2022 (4) TMI 870 - HC - Indian Laws

Maintainability of petition - Whether the proceedings could be initiated against the petitioner alone who is an employee of the Company and not the Company? - HELD THAT - This Court in similar case of SRI SUDEEP SRINIVAS (REPRESENTED BY HIS GPA HOLDER SMT. PUSHPALATHA G., SMT. PREETHI RAMAMOHAN (REPRESENTED BY HER GPA HOLDER SMT. SHUBHA RAMMOHAN VERSUS STATE OF KARNATAKA BY THE STATE OF KARNATAKA REPRESENTED BY MALLESHWARAM, POLICE STATION, SATISH KUMAR B.P. 2021 (9) TMI 1373 - KARNATAKA HIGH COURT where reliance placed in the judgment of the Apex Court in the case of ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. 2012 (5) TMI 83 - SUPREME COURT where it was held that the proceedings without making the Company a party was not maintainable. The present petition also raised a similar issue where the proceedings are instituted against the petitioners, who are Directors of the Company (accused Nos.1 and 2) without the proceedings are instituted without making the Company a party. The criminal petition is allowed.

Summary

Issues:
1. Proceedings initiated against an individual employee of a company without making the company a party.
2. Vicarious liability of individuals in charge of a company for corporate criminal acts.
3. Applicability of Section 141 of the Negotiable Instruments Act, 1881 in determining liability.

Analysis:

Issue 1: The primary issue in this judgment pertains to the maintainability of criminal proceedings against an individual employee of a company without involving the company as a party. The court, relying on the judgment in Aneeta Hada v. Godfather Travels And Tours Private Limited, emphasized the necessity of including the company as a party in such proceedings to establish corporate criminal liability.

Issue 2: The judgment delves into the concept of vicarious liability concerning persons responsible for the acts of a company. It highlights that the word "deemed" in Section 141 of the Act crystallizes corporate criminal liability and vicarious liability of individuals in charge of the company. The court references previous cases to establish that liability extends to officers of the company, subject to the conditions outlined in the Act.

Issue 3: The court extensively discusses the interpretation of Section 141 of the Negotiable Instruments Act, 1881, in determining liability for corporate criminal acts. It underscores that the commission of an offense by the company is a prerequisite to attracting vicarious liability to others, emphasizing the strict construction of the law in this regard. The judgment emphasizes the importance of including the company as a party when prosecuting individuals associated with it to ensure legal compliance.

The judgment concludes by allowing the criminal petitions, quashing the impugned orders, and directing the respondent State to take appropriate action in accordance with the law. It reiterates the necessity of including the company as a party in criminal proceedings involving individuals associated with it to uphold principles of corporate criminal liability and vicarious liability.