2021 INSC 00697 Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 1 of 32 REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. OF 2021 (ARISING OUT OF SPECIAL LEAVE PETITION (CRL.) NO. 39 13 OF 2020) DAYLE DE ’SOUZA ..... APPELLANT (S) VERSUS GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF LABOUR COMMISSIONER (C) AND ANOTHER ..... RESPONDENT(S) J U D G M E N T SANJIV KHANNA, J. Leave granted. 2. The appellant , Dayle De’ Souza, is a director of M/s. Writer Safeguard Pvt. Ltd. ( hereinafter referred t o as ‘ the Company ’). In 2009, the Company h ad entered into an agreemen t titled “Agreement for Servicing and Replenishment of Automated Teller Machines” with M/s . NCR Corporation India Private Ltd., the latter having earlier entered into an agreement with the State Bank of India for maintenance and upkeep of the State Bank of India’s Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 2 of 32 ATMs. On 19 th February 2014, the Labour Enforcement Officer (Central) had inspected the State Bank of India’s ATM at AST, Komal Chand Petrol Pump, Civil Lines, Sagar, Madhya Pra desh (hereinafter referred to as ‘the ATM ’). On 06th March 2014 , a 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 provisions of the Minimum Wages Act, 1948 (for short , ‘the Act ’) and Minimum Wages (Central) Rules, 1950 (for short , ‘the Rules ’) at the ATM. On 02nd April 2014, the Company responded claiming that they neither manage nor work at the ATM. After more than fo ur months, t he Labour Enforcement Officer (Central) , by letter dated 08th August 2014 , informed the a ppellant and Vinod Singh that they we re required to appear in the court on 14 th August 2014. On 14 th August 201 4, the Labour Enforcement Officer (Central) filed a criminal complaint before the Court of the Chief Judicial Magistrate, Sagar, Madhya Pradesh , under Section 22A of the Act . We shall refer to the contents of the complaint later. 3. On the date of presentation of the complaint , that is , 14 th August 20 14, the Judicial Magistrate, First Class, Sagar, Madhya Pradesh took cognisance of the offence and issued a bailable warrant against the appellant and Vinod Singh in Criminal Case No. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 3 of 32 3398/ 20 14. On 01st August 2015, the C ompany submitted a detailed represe ntation to the Deputy Chief Labour Commissioner (Central), Marhatal, Jabalpur, Madhya Pradesh denying the contents of the notice dated 06th March 2014. 4. Thereafter, on 01 st August 2015 , the appellant filed a petition M.Cr.C . No. 846/2016 under Section 482 of the Code of Criminal Procedure, 1973 (‘the Code ’, for short) before the High Court of Madhya Pradesh at its Principal Seat at Jabalpur for quashing the complaint in Criminal Case No. 3398/ 20 14. By the impugned order in M.Cr. C . No. 846/2016 dated 20 th January 2020, the High Court dismissed the petition as sans merit. Hence, the present appeal. 5. Upon perusal of the complaint in question , which is placed on record, we note that two individuals have been enlisted as accused, namely : (i) Dayle De’Souza – th e appellant before us , who as per the cause -title is stated to be a d irector 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. Write r Sa feguard Pvt. Ltd. and a resident of Bhopal, Madhya Pradesh. The C ompany is not Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 4 of 32 enlisted as an accused in the complaint and has not been summoned to stand trial. 6. The complaint, with reference to the two accused, in paragraph 3 states: “(3) That the a ccus ed persons are Contractor who were getting work of cash loading and security of cash through labours and they are responsible for employment and payment of labours employed in said work under said Act, who is Employer under Part 2 (E) of the Minimum Wa ges Act, 1948.” It is also alleged in the complaint: “(4) That the work of said Employer is regulated under Notification No. - S.O. 1284 (E) dated 20.05.2009 of the Government of India and they are Scheduled Employer under Minimum Wages Act, 1948 and Minim um W ages (Central) Rules, 1950.” 7. The complaint state s that the inspection on 19 th February 2014 had revealed violation of Rules 21(4), 22, 25(2), 26(1) and 26(5) on account of failure to keep and display, as the case may be, the Fine Register Form -1, Reg iste r Form -2, the notice of minimum wages , Rule , and abstract of the Act, name of Inspectors with address in Hindi and English at the worksite, overtime register, wages payment register and attendance register at the worksite or at any adjoining place (s). Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 5 of 32 8. Se ction 22A of the Ac t, the provision invoked , is a ‘General provision for punishment of other offences ’ where “an y employer who contravenes any provision of this Act or of any rule or order made thereunder shall, if no other penalty is provided for suc h co ntravention by this Act, be punishable with fine which m ay extend to five hundred rupees” . Clause (b) of sub -section (1 ) to Section 22B with the heading “Cognizance of offences” states that “N o court shall take cognisance of a complaint against any per son for an offence - under clause (b) of section 22 or under sec tion 22A , except on a complaint 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 “N o Court sha ll take cognisance of an offence – under Section 22A, unless complaint there of is made within six months of th e date on which the offence is alleged to have be en committed. ” 9. However, in the context of the present appeal , it is Section 22C of th e Act w hich is of m ore relevance which reads thus: “22C . Offences by companies. — (1) If the person committing any offence under this Act is 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 Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 6 of 32 liable to be proceeded against and punished accordingly: Provided 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 -secti on (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 offi cer of the company, such director, manager, secretary or other officer of the company shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. — For the purposes of this secti on — (a) “com pany” means any body corporate and includes a firm or o ther association of individuals; and (b) “director” in relation to a firm means a partner in the firm. ” 10. Sub -section (1) to Section 22C states that where an offence is committed by a c ompa ny , 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 , as well as the company itself shall be deemed to be guilty of the offence. By necessary implication , it foll ows that a person who do not bear out the requirements is not vicariously liable under Section 22C(1) of the Act . The proviso , which is in the nature of an exception , states that a person who is liable under sub -section (1) shall not be Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 7 of 32 punish ed if he prov es t hat the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. The onus to satisfy the requirements to take benefit of the proviso is on the accused , but it does not d isplace or ex tricate the initial onus and burden on the prosecution to first establish the requirements of sub -section (1) to Section 22C of the Act . The proviso is to giv e immunity to a person who is vicariously liable under sub -section (1) t o section 22C of the Ac t. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another ,1 in relation to pari materia proviso in Section 141 of the N egotiable Instrument s Act, 1881, this Court observed: “4… A company being a juristic person, all its deeds and functions are the re sult of acts of others. Therefore, officers of a company who are responsible for acts done in the na me of the company are so ught to be made personally liable for acts which result in criminal action being taken against the company. It makes every person wh o, a t the time the offence was committed, was in charge of, and was responsible to the company for t he conduct of business o f the company, as well as the company, liable for the offence. The proviso to the sub -section contains an escape route for persons w ho a re able to prove that the offence was committed without their knowledge or that they had exercis ed all due diligence to prevent commission of the offence. xx xx xx 9. The position of a managing director or a joint managing director in a company may be d ifferent. These persons, as the designation of their office 1 (2005) 8 SCC 89. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 8 of 32 suggests, are in charge of a company and are responsible for the conduct of the business of the company. In order to escape liability such persons may have to bring their case within the provi so t o Section 141(1), that is, they will have to prove that when the offence was committed they had no knowledge of the offe nce or that they exercised all due diligence to prevent the commission of the offence. ” (Emphasis added) In An eeta Hada v. Godfath er T ravels and Tours Private Limited ,2 this C ourt had reiterated that the proviso to general vicario us liability under Secti on 141 of the Negotiable Instrument s Act , 1881 , applies as an exception, by observing: “22. On a reading of the said provision, it i s pl ain as day that if a person who commits the offence under Section 138 of the Act is a company, t he company as well as ev ery person in charge of and responsible to the company for the conduct of business of the company at the time of commission of offen ce i s deemed to be guilty of the offence. The first proviso carves out under what circumstances the criminal liability would not be fastened. Sub -section (2) enlarges the criminal liability by incorporating the concepts of connivance, negligence and consen t th at engulfs many categories of officers. It is worth noting that in both the provisions, there is a “deemed” concept of c riminal liability.” (Emphasis added) The proviso being an exception cannot be made a justification or a ground to launch and initi ate prosecution without the satisfaction of conditions under sub -section (1) of Section 22C of the A ct . The proviso that pla ces the onus to prove the exception 2 (2012) 5 SCC 661 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 9 of 32 on the accused , does not reverse the onus under the main provision, namely Section 22C (1) of the Act , which remains on the prosecution and not on the person being prosecuted. 11. Sub -section (2) stat es that notwithstanding anything contained in sub -section (1) , where an y offence under the Act has been committed by a company , and it is proved that such o ffe nce has been committed with the consent or connivance of, or is attributable to any neglect on th e part of , any director, manager, secretary or other officer of the company, then such director, manager, secretary or other officer of the company shall al so be deemed to be guilty of that offence and shall be liable to be proceeded against and punished a ccordingly. Without much ado, it is clear from a reading of sub -section (2) to Section 22C of the Act that a person can not be prosecuted and punished merely be cause of the ir status or position as a director, manager, secretary or any other officer, unless the offence in question was committed with their consent or connivance or is attributable to any neglect on their part. The o nus under sub -section (2) to Se cti on 22C is on the prosecution and not on the person being prosecuted. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 10 of 32 12. Unlike sub -section (2) to S ection 22C , sub -section (1) conspicuously does not use the term ‘director, manager, secretary or other officer of the company’ to bring them within the ambi t of the vicarious liability provision , albeit every person in -charge of and responsible to the comp any for the conduct of i ts business at the time of the commission of the offence in question is deemed to be additionally liable . The words ‘in -charge of th e c ompany ’ and ‘responsible to the company’ are pivotal to sub -section (1) . This requirement has to be satisfied for the dee ming effect of sub - section (1) to apply and for rendering the person liable to be proceeded against and , on such position being prov ed , punished. Interpreting an identical expression used in Sections 23 -C(1) and 23 -C(2) of the Forei gn Exchange Regulation A ct, 1947, this C ourt in Girdhari Lal Gupta v. D.H . Mehta and A nother ,3 has held : “6. What then does the expression “a person in -char ge and responsible for the conduct of the affairs of a company” mean? It will be noticed that the wo rd “company” includes a firm or other association, and the same test must apply to a director in -charge and a partner of a firm in -charge of a business. It see ms to us that in the context a person “in -charge” must mean that the person should be in over -all control of the day to d ay business of the company or firm. This inference follows from the wording of Section 23 -C(2). It mentions director, who may be a p art y to the policy being followed by a company and yet not be in -charge of the business of the compa ny. Further it mentions manager, who usually is in charge of the business but 3 1971 (3) SCC 189 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 11 of 32 not in over -all charge. Similarly, the other officers may be in -charge of only so me part of business. xx xx xx 8. In R.K. Khandelwal v. State D.S. Mathur, J., in construing Se ction 27 of the Drugs Ac t, 1940, a provision similar to the one we are concerned with, observed: “There can be directors who merely lay down the policy and are not concerned with the day to day working of the company. Consequently, the mere fact that the a ccused person is a partn er or director of the Company, shall not make him criminally liable for the offence committed by the Company unless the other ingred ien ts are established which make him criminally liable.” ” Those not in overall control of the day t o day business of the co mpany or the firm are not deemed to be constr uctively liable under Section 23 -C(1) of the Foreign Exchange Regulation Act, 1947 . 13. This expositio n on the meaning of the term ‘in -charge and responsible for ’ was referred to with approval in State of Kar nataka v. Pratap Chand and Others .4 This decision relates to the prosecution of the partner of a firm under the Drugs and Cosmetics Act, 1 94 0. The judgment referred to the explanation to Section 34 in the said Act (which is pari mat eria with the explanatio n in Section 22C of the Minimum Wages A ct, 1948 ) to observe that for the purpose of imposing liability on the company 4 (1981) 2 SCC 335 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 12 of 32 under the said Secti on , a company includes a body corporate, a firm or an association of individuals. A director i n relation to a firm mea ns a partner in that firm . Therefore, even in the case of partners , when a firm commits an offence , the requirement of either sub -se ction (1 ) or sub -section (2) to Section 22C must be satisfied. This means that in terms of sub -secti on (1), the partner shou ld be “in -charge of ” and “responsible to ” the firm for the conduct of its business as per the dictum in Girdhari Lal Gupta (supra) . Furthe r, as per sub -section (2), a partner may also be liable , just as a director is liable for the conduct of the business of a company , if the offence is committed with the consent or connivance of, or is attributable to any neglect on the part of the pa rtner co ncerned. 14. W ay back in 1982 , in Municipa l Corporation of Delhi v. Ram Kishan Rohtagi and Othe rs ,5 this Court had quas hed criminal proceedings under the Prev ention of Food Adulteration Act , 1954 against the directors of a manufacturing company at the summo ni ng stage, observ ing that the presumptive assertion made in the complaint that the directors of the accused company ‘as such ’ were in -charge of and responsible for the conduct of the business of the company at the time of sampling was vague . Th e 5 1983 (1) SCC 1 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 13 of 32 use of the words “as such” in the complaint indicate d that the complainant had merely presumed tha t the directors must be guilty because they held the office of the director . The C ourt opined that such presumptive accusations against the directors withou t any specifi c averment or criminal attribution being m ade in the complaint would be in sufficient. Thereafter, reference was made to Section 319 of the Code of Criminal Procedure, 1973 which empowers the Court to take cognisance of and proceed against a pe rson w ho is not an accused before it and try him along with others. Upholding the reasoning of the H igh Court quashing the p roceedings against the directors , it was highlighted : “12. ...... The main clause of the complaint which is the subject -matter of the disput e is cl ause 5 which may be extracted thus: 5. That a ccused 3 is the Manager, of accused 2 and accused 4 to 7 are the Directors of accused 2 and as such they were incharge of and responsible for the conduct of business of a ccu sed 2 at the time of sam pling. xx xx xx 14. Reliance has been placed on the words “as such” in order to argue that becaus e (sic) the complaint do es not attribute any criminal responsibility to Accused 4 to 7 except that they were incharge of and responsible for the conduct of the bu siness of the Company. It is true that there is no clear averment of the fact that the Directo rs were really incharge of the manufacture and responsible for the conduct of business but the words “as such” indicate that the complainant has merely pres umed t hat the Directors of the Company must be Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 14 of 32 guilty because they are holding a particular office. This argument found favo ur with the High Court which quashed the proceedings against the Directors as also against the Manager, Respondent 1. ” However, th e init iation of a prosecution and the summon ing order against the manager in the factual context w as held to be proper . 15. In another decision by the same Be nch titled Municipal Corpo ration of Delhi v. Pursho tam Da ss Jhunj unwala and Others ,6 the assertions w ere th at the individual accused , namely the chairman, managing director and directors of the company , were “in -charge of and responsible to it for the conduct of its business at the time of commission of the offence”. The words “as such” were missing . T his Court , there fore, concluded that the directors of the company were not being prosecuted merely beca use of their official po sition but because of the assertion that they were “in -charge of and responsible for the conduct of the business at the time of comm ission of the offence ”. There was a clear averment regarding the active role played by the accused and the extent of their l iability. Accordingly, restoring the order passed by the Metropolitan Magistrate by which the directors etc. were summoned for trial in ac cordanc e with the law and setting 6 (1983) 1 SCC 9 Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 15 of 32 aside the order of the High Court quashing the prosecution against them , this Court has held : “3. ....The relevant allegations against the accused - respondents are to be found in para 5 of the complaint which may be ex tracte d thus: 5. That accused Ram Kishan Bajaj is the Chairman, accused R.P. Neyatia is the Managin g Director and Accused 7 to 12 are the Directors of the Hindustan Sugar Mills Ltd. and were incharge of and responsible to it for the conduct of its busines s at t he time of commission of offence. xx xx xx 5. In the instant case, a clear averment has be en made regarding the ac tive role played by the respondents and the extent of their liability. In this view of the matter, it cannot be said that para 5 of the co mplaint is vague and does not implicate Respondents 1 to 11. As to what would be the evidence against the respondents is not a matter to be considered at this stage and would have to be proved at the trial. We have already held that for the purpose of quas hing th e proceedings only the allegations set forth in the complaint have to be seen and nothi ng further.” 16. The legal position has undergone further elucidation in a number of judgments. 7 However, for the present decision, we would refer to the summ arisat ion in N ational Small Industries Corporation Limited v. Harmeet Singh Paintal and Another ,8 to the following effect: 7 See , Pooja Ravinder Devidasani v. State of Maharashtra and another , (2014) 16 SCC 1; Gunmala Sales Privat e Ltd. v. Anu Mehta and Others , (2015) 1 SCC 103; Shailendra Swarup v. Deputy Director , Enforcement Directorate , (2020) 16 SCC 561. 8 (2010) 3 SCC 330 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 16 of 32 “39. From the above discussion, the following principles emerge: (i) The primary responsibility is on the complainant to make specif ic ave rments as are required under the law in the complaint so as to make the accused vicariously li able. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Direc tors li able for the offence. The criminal liability can be fastened only on those who, at the time of the commission o f the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be in ferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite st atements, wh ich are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence commit ted by the company along with averments in the petition containing that the accused were in ch arge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on t he par t of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing D irector or a Joint Manag ing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be pro ceeded with. (vi ) If the accused is a Director or an officer of a company who signed the cheq ues on behalf of the com pany then also it is not necessary to make specific averment in the complaint. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 17 of 32 (vii) The person sought to be made liable should be in cha rge of and responsible for the conduct of the business of the company at the relevant time. Th is has to be averred as a fact as there is no deemed liabilit y of a Director in such cases.” 17. The n ecessities of sub -section (2) to Section 22C of the Act are di fferent from sub -section (1) to Section 22C of the Act . Vicarious liability under sub -section (2) to Section 22C can arise because of the director, manager, se cretary, or other officer ’s personal conduct, functional or transactional role , notwithstan ding that the person was not in overall control of the day to day busin ess of the company when the offence was committed. Vicari ous liab ility is att ra cted when t he offence is committed with th e consent, connivance , or is attributable to the neglect on the part of a director, manager, se cretary, or other officer of the company . 18. In the factual context present before us it is crystal clear that the compl aint does not satisfy the mandate of sub -section (1) to Section 22C of the Act as there are no assertions o r aver ments that the a ppellant before this Court was in -charge of and responsible to the company M/s. Writer Safeguard Pvt. Ltd. in the manner as int erpreted by this Court in the cases mentioned above . The proviso to sub -section (1) in the present case wou ld not apply . It is an exception that would be applicable and come Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 18 of 32 into operation only when the conditions of sub -section (1) to Section 22C are sati sfied. Notably, in the absence of any specific averment , the prosecution in the present case does not and cannot rely on Section 22C (2) of the Act. 19. There is yet another difficulty for the prosecution in the present case as the C ompany has not been made an accused or even summoned to be tried for the offence. The position of law as propounded in State of Madras v. C. V. Pare kh and An other :9 , reads : “3. Learned Counsel for the appellant, however, sought conviction of the two respondents on the basis of Secti on 10 of the Essential Commodities Act under which, if the person contravening an order made under Section 3 (whi ch cove rs an ord er under the Iron and Steel Control Order, 1956), is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as wel l as t he comp any, shal l be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. It was urge d that the two respondents were in charge of, and were responsible to, the Company for the conduct of the b usines s of th e Company and, consequently, they must be held responsible for the sale and for thus contravening the provisions of clause (5) of the Ir on and Steel Control Order. This argument cannot be accepted, because it ignores the first condition for th e appl icabili ty of Sec tion 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of clause (5) of the Iron and Steel Contro l Order w as made by the Company. In fact, the 9 (1970) 3 SCC 491. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 19 of 32 Company was not charged with the offence at all. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no eviden ce and no findin g that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsibl e. The actual contravention was by Kamdar and Vallabhdas Thacker and any contravention by them would not fa sten responsi bility on the respondents. The acquittal of the respondents is, therefore, fully justified. The appeal fails and is dismissed. ” 20. However , this proposition was later deviated from in Sheoratan Agarwal and Another v. State of Madhya Pradesh .10 Th is cas e perta ined to t he pari materia provision under Section 10 of the Essential Commodities Act , 1955 . The court held that anyone among : the compan y itself; every person in -charge of and responsible to the company for the conduct of the business ; or any direct or, man ager, sec retary or other officer of the company with whose consent or connivance or because of whose neglect offence ha d been committed, could be prosecuted alone . However, the person -in -charge or an officer of the company could be held guilty in th at capa city only after it has been established that there has been a contravention by the company as well. However, this will not mean that the person -in -charge or an officer of the company must be arraigned simultaneously along with the company if h e is t o be fo und guilt y and punished. 10 (1984) 4 SCC 352. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 20 of 32 21. Relying upon the reasoning in Sheoratan Agarwal (supra) and limiting the interpretation of C.V. Parekh (supra ), this C ourt in Anil Hada v. Indian Acrylic Ltd. 11 had held that: “13. If the offence was committed by a co mpany it can be punish ed only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons fall ing within the second or third category the payee can succeed in the case only if he succeeds in showing th at the offenc e was act ually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, thou gh such company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provis ions do not cont ain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is si ne qua non for c onvicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted pers ons cannot, on that score alone, escape from the penal liability created through the legal fiction envisage d in S ection 141 of th e Act.” 22. However, subsequent decisions of this Court have emphasised that the provision imposes vicariou s liability by way of deeming fiction which presupposes and requires the commission of the offence by the company itself as it is a sep arate j uristic e ntity . Therefore, unless the company as a principal accused has committed the offence, the persons mentioned in sub -section (1) would not be liable and cannot be prosecuted. Section 141(1) of 11 (2000) 1 SCC 1. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 21 of 32 the Negotiable Instruments Act , extends vi cariou s crimi nal liabi lity to the officers of a company by deeming fiction, which arises only when the offence is committed by the company itsel f and not otherwise. Overruling Sheoratan Agarwal and Anil Hada , in Aneeta Hada v. Godfather Travels and Tours P rivate Limite d,12 a 3 -judge bench of this court expound ing on the vicarious liability under Section 141 of the Negotiable Instrument s Act, ha s held : “51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C. V. Parekh whi ch is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocina tion, the decision in Anil Hada has to b e treated as not laying down the correct law as far as it states that the Director or any other officer can be p rosecu ted without impl eadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal imp ediment and the doctrine of lex non cogit ad impossibilia gets attracted. xx xx xx 59. In view of our aforesai d anal ysis, we arr ive 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 touchs tone o f vicarious liab ility as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parek h which is a three -Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay do wn the law and, ac cord ingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision i n Modi 12 (2012) 5 SCC 661. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 22 of 32 Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove. ” 23. The proposition of l aw laid down in Aneeta Hada (supra) was relied upon by this C ourt in Anil Gupta v. Star India Private Limited and Another :13 “13. In the present case, the High Court by the impugned judgment dated 13 -8-2007 [Visionaries Media Network v . Star India (P) L td., Criminal Misc. Case No. 2380 of 2004, decided on 13 -8-2007 (Del)] held that the complaint against Respondent 2 Company wa s not maintainable and quashed the summons issued by the trial court against Respondent 2 Company. Thereby, the Compan y being not a pa rty to the proceedings under Section 138 read with Section 141 of the Act and in view of the fact that part of the judgmen t referred to by the High Court in Anil Hada has been overruled by a three -Judge Bench of this Court in Aneeta H ada , w e have no ot her option but to set aside the rest part of the impugned 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 proceedings again st the appellant c an b e continued even in absence of the Company. We, accordingly, set aside that part of the impugned judgment dated 13 -8- 2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13 - 8-2007 (D el)] p assed by the Hig h Court so far as it relates to the appellant and quash the summons and proceeding pursuant to Complaint Case No. 698 of 2001 qua the appellant.” 24. In Sharad Kumar Sanghi v. Sangita Rane, 14 this C ourt observed that: “11. In the case at hand as the compl aina nt's initial statement would reflect, the allegations are against the 13 (2014) 10 SCC 373. 14 (2015) 12 SCC 781. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 23 of 32 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 va gue an d in fact, p rinc ipally the allegations are against the Company. There is no specific allegation against the Managing Director. When a comp any has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is faste ned under ce rtai n statutes. It has been so held by a three -Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the conte xt of the Negotiable Instruments Act, 1881. xx xx xx 13. When the company has not been arraigned as an accuse d, suc h an order c ould not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered op inion that the High Court should have been well advised to quash the criminal proceedings initiated against the appell ant and that hav ing not been done, the order is sensitively vulnerable and accordingly we set aside the same and quash the criminal procee dings initiated by the respondent against the appellant.” 25. This position was again clarified and reiterated by t his C ourt in Himan shu 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 two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, t he app ellant could not be prosecuted without the company being named as an accused. The cheque was issued by the company and was signed by the a ppellant as its Director. Secondly, it was urged that the observation of the High Court that the company can now be pr oceeded agai nst in the complaint is misconceived. The learned counsel submitted that the offence under Section 138 is complete only upon t he issuance of a notice of demand and the failure of payment within the 15 (2019) 3 SCC 797 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 24 of 32 prescribed period. In absence of complia nce wi th the requi reme nts of Section 138, it is asserted, the direction of the High Court that the company could be impleaded/arraigned at this stage is erroneous. 7. The first submission on behalf of the appellant is no longer res integra. A decision of a thre e-Judge Benc h of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. governs the area of dispute. The issue which fell for con sideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the N egotiable In stru m ents Act, 1881 without the company being arraigned as an accused. The three -Judge Bench held thus : (SCC p. 688, para 58) “58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an e xpress condition precedent to attract the vicarious liability of others. Thus, the words “as well as the company” appearin g in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the pe rsons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a find ing is recor ded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affect ed when a Director is indicted.” In similar terms, the Court further held: (SCC p. 688, para 59) “59. In view of our aforesaid a naly sis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraignin g of a company as an accused is imperative. The other categories of offenders can only be brought in the drag -ne t on t he touchston e of vicarious liability as the Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 25 of 32 same has been stipulated in the provision itself.” xx xx xx 12. The provisions of Section 1 41 postulate that if the person committing an offence under Section 138 is a company, every person, who at the t ime wh en the offen ce w as committed was in charge of or 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 punishe d. 13 . In the abs ence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appel lant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notic e of demand bein g served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding tha t the company could now be arraigned as an accused. ” 26. Applying the same proposition of law as laid down in Anee ta Had a (supra) , this C ourt in Hindustan Unilever Limited v. State of Madhya Pradesh 16 applying pari materia provision in Prevention of Food Adul teration Act, 1954 , held that: “23. Clause (a) of sub -section (1) of Section 17 of the Act makes the person nomi nated to be in cha rge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of sub -section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 14 1 of t he NI Act an d Se ction 17 of the Act which makes the company as well as the nominated person to be held guilty of the offences and/or liabl e to be proceeded and punished accordingly. Clauses (a) and (b) are not in the alternative but conjoint. Therefo re, in the absence of 16 (2020) 10 SCC 751. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 26 of 32 the company, the nominated person cannot be convicted or vice versa. Since the Company was not convicted by the trial cour t, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant -nominated person who has bee n fa cing trial for more than last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the enti re con viction of t he n ominated person as unsustainable.” 27. In terms of the ratio above , a company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences , a nd the refore, pros ecut ion of the company is mandatory. The e xception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar . However, such exceptions are of no relevance in the present case. Thus, t he p resent prosecution mus t fail for this reason as well . 28. There is also another aspect which requires our attention . We have noted in some detail the contents of the complaint, which refers to the violation as certain notices were not displayed and certain r egiste rs and forms wer e not kept at the ‘worksite ’, namely, ATM of the SBI at AST, Komal Chand P etrol Pump, Civil Lines, Sagar, District Sagar. A r esponse to the show -cause -cum - compliance notice in the form of a short reply by the authorised Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 27 of 32 signatory of M /s. Wr iter S afegua rd P vt. Ltd. on 02 nd April, 2014 , which factum though accepted, has not been a dverted to in the complaint. This short reply st ates that the Company neither manages the ATM nor works at the ATM and that the ATM site was managed by the resp ective banks and, ther efore, the volitional as alleged do not apply to them. The complaint does not state why the reply was deficient or indicat e even briefly as to the nature of activity and involvement of the Company's workers at the ATM site of the Stat e Bank of India ma ndat ing compliance at the site in question . W e are not rul ing on merits, albeit highlighting the complaint being bereft and s ilent on these aspects and whether th e authorities considered the legal provisions in the context of the factual backgr ound before init iating prosecution . 29. The authorities bestowed with the duty to confirm compliance are often em powered to take stringent including pe nal action to ensu re observanc e and check defiance . There cannot also be any quarrel on the need to en force obedience of the rules as the beneficial legislation protects the worker ’s basic right to receive minimum wages . Th e r ulebook makes sure that the workers are made aware of their rig hts and paid their dues as per law without unnecessary dispute s or al legati ons as to ab sence, overtime payment, deductions, etc. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 28 of 32 30. At the same time, initia tion of prosecution has adverse and harsh consequences for the persons named as accused . In Directora te of Revenue and A nother v. Mohammed Nisar Holia ,17 this Court explic itly r ecognise s th e right to not to be disturbed without sufficient grounds as one of the unde rlying mandates of Article 21 of the Constitution. Th us, the requirement and need to balance the law enforceme nt power and protection of citizens from injustice a nd har assment must be maintained. Earlier in M/s. Hindustan Steel Ltd. v. State of Orrisa ,18 this C ourt threw light on the aspect of invocation of penalty provisions in a mechanical manner by authorities t o observe: “8. Under the Act penalty may be imposed for fa ilure to reg ister as a dealer — Section 9(1) read with Section 25(1)(a) of the Act. But the liabi lity to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutor y obli gation is th e result of a quasi - criminal proceeding, and penalty will not ordinarily be imposed u nless the party obliged either acted deliberately in defiance of law or was guilty of conduct contuma cious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penal ty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a conside ration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority compet ent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or whe re 17 2008 (2) SCC 370. 18 1969 (2) SCC 627. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 29 of 32 the breach flow s from a bona fide belief that the offender is not liable to act in the manner prescr ibed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that t he Company w as not a dealer. Granting that they erred, no case for imposing penalty was made out. ” Almost ever y statute confer operational po wer to enforce and penalise , w hich power is to be exercised consistently from case to case , but adapted to f acts o f an individ ual cas e19. The passage from Hindustan Steel Ltd. (supra) highlights the rule that the discretion that vests with the prosecuting agencies is paired with the duty to be thoughtful in cases of technical , venial breaches and genuine and honest beli ef , and be firmly unforgiving in cases of deceit ful and mendaci ous conduct . Sometimes legal provisions are worded in great detail to give an expansive reach given the variables a nd complexities involved , and also to avoid omission and check subterfuges . Ho wever, lega l meaning of the provision is not determined in abstract , but only when applied to the relevant facts of the case 20. Therefore, i t is necessary that the discretion conferred on the authorities is applied fairly and judici ously avoid ing specious , unanticipa ted or unreasonable results . The intent, ob jective and purpos e of the enactment should guide the exercise of discretion , as the presumption is that the 19 Secretary of State for Work and Pensions v B [2005] EWCA Civ 929 at [43 ]. 20 See Bennion On Statutory Interpretation , Sixth E dition , Part V I at Page No. 37 1. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 30 of 32 makers did not anticipate ano malous or un worka ble consequences . The intention should not be to target an d penalise an unintentional defaulter who i s in essence law -abiding . 31. There are a number of decisions of this Court in which , with reference to the importance of the sum m oning order , it has been emphasised that the initiation of prosecution and s ummoning o f an accused to stand trial has serious consequences 21. They extend from monetary loss to humiliation and disrepute in society , sacrifice of time and ef fort to prepare defence and anxiety of uncertain times . Criminal law should not be set into mo tion as a matter of course or without adequate an d necessary investigation of facts on mere suspicion , or whe n the violation of law is doubtful . It is the duty and responsibility of the public officer to proceed responsibly and ascertain the true and corre ct facts. Execution of law without appropriate acquaintance with legal provisions and comprehens ive sense of their application may result in an innocent being prosecuted. 32. Equally , it is the court's duty not to issue summons in a me chanical and routine man ner. If do ne so , the entire purpose of 21 Se e – 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. Stat e of Uttar P radesh and Another , (2021 ) 5 SCC 435. Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 31 of 32 layin g down a detailed procedure under Chapter XV of the 1973 Code gets frustrated. Under the p roviso (a) to Section 200 of the 1973 Code , there may lie an exemption from record ing pre - summonin g evidence when a privat e complain t is filed by a public servant in discharge of his official duties ; however, it is th e duty of the M agistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking co gnizance and summoning the accused is made out or not . Th is C ourt ex plained the reasoning behind this exemption in National Small Industrie s Corporation Limited v. State (NCT of Delh i) and Others :22 “12. The object of Section 200 of the Code requiring the complainant and the witne sses to be examined, is to find out whether there are sufficient grounds for proceeding a gainst the accused and to prevent issue of process on complaints whi ch are false or vexatious or intended to harass the persons arrayed as accused. (See Nirmaljit Sing h Hoon v. State of W.B. ) Where the complainant is a public servant or court, clause (a) o f the proviso to Section 200 of the Code raises an implied statutory presumption that the complaint has been made respo nsibly and bona fide and not falsely or vexatiou sly. On account of such implied presumption, where the complainant is a public servant, t he statute exempts examin ation of the complainant and the witnesses, before issuing process.” 22 (2009) 1 SCC 407 . Criminal Appeal a/o. SLP (Crl.) No. 39 13 of 2 020 Page 32 of 32 The issue of process res ulting in summons is a judicial process that car ries with it a sanctity and a promise of legal propriety. 33. Resultantly, and for the reas ons stated above, we woul d allow the present appeal and quash the su mmoning order and the pr oc ee ding s against the present appellant. 34. Accus ed No. 2, Vinod Singh, would also be entitled to the benefit of this order. Accordingly , the proceedings initiated against the accused no. 2, namely Vinod Singh , also stand quashed. ...................... ................J. (R. SUBHASH REDDY) .......... ......................... ...J. (SANJIV KHANNA) NEW DELHI; OCTOBER 29 , 20 21 .