Directors Cannot Be Criminally Liable Merely Because Of Their Position In A Company By The Principle Of Vicarious Liability: Punjab & Haryana HC
The Punjab and Haryana High Court held that criminal liability upon the Directors of the Company cannot be imposed merely because of the positions they hold in the Company by applying the principle of vicarious liability.
The Court explained that the doctrine of vicarious liability is a civil concept and its applicability in criminal cases was an exception rather than the rule.
A Single Bench of Justice Harpreet Singh Brar observed, “A Company and its Directors are not immune from criminal prosecution but it has to be established that the said offence has been committed with their consent or in connivance with them. These persons cannot be arrayed as accused in the absence of their active participation and attribution of a specific role played in commission of the alleged offence with criminal intent.”
Sr. Advocates R.S. Cheema and Mukul Rohatgi represented the petitioner, while AAG Vikas Bharadwaj appeared for the respondents.
A family had met with an accident that led to the death of their 3-year-old child after they fell on the road due to a pothole and a four-wheeler drove over the child in a rash and negligent manner. Initial investigations led to a cancellation report due to failure to trace the offending vehicle or driver.
An SIT constituted by the High Court determined that there were pits on the road which resulted in the death of the minor child.
Consequently, the Directors of M/s Larsen and Toubro (L&T) were arraigned as accused for their involvement in the accident that occurred due to potholes and the poor conditions of a road and were subsequently summoned by the trial court.
The family argued that since L&T was an artificial legal entity which works through its Directors, the Directors were vicariously liable for the culpable negligence of the Company.
Now the court had to determine whether the Directors of L&T could be held vicariously liable for the offence under Section 304-A of the IPC.
The Court explained that the legal framework for imputing vicarious liability on corporate entities had been categorically provided for in a variety of legislations such as the Income Tax Act, 1961, the Negotiable Instruments Act, 1881, Essential Commodities Act, 1955 etc.
The Court delved into the following legal principles and explained:
No automatic vicarious liability in criminal offences: It is the fundamental principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides for it, which is conspicuously lacking in the IPC. Thus, the Directors or Management officials cannot be held vicariously liable for an offence since mens rea can be attributed to them, unless deeming statutory provisions for the same are provided in the relevant statute.
Doctrine of Alter Ego: If a group of persons responsible for the conduct of business of the company has a criminal intent, the same can be imputed to the body corporate and not vice versa. Therefore, such person, who had committed the offence on behalf of the Company can be made an accused along with the Company only if there is specific attribution of his active participation with culpable intent.
Therefore, the Court held that the Directors could not be implicated in the absence of any specific allegations indicating their specific role in the commission of the crime. Further, there was no provision in the IPC for fastening the vicarious liability upon the Directors of the Company for offences listed in it.
“For summoning the Directors of a Company for commission of an offence under the IPC, the conventional rule of existence of mens rea is to be followed. Actus non facit reum nisi mens sit rea- an act does not make the defendant guilty unless it is done with a guilty intent,” the Court remarked while quashing the criminal proceedings against the Directors.
Accordingly, the High Court allowed the petitions.
Cause Title: S. Rajgopal v. State of Haryana & Ors. (Neutral Citation: 2024:PHHC:044030)
Appearance:
Petitioner: Senior Advocate R.S. Cheema and Mukul Rohatgi; Advocates Subhash Gulati, Alankar Narula, Arshdeep Cheema, Satish Sharma, Rajni Narula, Prateek Gupta, Keshav Sehgal, Alankar Narula and Subhash Gulati
Respondents: AAG Vikas Bharadwaj; Advocates Denson Joseph and Karambir Kamal