Chairman, directors can't be held vicariously liable for criminal acts of company without stating specific individual role: Supreme Court

The Supreme Court on Monday ruled that company officials like chairman, managing director, director etc cannot be cannot be held vicariously liable under criminal law for offences committed by the company unless there are specific allegations and averments against them with respect to their individual role (Ravindranatha Bajpe v. Mangalore Special Economic Zone Ltd)..The Bench of Justices MR Shah and AS Bopanna held that the Magistrate has to record his satisfaction about a prima facie case against the accused like directors of the company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them."Merely because they are Chairman, Managing Director/Executive Director and/or Deputy General Manager and/or Planner/Supervisor of accused companies, without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as an accused, more particularly they cannot be held vicariously liable for the offences committed by the company," the judgment said.The Court, therefore, upheld the judgment of the Karnataka High Court and the Sessions Court which had set aside the order passed by the Magistrate issuing summons against the accused respondents.The complainant had filed a private complaint alleging was that the accused had conspired with common intention to lay the pipeline beneath the schedule properties belonging to the complainant without any lawful authority and right. In furtherance of that, they had trespassed over the schedule properties and demolished the compound wall and also cut and demolished trees.Accused nos 1. and 6 were companies while the accused nos. 2 to 5 and 7 to 13 were top officers or employees of the company.It was contended that each one of the accused had common intention to lay the pipeline by damaging the property of the complainant. With that intention, they have committed criminal trespass and caused damages. Therefore, the complainant urged trial court to take cognizance of the matter and to issue process against the accused.Judicial Magistrate, First Class, Mangalore by an order dated September 24, 2013 directed to register the case against all the accused, i.e, accused nos. 1 to 13 for offences punishable under Sections 427 (mischief causing loss to property), 447 (criminal trespass), 506 (criminal intimidation) and 120B (criminal conspiracy). Accused nos. 1 to 9 preferred criminal revision petitions before the Sessions Court which allowed the same and quashed and set aside the order passed by Magistrate with respect to accused nos. 1 to 8. The order was confirmed with respect to accused no. 9. The High Court confirmed the order of the Sessions Court leading to the present appeals before the Supreme Court.Before the top court, the complainant submitted that in the facts and circumstances of the case both, the High Court as well as the Sessions Court have materially erred in quashing and setting aside the order passed by the Magistrate.It was submitted that there was a specific allegation in the complaint that accused nos. 1 to 8 conspired with the co-accused to lay the pipeline under the property of the complainant and therefore at the stage of issuing process/summons, the revisional court could not have interfered with the order passed by the Magistrate summoning the accused. It was submitted that being the administrators of the companies, all the executives are vicariously liable. The accused on the other hand submitted that there were no specific allegations regarding role attributed to the accused except a bald statement that all of them have connived with each other.It was contended that the Supreme Court has held in a catena of decisions that issuing summons/process by the Court is a very serious matter and therefore unless there are specific allegations and the role attributed to each accused more than the bald statement, the Magistrate should not have issued the process..The Court accepted the contention of the accused placing reliance on various judgments including Sunil Bharti Mittal v. Central Bureau of Investigation, Maksud Saiyed v. State of Gujarat and GHCL Employees Stock Option Trust v. India Infoline Limited."Looking to the averments and the allegations in the complaint, there are no specific allegations and/or averments with respect to role played by them in their capacity as Chairman, Managing Director, Executive Director, Deputy General Manager and Planner & Executor," the Court observed.Merely because respondent Nos. 2 to 5 and 7 & 8 are the Chairman/Managing Director/Executive Director/Deputy General Manager/Planner & Executor, automatically they cannot be held vicariously liable, unless there are specific allegations and averments against them with respect to their individual role, the Court held. "Under the circumstances, the High Court has rightly dismissed the revision applications and has rightly confirmed the order passed by the learned Sessions Court quashing and setting aside the order passed by the learned Magistrate issuing process against respondent nos. 1 to 8," the Bench said dismissing the appeals.Advocates Nishant Patil and PP Hegde appeared on behalf of the accused persons while advocate Shailesh Madiyal appeared on behalf of the original complainant.[Read Judgment]