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CASE NO.: Appeal (crl.)  1377 of 1999

PETITIONER: MADHUMILAN SYNTEX LTD. & ORS

RESPONDENT: UNION OF INDIA & ANR

DATE OF JUDGMENT: 23/03/2007

BENCH: C.K. THAKKER & P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T

C.K. THAKKER, J.

       The present appeal is filed by the appellants against  an order passed by the High Court of Madhya Pradesh  (Indore Bench) on March 12, 1999 rejecting in limine  Miscellaneous Criminal Petition No. 4730 of 1998.  The facts giving rise to the present appeal are that  appellant No.1 Madhumilan Syntex Ltd. is a Public  Limited Company registered under the Companies Act,  1956. Appellant Nos. 2 to 4 are its Directors. Appellant- Company deals in the production and business of yarn at  Madhumilan Cinema Building, Ahata. The tax  assessment of the Company is done by the Deputy  Commissioner of Income Tax (Tax Assessment), Special  Range No.1, Indore. It was the case of the respondents  that for the Assessment Year 1989-90, Returns were  submitted by the Company on December 29, 1989. On  verification of the Returns, it was found that though an  amount of Rs.1,29,348/- was deducted by the Company  as Tax Deducted at Source (’TDS’ for short), it was not  credited by the Company in the account of the Central  Government as required by Sections 194C and 200 of the  Income Tax Act, 1961 (hereinafter referred to as ’the Act’)  read with Rule 30 of the Income Tax Rules, 1962  (hereinafter referred to as "the Rules"). It is, however, not  in dispute that the amount of TDS was credited by the  Company with interest later on.  But there was delay on  the part of the Company in depositing such amount.  Income Tax Officer (TDS), Bhopal, therefore, issued a  notice to the appellants on March 11, 1999 alleging  therein that there was failure to credit TDS to the Central  Government as required by Section 276B of the Act by  them.  The appellants had thus committed an offence  punishable under Section 278B of the Act. A show-cause  notice was, therefore, issued against the appellant- Company as also against appellant Nos. 2 to 4 (and one  Smt. Chandraprabha Modi) being principal officers of the  appellant-Company. The Income Tax Officer, TDS,  Bhopal asked the appellants to show-cause as to why  proceedings should not be initiated against them.  The  appellants were asked to submit their reply on or before  March 18, 1991 failing which it would be presumed that  they had nothing to say in the matter and action would  be taken accordingly. It was also stated in the notice that  the appellant Nos. 2 to 4 (and Smt. Chandraprabha Modi)  were to be considered as ’principal officer’ within the  meaning of Section 2(35) of the Act.

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       The appellants filed a reply to the show-cause notice  raising various objections. It was, inter alia, contended  that they had not committed any offence nor violated  provisions of the Act. It was stated that it was not a case  of ’no payment’ of TDS. The amount of tax along with  interest had been paid and statutory provisions had been  complied with. There was some delay in receiving loan  from Industrial Development Bank of India (IDBI) due to  which TDS could not be paid in time. Moreover, because  of construction of one unit by the Company, there was  shortage of liquid funds and hence the payment could  not be made. There was thus a ’reasonable cause’ for  non-payment of amount within the prescribed period but  the payment had been made with interest and there was  no loss to Revenue. It was, therefore, submitted that no  case had been made out for taking action against the  appellants and notice was required to be revoked.  The Commissioner of Income Tax, Bhopal- respondent No. 2 herein, vide his order dated February 4,  1992 granted sanction to prosecute appellants under  Section 279 of the Act observing therein that the  assessee had committed default under Section 194C of  the Act in paying TDS to the credit of the Central  Government. It was also observed that the reason put  forward by the Company was not correct. He, therefore,  granted sanction to prosecute the appellant-Company as  well as the Directors of the Company. In view of sanction  to prosecute, accorded by the Commissioner, a complaint  was filed against the appellants on February 26, 1992 in  the Court of the Additional Chief Judicial Magistrate  (Economic Crime), Indore.  The appellants filed applications under Section 245  of the Code of Criminal Procedure, 1973 (hereinafter  referred to as ’the Code’) for discharge from the case  contending that they had not committed any offence and  the provisions of the Act had no application to the case. It  was alleged that proceedings were initiated mala fide. In  several other similar cases, no prosecution was ordered  and the action was arbitrary as also discriminatory.   Moreover, there was ’reasonable cause’ for delay in  making payment and the case was covered by Section  278AA of the Act.  The Directors further stated that they  could not be treated as ’principal officers’ under Section  2(35) of the Act and it was not shown that they were ’in  charge’ of and were ’responsible for’ the conduct of  business of the Company. No material was placed by the  complainant as to how the Directors participated in the  conduct of business of the Company and for that reason  also, they should be discharged.  The trial Court, however, rejected the prayer of the  appellants. According to the Court, the contention raised  by the appellants required evidence as to whether a  particular accused was or was not a ’principal officer’ of  the Company and it can be considered only at the trial  and an appropriate decision could be taken. According to  the Court over and above the Company, other accused  persons were Directors and as they were treated as  principal officers, the prayer for discharge could not be  granted. The applications were accordingly rejected.  The appellants being aggrieved by the above order of  the trial Court, filed Revision Petition being Criminal  Revision No. 358 of 1994 in the Court of the Sessions  Judge, Indore under Section 397 read with Section 399  of the Code. The First Additional Sessions Judge, Indore  (MP), vide his order dated July 10, 1998 rejected the

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revision filed by the appellants-applicants and confirmed  the order passed by the trial Court.  The appellants moved the High Court of M.P.  (Indore Bench), by filing Miscellaneous Criminal Petition  under Section 482 of the Code on December 14, 1998. It  appears that the petition was dismissed for default of  appearance on February 2, 1999. An application for  restoration was filed on March 12, 1999 which was  allowed and the matter was restored to file but was heard  on the same day, and by the impugned order, it was  summarily rejected. The said order has been challenged  by the appellants in this Court.  On July 26, 1999, notice was issued and further  proceedings were stayed. Leave was granted on December  15, 1999 and stay was ordered to continue. The matter  has now been placed for final hearing before us.         We have heard learned counsel for the parties.         Mr. Ranjit Kumar, Senior Advocate appearing for  the appellants raised several contentions. He submitted  that the orders passed by the Courts below as well as by  the High Court deserve to be set aside. According to him,  the present case is neither a case of ’non deduction’ of  tax nor of ’non payment’ of tax. The tax required to be  deducted at source had been deducted by the Company  and the said amount had also been credited in the  account of Central Government. Only thing was that  there was some delay on the part of the Company in  crediting the amount. In some cases, there was delay of  few days only (two days).  As such, there was no reason  to prosecute the Company and/or its Directors. It also  cannot fall within the mischief of the Act so as to give rise  to criminal liability. It was also submitted that Company  is not a natural person but merely a legal or juristic  person and hence it cannot be punished. If it is so,  obviously, for such act, Directors or Officers of the  Company also cannot be punished. The action of the  respondents, therefore, is illegal and not warranted by  law. The counsel also submitted that appellant Nos. 2 to  4 cannot be said to be ’principal officers’ under the Act  and no prosecution can be initiated against them. It was  urged that to be a ’principal officer’ with reference to a  Company, it must be shown that such person is  "connected with the management or administration of the  Company" and who has been served with a notice that he  would be treated as principal officer of the Company. No  such notice had been issued by the respondents. Notice  which had been issued in the instant case is to show  cause as to why prosecution should not be launched  against them as they were to be treated as principal  officers under the Act. Such notice cannot be said to be a  notice to treat a particular officer as ’principal officer’  under the Act. It was also submitted that criminal  prosecution is a drastic step and should not be taken  lightly particularly when there are several provisions in  the Act providing for payment of interest, penalty, etc.  Recourse to prosecution should be had as a last resort.  According to the appellants, there was non-application of  mind on the part of the second respondent- Commissioner of Income Tax in granting sanction under  Section 279 of the Act. The second respondent has not  considered the relevant facts, reasons and grounds relied  upon by the appellants as to why the amount could not  be deposited. The circumstances pleaded by the  appellants in their reply to the show cause notice clearly  disclosed that there was ’reasonable cause’ for delay in

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depositing the amount and it was not a fit case for  prosecution of appellants. The counsel also urged that in any case, appellant  No.4 is a lady who cannot be said to be in charge of  business or management and at least to that extent, the  order to prosecute her is not sustainable. As to the order passed by the High Court, it was  submitted that on two grounds the order deserves to be  set aside. Firstly, the matter was dismissed for default  and when application for restoration was filed, the High  Court allowed the application, restored the matter but  insisted the appellants to proceed with the matter on  merits on the same day which could not have been done.  Secondly, the petition was dismissed summarily by a  cryptic order without recording reasons. The matter  raised important questions of law which could not have  been dismissed in such a manner. Finally, it was submitted that the so called default  relates to 1989-90, and almost two decades have passed.  Moreover, the Revenue has not suffered. In the facts and  circumstances, therefore, by exercising plenary powers  under Article 136 read with Article 142 of the  Constitution, the proceedings may be ordered to be  dropped even if they could have been taken. The  appellants had suffered a lot and this Court may now  close the proceedings.

Mr. K. Radha Krishnan, Senior Advocate for the  respondents, on the other hand, supported the order  passed by the Courts below. According to him, when the  tax was deducted at source and was not paid within the  prescribed period and sanction to prosecute the  appellants was granted by the second respondent, the  action of filing a criminal complaint cannot be said to be  illegal, unlawful or otherwise objectionable. Other points  as to ’reasonable cause’, circumstances in which the  payment could not be made within the statutory period  and other defences can be considered at the time of trial  and not now. At the stage of framing of charge, the Court  only considers whether prima facie case has been made  out. Once there is material to show that the amount was  not paid in the manner provided by law, proceedings  cannot be quashed. Having given anxious and thoughtful consideration  to the rival contentions of the parties, in our opinion, it  cannot be said that by ordering charges to be framed,  any illegality has been committed by the trial Court.  As far as an objection against the order passed by  the High Court is concerned, we are not impressed by the  argument of the learned counsel. It is true that the  petition was dismissed for default on 2nd February, 1999.  It is also true that an application for restoration of the  matter was made by the appellants on March 12, 1999  and the matter was restored to file asking the advocate  for the applicants to argue the case. But, it cannot be  contended that the Court could not have insisted on the  appellants-applicants and/or their counsel to proceed to  conduct the case on merits. We have come across several  cases in High Courts as well as in this Court where a  case is dismissed for default to secure the presence of the  learned counsel. Normally, when the matter is called out  and the advocate is absent, a Court may adjourn the  matter to next date of hearing. But it may also dismiss  the matter for default so as to secure appearance of the  advocate.  He may apply for restoration of the case either

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by written application or by oral prayer and the Court  may restore it asking him to argue the case so that an  appropriate order may be passed on merits. Appearance  of a party or his advocate and prayer for recalling an  order of dismissal for default may be a good ground for  restoring the matter but it cannot be said to be a good  ground for restoration of the matter for hearing in future.  In other words, a matter may be restored for hearing and  not for adjournment. We are, therefore, unable to uphold  the argument of the learned counsel that the Court could  not have insisted on the advocate to argue the matter  after the order of dismissal for default was recalled and  restoration was ordered. Similarly, we do not see force in the contention that  the petition could not have been dismissed in limine  without recording reasons. It was not a substantive  appeal which was heard by a Court. An application for  discharge of accused was rejected by the trial Court.  Revision petition was also dismissed by the Sessions  Court and the said order was challenged before the High  Court under Section 482 of the Code (Inherent power of  High Court). If the High Court did not think it fit to  exercise inherent powers in the light of the controversy  raised, question involved and the stage at which the  applicants had approached the Court, it cannot be said  that the Court must pass detailed speaking order or  record reasons in support of such order. That contention  also, therefore, has no force. Before adverting to the controversy raised in the  appeal, it is necessary to consider the relevant provisions  of the Act. Chapter XVII deals with "Collection and  Recovery of Tax" and ’Deduction at Source’ in certain  cases. It requires certain persons to deduct tax at source  and also consequences of failure to deduct or pay such  tax. Whereas Section 200 provides that any person  deducting any sum under the Act has to pay within the  prescribed period the sum so deducted to the credit of  the Central Government, Section 201 lays down  consequences of failure to deduct or to pay such tax. Chapter XXII relates to offences and prosecutions.  Section 276B deals with "Failure to pay tax.  The section  at the relevant time read as under; 276B. Failure to pay the tax deducted at source.  If a person fails to pay to the credit of the Central  Government, the tax deducted at source by him  as required by or under the provisions of  Chapter XVII-B he shall be punishable with  rigorous imprisonment for a term which shall  not be less than three months but which may  extend to seven years and with fine. Section 278B covered cases where offences were  committed by Companies. The section stated; 278B.  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. Provided that nothing contained in this sub- section shall render any such person liable to  any punishment if he proves that the offence  was committed without his knowledge or that

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he had 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 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 shall also be deemed  to be guilty of that offence and shall be liable  to be proceeded against and punished  accordingly. Explanation.--For the purposes of this section,-

(a) "company" means a body corporate,  and includes\027 (i) a firm; and (ii) an association of persons or a body of  individuals whether incorporated or not; and (b) "director", in relation to-- (i) a firm, means a partner in the firm; (ii) any association of persons or a body of  individuals, means any member controlling the  affairs thereof. Clause (20) of Section 2, inter alia, defines ’Director’  in relation to a Company having the meaning assigned to  it in the Companies Act, 1956. [Section 2(13) of the  Companies Act, 1956 defines ’Director’. The definition is  inclusive and includes "any person occupying the  position of Director by whatever name called"]. Clause  (31) of Section 2 defines ’person’ which includes  Company. Clause (35) defines ’principal officer’ and it  reads; (35) "principal officer", used with reference to a  local authority or a company or any other  public body or any association of persons or  any body of individuals, means-- (a) the secretary, treasurer, manager or agent  of the authority, company, association or body;  or (b) any person connected with the  management or administration of the local  authority, company, association or body upon  whom the Assessing Officer has served a  notice of his intention of treating him as the  principal officer thereof. From the above provisions, it is clear that wherever  a Company is required to deduct tax at source and to pay  it to the account of the Central Government, failure on  the part of the Company in deducting or in paying such  amount is an offence under the Act and has been made  punishable. It, therefore, cannot be said that the  prosecution against a Company or its Directors in default  of deducting or paying tax is not envisaged by the Act. It is no doubt true that Company is not a natural  person but ’legal’ or ’juristic’ person. That, however, does  not mean that Company is not liable to prosecution  under the Act. ’Corporate criminal liability’ is not  unknown to law. The law is well settled on the point and  it is not necessary to discuss it in detail. We may only  refer to a recent decision of the Constitution Bench of  this Court in Standard Chartered Bank & Ors. V.  Directorate of Enforcement & Ors., (2005) 4 SCC 530 : JT

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(2005) 5 SC 267. In Standard Chartered Bank, it was  contended on behalf of the Company that when a statute  fixes criminal liability on corporate bodies and also  provides for imposition of substantive sentence, it could  not apply to persons other than natural persons and  Companies and Corporations cannot be covered by the  Act. The majority, however, repelled the contention  holding that juristic person is also subject to criminal  liability under the relevant law. Only thing is that in case  of substantive sentence, the order is not enforceable and  juristic person cannot be ordered to suffer imprisonment.  Other consequences, however, would ensue, e.g. payment  of fine etc.  K.G. Balakrishnan, J. (as His Lordship then was),  speaking for the majority, summarized the law thus; "As the company cannot be sentenced to  imprisonment, the court cannot impose that punishment,  but when imprisonment and fine is the prescribed  punishment the court can impose the punishment of fine  which could be enforced against the company. Such a  discretion is to be read into the Section so far as the  juristic person is concerned. Of course, the court cannot  exercise the same discretion as regards a natural person.  Then the court would not be passing the sentence in  accordance with law. As regards company, the court can  always impose a sentence of fine and the sentence of  imprisonment can be ignored as it is impossible to be  carried out in respect of a company. This appears to be  the intention of the legislature and we find no difficulty  in construing the statute in such a way. We do not think  that there is a blanket immunity for any company from  any prosecution for serious offences merely because the  prosecution would ultimately entail a sentence of  mandatory imprisonment. The corporate bodies, such as a  firm or company undertake series of activities that affect  the life, liberty and property of the citizens. Large scale  financial irregularities are done by various corporations.  The corporate vehicle now occupies such a large portion  of the industrial, commercial and sociological sectors that  amenability of the corporation to a criminal law is  essential to have a peaceful society with stable economy.

In our opinion, therefore, it cannot be successfully  contended that prosecution could not have been ordered  against the Company and no charge could have been  framed. So far as Directors are concerned, it is alleged in the  show-cause notice as well as in the complaint that they  were ’principal officers’ of the Company. In the show- cause notice, it was asserted that the appellants were  considered as principal officers under Section 2(35) of the  Act. In the complaint also, it was stated that the other  accused were associated with the business of the  Company and were treated as principal officers under  Section 2(35) of the Act and hence they could be  prosecuted. Dealing with an application for discharge,  the trial Court observed that accused No.1 was Company  whereas other accused were Directors. Whether they  could be said to be principal officers or not would require  evidence and it could be considered at the stage of trial  and the application was rejected. In Revision, the First  Additional Sessions Judge took similar view.         The learned counsel contended that the Courts  committed an error of law in ordering prosecution against  the Directors.  The counsel, in this connection, invited

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our attention to certain decisions.  In Municipal  Corporation of Delhi v. Ram Kishan Rohtagi & Ors., AIR  1983 SC 67, the accused invoked the jurisdiction of the  High Court under Section 482 of the Code praying for  quashing of criminal proceedings initiated against them  under the Prevention of Food Adulteration Act, 1947.   Whereas accused No. 1 was Manager of the Company,  accused Nos. 2-5 were Directors.  A complaint was filed  by the Food Inspector of the Municipal Corporation, inter  alia, alleging that ’Morton toffees’ sold by the accused did  not conform to the standards prescribed for the  commodity.  The Metropolitan Magistrate issued  summons to all the accused for violating the provisions of  the Act.  It was contended on behalf of the accused that  proceedings were liable to be quashed as it was not  shown that accused persons were in-charge of and  responsible for the conduct of business.  The High Court  allowed the petition and quashed the proceedings.   Aggrieved Municipal Corporation challenged the decision.   This Court was called upon to consider as to whether the  High Court was right in quashing the proceedings against  the accused. The Court reproduced clause (5) of the complaint  which read thus\027         "That the accused No. 3 is the Manager,  of accused No. 2 and accused Nos. 4 to 7 are  the Directors of accused No. 2 and as such  they were in charge of and responsible for the  conduct of business of accused No. 2 at the  time of sampling."               (emphasis supplied)

       Considering the above clause, this Court held that  as far as the Manager was concerned "it was not and  could not be reasonably argued that no case is made out  against him because from the very nature of his duties, it  is manifest that he must be in the knowledge about the  affairs of the sale and manufacture of the disputed  sample". But so far as accused Nos. 4 to 7 were  concerned, it was alleged that they were Directors.  Interpreting the words ’as such’ the Court observed that  there was no clear averment that the Directors were in  charge of and responsible for the conduct of business  and the complainant has merely presumed that the  Directors of the Company must be guilty because they  were holding a particular office.         This Court, in the circumstances, observed;         "So far as the Manager is concerned, we  are satisfied that from the very nature of his  duties it can be safely inferred that he would  undoubtedly be vicariously liable for the  offence, vicarious liability being an incident of  an offence under the Act.  So far as the  Directors are concerned, there is not even a  whisper nor a shred of evidence nor anything  to show, apart from the presumption drawn by  the complainant, that there is any act  committed by the Directors from which a  reasonable inference can be drawn that they  could also be vicariously liable. In these  circumstances, therefore we find ourselves in  complete agreement with the argument of the  High Court that no case against the Directors  (accused Nos. 4 to 7) has been made out ex  facie on the allegations made in the complaint  and the proceedings against them were rightly

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quashed."

       A similar question came up for consideration before  the Court in Municipal Corporation of Delhi v. Purshotam  Dass Jhunjunwala & Ors., AIR 1983 SC 158.  There also,  a complaint was filed under the Prevention of Food  Adulteration Act, 1947 against the Directors of the  Company.  In para 5 of the complaint, it was stated;         "That accused Ram Kishan Bajaj is the  Chairman, accused R.P. Neyatia is the  Managing Director and accused Nos. 7 to 12  are the Directors of the Hindustan Sugar Mills  Ltd and were in charge of and responsible  to it for the conduct of its business at the  time of commission of offence." (emphasis supplied)

Setting aside the order of the High Court quashing  the proceedings against the Directors and distinguishing  Ram Kishan Rohtagi, the Court held that there was a  clear averment as to the active role played by the accused  and the extent of their liability.  A prima facie case for  summoning of accused was, therefore, made out and the  High Court was wrong in holding that allegations were  vague.  Further details could be given only in evidence. In Puran Devi & Ors. V. Z.S. Klar, Income Tax Officer,  (1988) 169 ITR 608, the High Court of Punjab & Haryana  held that a person or a partner of a firm prosecuted for  false verification of return must have been in charge of  and responsible to the firm for the conduct of its  business.  Necessary allegations, therefore, must be  made in the complaint. In K. Subramanyam v. Income Tax Officer, (1993)  199 ITR 723, the High Court of Madras held that before  prosecuting a person under the Act, it must be proved  that the person was ’in charge’ of and ’responsible to’ the  Firm or Company for the conduct of business.  The Court  observed that the word used is ’and’ and not ’or’.  Both  the ingredients, therefore, have to be pleaded and proved  by the prosecution and the burden is on the prosecution  that the accused was ’in charge of’ and ’responsible to’  the Firm or Company. In Jamshedpur Engineering & Machine  Manufacturing Company Ltd. & Ors. v. Union of India &  Ors., (1995) 214 ITR 556, the High Court of Patna  (Ranchi Bench) held that no vicarious liability can be  fastened on all Directors of a Company.  If there are no  averments in the complaint that any Director was ’in  charge of’ or ’responsible for’ conduct of business,  prosecution against those Directors cannot be sustained. In M.A. University & Ors. v. Deputy Commissioner of  Income Tax (Assessment), (1996) 218 ITR 606, the High  Court of Kerala held that when there was failure to  deduct tax at the source by a firm, prosecution can be  launched for violating the provisions of the Act against  the Firm. But if the complaint is filed against partners  also, there must be specific allegation that such partners  were responsible for conduct of business of firm. In  absence of such allegation, proceedings against the  partners cannot continue. Attention of the Court was also invited to a decision  of this Court in Sham Sunder v. State of Haryana, (1989)  4 SCC 630.  In Sham Sunder, this Court indicated that it

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is not uncommon that some of the partners of a firm may  not even be knowing what is going on day to day in the  firm.  There may be partners known as ’sleeping  partners’ who are not required to take any part in the  business of the firm.  Then there may be ladies and  minors who are admitted to the partnership firm only for  the benefit of business.  They also may not be aware  about the business of the firm.  It would be a travesty of  justice to prosecute all the partners and ask them to  prove that the offence was committed without their  knowledge.  The requisite condition, according to this  Court, was that it is for the prosecution to prove that the  partner was responsible for carrying on business and  was, during the relevant time, in charge of the business. Reference was also made to State of Karnataka v.  Pratap Chand & Ors., (1981) 2 SCC 335.  In that case,  this Court held that ’person in charge’ would mean a  person in over all control of day to day business.  A  person who is not in over all control of such business  cannot be held liable and convicted for the act of firm. In Monaben Ketanbhai Shah & Anr. v. State of  Gujarat & Ors., (2004) 7 SCC 15 : JT (2004) 6 SC 309,  dealing with the provisions of Sections 138 and 141 of  the Negotiable Instruments Act, 1881, this Court  observed that when a complaint is filed against a firm, it  must be alleged in the complaint that the partners were  in active business.  Filing of the partnership deed would  be of no consequence for determining the question.   Criminal liability can be fastened only on those who at  the time of commission of offence were in charge of and  responsible for the conduct of business of the firm.  The  Court proceeded to observe that it was because of the  fact that there may be sleeping partners who were not  required to take any part in the business of the firm;  there may be ladies and others who may not be knowing  anything about such business. The primary  responsibility is on the complainant to make necessary  averments in the complaint so as to make the accused  vicariously liable. "For fastening the criminal liability,  there is no presumption that every partner knows about  the transaction.  The obligation of the appellants to prove  that at the time the offence was committed they were not  in charge of and were not responsible to the firm for the  conduct of the business of the firm, would arise only  when first the complainant makes necessary averments  in the complaint and established that fact." Finally, the counsel referred to S.M.S.  Pharmaceuticals Ltd. v. Neeta Bhalla & Anr., (2005) 8 SCC  89 : JT (2005) 8 SC 450, wherein this Court held that  essential averments must be made in the complaint that  the person against whom complaint is made was in  charge of and responsible for the conduct of business of  the Company.  Without such averment, no criminal  liability would arise. From the statutory provisions, it is clear that to  hold a person responsible under the Act, it must be  shown that he/she is a ’principal officer’ under Section  2(35) of the Act or is ’in charge of’ and ’responsible for’  the business of the Company or Firm. It is also clear from  the cases referred to above that where necessary  averments have been made in the complaint, initiation of  criminal proceedings, issuance of summons or framing of  charge, cannot be held illegal and the Court would not  inquire into or decide correctness or otherwise of the  allegations levelled or averments made by the

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complainant. It is a matter of evidence and an  appropriate order can be passed at the trial. In the case on hand, in the show cause notice dated  March 11, 1991 issued under Section 276B read with  Section 278B of the Act, it was expressly stated by the  Income Tax Officer, TDS, Bhopal that the Directors were  considered to be Principal Officers under Section 2(35) of  the Act. In the complaint dated February 26, 1992 filed  by respondent No.2-Commissioner also, it was stated  that appellants were considered as Principal Officers. In  the above view of the matter, in our opinion, contention  of the learned counsel for the appellants cannot be  accepted that the complaint filed against the appellants,  particularly against appellant Nos. 2-4 is ill-founded or  not maintainable.  It was urged that a separate notice and/or  communication ought to have been issued before  issuance of show cause notice under Section 276 B read  with Section 278B of the Act that the Directors were to be  treated as Principal Officers under the Act. In our  opinion, however, no such independent and separate  notice is necessary and when in the show cause notice it  was stated that the Directors were to be considered as  Principal Officers under the Act and a complaint was  filed, such complaint is entertainable by a Court provided  it is otherwise maintainable. In view of the aforesaid discussion, the sanction to  prosecute granted by the second respondent cannot be  held illegal or unlawful nor the complaint can be held bad  in law.          The next contention that since TDS had already  been deposited to the account of the Central  Government, there was no default and no prosecution  can be ordered cannot be accepted.  Mr. Ranjit Kumar  invited our attention to a decision of the High Court of  Calcutta in Vinar & Co. & Anr. v. Income Tax Officer &  Ors., (1992) 193 ITR 300.  Interpreting the provisions of  Section 276B, a Single Judge of the High Court observed  that "there is no provision in the Income Tax Act  imposing criminal liability for delay in deduction or for  non-payment in time.  Under Section 276B, delay in  payment of income tax is not an offence".  According to  the learned Judge, such a provision is subject to penalty  under Section 201(1) of the Act.         We are unable to agree with the above view of the  High Court.  Once a statute requires to pay tax and  stipulates period within which such payment is to be  made, the payment must be made within that period.  If  the payment is not made within that period, there is  default and an appropriate action can be taken under the  Act. Interpretation canvassed by the learned counsel  would make the provision relating to prosecution  nugatory. The learned counsel is right in stating that one of  the appellants is a female-member. The counsel is also  right in contending that in some of the cases referred to  by him, this Court held that normally a lady member  may not be aware of day to day business of the Firm or  the Company. Without laying down general rule, it would  be sufficient if we observe that in the case on hand, she  was also treated as ’principal officer’ under the Act and  hence proceedings cannot be dropped at this stage  against her. As to contention that the case is squarely covered  by Section 278AA of the Act and that no offence has been

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committed in view of ’reasonable cause’ shown by the  appellants, we may state that the question can be  decided on the basis of evidence which would be adduced  by the parties before a competent Court. Hence, even  that contention, does not detain us. It is true that the Act provides for imposition of  penalty for non payment of tax.  That, however, does not  take away the power to prosecute accused persons if an  offence has been committed by them.  A similar  contention was raised before this Court in Rashida  Kamaluddin Syed & Anr. v. Shaikh Saheblal Mardan  (Dead) Through LRs & Anr., JT (2007) 4 SC 159 that since  a civil suit was filed for recovery of amount, no criminal  proceedings could have been initiated. Negating the contention, one of us (C.K. Thakker, J.)  stated;          Finally, the contention that a civil  suit is filed by the complainant and is  pending has also not impressed us.   If a  civil suit is pending, an appropriate order  will be passed by the competent Court.   That, however, does not mean that if the  accused have committed any offence,  jurisdiction of criminal court would be  ousted.  Both the proceedings are  separate, independent and one cannot  abate or defeat the other. (emphasis supplied)   

It is true that the matter relates to remote past.  Alleged non-payment of TDS pertains to 1989-90. It is  also true that the complaint was filed in the beginning of  1992 and more than fifteen years have passed but it  cannot be ignored that prosecution could not be over in  view of the fact that applications were made by the  appellants for their discharge under Section 245 of the  Code initially in the trial Court, then in the Sessions  Court and then in the High Court.  Even after dismissal  of the petition by the High Court, the appellants  approached this Court and obtained interim stay of  further proceedings. It is because of the pendency of  proceedings and grant of interim relief that the case  remained pending. It, therefore, cannot be urged that  there was failure, negligence or inaction on the part of  the prosecuting agency in not proceeding with the  matter. The ground of delay, in our considered opinion,  cannot help the appellants. Finally, the learned counsel submitted that an  appropriate direction may be issued to the trial Court so  that personal presence of respondent Nos. 2-4 may be  dispensed with and they may be granted exemption from  appearance. In our opinion, it would not be appropriate  to issue such direction to the Court. We have, however,  no doubt that if such a prayer is made by the appellants,  the Court would consider the prayer in its proper  perspective and will pass an appropriate order.  If  personal presence of appellant Nos. 2-4 is not necessary,  the Court would grant exemption on such terms and  conditions as it would think appropriate. For the foregoing reasons, the appeal deserves to be  dismissed and is hereby dismissed. Before parting with the matter, however, we may  clarify that we have not entered into merits of the matter  and have decided the question raised by the appellants  as to maintainability of criminal complaint. We may not

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be understood to have expressed any opinion one way or  the other on merits and as and when the matter will  come up for trial, it will be decided strictly on its own  merits without being inhibited by the observations made  by us hereinabove. All contentions of all parties are kept  open.