1989 (8) TMI 337 - SC - Indian Laws

Conviction and sentence of partners in default - Held that - Appeal allowed. It is impossible to hold that when the offence was committed all the partners were conducting the business of the firm. However, Lajpat Rai accused No. 3 cannot escape the liability. The material on record indicates that he was conducting the business of the firm and in fact, he has signed the statement Ex. P. 8 on behalf of the firm. His conviction cannot therefore be disturbed. But the conviction of other partners is absolutely uncalled for.

Summary

Issues:
Conviction for contravention of Haryana Rice Procurement (Levy) Order, 1979 under Essential Commodities Act - Liability of partners in a firm for criminal offense - Interpretation of Section 10 of Essential Commodities Act - Proof required for partners' liability in criminal offense.

Analysis:
The judgment deals with the conviction of partners in a firm for contravention of the Haryana Rice Procurement (Levy) Order, 1979 under the Essential Commodities Act. The appellants formed a partnership firm to run a rice mill and were convicted for short supply of levy rice to the government. The prosecution contended that all partners of the firm should be held liable for the offense based on Section 10 of the Essential Commodities Act, which deems the person in charge of the business of the firm guilty of contravention. However, the defense argued that criminal liability must be strictly construed and that all partners cannot be held vicariously liable without proof of their involvement in the offense.

The court analyzed the legal liability of partners in a firm under the Indian Partnership Act, highlighting that a firm is not a legal entity but an association of individuals conducting business collectively. Each partner acts as an agent and a principal, making them liable for the acts of the firm. However, in criminal liability, strict interpretation is required, and vicarious liability is not automatically imposed on all partners unless specified by the statute. Section 10 of the Essential Commodities Act does not impose blanket liability on all partners, especially if some partners are not actively involved in the business operations.

The court emphasized the importance of proving that the partner was responsible for conducting the business and in charge of the firm during the relevant time to establish liability under Section 10. Without such proof, all partners cannot be convicted for the offense. In this case, the evidence presented by the prosecution did not establish that all partners were actively involved in the business during the offense. Only one partner, who signed relevant documents on behalf of the firm, was found to be conducting the business and was held liable. The court acquitted the other partners, stating that their conviction was unwarranted based on the lack of evidence of their involvement.

In conclusion, the court allowed the appeal, setting aside the conviction and sentence of most appellants while maintaining the conviction of the partner directly involved in conducting the business. The judgment clarifies the interpretation of Section 10 of the Essential Commodities Act regarding the liability of partners in a firm for criminal offenses and underscores the importance of establishing individual involvement and responsibility to impose liability in such cases.