S.K.Shukla vs State Of Madhya Pradesh

This application under Section 482 of CrPC has been filed for quashing the order dated 23/12/2014 passed by Judicial Magistrate First Class, Vidisha

in Criminal Case No.3128/2014.

The necessary facts for the disposal of the present application in short are that a complaint has been filed against the applicant for an offence under

Sections 3(zz)(iii), 26(2)(i), 27(1) r/w Section 59 of the Food Safety and Standards Act, 2006 (hereinafter referred to as ''the Act''), Regulation

2.2.2(6), (10) and 2.3.1. (5) of the Food Safety and Standards (Packing and Labeling Regulations, 2011 (hereinafter referred to as “Regulationsâ€)

and also under Section 3(zf) (A) (iii), 3(zf) (c) (i), 26(2)(ii), 27(1) r/w Section 52 of the Act on the allegation that the applicant is a nominee of Satya

Sai Agroils Private Limited (hereinafter referred to as ''the Company'') which is carrying on business of manufacture of Soya Badi, Soya Lecithin,

Soya Flour and Fortune Refined Soyabean Oil etc. and the factory is situated at Sanchi Road, Vidisha. On 23/07/2014, the Food Safety Officer

inspected the Company and took the sample of Fortune Soya Chunks, Soya flour, Fortune Refined Soyabeen Oil etc. manufactured and packed by the

Company. A panchnama was prepared. The sample was sent to Food Analyst and according to the report of Food Analyst, the sample of Soya Badi

was found to be unsafe under the Act and the sample of Soya flour was found to be misbranded and unsafe under Regulation 2.2.2(6), (10) and 2.3.1.

(5) of the Regulations and under Sections 3(zf) (A) (iii), 3(zf) (c) (i), 26(2)(ii), 27(1) r/w Section 52 of the Act. The designated officer sent copy of the

report to the applicant. The sanction for prosecution to file a complaint under Section 36 of the Act was granted and accordingly, the complaint has

been filed for offence under Sections 3(zz)(iii), 26(2)(i), 27(1) r/w Section 59 of the Act, Regulation 2.2.2(6), (10) and 2.3.1. (5) of the Regulations and

under Sections 3(zf) (A) (iii), 3(zf) (c) (i), 26(2)(ii), 27(1) r/w Section 52 of the Act.

The Trial Court took cognizance of offence by order dated 23.12.2014.

Challenging the order taking cognizance, the present application has been filed.

Although several grounds have been taken by the applicant, but the counsel for the applicant confined his argument to a singular question of law. It is

submitted by the counsel for the applicant that according to the complaint itself, the principal/primary accused in the present case is Satya Sai Agroils

Private Limited and thus, without impleading the Company as an accused, the applicant cannot be prosecuted, merely being the nominee of the

Company. The applicant can be held vicariously liable only when the Company is made an accused. Since the liability is penal in nature, therefore,

strict interpretation of law is required. Thus, in order to attract the principle of ''vicarious liability'', then the prosecution must prove that the offence

was committed by a Company. Since Company is a juristic person, therefore, without arraigning the Company as an accused the applicant cannot be

held variously liable.Â

Per contra, it is submitted by the State counsel that the applicant is the nominee of the Company and, therefore, he can be prosecuted even in absence

of the Company.

Heard the learned counsel for the parties.

Section 66 of the Food and Safety and Standards Act, 2006 reads as under:-

“66. Offences by companies.- (1) Where an offence under this Act which has been committed by a company, every person who at the time the

offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the

company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that where a company has different establishments or branches or different units in any establishment or branch, the concerned Head or the

person in-charge of such establishment, branch, unit nominated by the company as responsible for food safety shall be liable for contravention in

respect of such establishment, branch or unit:

Provided further that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that

the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the

offence 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, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to

be proceeded against and punished accordingly.

Explanation.-For the purpose of this section,-

(a) ""company"" means any body corporate and includes a firm or other association of individuals; and

(b) ""director"" in relation to a firm, means a partner in the firm.â€​

The Supreme Court in the case of Aneeta Hada Vs. Godfather Tours and Travels (P) Ltd. reported in (2012) 5 SCC 661 has held as under :

“25. In Halsbury’s Laws of England, Vol. 11(1), in Para 35, it has been laid down that in general, a corporation is in the same position in

relation to criminal liability as a natural person and may be convicted of common law and statutory offences including those requiring mens rea.

In 19 Corpus Juris Secundum, in Para 1358, while dealing with liability in respect of criminal prosecution, it has been stated that a corporation shall

be liable for criminal prosecution for crimes punishable with fine; in certain jurisdictions, a corporation cannot be convicted except as specifically

provided by the statute. 27. In H.L. Bolton (Engg.) Co. Ltd. v. T.J. Graham & Sons Ltd. Lord Denning, while dealing with the liability of a company,

in his inimitable style, has expressed that: (QB p. 172)

“… A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands

which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are

nothing more than hands to do the work and cannot be said to represent the mind or will. Others are Directors and managers who represent the

directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is

treated by the law as such.â€​

In certain cases, where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the

company. The learned Law Lord referred to Lord Haldane’s speech in Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., AC at pp.

713-14. Elaborating further, he has observed that:

“… in criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the Directors or the

managers will render the company itself guilty.â€​

It may be appropriate at this stage to notice theobservations made by Mac Naghten, J. in Director of Public Prosecutions v. Kent and Sussex

Contractors Ltd.: (All ER p. 124)

“… A body corporate is a ‘person’ to whom, amongst the various attributes it may have, there should be imputed the attribute of a mind

capable of knowing and forming an intentionâ€" indeed it is much too late in the day to suggest the contrary. It can only know or form an intention

through its human agents, but circumstances may be such that the knowledge of the agent must be imputed to the body corporate. Counsel for the

respondents says that, although a body corporate may be capable of having an intention, it is not capable of having a criminal intention. In this

particular case the intention was the intention to deceive. If, as in this case, the responsible agent of a body corporate puts forward a document

knowing it to be false and intending that it should deceive, I apprehend, according to the authorities that Viscount Caldecote, L.C.J., has cited, his

knowledge and intention must be imputed to the body corporate.â€​

In this regard, it is profitable to refer to thedecision in Iridium India Telecom Ltd. v. Motorola Inc. wherein it has been held that in all jurisdictions

across the world governed by the rule of law, companies and corporate houses can no longer claim immunity from criminal prosecution on the ground

that they are not capable of possessing the necessary mens rea for commission of criminal offences. It has been observed that the legal position in

England and the United States has now been crystallised to leave no manner of doubt that the corporation would be liable for crimes of intent.

In the said decision, the two-Judge Bench hasobserved thus: (Motorola Inc. case, SCC p. 98, para 59) 7 M.Cr.C. No. 8057 of 2009 “59. The

courts in England have emphatically rejected the notion that a body corporate could not commit a criminal offence which was an outcome of an act of

will needing a particular state of mind. The aforesaid notion has been rejected by adopting the doctrine of attribution and imputation. In other words,

the criminal intent of the ‘alter ego’ of the company/body corporate i.e. the person or group of persons that guide the business of the company,

would be imputed to the corporation.â€​ 31. In Standard Chartered Bank, the majority has laid down the view that: (SCC p. 541, para 6)

“6. There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the

effect that corporations cannot commit a crime, the generally accepted modern rule is that … a corporation may be subject to indictment or other

criminal process, although the criminal act [may be] committed through its agents.â€​

It has also been observed that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for

which the punishment is mandatory imprisonment and fine.

We have referred to the aforesaid authorities tohighlight that the company can have criminal liability and further, if a group of persons that guide

the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be

understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in

charge as well as the company would bedeemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. As

is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own

signification.

In this context, we may refer with profit to theobservations made by James, L.J. in Levy, In re, ex p Walton, which is as follows: (Ch D p. 756)

“… When a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is entitled and bound

to ascertain for what purposes and between what persons the statutory fiction is to be resorted to.â€​

Lord Asquith, in East End Dwellings Co. Ltd. v. Finsbury Borough Council, had expressed his opinion as follows: (AC pp. 132-33)

“If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the

consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. … The

statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle

when it comes to the inevitable corollaries of that state of affairs.â€​

In Bengal Immunity Co. Ltd. v. State of Bihar the majority in the Constitution Bench have opined that legal fictions are created only for some

definite purpose.

In Hira H. Advani v. State of Maharashtra, while dealing with a proceeding under the Sea Customs Act, especially sub-section (4) of Section 171-

A wherein an enquiry by the Customs Authority is referred to, and the language employed therein, namely, “to be deemed to be a judicial

proceeding within the meaning of Sections 193 and 228 of the Penal Codeâ€​, it has been opined as follows: (SCC p. 680, para 37)

“37. … It was argued that the legislature might well have used the word ‘deemed’ in subsection (4) of Section 171 not in the first of the

above senses but in the second, if not the third. In our view, the meaning to be attached to the word ‘deemed’ must depend upon the context in

which it is used.â€​

In State of T.N. v. Arooran Sugars Ltd. The Constitution Bench, while dealing with the deeming provision in a statute, ruled that the role of a

provision in a statute creating legal fiction is well settled. Reference was made to Chief Inspector of Mines v. Karam Chand Thapar, J.K. Cotton Spg.

and Wvg. Mills Ltd. v. Union of India, M. Venugopal v. LIC and Harish Tandon v. ADM, Allahabad and eventually, it was held that when a statute

creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, the Court has to examine

and ascertain as to for what purpose and between which persons such a statutory fiction is to be resorted to and thereafter, the courts have to give full

effect to such a statutory fiction and it has to be carried to its logical conclusion.

From the aforesaid pronouncements, the principlethat can be culled out is that it is the bounden duty of the court to ascertain for what purpose

the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from

doing so. That apart, the use of the term “deemed†has to be read in its context and further, the fullest logical purpose and import are to be

understood. It is because in modern legislation, the term “deemed†has been used for manifold purposes. The object of the legislature has to be

kept in mind.

In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act,

arraigning of a 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 been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a three-

Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The

decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own

facts as has been explained by us herein-above.''

In the case of Sharad Kumar Sanghi Vs. Sangita Rane reported in (2015) 12 SCC 781, it has been held by the Supreme Court as under :-

“11. In the case at hand as the complainant’s initial statement would reflect, the allegations are against the Company, the Company has not

been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact,

principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been

arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a

three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881.â€​

This Court by order dated 20.02.2017 passed in M.Cr.C.No.1301 of 2011 (Managing Director vs. State of M.P.) has held as under :-

“Thus, as the Marico Industries Limited, Mumbai has not been arrayed as an accused, therefore, the prosecution of the applicant in his official

capacity is not permissible because he cannot be vicariously held liable for the offence committed by the Company unless and until, the Company

which is a juristic entity is arrayed as an accused.â€​

Thus, if the facts of the present case are considered in the light of the judgments, then it would be clear that Satya Sai Agroils Private Limited is the

manufacturer of soya products, however, the Company has not been made an accused and the applicant is being prosecuted in the capacity of

nominee of the Company. The applicant cannot be held vicariously liable for offence committed by the Company in absence of prosecution of

Company. Therefore, this Court is of the considered view that as the Company which is the manufacturer of soya products, has not been arraigned as

an accused, the applicant cannot be held vicariously liable. There is no allegation against the applicant in his personal capacity. Therefore, the

prosecution of the applicant, is bad in law.

Hence, the application succeeds and is hereby allowed. The order dated 23/12/2014 passed by Judicial Magistrate First Class, Vidisha in Criminal

Case No.3128/2014 is quashed.