Observing that vicarious liability cannot be imputed automatically on the Top Management for an offence committed by the company in the absence of any statutory provisions, the Supreme Court has said that chairman/managing director/director of a company cannot be prosecuted if there is no specific allegation against them.

A bench of Justice M R Shah and Justice A S Bopanna said in such cases, a magistrate had to record his satisfaction about a prima facie case against the managing director, the company secretary and the directors of the company and the role played by them in their respective capacities before initiating criminal proceedings against them. It said they cannot be summoned in a routine manner on a bald statement made against them for the offence committed by their company.

The bench upheld the order passed by the Karnataka High Court setting aside summon order passed by a magistrate against the managing director and other top officials of a company on a private complaint filed by a person alleging that they all had connived and were involved behind the company's actions for damaging his property. He alleged that his compound wall was demolished and trees were cut by the company while laying down a pipeline.

The top court noted that there was no specific allegation against any of the officials who were not even present in the city when the alleged trespassing and demolition took place.

The bench stated:

“As held by this court in the case of India Infoline Limited, 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 a sine qua non for initiating criminal proceedings against them. Looking to the averments and the allegations in the complaint, there are no specific allegations and/or averments with respect to role played by them in their capacity as chairman, managing director, executive director, deputy general manager and planner & executor,” 

 It further said:

“Merely because they are chairman, managing director/ executive director and/or deputy general manager and/orplanner/supervisor of A1 & A6(companies), without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as an accused, more particularly they cannot be held vicariously liable for the offences committed by A1 & A6,” 

 The bench said automatically they cannot be held vicariously liable, unless there are specific allegations and averments against them with respect to their individual role.

Read Judgement Here:

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