Madras High Court
Lakshmi G. Menon vs Union Of India on 18 November, 1997
Equivalent citations: 1999(105)ELT279(MAD)
ORDER
1. This revision arises against the order of the Additional Chief Metropolitan Magistrate (E.O. II), dated 6-5-1996 im M.P. No. 46 of 1996 in E.O.C.C. No. 84 of 1995.
2. E.O.C.C. No. 84 of 1395 is a complaint filed by the respondent herein as against Hindustan Teleprinters Limited, Madras-32 (first accused) and Mrs. Lakshmi G. Menon, the Chairman and Managing Director of M/s. HTL. Limited (second accused).
3. The complaint was filed under various provisions of the Central Excises and Salt Act, 1944 on the following allegations :-
It was alleged that based on the intelligence gathered the first accused was evading payment of duty by suppressing the real value of the goods manufactured and cleared from the factory and was receiving huge amounts from their customers subsequent to the sale of goods, in addition to the amount shown in the invoices, that during the visit of the Central Excise officers, it was found that the first accused had raised debit notes for Rs. 6,21,61,927/- towards reimbursement of interest on loan portion of the capital employed and wage revision arrears etc., that the first accused failed to include the reimbursement charges in the assessable value and thereby failed to pay duty on the same and that they had suppressed the facts of raising debit notes, and hence a show cause notice dated 19-6-1991 invoking the proviso to sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944 was issued to the first accused as well as the second accused who is the Chairman and Managing Director of the first accused company. The allegation against the second accused was that she was responsible for the Management of the first accused company in a proper manner and that she had failed to observe the proper payment of Central Excise duty by the first accused company and was grossly negligent in this regard to stop various contraventions and violations of the Central Excise Rules and that there was continued evading of payment of duty deserving launching of the prosecution. Under such circumstances the accused were charged under Section 9(1)(b) and 9(1)(bb) of the Central Excises and Salt Act, 1944 read with the relevant rules framed thereunder.
4. The second accused/revision petitioner herein filed preliminary objections in M.P. No. 46 of 1996 praying to drop all the further proceedings against her and to discharge her under Section 242(2) Cr. P.C. The main objection raised by her was that no sanction had been obtained for prosecuting her, she being a public servant within meaning of Section 21 I.P.C. and having been appointed by the President of India and the Department of Telecommunication functioning under the Ministry of Communication. She contended that she was removable from her office only by the President of India representing the Central Government. She further contended that there was no requisite foundation in the complaint and no act has been alleged against the petitioner fixing responsibility on the petitioner. She also contended that the Hindustan Teleprinters Limited was fully owned by the Government of India, that she had not derived any pecuniary advantage as the result of the violations as alleged in the complaint against the first accused. The learned Magistrate after hearing both sides rejected the prayer of the petitioner and held that the petitioner was not entitled to be discharged. It is as against the said order of the learned Magistrate the above revision has been filed.
5. Mr. A. Raghunathan, learned Counsel appearing for the petitioner has mainly raised four points before this Court which are as follows :-
(i) The Supreme Court in its order reported in 1994 (70) E.L.T. 45 (Oil and Natural Gas Commission v. Collector of Central Excise) has directed that the disputes between Government Ministries and Public Sector Undertakings must be subject to in-house conciliation and therefore, resort to Criminal Court was contrary to the directions of the Supreme Court.
(ii) The second accused/petitioner while discharging the duties as the Chairman of the first accused, was the employee in connection with the affairs of the Union of the Central Government and hence a prior sanction ought to have been obtained before the Court took cognizance of the offence and the prosecution, not having been obtained sanction under Section 197 Cr. P.C., the proceedings have to be quashed against her.
(iii) It is only the company which can be held liable for the offences committed by the company and not its employees.
(iv) The nature of the offence and allegations made against the petitioner would necessarily require the grant of sanction.
6. Point No. (i) : With reference to the contention raised by the petitioner in the context of the directions of the Supreme Court, the Counsel refers to certain directions issued by the Supreme Court in Civil Appeal Nos. 2058-59 of 1988. The directions by the Supreme Court dated 11-10-1991 are as follows :-
"We direct that the Government of India shall set up a Committee consisting representatives from the Ministry of Industry, the Bureau of Public Enterprises and the Ministry of Law, to monitor disputes between Ministry and Ministry of Government of India, Ministry and Public Sector Undertaking of the Government of India and Public Sector Undertakings in between themselves, to ensure that no litigation comes to Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation. Government may included a representative of the Ministry concerned in a specific case and one from the Ministry of Finance in the Committee. Senior Officers only should be nominated so that the Committee would function with status, control and discipline."
After the giving of the said directions, further clarifications were also sought for in I.A. Nos. 3 and 4 of 1992 and the order of the Supreme Court dated 7-1-1994 is reported in 1994 (70) E.L.T. 45 (Oil and Natural Gas Commission v. Collector of Central Excise). In the said order the Supreme Court has issued certain clarifications to the effect that the High Power Committee contemplated in the earlier order was only to ensure that no litigation came to the Court without the parties having had an opportunity of conciliation before in-house Committee. It was also clarified that the others would apply even with reference to the pending matters before any Court or Tribunal which should also be the subject matter of the deliberations of the High Power Committee. The contention of the learned Counsel for the petitioner is that the complaint against her being an outcome of a dispute between the Department of Central Excise and the first accused, the directions of the Supreme Court ought to have been complied with. A perusal of the directions of the Supreme Court would make it abundantly clear that the directions could be applied only to civil claims between the Union Government and the various public bodies and disputes arising on policy matters between the said two bodies. In the directions contained in the order dated 11-10-1991, a reference is made to the instructions of the Cabinet Secretariat to all the Departments of the Government of India as well as the Public Sector Undertakings to the effect that all disputes should be resolved amicably by mutual conciliation or through the good offices of the empowered agencies of the Government or through the arbitration and recourse to the litigation should be eliminated. Consideration of the circumstances under which the order of the Supreme Court came to be passed and a perusal of the various directions of the Supreme Court as well as the subsequent clarification issued by the Supreme Court would make it abundantly clear that the disputes contemplated therein would only relate to civil disputes and monetary claims as between the Government and the public bodies as well as policy matters and that by no stretch of imagination can the orders of the Supreme Court have any relevance to the criminal complaints which are filed by virtue of specific penal provisions as in the present case. As stated earlier a perusal of the complaint will show that the accused are sought to be proceeded under the penal provisions of the Central Excises and Salt Act, 1944. The allegation against the accused relate to the alleged suppression of accounts and facts resulting in loss of Excise Duty and gross negligence on the part of the second accused as well as the continued evasion of payment of duty which require launching of prosecution. I am inclined to hold that the context in which the directions of the Supreme Court as mentioned above have been made, has nothing to do with the nature of the proceedings now launched against the petitioner herein and hence the observations of the Supreme Court cannot stand in the way of the prosecution being continued.
7. Point No. (ii) In support of her contention that the sanction would be necessary the petitioner would contend that she is a regular employee of the Central Government and her services have been placed at the disposal of the first accused and it was only the President of India who was the disciplinary authority and as such sanction under Section 197 (Cr. P.C. is mandatory. Learned Counsel refers to the definition of public servant as contained in Clause (12) of Section 21 I.P.C. which is as follows :-
"21. "Public Servant" The words "public servant" denote a person falling under any of the description hereinafter the following namely :-
First - ...
Twelfth. - Every person -
(a) in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government;
(b) in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government Company as defined in Section 617 of the Companies Act, 1956.
Illustrations A Municipal Commissioner is a public servant.
Explanation 1. - Person falling under any of the above descriptions are public servants, whether appointed by the Government or not.
Explanation 2. - Wherever the words "public servant" occur, they shall be understood of every person who is in actual possession of the situation of a public servant, whatever legal defect there may be in his right to hold that situation.
Explanation 3. - The word "election" denotes an election for the purpose of selecting members of any legislative, municipal or other public authority, of whatever character, the method of selection to which is by, or under, any law prescribed as by election."
In order to substantiate that she was employed as in the service of a Government Company, learned Counsel also refers to the definition of "Government Company" as occurring in Section 617 of the Indian Companies Act, 1956. "Government Company is defined as follows :-
"Definition of "Government Company" 617. For the purposes of (this Act) Government Company means any company in which not less than fifty-one percent of the (paid-up share capital) is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments (and includes a company which is a subsidiary of a Government company as thus defined).
Learned Counsel for the petitioner also refers to the definition of "Central Government" as occurring in Section 3(8) of the General Clauses Act, 1897. He would also further contend that the petitioner while discharging the duties of the office of the Chairman and Managing Director of the first accused, was employed in connection with the affairs of the Union Government and hence sanction under Section 197 Cr. P.C. was mandatory.
8. Learned Counsel refers to a decision of the Division Bench of the Andhra Pradesh High Court reported in 1963 M.L.J. (Crl.) 298 (Chief Executive Officer, Andhra Pradesh Road Transport Corporation, Hyderabad). In the said case, the Chief Executive Officer of the Andhra Pradesh State Road Corporation question his conviction for an offence under Section 123(1) of the Motor Vehicles Act for having allowed a bus belonging to the Corporation to run without a route permit. The question arose whether a sanction under Section 197 Cr. P.C. would be necessary and the Division Bench of the Andhra Pradesh High Court held that on the basis of the allegations against the accused, obtaining of a permit was an official act and that therefore, the omission to obtain the same was a derelication of duty referrable to the official functions of the accused and therefore, prior sanction of the State Government was necessary. However, in the said judgment, the question whether an employee of a Road Transport Corporation was entitled to seek the protection under Section 197 Cr. P.C. was not gone into.
9. Learned Counsel has also referred to the judgment of the Andhra Pradesh High Court reported in 1978 MLJ 377 (Dr. A. S. Rao v. C. N. N. Kutty). In the said case, a learned Single Judge of the Andhra Pradesh High Court has held that the Managing Director of Electronic Corporation of India Limited, was definitedly discharging the duties of a public servant in the discharge of the affairs of the Union Government.
10. Learned Counsel places strong reliance on the 12th Clause of Section 21 I.P.C. and would contend that an employee of the Government Company was also a public servant and hence in the absence of obtaining any sanction to file a complaint against the petitioner, the same ought to be dismissed .
11. Mr. R. Rajamanickam, Special Public Prosecutor appearing for the respondent would contend that the first respondent was only a private company and the second accused employed as its Managing Director was not a public servant, nor was she discharging the duties referable to the affairs of the State. He has referred to a decision of a Division Bench of Madhya Pradesh High court reported in 1973 Crl. Law Journal, 1671 (Regional Inspector, Mines v. K. K. Sengupta). In the said judgment the accused an Under Secretary, Government of India, was at the relevant point of time, the Senior Geologist in the Bhilai Steel Project. It was held that it may be true that he was a public servant but with reference to the commission of offence in the capacity of an employee of the Bhilai Steel Project, there was no material on record to show that he was working in connection with the affairs of the union. It was further held that even though Bhilai Steel Plant may be a Government Company, it is a separate legal entity from the Central Government and therefore, no sanction was necessary.
12. Reference was also made to a decision of the Patna High Court reported in 1967 Crl. L.J. 1684 (State v. B. L. Ohri). That case related to prosecution of employees of the National Coal Development Corporation and it was held that the sanction of the Central Government was necessary only when the person accused of an offence, at the time of the commission of the offence was employed in connection with the affairs of the union and as an employee of the National Coal Development Corporation, the accused concerned was not discharging the affairs of the union and hence no sanction by the Central Government was necessary.
13. Learned Counsel for the respondent also relied on a decision of the Supreme Court reported in 1981 Crl. L.J. 871 (S. S. Dhanoa v. Delhi Municipality). That was a case in which a civil servant working on deputation with a cooperative society (a member of the Indian Administrative Service), was prosecuted under Section 7 read with Section 16 of the Prevention of Food Adulteration Act, 1954. While considering the effect of Clause (12) of Section 21 I.P.C., the Supreme Court held that during his period of deputation he was not an officer in the service or pay of the Government, nor was he in the service of a local authority. In construing the words "Corporation" or a "Company" registered under the Companies Act, as occurring in Clause (12) of Section 21 of I.P.C., the Supreme Court held as follows in paragraph Nos. 9 and 10 of the judgment :-
"9. Corporation, in its widest sense, may mean any association of individuals entitled to act as an individual. But that certainly is not the sense in which it is used here. Corporation established by or under an Act of Legislature can only mean a body corporate which owes its existence, and not merely its corporate status, to the Act, for example, a Municipality, Zilla Parishad or Gram Panchayat owes its existence and status to an Act of Legislature. On the other hand, an association of persons constituting themselves into a company under the Companies Act or a society under the Societies Registration Act owes its existence not to the Act of Legislature but to acts of parties though, it may owe its status as a body corporate to an Act of Legislature.
10. There is a distinction between a corporation established by or under an Act and a body incorporated under an Act. The distinction was brought out by this Court in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi - . It was observed :
"A company incorporated under the Companies Act is not created by the Companies Act but comes into existence in accordance with the provisions of the Act. There is thus a well marked distinction between a body created by a statute and a body which, after coming into exitence, is governed in accordance with the provisions of a statue. In Sabhajit Tewary v. Union of India the question a rose whether the Council of Scientific and Industrial Research which was a society registered under the Societies Registration Act, was a statutory body. It was argued that because the Council of Scientific and Industrial Research had Government nominees as the President of the body and derived guidance and financial aid from the Government, it was a statutory body. Repelling the contention, the Court observed : (at p. 1330 of A.I.R.) :
"The society does not have a statutory character like the Oil and Natural Gas Commission, or the Life Insurance Corporation or Industrial Finance Corporation. It is a society incorporated in accordance with the provisions of the Societies Registration Act. The fact that the Prime Minister is the President or that the Government appoints nominees to the governing body or that the Government may terminate the membership will not establish anything more than the fact that the Government takes special care that the promotion, guidance and co-operation of Scientific and Industrial Research, the institution and financing of specific researches, establishment or development and assistance to special institutions or departments of the existing institutions for scientific study of problems affecting particular industry in a trade, the utilisation of the result of the researches conducted under the auspices of the Council towards the development of industries in the country are carried out in a responsible manner."
Whatever has been said with regard to the Council of Scientific and Industrial Research, which was a society registered under the Societies Registration Act, equally applies to the Co-operative Stores Limited, which is a society registered under the Bombay Co-operative Societies Act, 1925. It is not a statutory body because it is not created by a statute. It is a body created by an act of a group of individuals in accordance with the provisions of a statute."
14. Therefore, according to the Supreme Court a Company, incorporated under the Companies Act, was not created under the Companies Act, but came into existence in accordance with the provisions of the Act and that there was a well marked distinction between a body created by a statute and a body which was governed in accordance with the provision of a statute. The Supreme Court has also taken note of the fact that the petitioner in the said case, while being employed as an officer of the society was not discharging any affairs of the Union within the meaning of Section 197 Cr. P.C.
15. It is true that the contention of the learned Special Public Prosecutor that the first accused was a private company may not be accurate. The first accused definitely answers the definition of "Government Company" as defined under Section 617 of the Companies Act, 1956. A perusal of the Memorandum of Association of the Company shows that the entire assets are held by the Union Government. But the question is whether the second accused, while discharging her service as Managing Director could be said to be a public servant or connected with the affairs of the State. One of the tests laid down by the Supreme Court in the judgment reported in 1981 Crl. Law Journal 871 (cited supra) is to find out as to whether the accused was receiving pay from the Government or from the Corporation. In this case, a perusal of the order of appointment shows that the second accused was receiving her pay as well as all other incidental allowances only from the first accused. A perusal of the order dated 15-3-1990 issued by the Government of India, Ministry of Telecommunications, placing the services of the second accused at the disposal of the first accused, shows that she was appointed on permanent absorption basis. Apart from receiving her salary and allowances from the first accused, Condition No. 11 also shows that the Conduct, Discipline and Appeal Rules framed by the Hindustan Teleprinters Limited would also apply to the second accused with the only modification that the disciplinary authority in her case would be the President of India. It is further stated that with reference to the terms and conditions not covered by the order of appointment she will be governed by the Rules of the Hindustan Teleprinters.
16. Therefore, in the said circumstances I hold, as a Managing Director of the Hindustan Teleprinters Limited, the second accused was not discharging her duties as public servant nor could it be stated that she was discharging the affairs of the State while functioning as Chairman and Managing Director of the first accused company. It is true that the definition of the public servant as contained in Clause (12) of Section 21 I.P.C would appear to include every person in the service of a company as defined in Section 617 of the Companies Act. But the interpretation of Section 21(12) I.P.C. by the Supreme Court in the judgment reported in 1981 Cr. Law Journal 871 cited above is clear to the effect that it is only in respect of Corporations or Organisations which are creatures of any statute alone could fall under Section 21(12) I.P.C. Even though in the said case, the Supreme Court was only concerned with an employee of a Co-operative Society, the Supreme Court has gone further to examine the implications of Section 21(12) I.P.C. and has categorically held that a Society or a Company not having a statutory character will not fall under Clause (12) of Section 21 I.P.C. The Supreme Court has specifically held that though the term "Corporation" was wide enough to include private corporations also, the expression must be given a narrow legal connotation in the context of Section 21(12) I.P.C. The judgments rendered by the Supreme Court are not only decisional between the parties, but also declaratory for the entire nation as provided under Article 141 of the Constitution of India, and therefore in view of the said judgment, the plea of the petitioner herein has to fail.
17. Point No. (iii) : In the context of the contention of the petitioner that it is only the company which could be liable for the offences committed and not its employees, the learned Counsel for the petitioner has relied on a judgment of the Karnataka High Court reported in 1995 (75) E.L.T. 456 [Tonesta Electronics v. Asstt. Collector of Excise, Bangalore]. It is true that in paragraph No. 8 of the judgment, it is stated that where the provisions of the Act are violated by a company, it is the company which actually commits the offence and a person cannot be made vicariously liable for the offence committed by another. But the same judgment provides answer to the points raised by the petitioner namely, that a statute can specifically make another person vicariously liable and that Section 9AA of Central Excise Act, 1944 provides for vicarious liability of certain persons for the offence committed by the company. In Municipal Corporation of Delhi v. Ramkishan Rohatgi and Ors. [1983 (1) SSC 1], the Supreme Court has held that a manager of the company who was prosecuted under the provisions of the Prevention of Food Adulteration Act was vicariously liable for the offence. In another judgment of the Supreme Court reported in Municipal Corporation of Delhi v. Purushothamdass Jhunjunwala & Ors. , the Supreme Court held that the Managing Director and Directors of the Mills in question were in charge of and responsible for the conduct of its business at the time of commission of offence and that they were liable to be prosecuted. It was also held that the complaint was not vague and proceedings against them could not be quashed. It was also contended that the allegations against the petitioner herein was very vague and did not warrant any penal action against the petitioner herein. A gist of the complaint has already been stated above and it is seen from the complaint that there are specific allegations against the second accused to the effect that she had failed to observe the rules and regulations and was grossly negligent in effecting proper payment of excise duty by the first accused company and that company was persistent in violating the Central Excise Rules. Therefore, there are prima facie allegations against the second accused to sustain the complaint.
18. Point No. (iv) : Number of rulings were referred to by the learned Counsel for the petitioner in support of his contention that the complaint against the petitioner was referrable to her acts in the discharge of her official duties and while acting or purporting to act in the discharge of her duties and that sanction would be necessary even in case of dereliction of duties as well. In support of his contention, learned Counsel has relied on the following judgments :-
(i) (Captain Shankarrao v. Burjor D. Engineer)
(ii) (N. K. Aher v. H. G. Vartak)
(iii) (Shreekantiah Ramayya Munipalli v. State of Bombay)
(iv) (Amrik Singh v. State of Pepsu)
(v) (Matajog Dobey v. H. C. Bhari)
(vi) (Somchand Sanghvi v. Bibhuti Bhusan Chakravarty) In all the above mentioned judgments, it is true that the Courts have held that for all offences arising out of discharge of the functions of a public servant, sanction would be necessary if the act was purported to be done in the exercise of a public duty as well as dereliction of duty and that the gravity of the offence was irrelevant. But as I have held that no sanction would be necessary under Section 197 Cr. P.C. as against the petitioner herein in view of the fact that she cannot be said to be a public servant within the scope of Section 21(12) I.P.C. discharging any affairs of the State within the meaning of Section 197 Cr. P.C., there is no necessity to examine point No. 4 as raised by the petitioner.
19. In the result, I hold that there are no merits in the points raised by the petitioner and the revision is therefore, dismissed. Consequently, connected Crl. M.P. is also dismissed.