Office Bearer Can't Be Held Vicariously Liable In Criminal Proceedings Unless Company Is Made Accused: Jammu & Kashmir High Court Reiterates

The Jammu and Kashmir High Court recently observed that vicarious liability cannot be attached to the office bearers of a company till impleadment of the company as an accused. The observation came from Justice Sanjay Dhar: "Each and every action of the petitioners was in their capacity as office bearers of the company and whatever they did, the same was done on behalf of the company. Even the money was received from the respondent/complainant in the account of the company. Thus, without impleading the company as an accused, the proceedings against the petitioners could not have been initiated. The learned Chief Judicial Magistrate has, therefore, erred in issuing process against the petitioners." The respondent had filed a complaint before the Court of Chief Judicial Magistrate, Anantnag, alleging that the petitioners entered into a criminal conspiracy by forming a company, namely, Aizen Communications Pvt. Ltd. It was alleged that the respondent was introduced by petitioner no 2. to other petitioners who were on tour to Kashmir Valley to promote the business of the aforesaid company. A meeting was held by the petitioners with the respondent at Anantnag wherein the respondent was invited to invest money in the company and the company, in return, assured to pay double the amount within a span of three years with bonus. The instant petition was filed challenging the complaint filed by respondent against them, alleging commission of offences under Section 420, 120-B IPC. Challenge was also thrown to the proceedings initiated by the Chief Judicial Magistrate, on the said complaint. Respondents alleged that the petitioners published notices in national as well as local media making false representations in the name of the company, Aizen Communications Pvt. Ltd., with an intention to cheat the public in general and the respondent in particular. It is further alleged that in one of the advertisement notices, it was provided that if anybody pays 51 installments of Rs.4,000/ in one go, the company would return double the amount within three years and will further pay an amount of Rs.1,836 per working day for 200 days with a foreign tour of 07 days at their expenses. It was averred that the respondent/complainant, believing in these representations, was duped of Rs. 3 crores. It was also further averred that the money that was paid by respondent/complainant was deposited by him in the bank account of the company, the details whereof have been given in the complaint. It was alleged that the petitioners, after collecting huge wealth, stopped communicating and fled away from the Valley thereby committing the offence of cheating. It was also alleged that the petitioners induced the respondent/complainant to deliver the property in the name of the company by making false and deceptive representations. Lastly, it was submitted that the offences have been committed by the company in connivance with the petitioners. The petitioner argued that firstly, the impugned complaint as against the petitioners cannot proceed without impleading the company as an accused. Secondly, the petitioners/accused were residing beyond the limits of local jurisdiction of the trial Magistrate, as such, it was not open to the learned Magistrate to issue process against them without conducting enquiry/investigation in terms of Section 202 Cr. P. C. Court said that there can be no quarrel with the proposition that vicarious liability of Managing Director, Director or any other office bearer of a body corporate would arise only if there exists any provision in that behalf in the Statute. Further it was observed that it is settled law that even where vicarious liability is fastened under certain statutes, without impleading company as a party, no proceedings can be initiated against its Directors/office bearers. Court also relied on the ratio relied by the Supreme Court in Sharad Kumar Sanghi v. Sangita Rane wherein the Supreme Court clearly laid down that when the company has not been arrayed as an accused, no criminal proceedings can be initiated against its Managing Director. Based on the above discussion, the court observed that the Penal Code does not contain any provision for attaching vicarious liability on the office bearers of a company. Unless there are specific allegations against the office bearers of the company and the company is made as an accused, the criminal proceedings against its office bearers cannot be initiated. Coming back to the present case, court said that each and every action of the petitioners was in their capacity as office bearers of the company and whatever they did, the same was done on behalf of the company. "Even the money was received from the respondent/complainant in the account of the company. Thus, without impleading the company as an accused, the proceedings against the petitioners could not have...

Office Bearer Can't Be Held Vicariously Liable In Criminal Proceedings Unless Company Is Made Accused: Jammu & Kashmir High Court Reiterates

Zeb Hasan

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