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PETITIONER: U.P. POLLUTION CONTROL BOARD

       Vs.

RESPONDENT: MODI DISTILLERY & ORS.

DATE OF JUDGMENT06/08/1987

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) NATRAJAN, S. (J)

CITATION:  1988 AIR 1128            1987 SCR  (3) 798  1987 SCC  (3) 684        JT 1987 (3)   221  1987 SCALE  (2)208

ACT:     Water  (Prevention and Control of Pollution) Act,  1974: Ss.  25, 26, 44 & 47--Company--Discharge of trade  effluents without  consent of the Board--Commission of  offence  under the   Act--Officials  of  the  Company  whether  guilty   of offence----Vicarious responsibility.     Practice and Procedure: Prevention and Control of Pollu- tion-Launching of prosecution--Need for drafting  complaints with circumspection and without any technical flaw.

HEADNOTE:     The  respondent-distillery,  an industrial unit of  M/s. Modi Industries Ltd., at Modi Nagar manufacturing industrial alcohol has been discharging its highly noxious and polluted trade  effluents  into the river through a local  drain.  It applied  to the Pollution Control Board under ss. 25(1)  and 26 of the Act on March 27, 1981 for consent of the Board  to discharge  its  trade effluents into the stream.  The  Board found  the  application  incomplete in  many  respects,  and called upon the respondents to rectify the discrepancies. As there  was no response from the respondents,  the  appellant Board refused to grant the consent prayed for in the  public interest and thereafter issued notice under s. 20 of the Act directing the Company to furnish certain information regard- ing  the  particulars and names of  the  Managing  Director, Directors  and other persons responsible for the conduct  of the Company. This was followed by various reminders.     Finding  no response from the respondents, the Board  on October 21, 1983 lodged a complaint against the  respondents under  s. 44 of the Act in the Court of the  Chief  Judicial Magistrate,  Gaziabad.  Instead of launching  a  prosecution against  M/s. Modi Industries Ltd., the Board impleaded  the industrial unit as respondent No. 1 and the Chairman.  Vice- Chairman,  Managing  Director and members of  the  Board  of Directors  of  the Company as respondent Nos. 2 to  11.  The Judicial Magistrate directed the issue of process. 799     The respondents preferred a revision under s. 397 of the Code  of Criminal Procedure, 1973 before the High  Court  in which an application was filed under s. 482 of the Code  for quashing the proceedings. The Single Judge of the High Court

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quashed the proceedings on the ground that there could be no vicarious liability saddled on the Chairman,  Vice-Chairman, Managing  Director and other members of the Board of  Direc- tors of the Company under s. 47 of the Act unless there  was a prosecution of the Company. Allowing the appeal,     HELD: A combined reading of the provisions contained  in subss.  (1)  and (2) of s. 47 of the Water  (Prevention  and Control  of Pollution) Act, 1974 makes it apparent that  the officials  of the Company owning the  respondent  industrial unit  could  be prosecuted as having been in charge  of  and responsible to the Company for the business of that unit and could be deemed to be guilty of the offence with which  they were charged. [804DE]     The industrial unit owned by the Company was discharging its trade effluents into the river prior to the commencement of the Act. It was, therefore, mandatory for the Company  to make an application to the Board under s. 25(2) read with s. 26 of the Act for grant of consent for the discharge of  its trade effluents into the stream. The application made by the industrial  unit  having been found incomplete in  many  re- spects was rejected by the Board in public interest.  There- after the Company which did not have proper arrangements for treatment of the highly polluted trade effluents  discharged by it, had been in spite of repeated letters from the  Board intentionally and deliberately avoiding compliance with  the requirements  of ss. 25(1) and 26 rendering themselves  pun- ishable under s. 44 of the Act. The Chairman.  ViceChairman, Managing  Director and members of the Board of Directors  of the Company in such capacity were incharge of and  responsi- ble for the conduct of the business of the Company and were, therefore,  deemed  to  be guilty of the  said  offence  and liable  to be proceeded against and punished under s. 47  of the Act. [805H-806F]     The vicarious liability of these officials of the Compa- ny is to be viewed not in isolation but in the conspectus of facts  and events and not in vacuum. The technical  flaw  in the complaint lodged by the appellant Board had occurred due to  the recalcitrant attitude of the industrial unit,  which in  spite of more than one notice being issued had  deliber- ately failed to furnish information called for regarding the particulars and 800 names of the Managing Director, Directors and other  persons responsible for the conduct of the Company. Having  wilfully failed to furnish the requisite information to the Board, it is  not open to the respondents 2 to 11 to seek the  Court’s assistance  to derive advantage from the lapse committed  by their own industrial unit. Furthermore, the legal  infirmity is  of such a nature which could be easily cured  by  having the  matter remitted to the trial court with a direction  to call upon the appellant to make the formal amendments to the averments  in  the complaint so as to make  the  controlling company  of  the  industrial unit figure  as  the  concerned accused. [805BC, 804G, EF, H-805A]     The Board and its legal advisors should have drafted the complaint  with  greater  circumspection not  to  leave  any technical flaw which would invalidate the initiation of  the prosecution  allowing a large business house to  escape  the consequences  of the breaches committed by it of the  provi- sions of the Act with impunity. [805GH]

JUDGMENT:

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   CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 415 of 1986.     From  the  Judgment and Order dated 16.5.  1984  of  the Allahabad High Court in Crl. Rev. No. 2330 of 1983.     R.N. Trivedi, Additional Advocate General (U.P.) Mrs. S. Dikshit and C.B. Singh for the Appellant.     Ram  Jethmalani, Rajinder Sachhar, and D.N.  Mishra  for the Respondents. The Judgment of the Court was delivered by     SEN, J. This appeal by special leave is directed against the judgment and order of the High Court of Allahabad  dated May 16, 1984 setting aside in its revisional jurisdiction an order  of  the  Chief Judicial  Magistrate,  Gaziabad  dated November 3, 1983 directing the issue of process against  the respondents  on  a complaint filed by  the  appellant  under section  44 of the Water (Prevention and Control  of  Pollu- tion)  Act,  1974. The issue involved is whether the  Chair- man,  ViceChairman,  Managing Director and  members  of  the Board  of Directors of Messrs Modi Industries  Limited,  the Company  owning the industrial unit called Messrs Modi  Dis- tillery  could be proceeded against on a  complaint  against the  said  industrial  unit. A learned  Single  Judge  (K.C. Agarwal,  J.) following the decision of this Court in  State (Delhi   801 Admn.) v. LK. Nangia & Anr., [1980] 1 SCC 258 interpreting a similar  provision contained in sub-s. (4) of s. 17  of  the Prevention  of  Food Adulteration Act, 1954  had  held  that there  was  no  sufficient ground  against  the  respondents inasmuch  as  the allegations made in the complaint  do  not constitute  an offence punishable under section 44  for  the admitted  contravention of ss. 25(1) and 26 read with s.  47 of the Act. The question essentially turns upon the rule  of construction to be adopted in s. 47.     The facts of the case are these. Messrs Modi  Industries Limited  is  an existing company under  the  Companies  Act, 1956. It is a large business organisation having diversified business activities. Prior to the commencement of the Act it had  established an industrial unit called Messrs Modi  Dis- tillery  at Modi Nagar, Gaziabad engaged in the business  of manufacture  and  sale  of industrial  alcohol.  During  the process of manufacture of such industrial alcohol, the  said industrial  unit discharges its highly noxious and  polluted trade  effluents  into the Kali River through  the  Kadrabad Drain which is a stream within the meaning of s. 2(j) of the Act  and  thereby causes continuous pollution  of  the  said stream  without  the consent of the Board and  therefore  it falls  within the purview of s. 26. Under the provisions  of s.  26,  as amended, it has been made  mandatory  for  every existing  industry  to obtain the consent of the  Board  for discharging  its  trade effluent into a stream  or  well  or sewer  or  on  land. The last date for  submission  of  such application seeking the consent of the Board by an  existing industry  had been extended upto December 31, 1981.  In  ac- cordance with the procedure laid down under ss. 25(1) and 26 of  the Act, the Company was required to submit an  applica- tion  for consent of the Board in the prescribed form  along with the prescribed consent fee and the particulars. Instead of  the  Company its industrial unit,  namely,  Messrs  Modi Distillery on March 27, 1981 applied to the Board for  grant of consent to discharge its trade effluents into the stream. The  aforesaid application was scrutinised by the Board  and found incomplete in many respects. The Board accordingly  by its letter dated April 29, 1981 informed the said industrial unit  with regard to the discrepancies and  the  particulars

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wanting. There was no response from the respondents nor  did they  rectify the discrepancies pointed out or  furnish  the particulars  required. The Board accordingly by  its  letter dated July 30, 1981 refused to grant the consent prayed  for in  the  public  interest since the  application  was  found incomplete in many respects and also because the said indus- trial unit did not have proper arrangements for treatment of its  highly polluted trade effluents. Thereafter, the  Board by  its letter dated June 30, 1982 issued a notice under  s. 20 of the Act 802 directing the Company to furnish certain information regard- ing  the  particulars and names of  the  Managing  Director, Directors  and other persons responsible for the conduct  of the Company, but the respondents did not furnish the  infor- mation  called  for.  This was followed  by  two  subsequent letters  of  the Board dated February 21, 1983 and  June  9, 1983 drawing the attention of the respondents that they were deliberately violating the provisions of the Act and thereby rendering  themselves liable to be punished under s. 44  for contravention  of  the provisions of ss. 25(1)  and  26.  On October  21, 1983 the Board lodged a complaint  against  the respondents under s. 44 of the Act in the Court of the Chief Judicial Magistrate, Gaziabad. Unfortunately, the  complaint was  inartistically drafted. It was averred in  paragraph  2 that  Messrs Modi Distillery i.e. the industrial unit was  a company within the meaning of s. 47 of the Act, that it  had been  knowingly and wilfully discharging its highly  noxious and polluted trade effluents into the Kali River which is  a stream within the meaning of s. 2(j) of the Act through  the Kadrabad  Drain and thereby causing continuous pollution  of the  said stream. There were eleven persons arrayed  as  ac- cused.  Instead  of launching a prosecution  against  Messrs Modi Industries Limited, the Board impleaded its  industrial unit  Messrs Modi Distillery as respondent no. 1  while  re- spondents  nos.’  2-11  were  the  Chairman,  Vice-Chairman, Managing  Director and members of the Board of Directors  of Messrs  Modi Industries Limited i.e. the Company owning  the industrial unit.     It  appears that the respondents did not  appear  before the  learned  Chief Judicial Magistrate in response  to  the notice issued to them. The learned Magistrate after  record- ing  the  statement of S.M. Pandey, Legal Assistant  of  the Board  directed  the issue of process  to  the  respondents. Aggrieved,  respondents nos. 2, 3 and 4, namely, K.M.  Modi, K.K.  Modi  and M.L. Modi, the Chairman,  Vice-Chairman  and Managing  Director  respectively of Messrs  Modi  Industries Limited preferred a revision before the High Court under  s. 397  of  the Code of Criminal Procedure, 1973.  Two  of  the other  accused, namely, S.C. Trikha and Raghunath  Rai,  the nominated  members of the Board of Directors of the  Company also filed an application before the High Court under s. 482 of the Code for quashing the proceedings. As already stated, a learned Single Judge invoking the revisional  jurisdiction of the High Court has quashed the proceedings on the  ground that  there could be no vicarious liability saddled  on  the Chairman, Vice Chairman, Managing Director and other members of the Board of Directors of the Company under s. 47 of  the Act  unless  there  was a prosecution of  the  Company  i.e. Messrs Modi Industries Limited. He 803 held  that  the  complaint suffers from  the  serious  legal infirmity and in the circumstances, to allow the proceedings to  continue would amount to an abuse of the process of  the Court.

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   The  question that arises in the appeal is  whether  the Chairman,  Vice-Chairman, Managing Director and  members  of the  Board of Directors are liable to be  proceeded  against under  s. 47 of the Act in the absence of a  prosecution  of the  Company owning the said industrial unit. S. 47  insofar as material reads as follows:               "47.  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  con-               duct, 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 provided in this  Act               if  he proves that the offence  was  committed               without his knowledge or that he exercised all               due  diligence  to prevent the  commission  of               such offence.                         (2)  Notwithstanding  anything  con-               tained   in subsection (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 neglet on the  part               of, any director. manager, secretary or  other               officer of the company, such director,  manag-               er,  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."     On  a plain reading of sub-s. (1) of s. 47 of  the  Act, where  an  offence has been committed by  a  company,  every person who at the time of the commission of the offence  was in charge of and 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. Proviso  to sub-s. (1) however engrafts an exception in  the case of any such person if he were to prove that the offence was committed without his knowledge or that he exercised all due diligence to prevent the 804 commission of such offence. It would be noticed that  sub-s. (1)  of s. 47 is much wider than sub-s.(4) of s. 17  of  the Prevention  of  Food Adulteration Act, 1954 which  fell  for consideration in I.K. Nangia’s case. Furthermore, proviso to sub-s.  (1) shifts the burden on the delinquent  officer  or servant of the company responsible for the commission of the offence. The burden is on him to prove that he did not  know of  the offence or connived in it or that he  had  exercised all due diligence to prevent the commission of such offence. The  non-obstante  clause in sub-s. (2)  expressly  provides that notwithstanding anything contained in sub-s. (1), where an offence under the 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 liale to be  proceeded  against  and punished accordingly.

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   On  a  combined reading of the provisions  contained  in sub-ss.  (1)  and (2), we have no doubt  whatever  that  the Chairman,  Vice Chairman, Managing Director and  members  of the  Board of Directors of Messrs Modi  Industries  Limited, the Company owning the industrial unit Messrs Modi  Distill- ery  could  be prosecuted as having been in  charge  of  and responsible  to the company, for the business of the  indus- trial  unit Messrs Modi Distillery owned by it and could  be deemed  to  be  guilty of the offence with  which  they  are charged. The learned Single Judge has failed to bear in mind that this situation has been brought about by the industrial unit  viz. Messrs Modi Distillery of Messrs Modi  Industries Limited  because  in  spite of more than  one  notice  being issued  by  the Board, the unit of  Messrs  Modi  Distillery deliberately  failed to furnish the information  called  for regarding  the particulars and names of the Managing  Direc- tor, Directors and other persons responsible for the conduct of the Company. Having wilfully failed to furnish the requi- site  information  to the Board, it is now not open  to  the Chairman, Vice-Chairman, Managing Director and other members of the Board of Directors to seek the Court’s assistance  to derive  advantage  from  the lapse committed  by  their  own industrial  unit. The learned Single Judge has focussed  his attention  only on the technical flaw in the  complaint  and has  failed to comprehend that the flaw had occurred due  to the  recalcitrant  attitude of Messrs  Modi  Distillery  and furthermore  the  infirmity  is one which  could  be  easily removed by having the matter remitted to the Chief  Judicial Magistrate  with a direction to call upon the  appellant  to make  the  formal amendments to the averments  contained  in paragraph 2 of the comp- 805 laint so as to make the controlling company of the industri- al  unit figure as the concerned accused in  the  complaint. All  that has to be done is the making of a formal  applica- tion  for amendment by the appellant for leave to  amend  by substituting the name of Messrs Modi Industries Limited, the Company owning the industrial unit, in place of Messrs  Modi Distillery.  Although  as a pure proposition of law  in  the abstract  the learned Single Judge’s view that there can  be no  vicarious  liability  of  the  Chairman,  Vice-Chairman, Managing  Director  and members of the  Board  of  Directors under sub-s. (1) or (2) of s. 47 of the Act unless there was a  prosecution against Messrs Modi Industries  Limited,  the Company  owning the industrial trait, can be termed as  cor- rect,  the  objection raised by the petitioners  before  the High Court ought to have been viewed not in isolation but in the  conspectus  of facts and events and not in  vacuum.  We have  already  pointed out that the technical  flaw  in  the complaint  is attributable to the failure of the  industrial unit to furnish the requisite information called for by  the Board. Furthermore, the legal infirmity is of such a  nature which  could  be easily cured.  Another  circumstance  which brings  out  the narrow perspective of  the  learned  Single Judge  is his failure to appreciate the fact that the  aver- ment in paragraph 2 has to be construed in the light of  the averments contained in paragraphs 17, 18 and 19 which are to the effect that the Chairman, Vice-Chairman, Managing Direc- tor  and members of the Board of Directors were also  liable for the alleged offence committed by the Company.     It  is regrettable that although Parliament enacted  the Water  (Prevention  and Control of Pollution) Act,  1974  to meet the urgent need for introducing a comprehensive  legis- lation  with its established unitary agencies in the  Centre and the States to provide for the prevention. abatement  and

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control of pollution of rivers and streams, for  maintaining or restoring wholesomeness of water courses and for control- ling the existing and new discharges of domestic and  indus- trial  wastes, which is a matter of grave national  concern, the  manner  in  which some of the  Boards  are  functioning leaves much to be desired. This is an instance where due  to the  sheer negligence on the part of the legal  advisors  in drafting the complaint a large business house is allowed  to escape  the consequences of the breaches committed by it  of the  provisions  of the Act with impunity, It  was  expected that  the Board and its legal advisors should  have  drafted the  complaint with greater circumspection not to leave  any technical flaw which would invalidate the initiation of  the prosecution  allowing the respondents to escape  the  conse- quences of the breaches committed by them of the  provisions of  the Act with impunity. As already stated, prior  to  the commencement 806 of  the Act the Company owned an industrial unit  styled  as Messrs  Modi  Distillery  which was  discharging  its  trade effluents into the Kali River through the Kadrabad Drain and therefore  the matter fell within the ambit of s. 26 of  the Act.  S. 26 provides that where immediately before the  com- mencement  of the Act any person was discharging any  sewage or  trade  effluent into a stream, the provisions of  s.  25 shall, so far as may be, apply to such person as they  apply in  relation  to a person referred to in  that  section.  S. 25(1) creates an absolute prohibition against bringing  into use any new or altered outlet for the discharge of sewage or trade’  effluent  into a stream without the consent  of  the Board.  On  a combined reading of ss. 25(1) and  26  it  was mandatory for the Company viz. Messrs Modi Industries Limit- ed  to make an application to the Board under sub-s. (2)  of s. 25 read with s. Z6 in the prescribed form containing  the prescribed  particulars  for grant of consent for  the  dis- charge of its trade effluents into the said stream,  subject to  such  conditions as it may impose. Along with  the  com- plaint the appellant has placed on record several  documents showing  that  the rejection of the application was  in  the public interest as it was incomplete in many respects. These documents  also reveal that the Company did not have  proper arrangements  for  treatment of the  highly  polluted  trade effluents  discharged by it and although the  appellant  re- peatedly  by its letter required the Company to  obtain  the consent  of  the Board, the Company  was  intentionally  and deliberately avoiding compliance of the requirements of  ss. 25(1)  and 26 of the Act. The contravention of these  provi- sions  is an offence punishable under s. 44. The  other  ten persons  arrayed  by name as accused in  the  complaint  are respondents nos. 2-11, the Chairman, Vice-Chairman, Managing Director  and  members of the Board of Directors  of  Messrs Modi  Industries Limited. It cannot be doubted that in  such capacity  they  were in charge of and  responsible  for  the conduct  of the business of the Company and  were  therefore deemed  to  be guilty of the said offence and liable  to  be proceeded  against and punished under s. 47 of the  Act.  It would be a travesty of justice if the big business house  of Messrs  Modi  Industries Limited is allowed  to  defeat  the prosecution launched and avoid facing the trial on a techni- cal flaw which is not incurable for their alleged deliberate and  wilful breach of the provisions contained in ss.  25(1) and  26 made punishable under s. 44 read with s. 47  of  the Act.     Faced  with the difficulty of refuting the  gravamen  of the  offence set out in the complaint, Shri Ram  Jethmalani,

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learned  counsel  appearing  for the  respondents  drew  our attention to the counteraffidavit of Virendra Prasad, Manag- er  (Personnel  &  Administration),  Modi  Distillery  dated January 13, 1986 and the two supplementary 807 affidavits  dated  August  25, 1986 and  November  17,  1986 tending  to  show that Messrs Modi Industries  Limited,  the company  owning  the industrial unit, have  taken  effective steps  to  set up an effluents treatment plant  by  entering into an agreement dated December 23, 1985 with Messrs Chemi- cal Consultants & Engineers, Ahmadnagar who would set it  up in  collaboration with Sulzer Bros. Limited, Switzerland  by employment  of the technical knowhow which would be able  to recover methane gas upto 70% and also bring down BOD  reduc- tion  upto  90%.  Further, it is averred  that  the  company sought  and obtained the approval of the Board subject to  a time schedule for erection and installation of the plant  by the  end  of June 1987. It is also averred  that  since  the Government  of India has turned down the application of  the respondents  for subsidy for installation of the said  plant insofar  as the year 1985-86 was concerned, they are  trying other  sources of finance and that in the meanwhile  pending the installation and commissioning of the plant based on the Sulzer’s  process are treating the effluents by  alternative methods in order to reduce the extent of BOD discharge. They are  diluting  the effluents by mixing fresh  water  to  the extent  of 13 to 15 times the amount of effluent  discharged in  order to reduce the extent of pollution. In view of  the subsequent events the learned counsel submits that this  was a fit case for dropping the proceedings. The averments  made by  the  respondents  in the various  affidavits  have  been controverted by the affidavit-in-rejoinder sworn by  Chandra Bhal Singh, Law Officer of the appellant-Board showing  that there  is little or no progress in the matter of  establish- ment  of  the effluents treatment plant. We need  not  enter into  this  controversy. These are all matters to  be  dealt with by the learned Chief Judicial Magistrate.     The result therefore is that the appeal succeeds and  is allowed. The judgment and order passed by the High Court are set aside and that of the learned Chief Judicial  Magistrate directing issue of process to the respondents are  restored. The  learned  Magistrate  shall proceed with  the  trial  as expeditiously as possible in accordance with law. P.S.S.                                                Appeal allowed. 808