Chairman, MD can’t be held liable for firm's acts: SC

Chairman, MD, ED can’t be held vicariously liable for criminal acts of company: SC

Supreme Court of India. Credit: PTI Photo

The Supreme Court has said that senior officials like chairman and managing director cannot automatically be held liable, under criminal law, for offences committed by the company in the absence of specific allegations against them. 

"Merely because they are the Chairman Managing Director/Executive Director/Deputy General Manager/Planner and Executor, automatically they cannot be held vicariously liable unless there are specific allegations and averments against them with respect to their individual role," a bench of Justices M R Shah and A S Bopanna said.

The court said a judicial magistrate has to record his satisfaction about a prima facie case against the accused and the role played by them in their respective capacities, which is sine qua non for initiating criminal proceedings against them.

The court dismissed an appeal filed by advocate Shailesh Madiyal on behalf of Ravindranatha Bajpe against the judgements of the Karnataka High Court judgment and the sessions court, which had set aside magistrate order, issuing summons against the accused, senior officials of Mangalore Special Economic Zone Ltd and others.

The counsel claimed the accused had conspired with common intention to lay a water pipeline beneath the schedule properties belonging to the complainant, abutting Mangalore-Bajpe Old Airport Road without any lawful authority and right. He claimed they had trespassed over his properties and demolished the compound wall and destroyed 100 valuable trees.

Advocates Nishanth Patil and P P Hegde, appearing for the accused officials, maintained that there are no specific allegations and attribution of role to them except the bald statement that all of them have connived with each other.

Agreeing to their contention, the bench also noted that the chairman and executive director, at the time of demolition of the wall and cutting of trees, were stationed at Hyderabad and not present at the site.

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