REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.  266  OF 2009 (Arising out of SLP (Crl.) No. 2119 of 2007)

State (Govt. of NCT of Delhi)   ..Appellant    

Versus

D.A.M. Prabhu and Anr. .. Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.  

2. Challenge in this appeal is to the judgment of a learned Single Judge

of the Delhi High Court quashing the order passed by learned Special Judge

under the Essential Commodities Act, 1955 (in short the ‘Act’).  

3. Background facts as noted by the High Court are as follows:

On 23.01.1988, a complaint was lodged by the Enforcement Inspector

with the Station House Officer of Police Station Moti Nagar, New Delhi,

alleging that Swatanta Bharat Mills had, by declaring and stamping wrong

fibre compositions for the cloth, contravened the provisions of the Textile

Commissioner’s notification dated 23.11.1981 and  clause 17 of the Textile

(Control)  Order,  1986  rendering  themselves  liable  for  penal  action  for

violation of the order  made under Section 3 of the Act punishable under

Section 7 thereof. On 11.02.1988, an FIR was registered on the basis of the

said complaint. On 06.05.1988, the charge sheet was filed in court, but there

was only one accused, namely,  A.K. Rohtagi, who was shown in Column

No.4 for the offence, inter-alia, under section 7 of the said Act. On that date,

the Court passed the following order:  

“New challan filed today. It be checked and registered. Accused person be summoned for 09.06. 1988.”

Thereafter, the accused A.K. Rohtagi appeared and was released

on  bail.  On  4.12.1990,  a  supplementary  challan  was  filed  and  the  court

passed the following order:-

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“Supplementary challan  filed today.  It  be  checked  and registered.  Accused  be  summoned  for  18.12.1990  as main case is already fixed for 18.12.1990.”

In the supplementary charge sheet, the said A.K. Rohatgi was again

shown in Column No.4. However, in Column No.2, the respondents along

with R.C Kesar and Lala Bansidhar were shown in Column No.2. It appears

that on 18.02.1991, respondent No.2 V.K. Malhotra appeared in court and

on 22.02.1991, the court passed the following order: -

“V.K  Malhotra  mentioned  in  column  No.2  is  not required  for  the  time  being.  He  is  being  discharged.

Only the accused persons  mentioned  in  Column No.3/4  of  the  challan  u/s  173  of  Cr.P.C.  was  to  be summoned and not those mentioned in Column No.2 of that report.”

On  24.04.1991,  the  earlier  charge-sheet  and  the  supplementary

charges sheet were consolidated and the court observed that summons were

issued to some of the accused and that the predecessor court by order dated

22.02.1991 had mentioned that these persons may not be summoned for the

time being. Thereafter, the court directed that the matter should come up for

arguments  on  04.06.1991 on the question  whether  the  persons  named in

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Column No.2. be summoned as accused. In the order dated 11.2.1994, it is

recorded as under:

“It  appears  that  in  the  supplementary  challan,  four accused were placed in Column No.2 and have not been summoned so far probably on the presumption that they have not been sent up for trial by the police. However, a perusal of the final report in the supplementary challan would  show that  the police  has  specifically  mentioned that  there  was  a  violation  of  Clause  17  of  the  Textile Control Order, 1986 by Swantantra Bharat Mills which is a company by virtue of Section 10 of the Act and the Managing  Director,  General  Manager,  Executive Director (Textile) and Supervisors, Folding Division are liable and should be summoned.”

Accordingly,  the  court  came  to  the  view  that  the  respondents

alongwith other two mentioned in Column No.2, namely, R.C. Kesar and

Lala Bansidhar be also summoned.

The basic stand before the High Court was that the deeming provision

of Section 10 of the Act cannot be applied to the facts of the case.   

The High Court found that Swatantra Bharat Mills was nothing but a

unit of the body corporate known as DCM Ltd.  But it cannot be called to be

an  association  of  individuals.  So  holding,  the  proceedings  so  far  as  the

respondents are concerned were quashed.  

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4. Learned counsel for the appellant-State submitted that true scope and

ambit of Explanation appended to Section 10 has not been kept in view.

5. Learned counsel for the respondents on the other hand supported the

judgment. Additionally, it is submitted that the infraction as alleged is of a

very minor nature and, therefore, continuance of the proceedings shall not

be appropriate.  

6. To appreciate rival submissions it would be necessary to take note of

Section 10 of the Act. The said provision reads as follows:

“(1)  If  the  person  contravening  an  order  made under Section 3 is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company, shall be deemed to be guilty of the contravention 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 contravention took place without his knowledge  or  that  he  exercised  all  due  diligence  to prevent such contravention.

(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

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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 purpose of this section,-

(a) “company”  means  any  body  corporate,  and includes a firm or other association of individuals; and

(b) “director” in relation to a firm means a partner in        the firm.”

7. In Dulichand Laxminarayan v. Commissioner of Income Tax, Nagpur

(1956 SCR 154)  it was inter-alia observed that the expression ‘person’ has

not been defined and applying the definition under the General Clauses Act,

1872  (in  short  the  ‘General  Clauses  Act’)  body  of  individuals  can  be

covered under the expression ‘person’.  Sub-Section (42) of Section 3 of the

General  Clauses  Act  has  been  statutorily  incorporated  by  way  of  an

Explanation under Section 10.

8. The  section  appears  to  our  mind  to  be  plain  enough.   If  the

contravention  of  the  order  made  under  Section  3  is  by  a  company,  the

persons who may be held guilty and punished are (1) the company itself, (2)

every  person  who,  at  the  time the  contravention  was  committed,  was  in

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charge  of,  and  was  responsible  to,  the  company  for  the  conduct  of  the

business of the company whom, for short, we shall describe as the person-

in-charge of the company, and (3) any director, manager, secretary or other

officer of the  company with whose consent  or connivance or  because of

neglect attributable to whom the offence has been committed, whom, for

short, we shall describe as an officer of the company.  Any one or more or

all of them may be prosecuted and punished. The company alone may be

prosecuted.  The person-in-charge only may be prosecuted.  The conniving

officer  may  individually  be  prosecuted.   One,  some  or  all  may  be

prosecuted.  There is no statutory compulsion that the person-in-charge or

an  officer  of  the  company  may  not  be  prosecuted  unless  he  be  ranged

alongside the company itself.  Section 10 indicates the persons who may be

prosecuted where the contravention is made by the company.  It does not lay

down any condition that the person-in-charge or an officer of the company

may not be separately prosecuted if the company itself is not prosecuted.

Each  or  any  of  them  may  be  separately  prosecuted  or  along  with  the

company.  Section 10 lists the person who may be held guilty and punished

when it is a company that contravenes an order made under Section 3 of the

Essential Commodities Act.  Naturally, before the person in–charge or an

officer of the company is held guilty in that capacity it must be established

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that there has been a contravention of the order by the company.

9. The above position was highlighted in  Sheoratan Agarwal and Anr.

V.  State of Madhya Pradesh  (1984 (4) SCC 352) and  State of Punjab v.

Kasturi Lal and Ors.  (2004 (12) SCC 195)  

10. Added to  that,  the  threshold  interference  does  not  appear  to  be  in

order.  The stand as taken by the respondents  was essentially the defence

which is to be considered at the time of trial.  The impugned judgment is

unsupportable and is set aside.  

11. The appeal is allowed.      

………………………………….J. (Dr. ARIJIT PASAYAT)

………………………………….J. (ASOK KUMAR GANGULY)

New Delhi, February 11, 2009

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