No Vicarious Liability Under Criminal Law Unless It Is A Part Of The Statute; Bombay HC Sets Aside Summons Issued To Directors Of HUL [Read Judgment]

Justice Bharati Dangre noted that the petitioner directors were not liable for prosecution under Section 52 of the Maharashtra Shops and Establishments Act, 1948 for alleged violation by the 'employer'.

Case Background

In December 2013, HUL obtained a space on the third floor at a building called the Army and Navy Building in Mumbai with intention of having an additional place of business and got itself registered under the Shops and Establishments Act.

Accordingly, a certificate dated January 15, 2014 came to be issued in favour of the company. On January 19, 2015, Inspector, Shops and Establishments visited the premises and recorded certain 'discrepancies' at the premises, allegedly amounting to non-compliance of the provisions of the Shops and Establishments Act and Rules.

It is the case of HUL, that the business of the Petitioners from the said premises completely stopped and the premises were not functional from May 2015 and they continued to remain closed from that date onwards.

Thereafter, MCGM filed a complaint against the Company and some of its Directors. On March 16, 2016, the Metropolitan Magistrate passed an order issuing summons to the petitioners.

Submissions

Senior Advocate Amit Desai appeared on behalf of HUL and vehemently opposed the order by the ACMM. He submitted that the said order is passed without recording any verification of statement of the complainant and without examining the complainant or any witnesses. Desai strongly pointed out the mechanical manner in which summons came to be issued against the petitioners, in particular, when no allegations are contained in the complaint against the petitioners.

For the purpose of the Maharashtra Shops and Establishments Act, the term 'employer' means a person owning or having ultimate control over the affairs of an establishment and the alleged offences are qua the employer and since the statute do not attribute any vicarious liability to an individual Director, the liability cannot be fastened on the petitioners and the issuance of summons by the Magistrate is erroneous, Desai said.

Judgement

At the very outset, Court noted-

"It is pertinent to note that there is no provision contained in the Shops and Establishments Act, 1948 holding the directors of any Company vicariously liable for violation of its provisions. The statutory scheme of the Act discloses that it is the 'employer' who is cast with the duty to ensure the compliance including the registration of the establishment and the duty to produce the relevant registers, records, etc. required to be kept for the purpose of the Act of 1948. Failure to comply with the provisions of the Act by the 'employer' attracts penal provisions and amounts to an offence and it is the 'employer' and the 'manager' who are liable for conviction for the offences contemplated under Section 52."

However, Justice Dangre observed that apart from Section 58, there is no provision in the Act making every director of the Company to be brought within the sweep of the term 'employer' and, therefore, unless and until it is specifically averred in the complaint that the person in the capacity of director was having ultimate control over the affairs of the establishment, he is not liable to be prosecuted for the offences under the Act of 1948.

Court pointed out that on the visits to the premises, the inspector has disclosed that one Mrs. Prajakta Tabib, Manager was present and she produced the relevant documents to the Inspector-

"In utter ignorance of the said fact, the Additional Chief Metropolitan Magistrate issued summons to the five directors of M/s. Hindustan Unilever Limited along with the company itself.

Without application of mind as to whether these directors would fall within the meaning of the term 'Employer', who are liable for prosecution for violation of the provisions of Sections 8 and 51 of the Act, the process has been mechanically issued."

Finally, Justice Dangre examined the 'vicarious liability' of the directors in the alleged violation and observed-

"It is settled position of law that the criminal liability in form of penal provision must be strictly construed and there is no vicarious liability under the criminal law unless the statute takes it within its fold. The Maharashtra Shops and Establishments Act, 1948 do not contain any provision to be fastened for vicarious liability on all the directors and do not make all of them liable for the offence alleged to have been committed, whether or not they own or have ultimate control over the affairs of the establishment."

Court relied on the decision of a full bench of the High Court in Suresh Tulsidas v. Collector of Bombay and apex court's decision in SK Alagh v. State of Uttar Pradesh & Ors.

Allowing the petition, Court said-

"Only those of the individuals who are responsible for the acts done in the name of the Company can be made personally liable if the statute fixed a responsibility on them. Every person who was at the helm of the affairs of the Company cannot be held responsible for violation of certain provisions of the enactment in one of its establishment."

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