Case BriefsSupreme Court

Supreme Court: The bench of MR Shah* and AS Bopanna, JJ has held that merely because someone is the Chairman/Managing Director/Executive Director/Deputy General Manager/Planner & Executor, automatically they cannot be held vicariously liable, unless there are specific allegations and averments against them with respect to their individual role in a criminal case.

Factual Background

The Court was dealing with a case wherein it was alleged that all the accused had conspired with common intention to lay the pipeline beneath the schedule properties belonging to the complainant without any lawful authority and right whatsoever.

It is pertinent to note that original accused no.1 was a company incorporated under the Companies Act, original accused nos. 2 & 3 being Chairman and Managing Director of Accused no.1- company and accused no.4 was arrayed as an accused being Deputy General Manager (Civil & Env.) of accused no.1. Accused No.5 was the Planner and Executor of the project work of accused no.1. Likewise, accused no. 6 was also a company incorporated under the Companies Act, accused nos. 7 & 8 were arrayed as an accused being Chairman and Executive Director respectively of accused no.6. Accused no.9 was the Site Supervisor of accused no.6 and accused no.10 was the Sub-Contractor under accused no.6 and accused nos. 11 to 13 were the employees of accused no.10.

Accused No.1 intended to lay water pipeline by the side of Mangalore-Bajpe Old Airport Road abutting the schedule properties. 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 schedule properties belonging to the complainant without any lawful authority and right whatsoever. In furtherance thereof, they had trespassed over the schedule properties 3 and demolished the compound wall which was having the height of 7 feet and foundation of 2 feet to a distance of 500 metres. They had cut and destroyed 100 valuable trees and laid pipeline beneath the schedule properties.

It was contended that

“… the accused have committed the act of mischief and waste and caused pecuniary loss of more than Rs.27 lakhs to the complainant. All the accused are jointly and severally liable to make good the loss to the complainant.”

Analysis

The bench noticed that except the bald statement that accused nos. 2 to 5 and 7 & 8 have conspired with common intention to lay the pipeline within the schedule properties belonging to the complainant, without any lawful authority and right whatsoever and in furtherance they have committed to trespass into the schedule properties of the complainant and demolished the compound wall, there were no other allegations that at that time they were present.

There were no further allegations that at the command of A2 to A5 and A7 & A8, the demolition of the compound wall has taken place. All of them are merely arrayed as an accused as Chairman, Managing Director, Deputy General Manager (Civil & Env.), Planner & Executor, Chairman and Executive Director respectively.

“Therefore, as such, 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 12 under Sections 427, 447, 506 and 120B read with Section 34 IPC.”

The Court held that issuing summons/process by the Court is a very serious matter and therefore unless there are specific allegations and the role attributed to each accused more than the bald statement, the Magistrate ought not to have issued the process.

Here are some authorities on the power of the magistrate of summoning of an accused in a criminal case:

Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609

“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.

(…)

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.”

Read more: Order issuing summons to Sunil Mittal and others in 2G Scam case by Special Judge, CBI, set aside

GHCL Employees Stock Option Trust v. India Infoline Limited, (2013) 4 SCC 505

In the order issuing summons, the learned Magistrate has to record his satisfaction about a prima facie case against the accused who are Managing Director, the Company Secretary and the Directors of the Company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them.

Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668

“13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The 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 pose unto himself the correct question viz. as to whether the complaint petition, 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 Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.”

Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749

“28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the 14 Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused.”

[Ravindranatha Bajpe v. Mangalore Special Economic Zone Ltd, CRIMINAL APPEAL NOS.1047-1048/2021, decided on 27.09.2021]

_________________________________________________________________________

Counsels:

For original complainant: Advocate Shailesh Madiyal

For accused persons: Advocates Nishanth Patil and P.P. Hegde


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsHigh Courts

Bombay High Court: The Division Bench of Z.A. Haq and Amit B. Borkar, JJ., while addressing the matter, observed that:

In the absence of a specific penal provision creating vicarious liability, an administrator of a WhatsApp group cannot be held liable for objectionable content posted by a member of a group.

Common intention cannot be established in the case of WhatsApp service user merely acting as a group administrator.

By the present application under Section 482 of the Code of Criminal Procedure, the applicant laid challenge to charge-sheet filed in the Court of Judicial Magistrate in pursuance of FIR registered with non-applicant 1 for offences punishable under Sections 354-A(1)(iv), 509 and 107 of the Penal Code, 1860 and Section 67 of the Information Technology Act, 2000.

As per the FIR, applicant was an administrator of a WhatsApp group, that accused 1 used filthy language against non-applicant 2 on a WhatsApp group of which applicant was an administrator, that despite accused 1 using filthy language against the non-applicant 2, applicant had not taken any action against accused 1.

Further, it was alleged that the applicant being the administrator had not removed nor deleted accused 1 from the WhatsApp Group.

In view of the above, non-applicant 2 lodged the FIR against the applicant and accused 1.

Hence, the applicant has, therefore, filed a present application challenging filing of charge-sheet and continuation of proceedings against the applicant.

Crux of the Issue

Whether an administrator of a WhatsApp group can be held criminally liable for the objectionable post of its member for committing offences punishable under Sections 354-A(i)(iv), 509 and 107 of the Penal Code, 1860 and Section 67 of the Information Technology Act, 2000?

Powers of the WhatsApp Group Administrator:

A group administrator has limited power of removing a member of the group or adding other members of the group. Once the group is created, the functioning of the administrator and that of the members is at par with each other, except for the power of adding or deleting members to the group.

The administrator does not have the power to regulate, moderate or censor the content before it is posted on the group. But, if a member of the WhatsApp group posts any content, which is actionable under law, such person can be held liable under relevant provisions of law.

Further, it was expressed that, a group administrator cannot be held vicariously liable for an act of a member of the group, who posts objectionable content, unless it is shown that there was a common intention or pre-arranged plan acting in concert pursuant to such plan by such member of a Whatsapp group and the administrator.

In the FIR it was stated that sexually coloured remarks were made by accused 1 and applicant being administrator of the WhatsApp group had not taken action of deleting the accused 1 from the group, nor had sought an apology from accused 1.

Decision

In Court’s opinion, non-removal of a member by the administrator of a WhatsApp group or failure to seek apology from a member, who had posted the objectionable remark, would not amount to making sexually coloured remarks by the administrator.

Court found that essential ingredients of Section 107 of IPC that the applicant had instigated or intentionally aided by his act or illegal omission to accused 1 to make sexually coloured remarks against non-applicant 2 were conspicuously absent. Hence the said Section will not be attracted in the present case.

Section 509 of the IPC criminalizes word, gesture, or act ‘intended’ to insult the modesty of a woman. In order to establish this offence, it is necessary to show that modesty of a particular woman has been insulted by a spoken word, gesture or physical act.

In the present matter, the above-stated offence cannot be made out against applicant, when the grievance of non-applicant 2 was that accused 1 had used filthy language against the non-applicant 2.

To constitute an offence under Section 67 of the Information Technology Act, 2000, a person must publish or transmit an obscene material in electronic form.

High Court in view of the above discussion, found no allegation or material that the applicant had either published, transmitted or caused to be published or transmitted in electronic form any material, which was lascivious or appealed to prurient interest or its effect was such to tend to deprave and corrupt persons who were likely to read, see or hear the matter contained.

Bench added that the applicant had neither published nor transmitted or caused to be published or transmitted any electronic form, any material which was obscene in nature.

Lastly while concluding, the High Court held that parameters of exercise of the powers conferred on this Court under Section 482 CrPC being settled, that in order to prevent the abuse of process of any Court and to secure the ends of justice, this power can be exercised.

Bench stated that the present case is the one where power needs to be exercised.

Taking the overall view of the matter, Court was satisfied that even if allegations in the FIR were accepted as correct and considering the material in charge sheet on its face value it does not disclose essential ingredients of offences alleged against the applicant under Sections 354-A(1)(iv), 509 and 107 of the Indian Penal Code and section 67 of the Information Technology Act, 2000.

Hence the continuation of present proceedings against the applicant would amount to an abuse of process of Court. [Kishor v. State of Maharashtra, 2021 SCC OnLine Bom 654, decided on 01-03-2021]


Advocates before the Court:

Mr R.M.Daga, Advocate for the applicant. Mr T.A.Mirza, A.P. P. for the non-applicant No.1.

Mr Sanjay A. Bramhe, Advocate for the non-applicant No.2.

Case BriefsHigh Courts

Allahabad High Court: Ravi Nath Tilhari, J., addressed a matter wherein a person being the director of the company signed a cheque on behalf of the company and since the said cheque got dishonoured, he was made liable, without the company being made liable under the offence of Section 138 of Negotiable Instruments Act, 1881.

The instant petition was filed under Section 482 of the Code of Criminal Procedure, 1973 for quashing of summoning order passed by Additional Chief Judicial Magistrate under Section 138 of the Negotiable Instruments Act.

Facts as stated by the applicant

Applicant has been stated to be the Director of a Company and complainant/OP 2, an employee in the railways, by giving assurance of contract of road construction from his superior officers in favour of applicant’s company obtained post-dated cheque of 5 lakh rupees in terms of security money.

Complainant had assured the applicant that once he starts earning profits from the said contract work he would return the post-dated cheques.

However, applicant without any prior notice to the company, complainant presented the cheque in the bank which was dishonoured due to non-availability of funds. One of the legal notice, though was not received by the applicant, but the second notice was served.

Points that arose for consideration:

High Court formulated the following points of consideration:

  • Whether criminal prosecution against the person in charge of, and responsible for conduct of the business of the company under Section 138 NI Act, can be maintained, in the absence of any prosecution of the Company for such offence and without making the company an accused, in view of Section 141 of the NI Act?
  • Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of director of the company?
  • Whether the orders under challenge and the criminal proceedings against the applicant deserve to be quashed in the exercise of jurisdiction under Section 482 CrPC?

Analysis of the above points:

In order to consider the first point, Court referred to Sections 138 and 141 of the Negotiable Instruments Act, 1881.

On perusal of the said provisions, the essential ingredients of offence under Section 138 NI Act as laid down by the Bench were:

  • The person drew a cheque on an account maintained by him with the banker
  • When such a cheque is presented to the bank is returned by the bank unpaid
  • such cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier;
  • the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to the payee
  • Such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding return of the cheque, as unpaid and
  • Inspite of the demand notice the drawer of the cheque failed to make the payment within a period of 15 days from the date of receipt of the demand notice

For the offence to be constituted under Section 138 NI Act, all the above ingredients need to co-exist.

Supreme Court decision in Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, held that Section 141 of NI Act is concerned with the offences by the company. It makes the other persons, vicariously liable for commission of an offence on the part of the company.

The vicarious liability gets attracted when the condition precedent laid down in Section 141 NI Act stands satisfied. There can be no vicarious liability unless there is a prosecution against the company. For maintaining a prosecution under Section 141 NI Act, arraying of the company as an accused is imperative.

 In Supreme Court’s decision of Standard Chartered Bank v. State of Maharashtra, (2016) 6 SCC 62, it was held that there cannot be any vicarious liability unless there was a prosecution against the Company.

In Harihara Krishnan v. J Thomas, (2018) 13 SCC 663, Supreme Court held that Section 141 stipulates the liability for the offence punishable under Section 138 NI Act when the person committing such an offence happens to be a company.

In Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, it was settled that for maintaining a prosecution against the person in charge of and responsible for conduct of the business of the company under Section 138 NI Act, arraigning of the Company as an accused is imperative in view of Section 141 of the Act, as such a person can only be held vicariously liable.

With regard to point 1, hence Court held that such a person, cannot be prosecuted unless there was prosecution of the company.

Second Point

 Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of the Director of the Company?

The above-stated question can be determined from perusal of the cheque itself. It is one of the essential ingredients to constitute an offence under Section 138 NI Act, that the person drew a cheque on an account maintained with the Banker and the existence of this ingredient is to be proved from the document itself, i.e. the cheque, and for its proof no other evidence is required. Hence, Court could determine if the cheque was issued as authorized signatory or in personal capacity by the applicant by exercising its jurisdiction under Section 482 CrPC.

On perusal of the copy f the cheque it was found that the said was signed by Sanjay Singh, the applicant for Udit Infraheights Private Limited, as its authorized signatory.

Hence the cheque was not issued in the applicant’s personal capacity.

In the absence of the company, as accused, any offence was not made out, even prima facie, against the applicant for his summoning under Section 138 read with Section 141 of the NI Act.

While referring to the Supreme Court decision in Ashoke Bafna v. Upper India Steel Manufacturing and Engineering Company Ltd., (2018) 14 SCC 202, it was held that before summoning an accused under Section 138 NI Act, the Magistrate is expected to examine the nature of the allegations made in the complaint and the evidence, both oral and documentary, in support thereof, and then to proceed further with the proper application of mind to the legal principle of the issue.

Last Point

 With regard to the last point of consideration, Bench referred to the decision of Supreme Court in Rishipal Singh v. State of U.P., (2014) 7 SCC 215, Supreme Court, while considering the scope of Section 482 CrPC held that when a prosecution at the initial stage is asked to be quashed, the test to be applied is as to whether the uncontroverted allegations as made in the complaint prima facie establish the case.

In Pooja Ravinder Devidasani v. State of Maharshtra, (2015) 88 ACC 613, Supreme Court held that the Superior Court should maintain purity in the administration of justice and should not allow the abuse of process of the Court.

Therefore, Court opined that the complaint was not filed against the company, as the company was not made a party accused and no vicarious liability could be imposed upon the accused applicant.

Since, the cheque was not signed by the applicant in his personal capacity, the complaint could not have proceeded against him and no offence could be made out against the applicant.

Petition was allowed and the orders challenged were quashed. [Sanjay Singh v. State of U.P., 2021 SCC OnLine All 120, decided on 10-02-2021]

Case BriefsHigh Courts

Madras High Court: G.K. Ilathiraiyan, J., while addressing the instant matter, observed that, a person who is inducted as the Non-Executive Director of an accused company and not responsible for the day-to-day affairs of the company, he/she cannot be vicariously liable for the offence committed by the company.

Petitioners Counsel submitted that the petitioner was arrayed as Accused 3 on the complaint filed by the respondents for the offences punishable under Section 138 of Negotiable Instruments Act, 1881.

Magistrate took cognizance as against the petitioner when there was absolutely no specific allegation against the petitioner to attract the offences under Section 141 of NI Act and issued summon without application of mind.

Petitioner being merely Director of the company was not liable to be prosecuted for the offences under Section 141 of NI Act.

Further, it was stated that the respondent cannot presume every Director knows about the transaction while fastening criminal liability as against the Director of the Company.

To attract the offences under Section 141 of NI Act as against the petitioner, the complainant should have specifically averred in the complaint that at the time of offence the petitioner was in charge of and responsible for the conduct and the business of the company.

Adding to its contention, it was also stated that if a person who was in charge of the day to day management of the company or by stating that he / she was in charge of affairs of the company cannot be vicariously made liable under Section 141(1) of NI Act.

Counsel for the petitioner Nithyaesh Natraj and Counsel for the respondent R. Prasanna Vineeth Durai.

Dishonour of Cheque

On the Complaint lodged, in total there were 4 accused of the offences punishable under Sections 138 and 141 of NI Act. It was alleged that the accused persons had already availed term loan from the complainant to the tune of Rs 65 lakhs. Accused towards partial discharge of their liability issued eight cheques in favour of the respondent but the same were returned dishonoured on being presented for the reason “account closed”.

Respondent after serving statutory notice under Section 138 of NI Act, initiated proceedings for the offences punishable under Sections 138 and 141 of NI Act against the accused persons.

Respondent made allegation foisting liability on the petitioner in the complaint as follows:

“the second accused being the Managing Director and the third accused being one of the Director who are respectively in charge of the managing all such business activities of the first accused company and also running the day to day affairs naturally aware about their liability”.

Analysis and Decision

Bench stated that Section 141 of the NI Act does not make all the Directors liable for the offence. The person sought to be made liable should be in charge and responsible for the conduct of the business of the company at the relevant time.

Therefore, it was stated that there is no deemed liability of the Director in such case.

Several Supreme Court decisions have held that the complaint has to specifically say as to how and in what manner Director was responsible for the conduct of the business of the company.

Court held that unfortunately, in the impugned complaint, the allegation did not satisfy the requirements of Section 141 of the NI Act.

Further, on perusal of the complaint, Court observed that the petitioner was inducted as the Non-Executive Director of the first accused company, therefore the petitioner was not responsible for the day to day affairs of the company and hence cannot be made liable vicariously for the offence committed by the company.

Therefore, the Court, in order to secure ends of justice, opined to necessarily interfere with the proceedings in exercise of its jurisdiction under Section 482 of CrPC.

Hence, the Criminal Original Petitions were allowed and the proceedings on the file of Metropolitan Magistrate were ordered to be quashed as far as the petitioner was concerned, whereas, for other accused, the trial court has been directed to complete the trial. [Vijaya Arun v. New Link Overseas Finance Ltd., Crl. OP Nos. 5, 8 & 11 of 2020, decided on 18-08-2020]

Case BriefsHigh Courts

Allahabad High Court: While deciding a petition filed under Article 227 of the Constitution of India, Suresh Kumar Gupta, J., dismissed the same and declined to interfere in the judgment delivered by Sessions Court.

The present petition has been filed by the petitioner to set aside the impugned orders dated 31-10-2018 passed by Additional Court No. 3, Agra in Complaint No. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of Negotiable Instruments Act, 1881(Hereinafter referred as N.I. Act) and the order dated 6-02-2020 passed by Additional Sessions Judge, Agra in Criminal Revision No. 552 of 2018 (Dhirendra v. State of U.P. ) and to quash the summoning order dated 28-3-2012 as well as an entire proceeding of Complaint Case No. 1500 of 2011 pending in the Additional Court No. 3, Agra.

The factual matrix in the instant case is such that the present petitioner borrowed Rs 1,00,000 from respondent 2 and handed over cheques bearing Nos. 850213 & 850214 for repayment of the borrowed amount. However, the cheques were dishonoured by the bank due to insufficient amount in the account subsequent to which respondent 2 served a notice to the petitioner on 18-10-2011. Later, on 08-11-2011, respondent 2 filed a complaint case no. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of N.I. Act against the petitioner in the trial court. The trial court vide its order dated 28-3-2012 has taken cognizance and summoned the petitioner.

Counsel for the petitioner, Deepak Kumar Kulshrestha has relied on Section 138 of the N.I. Act, submitting that the complainant/respondent is incompetent to lodge the prosecution as the cheques were issued by the firm Rashmi Arosole & Chemicals and the petitioner is the proprietor of this firm but the firm is not arraigned as an accused. He relied on the judgments delivered in the cases of Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 and Devendra Kumar Garg v. State of U.P., 1990 SCC OnLine All 806 and added that until and unless company or firm is arraigned as an accused director or the other officer of the company/firm cannot be prosecuted/punished in the complaint.

Counsel for the respondent, S.B. Maurya attempted to refute these contentions by submitting that the cheques were drawn by the petitioner in his personal capacity and were given by way of security for payment of money. The circumstances do not warrant the arraignment of the aforementioned firm as a party.

The Court perused the cheques closely and concluded that the cheques bear the petitioner’s signature and that there is no dispute with regard to the fact that the petitioner is the sole proprietor of Rashmi Arosole & Chemicals. Also, on perusal of the registration certificate of the firm, it can be established that the petitioner is the sole proprietor of the firm namely Rashmi Arosole & Chemicals.

Upon careful consideration of the facts, circumstances and arguments advances, the Court observed that-

“While a partnership results in the collective identity of a firm coming into existence, a proprietorship is nothing more than a cloak or a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a ‘concern’ of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity.”

The Court was able to conclude that in a sole proprietary concern, vicarious liability cannot arise because there’s only one person involved. The identity of the sole proprietor and his concern remain one, even if the sole proprietor may adopt a different name for his concern. Hence, there is no defect in the complaint lodged by the respondent. The sole proprietorship firm need not be impleaded for the respondent to realise his claim against the petitioner.

In view of the above, the petition has been dismissed for lack of merit. The Court found no reason to interfere in the orders dated 31-10-2018 passed by Additional Court No. 3, Agra and the order dated 6-2-2020 passed by Additional Sessions Judge against the petitioner. [Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, decided on 13-10-2020]


Yashvardhan Shrivastav, Editorial Assistant has put this story together

Case BriefsForeign Courts

Court of Appeal of the Democratic Socialist Republic of Sri Lanka: A Division Bench of K.K. Wickremasinghe and K. Priyantha Fernando, JJ., dismissed an appeal filed aggrieved by the judgment of High Court which convicted the three appellants for the count of murder punishable under Section 296 to be read with Section 32 of the Penal Code, sentencing them to death and the fourth appellant was convicted for a lesser offence punishable under Section 314 of the Penal Code. The appellants contended that prosecution had failed to prove the charge against the 1st Appellant beyond a reasonable doubt, there appears a conflict of evidence between the witnesses; evidence led at the trial negates common murderous intention on the part of 2nd and 3rd appellant and thus imputation of vicarious liability was legally and factually flawed.

The deceased was a police officer. His wife was a school teacher and the deceased and the wife were living in the teacher’s quarters inside the school premises. The witness stated that when she had gone for band practices she saw the 2nd and 3rd appellant had gone to the quarters that the deceased was living and had tapped on the door and then they were seen fighting and then the deceased went inside and the appellants moved towards the road. After a while the deceased had come out of the house, dressed in his police uniform and had gone towards the road, then the 2nd and 3rd Appellants and the 4th  Accused carrying poles had come towards the deceased and had assaulted him. Another witness had told that the 1st Appellant had stabbed the deceased.

The Court while dismissing the appeal held that the Trial Judge had considered all the evidence adduced at the trial, analyzed the same and rightly decided that the 1st Appellant stabbed the deceased that caused his death, there was no evidence of the 1st Appellant using his right of self-defence, at the trial and there was found no conflict between the evidence of the witnesses that would affect their credibility. Lastly, as per the established facts, the intention was clear that it was to kill the deceased when that injury was caused. There were 10 more injuries observed by the Medical Officer who conducted the autopsy on the body of the deceased, thus the High Court has rightly come to the correct conclusion that the prosecution has proved the charge of murder against the 1st, 2nd and 3rd Appellants beyond a reasonable doubt. [Maduwanage Francis Wimalaratne v. Attorney General, Court of Appeal Case No. HCC 226-227 of 2012, decided on 17-01-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Justice V.K. Jain (Presiding Member), while disposing of the present application with respect to negligence of doctors, noted a very significant point, that,

“A doctor writing a prescription advised by any doctor cannot be said to be negligent only on account of his writing such a prescription.”

In the present case husband of the complainant visited OP-2 (Dr Sandeep Agarwal) in Sahara Hospital, Lucknow. Later he was admitted there for a day; during his stay at the hospital his pathology tests were done and it was found that his serum creatinine was found to be excessive from what is to be in the range prescribed.

No investigations or treatment for monitoring and management of high creatinine which was found in his reports indicating kidney disease was advised to him during the time of discharge and nor was he asked to consult the Nephrologist for the said purpose. On being admitted again to the hospital, he was seen by OP-2 as well as OP-3 (Dr Muffazal Ahmed). OP-3 had informed the family of the deceased and the deceased as well of suffering from the end-stage renal disease for which he required dialysis.

Further, it was stated that the complainant was allegedly given iron injection during his stay at the hospital though such injection according to the complainant was contra indicated in case of a person suffering from kidney disease. He was also prescribed iron injection without checking his ferritin level.

Complainant also stated that medicine Metformin was advised to the deceased which was again contra indicated in his case. Medicine named Liofen was also prescribed to him which was also contra indicated in the deceased’s case.

In view of the above, complainant alleged negligence on the part of OPs in the deceased’s treatment. Complainant thus approached the Commission seeking compensation for damages.

The above complaint has been resisted by the opposite parties.

Case of OPs is that they thought that the serum creatinine level might have increased due to dehydration. The discharge summary, however, does not record any such assumption. Even if the opposite party / treating doctor was of the opinion that high creatinine level could be due to dehydration, the least expected from him was to note it down in the discharge summary and advise the patient to get his creatinine level checked regularly, since the said level would have come down in due course had the same been caused by dehydration. Considering the high level of creatinine the OP-2 ought to have suggested consultation by a nephrologist to confirm the cause of the increase in serum creatinine. Therefore, it would be difficult to say that the OP-2 was negligent in the treatment of the complainant, he had not given any treatment or advise to him for the monitoring, management and treatment of the high level of serum creatinine found nor having advised him to consult a Nephrologist during the course of his treatment.

It is to be noted that ‘Encicarb’ was advised to the deceased to be infused daily for two hours for two days after a detailed discussion.

Treating doctor should first get the TSAT and Ferritin level of the patient checked before initiating ESA therapy. Admittedly, ferritin and TSAT of the complainant were not got checked soon before 18.3.2014 when intravenous iron Encicarb was advised to him. His ferritin levels were last checked on 10.12.2013 and more than three months had already expired by the time iron injection encicarb was advised to him on 18.3.2014. In view of the guidelines issued by Indian Society of Nephrology advising the injection Encicarb on 18.3.2014, without checking TSAT and ferritin was an act of negligence on the part of the opposite party No.3.

Tribunal on noting the material submitted by the complainant and considering the facts and circumstances of the case found OP-2 and 3 to be negligent in the treatment of complainant who died during the pendency of the complaint. Since OP-2 and 3 were working with OP-1, the said opposite party is vicariously liable for the negligent acts of OPs 2 & 3.

The next question for consideration was with respect to the quantum of compensation. Though the complainants have claimed compensation running into crores of rupees, the facts, and circumstances of the case do not justify such a huge and fanciful compensation. The complainant was alive when this complaint was instituted and he died during the pendency of this complaint. There is no evidence to prove that the complainant died on account of the deficiency attributed to the opposite parties in his treatment. His creatinine level was pretty high even at the time it was checked in Sahara Hospital.

Thus, Complainant was entitled to an aggregate of Rs 30 lakhs. [Gyan Mishra v. Sahara India medical Institute Ltd., 2019 SCC OnLine NCDRC 333, decided on 07-11-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Appellate Tribunal (SAT): Tarun Agarwala, J. (Presiding Officer) and Dr C. K. G. Nair, Member quashed an order passed by the Securities and Exchange Board of India (‘SEBI’) which imposed a ban on auditing firm, however, upheld the punitive damages awarded for wrongful gain.

In the present case, the appellants being the auditing firm, Price Waterhouse Coopers (‘PWC’) had challenged an order passed by the SEBI wherein a two-year ban was imposed on the firm from auditing any listed company due to its involvement in the 2009 Satyam Scam. The auditing firm had been the auditor of the Satyam Computers Services Limited (‘Satyam’) during the period 2000-2009 and in the year 2009, the Chairman of Satyam stated that the books of accounts of Satyam were not true and the company was involved in large scale financial irregularities and misappropriation of funds. SEBI, upon an investigation of the books of Satyam, found out that PWC was the statutory auditor of the company and there were fabrication, falsification and misrepresentation in the books of account and financial statements of Satyam.

The senior counsels representing the appellants, Janak Dwarkadas along with Mukul Rohatgi questioned the jurisdiction of SEBI in banning an audit firm and submitted that the impugned order deals with the roles of an auditor and its contravention which are prescribed by Institute of Chartered Accountants of India (‘ICAI’) and thus, having the jurisdiction to deal with matter relating to contravention by audit firms. It was contended that as on the date of the impugned order there were new partners who were not partners of the firms during the period 2000 to 2009 and thus, banning them from doing audit work of listed Company merely because those are presently partners in PWC firms is wholly arbitrary and illegal.

The senior advocates representing the respondents, Ravi Kadam being assisted by Kevic Setalvad, submitted that the impugned order does not suffer from any illegality since the Satyam scam had a direct and adverse effect on the securities market. They also urged that failure to comply with the basic auditing standards constituted fraud and thus it was ideal to impose a ban on the auditing firm.

The Appellate Tribunal upon perusal of facts and circumstances of the case stated that it was true that the network of firms under PWC alleged to have been involved in the scam was not under the PWC hence had no stake and vicarious liability of a chartered accountant cannot be extended to a firm. The Appellate Tribunal stated that “in the absence of any finding of connivance or collusion or intention or knowledge on the part of the ten firms in the audit of Satyam Computers, and in view of the clear cut directions of the Bombay High Court, no directions could have been issued by the Whole Time Member against the ten firms.” Dealing with the issue of jurisdiction the Tribunal said SEBI did not have any authority to look into the quality of audit and auditing services and it can only take remedial and preventative action. The direction issued is neither remedial nor preventive, but punitive in nature and thereby quashing the order passed by the SEBI. However, the Appellate Tribunal upheld SEBI’s direction on disgorgement of Rs 13 crore from the auditor along with interest of 12% since 2007 for the wrongful gain.[Price Waterhouse & Co. v. Securities and Exchange Board of India, 2019 SCC OnLine SAT 165, decided on 09-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Coram of Justice Tarun Agarwala (Presiding Officer), Dr C.K.G. Nair (Member), and Justice M.T. Joshi (Judicial Member), quashed an order by the WTM who held the appellant vicariously liable for an act of the Company she worked in.

SEBI received a complaint against Silicon Projects India Limited (SPIL) in respect of the issue of Secured Redeemable Non-Convertible Debentures (NCDs) and consequently made an investigation as to whether SPIL made any public issue of securities without complying with the provisions of the Companies Act, 1956. On investigation, it was found that SPIL had made an offer of NCDs in the financial years 2009-10, 2010-11, 2011-12 and raised an amount of Rs 18.03 crore from 406 allottees. This offer was found to be in violation of the provisions of SEBI Act, 1992, the Companies Act, 1956 and SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (ILDS Regulations). Accordingly, SEBI passed an order on 03-03-2016 for their debarment and refund to the investors against SPIL and its Directors. Since the directions were not complied with, SEBI initiated recovery proceedings against the Company and its Directors.

Along with the appellant, Shib Narayan Das and Antara Mukherjee were also Directors of SPIL during the issuance of the NCDs and were also engaged in fund mobilizing activity. SEBI issued an interim order on 07-03-2016 restraining them from accessing the securities market and further prohibited from buying, selling or dealing in the securities market and asked them to provide a full inventory of all their assets and properties.

By the same interim order, the appellant and the other Directors were directed to show cause as to why action should not be taken under Section 11 and 11-B of the SEBI Act to refund the money collected with interest.

The appellant filed a reply contending that she was appointed as a receptionist in 2009 on a salary of Rs 3000 and in March 2011, she was made a Director of the Company and her salary was increased to Rs 5000 per month. She gave her resignation as a Director on 01-12-2011. She contended that she had nothing to do with the issuance of NCDs and had never attended any meeting of the Board of Directors nor was a signatory to any Resolution in relation to the issuance of NCDs. Instead, Shib Narayan Das in his capacity of Chairman and Director of the Company used to sign all the necessary documents. Further, she was never involved in any activity of the Company. When CBI investigated the case against the Company in 2016, all the Directors including Shib Narayan Das was arrested but the appellant was not.

The WTM passed an order holding that the appellant is jointly and severally liable to refund the money collected by SPIL as she was a Director in the Company and cannot plead ignorance of the affairs of the Company. The appellant was aggrieved by this order and filed an appeal to challenge this order.

The Tribunal held that the said order was patently erroneous and against the provisions of Section 73(2) of the Companies Act as it was made on the assumption that in the absence of any officer being nominated as an officer in default then all the Directors were liable under Section 5(g) of the Companies Act. The WTM did not rely on any evidence on record and therefore, their order was illegal and unsustainable.

Usually, when an offence is committed by a company, the liability is not imposed on all the officers of the company en bloc. The Companies Act makes a departure from this pattern. It gives an opportunity to the board of directors to distribute the work as between the members of the board or to appoint a managerial person. If nothing of this sort is done, only then the whole board is liable to be prosecuted. In this case, it was not possible to hold one Director vicariously responsible for the acts of the Directors in charge of day-to-day affairs of the Company. The spirit of Section 27 of the SEBI Act indicates that an appellant who has nothing to do with the day-to-day affairs of the Company cannot be held guilty of any violation as there is no such thing as vicarious liability under Section 11-B of the SEBI Act. The order was quashed and the appeal was allowed.[Sayanti Sen v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 132, decided on 09-08-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Dispute Redressal Commission (NCDRC): A Coram of R.K. Agrawal (President), J. and M. Shreesha (Member) allowed an appeal against the order of State Consumer Dispute Redressal Commission, Punjab that directed a doctor to compensate an aggrieved couple for the death of their three year old daughter caused by gross negligence.

Respondent herein was the father of a three-year-old girl who was diagnosed with blood cancer. The child was admitted to appellant-hospital where Dr Raman Arora (appellant 3 herein) prepared a written protocol of the treatment detailing that the patient was to be given four cycles of chemotherapy for which injections of Vincristine were to be given intravenously and injections of Methotrexate were to be administered intrathecally. Dr Vandana Bhambri and Dr Harjit Singh Kohli assisted him. The patient was given three cycles of chemotherapy, and then her bone marrow test was conducted which showed that her condition had improved. The requisite injections for the fourth cycle were handed over to Dr Harjit Singh Kohli in a sealed packet where it was clearly written that the medicine Vincristine was to be administered intravenously only. However, Dr Kohli administered the injection intrathecally, which led to the depletion in the health of the patient and ultimately she died. The aggrieved parents of child (respondents herein) filed a complaint before the State Consumer Dispute Redressal Commission which held that the doctors and hospital (vicariously) committed gross negligence. The present appeal was filed by the hospital and doctors challenging the said order.

Learned counsel for appellants Y. Rajagopala Rao, contended that the injection Vincristine was not administered on the given date, and the State Commission had erred in giving a finding that Vincristine was administered by an anesthetist i.e. Dr Kohli. Furthermore, he stated that the Histopathology report and the chemical examination report read together with the post-mortem report did not state that the death was due to Vincristine injection. Moreover, the State Commission had failed to consider the expert report which opined that the cause of death in the present case was Toxaemia of Acute Lymphoid Leukaemia, which is a natural cause in case of cancer patients. Also, he argued that Dr Raman Arora is not liable as he did not administer the medicine.

Learned counsel for respondents, Prashant Sareen, contended that the injection was given by Dr Kohli who had testified that he, along with the help of Dr Vandana, had administered the injection intrathecally and later on acquired the knowledge that such administration was fatal. Moreover, he accused Dr. Arora for being negligent as he did not even read the ordinary precautions for treatment.

The Commission relied on S.K. Jhunjhunwala v. Dhanwanti Kumari, (2019) 2 SCC 282, and applied the principle of Bolam Test that gives grounds to hold a professional liable for negligence; and ruled that the doctors were negligent in their conduct. It was held that that admittedly the entire standard protocol was given by Dr Raman Arora and the entire treatment was rendered under his care. Therefore, he was liable for any acts/ commission or omissions done by his team or the assistants who assisted him in rendering treatment to the patient.

The National Commission remarked that the State Commission had rightly relied on the expert opinion given by the Indian Medical Association, Ludhiana which held the doctors responsible for gross negligence.

Placing reliance on Achutrao Haribhau Khodwa v. State of Maharashtra, (1996) 2 SCC 634, it was held that the hospital was vicariously liable for the negligent acts of its doctors.[Mohan Dai Oswal Cancer Treatment & Research Foundation v. Prashant Sareen, 2019 SCC OnLine NCDRC 75, decided on 24-05-2019]

Case BriefsHigh Courts

Delhi High Court: The Bench of R.K. Gauba, J. interfered with the impugned order passed by Metropolitan Magistrate and quashed the summon issued against petitioner.

Petitioner was a Non-Executive Nominee Director of Vasan Health Care (P) Ltd. A complaint was filed against certain persons including petitioner under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheque which was issued on the account of Vasan Health Care. In regard to the same, summoning orders were issued against the petitioner.

Sushil Bajaj and Shalin Arthwan, Advocates for the petitioner contended that proceedings against him were an abuse of the process of law as his position in the company was only that of aNon-Executive Nominee Director and he had no role to play in day-to-day affairs of the company.

The High Court served notice of the petition on the respondent but they did not file any reply and nor did they appear before the Court. As such, the Court accepted as indisputable the documents filed by the petitioner confirming his position in the company as claimed by him. Relying on Pooja Ravinder Devidasini v. State of Maharashtra, (2014) 16 SCC 1, the Court held that since at the relevant time, the petitioner could not be said to be at helm of the affairs of the company, therefore no vicarious liability could be fastened on him. As such, the summoning order issued against the petitioner was quashed. [Bhardwaj Thirvenkata Venkatavaraghavan v. PVR Ltd., 2019 SCC OnLine Del 6774, dated 29-01-2019]

Case BriefsForeign Courts

Supreme Court of Sri Lanka: The Supreme Court affirmed the High Court’s award of Rs. 3,500,000/- as damages to the plaintiff in a case of accident caused due to the negligence of gatekeepers appointed by the Sri Lankan Government.

The plaintiff is the wife of the deceased who was killed in an accident while he was driving his car through a level crossing. An unscheduled train passed through the crossing at the time which hit the plaintiff’s car, fatally injuring him. The fact being argued upon was whether leaving the gates of the level crossing by the gatekeepers amounted to negligence.

The Court affirmed with the judgment of the High Court and the District Court that it was the all important duty of the gatekeepers to shut the gates of the crossing before the arrival of the train. Failure to do so amounted to negligence on the part of the gatekeepers. Any person, who sees that the gates are open, can rightfully assume that there are no trains arriving at that time and hence he can safely cross. This is exactly what happened with the deceased and hence there was no contributory negligence on his part. Since the defendants were employed as gatekeepers by Sri Lankan Railways and the negligence was within the scope of employment, therefore Sri Lankan Railways shall also be made vicariously liable. The liability of the Sri Lankan Railways also arises out of the fact that they never informed the gatekeeper defendants about the arrival of an unscheduled train. The appeal was dismissed on these grounds. [Bhadra De Silva Rajakaruna v. General Manager of Railways, SC Appeal No. 62/2013, decided on 01.08.2017]