being able to manage business due to his age, could this be accepted as defence? Del HC answers

Delhi High Court: Subramonium Prasad, J., addressed a matter pertaining to vicarious liability of directors of the company alleged for offences under Section 138 NI Act.

Petitioner sought to quash a criminal complaint which was filed under Section 138 of the Negotiable Instruments Act, 1881 along with this, he also sought to quash an order passed by the trial court issuing summons to the petitioner.

Respondent 2 had filed a complaint under Section 138 read with Section 142 of the NI Act before the Court of Metropolitan Magistrate, Saket Court.

Respondent 2 was appointed as CFO of India Ahead News Private Ltd. which was engaged in the business of running a TV news channel. Petitioner and accused 2 were the directors of India Ahead News Pvt. Ltd. and they were responsible for the day-to-day affairs of the company.

The complainant was taken in service by respondent 1 at a fixed salary of Rs 10,00,000 per month plus GST less TDS along with monthly expenditure and reimbursement if Rs 1,50,000 per month, along with this a stake of 10% was also assured to the complainant.

In the year 2019, the salaries of the staff along with complainant’s started getting delayed and even the statutory obligations like PF, ESI, etc., were not being fulfilled by the company. Since the dues and the arrears of salary were mounting up at the request of petitioner’s son the complainant offered to take a salary cut.

Further, when the cheques for payment of arrears of salary were presented for encashment the same were returned with remark “insufficient fund”. Hence, a legal notice was issued in compliance with to mandate of Section 138 NI Act demanding payment.

Since there was nothing on record to show that the accused’s 2 & 3 were the directors of the company, the complainant was directed to place on record the Master Data of the company. After the pre-summoning evidence, summons was issued and the said order of the Court has been challenged before this Court.

Despite several attempts to settle the dispute, the parties could not arrive at a settlement.

Supreme Court has in a number of decisions laid down the factors necessary to be kept in mind before making a person vicariously liable for the offences committed by the company under Section 138 of the NI Act:

(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. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position, they are liable to be proceeded with.

(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

[Refer Gunmala Sales Private Limited v. Anu Mehta, (2015) 1 SCC 103; National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 4 SCC 70; Saroj Kumar Poddar v. State (NCT of Delhi), (2007) 3 SCC 693; N.K. Wahi v. Shekhar Singh, (2007) 9 SCC 481; N. Rangachari v. BSNL, (2007) 5 SCC 108; Paresh P. Rajda v. State of Maharashtra, (2008) 7 SCC 442; K.K. Ahuja v. V.K. Vohra, (2009) 10 SCC 48.]

The complaint read as a whole indicated that at the time of cheques being issued by the company and returned by the bank, the son of the petitioner and the petitioner were the only directors of the company and were responsible for the conduct of the business of the company. Hence, this Court was not inclined to interfere with the order issuing summons to the petitioner.

High Court stated that the petitioner should have established in trial that he was not responsible for the conduct of the business of the company owing to his age and the mere ipsi dixit of the petitioner that he was 80 years of age and was unable to manage the affairs of the company and the same cannot be accepted at present stage.

Supreme Court’s decision in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., 2021 SCC OnLine SC 915 squarely covers the present case.

Lastly, the Court concluded that the observations of this Court are limited to the issue as to whether the complaint should be quashed or not because of the fact that the complaint does not state the exact role of the petitioner in the conduct of the business of the company.

“…it is always open for the petitioner to substantiate his assertion that he was not responsible for the conduct of the business of the company by leading evidence which should be considered on its own merits without being influenced by the observations made in this order.”

Therefore, the petition was dismissed. [Gopala Krishna Mootha v. State Govt of NCT of Delhi, 2022 SCC OnLine Del 530, decided on 21-2-2022]

Advocates before the Court:

For the Petitioner: Neeraj Malhotra, Senior Advocate with Shiv Gupta, Devahuti Tamuli, Advocates

For the Respondents: Neelam Sharma, APP for the State

Kamlesh Mahajan, Advocate for R-2

Case Briefs District Court

Law on Medical Negligence | When can a doctor be summoned for criminal charges relating to medical negligence? Patiala House Courts explains

Patiala House Courts, New Delhi: While addressing a case of medical negligence Prayank Nayak, MM-01, expressed that doctors can be summoned for negligence only if the negligence is gross or the doctors did not possess the requisite skill required for the treatment

Complainant sought summoning of accused namely Dr Ram Manohar Lohiya, Hospital, New Delhi, CMO, Dr Ram Manohar Lohiya, Hospital and Dr Dinesh, Dr Ram Manohar Lohiya Hospital for offence punishable under Sections 270, 272, 326, 336, 338 of Penal Code, 1860.

Victim was aged about 3 months when she developed fever, cough and bronco pneumonia for which she sought treatment at OPD of RML. She was administered antibiotics and infusion intravenously. It was alleged that due to faulty administration of injection in a rash and negligent manner, victim developed gangrene.

After her examination by several doctors, her right hand had to be amputated from the wrist down. Hence it was stated that due to the negligence, commissions, and illegal omission of RML Hospital and its doctors they were liable to be punished under Sections 269, 270, 326 and 338 of the Penal Code, 1860 (IPC).

Analysis, Law and Decision

Law on Medical Negligence and Criminal Liability

Court expressed that the law of the land on the above stated was summed up in the decision of Supreme Court in Jacob Mathew v. State of Punjab, (2005) 6 SCC 1,

“…To prosecute a medical professional for negligence under criminal law it must be shown that the accused did something or failed to do something which in the given facts and circumstances no medical professional in his ordinary senses and prudence would have done or failed to do. The hazard taken by the accused doctor should be of such a nature that the injury which resulted was most likely imminent.”

Delhi High Court in Hukam Chand v. State, 2016 SCC OnLine Del 4129, held that:

“6. Thus to proceed against a doctor the complainant is required to, even at the stage of summoning, prima facie show that the negligence is of such a kind that either the doctor was not processed of the requisite skills which he professed to possess or the negligence and recklessness was of a high degree which could be termed as gross.”

Hence, Court expressed those doctors can be summoned for negligence only if the negligence is gross or the doctors did not possess the requisite skill required for the treatment.

However, in the present matter, there was nothing on record to show that the treating doctors were grossly negligent while treating the victim. Even the Committee of the doctors did not mention that there was any negligence on the part of the treating doctors.

In Delhi High Court’s decision of Dr A.K. Banerji v. State, 2014 SCC OnLine Del 2322, while dealing with a criminal revision in a matter relating to medical negligence where the victim’s hand had to be amputated, held that since the Medical Council of India had opined that there was no negligence on the part of the treating doctor, summoning order of the magistrate for offence punishable under Section 338 IPC was liable to be set aside.

Bench held that since no sanction under Section 197 CrPC had been obtained, the doctors could not be summoned for the charges of medical negligence.

On finding no grounds for proceeding against the hospital and treating doctors arrayed as accused, the complaint was dismissed under Section 203 CrPC. [Gudia v. Dr Ram Manohar Lohia Hospital, CC No. 18745 of 2016, decided on 12-10-2021]

Case Briefs High Courts

[Tandav] “Cheap and objectionable”, All HC rejects bail application of Aparna Purohit. Holds, submission of apology or withdrawal of scene after streaming would not absolve criminal liability

Allahabad High Court: In an interesting case regarding a controversial web-series, Tandav broadcasted on Amazon Prime on 16-01-2021, Siddharth, J., had denied anticipatory bail to Aparna Purohit, head of India Originals at Amazon Seller Services Pvt. Ltd. The Court remarked,

Actions of the applicant being against fundamental rights of majority of citizens, her fundamental right of life and liberty cannot be protected by grant of anticipatory bail.

The instant anticipatory bail application had been filed with a prayer to grant bail to the applicant in a case filed under Sections 153(A)(1)(b), 295-A, 505(1)(b), 505(2) Penal Code, Sections 66 and 67 of the Information Technology Act and Section 3(1)(r) of SC/ST Act. The allegations against the applicant were that religiously insensitive and objectionable scenes had been deliberately put in the movie to make the web series controversial and gain publicity for the purpose of commercial gain. In the series, caste and community-related utterances had been made deliberately so that it may affect public peace. Some of the dialogues that lead to outburst were:

“Bholenath, you are very innocent, do something new, Infact tweet something new, something sensational, some flaming blaze, like (Thinking) Yes, “All students of Campus became traitors, they are raising slogans of freedom-freedom” and

“When a man of a lower caste dates a woman of a higher caste, he is taking revenge for the centuries of atrocities from that one woman.”

The Bench observed, the scenes referred to above had shown the woman of higher caste in a derogatory manner affecting the dignity of the woman since she had been made a symbol of revenge of a man of lower caste for taking revenge against the atrocities done against the woman of lower castes from long time. The judge, while making a remark on the title of the movie said that, the use of the word “TANDAV” as the name of the movie could be offensive to majority of people since this word was associated with a particular act assigned to Lord Shiva. The scenes alluding to Lord Rama gaining popularity on social media were considered by the Court as a clear pointer to the dispute regarding the construction of Lord Ram’s temple.

Noticing the manner in which Devakinandan (a movie character) was abusing the man of lower caste working as a cobbler, comments regarding grant of reservation to scheduled castes and a scene where the image of the police of State of Uttar Pradesh had been depicted adversely the Bench stated,

“Irrespective of caste, boys and girls are marrying and the message given in the movie that if a man of lower caste dates a woman of higher caste, it will amount to revenge for the centuries of atrocities committed against people of lower caste by dating of woman of higher caste is not as per Article 38 of the Constitution of India.”

While relying on Amish Devgan v. Union of India, (2021) 1 SCC 1, wherein the Supreme Court had held that paradox of toleration is that if we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend the tolerant society against the onslaught of intolerant, then the tolerant will be destroyed,

the Court said though cast and the crew had issued an unconditional apology and had removed the offensive scenes and now there was no offensive material in the series, the submission of apology or withdrawal of scene after its streaming would not absolve the accused persons of the offence committed by them.

Further, the Bench expressed concern over worsening trend in hindi film industry of showing Gods and Goddesses in disrespectful manner (Ram Teri Ganga Maili, Satyam Shivam Sundram, P.K., Oh My God, etc.). The Bench stated not only this; efforts had been made to subvert the image of historical and mythological personalities (Padmavati) and names and icons of faith of majority community had been used to earn money (Goliyon Ki Rasleela Ram Leela). To point out that similar trend had been followed in comedy, the judge mentioned how an obscure stand-up comedian, Munawar Faruqui, from Gujarat made comments on Hindu God and Godesses.

Lastly, the Single Judge observed that on the one hand, the sentiments of majority community had been hurt by display of the characters of their faith in disrespectful manner and on the other hand, an attempt had been made to widen the gap between the higher castes and the scheduled castes when the object of the State is to bridge the gap between the different castes and communities and make the country a united force socially, communally and politically.

Hence, in the light of facts that the applicant was granted interim protection from arrest by the order dated 11-02-2021 by a co-ordinate Bench, but she was not co-operating with the investigation the instant bail application was rejected.[Aparna Purohit v. State of U.P., 2021 SCC OnLine All 179, decided on 25-2-021]

Kamini Sharma, Editorial Assistant has put this story together.

New releases News

Legal potion for future Intelligence by EBC| Artificial Intelligence: Law And Policy Implications [Edn. 2020]

Artificial Intelligence: Law And Policy Implications [Edn. 2020]

Overview:

Artificial Intelligence is an important subdivision of Cyber law and is constantly developing in the country. This thoroughly researched handbook discusses the issues associated with Artificial Intelligence involvement at social, institutional and government level. The work is a blend of multi-disciplines like law, Policy, philosophy, social theory and Technology. It brings together, under one roof contributions by scholars in the newly emerging field of artificial intelligence, policy and Law. The work makes and attempts to address all the unanswered question which are popping up in the field of law, policy and regulation due to fast development of AI in India and globally.

Notable features

It address the legal, policy and regulatory issues pertaining to Artificial Intelligence.
Authors have talked about legal principles and legal frameworks relating to Artificial Intelligence
Helps to develops legal reasoning on critical issues in Artificial Intelligence and criminal liability.
It discusses all the issues in Artificial Intelligence with a multidisciplinary approach.
Explains real legal issues that one needs to consider as an AI thinker and legal practitioner.
Makes an attempt to legal awareness of Artificial Intelligence technology.
Provides clarity on contemporary issues in Artificial Intelligence and law including but not limited to intellectual property, confidentiality, criminal law, Agency and data protection.
An asset for research scholars who want to work in the area of AI, policy & law.

Corporations: Legal Fiction or An Unborn Predator?

I. Introduction

1.The Lok Sabha, on March 17, 2020[1], introduced the Companies (Amendment) Bill, 2020 (the Bill) to decriminalise various provisions of the Companies Act, 2013 (the 2013 Act). In the first part of this two-part series, we will provide an analysis of the doctrine of corporate criminal liability and its evolution in India. In the second part, we will deal with details of the Bill and its significance in commencing a new chapter in the development of corporate criminal liability in India.

II.Evolution of corporate criminal liability particularly in the United States of America and the United Kingdom

2.The concept of corporate criminal liability developed in the Anglo-American tradition of common law through a process of accretion that lacked any conscious effort or a direction. Initially, the corporations were considered incapable of committing crimes, but with globalisation and liberalisation came a shift in the societal stance wherein corporations were seen as being involved in committing (almost all) white collar crimes[2].

3. In the early 1700s, the development of corporate criminal liability faced four main obstacles[3]:

a. Attributing acts to a juristic person[4];

b.Belief that companies could not possess the moral culpability necessary to commit intentional crimes[5];

c. Ultra vires doctrine, under which courts would not hold corporations accountable for acts, such as crimes, that were not provided for in their charters[6]; and

d.Understanding of the extant criminal procedure, wherein procedure without the accused physically coming before the court was unknown[7].

4. Criminal liability stands on the basic rule of ‘actus non facit reum nisi mens sit rea’ i.e. an act is wrongful only when it is done with a wrongful state of mind. However, a corporation neither has a mind which can possess knowledge or intention, nor does it have hands to carry out its intentions. To address this issue, it is essential to understand that the original application of both civil and criminal liability to corporate entities were derived primarily from the ancient common law tort doctrine which says masters had “vicarious” liability for the wrongful actions of their servants[8]. As a result, the courts were soon willing to hold corporations criminally liable for almost all wrongs except rape, murder, bigamy, and other crimes of malicious intent[9].

5. The common criminal law also took the position that, in general, there could be no vicarious criminal responsibility i.e. a person could not be deemed to be guilty of a criminal offence committed by another[10]. Over a period of time, application of this rule became subject to exception on the basis of specific provisions in the statutes extending liability to others.

6. In the United Kingdom, the House of Lords while hearing the case of Tesco Supermarkets Ltd v. Nattrass[11] held that an employee was not a part of the ‘directing mind’ of the corporation and, therefore, his conduct was not attributable to the act of corporation. However, in Meridian Global Funds Management Asia Ltd v. Securities Commission[12] the Privy Council ruled that a company can be held liable for the crimes of its senior personnel, committed without the knowledge of the company. The identification theory imposes vicarious liability of an organisation for the acts committed by agents of the organisation and was identified in the above two judgments.

7. Both the American standards i.e. vicarious liability and Respondent Superior for holding organisations criminally liable employ the ‘identification’ approach pioneered in England. Respondent Superior is the broader of the two standards. Derived from agency principles in tort law, it provides that a corporation may be held criminally liable for the acts of any of its agents [who] (1) commits a crime, (2) within the scope of employment, (3) with the intent to benefit the corporation[13]. This standard is quite broad, permitting organisational liability for the act of any agent, even the lowest level employee[14].

III. Development of corporate criminal liability in India

A. Judicial Interpretation

8. The special vicarious liability doctrine adopted in India emanates from the common law principle which enables the courts to hold the directing minds responsible for the actions and affairs of the company[15]. In Sunil Bharti Mittal v. Central Bureau of Investigation[16], the Supreme Court, while adopting the position from Tesco Supermarkets Limited, held that a company cannot be criminally liable for the actions of its employees. Therefore, there is no special vicarious liability in criminal law without a specific statutory exception. However, this position was overturned in Standard Chartered Bank v. Directorate of Enforcement[17], where the Supreme Court at the outset rejected the idea that the company is immune from criminal prosecution where custodial sentence is mandatory and observed that the company is liable to be prosecuted and punished for criminal offences.

9. Thereafter, in the landmark case of Iridium India Telecom Limited v. Motorola Inc.[18], the Supreme Court observed that corporate houses can no longer claim immunity from criminal prosecution on the ground that they are not capable of possessing mens rea. Therefore, the actions of the directors of the accused company were directly linked to the actions of the company itself, thereby holding the corporation criminally liable both under common law and statutory law. It is an admitted position in India that despite being a juristic person, a company is liable for its actions and inactions that result in commission of an offence punishable under law.

B. Corporate criminal liability under the Companies Act

10. In India, the corporate criminal liability is imposed on the corporations through various legislations such as the Income Tax Act, 1961, the Securities and Exchange Board of India Act, 1992, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Negotiable Instruments Act, 1881 and the Prevention of Corruption Act, 2013 to hold the company and the key managerial personnel (KMP) responsible for the illegal acts of the corporations. Considering that the Companies Act, 1956 (the 1956 Act) and the 2013 Act are legislations solely for the governance of the corporations, the study of the corporate criminal liability as provided for in these legislations become relevant.

11. Corporate criminal liability under the 1956 Act was based on the principle of strict vicarious liability, as discussed in the section above. However, the threshold of corporate criminal liability was increased under the 2013 Act by introducing stricter provisions to hold officers and directors vicariously liable on account of their designation, scope of employment and responsibility irrespective of any requirement to prove their involvement in commissioning of the crime.

12. The 2013 Act streamlines the manner in which corporate criminal liability is to be imposed on corporations. It specifies that the KMP would be considered as defaulting “officers”. The officers under the Companies Act, 2013 have been categorised as following:

(i) KMP including managing director, whole time directors, chief executive directors, chief financial officers and company secretaries;

(ii) personnel reporting to the KMP that are responsible for maintaining, filing or distribution accounts and records and participating in actively taking certain actions or inactions;

(iii) personnel responsible for ‘maintaining accounts and records’;

(iv) directors possessing the knowledge of any default committed by the other officers on behalf of the company through participation in board meetings or being in receipt of any board proceedings; and

(v) personnel not involved in the day-to-day affairs of the company but involved in the transfer of shares such as share transfer agents, registrars and the merchant bankers to the issue or transfer of shares.

13.The existing standards under the 2013 Act are inconsistent with the principles of criminal law as it holds the officers and personnel criminally liable merely on account of their designation and there specific actions or inactions that indicate that they possessed knowledge of the crime while they may not be actively involved in the commission of the crime. It is relevant to note the imposition of stricter punishments for offences committed by corporations was introduced in the 2013 Act with the objective of ensuring ‘deterrence’ on the companies. However, the imposition of stricter liability has made the corporations very vulnerable, thus greatly hampering the ease of doing business.

IV. Conclusion

14. While corporations have been a blessing to the economy, it is crucial that for progress and development of the society, the laws governing such corporations strike at the root cause of the crimes committed. While doing so, the legislations should also incentivise corporations to carry out their business with ease, and by freeing the directing mindsof the fear of being criminally liable merely on account of their designation. It is imperative for the legislation, while combating crimes, to strike a balance between functioning of the society and the overall benefit of the economy.

15. Therefore, there is a pressing need to dilute the corporate criminal liability, imposed specifically under the 2013 Act. The unrealistic standards prescribed under the said legislation needs to be watered down to a certain extent for the purpose of enhancing the ease of doing business. With this objective, the legislators introduced the Bill to decriminalise various provisions of the 2013 Act.

* Partner, Cyril Amarchand Mangaldas

** Partner, Cyril Amarchand Mangaldas

*** Senior Associate, Cyril Amarchand Mangaldas

†Associate, Cyril Amarchand Mangaldas

‡Associate, Cyril Amarchand Mangaldas

[1] Companies (Amendment) Bill, 2020 [Bill No. 88 of 2020]

[2] Thomas J. Bernard, The Historical Development of Corporate Criminal Liability, 22 Criminology 3 (1984).

[3] John C. Coffee, Jr., Corporate Criminal Responsibility, in 1 Encyclopaedia of Crime and Justice 253, 253 (Sanford H. Kadish ed., 1983)

[4] Coffee, supra note 3, at 253

[5] Ibid

[6] L.H. Leigh, The Criminal Liability of Corporations in English Law 1-12 (1969) (discussing the development of English corporate criminal liability).

[7] Ibid

[8] Ibid

[9] Richard S. Gruner, Corporate Crime and Sentencing § 1.9.2, at 52-55 (1994)

[10] Matthew Goode, Corporate Criminal Liability, Australian Govt. Publications, available at http://www.aic.gov.au/medialibrary/publications/proceedings/26/goode.pdf

[11] [1972] AC 153

[12] [1995] 2 AC 500

[13] United States v. A&P Trucking Co., 358 U.S. 121, 124-27 (1958)

[14] Corporate Criminal Responsibility-American Standards of Corporate Criminal Liability; available at

https://law.jrank.org/pages/744/Corporate-Criminal-Responsibility-American-standards-corporate-criminal-liability.html

[15] Tesco Supermarkets Ltd v. Nattrass, [1972] AC 153

[16] (2015) 4 SCC 609

[17] Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530

[18] (2011) 1 SCC 74

Case Briefs Foreign Courts

Bolton has gambled with national security of USA | US District Court says: Former NSA is exposed to potentially criminal liability, while ruling against injunction on his White House Memoir

United States District Court, Columbia: Royce C. Lamberth, J., held that, a mandated pre-publication review process is not an unconstitutional prior restraint.

Bolton has gambled with national security of USA.

Background

John Bolton in the year 2018 had accepted the role as a National Security Advisor and was responsible for directing and supervising the work of National Security Council staff on behalf of the president.

Further in the Year 2019, when he left his post he secured a book deal with publisher Simon and Schuster.

Bolton had accepted the certain conditions in his employment and executed multiple non-disclosure agreements with the government.

In one agreement, Bolton agreed that he would “never divulge classified information to anyone unless: (a) he has officially verified that the recipient has been properly authorized by the United States Government to receive it; or (b) he has been given prior written notice of authorization from the United States Government . . . that such disclosure is permitted.”

In the event Bolton was “uncertain about the classification status of information, [he was] required to confirm from an authorized official that the information is unclassified before he may disclose it.

Violation of the above could result in assigning to the US Government all royalties, remunerations and emoluments.

On June 8, 2020, John Eisenberg, Deputy White House Counsel and Legal Advisor to the NSC, issued a letter to Bolton that claimed the manuscript of the book contained classified information. By that point, Bolton had already delivered a final manuscript to his publisher for printing and shipping, without written authorization and without notice to the government.

What is the government asking this Court to do about the above-stated issue?

Government seeks a Temporary Restraining Order or Preliminary Injunction that would:

Enjoin Bolton from “proceeding with the publication of his book in any form or media without first obtaining written authorization from the United States through the prepublication review process;”
Require Bolton to “ensure that his publisher and resellers receive notice that the book contains classified information that he was not authorized to disclose;”
Require Bolton to “instruct his publisher to delay the release date of the book pending the completion of the prepublication review process and authorization from the United States that no classified information remains in the book;”
Require Bolton to “instruct his publisher to take any and all available steps to retrieve and destroy any copies of the book that may be in the possession of any third party;”
Enjoin Bolton from “taking any additional steps towards publicly disclosing classified information without first obtaining authorization from the United States through the prepublication review process;” and
Require Bolton to “ensure that his publisher and resellers receive notice of the injunction.”

Bolton was the National Security Advisor to the President. He was entrusted with countless national secrets and privy to countless sensitive dealings.

To Bolton, this is a selling point: His book is entitled The Room Where It Happened.

He rushed to write an account of his behind-closed-doors experiences and produced over 500 pages of manuscript for review. Not four months later, Bolton pulled the plug on the process and sent the still-under-review manuscript to the publisher for printing.

Many Americans are unable to renew their passports within 4 months, but Bolton complains that reviewing hundreds of pages of a National Security Advisor’s tell-all deserves a swifter timetable.

Access to sensitive intelligence is rarely consolidated in individuals, and it comes as no surprise to the Court that the government requested several iterations of review headed by multiple officers. But what is reasonable to the Court was intolerable to Bolton, and he proceeded to publication without so much as an email notifying the government.

Court further added that the NDA’s signed by Bolton barred publication of classified material but he likely published materials.

Government also argued that an injunction would atleast prevent any further spread of the book, such as limiting its audiobook release.

But for the said argument, Court stated that it is unavailing, Bolton has without securing final approval from national intelligence authorities published his book and may indeed have caused irreparable harm to the country.

With hundreds of thousands of copies around the globe—many in newsrooms—the damage is done. There is no restoring the status quo.

Hence, Court while concluding and denying the motion held that,

“.. Bolton has gambled with the national security of the United State and has exposed his country to harm and himself to civil and potentially criminal liability. “

The above facts do not control the motion before the Court and government has failed to establish that an injunction will prevent irreparable harm. [ U.S.A v. John R. Bolton, Case No. 1:20-cv-1580(RCL), decided on 20-06-2020]

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