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M/s. C.C.L. Products (India) Ltd., Rep., by its Executive Chairman, Challarajendra Prasad & Others v/s The State of Andhra Pradesh, Rep., by its Public Prosecutor & Another


Company & Directors' Information:- CCL PRODUCTS (INDIA) LIMITED [Active] CIN = L15110AP1961PLC000874

Company & Directors' Information:- P P PRODUCTS PVT LTD [Active] CIN = U32305WB1991PTC051091

Company & Directors' Information:- K K PRODUCTS LIMITED [Active] CIN = U31300DL1991PLC045521

Company & Directors' Information:- K B PRODUCTS PRIVATE LIMITED [Active] CIN = U51909MH2007PTC169627

Company & Directors' Information:- K G PRODUCTS PRIVATE LIMITED [Active] CIN = U51909PB2007PTC031201

Company & Directors' Information:- S S P PRODUCTS PRIVATE LIMITED [Active] CIN = U22110WB1974PTC210201

Company & Directors' Information:- M L B PRODUCTS PRIVATE LIMITED [Active] CIN = U74899DL1990PTC040990

Company & Directors' Information:- M M PRODUCTS LIMITED [Strike Off] CIN = U28994DL1992PLC050955

Company & Directors' Information:- M P K PRODUCTS PVT LTD [Active] CIN = U26919AS1994PTC004183

Company & Directors' Information:- G K PRODUCTS PRIVATE LIMITED [Active] CIN = U74899DL1991PTC043260

Company & Directors' Information:- N R PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U51109AS1998PTC005561

Company & Directors' Information:- C L PRODUCTS INDIA LIMITED [Active] CIN = U51909DL2002PLC116975

Company & Directors' Information:- K. S. A. PRODUCTS PRIVATE LIMITED [Active] CIN = U51220PB2014PTC039023

Company & Directors' Information:- D. R. PRODUCTS PRIVATE LIMITED [Active] CIN = U52320DL2011PTC213508

Company & Directors' Information:- R S PRODUCTS PRIVATE LIMITED [Active] CIN = U74899DL1989PTC036603

Company & Directors' Information:- R R PRODUCTS PRIVATE LIMITED [Active] CIN = U24249HR1999PTC034291

Company & Directors' Information:- I G PRODUCTS PRIVATE LIMITED [Active] CIN = U74999WB2012PTC183503

Company & Directors' Information:- J S R PRODUCTS PRIVATE LIMITED [Active] CIN = U31908DL2007PTC170841

Company & Directors' Information:- C F C PRODUCTS PRIVATE LIMITED [Active] CIN = U28129DL1998PTC095531

Company & Directors' Information:- M S PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U74899DL1993PTC055125

Company & Directors' Information:- B R PRODUCTS PRIVATE LIMITED [Active] CIN = U31909DL1999PTC100727

Company & Directors' Information:- S P B PRODUCTS LIMITED [Active] CIN = U51909DL1996PLC082631

Company & Directors' Information:- G K D PRODUCTS PRIVATE LIMITED [Active] CIN = U15431WB1998PTC086840

Company & Directors' Information:- M B R PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U17111WB1993PTC060806

Company & Directors' Information:- P D PRODUCTS PRIVATE LIMITED [Active] CIN = U23201DL2000PTC108462

Company & Directors' Information:- S K M PRODUCTS PRIVATE LIMITED [Active] CIN = U18101DL1998PTC093415

Company & Directors' Information:- H R PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U74899DL1978PTC009183

Company & Directors' Information:- V S PRODUCTS PRIVATE LIMITED [Active] CIN = U36900DL2008PTC185445

Company & Directors' Information:- H K PRODUCTS LIMITED [Active] CIN = U51900GJ2015PLC085457

Company & Directors' Information:- S R K PRODUCTS PRIVATE LIMITED [Active] CIN = U51221KA1989PTC010032

Company & Directors' Information:- G M PRODUCTS PRIVATE LIMITED [Active] CIN = U74899DL1991PTC044687

Company & Directors' Information:- V T N PRODUCTS PVT LTD [Active] CIN = U51109WB1996PTC080094

Company & Directors' Information:- W S T Q PRODUCTS PRIVATE LIMITED [Active] CIN = U31300DL1999PTC102655

Company & Directors' Information:- J M K PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U24246OR2005PTC008446

Company & Directors' Information:- G S T PRODUCTS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U31909TN2006PTC059575

Company & Directors' Information:- S M P PRODUCTS PRIVATE LIMITED [Active] CIN = U25200DL2009PTC190965

Company & Directors' Information:- S N S PRODUCTS PRIVATE LIMITED [Active] CIN = U15490DL2005PTC142749

Company & Directors' Information:- U B PRODUCTS PRIVATE LIMITED [Active] CIN = U51224DL2002PTC116457

Company & Directors' Information:- A AND A PRODUCTS PRIVATE LIMITED [Active] CIN = U21098MP2004PTC017128

Company & Directors' Information:- V J PRODUCTS PRIVATE LIMITED [Active] CIN = U36900GJ2011PTC065252

Company & Directors' Information:- S AND A PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U51311DL1991PTC042938

Company & Directors' Information:- S AND G PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U51909DL1982PTC014843

Company & Directors' Information:- B P PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U24241WB1999PTC089499

Company & Directors' Information:- D AND P PRODUCTS LIMITED [Amalgamated] CIN = U99999MH1951PTC008422

Company & Directors' Information:- S D H PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U55204KA2006PTC040734

Company & Directors' Information:- V M PRODUCTS PRIVATE LIMITED [Active] CIN = U24100DL2014PTC266679

Company & Directors' Information:- E C A PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U27209TN1987PTC014022

Company & Directors' Information:- G S PRODUCTS LIMITED [Strike Off] CIN = U25191UP1989PLC010483

Company & Directors' Information:- A R K PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U24231UP1978PTC004606

Company & Directors' Information:- S. M. PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U17299DL1966PTC004634

Company & Directors' Information:- R. M. R. PRODUCTS PRIVATE LIMITED [Active] CIN = U74999MH2017PTC298120

Company & Directors' Information:- P & Q PRODUCTS PRIVATE LIMITED [Strike Off] CIN = U51909DL2014PTC269162

Company & Directors' Information:- H T PRODUCTS PVT LTD [Strike Off] CIN = U29266WB1981PTC033424

Company & Directors' Information:- PRODUCTS (INDIA) LTD [Strike Off] CIN = U31901WB1961PLC024991

Company & Directors' Information:- M PRODUCTS & CO PVT LTD [Strike Off] CIN = U51909WB1956PTC023215

    Crl.P. No. 1614 of 2016

    Decided On, 24 January 2020

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE D.V.S.S. SOMAYAJULU

    For the Petitioners: C.V. Mohan Reddy, Advocate. For the Respondents: R1, Public Prosecutor, R2, Vasudha Nagaraj, Advocate.



Judgment Text


This Criminal Petition is filed by the petitioners to quash all further proceedings in C.C.No.557 of 2015 on the file of the Additional Judicial First Class Magistrate.

This Court has heard Sri C.V.Mohan Reddy, learned senior counsel appearing for the petitioners, learned Public Prosecutor appearing for the 1st respondent-State, the learned counsel for the 2nd respondent. The de facto complainant was also present in person and thereafter his counsel appeared and argued the matter at length.

The petitioners before this Court are the accused in C.C.No.557 of 2015, which is filed for the alleged offence under Section 37 of the AIR (Prevention and Control of Pollution) Act, 1981 (in short “the AIR Act”) and Section 41 and 43 of the Water (Prevention and Control of Pollution) Act, 1974 (in short “the Water Act”). The de facto complainant is the 2nd respondent. He had filed a private complaint before the concerned jurisdictional Magistrate, who took cognizance of the case. After the investigation the charge sheet was filed. Questioning the said charge sheet the present petition is filed.

Sri C.V.Mohan Reddy, learned senior counsel appearing for the petitioners states that the 1st petitioner is a company represented by its Executive Chairman, the 2nd petitioner is the Executive Chairman and the 3rd petitioner is the Managing Director. Learned senior counsel argued that the concept of vicarious liability is unknown in criminal law and that if the statue provides a particular method of prosecuting a person, who was in-charge of the affairs of the company that procedure should be very scrupulously followed. He points out that in the case on hand except a bald allegation in the course of the sworn statement there is virtually no material available to implicate A2 and A3 or to prosecute A1. He points out that a private complaint is filed by the de facto complainant with the obvious aid and assistance of a counsel who drafted the same and in that complaint itself there is no whisper whatsoever about the role of A2 and A3 in the affairs of A1 company. He submits that as an improvement a single line was deposed in the sworn statement and this lead to the Magistrate taking cognizance of the case. It is his submission that the same was in direct violation of the provisions of the Act. He also argues that the learned Magistrate did not exercise the judicial discretion necessary for taking cognizance of the offence. It is his contention that the prosecution is vexatious and is an abuse of process of Court. Therefore, he prays that the same should be quashed.

Learned senior counsel relies upon Section 40 of the AIR Act, which is as follows:

“Section 40(1): Where an offence under this Act has been committed by a company, every person who, at the time of offence was committed was directly 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 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.”

Similarly, he relies upon Section 47 (1) of the Water Act, which is to the following effect:

“Section 47(1): Where an offence under this Act has been committed by a company, every person who, at the time of 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 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.”

Relying on the plain language of the AIR Act, learned senior counsel submits that the words used in this Act are capable of one interpretation only. He states that a person should be “directly in charge” before being prosecuted. Similarly, with regard to Section 47 of Water Act also he states that a person should be “in charge of and responsible to the company” for the conduct of its business or its day to day affairs. Learned senior counsel submits that the Hon’ble Supreme Court of India in SMS Pharmaceuticals Ltd., v Neeta Bhalla (2005) 8 SCC 89) has held while interpreting a similar provision under the Negotiable Instruments Act that the liability arises on account of the conduct, action or omission on the part of a person. Therefore, he states that merely because a person is holding an office he cannot be prosecuted unless specific/clear averments are made against the said person. Learned senior counsel also points out that the Magistrate did not even look into the complaint to decide whether such an averment is there as required under law. Apart from that he submits that these Acts defined a State Board and a Central Board. He points out that in the case on hand notices were issued to the Central Pollution Control Board and not to the State Board. He points out that under the AIR Act notice should be issued to the concerned Board, because it is a prerequisite for taking cognizance. In the case on hand, learned senior counsel also submits that as the prerequisite viz., an appropriate notice has not been given, the complaint should be quashed. For all these reasons he prays for quashing of further proceedings.

Learned Additional Public Prosecutor vehemently opposed the application. It is his contention that the order of taking cognizance discloses a clear application of mind. He points out that the learned Magistrate has not merely considered the complaint but also the sworn statement. Apart from that he points out that one particular Act has been deleted viz., the Environment Protection Act and the petitioners were only proceeded against in respect of Water and Air Act. Therefore, learned Public Prosecutor submits that the order discloses an application of mind and hence he argues that the Magistrate did not commit any mistake at that stage. It is his contention that a full-fledged speaking order is not contemplated at this stage. He also points out that relying upon the proviso under Section 47 of the Water Act that is for the delinquent officer or servant to prove that he did not commit the offence. He argues against quashing more so at this stage.

The learned counsel for the 2nd respondent also relies upon a judgment of the Bombay High Court reported in Pulgaon Cotton Mills Ltd., and Others v Maharashtra Pollution Control Board (2001 Crl.LJ 610)and argues on similar lines. He points out that technical objections should not come in the way of substantive justice. Relying upon the submissions made in that case, he states that it is not necessary to make such averment against the persons individually in the complaint itself. The counsel for the complainant also relies upon Section 33 (a) of the Water Act to argue that effluents cannot be discharged into the general irrigation canals. He submits that this is a case which has to go a trial and that the quashing of the proceedings not called for. It is his contention that in these sort of matters which have environmental impact; a full trial should be conducted.

COURT:

1) The first and foremost point to be noted is that both the AIR Act and the Water Act, contain provisions/sections for prosecution of the persons, who were in charge of and were responsible to the company for the conduct of the business of the company. In fact, the AIR Act in Section 40 clearly states that where an offence is committed by a company that every person, who was directly in charge of and was responsible for the conduct of the business of the company can be prosecuted (emphasis supplied). Therefore, a plain language interpretation of this Section would show that the person who is charged that the offence must be “directly in charge of the company” and should be responsible to the company for the conduct of its business. A reading of the section makes it clear that only if a person is “directly” in charge of the affairs of the company and the said affairs of the company lead to the actual commission of the offence, then only he can be charged. The Water Act talks of every person who was in charge of and was responsible to the company for the conduct of the business that lead to the offence. In SMS Pharmaceuticals case (1 supra) the Hon’ble Supreme Court of India interpreted Section 141 of the N.I. Act, which is in pari materia with the Water Act and to a large extent with the Air Act. This is a land mark judgment of the Hon’ble Supreme Court of India, wherein the Companies Act was considered. The roles and the duties of the Directors were also considered. The Hon’ble Supreme Court of India held that every person connected with business of the company or holding an office in the company cannot be made liable. The liability would arise when the person was in charge of and responsible for the conduct of the business at the time the offence was committed. Mere holding of an office is not the criteria. The person should be connected with the affairs of the company and also connected with business of the company that leads to the commission of the crime at that point of time. The Hon’ble Supreme Court of India clearly held that the words used are “every person and not every Director/Manager or Secretary”. The Hon’ble Supreme Court of India also approved the decision of the Hon’ble High Court of Andhra Pradesh in Secunderabad Health Care Ltd., and Others v Secunderabad hospitals Pvt. Ltd., and others. The Hon’ble Supreme Court of India held that only such directors who were in-charge of the company or the affairs of the company at the material time can be made liable. Some provisions of the other Acts were also considered. Ultimately, the Hon’ble Supreme Court of India came to a conclusion in para 19 as follows:

“To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision.”

Learned senior also relied upon the judgment of the Hon’ble Supreme Court of India in Sharad Kumar Sanghi v Sangita Rane (2015) 12 SCC 781), wherein the judgment of the Hon’ble Supreme Court of India in an earlier case was cited with approval. Here also as there were no specific allegations, the complaint was dismissed, particularly, when the company was not made a party. However, on the question of vicarious liability the Hon’ble Supreme Court of India has held that a ground should be made out in the complaint itself for proceeding against the respondents.

As mentioned earlier the learned Public Prosecutor and the de facto complainant also cited their case law on the subject.

This Court after analysing the cases on the subject vis a vis the complaint that is filed is of the opinion that the complaint in this case does not make out a case as far as the accused-Directors are concerned. A perusal of the entire complaint reveals that it is very very silent on this critical aspect. There is no reference to the role of Accused No.2/Accused No.3 in the entire complaint. The complaint uses the word “Accused” at more than one place without stating anything more about the exact role of Accused No.2/Accused No.3 in the affairs of Accused No.1. As there are three accused, the complaint should have spelt out with clarity the roles of each accused. If the three judge pronouncement judgment of the Hon’ble Supreme Court of India in SMS Pharmaceuticals (1 supra) is closely perused it is clear that the Hon’ble Supreme Court of India clearly held that the liability under criminal law would arise only if necessary averments are made in the complaint itself. By virtue of the office that the persons are holding they cannot be made liable unless it is shown that they are personally responsible for conduct of the business and that this conduct of business lead to the offence. In fact, the AIR Act used the word “directly” in charge of the company. In the case on hand the petitioners have not pleaded or mentioned anything about the exact role that is played by the petitioners 2 and 3. Even in the judgments cited by the learned counsel for the 2nd respondent, the Bombay High Court held that necessary averments are not there against the petitioners in that case. The necessity for clear averments will also be clear from the following. Suppose the accused in a case was a “Director (Marketing) in charge of marketing of the products of the accused company and is stationed in place “X”. Can he be prosecuted if the factory situated at place “Y” discharged effluents into a river? It is thus clear that it is the action / inaction of a director responsible for the actual business of the company that lead to the alleged offence that can lead to his prosecution and not merely because of his position or office as a “Director”.

Coming to the submissions made by the learned Public Prosecutor it is true that where an offence has been committed by the company and a person is charged he has a discretion and an option of proving that he was not in charge of the company or that the offence was committed without his knowledge. This argument appears to be interesting at first blush. However, the statutory requirement is that a necessary averment should be made in the complaint of the exact role played by an accused; before cognisance can be taken or process can be issued against him. Thereafter an option is given under the Proviso to the accused to prove his exact role and plead for quashing/acquittal or exoneration. However, merely because he has an option of disproving the allegation it does not mean that even without necessary averments in the complaint etc., cognizance could be taken. Therefore, this Court agrees with the submissions made by the learned senior counsel for the petitioners in view of the interpretation of the Hon’ble Supreme Court of India on two similar provisions in the three Judge decision of SMS Pharmaceuticals (1 supra) that necessary averments must be made in the complaint itself about the role played by the accused.

Even if the sworn statement is taken into account the petitioner has merely stated the entire operations of the factory are being looked after by Accused Nos.2 and 3. He has not stated how they have actually been in-charge of the day to day operations. The submission of the learned senior counsel about the lack of this averment in the private complaint which is obviously drafted with the aid and assistance of a learned counsel is something that cannot be lost sight of. It is apparent that the de facto complainant had the benefit of legal advise, yet the private complaint is absolutely silent about the role of the petitioners 2 and 3. Even in the sworn statement nothing specifically was stated about the role lead by each of the accused, particularly in the release of the effluents.

This Court therefore agrees with the submissions made by the learned senior counsel and overrules the submissions made by the learned counsel for the respondents. Therefore, on this preliminary ground itself this Court holds that the Magistrate committed an error in taking cognizance of the offence. This factor should have been considered by the learned Magistrate. Application of mind to the facts, the language used in the Sections and the law is not visible. If the learned Magistrate perused the complaint carefully and the language of the relevant section in the Acts, he would have noticed that this vital/critical element was missing.

2) Coming to the second aspect, as pointed out by the learned counsel for the petitioner a statutory notice should be issued to the State Board. In the case on hand it is not the petitioner’s case that there is no State Board. The notice was only issued to the Central Pollution Board. In reply to this on 18.03.2015 the Central Pollution Control Board directed the State Board to look into the status of the case. The submission of the learned counsel for the petitioners is that the cognizance can only be taken if a requisite notice is given in the manner prescribed to the appropriate Board or an officer authorised as such. Under the AIR Act, Section 2 (f) defines the Board, which means a Central or the State Board. Section 2 (g) defines the Central Board and Section 2(a) defines the State Board. The methodology prescribed under Section 43 for cognizance of an offence has not been followed. Similarly, under the Water Act also Board, Central Board and State Board are defined. The notice in this case has been issued to the Central Board only and not to the State Board. The procedure under Section 49 has not been followed. Learned senior counsel’s point that when the statute prescribes a particular method in doing a thing it must be done in that manner alone or not at all, cannot be lost sight of. In both these cases, cognizance can only be taken if the requisite notice is given to prescribe Board viz., the State Board. In the case on hand the same is not done. Section 43 (1) of the AIR Act and 49(1)(a) of the Water Act are not complied. The Magistrate, while taking cognizance did not examine this aspect.

3) As has been held repeatedly by the Hon’ble Supreme Court of India, the Magistrate while taking cognizance of an offence, should apply his mind. Application of mind should be visible from a reading of the order. Merely stating that I have perused the complaint and sworn statement is not really enough(Anil Kumar v M.K. Aiyappa (2013) 10 SCC 705). In the case on hand this becomes all the more important for the reason that the primary document that was available before the learned Magistrate is a private complaint filed under Section 200 Cr.P.C. It does not make any averment whatsoever against the accused 2 and 3. Even in the sworn statement, it is merely stated that A2 and A3 are looking after the affairs. The complaint is filed under the provisions of the AIR Act, Water Act and the Environment Protection Act. The learned Magistrate must have examined the provisions of the Act before taking cognizance. Consequently, in the opinion of this Court the learned Magistrate should have been conscious of the fact that unless specific averments are there in the complaint it

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self about the role of the accused, cognizance cannot be taken. The sections themselves make this clear. The law on the subject has been very well settled by December, 2015 when cognizance was taken. In 2005 itself the SMS Pharmaceuticals case (1 supra) was decided by three judges of the Hon’ble Supreme Court of India. It clearly held that the liability arises on account of the conduct, act or omission on the part of the person and not merely on account of the office that he is holding. In the light of this decision of three judges of Hon’ble Supreme Court of India, the Magistrate should have seen as to whether necessary ingredients are present to prosecute the company and or its Directors for the alleged offence. This Court for all the above reasons holds that (1) The company cannot be prosecuted unless a person who is directly responsible is representing the company. Adequate and proper notice was not given as mentioned to take cognizance of the alleged offence. Lastly, the Magistrate did not apply his judicial mind before taking cognizance of the case against all the accused. (2) The 2nd / 3rd petitioners cannot be prosecuted as the necessary averments / ingredients are not spelt out with the requisite clarity. The fact that the quoted judgment of the Hon’ble Supreme Court of India and the language of the applicable sections have not been considered makes it clear that the Magistrate has not really exercised his mind on the subject in so far as all the three petitioners are concerned. In view of all that is discussed above, this Court is of the opinion that this is a fit case in which the Court should exercise its extraordinary power under Section 482 of Cr.P.C. to quash all further proceedings. Continuation of the proceedings would amount to an abuse of the process of Court. Accordingly, the Criminal Petition is allowed and further proceedings in C.C.No.557 of 2015 pending on the file of the learned II Additional Judicial First Class Magistrate, Tenali, are hereby quashed. Miscellaneous petitions, if any, pending shall also stand closed.
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