Crime Without Punishment Conundrum Of Vicarious Liability In Criminal Law

Nidhi Raman & Ritesh Kumar

9 May 2020 9:46 AM GMT

  • Crime Without Punishment Conundrum Of Vicarious Liability In Criminal Law

    Thursday morning, we all woke up to the sad news of styrene gas leak from a chemical plant in Visakhapatnam which killed at least 11 persons and left over 1000 affected. Styrene gas is stated to be synthetic chemical, a derivative of benzene that is used to manufacture latex, synthetic rubber and plastic packaging, disposable cups etc. The colourless liquid evaporates easily, and can...

    Thursday morning, we all woke up to the sad news of styrene gas leak from a chemical plant in Visakhapatnam which killed at least 11 persons and left over 1000 affected. Styrene gas is stated to be synthetic chemical, a derivative of benzene that is used to manufacture latex, synthetic rubber and plastic packaging, disposable cups etc. The colourless liquid evaporates easily, and can be fatal if inhaled or ingested, and harmful, if it comes in contact with skin and eyes.

    The company which own this chemical plant was established in 1961 as "Hindustan Polymers" for manufacturing Polystyrene and its Co-polymers at Visakhapatnam and merged with Mc Dowell & Co. Ltd. of Vijay Mallya's UB Group in 1978. Pursuant to a 100% takeover by LG Chem (South Korea), Hindustan Polymers was renamed as LG Polymers India Private Limited (LGPI) in July, 1997.

    LG Polymers director Mr. PurnaChnadra Mohan Rao is reported to have said that the leak had occurred because of a spontaneous chemical reaction – auto polymerisation – that occurred because the plant had been shut for more than 40 days owning to the Covid -19 outbreak and the subsequent lockdown and the company had been preparing to resume operations from Thursday.

    While the cause of the deadly accident is a matter of investigation, on the same day i.e. Thursday, 7th May 2020, Vizag police has registered a First Information Report (FIR) against LG Polymers India Pvt. Ltd. with respect to the gas leak incident.

    The FIR registered against the company management at Gopalapatnam police station invokes Indian Penal Code (IPC) sections 278 (Making atmosphere noxious to health, 284 (Negligent conduct with respect to poisonous substance), 285 (Negligent conduct with respect to fire or combustible matter), 337(Causing hurt by act endangering life or personal safety of others) 338 (Causing grievous hurt by act endangering life or personal safety of others) and 304 IIA (culpable homicide not amounting to murder).

    The FIR is based on a complaint of village revenue officer of the village near the chemical plant which inter alia, stated that the gas leakage from the plant at about 3.30 a.m. affected Venkatapuram and other villages and resulted in loss of lives and sought action against the company management for the same.

    LG Polymers India Private Limited, being a separate legal entity, and also a wholly-owned subsidiary of LG Chem (South Korea) question would arise as to the likelihood of fixing criminal liability on the company and its management.

    A general organizational structure of a Corporation broadly consists of Shareholders, Board, CEO, Managers and employees and it acts through them unlike a human being. A corporation also cannot possess an "intent" to commit a crime. These obstacles in attaching criminal liability to a corporation has given rise to an interesting issue of vicarious liability in criminal law.

    According to Salmond, 'in general a person is responsible only for his own acts but there are exceptional cases in which the law imposes on him vicarious responsibility for the acts of others, however, blameless he himself is'

    Section 11 of the Indian Penal Code, 1860 defines the expression "Person" as including a company, association or body or persons, whether incorporated or not. However, 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. In almost all the offences under the Penal Code, one of the essential ingredients is the existence of the requisite criminal intent or knowledge. Hence a master will not be liable for the criminal acts of his servants unless it could be shown that he abetted the commission of the offence either by instigation or by any other method described in that section. Sections 154, 155 and 156of the Code are, however, in the nature of exceptions to this rule.

    A person is criminally liable for the acts of another if they are a party to the offence. In Suresh vs. State of U.P., reported in (2001) 3 SCC 673, the Supreme Court has observed that Section 34 IPC, recognises the principle of vicarious liability in the criminal jurisprudence. It makes a person liable for action of an offence not committed by him but by another person with whom he shared the 'common intention'. However, it is a rule of evidence and does not create a substantive offence.

    As observed by the Supreme Court, in the case of S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, (2005) 8 SCC 89, the normal rule in the case involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others.

    Undoubtedly, criminal liability can be fastened on a corporation and doctrine of vicarious liability has been invoked specifically under various statutes such as, the Prevention of Food Adulteration Act, 1954, the Negotiable Instruments Act, 1881, the Income Tax Act, 1961 and Essential commodities Act etc.,

    A perplexing situation arises when a corporation is sought to be prosecuted for offence under IPC where one of the essential ingredients is mens rea or the existence of the requisite criminal intent or knowledge.

    The courts in England have rejected the notion that a body corporate could not commit a criminal offence by adopting the doctrine of attribution and imputation. The criminal intent of the "alter ego" of the company/body corporate i.e. the person or group of persons that guide the business of the company, would be imputed to the corporation.

    Lord Denning in Bolton (H.L.) (Engg.) Co. Ltd. v. T.J. Graham & Sons Ltd. [(1957) 1 QB 159: (1956) 3 All ER 624 (CA)] reiterated the principle as follows:

    "A company may in many ways be likened to a human body. They have a brain and a nerve centre which controls what they do. They also have hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what they do. The state of mind of these managers is the state of mind of the company and is treated by the law as such. So you will find that in cases where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company. So also in the criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the directors or the managers will render the company themselves guilty."

    American Jurisprudence are also in same lines. In the 19 Corpus Juris Secundum, Para 1363 it has been observed:

    "A corporation may be criminally liable for crimes which involve a specific element of intent as well for those which do not, and, although some crimes require such a personal, malicious intent, that a corporation is considered incapable of committing them, nevertheless, under the proper circumstances the criminal intent of its agent may be imputed to it so as to render it liable, the requisites of such imputation being essentially the same as those required to impute malice to corporations in civil actions."

    A two Judges Bench of Supreme Court of India in the case of Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74 has applied the principle of "alter ego" to attribute mens rea to a corporation and has held that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs.The two Judges Bench also relied on the case of Standard Chartered Bank & Others vs. Directorate of Enforcement, (2005) 4 SCC 530, wherein the Constitution Bench considered the issue as to whether a company, or a corporation, being a juristic person, could be prosecuted for an offence for which mandatory sentence of imprisonment and fine is provided had held that there is no dispute that a company is liable to be prosecuted and punished for criminal offences.

    However, mere application of the doctrine of "alter ego" is not enough to implicate the managing directors, directors and other employees of the corporation. It is also a well settled principle that since all criminal offences are creature of statute, the amenability of a person to prosecute necessary depends upon the terminology employed in the statute.

    In the case of MaksudSaiyed v. State of Gujarat, (2008) 5 SCC 668, the Supreme Court has held as follows:

    "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".

    Similarly, in KekiHormusjiGharda v. Mehervan Rustom Irani: (2009) 6 SCC 475, it has been held as follows:

    "Penal Code, 1860, save and except some matters does not contemplate any vicarious liability on the part a person. Commission of an offence by raising a legal fiction or by creating a vicarious liability in terms of the provisions of a statute must be expressly stated. The Managing Director or the Directors of the Company, thus, cannot be said to have committed an offence only because they are holders of offices".

    The Judgment of the Supreme Court of India in Sunil Bharti Mittal vs. CBI, (2015) 4 SCC 609 has clarified many important principles of corporate criminal liability. Justice Sikri speaking for the three Judges Bench clarifies applicability of vicarious liability and alter ego principle in relation to corporate criminal liability in the absence of any specific legislative mandate. It has been held as under:

    "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. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 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".

    Recently, in the case of Shiv Kumar Jatia vs. State, AIR 2019 SC 4463, the Supreme Court has reiterated the principle as follows:

    "An individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused".

    In the present case, the FIR has been registered against the company, LG Polymers and its management under various provisions of IPC including under Section 304 IIA (culpable homicide not amounting to murder), which can be supported only by proving that on the fateful day when the Plant was run, it was run by the accused concerned with the knowledge that such running of plant was likely to cause deaths of human being. Mere act of running a plant as per permission granted by the authorities may not be a criminal act, even assuming that it was a defective plant and was dealing with a very toxic and hazardous substance as held by the Supreme Court in the case of Keshub vs. State of M.P., (1996) 6 SCC 129 which arose out of Bhopal gas disaster. Although, these findings have to be read as only based on materials gathered in the investigation and brought before the court till the stage of framing of charges, as clarified by the Constitution Bench while dealing with a curative petition in the case of CBI vs. Keshub Mahindra, (2011) 6 SCC 216.


    The principles on the point can be summarised by stating that the Indian Penal Code, 1860 does not contain any provision for attributing vicarious liability upon the directors or other high ranking officers of a company, even when the offence is said to be committed by the company, except if there is an abatement, the abettor may be joined with the principal offender or if there is a common or conspiracy involved. In the absence of any provision laid down under the statute, a director of a company or employees cannot be held to be vicariously liable for an offence committed by the company itself.

    Clearly, there is an absence of law to deal with disaster of this kind and law has to be amended to provide for adequate punishment and holding the management of a company legally responsible for any such mishap.

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    (Ritesh Kumar is an AOR, Supreme Court of India. Nidhi Raman is an advocate practicing in Supreme Court, Delhi High Court and other Forums. .)

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