Directors Can't Be Held Vicariously Liable In Criminal Cases Merely Because They Hold A Position In Company: Punjab & Haryana High Court

The Punjab & Haryana High Court has quashed the chargesheet arraying the Directors of a Company responsible for maintenance of a road, in a criminal case pertaining to the death of a 3-year-old child in an accident allegedly by falling from a bike due to a pothole.

The Directors were booked for causing death by negligence (Section 304-A IPC), causing hurt by act endangering life or personal safety of others (Section 337 IPC) and rash driving (Section 279 IPC), after an SIT found that the death of the child was caused because there were pits on the road and the M/s Larsen and Toubro (L&T) was sub-contracted to maintain it.

While setting aside the supplementary chargesheet and summoning order against the Directors, Justice Harpreet Singh Brar said, "the petitioners cannot be implicated in the absence of any specific allegations indicating their specific role in commission of the crime. Further, there is no provision in the IPC for fastening the vicarious liability upon the Directors of the Company for offences listed in it. The criminal liability upon the Directors of the Company cannot be imposed merely because of the positions they hold in the Company at the relevant time, by applying the principle of vicarious liability."

 The Court also summarised the following legal positions:

1. A Company and its Directors are not immune from criminal prosecution but it has to be established that the said offence has been committed with their consent or in connivance with them. These persons cannot be arrayed as accused in the absence of their active participation and attribution of a specific role played in commission of the alleged offence with criminal intent.

2. Vicarious liability cannot be fastened upon any Director automatically in the absence of legislative mandate merely because they had occupied certain positions in the Company at the relevant time.

3. For summoning the Directors of a Company for commission of an offence under the IPC, the conventional rule of existence of mens rea is to be followed. [Actus non facit reum nisi mens sit rea- an act does not make the defendant guilty unless it is done with a guilty intent].

4. Summoning the accused in a criminal case requires recording of prima facie satisfaction about the involvement of the accused, as a bare minimum. The summoning order must satisfy the objective standards of reason and justice.

These observations were made while hearing a batch of petitions filed by Directors of L&T under Section 482 CrPC seeking quashing of the Supplementary Chargesheet as well as summoning order passed by a Faridabad Court in FIR lodged under Sections 279, 337, 304-A of IPC.

It was alleged that the complainant and his wife were travelling on a bike along with their 3 years old son and the vehicle rode over a pothole causing all three of them to fall down.

Thereafter, an unidentified four-wheeler, being driven in a rash and negligent manner, came from behind and struck the complainant's son while running over her legs. The driver of the said vehicle fled from the scene. The complainant and her son were brought to the hospital, where their son succumbed to his injuries, the complaint stated.

An SIT was constituted to probe the matter and it found that there were pits on the road which resulted in the death of the complainant's minor son.

The project for road widening in the Delhi-Agra section of NH-2, which was the site of the accident, was awarded to M/s DA Toll Road Pvt. Ltd., Concessionaire, Special Purpose Vehicle Company, promoted and incorporated by M/s Reliance Infrastructure Ltd. by NHAI. Reliance had further sub-contracted the work to M/s Larsen and Toubro ( L&T)  making it responsible for supervision of maintenance of the said stretch of road, the SIT said.

Director, M/s L&T was also arraigned as an accused along with L&T in the original chargesheet and resultantly, a summoning order was issued to them. Consequently, an application was moved by L&T before the JMIC to recall the summons issued in the name of Director, M/s L&T as the same was vague and ambiguous, bereft of any specific name or attribution of a particular role.

The JMIC directed the investigating agency to specify the name of the Director, L&T who was directly responsible for overseeing the said project. In pursuance of the same, a Supplementary Chargesheet was filed arraigning all 15 Directors of L&T, who were subsequently summoned.

Senior Advocate appearing for the petitioner argued that no specific or general role has been attributed to the petitioners in the original Chargesheet as well as the Supplementary Chargesheet.

It was further argued that the concept of vicarious liability of a Director of a Company, in respect of offences alleged under the IPC, does not exist, the Senior Advocate.

After examining the submissions, the Court noted that the doctrine of vicarious liability is a civil concept and its applicability in criminal cases is an exception rather than the rule. The doctrine of vicarious liability originates from the maxim Qui Facit per Alium Facit per, which means any act done by the servant in the course of his employment is considered to be done by the master and in principle, the master is also liable for the said act, it added.

Justice Brar further said that in the Indian context, a person can be held liable for the actions of another, with the aid of provisions contained in Section 34, 120-B and 149 of the IPC. As such, in criminal law, in certain cases, a person may be held liable even though the actus reus was committed by another person.

However, the legal framework for imputing vicarious liability on corporate entities is categorically provided for in a variety of legislations such as the Income Tax Act, 1961, the Negotiable Instruments Act, 1881, the Insecticides Act, 1968, the Drugs and Cosmetics Act, 1940 and Essential Commodities Act, 1955 etc, added the judge.

The Court pointed that the culpable negligence is alleged to have been committed in pursuance of the work awarded to L&T in terms of the agreement. "The complainant has sought to set up a case that L&T is an artificial legal entity which works through its Directors and as such, the Directors are vicariously liable for the culpable negligence of the Company."

Reliance was placed upon HDFC Securities Ltd. Vs. State of Maharashtra [AIR 2017 (SC) 61], to underscore that IPC does not provide for vicarious liability for any offence alleged to have been committed by a Company. If such liability was sought to be imputed by the legislature by creating a legal fiction, the same would have been specifically provided in the statute as is the case with the Negotiable Instruments Act.

Justice Brar found that the Supplementary Chargesheet is "conspicuously silent" as to how and in what manner the petitioners are liable for the alleged offence. It is further mentioned that the investigation with regard to the offending vehicle involved in the accident and its driver is still under progress and a supplementary report would be filed after tracing the same.

Adding that the criminal liability upon the Directors of the Company cannot be imposed merely because of the positions they hold in the Company at the relevant time, by applying the principle of vicarious liability, the Court said "there is no other allegation against the petitioners to indicate their complicity except for being members of the Board of Directors of the Company."

In light of the above, the Court quashed the Supplementary Charge sheet and summoning orders issued in the names of the Directors.

R.S. Cheema, Senior Advocate with  Subhash Gulati, Alankar Narula, Arshdeep Cheema, Satish Sharma,  Rajni Narula, Advocates for the petitioner(s) in CRM-M-34999-2019, CRM-M-35070-2019 and CRM-M-35080-2019.

Mukul Rohatgi, Senior Advocate with Prateek Gupta and Keshav Sehgal, Advocates for the petitioners in CRM-M-38156-2019.

 Alankar Narula, and Subhash Gulati Advocates for the petitioner(s) in CRM-M-35036-2019, CRM-M-38271-2019 and CRM-M-37166-2019.

Denson Joseph and Karambir Kamal, Advocate for respondent No.3-complainant.

Vikas Bharadwaj, AAG, Haryana.

 Citation: 2024 LiveLaw (PH) 104

Title: S. Rajgopal v. State of Haryana and others

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