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Officials not vicariously liable for Company's acts: SC

The Statesman logo The Statesman 28-09-2021 SNS
a large lawn in front of a house: Officials not vicariously liable for Company's acts: SC © Provided by The Statesman Officials not vicariously liable for Company's acts: SC

The Supreme Court on Tuesday ruled that senior company officials — chairman, managing director, executive director, deputy general manager, planner and executor — automatically cannot be held liable under criminal law for offences committed by the company in the absence of specific allegations against them.

The top court upheld a Karnataka High Court judgement and dismissed the appeal filed against Mangalore Special Economic Zone Ltd and others.

In a judgment, a bench of MR Shah and AS Bopanna said, “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”.

“Merely because they are Chairman, Managing Director/Executive Director and/or Deputy General Manager and/or Planner/Supervisor of A1 & A6, without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as an accused”, said the top court, adding that they cannot be held vicariously liable for the offences committed by the company.

A private complaint was filed alleging the accused had conspired with common intention to lay a water pipeline beneath the scheduled properties belonging to the complainant without any lawful authority and right.

It was also alleged they had trespassed over the schedule properties and demolished the compound wall and destroyed 100 valuable trees and laid pipeline beneath the schedule properties. According to the complaint, accused 1 and 6 were companies, while the accused number 2 to 5 and 7 to 13 were top officers or employees of the company.

The bench,  however, noted that merely because respondent number 2 to 5 and 7 and 8 are the chairman, managing director, executive director, deputy general manager, planner and executor, automatically they cannot be held vicariously liable, unless, there are specific allegations and averments against them with respect to their individual role.

The bench also noted that the chairman and executive director, at the time of demolition of the wall and cutting of trees, were stationed at Hyderabad and not present at the site.

The top court upheld the Karnataka High Court judgment and the sessions court, which had set aside the magistrate order, issuing summons against the accused.

The bench noted that there were no specific allegations regarding the role attributed to them, except a bald statement by complainant that they have connived with each other.

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