DAYLE DE’SOUZA versus GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF LABOUR COMMISSIONER (C) AND ANOTHER

[2021] 11 S.C.R. 511

DAYLE DE’SOUZA

GOVERNMENT OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANOTHER

(Criminal Appeal No. 1319 of 2021)

OCTOBER 29, 2021

[R. SUBHASH REDDY AND SANJIV KHANNA, JJ.]

Minimum Wages Act, 1948: s.22A, s.22C(1) and (2) – Appellantis director of WS Company which had entered into an agreementfor servicing of ATMs with another company – The latter companyhad entered into agreement with State Bank for maintenance andupkeep of all their ATMs – notice was issued to the appellant andthe head of WS company (accused no.2) by Labour EnforcementOfficer alleging non-compliance of provisions of 1948 Act – WScompany responded that they neither manage the ATMs nor workat the ATMs – Criminal complaints filed against the appellant andthe head of WS company under s.22A – WS Company was not enlistedas an accused in the complaint and was not summoned to standtrial – Appellant-director filed s.482 CrPC petition which wasdismissed by High Court – On appeal, held: s.22A of the Act is a‘General provision for punishment of other offences’ where “anyemployer who contravenes any provision of this Act or of any ruleor order made thereunder shall, if no other penalty is provided forsuch contravention by this Act, be punishable with fine...”– Sub-section (1) to s.22C states that where an offence is committed by acompany, every person who at the time the offence was committedwas in-charge of and was responsible to the company for the conductof the business, as well as the company itself shall be deemed to beguilty of the offence – By necessary implication, it follows that aperson who do not bear out the requirements is not vicariously liableunder s.22C(1) of the Act – The proviso, which is in the nature ofan exception, states that person who is liable under sub-section(1) shall not be punished if he proves that the offence was committedwithout his knowledge or that he had exercised all due diligence toprevent the commission of such offence – The onus to satisfy therequirements to take benefit of the proviso is on the accused, but itdoes not displace or extricate the initial onus and burden on the

CDEFGH

Aprosecution to first establish the requirements of sub-section (1) tos.22C of the Act – Sub-section (2) states that notwithstandinganything contained in sub-section (1), where any offence under theAct has been committed by company, and it is proved that suchoffence has been committed with the consent or connivance of, oris attributable to any neglect on the part of, any director, manager,Bsecretary or other officer of the company, then such director,manager, secretary or other officer of the company shall also bedeemed to be guilty of that offence and shall be liable to beproceeded against – The words ‘in-charge of the company’ and‘responsible to the company’ are pivotal to sub-section (1) – ThisCrequirement has to be satisfied for the deeming effect of sub-section(1) to apply and for rendering the person liable to be proceededagainst and, on such position being proved, punished – Thenecessities of sub-section (2) to s.22C of the Act are different fromsub-section (1) to s.22C of the Act – Vicarious liability under sub-section (2) to s.22C can arise because of the director, manager,Dsecretary, or other officer’s personal conduct, functional ortransactional role, notwithstanding that the person was not in overallcontrol of the day to day business of the company when the offencewas committed – Vicarious liability is attracted when the offence iscommitted with the consent, connivance, or is attributable to theEneglect on the part of director, manager, secretary, or other officerof the company – In the factual context of this case, it is crystalclear that the complaint does not satisfy the mandate of sub-section(1) to s.22C of the Act as there are no assertions or averments thatthe appellant was in-charge of and responsible to WS company –The proviso to sub-section (1) in the present case would not apply –FIt is an exception that would be applicable and come into operationonly when the conditions of sub-section (1) to s.22C are satisfied –In the absence of any specific averment, the prosecution in theinstant case does not and cannot rely on s.22C(2) of the Act – Thus,proceedings initiated against the appellant and also against accusedGno.2 are quashed.

Liability: Vicarious liability – company being juristicperson cannot be imprisoned, but it can be subjected to fine,which in itself is punishment – Every punishment has adverseconsequences, and therefore, prosecution of the company isHmandatory – Minimum Wages Act, 1948.

Allowing the appeal, the Court

HELD: 1. Section 22A of the Act, the provision invoked, isa ‘General provision for punishment of other offences’ where “anyemployer who contravenes any provision of this Act or of any ruleor order made thereunder shall, if no other penalty is provided forsuch contravention by this Act, be punishable with fine which mayextend to five hundred rupees”. Sub-section (1) to Section 22Cstates that where an offence is committed by company, everyperson who at the time the offence was committed was in-chargeof and was responsible to the company for the conduct of thebusiness, as well as the company itself shall be deemed to beguilty of the offence. By necessary implication, it follows that aperson who do not bear out the requirements is not vicariouslyliable under Section 22C(1) of the Act. The proviso, which is inthe nature of an exception, states that person who is liable undersub-section (1) shall not be punished if he proves that the offencewas committed without his knowledge or that he had exercisedall due diligence to prevent the commission of such offence. Theonus to satisfy the requirements to take benefit of the proviso ison the accused, but it does not displace or extricate the initialonus and burden on the prosecution to first establish therequirements of sub-section (1) to Section 22C of the Act. Theproviso is to give immunity to person who is vicariously liableunder sub-section (1) to section 22C of the Act. The proviso beingan exception cannot be made justification or ground to launchand initiate prosecution without the satisfaction of conditionsunder sub-section (1) of Section 22C of the Act. The proviso thatplaces the onus to prove the exception on the accused, does notreverse the onus under the main provision, namely Section22C(1) of the Act, which remains on the prosecution and not onthe person being prosecuted. [Paras 8, 10][521-B-C; 522-C-F;523-G-H; 524-A]

S.M.S. Pharmaceuticals Ltd.v. Neeta Bhalla andAnother (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371;Aneeta Hada v. Godfather Travels and Tours PrivateLimited (2012) 5 SCC 661 : [2012] 5 SCR 503 – reliedon.

A2. Sub-section (2) states that notwithstanding anythingcontained in sub-section (1), where any offence under the Acthas been committed by company, and it is proved that suchoffence has been committed with the consent or connivance of,or is attributable to any neglect on the part of, any director,manager, secretary or other officer of the company, then suchBdirector, manager, secretary or other officer of the company shallalso be deemed to be guilty of that offence and shall be liable tobe proceeded against and punished accordingly. Without muchado, it is clear from reading of sub-section (2) to Section 22C ofthe Act that person cannot be prosecuted and punished merelyCbecause of their status or position as director, manager, secretaryor any other officer, unless the offence in question was committedwith their consent or connivance or is attributable to any neglecton their part. The onus under sub-section (2) to Section 22C ison the prosecution and not on the person being prosecuted.[Para 11][524-B-D]D3. Unlike sub-section (2) to Section 22C, sub-section (1)conspicuously does not use the term ‘director, manager, secretaryor other officer of the company’ to bring them within the ambit ofthe vicarious liability provision, albeit every person in-charge ofand responsible to the company for the conduct of its business atEthe time of the commission of the offence in question is deemedto be additionally liable. The words ‘in-charge of the company’and ‘responsible to the company’ are pivotal to sub-section (1).This requirement has to be satisfied for the deeming effect ofsub-section (1) to apply and for rendering the person liable to beFproceeded against and, on such position being proved, punished.[Para 12][524-E-F]

Girdhari Lal Gupta v. D.H. Mehta and Another 1971(3) SCC 189: [1971] 3 SCR 748 : [1971] 3 SCR 748;State of Karnataka v. Pratap Chand and Others. (1981)G2 SCC 335 : [1981] 3 SCR 200; Municipal Corporationof Delhi v. Purshotam Dass Jhunjunwala and Others(1983) 1 SCC 9 : [ 1983] 1 SCR 895; National SmallIndustries Corporation Limited v. Harmeet Singh Paintaland Another (2010) 3 SCC 330 : [2010] 2 SCR 805 –relied on.

Municipal Corporation of Delhi v. Ram Kishan Rohtagiand Others 1983 (1) SCC 1 : [1983] 1 SCR 884 –referred to.

4. The necessities of sub-section (2) to Section 22C of theAct are different from sub-section (1) to Section 22C of the Act.Vicarious liability under sub-section (2) to Section 22C can arisebecause of the director, manager, secretary, or other officer’spersonal conduct, functional or transactional role, notwithstandingthat the person was not in overall control of the day to day businessof the company when the offence was committed. Vicarious liabilityis attracted when the offence is committed with the consent,connivance, or is attributable to the neglect on the part of adirector, manager, secretary, or other officer of the company.[Para 17][529-C-D]

5. In the factual context present, it is crystal clear that thecomplaint does not satisfy the mandate of sub-section (1) to Section22C of the Act as there are no assertions or averments that theappellant before this Court was in-charge of and responsible toWS company in the manner as interpreted by this Court in thecases mentioned above. The proviso to sub-section (1) in thiscase would not apply. It is an exception that would be applicableand come into operation only when the conditions of sub-section(1) to Section 22C are satisfied. Notably, in the absence of anyspecific averment, the prosecution in the present case does notand cannot rely on Section 22C(2) of the Act. [Para 18][529-E-G]

State of Madras v. C.V. Parekh and Another (1970) 3SCC 491; Sharad Kumar Sanghi v. Sangita Rane (2015)12 SCC 781 : [2015] 2 SCR 145; Himanshu v. B.Shivamurthy and Another (2019) 3 SCC 797 : [2019] 1SCR 991 – relied on.

Sheoratan Agarwal and Another v. State of MadhyaPradesh (1984) 4 SCC 352 : [1985] 1 SCR 719; AnilHada v. Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5Suppl. SCR 6; Anil Gupta v. Star India Private Limitedand Another (2014) 10 SCC 373 : [2014] 8 SCR 183;Hindustan Unilever Limited v. State of Madhya Pradesh(2020) 10 SCC 751 – referred to.

A6. company being juristic person cannot be imprisoned,but it can be subjected to fine, which in itself is punishment.Every punishment has adverse consequences, and therefore,prosecution of the company is mandatory. The exception wouldpossibly be when the company itself has ceased to exist or cannotbe prosecuted due to statutory bar. However, such exceptionsBare of no relevance in the present case. Thus, the presentprosecution must fail for this reason as well. [Para 27][536-D-E]

7. The complaint refers to the violation as certain noticeswere not displayed and certain registers and forms were not keptat the ‘worksite’. response to the show-cause-cum-complianceCnotice in the form of short reply states that the Company neithermanages the ATM nor works at the ATM and that the ATM sitewas managed by the respective banks and, therefore, the volitionalas alleged do not apply to them. The complaint does not statewhy the reply was deficient or indicate even briefly as to the natureDof activity and involvement of the Company’s workers at the ATMsite of the State Bank of India mandating compliance at the sitein question. We are not ruling on merits, albeit highlighting thecomplaint being bereft and silent on these aspects and whetherthe authorities considered the legal provisions in the context ofthe factual background before initiating prosecution.E[Para 28][536-F-H; 537-A-B]

8. The authorities bestowed with the duty to confirmcompliance are often empowered to take stringent including penalaction to ensure observance and check defiance. There cannotalso be any quarrel on the need to enforce obedience of the rulesFas the beneficial legislation protects the worker’s basic right toreceive minimum wages. The rulebook makes sure that theworkers are made aware of their rights and paid their dues asper law without unnecessary disputes or allegations as to absence,overtime payment, deductions, etc. [Para 29][537-B-C]

GDirectorate of Revenue and Another v. MohammedNisar Holia 2008 (2) SCC 370 : [2007] 12 SCR 906 –referred to.

9. Almost every statute confer operational power to enforceand penalise, which power is to be exercised consistently fromHcase to case, but adapted to facts of an individual case. The

passage from Hindustan Steel Ltd. highlights the rule that thediscretion that vests with the prosecuting agencies is paired withthe duty to be thoughtful in cases of technical, venial breachesand genuine and honest belief, and be firmly unforgiving in casesof deceitful and mendacious conduct. Sometimes legal provisionsare worded in great detail to give an expansive reach given thevariables and complexities involved, and also to avoid omissionand check subterfuges. However, legal meaning of the provisionis not determined in abstract, but only when applied to therelevant facts of the case. Therefore, it is necessary that thediscretion conferred on the authorities is applied fairly andjudiciously avoiding specious, unanticipated or unreasonableresults. The intent, objective and purpose of the enactment shouldguide the exercise of discretion, as the presumption is that themakers did not anticipate anomalous or unworkableconsequences. The intention should not be to target and penalisean unintentional defaulter who is in essence law-abiding.[Para 30][538-C-F]

M/s. Hindustan Steel Ltd. v. State of Orrisa 1969 (2)SCC 627 : [1970] 1 SCR 753 – relied on.

10. The initiation of prosecution and summoning of anaccused to stand trial has serious consequences. They extendfrom monetary loss to humiliation and disrepute in society,sacrifice of time and effort to prepare defence and anxiety ofuncertain times. Criminal law should not be set into motion as amatter of course or without adequate and necessary investigationof facts on mere suspicion, or when the violation of law is doubtful.It is the duty and responsibility of the public officer to proceedresponsibly and ascertain the true and correct facts. Executionof law without appropriate acquaintance with legal provisions andcomprehensive sense of their application may result in an innocentbeing prosecuted. [Para 31][538-G; 539-A-B]

11. Equally, it is the court’s duty not to issue summons in amechanical and routine manner. If done so, the entire purpose oflaying down detailed procedure under Chapter XV of the 1973Code gets frustrated. Under the proviso (a) to Section 200 of the1973 Code, there may lie an exemption from recording

518SUPREME COURT REPORTS

Apre-summoning evidence when private complaint is filed by apublic servant in discharge of his official duties; however, it isthe duty of the Magistrate to apply his mind to see whether onthe basis of the allegations made and the evidence, prima faciecase for taking cognizance and summoning the accused is madeout or not. [Para 32][539-C-D]B

National Small Industries Corporation Limited v. State(NCT of Delhi) and Others (2009) 1 SCC 407 : [2008]16 SCR 83 – relied on.

12. The issue of process resulting in summons is judicialCprocess that carries with it sanctity and promise of legalpropriety. [Para 32][539-H]

Case Law Reference

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR.

CRIMINAL APPELLATE JURISDICTION: Criminal AppealNo.1319 of 2021.

From the Judgment and Order dated 20.01.2020 of the High Courtof Madhya Pradesh at Jabalpur in M. Cr. C. No.846 of 2016.

Siddharth Luthra, Sr. Adv., Samsher Garud, Sandeep SudhakarDeshmukh, Ms. Subhangi Jain, Pankaj Singhal, Advs. for the Appellant.

Vikramjit Banerjee, ASG, Subhranshu Padhi, P. V. Yogeswaran,Amrish Kumar, Advs. for the Respondents.

The Judgment of the Court was delivered by

SANJIV KHANNA, J.

1. Leave granted.

2. The appellant, Dayle De’Souza, is director of M/s. WriterSafeguard Pvt. Ltd. (hereinafter referred to as ‘the Company’). In 2009,the Company had entered into an agreement titled “Agreement forServicing and Replenishment of Automated Teller Machines” with M/s.NCR Corporation India Private Ltd., the latter having earlier enteredinto an agreement with the State Bank of India for maintenance andupkeep of the State Bank of India’s ATMs. On 19[th] February 2014, theLabour Enforcement Officer (Central) had inspected the State Bank ofIndia’s ATM at AST, Komal Chand Petrol Pump, Civil Lines, Sagar,Madhya Pradesh (hereinafter referred to as ‘the ATM’). On 06[th] March2014, notice was issued by the Labour Enforcement Officer (Central)to the appellant and one Vinod Singh, Madhya Pradesh head of M/s.Writer Safeguard Pvt. Ltd. alleging non-compliance with the provisionsof the Minimum Wages Act, 1948 (for short, ‘the Act’) and MinimumWages (Central) Rules, 1950 (for short, ‘the Rules’) at the ATM. On02[nd] April 2014, the Company responded claiming that they neither managenor work at the ATM. After more than four months, the LabourEnforcement Officer (Central), by letter dated 08[th] August 2014, informedthe appellant and Vinod Singh that they were required to appear in thecourt on 14[th] August 2014. On 14[th] August 2014, the Labour EnforcementOfficer (Central) filed criminal complaint before the Court of the ChiefJudicial Magistrate, Sagar, Madhya Pradesh, under Section 22A of theAct. We shall refer to the contents of the complaint later.3. On the date of presentation of the complaint, that is, 14[th] August2014, the Judicial Magistrate, First Class, Sagar, Madhya Pradesh took

Acognisance of the offence and issued bailable warrant against theappellant and Vinod Singh in Criminal Case No. 3398/2014. On 01[st]August 2015, the Company submitted detailed representation to theDeputy Chief Labour Commissioner (Central), Marhatal, Jabalpur,Madhya Pradesh denying the contents of the notice dated 06[th] March2014.B

4. Thereafter, on 01[st] August 2015, the appellant filed petitionM.Cr.C. No. 846/2016 under Section 482 of the Code of CriminalProcedure, 1973 (‘the Code’, for short) before the High Court of MadhyaPradesh at its Principal Seat at Jabalpur for quashing the complaint inCriminal Case No. 3398/2014. By the impugned order in M.Cr.C. No.C846/2016 dated 20[th] January 2020, the High Court dismissed the petitionas sans merit. Hence, the present appeal.

5. Upon perusal of the complaint in question, which is placed onrecord, we note that two individuals have been enlisted as accused,namely: (i) Dayle De’Souza – the appellant before us, who as per theDcause-title is stated to be director of M/s. Writer Safeguard Pvt. Ltd.and resident of Writer House located in Mumbai, Maharashtra; and (ii)Vinod Singh, who it is stated is the Madhya Pradesh head of M/s. WriterSafeguard Pvt. Ltd. and resident of Bhopal, Madhya Pradesh. TheCompany is not enlisted as an accused in the complaint and has not beenEsummoned to stand trial.

6. The complaint, with reference to the two accused, in paragraph3 states:

“(3) That the accused persons are Contractor who were gettingwork of cash loading and security of cash through labours andFthey are responsible for employment and payment of laboursemployed in said work under said Act, who is Employer underPart 2 (E) of the Minimum Wages Act, 1948.”

It is also alleged in the complaint:

G“(4) That the work of said Employer is regulated under NotificationNo.- S.O. 1284 (E) dated 20.05.2009 of the Government of Indiaand they are Scheduled Employer under Minimum Wages Act,1948 and Minimum Wages (Central) Rules, 1950.”

7. The complaint states that the inspection on 19[th] February 2014had revealed violation of Rules 21(4), 22, 25(2), 26(1) and 26(5) onH

account of failure to keep and display, as the case may be, the FineRegister Form-1, Register Form-2, the notice of minimum wages, Rule,and abstract of the Act, name of Inspectors with address in Hindi andEnglish at the worksite, overtime register, wages payment register andattendance register at the worksite or at any adjoining place(s).

8. Section 22A of the Act, the provision invoked, is ‘Generalprovision for punishment of other offences’ where “any employer whocontravenes any provision of this Act or of any rule or order madethereunder shall, if no other penalty is provided for suchcontravention by this Act, be punishable with fine which may extendto five hundred rupees”. Clause (b) of sub-section (1) to Section 22Bwith the heading “Cognizance of offences” states that “No court shalltake cognisance of complaint against any person for an offence- under clause (b) of section 22 or under section 22A, except on acomplaint made by, or with the sanction of, an Inspector”. Sub-section (2) to Section 22B, insofar as it relates to Section 22A, vide sub-clause (b) states that “No Court shall take cognisance of an offence– under Section 22A, unless complaint thereof is made within sixmonths of the date on which the offence is alleged to have beencommitted.”

9. However, in the context of the present appeal, it is Section 22Cof the Act which is of more relevance which reads thus:

“22C. Offences by companies. —

(1) If the person committing any offence under this Act is acompany, every person who at the time the offence was committed,was in charge of, and was responsible to, the company for theconduct of the business of the company as well as the companyshall be deemed to be guilty of the offence and shall be liable tobe proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall renderany such person liable to any punishment provided in this Act if heproves that the offence was committed without his knowledge orthat he exercised all due diligence to prevent the commission ofsuch offence.

(2) Notwithstanding anything contained in sub-section (1), wherean offence under this Act has been committed by company andit is proved that the offence has been committed with the consent

Aor connivance of, or is attributable to any neglect on the part of,any director, manager, secretary or other officer of the company,such director, manager, secretary or other officer of the companyshall also be deemed to be guilty of that offence and shall be liableto be proceeded against and punished accordingly.

BExplanation. — For the purposes of this section —(a) “company” means any body corporate and includes firm orother association of individuals; and

(b) “director” in relation to firm means partner in the firm.”

C10. Sub-section (1) to Section 22C states that where an offenceis committed by company, every person who at the time the offencewas committed was in-charge of and was responsible to the companyfor the conduct of the business, as well as the company itself shall bedeemed to be guilty of the offence. By necessary implication, it followsthat person who do not bear out the requirements is not vicariouslyDliable under Section 22C(1) of the Act. The proviso, which is in thenature of an exception, states that person who is liable under sub-section (1) shall not be punished if he proves that the offence wascommitted without his knowledge or that he had exercised all duediligence to prevent the commission of such offence. The onus to satisfyEthe requirements to take benefit of the proviso is on the accused, but itdoes not displace or extricate the initial onus and burden on the prosecutionto first establish the requirements of sub-section (1) to Section 22C ofthe Act. The proviso is to give immunity to person who is vicariouslyliable under sub-section (1) to section 22C of the Act. In S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla and Another,[1 ]in relation toFpari materia proviso in Section 141 of the Negotiable Instruments Act,1881, this Court observed:

“4… company being juristic person, all its deeds and functionsare the result of acts of others. Therefore, officers of companywho are responsible for acts done in the name of the companyGare sought to be made personally liable for acts which result incriminal action being taken against the company. It makes everyperson who, at the time the offence was committed, was in chargeof, and was responsible to the company for the conduct of businessof the company, as well as the company, liable for the offence.

-The proviso to the subsection contains an escape route for personswho are able to prove that the offence was committed withouttheir knowledge or that they had exercised all due diligence toprevent commission of the offence.

9. The position of managing director or joint managing directorin company may be different. These persons, as the designationof their office suggests, are in charge of company and areresponsible for the conduct of the business of the company. Inorder to escape liability such persons may have to bring their casewithin the proviso to Section 141(1), that is, they will have to provethat when the offence was committed they had no knowledge ofthe offence or that they exercised all due diligence to prevent thecommission of the offence.”

(Emphasis added)

In Aneeta Hada v. Godfather Travels and Tours PrivateLimited,[2]this Court had reiterated that the proviso to general vicariousliability under Section 141 of the Negotiable Instruments Act, 1881, appliesas an exception, by observing:

“22. On reading of the said provision, it is plain as day that if aperson who commits the offence under Section 138 of the Act isa company, the company as well as every person in charge of andresponsible to the company for the conduct of business of thecompany at the time of commission of offence is deemed to beguilty of the offence. The first proviso carves out under whatcircumstances the criminal liability would not be fastened. Sub-section (2) enlarges the criminal liability by incorporating theconcepts of connivance, negligence and consent that engulfs manycategories of officers. It is worth noting that in both the provisions,there is “deemed” concept of criminal liability.”

(Emphasis added)

The proviso being an exception cannot be made justification ora ground to launch and initiate prosecution without the satisfaction ofconditions under sub-section (1) of Section 22C of the Act. The provisothat places the onus to prove the exception on the accused, does not

2 (2012) 5 SCC 661.

Areverse the onus under the main provision, namely Section 22C(1) of theAct, which remains on the prosecution and not on the person beingprosecuted.

11. Sub-section (2) states that notwithstanding anything containedin sub-section (1), where any offence under the Act has been committedBby company, and it is proved that such offence has been committedwith the consent or connivance of, or is attributable to any neglect on thepart of, any director, manager, secretary or other officer of the company,then such director, manager, secretary or other officer of the companyshall also be deemed to be guilty of that offence and shall be liable to beproceeded against and punished accordingly. Without much ado, it isCclear from reading of sub-section (2) to Section 22C of the Act that aperson cannot be prosecuted and punished merely because of their statusor position as director, manager, secretary or any other officer, unlessthe offence in question was committed with their consent or connivanceor is attributable to any neglect on their part. The onus under sub-sectionD(2) to Section 22C is on the prosecution and not on the person beingprosecuted.12. Unlike sub-section (2) to Section 22C, sub-section (1)conspicuously does not use the term ‘director, manager, secretary orother officer of the company’ to bring them within the ambit of theEvicarious liability provision, albeit every person in-charge of andresponsible to the company for the conduct of its business at the time ofthe commission of the offence in question is deemed to be additionallyliable. The words ‘in-charge of the company’ and ‘responsible to thecompany’ are pivotal to sub-section (1). This requirement has to besatisfied for the deeming effect of sub-section (1) to apply and forFrendering the person liable to be proceeded against and, on such positionbeing proved, punished. Interpreting an identical expression used inSections 23-C(1) and 23-C(2) of the Foreign Exchange Regulation Act,1947, this Court in Girdhari Lal Gupta v. D.H. Mehta and Another,[3]has held:

G“6. What then does the expression “a person in-charge andresponsible for the conduct of the affairs of company” mean? Itwill be noticed that the word “company” includes firm or otherassociation, and the same test must apply to director in-chargeand partner of firm in-charge of business. It seems to us that

H3 1971 (3) SCC 189.

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

in the context person “in-charge” must mean that the personshould be in over-all control of the day to day business of thecompany or firm. This inference follows from the wording ofSection 23-C(2). It mentions director, who may be party to thepolicy being followed by company and yet not be in-charge ofthe business of the company. Further it mentions manager, whousually is in charge of the business but not in over-all charge.Similarly, the other officers may be in-charge of only some part ofbusiness.

xxxx

8. In R.K. Khandelwal v. State D.S. Mathur, J., in construingSection 27 of the Drugs Act, 1940, provision similar to the onewe are concerned with, observed:

“There can be directors who merely lay down the policy andare not concerned with the day to day working of the company.Consequently, the mere fact that the accused person is apartner or director of the Company, shall not make himcriminally liable for the offence committed by the Companyunless the other ingredients are established which make himcriminally liable.””

Those not in overall control of the day to day business of thecompany or the firm are not deemed to be constructively liable underSection 23-C(1) of the Foreign Exchange Regulation Act, 1947.

13. This exposition on the meaning of the term ‘in-charge andresponsible for’ was referred to with approval in State of Karnataka v.Pratap Chand and Others.[4] This decision relates to the prosecution ofthe partner of firm under the Drugs and Cosmetics Act, 1940. Thejudgment referred to the explanation to Section 34 in the said Act (whichis pari materia with the explanation in Section 22C of the MinimumWages Act, 1948) to observe that for the purpose of imposing liability onthe company under the said Section, company includes body corporate,a firm or an association of individuals. director in relation to firmmeans partner in that firm. Therefore, even in the case of partners,when firm commits an offence, the requirement of either sub-section(1) or sub-section (2) to Section 22C must be satisfied. This means thatin terms of sub-section (1), the partner should be “in-charge of” and

A“responsible to” the firm for the conduct of its business as per the dictumin Girdhari Lal Gupta (supra). Further, as per sub-section (2), partnermay also be liable, just as director is liable for the conduct of thebusiness of company, if the offence is committed with the consent orconnivance of, or is attributable to any neglect on the part of the partnerconcerned.B

14. Way back in 1982, in Municipal Corporation of Delhi v.Ram Kishan Rohtagi and Others,[5] this Court had quashed criminalproceedings under the Prevention of Food Adulteration Act, 1954 againstthe directors of manufacturing company at the summoning stage,observing that the presumptive assertion made in the complaint that theCdirectors of the accused company ‘as such’ were in-charge of andresponsible for the conduct of the business of the company at the timeof sampling was vague. The use of the words “as such” in the complaintindicated that the complainant had merely presumed that the directorsmust be guilty because they held the office of the director. The CourtDopined that such presumptive accusations against the directors withoutany specific averment or criminal attribution being made in the complaintwould be insufficient. Thereafter, reference was made to Section 319 ofthe Code of Criminal Procedure, 1973 which empowers the Court totake cognisance of and proceed against person who is not an accusedbefore it and try him along with others. Upholding the reasoning of theEHigh Court quashing the proceedings against the directors, it washighlighted:

“12.......The main clause of the complaint which is the subject-matter of the dispute is clause 5 which may be extracted thus:

F5. That accused 3 is the Manager, of accused 2 and accused 4to 7 are the Directors of accused 2 and as such they wereincharge of and responsible for the conduct of business ofaccused 2 at the time of sampling.

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G14. Reliance has been placed on the words “as such” in order toargue that because (sic) the complaint does not attribute anycriminal responsibility to Accused 4 to 7 except that they wereincharge of and responsible for the conduct of the business of theCompany. It is true that there is no clear averment of the fact that

H5 1983 (1) SCC 1.

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

the Directors were really incharge of the manufacture andresponsible for the conduct of business but the words “as such”indicate that the complainant has merely presumed that theDirectors of the Company must be guilty because they are holdinga particular office. This argument found favour with the HighCourt which quashed the proceedings against the Directors asalso against the Manager, Respondent 1.”

However, the initiation of prosecution and the summoning orderagainst the manager in the factual context was held to be proper.

15. In another decision by the same Bench titled MunicipalCorporation of Delhi v. Purshotam Dass Jhunjunwala and Others,[6]the assertions were that the individual accused, namely the chairman,managing director and directors of the company, were “in-charge of andresponsible to it for the conduct of its business at the time of commissionof the offence”. The words “as such” were missing. This Court,therefore, concluded that the directors of the company were not beingprosecuted merely because of their official position but because of theassertion that they were “in-charge of and responsible for the conductof the business at the time of commission of the offence”. There was aclear averment regarding the active role played by the accused and theextent of their liability. Accordingly, restoring the order passed by theMetropolitan Magistrate by which the directors etc. were summonedfor trial in accordance with the law and setting aside the order of theHigh Court quashing the prosecution against them, this Court has held:

“3.....The relevant allegations against the accused-respondentsare to be found in para 5 of the complaint which may be extractedthus:

5. That accused Ram Kishan Bajaj is the Chairman, accusedR.P. Neyatia is the Managing Director and Accused 7 to 12are the Directors of the Hindustan Sugar Mills Ltd. and wereincharge of and responsible to it for the conduct of its businessat the time of commission of offence.

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5. In the instant case, clear averment has been made regardingthe active role played by the respondents and the extent of theirliability. In this view of the matter, it cannot be said that para 5 of

Athe complaint is vague and does not implicate Respondents 1 to11. As to what would be the evidence against the respondents isnot matter to be considered at this stage and would have to beproved at the trial. We have already held that for the purpose ofquashing the proceedings only the allegations set forth in thecomplaint have to be seen and nothing further.”B16. The legal position has undergone further elucidation in numberof judgments.[7] However, for the present decision, we would refer to thesummarisation in National Small Industries Corporation Limited v.Harmeet Singh Paintal and Another,[8] to the following effect:

“39. From the above discussion, the following principles emerge:C

(i)The primary responsibility is on the complainant to makespecific averments as are required under the law in thecomplaint so as to make the accused vicariously liable. Forfastening the criminal liability, there is no presumption thatevery Director knows about the transaction.D(ii)Section 141 does not make all the Directors liable for theoffence. The criminal liability can be fastened only on thosewho, at the time of the commission of the offence, were incharge of and were responsible for the conduct of thebusiness of the company.

E(iii)Vicarious liability can be inferred against companyregistered or incorporated under the Companies Act, 1956only if the requisite statements, which are required to beaverred in the complaint/petition, are made so as to makethe accused therein vicariously liable for offence committedFby the company along with averments in the petitioncontaining that the accused were in charge of andresponsible for the business of the company and by virtueof their position they are liable to be proceeded with.

(iv)Vicarious liability on the part of person must be pleadedand proved and not inferred.G

(v)If the accused is Managing Director or Joint ManagingDirector then it is not necessary to make specific averment

7 See, Pooja Ravinder Devidasani v. State of Maharashtra and another, (2014) 16 SCC 1;Gunmala Sales Private Ltd. v. Anu Mehta and Others, (2015) 1 SCC 103; ShailendraSwarup v. Deputy Director, Enforcement Directorate, (2020) 16 SCC 561.H8 (2010) 3 SCC 330.

in the complaint and by virtue of their position they areliable to be proceeded with.

(vi)If the accused is Director or an officer of companywho signed the cheques on behalf of the company thenalso it is not necessary to make specific averment in thecomplaint.

(vii)The person sought to be made liable should be in charge ofand responsible for the conduct of the business of thecompany at the relevant time. This has to be averred as afact as there is no deemed liability of Director in suchcases.”

17. The necessities of sub-section (2) to Section 22C of the Actare different from sub-section (1) to Section 22C of the Act. Vicariousliability under sub-section (2) to Section 22C can arise because of thedirector, manager, secretary, or other officer’s personal conduct, functionalor transactional role, notwithstanding that the person was not in overallcontrol of the day to day business of the company when the offencewas committed. Vicarious liability is attracted when the offence iscommitted with the consent, connivance, or is attributable to the neglecton the part of director, manager, secretary, or other officer of thecompany.18. In the factual context present before us it is crystal clear thatthe complaint does not satisfy the mandate of sub-section (1) to Section22C of the Act as there are no assertions or averments that the appellantbefore this Court was in-charge of and responsible to the company M/s.Writer Safeguard Pvt. Ltd. in the manner as interpreted by this Court inthe cases mentioned above. The proviso to sub-section (1) in the presentcase would not apply. It is an exception that would be applicable andcome into operation only when the conditions of sub-section (1) to Section22C are satisfied. Notably, in the absence of any specific averment, theprosecution in the present case does not and cannot rely on Section22C(2) of the Act.

19. There is yet another difficulty for the prosecution in the presentcase as the Company has not been made an accused or even summonedto be tried for the offence. The position of law as propounded in State ofMadras v. C.V. Parekh and Another:[9], reads:

A“3. Learned Counsel for the appellant, however, sought convictionof the two respondents on the basis of Section 10 of the EssentialCommodities Act under which, if the person contravening an ordermade under Section 3 (which covers an order under the Iron andSteel Control Order, 1956), is company, every person who, atthe time the contravention was committed, was in charge of, andBwas responsible to, the company for the conduct of the businessof the company as well as the company, shall be deemed to beguilty of the contravention and shall be liable to be proceededagainst and punished accordingly. It was urged that the tworespondents were in charge of, and were responsible to, theCCompany for the conduct of the business of the Company and,consequently, they must be held responsible for the sale and forthus contravening the provisions of clause (5) of the Iron andSteel Control Order. This argument cannot be accepted, becauseit ignores the first condition for the applicability of Section 10 tothe effect that the person contravening the order must be aDcompany itself. In the present case, there is no finding either bythe Magistrate or by the High Court that the sale in contraventionof clause (5) of the Iron and Steel Control Order was made bythe Company. In fact, the Company was not charged with theoffence at all. The liability of the persons in charge of the CompanyEonly arises when the contravention is by the Company itself. Since,in this case, there is no evidence and no finding that the Companycontravened clause (5) of the Iron and Steel Control Order, thetwo respondents could not be held responsible. The actualcontravention was by Kamdar and Vallabhdas Thacker and anycontravention by them would not fasten responsibility on theFrespondents. The acquittal of the respondents is, therefore, fullyjustified. The appeal fails and is dismissed.”

20. However, this proposition was later deviated from in SheoratanAgarwal and Another v. State of Madhya Pradesh.[10] This casepertained to the pari materia provision under Section 10 of the EssentialGCommodities Act, 1955. The court held that anyone among: the companyitself; every person in-charge of and responsible to the company for theconduct of the business; or any director, manager, secretary or otherofficer of the company with whose consent or connivance or because

H10 (1984) 4 SCC 352.

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

of whose neglect offence had been committed, could be prosecutedalone. However, the person-in-charge or an officer of the company couldbe held guilty in that capacity only after it has been established that therehas been contravention by the company as well. However, this will notmean that the person-in-charge or an officer of the company must bearraigned simultaneously along with the company if he is to be foundguilty and punished.

21. Relying upon the reasoning in Sheoratan Agarwal (supra)and limiting the interpretation of C.V. Parekh (supra), this Court in AnilHada v. Indian Acrylic Ltd.[11] had held that:

“13. If the offence was committed by company it can be punishedonly if the company is prosecuted. But instead of prosecuting thecompany if payee opts to prosecute only the persons fallingwithin the second or third category the payee can succeed in thecase only if he succeeds in showing that the offence was actuallycommitted by the company. In such prosecution the accusedcan show that the company has not committed the offence, thoughsuch company is not made an accused, and hence the prosecutedaccused is not liable to be punished. The provisions do not containa condition that prosecution of the company is sine qua non forprosecution of the other persons who fall within the second andthe third categories mentioned above. No doubt finding that theoffence was committed by the company is sine qua non forconvicting those other persons. But if company is not prosecuteddue to any legal snag or otherwise, the other prosecuted personscannot, on that score alone, escape from the penal liability createdthrough the legal fiction envisaged in Section 141 of the Act.”

22. However, subsequent decisions of this Court have emphasisedthat the provision imposes vicarious liability by way of deeming fictionwhich presupposes and requires the commission of the offence by thecompany itself as it is separate juristic entity. Therefore, unless thecompany as principal accused has committed the offence, the personsmentioned in sub-section (1) would not be liable and cannot be prosecuted.Section 141(1) of the Negotiable Instruments Act, extends vicariouscriminal liability to the officers of company by deeming fiction, whicharises only when the offence is committed by the company itself and not

Aotherwise. Overruling Sheoratan Agarwal and Anil Hada, in AneetaHada v. Godfather Travels and Tours Private Limited,[12] 3-judgebench of this court expounding on the vicarious liability under Section141 of the Negotiable Instruments Act, has held:

“51. We have already opined that the decision in SheoratanBAgarwal runs counter to the ratio laid down in C.V. Parekh whichis by larger Bench and hence, is binding precedent. On theaforesaid ratiocination, the decision in Anil Hada has to be treatedas not laying down the correct law as far as it states that theDirector or any other officer can be prosecuted withoutimpleadment of the company. Needless to emphasise, the matterCwould stand on different footing where there is some legalimpediment and the doctrine of lex non cogit ad impossibiliagets attracted.

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D59. In view of our aforesaid analysis, we arrive at the irresistibleconclusion that for maintaining the prosecution under Section 141of the Act, arraigning of company as an accused is imperative.The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has beenstipulated in the provision itself. We say so on the basis of theEratio laid down in C.V. Parekh which is three-Judge Benchdecision. Thus, the view expressed in Sheoratan Agarwal doesnot correctly lay down the law and, accordingly, is hereby overruled.The decision in Anil Hada is overruled with the qualifier as statedin para 51. The decision in Modi Distillery has to be treated to beFrestricted to its own facts as has been explained by ushereinabove.”23. The proposition of law laid down in Aneeta Hada (supra)was relied upon by this Court in Anil Gupta v. Star India Private Limitedand Another:[13]G“13. In the present case, the High Court by the impugned judgmentdated 13-8-2007 [Visionaries Media Network v. Star India (P)Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] held that the complaint against Respondent 2 Company

12 (2012) 5 SCC 661.H13 (2014) 10 SCC 373.

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

was not maintainable and quashed the summons issued by thetrial court against Respondent 2 Company. Thereby, the Companybeing not party to the proceedings under Section 138 read withSection 141 of the Act and in view of the fact that part of thejudgment referred to by the High Court in Anil Hada has beenoverruled by three-Judge Bench of this Court in Aneeta Hada,we have no other option but to set aside the rest part of theimpugned judgment [Visionaries Media Network v. Star India (P)Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] whereby the High Court held that the proceedingsagainst the appellant can be continued even in absence of theCompany. We, accordingly, set aside that part of the impugnedjudgment dated 13-8-2007 [Visionaries Media Network v. StarIndia (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on13-8-2007 (Del)] passed by the High Court so far as it relates tothe appellant and quash the summons and proceeding pursuant toComplaint Case No. 698 of 2001 qua the appellant.”

24. In Sharad Kumar Sanghi v. Sangita Rane,[14]this Courtobserved that:

“11. In the case at hand as the complainant’s initial statementwould reflect, the allegations are against the Company, theCompany has not been made party and, therefore, the allegationsare restricted to the Managing Director. As we have noted earlier,allegations are vague and in fact, principally the allegations areagainst the Company. There is no specific allegation against theManaging Director. When company has not been arrayed as aparty, no proceeding can be initiated against it even where vicariousliability is fastened under certain statutes. It has been so held by athree-Judge Bench in Aneeta Hada v. Godfather Travels andTours (P) Ltd. in the context of the Negotiable Instruments Act,1881.

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13. When the company has not been arraigned as an accused,such an order could not have been passed. We have said so forthe sake of completeness. In the ultimate analysis, we are of theconsidered opinion that the High Court should have been well

Aadvised to quash the criminal proceedings initiated against theappellant and that having not been done, the order is sensitivelyvulnerable and accordingly we set aside the same and quash thecriminal proceedings initiated by the respondent against theappellant.”

B25. This position was again clarified and reiterated by this Courtin Himanshu v. B. Shivamurthy and Another.[15]The relevant portion

of the judgment reads thus:

“6. The judgment of the High Court has been questioned on twogrounds. The learned counsel appearing on behalf of the appellantCsubmits that firstly, the appellant could not be prosecuted withoutthe company being named as an accused. The cheque was issuedby the company and was signed by the appellant as its Director.Secondly, it was urged that the observation of the High Court thatthe company can now be proceeded against in the complaint ismisconceived. The learned counsel submitted that the offenceDunder Section 138 is complete only upon the issuance of noticeof demand and the failure of payment within the prescribed period.In absence of compliance with the requirements of Section 138, itis asserted, the direction of the High Court that the company couldbe impleaded/arraigned at this stage is erroneous.

7. The first submission on behalf of the appellant is no longer resintegra. decision of three-Judge Bench of this Court in AneetaHada v. Godfather Travels & Tours (P) Ltd. governs the areaof dispute. The issue which fell for consideration was whether anauthorised signatory of company would be liable for prosecutionFunder Section 138 of the Negotiable Instruments Act, 1881 withoutthe company being arraigned as an accused. The three-JudgeBench held thus: (SCC p. 688, para 58)

“58. Applying the doctrine of strict construction, we are of theconsidered opinion that commission of offence by the companyGis an express condition precedent to attract the vicarious liabilityof others. Thus, the words “as well as the company” appearingin the section make it absolutely unmistakably clear that whenthe company can be prosecuted, then only the personsmentioned in the other categories could be vicariously liable

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

for the offence subject to the averments in the petition andproof thereof. One cannot be oblivious of the fact that thecompany is juristic person and it has its own respectability. Ifa finding is recorded against it, it would create concavity inits reputation. There can be situations when the corporatereputation is affected when Director is indicted.”

In similar terms, the Court further held: (SCC p. 688, para 59)

“59. In view of our aforesaid analysis, we arrive at theirresistible conclusion that for maintaining the prosecution underSection 141 of the Act, arraigning of company as an accusedis imperative. The other categories of offenders can only bebrought in the drag-net on the touchstone of vicarious liabilityas the same has been stipulated in the provision itself.”

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12. The provisions of Section 141 postulate that if the personcommitting an offence under Section 138 is company, everyperson, who at the time when the offence was committed wasin charge of or was responsible to the company for the conductof the business of the company as well as the company, shallbe deemed to be guilty of the offence and shall be liable to beproceeded against and punished.

13. In the absence of the company being arraigned as anaccused, complaint against the appellant was therefore notmaintainable. The appellant had signed the cheque as Directorof the company and for and on its behalf. Moreover, in theabsence of notice of demand being served on the companyand without compliance with the proviso to Section 138, theHigh Court was in error in holding that the company couldnow be arraigned as an accused.”

26. Applying the same proposition of law as laid down in AneetaHada (supra), this Court in Hindustan Unilever Limited v. State ofGMadhya Pradesh[16] applying pari materia provision in Prevention ofFood Adulteration Act, 1954, held that:

“23. Clause (a) of sub-section (1) of Section 17 of the Act makesthe person nominated to be in charge of and responsible to the

16 (2020) 10 SCC 751.

Acompany for the conduct of business and the company shall beguilty of the offences under clause (b) of sub-section (1) of Section17 of the Act. Therefore, there is no material distinction betweenSection 141 of the NI Act and Section 17 of the Act which makesthe company as well as the nominated person to be held guilty ofthe offences and/or liable to be proceeded and punishedBaccordingly. Clauses (a) and (b) are not in the alternative butconjoint. Therefore, in the absence of the company, the nominatedperson cannot be convicted or vice versa. Since the Companywas not convicted by the trial court, we find that the finding of theHigh Court to revisit the judgment will be unfair to the appellant-Cnominated person who has been facing trial for more than last 30years. Therefore, the order of remand to the trial court to fill upthe lacuna is not fair option exercised by the High Court as thefailure of the trial court to convict the Company renders the entireconviction of the nominated person as unsustainable.”

D27. In terms of the ratio above, company being juristic personcannot be imprisoned, but it can be subjected to fine, which in itself isa punishment. Every punishment has adverse consequences, andtherefore, prosecution of the company is mandatory. The exception wouldpossibly be when the company itself has ceased to exist or cannot beEprosecuted due to statutory bar. However, such exceptions are of norelevance in the present case. Thus, the present prosecution must failfor this reason as well.

28. There is also another aspect which requires our attention. Wehave noted in some detail the contents of the complaint, which refers toFthe violation as certain notices were not displayed and certain registersand forms were not kept at the ‘worksite’, namely, ATM of the SBI atAST, Komal Chand Petrol Pump, Civil Lines, Sagar, District Sagar. Aresponse to the show-cause-cum-compliance notice in the form of ashort reply by the authorised signatory of M/s. Writer Safeguard Pvt.Ltd. on 02[nd] April, 2014, which factum though accepted, has not beenGadverted to in the complaint. This short reply states that the Companyneither manages the ATM nor works at the ATM and that the ATM sitewas managed by the respective banks and, therefore, the volitional asalleged do not apply to them. The complaint does not state why the replywas deficient or indicate even briefly as to the nature of activity andHinvolvement of the Company’s workers at the ATM site of the State

DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEFLABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

Bank of India mandating compliance at the site in question. We are notruling on merits, albeit highlighting the complaint being bereft and silenton these aspects and whether the authorities considered the legalprovisions in the context of the factual background before initiatingprosecution.

29. The authorities bestowed with the duty to confirm complianceare often empowered to take stringent including penal action to ensureobservance and check defiance. There cannot also be any quarrel onthe need to enforce obedience of the rules as the beneficial legislationprotects the worker’s basic right to receive minimum wages. The rulebookmakes sure that the workers are made aware of their rights and paidtheir dues as per law without unnecessary disputes or allegations as toabsence, overtime payment, deductions, etc.30. At the same time, initiation of prosecution has adverse andharsh consequences for the persons named as accused. In Directorateof Revenue and Another v. Mohammed Nisar Holia,[17]this Courtexplicitly recognises the right to not to be disturbed without sufficientgrounds as one of the underlying mandates of Article 21 of theConstitution. Thus, the requirement and need to balance the lawenforcement power and protection of citizens from injustice andharassment must be maintained. Earlier in M/s. Hindustan Steel Ltd. v.State of Orrisa,[18] this Court threw light on the aspect of invocation ofpenalty provisions in mechanical manner by authorities to observe:

“8. Under the Act penalty may be imposed for failure to registeras dealer — Section 9(1) read with Section 25(1)(a) of the Act.But the liability to pay penalty does not arise merely upon proof ofdefault in registering as dealer. An order imposing penalty forfailure to carry out statutory obligation is the result of quasi-criminal proceeding, and penalty will not ordinarily be imposedunless the party obliged either acted deliberately in defiance oflaw or was guilty of conduct contumacious or dishonest, or actedin conscious disregard of its obligation. Penalty will not also beimposed merely because it is lawful to do so. Whether penaltyshould be imposed for failure to perform statutory obligation is amatter of discretion of the authority to be exercised judicially and

18 1969 (2) SCC 627.

Aon consideration of all the relevant circumstances. Even if aminimum penalty is prescribed, the authority competent to imposethe penalty will be justified in refusing to impose penalty, whenthere is technical or venial breach of the provisions of the Act orwhere the breach flows from bona fide belief that the offenderis not liable to act in the manner prescribed by the statute. ThoseBin charge of the affairs of the Company in failing to register theCompany as dealer acted in the honest and genuine belief thatthe Company was not dealer. Granting that they erred, no casefor imposing penalty was made out.”

Almost every statute confer operational power to enforce andCpenalise, which power is to be exercised consistently from case to case,but adapted to facts of an individual case[19]. The passage from HindustanSteel Ltd. (supra) highlights the rule that the discretion that vests withthe prosecuting agencies is paired with the duty to be thoughtful in casesof technical, venial breaches and genuine and honest belief, and be firmlyDunforgiving in cases of deceitful and mendacious conduct. Sometimeslegal provisions are worded in great detail to give an expansive reachgiven the variables and complexities involved, and also to avoid omissionand check subterfuges. However, legal meaning of the provision is notdetermined in abstract, but only when applied to the relevant facts of thecase[20]. Therefore, it is necessary that the discretion conferred on theEauthorities is applied fairly and judiciously avoiding specious, unanticipatedor unreasonable results. The intent, objective and purpose of theenactment should guide the exercise of discretion, as the presumption isthat the makers did not anticipate anomalous or unworkableconsequences. The intention should not be to target and penalise anFunintentional defaulter who is in essence law-abiding.

31. There are number of decisions of this Court in which, withreference to the importance of the summoning order, it has beenemphasised that the initiation of prosecution and summoning of an accusedto stand trial has serious consequences[21]. They extend from monetary

19 Secretary of State for Work and Pensions v [2005] EWCA Civ 929 at [43].

20 See Bennion On Statutory Interpretation, Sixth Edition, Part VI at Page No. 371.

21 See – Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others, (1998)5 SCC 749; GHCL Employees Stock Option Trust v. Indian Infoline Ltd. and Others,(2013) 4 SCC 505; Krishna Lal Chawla and Others v. State of Uttar Pradesh andAnother, (2021) 5 SCC 435.H

loss to humiliation and disrepute in society, sacrifice of time and effort toprepare defence and anxiety of uncertain times. Criminal law should notbe set into motion as matter of course or without adequate and necessaryinvestigation of facts on mere suspicion, or when the violation of law isdoubtful. It is the duty and responsibility of the public officer to proceedresponsibly and ascertain the true and correct facts. Execution of lawwithout appropriate acquaintance with legal provisions andcomprehensive sense of their application may result in an innocent beingprosecuted.

32. Equally, it is the court’s duty not to issue summons in amechanical and routine manner. If done so, the entire purpose of layingdown detailed procedure under Chapter XV of the 1973 Code getsfrustrated. Under the proviso (a) to Section 200 of the 1973 Code, theremay lie an exemption from recording pre-summoning evidence when aprivate complaint is filed by public servant in discharge of his officialduties; however, it is the duty of the Magistrate to apply his mind to seewhether on the basis of the allegations made and the evidence, primafacie case for taking cognizance and summoning the accused is madeout or not. This Court explained the reasoning behind this exemption inNational Small Industries Corporation Limited v. State (NCT ofDelhi) and Others:[22]

“12. The object of Section 200 of the Code requiring thecomplainant and the witnesses to be examined, is to find outwhether there are sufficient grounds for proceeding against theaccused and to prevent issue of process on complaints which arefalse or vexatious or intended to harass the persons arrayed asaccused. (See Nirmaljit Singh Hoon v. State of W.B.) Wherethe complainant is public servant or court, clause (a) of theproviso to Section 200 of the Code raises an implied statutorypresumption that the complaint has been made responsibly andbona fide and not falsely or vexatiously. On account of such impliedpresumption, where the complainant is public servant, the statuteexempts examination of the complainant and the witnesses, beforeissuing process.”

The issue of process resulting in summons is judicial processthat carries with it sanctity and promise of legal propriety.

540SUPREME COURT REPORTS

A33. Resultantly, and for the reasons stated above, we would allowthe present appeal and quash the summoning order and the proceedingsagainst the present appellant.

34. Accused No. 2, Vinod Singh, would also be entitled to thebenefit of this order. Accordingly, the proceedings initiated against theBaccused no. 2, namely Vinod Singh, also stand quashed.

Devika Gujral

Appeal allowed.