[HumJanenge] Re: Request legal guidance on culpability of MD in cheating / conspiracy / abetment

Dear Victor

http://punjabrevenue.nic.in/crime1.htm

11. "Person".- The word "person includes any company or
association or body of persons, whether incorporated or not.

COMMENTS

Scope : Section 11 has the effect of including within the
expression :

(a) any company, whether incorporated or not;

(b) any association of persons, whether incorporated or
not; and

(c) any body of persons, whether incorporated or not.
Criminal liability of corporations : Corporations are either :
(a) Corporations sole (one person or entity constituted by law as an
artificial juridical person), or

(b) Corporations in aggregate (e.g. companies).

Corporations and their officers : The general proposition that
corporations may be criminally liable gets some support from Section
11,which has also the effect of giving them the benefit of criminal
law if they happen to become the victim of specific offences sentenced
to imprisonment.- Syndicate Transport Co., (1963) 66 Bom LR 197.
Conversely, if the offence is punishable with fine only, the
corporation (e.g. a local authority) can be punished.- Girdharilal v.
Lalchand, 1970 Cr LJ 987 (Raj).

More important is the question of liability of Directors and
responsible officers of corporations. Where, technically, the offender
is a corporation , the Directors, etc. may still be liable(in
addition to the criminal liability of the corporation)if their own
participation in the offence amounts to abetting the offence within
the meaning of Sections 107 and 108 of the Indian Penal Code. Besides
this , most special Acts enacted during the recent years contain
provisions under which Directors and other Officers, who are in
charge of the affairs of the corporation and responsible to the
corporation for the conduct of the affairs of the corporation, are
also declared criminally liable for an offence against that special
Act, unless they can prove that the offence was committed without
their knowledge, or that they exercised all due diligence to prevent
the commission of that offence.

Criminal liability of partners: The Supreme Court, in Sham Sundar v.
State of Haryana, (Judgment dated 21 August, 1989),JT 1989(3) SC 523,
has held that with reference to Section 10 of the Essential
Commodities Act, 1955, the true position is that only a partner
responsible for conduction the business of the firm could be
convicted. The case related to breach of the Haryana Rice Procurement
(Levy) Order,1979.The offender was said to have failed to supply the
necessary quantity of rice as per levy rules. Such short supply in
contravention of Rice Procurement Order is punishable under Section 7
of the Essential Commodities Act. All the partners were convicted of
the offence. It was urged by the appellants before the Supreme Court
that there was no evidence that the appellants were in charge of the
business of the firm, and for want of evidence, the conviction could
not be sustained. The Supreme Court upheld the contention and
allowed the appeal. It may be mentioned that Section 10 (1) of the
Essential Commodities Act provides that if the person contravening an
Order made under the Act is a company (which is defined to include a
firm),every person who, at the time of contravention, 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 contravention and shall be liable to be proceeded
against and punished accordingly. However , this provision does not
render any such person liable to any punishment if he proves that the
contravention took place without his knowledge or that he exercised
all due diligence to prevent such contravention.

The Supreme Court held that Section 10 of Essential
Commodities Act was penal provision with a criminal liability, and
must be construed strictly. Section 10 dies not provide for vicarious
liability and dies not make all partners liable for an offence,
whether they do business or not. The Court observed as under, in this
context:-

"It is, therefore, necessary to add an emphatic note of
caution in his regard. More often it is common that some of the
partners of a firm may not even be knowing of what is going on day to
day in the firm. There may be partners, better known as sleeping
partners, who are not required to take part in the business of the
firm. There may be ladies and minors who were admitted for the
benefit of partnership. They may not know anything about the bus
anything about the business of the firm. It would be a travesty of
justice to prosecute all partners and ask them to prove under the
proviso to sub-section (1) that the offence was committed without
their knowledge. It is significant to note that the obligation for the
accused to probe under the proviso that the offence took place without
his knowledge or that he exercised all due diligence to prevent
such offence, arises only when the prosecution establishes that the
requisite condition mentioned in sub section (1) is established . The
requisite condition is that the partner we responsible for carrying
on the business and was, during the relevant time, in charge of the
business. In the absence of any such proof, no partner could be
convicted. We, therefore, reject the contention urged by counsel for
the State".

Sarbajit

On Dec 13, 3:58 pm, Nagendra Babu N <nnagendrab...@gmail.com> wrote:
> Dear Victor
>
> If the said transaction were to result in the benefit of the said company,
> certainly the Managing Director of the company can also be made an accused.
>
> On Sat, Dec 11, 2010 at 3:41 PM, Victor Cooper <victor99coo...@yahoo.com>wrote:
>
> > Friends:
>
> > please give some guidance whether a Managing Director of a company is
> > culpable for the acts of his executives in cheating, conspiracy, abetment,
> > criminal breach of trust, etc. Any citations, please?
>
> > Thanks.
> > Victor
>
> --
> N.Nagendra Babu, ADVOCATE
> CONVENOR,
> United Forum for RTI Campaign -AP