Holding

Vicarious liability under Section 22C(1) of the Minimum Wages Act, 1948 does not attach to a director unless the prosecution first establishes that he was in‑charge of and responsible to the company, which the complaint failed to do; consequently, the criminal proceedings against the appellant and the second accused are quashed.

Summary

The appellant, Dayle De’Souza, a director of Writer Safeguard Pvt. Ltd., was served with a notice and later a criminal complaint under Section 22A of the Minimum Wages Act, 1948 for alleged non‑compliance at an ATM site, although the company itself was not named as an accused. The High Court dismissed his petition under Section 482 CrPC, leading to this appeal. The Supreme Court examined the scope of Sections 22A, 22B and, crucially, 22C of the Act, holding that vicarious liability under s.22C(1) arises only when the prosecution first proves that the person was "in‑charge of and responsible to" the company, a condition absent in the complaint. The proviso to s.22C(1) cannot be invoked without satisfying its antecedent, and s.22C(2) cannot be relied upon either. Consequently, the complaint against the appellant and the second accused was untenable and the proceedings were quashed. The appeal was allowed, and the summons and criminal proceedings were set aside.

Issues considered

The applicability of Section 22C(1) of the Minimum Wages Act, 1948 to a director when the complaint does not aver that he was in‑charge of and responsible to the company.
Whether the proviso to Section 22C(1) can be invoked in the absence of a finding that the antecedent condition is satisfied.
The relevance of Section 22C(2) where the complaint contains no specific allegation of consent, connivance or neglect by the director.
The requirement that the company itself be prosecuted before a director can be held vicariously liable.
The interpretation of Section 22A as a general provision for punishment of other offences.

Legislation cited

Code of Criminal Procedure, 1973s. 200, s. 482
Essential Commodities Act, 1955s. 10
Minimum Wages Act, 1948s. 22A, s. 22B, s. 22C
Negotiable Instruments Act, 1881s. 141

Subjects

Minimum Wages Actvicarious liabilitySection 22Cdirector liabilitycorporate criminal liabilitySection 22Aprovisoquash of criminal proceedingsCriminal Procedure

Judgment

[2021] 11 S.C.R. 511 511

DAYLE DE’SOUZA A
v.
GOVERNMENT OF INDIA THROUGH DEPUTY CHIEF
LABOUR COMMISSIONER (C) AND ANOTHER
(Criminal Appeal No. 1319 of 2021) B
OCTOBER 29, 2021
[R. SUBHASH REDDY AND SANJIV KHANNA, JJ.]
Minimum Wages Act, 1948: s.22A, s.22C(1) and (2) – Appellant
is director of WS Company which had entered into an agreement
C
for servicing of ATMs with another company – The latter company
had entered into agreement with State Bank for maintenance and
upkeep of all their ATMs – A notice was issued to the appellant and
the head of WS company (accused no.2) by Labour Enforcement
Officer alleging non-compliance of provisions of 1948 Act – WS
company responded that they neither manage the ATMs nor work D
at the ATMs – Criminal complaints filed against the appellant and
the head of WS company under s.22A – WS Company was not enlisted
as an accused in the complaint and was not summoned to stand
trial – Appellant-director filed s.482 CrPC petition which was
dismissed by High Court – On appeal, held: s.22A of the Act is a
E
‘General provision for punishment of other offences’ where “any
employer who contravenes any provision of this Act or of any rule
or order made thereunder shall, if no other penalty is provided for
such contravention by this Act, be punishable with fine...”– Sub-
section (1) to s.22C states that where an offence is committed by a
company, every person who at the time the offence was committed F
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 follows that a
person who do not bear out the requirements is not vicariously liable
under s.22C(1) of the Act – The proviso, which is in the nature of
G
an exception, states that a person who is liable under sub-section
(1) shall not be punished if he proves that 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 displace or extricate the initial onus and burden on the H
511
512 SUPREME COURT REPORTS [2021] 11 S.C.R.

A prosecution to first establish the requirements of sub-section (1) to
s.22C of the Act – Sub-section (2) states that notwithstanding
anything contained in sub-section (1), where any offence under the
Act has been committed by a company, and it is proved that such
offence has been committed with the consent or connivance of, or
is attributable to any neglect on the part of, any director, manager,
B
secretary or other officer of the company, then 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 – The words ‘in-charge of the company’ and
‘responsible to the company’ are pivotal to sub-section (1) – This
C requirement has to be satisfied for the deeming effect of sub-section
(1) to apply and for rendering the person liable to be proceeded
against and, on such position being proved, punished – The
necessities of sub-section (2) to s.22C of the Act are different from
sub-section (1) to s.22C of the Act – Vicarious liability under sub-
section (2) to s.22C can arise because of the director, manager,
D
secretary, or other officer’s personal conduct, functional or
transactional role, notwithstanding that the person was not in overall
control of the day to day business of the company when the offence
was committed – Vicarious liability is attracted when the offence is
committed with the consent, connivance, or is attributable to the
E neglect on the part of a director, manager, secretary, or other officer
of the company – In the factual context of this case, it is crystal
clear that the complaint does not satisfy the mandate of sub-section
(1) to s.22C of the Act as there are no assertions or averments that
the appellant was in-charge of and responsible to WS company –
The proviso to sub-section (1) in the present case would not apply –
F
It is an exception that would be applicable and come into operation
only when the conditions of sub-section (1) to s.22C are satisfied –
In the absence of any specific averment, the prosecution in the
instant case does not and cannot rely on s.22C(2) of the Act – Thus,
proceedings initiated against the appellant and also against accused
G no.2 are quashed.
Liability: Vicarious liability – 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, and therefore, prosecution of the company is
H mandatory – Minimum Wages Act, 1948.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 513
LABOUR COMMISSIONER (C) AND ANR.

Allowing the appeal, the Court A
HELD: 1. Section 22A of the Act, the provision invoked, is
a ‘General provision for punishment of other offences’ where “any
employer who contravenes any provision of this Act or of any rule
or order made thereunder shall, if no other penalty is provided for
such contravention by this Act, be punishable with fine which may B
extend to five hundred rupees”. Sub-section (1) to Section 22C
states that where an offence is committed by 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, as well as the company itself shall be deemed to be
guilty of the offence. By necessary implication, it follows that a C
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 punished if he proves that the offence
was committed without his knowledge or that he had exercised D
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 displace or extricate 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 give immunity to a person who is vicariously liable E
under sub-section (1) to section 22C of the Act. The proviso being
an exception cannot be made a justification or a ground to launch
and initiate prosecution without the satisfaction of conditions
under sub-section (1) of Section 22C of the Act. The proviso that
places the onus to prove the exception on the accused, does not F
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. [Paras 8, 10][521-B-C; 522-C-F;
523-G-H; 524-A]
S.M.S. Pharmaceuticals Ltd.v. Neeta Bhalla and G
Another (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371;
Aneeta Hada v. Godfather Travels and Tours Private
Limited (2012) 5 SCC 661 : [2012] 5 SCR 503 – relied
on.

H
514 SUPREME COURT REPORTS [2021] 11 S.C.R.

A 2. Sub-section (2) states that notwithstanding anything
contained in sub-section (1), where any offence under the Act
has been committed by a company, and it is proved that such
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 officer of the company, then such
B
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. Without much
ado, it is clear from a reading of sub-section (2) to Section 22C of
the Act that a person cannot be prosecuted and punished merely
C because of their 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 onus under sub-section (2) to Section 22C is
on the prosecution and not on the person being prosecuted.
[Para 11][524-B-D]
D
3. Unlike sub-section (2) to Section 22C, sub-section (1)
conspicuously does not use the term ‘director, manager, secretary
or other officer of the company’ to bring them within the ambit of
the vicarious liability provision, albeit every person in-charge of
and responsible to the company for the conduct of its business at
E the time of the commission of the offence in question is deemed
to be additionally liable. The words ‘in-charge of the company’
and ‘responsible to the company’ are pivotal to sub-section (1).
This requirement has to be satisfied for the deeming effect of
sub-section (1) to apply and for rendering the person liable to be
F proceeded against and, on such position being proved, punished.
[Para 12][524-E-F]
Girdhari Lal Gupta v. D.H. Mehta and Another 1971
(3) SCC 189: [1971] 3 SCR 748 : [1971] 3 SCR 748;
State of Karnataka v. Pratap Chand and Others. (1981)
G 2 SCC 335 : [1981] 3 SCR 200; Municipal Corporation
of Delhi v. Purshotam Dass Jhunjunwala and Others
(1983) 1 SCC 9 : [ 1983] 1 SCR 895; National Small
Industries Corporation Limited v. Harmeet Singh Paintal
and Another (2010) 3 SCC 330 : [2010] 2 SCR 805 –
relied on.
H
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 515
LABOUR COMMISSIONER (C) AND ANR.

Municipal Corporation of Delhi v. Ram Kishan Rohtagi A
and Others 1983 (1) SCC 1 : [1983] 1 SCR 884 –
referred to.
4. The necessities of sub-section (2) to Section 22C of the
Act are different from sub-section (1) to Section 22C of the Act.
Vicarious liability under sub-section (2) to Section 22C can arise B
because of the director, manager, secretary, or other officer’s
personal conduct, functional or transactional role, notwithstanding
that the person was not in overall control of the day to day business
of the company when the offence was committed. Vicarious liability
is attracted when the offence is committed with the consent,
connivance, or is attributable to the neglect on the part of a C
director, manager, secretary, or other officer of the company.
[Para 17][529-C-D]
5. In the factual context present, it is crystal clear that the
complaint does not satisfy the mandate of sub-section (1) to Section
22C of the Act as there are no assertions or averments that the D
appellant before this Court was in-charge of and responsible to
WS company in the manner as interpreted by this Court in the
cases mentioned above. The proviso to sub-section (1) in this
case would not apply. It is an exception that would be applicable
and come into operation only when the conditions of sub-section E
(1) to Section 22C are satisfied. 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. [Para 18][529-E-G]
State of Madras v. C.V. Parekh and Another (1970) 3
SCC 491; Sharad Kumar Sanghi v. Sangita Rane (2015) F
12 SCC 781 : [2015] 2 SCR 145; Himanshu v. B.
Shivamurthy and Another (2019) 3 SCC 797 : [2019] 1
SCR 991 – relied on.
Sheoratan Agarwal and Another v. State of Madhya
Pradesh (1984) 4 SCC 352 : [1985] 1 SCR 719; Anil G
Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5
Suppl. SCR 6; Anil Gupta v. Star India Private Limited
and Another (2014) 10 SCC 373 : [2014] 8 SCR 183;
Hindustan Unilever Limited v. State of Madhya Pradesh
(2020) 10 SCC 751 – referred to.
H
516 SUPREME COURT REPORTS [2021] 11 S.C.R.

A 6. 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, and therefore,
prosecution of the company is mandatory. The exception would
possibly be when the company itself has ceased to exist or cannot
be prosecuted due to a statutory bar. However, such exceptions
B
are of no relevance in the present case. Thus, the present
prosecution must fail for this reason as well. [Para 27][536-D-E]
7. The complaint refers to the violation as certain notices
were not displayed and certain registers and forms were not kept
at the ‘worksite’. A response to the show-cause-cum-compliance
C notice in the form of a short reply states that the Company neither
manages the ATM nor works at the ATM and that the ATM site
was managed by the respective banks and, therefore, the volitional
as alleged do not apply to them. The complaint does not state
why the reply was deficient or indicate even briefly as to the nature
D of activity and involvement of the Company’s workers at the ATM
site of the State Bank of India mandating compliance at the site
in question. We are not ruling on merits, albeit highlighting the
complaint being bereft and silent on these aspects and whether
the authorities considered the legal provisions in the context of
the factual background before initiating prosecution.
E [Para 28][536-F-H; 537-A-B]
8. The authorities bestowed with the duty to confirm
compliance are often empowered to take stringent including penal
action to ensure observance and check defiance. There cannot
also be any quarrel on the need to enforce obedience of the rules
F as the beneficial legislation protects the worker’s basic right to
receive minimum wages. The rulebook makes sure that the
workers are made aware of their rights and paid their dues as
per law without unnecessary disputes or allegations as to absence,
overtime payment, deductions, etc. [Para 29][537-B-C]
G Directorate of Revenue and Another v. Mohammed
Nisar Holia 2008 (2) SCC 370 : [2007] 12 SCR 906 –
referred to.
9. Almost every statute confer operational power to enforce
and penalise, which power is to be exercised consistently from
H case to case, but adapted to facts of an individual case. The
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 517
LABOUR COMMISSIONER (C) AND ANR.

passage from Hindustan Steel Ltd. highlights the rule that the A
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 belief, and be firmly unforgiving in cases
of deceitful and mendacious conduct. Sometimes legal provisions
are worded in great detail to give an expansive reach given the
B
variables and complexities involved, and also to avoid omission
and check subterfuges. However, legal meaning of the provision
is not determined in abstract, but only when applied to the
relevant facts of the case. Therefore, it is necessary that the
discretion conferred on the authorities is applied fairly and
judiciously avoiding specious, unanticipated or unreasonable C
results. The intent, objective and purpose of the enactment should
guide the exercise of discretion, as the presumption is that the
makers did not anticipate anomalous or unworkable
consequences. The intention should not be to target and penalise
an unintentional defaulter who is in essence law-abiding.
D
[Para 30][538-C-F]
M/s. Hindustan Steel Ltd. v. State of Orrisa 1969 (2)
SCC 627 : [1970] 1 SCR 753 – relied on.
10. The initiation of prosecution and summoning of an
accused to stand trial has serious consequences. They extend E
from monetary loss to humiliation and disrepute in society,
sacrifice of time and effort to prepare defence and anxiety of
uncertain times. Criminal law should not be set into motion as a
matter of course or without adequate and necessary investigation
of facts on mere suspicion, or when the violation of law is doubtful.
It is the duty and responsibility of the public officer to proceed F
responsibly and ascertain the true and correct facts. Execution
of law without appropriate acquaintance with legal provisions and
comprehensive sense of their application may result in an innocent
being prosecuted. [Para 31][538-G; 539-A-B]
11. Equally, it is the court’s duty not to issue summons in a G
mechanical and routine manner. If done so, the entire purpose of
laying down a detailed procedure under Chapter XV of the 1973
Code gets frustrated. Under the proviso (a) to Section 200 of the
1973 Code, there may lie an exemption from recording

H
518 SUPREME COURT REPORTS [2021] 11 S.C.R.

A pre-summoning evidence when a private complaint is filed by a
public servant in discharge of his official duties; however, it is
the duty of the Magistrate to apply his mind to see whether on
the basis of the allegations made and the evidence, a prima facie
case for taking cognizance and summoning the accused is made
out or not. [Para 32][539-C-D]
B
National Small Industries Corporation Limited v. State
(NCT of Delhi) and Others (2009) 1 SCC 407 : [2008]
16 SCR 83 – relied on.
12. The issue of process resulting in summons is a judicial
C process that carries with it a sanctity and a promise of legal
propriety. [Para 32][539-H]
Case Law Reference
[2005] 3 Suppl. SCR 371 relied on Para10
[2012] 5 SCR 503 relied on Para 10
D [1971] 3 SCR 748 relied on Para 12
[1981] 3 SCR 200 relied on Para 13
[1983] 1 SCR 884 referred to Para 14
[1983] 1 SCR 895 relied on Para 15
E [2010] 2 SCR 805 relied on Para 16
(1970) 3 SCC 491 relied on Para 19
[1985] 1 SCR 719 referred to Para 20
[1999] 5 Suppl. SCR 6 referred to Para 21
F [2012] 5 SCR 503 referred to Para 22
[2014] 8 SCR 183 referred to Para 23
[2015] 2 SCR 145 relied on Para 24
[2019] 1 SCR 991 relied on Para 25
G (2020) 10 SCC 751 referred to Para 26
[2007] 12 SCR 906 referred to Para 30
[1970] 1 SCR 753 relied on Para 30
[2008] 16 SCR 83 relied on Para 32

H
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 519
LABOUR COMMISSIONER (C) AND ANR.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal A
No.1319 of 2021.
From the Judgment and Order dated 20.01.2020 of the High Court
of Madhya Pradesh at Jabalpur in M. Cr. C. No.846 of 2016.
Siddharth Luthra, Sr. Adv., Samsher Garud, Sandeep Sudhakar
Deshmukh, Ms. Subhangi Jain, Pankaj Singhal, Advs. for the Appellant. B

Vikramjit Banerjee, ASG, Subhranshu Padhi, P. V. Yogeswaran,
Amrish Kumar, Advs. for the Respondents.
The Judgment of the Court was delivered by
SANJIV KHANNA, J. C
1. Leave granted.
2. The appellant, Dayle De’Souza, is a director of M/s. Writer
Safeguard Pvt. Ltd. (hereinafter referred to as ‘the Company’). In 2009,
the Company had entered into an agreement titled “Agreement for
D
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 ATMs. On 19th 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, E
Madhya Pradesh (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
F
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 four months, the Labour
Enforcement Officer (Central), by letter dated 08th August 2014, informed
the appellant and Vinod Singh that they were required to appear in the
court on 14th August 2014. On 14th August 2014, the Labour Enforcement G
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, 14th August
2014, the Judicial Magistrate, First Class, Sagar, Madhya Pradesh took H
520 SUPREME COURT REPORTS [2021] 11 S.C.R.

A cognisance of the offence and issued a bailable warrant against the
appellant and Vinod Singh in Criminal Case No. 3398/2014. On 01 st
August 2015, the Company submitted a detailed representation to the
Deputy Chief Labour Commissioner (Central), Marhatal, Jabalpur,
Madhya Pradesh denying the contents of the notice dated 06th March
2014.
B
4. Thereafter, on 01st 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. 3398/2014. By the impugned order in M.Cr.C. No.
C
846/2016 dated 20th 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 – the appellant before us, who as per the
D cause-title is stated to be a director 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. Writer
Safeguard Pvt. Ltd. and a resident of Bhopal, Madhya Pradesh. The
Company is not enlisted as an accused in the complaint and has not been
E summoned to stand trial.
6. The complaint, with reference to the two accused, in paragraph
3 states:
“(3) That the accused persons are Contractor who were getting
work of cash loading and security of cash through labours and
F 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 Wages Act, 1948.”
It is also alleged in the complaint:

G “(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 Minimum Wages (Central) Rules, 1950.”
7. The complaint states that the inspection on 19th February 2014
had revealed violation of Rules 21(4), 22, 25(2), 26(1) and 26(5) on
H
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 521
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

account of failure to keep and display, as the case may be, the Fine A
Register Form-1, Register 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).
8. Section 22A of the Act, the provision invoked, is a ‘General B
provision for punishment of other offences’ where “any employer who
contravenes any provision of this Act or of any rule or order made
thereunder shall, if no other penalty is provided for such
contravention by this Act, be punishable with fine which may extend
to five hundred rupees”. Clause (b) of sub-section (1) to Section 22B
with the heading “Cognizance of offences” states that “No court shall C
take cognisance of a complaint against any person for an offence
- under clause (b) of section 22 or under section 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 “No Court shall take cognisance of an offence D
– under Section 22A, unless complaint thereof is made within six
months of the date on which the offence is alleged to have been
committed.”
9. However, in the context of the present appeal, it is Section 22C
of the Act which is of more relevance which reads thus: E
“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 F
shall be deemed to be guilty of the offence and shall be 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 G
that he exercised all due diligence to prevent the commission of
such offence.
(2) Notwithstanding anything contained in sub-section (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 H
522 SUPREME COURT REPORTS [2021] 11 S.C.R.

A or connivance of, or is attributable to any neglect on the part of,
any director, manager, secretary or other officer 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.
B Explanation. — For the purposes of this section —
(a) “company” means any body corporate and includes a firm or
other association of individuals; and
(b) “director” in relation to a firm means a partner in the firm.”

C 10. Sub-section (1) to Section 22C states that where an offence
is committed by 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, as well as the company itself shall be
deemed to be guilty of the offence. By necessary implication, it follows
that a person who do not bear out the requirements is not vicariously
D 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 punished if he proves that 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
E the requirements to take benefit of the proviso is on the accused, but it
does not displace or extricate 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 give immunity to a person who is vicariously
liable under sub-section (1) to section 22C of the Act. In S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and Another,1 in relation to
F pari materia proviso in Section 141 of the Negotiable Instruments Act,
1881, this Court observed:
“4… A company being a juristic person, all its deeds and functions
are the result of acts of others. Therefore, officers of a company
who are responsible for acts done in the name of the company
G are sought to be made personally liable for acts which result in
criminal action being taken against the company. It makes every
person who, at the time the offence was committed, was in charge
of, and was responsible to the company for the conduct of business
of the company, as well as the company, liable for the offence.
1
H (2005) 8 SCC 89.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 523
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

The proviso to the sub-section contains an escape route for persons A
who are able to prove that the offence was committed without
their knowledge or that they had exercised all due diligence to
prevent commission of the offence.
xx xx xx
9. The position of a managing director or a joint managing director B
in a company may be different. These persons, as the designation
of their office 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 proviso to Section 141(1), that is, they will have to prove C
that when the offence was committed they had no knowledge of
the offence or that they exercised all due diligence to prevent the
commission of the offence.”
(Emphasis added)
In Aneeta Hada v. Godfather Travels and Tours Private D
Limited,2 this Court had reiterated that the proviso to general vicarious
liability under Section 141 of the Negotiable Instruments Act, 1881, applies
as an exception, by observing:
“22. On a reading of the said provision, it is plain as day that if a
person who commits the offence under Section 138 of the Act is E
a company, the company as well as every person in charge of and
responsible to the company for the conduct of business of the
company at the time of commission of offence is 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 F
concepts of connivance, negligence and consent that engulfs many
categories of officers. It is worth noting that in both the provisions,
there is a “deemed” concept of criminal liability.”
(Emphasis added)
G
The proviso being an exception cannot be made a justification or
a ground to launch and initiate prosecution without the satisfaction of
conditions under sub-section (1) of Section 22C of the Act. The proviso
that places the onus to prove the exception on the accused, does not
2
(2012) 5 SCC 661. H
524 SUPREME COURT REPORTS [2021] 11 S.C.R.

A 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) states that notwithstanding anything contained
in sub-section (1), where any offence under the Act has been committed
B by a company, and it is proved that such 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 officer of the company,
then 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. Without much ado, it is
C clear from a reading of sub-section (2) to Section 22C of the Act that a
person cannot be prosecuted and punished merely because of their 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 onus under sub-section
D (2) to Section 22C is on the prosecution and not on the person being
prosecuted.
12. Unlike sub-section (2) to Section 22C, sub-section (1)
conspicuously does not use the term ‘director, manager, secretary or
other officer of the company’ to bring them within the ambit of the
E vicarious liability provision, albeit every person in-charge of and
responsible to the company for the conduct of its business at the time of
the commission of the offence in question is deemed to be additionally
liable. The words ‘in-charge of the company’ and ‘responsible to the
company’ are pivotal to sub-section (1). This requirement has to be
satisfied for the deeming effect of sub-section (1) to apply and for
F rendering the person liable to be proceeded against and, on such position
being proved, punished. Interpreting an identical expression used in
Sections 23-C(1) and 23-C(2) of the Foreign Exchange Regulation Act,
1947, this Court in Girdhari Lal Gupta v. D.H. Mehta and Another,3
has held:
G “6. What then does the expression “a person in-charge and
responsible for the conduct of the affairs of a company” mean? It
will be noticed that the word “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 seems to us that
3
H 1971 (3) SCC 189.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 525
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

in the context a person “in-charge” must mean that the person A
should be in over-all control of the day to day business of the
company or firm. This inference follows from the wording of
Section 23-C(2). It mentions director, who may be a party to the
policy being followed by a company and yet not be in-charge of
the business of the company. Further it mentions manager, who
B
usually is in charge of the business but not in over-all charge.
Similarly, the other officers may be in-charge of only some part of
business.
xx xx xx
8. In R.K. Khandelwal v. State D.S. Mathur, J., in construing
C
Section 27 of the Drugs Act, 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 accused person is a
D
partner or director of the Company, shall not make him
criminally liable for the offence committed by the Company
unless the other ingredients are established which make him
criminally liable.””
Those not in overall control of the day to day business of the
company or the firm are not deemed to be constructively liable under E
Section 23-C(1) of the Foreign Exchange Regulation Act, 1947.
13. This exposition on the meaning of the term ‘in-charge and
responsible for’ was referred to with approval in State of Karnataka v.
Pratap Chand and Others.4 This decision relates to the prosecution of
the partner of a firm under the Drugs and Cosmetics Act, 1940. The F
judgment referred to the explanation to Section 34 in the said Act (which
is pari materia with the explanation in Section 22C of the Minimum
Wages Act, 1948) to observe that for the purpose of imposing liability on
the company under the said Section, a company includes a body corporate,
a firm or an association of individuals. A director in relation to a firm G
means a partner in that firm. Therefore, even in the case of partners,
when a firm commits an offence, the requirement of either sub-section
(1) or sub-section (2) to Section 22C must be satisfied. This means that
in terms of sub-section (1), the partner should be “in-charge of” and
4
(1981) 2 SCC 335. H
526 SUPREME COURT REPORTS [2021] 11 S.C.R.

A “responsible to” the firm for the conduct of its business as per the dictum
in Girdhari Lal Gupta (supra). Further, 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 partner
concerned.
B
14. Way back in 1982, in Municipal Corporation of Delhi v.
Ram Kishan Rohtagi and Others,5 this Court had quashed criminal
proceedings under the Prevention of Food Adulteration Act, 1954 against
the directors of a manufacturing company at the summoning stage,
observing that the presumptive assertion made in the complaint that the
C 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. The use of the words “as such” in the complaint
indicated that the complainant had merely presumed that the directors
must be guilty because they held the office of the director. The Court
D opined that such presumptive accusations against the directors without
any specific averment or criminal attribution being made in the complaint
would be insufficient. 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 person who is not an accused
before it and try him along with others. Upholding the reasoning of the
E High Court quashing the proceedings against the directors, it was
highlighted:
“12.......The main clause of the complaint which is the subject-
matter of the dispute is clause 5 which may be extracted thus:

F 5. That accused 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
accused 2 at the time of sampling.
xx xx xx
G 14. Reliance has been placed on the words “as such” in order to
argue that because (sic) the complaint does not attribute any
criminal responsibility to Accused 4 to 7 except that they were
incharge of and responsible for the conduct of the business of the
Company. It is true that there is no clear averment of the fact that
5
H 1983 (1) SCC 1.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 527
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

the Directors were really incharge of the manufacture and A
responsible for the conduct of business but the words “as such”
indicate that the complainant has merely presumed that the
Directors of the Company must be guilty because they are holding
a particular office. This argument found favour with the High
Court which quashed the proceedings against the Directors as
B
also against the Manager, Respondent 1.”
However, the initiation of a prosecution and the summoning order
against the manager in the factual context was held to be proper.
15. In another decision by the same Bench titled Municipal
Corporation of Delhi v. Purshotam Dass Jhunjunwala and Others,6 C
the assertions were that 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. This Court,
therefore, concluded that the directors of the company were not being
prosecuted merely because of their official position but because of the D
assertion that they were “in-charge of and responsible for the conduct
of the business at the time of commission of the offence”. There was a
clear averment regarding the active role played by the accused and the
extent of their liability. Accordingly, restoring the order passed by the
Metropolitan Magistrate by which the directors etc. were summoned E
for trial in accordance with the law and setting 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 extracted
thus:
F
5. That accused Ram Kishan Bajaj is the Chairman, accused
R.P. Neyatia is the Managing 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 business
at the time of commission of offence.
G
xx xx xx
5. In the instant case, a clear averment has been made regarding
the active 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
6
(1983) 1 SCC 9 H
528 SUPREME COURT REPORTS [2021] 11 S.C.R.

A the complaint 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
quashing the proceedings only the allegations set forth in the
complaint have to be seen and nothing further.”
B
16. The legal position has undergone further elucidation in a number
of judgments.7 However, for the present decision, we would refer to the
summarisation in National Small Industries Corporation Limited v.
Harmeet Singh Paintal and Another,8 to the following effect:
“39. From the above discussion, the following principles emerge:
C
(i) The primary responsibility is on the complainant to make
specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that
every Director knows about the transaction.
D
(ii) Section 141 does not make all the Directors liable for the
offence. The criminal liability can be fastened only on those
who, at the time of the commission of the offence, were in
charge of and were responsible for the conduct of the
business of the company.
E (iii) Vicarious liability can be inferred against a company
registered or incorporated under the Companies Act, 1956
only if the requisite statements, which are required to be
averred in the complaint/petition, are made so as to make
the accused therein vicariously liable for offence committed
F by the company along with averments in the petition
containing that the accused were in charge 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 the part of a person must be pleaded
and proved and not inferred.
G
(v) If the accused is a Managing Director or a Joint Managing
Director then it is not necessary to make specific averment
7
See, Pooja Ravinder Devidasani v. State of Maharashtra and another, (2014) 16 SCC 1;
Gunmala Sales Private Ltd. v. Anu Mehta and Others, (2015) 1 SCC 103; Shailendra
Swarup v. Deputy Director, Enforcement Directorate, (2020) 16 SCC 561.
H 8
(2010) 3 SCC 330.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 529
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

in the complaint and by virtue of their position they are A
liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company
who signed the cheques on behalf of the company then
also it is not necessary to make specific averment in the
complaint. B
(vii) The person sought to be made liable should be in charge of
and responsible for the conduct of the business of the
company at the relevant time. This has to be averred as a
fact as there is no deemed liability of a Director in such
cases.” C
17. The necessities of sub-section (2) to Section 22C of the Act
are different 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, secretary, or other officer’s personal conduct, functional
or transactional role, notwithstanding that the person was not in overall
D
control of the day to day business of the company when the offence
was committed. Vicarious liability is attracted when the offence is
committed with the consent, connivance, or is attributable to the neglect
on the part of a director, manager, secretary, or other officer of the
company.
18. In the factual context present before us it is crystal clear that E
the complaint does not satisfy the mandate of sub-section (1) to Section
22C of the Act as there are no assertions or averments that the appellant
before this Court was in-charge of and responsible to the company M/s.
Writer Safeguard Pvt. Ltd. in the manner as interpreted by this Court in
the cases mentioned above. The proviso to sub-section (1) in the present F
case would not apply. It is an exception that would be applicable and
come into operation only when the conditions of sub-section (1) to Section
22C are satisfied. 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.
G
19. There is yet another difficulty for the prosecution in the present
case as the Company 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. Parekh and Another:9, reads:

9
(1970) 3 SCC 491. H
530 SUPREME COURT REPORTS [2021] 11 S.C.R.

A “3. Learned Counsel for the appellant, however, sought conviction
of the two respondents on the basis of Section 10 of the Essential
Commodities Act under which, if the person contravening an order
made under Section 3 (which covers an order 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
B
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. It was urged that the two
respondents were in charge of, and were responsible to, the
C Company for the conduct of the business of the Company and,
consequently, they must be held responsible for the sale and for
thus contravening the provisions of clause (5) of the Iron and
Steel Control Order. This argument cannot be accepted, because
it ignores the first condition for the applicability of Section 10 to
the effect that the person contravening the order must be a
D
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 Control Order was made by
the Company. In fact, the Company was not charged with the
offence at all. The liability of the persons in charge of the Company
E only arises when the contravention is by the Company itself. Since,
in this case, there is no evidence and no finding that the Company
contravened clause (5) of the Iron and Steel Control Order, the
two respondents could not be held responsible. The actual
contravention was by Kamdar and Vallabhdas Thacker and any
contravention by them would not fasten responsibility on the
F
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 This case
G pertained to the pari materia provision under Section 10 of the Essential
Commodities Act, 1955. The court held that anyone among: the company
itself; every person in-charge of and responsible to the company for the
conduct of the business; or any director, manager, secretary or other
officer of the company with whose consent or connivance or because
10
H (1984) 4 SCC 352.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 531
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

of whose neglect offence had been committed, could be prosecuted A
alone. However, the person-in-charge or an officer of the company could
be held guilty in that capacity 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 he is to be found
B
guilty and punished.
21. Relying upon the reasoning in Sheoratan Agarwal (supra)
and limiting the interpretation of C.V. Parekh (supra), this Court in Anil
Hada v. Indian Acrylic Ltd.11 had held that:
“13. If the offence was committed by a company it can be punished C
only if the company is prosecuted. But instead of prosecuting the
company if a payee opts to prosecute only the persons falling
within the second or third category the payee can succeed in the
case only if he succeeds in showing that the offence was actually
committed by the company. In such a prosecution the accused
D
can show that the company has not committed the offence, though
such company is not made an accused, and hence the prosecuted
accused is not liable to be punished. The provisions do not contain
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 E
offence was committed by the company is sine qua non for
convicting those other persons. But if a company is not prosecuted
due to any legal snag or otherwise, the other prosecuted persons
cannot, on that score alone, escape from the penal liability created
through the legal fiction envisaged in Section 141 of the Act.”
F
22. However, subsequent decisions of this Court have emphasised
that the provision imposes vicarious liability by way of deeming fiction
which presupposes and requires the commission of the offence by the
company itself as it is a separate juristic entity. Therefore, unless the
company as a principal accused has committed the offence, the persons
G
mentioned in sub-section (1) would not be liable and cannot be prosecuted.
Section 141(1) of the Negotiable Instruments Act, extends vicarious
criminal liability to the officers of a company by deeming fiction, which
arises only when the offence is committed by the company itself and not

11
(2000) 1 SCC 1. H
532 SUPREME COURT REPORTS [2021] 11 S.C.R.

A otherwise. Overruling Sheoratan Agarwal and Anil Hada, in Aneeta
Hada v. Godfather Travels and Tours Private Limited,12 a 3-judge
bench of this court expounding on the vicarious liability under Section
141 of the Negotiable Instruments Act, has held:
“51. We have already opined that the decision in Sheoratan
B Agarwal runs counter to the ratio laid down in C.V. Parekh which
is by a larger Bench and hence, is a binding precedent. On the
aforesaid ratiocination, the decision in Anil Hada has to be treated
as not laying down the correct law as far as it states that the
Director or any other officer can be prosecuted without
impleadment of the company. Needless to emphasise, the matter
C would stand on a different footing where there is some legal
impediment and the doctrine of lex non cogit ad impossibilia
gets attracted.
xx xx xx

D 59. In view of our aforesaid analysis, we arrive 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 touchstone of vicarious liability as the same has been
stipulated in the provision itself. We say so on the basis of the
E ratio laid down in C.V. Parekh which is a three-Judge Bench
decision. Thus, the view expressed in Sheoratan Agarwal does
not correctly lay down the law and, accordingly, is hereby overruled.
The decision in Anil Hada is overruled with the qualifier as stated
in para 51. The decision in Modi Distillery has to be treated to be
F restricted to its own facts as has been explained by us
hereinabove.”
23. The proposition of law laid down in Aneeta Hada (supra)
was relied upon by this Court in Anil Gupta v. Star India Private Limited
and Another:13
G “13. In the present case, the High Court by 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 (Del)] held that the complaint against Respondent 2 Company
12
(2012) 5 SCC 661.
H 13
(2014) 10 SCC 373.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 533
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

was not maintainable and quashed the summons issued by the A
trial court against Respondent 2 Company. Thereby, the Company
being not a party to the proceedings under Section 138 read with
Section 141 of the Act and in view of the fact that part of the
judgment referred to by the High Court in Anil Hada has been
overruled by a three-Judge Bench of this Court in Aneeta Hada,
B
we have no other 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
against the appellant can be continued even in absence of the
Company. We, accordingly, set aside that part of the impugned C
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 (Del)] passed by the High 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.”
D
24. In Sharad Kumar Sanghi v. Sangita Rane,14 this Court
observed that:
“11. In the case at hand as the complainant’s initial statement
would reflect, the allegations are against the Company, the
Company has not been made a party and, therefore, the allegations E
are restricted to the Managing Director. As we have noted earlier,
allegations are vague and in fact, principally the allegations are
against the Company. There is no specific allegation against the
Managing Director. When a company has not been arrayed as a
party, no proceeding can be initiated against it even where vicarious
liability is fastened under certain statutes. It has been so held by a F
three-Judge Bench in Aneeta Hada v. Godfather Travels and
Tours (P) Ltd. in the context of the Negotiable Instruments Act,
1881.
xx xx xx
G
13. When the company has not been arraigned as an accused,
such an order could not have been passed. We have said so for
the sake of completeness. In the ultimate analysis, we are of the
considered opinion that the High Court should have been well
14
(2015) 12 SCC 781. H
534 SUPREME COURT REPORTS [2021] 11 S.C.R.

A advised to quash the criminal proceedings initiated against the
appellant and that having not been done, the order is sensitively
vulnerable and accordingly we set aside the same and quash the
criminal proceedings initiated by the respondent against the
appellant.”
B 25. This position was again clarified and reiterated by this Court
in Himanshu 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
C submits that firstly, the appellant could not be prosecuted without
the company being named as an accused. The cheque was issued
by the company and was signed by the appellant as its Director.
Secondly, it was urged that the observation of the High Court that
the company can now be proceeded against in the complaint is
misconceived. The learned counsel submitted that the offence
D under Section 138 is complete only upon the issuance of a notice
of demand and the failure of payment within the prescribed period.
In absence of compliance with the requirements of Section 138, it
is asserted, the direction of the High Court that the company could
be impleaded/arraigned at this stage is erroneous.
E 7. The first submission on behalf of the appellant is no longer res
integra. A decision of a three-Judge Bench of this Court in Aneeta
Hada v. Godfather Travels & Tours (P) Ltd. governs the area
of dispute. The issue which fell for consideration was whether an
authorised signatory of a company would be liable for prosecution
F under Section 138 of the Negotiable Instruments 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
G is an express condition precedent to attract the vicarious liability
of others. Thus, the words “as well as the company” appearing
in the section make it absolutely unmistakably clear that when
the company can be prosecuted, then only the persons
mentioned in the other categories could be vicariously liable
15
H (2019) 3 SCC 797.
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 535
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

for the offence subject to the averments in the petition and A
proof thereof. One cannot be oblivious of the fact that the
company is a juristic person and it has its own respectability. If
a finding is recorded against it, it would create a concavity in
its reputation. There can be situations when the corporate
reputation is affected when a Director is indicted.”
B
In similar terms, the Court further held: (SCC p. 688, para 59)
“59. In view of our aforesaid analysis, we arrive 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 C
brought in the drag-net on the touchstone of vicarious liability
as the same has been stipulated in the provision itself.”
xx xx xx
12. The provisions of Section 141 postulate that if the person
committing an offence under Section 138 is a company, every D
person, who at the time when the offence was 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 punished. E
13. In the absence of the company being arraigned as an
accused, a complaint against the appellant was therefore not
maintainable. The appellant had signed the cheque as a Director
of the company and for and on its behalf. Moreover, in the
absence of a notice of demand being served on the company F
and without compliance with the proviso to Section 138, the
High Court was in error in holding that the company could
now be arraigned as an accused.”
26. Applying the same proposition of law as laid down in Aneeta
Hada (supra), this Court in Hindustan Unilever Limited v. State of
G
Madhya Pradesh16 applying pari materia provision in Prevention of
Food Adulteration Act, 1954, held that:
“23. Clause (a) of sub-section (1) of Section 17 of the Act makes
the person nominated to be in charge of and responsible to the
16
(2020) 10 SCC 751. H
536 SUPREME COURT REPORTS [2021] 11 S.C.R.

A 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 141 of the NI Act and Section 17 of the Act which makes
the company as well as the nominated person to be held guilty of
the offences and/or liable to be proceeded and punished
B
accordingly. Clauses (a) and (b) are not in the alternative but
conjoint. Therefore, in the absence of the company, the nominated
person cannot be convicted or vice versa. Since the Company
was not convicted by the trial court, we find that the finding of the
High Court to revisit the judgment will be unfair to the appellant-
C nominated person who has been facing 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 entire
conviction of the nominated person as unsustainable.”
D 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, and
therefore, prosecution of the company is mandatory. The exception would
possibly be when the company itself has ceased to exist or cannot be
E prosecuted due to a statutory bar. However, such exceptions are of no
relevance in the present case. Thus, the present prosecution must 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
F the violation as certain notices were not displayed and certain registers
and forms were not kept at the ‘worksite’, namely, ATM of the SBI at
AST, Komal Chand Petrol Pump, Civil Lines, Sagar, District Sagar. A
response to the show-cause-cum-compliance notice in the form of a
short reply by the authorised signatory of M/s. Writer Safeguard Pvt.
Ltd. on 02nd April, 2014, which factum though accepted, has not been
G adverted to in the complaint. This short reply states that the Company
neither manages the ATM nor works at the ATM and that the ATM site
was managed by the respective banks and, therefore, the volitional as
alleged do not apply to them. The complaint does not state why the reply
was deficient or indicate even briefly as to the nature of activity and
H involvement of the Company’s workers at the ATM site of the State
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 537
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

Bank of India mandating compliance at the site in question. We are not A
ruling on merits, albeit highlighting the complaint being bereft and silent
on these aspects and whether the authorities considered the legal
provisions in the context of the factual background before initiating
prosecution.
29. The authorities bestowed with the duty to confirm compliance B
are often empowered to take stringent including penal action to ensure
observance and check defiance. There cannot also be any quarrel on
the need to enforce obedience of the rules as the beneficial legislation
protects the worker’s basic right to receive minimum wages. The rulebook
makes sure that the workers are made aware of their rights and paid C
their dues as per law without unnecessary disputes or allegations as to
absence, overtime payment, deductions, etc.
30. At the same time, initiation of prosecution has adverse and
harsh consequences for the persons named as accused. In Directorate
of Revenue and Another v. Mohammed Nisar Holia,17 this Court D
explicitly recognises the right to not to be disturbed without sufficient
grounds as one of the underlying mandates of Article 21 of the
Constitution. Thus, the requirement and need to balance the law
enforcement power and protection of citizens from injustice and
harassment must be maintained. Earlier in M/s. Hindustan Steel Ltd. v.
State of Orrisa,18 this Court threw light on the aspect of invocation of E
penalty provisions in a mechanical manner by authorities to observe:
“8. Under the Act penalty may be imposed for failure to register
as a dealer — Section 9(1) read with Section 25(1)(a) of the Act.
But the liability to pay penalty does not arise merely upon proof of
default in registering as a dealer. An order imposing penalty for F
failure to carry out a statutory obligation is the result of a quasi-
criminal proceeding, and penalty will not ordinarily be imposed
unless the party obliged either acted deliberately in defiance of
law or was guilty of conduct contumacious or dishonest, or acted
in conscious disregard of its obligation. Penalty will not also be G
imposed merely because it is lawful to do so. Whether penalty
should be imposed for failure to perform a statutory obligation is a
matter of discretion of the authority to be exercised judicially and

17
2008 (2) SCC 370.
18
1969 (2) SCC 627. H
538 SUPREME COURT REPORTS [2021] 11 S.C.R.

A on a consideration of all the relevant circumstances. Even if a
minimum penalty is prescribed, the authority competent 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
where the breach flows from a bona fide belief that the offender
is not liable to act in the manner prescribed by the statute. Those
B
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
the Company was not a dealer. Granting that they erred, no case
for imposing penalty was made out.”
Almost every statute confer operational power to enforce and
C
penalise, which power is to be exercised consistently from case to case,
but adapted to facts of an individual case19. 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 belief, and be firmly
D unforgiving in cases of deceitful and mendacious conduct. Sometimes
legal provisions are worded in great detail to give an expansive reach
given the variables and complexities involved, and also to avoid omission
and check subterfuges. However, legal meaning of the provision is not
determined in abstract, but only when applied to the relevant facts of the
case20. Therefore, it is necessary that the discretion conferred on the
E
authorities is applied fairly and judiciously avoiding specious, unanticipated
or unreasonable results. The intent, objective and purpose of the
enactment should guide the exercise of discretion, as the presumption is
that the makers did not anticipate anomalous or unworkable
consequences. The intention should not be to target and penalise an
F unintentional defaulter who is in essence law-abiding.
31. There are a number of decisions of this Court in which, with
reference to the importance of the summoning order, it has been
emphasised that the initiation of prosecution and summoning of an accused
to stand trial has serious consequences21. They extend from monetary
G
19
Secretary of State for Work and Pensions v B [2005] EWCA Civ 929 at [43].
20
See Bennion On Statutory Interpretation, Sixth Edition, Part VI at Page No. 371.
21
See – 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. State of Uttar Pradesh and
Another, (2021) 5 SCC 435.
H
DAYLE DE’SOUZA v. GOVT. OF INDIA THROUGH DEPUTY CHIEF 539
LABOUR COMMISSIONER (C) AND ANR. [SANJIV KHANNA, J.]

loss to humiliation and disrepute in society, sacrifice of time and effort to A
prepare defence and anxiety of uncertain times. Criminal law should not
be set into motion as a matter of course or without adequate and necessary
investigation of facts on mere suspicion, or when the violation of law is
doubtful. It is the duty and responsibility of the public officer to proceed
responsibly and ascertain the true and correct facts. Execution of law
B
without appropriate acquaintance with legal provisions and
comprehensive 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
mechanical and routine manner. If done so, the entire purpose of laying C
down a detailed procedure under Chapter XV of the 1973 Code gets
frustrated. Under the proviso (a) to Section 200 of the 1973 Code, there
may lie an exemption from recording pre-summoning evidence when a
private complaint is filed by a public servant in discharge of his official
duties; however, it is the duty of the Magistrate to apply his mind to see
whether on the basis of the allegations made and the evidence, a prima D
facie case for taking cognizance and summoning the accused is made
out or not. This Court explained the reasoning behind this exemption in
National Small Industries Corporation Limited v. State (NCT of
Delhi) and Others:22
“12. The object of Section 200 of the Code requiring the E
complainant and the witnesses to be examined, is to find out
whether there are sufficient grounds for proceeding against the
accused and to prevent issue of process on complaints which are
false or vexatious or intended to harass the persons arrayed as
accused. (See Nirmaljit Singh Hoon v. State of W.B.) Where F
the complainant is a public servant or court, clause (a) of the
proviso to Section 200 of the Code raises an implied statutory
presumption that the complaint has been made responsibly and
bona fide and not falsely or vexatiously. On account of such implied
presumption, where the complainant is a public servant, the statute
exempts examination of the complainant and the witnesses, before G
issuing process.”
The issue of process resulting in summons is a judicial process
that carries with it a sanctity and a promise of legal propriety.
22
(2009) 1 SCC 407. H
540 SUPREME COURT REPORTS [2021] 11 S.C.R.

A 33. Resultantly, and for the reasons stated above, we would allow
the present appeal and quash the summoning order and the proceedings
against the present appellant.
34. Accused No. 2, Vinod Singh, would also be entitled to the
benefit of this order. Accordingly, the proceedings initiated against the
B accused no. 2, namely Vinod Singh, also stand quashed.

Devika Gujral Appeal allowed.

C

D

E

F

G

H