The Supreme Court of India.
Credit: PTI File Photo
New Delhi: The Supreme Court has quashed criminal proceedings initiated against top executives of TATA Realty and Infrastructure Limited and Tata Housing Development Co Ltd and others for alleged felling of trees in Haryana, holding that no vicarious liability can be attached to them without specific provisions in law and the role ascribed to them in the offence.
A bench of Justices J B Pardiwala and R Mahadevan said an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused if the statute provides for such liability and if there is sufficient evidence of his active role coupled with criminal intent.
"While a company may be held liable for the wrongful acts of its employees, the liability of its directors is not automatic. It depends on specific circumstances, particularly the interplay between the director’s personal actions and the company’s responsibilities," the bench said in its recent judgment.
The court also highlighted the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
"For fastening criminal liability on an officer of a company, there is no presumption that every officer of a company knows about the transaction in question," the bench said.
The court quashed the proceedings initiated against appellant Sanjay Dutt, Managing Director and Chief Executive Officer of TATA Realty and Infrastructure Limited and Tata Housing Development Co Ltd, and others.
Allowing their appeal against the Punjab and Haryana High Court's refusal to intervene into the matter, the bench said the court concerned should remain vigilant and apply its mind carefully before taking cognisance of a complaint of said nature.
The complaint was filed by the Range Forest Officer for an alleged offence under Section 4 of the Punjab Land Preservation Act, 1900, punishable under Section 19 of the same.
It was alleged that on September 2, 2021, in the area of sector 113 Gate Vida Gurugram, notified under the Forest Act and belonging to the Forest Department, the accused destroyed 256 trees using JCB, causing a loss of Rs 90,580 to the department.
In the case, the bench noted that the persons actually found at the site felling the trees have not been named as accused in the complaint.
"Although the license or necessary permission for development of the land in the specified area had been granted in favour of the company, yet for the reasons best known to the complainant the company has not been arrayed as an accused in the complaint," the bench said.
The court said when a complainant intends to rope in a Managing Director or any officer of a company, it is essential to make requisite allegations to constitute the various liabilities.
Referring to the 1900 Act, the bench also pointed out that there is no vicarious liability that can be attached to any of the directors or any office bearer of the company. It is the individual liability or an act that would make the person concerned liable for being prosecuted for the offence, it said.
"A director may be vicariously liable only if the company itself is liable in the first place and if such director personally acted in a manner that directly connects their conduct to the company’s liability," the bench said.
The court also pointed out that mere authorisation of an act at the behest of the company or the exercise of a supervisory role over certain actions or activities of the company is not enough to render a director vicariously liable.
"There must exist something to show that such actions of the director stemmed from their personal involvement and arose from actions or conduct falling outside the scope of its routine corporate duties. Thus, where the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. There has to be a specific act attributed to the director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company," the bench said.
The bench also said, wherever by a legal fiction the principle of vicarious liability is attracted and a person who is otherwise not personally involved in the commission of an offence is made liable for the same, it has to be specifically provided in the statute concerned.
"When it comes to penal provisions, vicarious liability of the managing director and director would arise provided any provision exists in that behalf in the statute. Even where such provision for fastening vicarious liability exists, it does not mean that any and all directors of the company would be automatically liable for any contravention of such statute," the bench said.
The court said vicarious liability would arise only if there are specific and substantiated allegations attributing a particular role or conduct to such director, sufficient enough to attract the provisions constituting vicarious liability and by extension the offence itself.
The court noted the allegation made against the appellants was vague, and held that no case could be said to have been made out for putting the three appellants to trial for the alleged offence,
"Having regard to the nature of the allegations, it is difficult for us to take the view that the appellants herein are responsible for the alleged offence. There are no allegations worth the name in the complaint that the three appellants before us are directly responsible for uprooting of the trees with the aid of Bulldozers or JCB machines or causing damage to the environment," the bench said.