Minimum Wages Act, 1948: s.22A, s.22C(1) and (2) – Appellant is director of WS Company which had entered into an agreement 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 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 ‘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...”– Subsection (1) to s.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 liable under s.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 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 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, 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 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 subsection (2) to s.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 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 – 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 – 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 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 mandatory – Minimum Wages Act, 1948.
Allowing the appeal, the Court
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 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 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 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 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 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 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.
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 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 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]
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 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 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)
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.
Municipal Corporation of Delhi v. Ram Kishan Rohtagi 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 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 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 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
(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)
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 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.
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 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 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 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. [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 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] 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 case to case, but adapted to facts of an individual case. The passage from Hindustan Steel Ltd. 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 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 case. Therefore, it is necessary that the discretion conferred on the 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 unintentional defaulter who is in essence law-abiding. [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 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 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 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 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]
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 process that carries with it a sanctity and a promise of legal propriety. [Para 32][539-H]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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