Jharkhand High Court

Sri Ashutosh Rastogi vs The State Of Jharkhand on 27 March, 2023

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               IN THE HIGH COURT OF JHARKHAND, RANCHI
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Cr.M.P. No. 1748 of 2012

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Sri Ashutosh Rastogi, s/o late Parmatma Saran, Ex-Senior Divisional Manager, Life Insurance Corporation of India, Hazaribagh Division, P.O., P.S. and Town Hazaribagh, District Hazaribagh, State-Jharkhand .... Petitioner

-- Versus --

1.The State of Jharkhand

2.The Labour Enforcement Officer (Central), Hazaribagh cum Inspector appointed u/s 28 of the CL (R&A) Act, 1970 Imlikothi, P.O., P.S., Town & District Hazaribagh .... Opposite Parties

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CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

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       For the Petitioner         :- Ms. Surabhi, Advocate
       For the State              :- Ms. Shweta Singh, Advocate
       For the Union of India     :- Mr. Vikas Kumar, C.G.C.
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6/27.03.2023       Heard Ms. Surabhi, the learned counsel for the petitioner,

Ms. Shweta Singh, the learned counsel for the respondent State and Mr.

Vikas Kumar, the learned counsel appearing on behalf of the respondent

State.

This petition has been filed for quashing of the entire

criminal proceeding in G.Case No.592 of 2009, pending in the court of

Judicial Magistrate, 1st Class, Hazaribagh including the order taking

cognizance dated 19.12.2009 whereby learned court has been pleased to

take cognizance under section 23 and 24 of Contract Labour (Regulation

and Abolition) Act, 1970.

The complaint was registered on the basis of a written complaint filed under section 23 and 24 of Contract Labour (Regulation and Abolition) Act, 1970 by the O.P.No.2. The complainant is Labour Enforcement Officer (Central) at Hazaribagh. It is alleged in the complaint petition that the complainant is appointed as Labour Enforcement Officer and has been appointed as an Inspector under section 28 of Contract Labour (Regulation and Abolition) Act, 1970. The complainant inspected the establishment of the accused at Office of Sr. Divisional Manager, LIC of India, at Julu Park, Hazaribagh on 30.09.2009. It is alleged that the accused is the Principal employer contemplated under section 2(g) of the Act relating to establishment for civil construction and maintenance work and observed the above offences, which were committed by the accused and an inspection cum show

cause notice dated 19.10.2009 was served on the accused person and his reply was not received till date. According to the complainant, the accused person is responsible for the violation of the Act and Rules. According to complainant the accused has committed the following offense:

(i) Non maintenance of Register of contractor in Form-XII Breach of Rules-74

(ii) Non display of notice Board in conspicuous place/ main entrance of the office, Breach of Rule 81(1)(i)

(iii) Non submission of commencement of work in Form-VIB to the Inspector of the Area, Breach of Rule 81(3), and

(iv) Employer has failed to obtain a certificate of Registration under CL(R&A) Act 1970, violation of section-7.

Ms. Surbhi, the learned counsel for the petitioner submits

that the petitioner was Sr. Divisional Manager of Life Insurance

Corporation, Hazaribagh. She submits that he was not looking into the

day to day affairs of the company. In view of section 25 of the Act, the

person who is looking into the day to day affairs of the company can only

be prosecuted. Further by way of elaborating her argument she submits

that the company namely Life Insurance Corporation is not made

accused and to buttress her argument she relied in the case of S.K.

Alogh v. State of Uttar Pradesh & Others, (2008) 5 SCC 662 . Paragraph

no.19 of the said judgment is quoted below:

"19. As, admittedly, drafts were drawn in the name of the Company, even if the appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a Company or an employee cannot be held to be vicariously liable for any offense committed by the Company itself."

She further submits that order taking cognizance is also in

in accordance with law.

Mr. Vikas Kumar, the learned counsel appearing for the

respondent Union of India -O.P.No.2 submits the violation is there and

that is why the case has been registered and learned court has taken

cognizance. He submits that in view of the status report the some of the

defence witnesses have already been examined and accordingly this

Court at this stage may not interfere with the cognizance order.

Ms.Shweta Singh, the learned counsel for the respondent

State submits that the learned court has rightly taken cognizance and the

order taking cognizance is in accordance with law.

In view of the submission of the learned counsels appearing

for the parties the Court has gone through the materials on record

including the complaint as well as the order taking cognizance. It

transpires that the allegation is made with regard to certain and seizure

conducted at the site of Life Insurance of India and this petitioner was

only Sr. Divisional Manager of the said Corporation and the complaint has

not been filed against the Life Insurance Company and the order taking

cognizance is also not in accordance with law. In view of that, the case

of the petitioner is fully covered in light of the judgment in case of "S.K.

Alogh v. State of Uttar Pradesh & Others"(supra). In view of section 25

of the Contract Labour (Regulation and Abolition) Act, 1970 the person

who is looking into the day to day affairs of the company only can be

prosecuted. In the case in hand, there is no averment that this petitioner

was looking into the day to day affairs of the company and the case of

the petitioner is fully covered in light of the judgment rendered in the

case of "Dayle De'souza v. Government Of India, through Deputy Chief

Labour Commissioner (c) And Another [CRIMINAL APPEAL NO. OF 2021

(ARISING OUT OF SPECIAL LEAVE PETITION (CRL.) NO. 3913 OF 2020).

Paragraph nos.19, 22, 23, 24, 25 and 27 of the said judgment are quoted

herein below:

"19. There is yet another difficulty for the prosecution in the present case as the Company has not been made an accused or even summoned to be tried for the offence. The position of law as propounded in State of Madras v. C.V. Parekh and Another: (1970) 3 SCC 491., reads:

"3. Learned Counsel for the appellant, however, sought conviction of the two respondents on the basis of Section 10 of the Essential Commodities Act under which, if the person contravening an order made under Section 3 (which covers an order under the Iron and Steel Control Order, 1956), is a company, every person who, at the time the contravention was

committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. It was urged that the two respondents were in charge of, and were responsible to, the Company for the conduct of the business of the Company and, consequently, they must be held responsible for the sale and for thus contravening the provisions of clause (5) of the Iron and Steel Control Order. This argument cannot be accepted, because it ignores the first condition for the applicability of Section 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of clause (5) of the Iron and Steel 11 Control Order was made by the Company. In fact, the Company was not charged with the offence at all. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The actual contravention was by Kamdar and Vallabhdas Thacker and any contravention by them would not fasten responsibility on the respondents.

The acquittal of the respondents is, therefore, fully justified. The appeal fails and is dismissed."

22. However, subsequent decisions of this Court have emphasised that the provision imposes vicarious liability by way of deeming fiction which presupposes and requires the commission of the offence by the company itself as it is a separate juristic entity. Therefore, unless the company as a principal accused has committed the offence, the persons mentioned in sub-section (1) would not be liable and cannot be prosecuted. Section 141(1) of the Negotiable Instruments Act, extends vicarious criminal liability to the officers of a company by deeming fiction, which arises only when the offence is committed by the company itself and not otherwise. Overruling Sheoratan Agarwal and Anil Hada, in Aneeta Hada v. Godfather Travels and Tours Private Limited, (2012) 5 SCC 661. A 3-judge bench of this court expounding on the vicarious liability under Section 141 of the Negotiable Instruments Act, has held:

"51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted.

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove."

23. The proposition of law laid down in Aneeta Hada (supra) was relied upon by this Court in Anil Gupta v. Star India Private Limited and Another (2014) 10 SCC 373.

"13. In the present case, the High Court by the impugned judgment dated 13-8-2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] held that the complaint against Respondent 2 Company was not maintainable and quashed the summons issued by the trial court against Respondent 2 Company. Thereby, the Company being not a party to the proceedings under Section 138 read with Section 141 of the Act and in view of the fact that part of the judgment referred to by the High Court in Anil Hada has been overruled by a three-Judge Bench of this Court in Aneeta Hada, we have no other option but to set aside the rest part of the impugned judgment [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13- 8-2007 (Del)] whereby the High Court held that the proceedings against the appellant can be continued even in absence of the Company. We, accordingly, set aside that part of

the impugned judgment dated 13-8- 2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13- 8-2007 (Del)] passed by the High Court so far as it relates to the appellant and quash the summons and proceeding pursuant to Complaint Case No. 698 of 2001 qua the appellant."

24. In Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781, this Court observed that:

"11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881.

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13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vulnerable and accordingly we set aside the same and quash the criminal proceedings initiated by the 13 respondent against the appellant."

25. This position was again clarified and reiterated by this Court in Himanshu v. B. Shivamurthy and Another. (2019) 3 SCC 797 The relevant portion of the judgment reads thus:

"6. The judgment of the High Court has been questioned on two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, the appellant could not be prosecuted without the company being named as an accused. The cheque was issued by the company and was signed by the appellant as its Director. Secondly, it was urged that the observation of the High Court that the company can now be proceeded against in the complaint is misconceived. The learned counsel submitted that the offence under Section 138 is complete only upon the issuance of a notice of demand and the failure of payment within the prescribed period. In absence of compliance with the requirements of Section 138, it is asserted, the direction of the High Court that the company could be impleaded/arraigned at this stage is erroneous.

7. The first submission on behalf of the appellant is no longer res integra. A decision of a three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. governs the area of dispute. The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. The three-Judge Bench held thus: (SCC p. 688, para 58) "58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted."

In similar terms, the Court further held: (SCC p. 688, para 59) "59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is 14 imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself."

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12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the

company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused."

27. In terms of the ratio above, a company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well."

Further the Court finds that the order taking cognizance is

not in accordance with law. The Court finds in the order taking

cognizance that the learned court by way of filling the section, the date

and the name of the learned Judicial Officer in the blank spaces has

taken cognizance which suggest that there is non-application of judicial

mind. It is well settled that even if the case is proceeded and the High

Court sitting under section 482 Cr.P.C comes to the conclusion that to

allow the proceeding further will amount to abuse of process of the

Court, can interfere under section 482 of Cr.P.C.

In view of the above facts, reasons and the analysis, entire

criminal proceeding in G.Case No.592 of 2009, including the order taking

cognizance dated 19.12.2009, pending in the court of Judicial Magistrate,