Karnataka High Court
Karnataka Minerals And Mfg. Co. Ltd. vs Asstt. C.C. And C.E. on 3 March, 1994
Equivalent citations: 2005(184)ELT356(KAR)
ORDER B. Jagannatha Hegde, J.
1. This is a petition filed under Section 482 Cr. P.C. praying to quash the proceedings in C.C. No. 1318/1989 on the file of the J.M.F.C., Hosadurga, in which these three petitioners have been arraigned as A-1 to A-3.
2. The learned Counsel for the petitioners contends that the first petitioner is a company and, therefore, process for having committed an offence punishable under Section 9(1)(i) of the Central Excise & Salt Act (for short 'the Act') could not have been issued, relying on a decision in the case of Vijaya Commercial Credit Ltd. v. VI Income Tax Officer (I.L.R. 1987 (3) Karnataka 2317). In that case, a limited company was accused of the commission of an offence under Section 278B of the Income-Tax Act. It was held, relying on a decision in the case of Kusum v. Sinha (1980 126 ITR 804) that when the Parliament has prescribed a punishment of compulsory imprisonment for an offence, a company or a juristic person cannot possibly by sent to prison.
3. Section 9(1)(i) of the Act reads thus :
"9. Offences and Penalties - (1) whoever commits any of the following offences, namely :
(a) contravenes any of the provisions of a notification issued under Section 6 or of Section 8, or of a rule made under Clause (iii) of Sub-section (2) of Section 37;
(b) evades the payment of any duty payable under this Act;
(bb) removes any excisable goods in contravention of any of the provisions of this Act or any rule made thereunder or in any way concerns himself with such removal;
(bbb) acquires possession of, or in any way concerns himself in transporting, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under this Act or any rule made thereunder;
(c) fails to supply any information which he is required by rules made under this Act to supply or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information;
(d) attempts to commit, or abets the commission of any of the offences mentioned in Clauses (a) and (b) of this Section;
shall be punishable, -
(i) in the case of an offence relating to any excisable goods, the duty leviable thereon under this Act exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such imprisonment shall not be for a term of less than six months;"
4. Shri S.S. Naganand, learned Counsel for the petitioners, has placed before me an unreported judgment of this Court dated 11-11-1991 passed in Criminal Petition No. 1295/1989, wherein it is held that the Magistrate was not justified in proceeding against an accused when the offence alleged against a company is punishable with compulsory imprisonment. I am, therefore, of the view that the Magistrate could not have issued process as against A-1, the first petitioner herein.
5. It is also contended by the learned Counsel for the petitioner that there are no specific allegations against petitioners-2 and 3 (A-2 and A-3) connecting them with the offence alleged. Section 9AA(1) of the Act makes certain persons vicariously liable for the offences committed by the companies. The said provision reads thus :
"9-AA. Offences by Companies - (1) Where an offence under this Act has been 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 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:"
6. In the case of Smt. Nagawwa v. Veemnna Shivalingappa Konjalgi (AIR 1976 S.C. 1947), it was held that where the allegations made in the complaint or the statements of the witnesses recorded, in support of the same, taken at their face value, make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused, the Magistrate cannot issue process.
7. In the instant case, the grievance of petitioners 2 and 3 is that there is no allegation in the complaint that they were in charge of the company or were responsible to the company for the conduct of the business of the company at the time of the commission of the offence. No doubt, in the complaint, it is stated that the accused petitioners have contravened certain provisions of the Act and the rules framed thereunder. But, nowhere the part played by petitioners 2 and 3 which has resulted in the commission of the offence or offences has been stated. In other words, the complaint does not disclose the essential ingredients of an offence which is alleged against petitioners 2 and 3. If petitioners 2 and 3 were not in charge of the affairs of the company or if they were not responsible for the conduct of the business of the company at the time of the commission of the offence, they would not be guilty of an offence or offences stated in the complaint.
8. In the case of Municipal Corporation of Delhi v. Ram Kishan Rohtagi (AIR 1983 S.C. 67), it has been held that when the allegations set out in the complaint do not constitute any offence, the High Court is competent to exercise its inherent jurisdiction under Section 482 Cr. P.C. to quash the order passed by the Magistrate taking cognizance of the offence. Similar view was taken by this Court in the case of Shrenikraj v. Labour Officer (I.L.R. 1986 Karnataka 2623). In that case, the partners of a firm were arraigned as accused. The complaint did not disclose that the accused were in charge of and were responsible to the firm for the conduct of the business of the firm at the time of the commission of the offence. This Court held that taking cognizance by the Magistrate was bad in law. Similar view was also taken in the case of Kishorilal v. State of Karnataka (I.L.R. 1990 Karnataka 3876). It was a case under the Essential Commodities Act, 1955 and a criminal case was launched against a partner. In that context, this Court held that a partner cannot be proceeded against simply on the ground that he is a partner of the company. The prosecution must show that the partner of the firm was in charge of and responsible to the firm for the conduct of the business of the firm. These allegations are not found in the complaint filed in the instant case. This answers the objections raised by the Central Government Standing Counsel that the fact that A-2 and A-3 are the Managing Director and the Director of the Company is sufficient to proceed against them.
9. Even assuming that petitioners 2 and 3 (A-2 and A-3) are Managing Director and Director of the Company of petitioner-1-company, it cannot be presumed that they were in charge of the affairs of the company and that they were responsible for the conduct of the business of the company. I am, therefore, of the opinion that necessary allegations are not forthcoming in the complaint to proceed against petitioners 2 and 3.
10. Hence, the complaint and the subsequent proceedings initiated in C.C. No. 1318/1989 on the file of the J.M.P.C., Hosadurga, are quashed. However, it is open to the respondent to initiate fresh action against petitioners 2 and 3 (A-1 and A-3) in accordance with law.