The liability of the Directors /the controlling authorities of company, in a corporate criminal liability

Supreme Court of India
Shiv Kumar Jatia vs State Of Nct Of Delhi on 23 August, 2019
Author: R. Subhash Reddy
Bench: Abhay Manohar Sapre, R. Subhash Reddy
 Crl.A. @ SLP( Crl.)No.8008/18 etc. etc.
 REPORTABLE
 IN THE SUPREME COURT OF INDIA
 CRIMINAL APPELLATE JURISDICTION
 CRIMINAL APPEAL NO.1263 OF 2019
 (Arising out of S.L.P.(Crl.) No.8008 of 2018)
 Shiv Kumar Jatia ...Appellant
 Versus
 State of NCT of Delhi ...Respondent
 WITH
 CRIMINAL APPEAL NO.1264 OF 2019
 (Arising out of S.L.P.(Crl.) No.7969 of 2018)
 AND
 CRIMINAL APPEAL NO.1265-1267 OF 2019
 (Arising out of S.L.P.(Crl.) Nos.10054-10056 of 2018)
 J U D G M E N T
R.Subhash Reddy,J26. To prove the alleged offence under Section 336, essential elements are, the act, done rashly and
negligently, to endanger human life or personal safety. To prove the guilt of the accused under
Section 338, in addition to the elements under Section 336, an additional consequence of grievous
hurt is to be proved. It is clear from the material placed on record that the appellant (A-4) was not in
the country on the date of the incident and the license of the hotel is in the name of accused No.3
namely P.R. Subramanian. The owner of the hotel is M/s Asian Hotels (North) Limited, which is a
public listed company made as accused no.1. Taking on the face value the allegations made against
Crl.A. @ SLP( Crl.)No.8008/18 etc. etc. the appellant (accused no.2) in the chargesheet, so far as
Shiv Kumar Jatia he is sought to be prosecuted for the aforesaid offences only on the ground that he
is Managing Director of M/s Asian Hotels (North) Limited, which runs Hotel Hyatt Regency and
also on the ground that he is the only non-independent and Executive Director of the Company who
chairs meeting of the company and signatory for various decisions.
27. The liability of the Directors /the controlling authorities of company, in a corporate criminal
liability is elaborately considered by this Court in the case of Sunil Bharti Mittal2. In the aforesaid
case, while considering the circumstances when Director/person in charge of the affairs of the
company can also be prosecuted, when the company is an accused person, this Court has held, 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. At the same time it is
observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious Crl.A. @
SLP( Crl.)No.8008/18 etc. etc. liability unless the Statute specifically provides for. It is further held
by this Court, an individual who has perpetrated the commission of an offence on behalf of the
company can be made an accused, along with the company, if there is sufficient evidence of his
active role coupled with criminal intent. Further it is also held that an individual can be implicated
in those cases where statutory regime itself attracts the doctrine of vicarious liability, by specifically
incorporating such a provision.
28. Though there are allegations of negligence on the part of hotel and its officers who are incharge
of day to day affairs of the hotel, so far as appellant accused no.2 Shiv Kumar Jatia is concerned, no
allegation is made directly attributing negligence with the criminal intent attracting provisions
under Sections 336, 338 read with Section 32 of IPC. Taking contents of the final report as it is we
are of the view that, there is no reason and justification to proceed against him only on ground that
he was the Managing Director of M/s Asian Hotels (North) Limited, which runs Hotel Hyatt
Shiv Kumar Jatia vs State Of Nct Of Delhi on 23 August, 2019
Indian Kanoon - http://indiankanoon.org/doc/156383456/ 7
Regency. The mere fact that he was chairing the meetings of the company and taking Crl.A. @ SLP(
Crl.)No.8008/18 etc. etc. decisions, by itself cannot directly link the allegation of negligence with the
criminal intent, so far as appellantaccused no.2. Applying the judgment in the case of Sunil Bharti
Mittal2 we are of the view that the said view expressed by this Court, supports the case of
appellant/accused no.2.
29. By applying the ratio laid down by this Court in the case of Sunil Bharti Mittal2 it is clear that 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. Further in the case of Maksud Saiyed vs. State of Gujarat & Ors.3 this Court has examined
the vicarious liability of Directors for the charges levelled against the Company. In the aforesaid
judgment this Court has held that, 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 a Company. It is held that vicarious liability of the Managing Director and Director would
Crl.A. @ SLP( Crl.)No.8008/18 etc. etc. arise provided any provision exists in that behalf in the
Statute. It is further held that Statutes indisputably must provide fixing such vicarious liability. It is
also held that, 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.
30. In the judgment of this Court in the case of Sharad Kumar Sanghi vs. Sangita Rane4 while
examining the allegations made against the Managing Director of a Company, in which, company
was not made a party, this Court has held that when the allegations made against the Managing
Director are vague in nature, same can be the ground for quashing the proceedings under Section
482 of Cr.P.C. In the case on hand principally the allegations are made against the first
accused-company which runs Hotel Hyatt Regency. At the same time, the Managing Director of
such company who is accused no.2 is a party by making vague allegations that he was attending all
the meetings of the company and various decisions were being taken under his signatures. Applying
the ratio laid down in the aforesaid cases, it Crl.A. @ SLP( Crl.)No.8008/18 etc. etc. is clear that
principally the allegations are made only against the company and other staff members who are
incharge of day to day affairs of the company. In absence of specific allegations against the
Managing Director of the company and having regard to nature of allegations made which are vague
in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing
Director is concerned.