Corporate Offences under Section 32 of the Industrial Disputes Act, 1947: Scope, Vicarious Liability and Procedural Contours

Corporate Offences under Section 32 of the Industrial Disputes Act, 1947: Scope, Vicarious Liability and Procedural Contours

Introduction

Section 32 of the Industrial Disputes Act, 1947 (hereinafter “IDA”) embodies a specialised regime of vicarious criminal liability for offences committed by companies in the sphere of industrial relations. Although comparatively brief, the provision occupies a pivotal position in the enforcement architecture of the IDA by fastening personal liability on “every director, manager, secretary or other officer” who is in charge of and responsible to the company for the conduct of its business.[1] Recent judicial disagreement on whether the company itself must be arraigned as an accused before its officers can be prosecuted has reinvigorated scholarly interest in the provision.[2]–[5] This article critically examines the statutory text, legislative purpose, evolving jurisprudence and practical challenges surrounding Section 32, situating the debate within broader doctrines of corporate criminality and industrial adjudication in India.

Statutory Framework and Legislative Purpose

Section 32 was enacted in 1950—three years after the IDA’s commencement—to make explicit the criminal consequences of non-compliance by companies with the Act, its rules, awards or settlements. The legislature evidently perceived that without a mechanism piercing the “corporate veil,” wilful defiance of industrial awards (enforceable under Sections 29–31) could be rendered toothless by recalcitrant corporate employers. Section 32 therefore:

  • Creates a deeming fiction that every person who was in charge of, and responsible to, the company at the time the offence was committed “shall be deemed to be guilty,” unless he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent it;
  • Operates in addition to the liability of the company itself, thereby envisaging dual prosecution; and
  • Reposes a reversed or on-us of proof upon the accused officer, consistent with industrial social-welfare objectives.[1]

Corporate Criminal Liability and Industrial Jurisprudence

Indian law has long recognised that corporations, though juristic, may commit statutory offences—often through strict-liability clauses.[12] Section 32 forms part of this lineage but with two distinctive features:

  1. Sector-specific rationale. Unlike generic penal statutes, the IDA’s social-welfare tenor demands swift, deterrent sanctions to ensure compliance with arbitral awards and tribunal decisions (cf. Engineering Mazdoor Sabha[6] and Rohtas Industries[7]).
  2. Conjunctive liability. Parliament intended simultaneous arraignment of the company and its officers, mirroring analogous provisions such as Section 141 of the Negotiable Instruments Act, 1881, and Section 278B of the Income-tax Act, 1961.

Elements of Liability under Section 32

Commission of a Predicate Offence

Prosecution under Section 32 presupposes the commission of a punishable offence by the company under any provision of the IDA, typically Sections 29 (breach of settlement/award) or 31 (contravention of certain orders). Non-implementation of an award—e.g., an arbitrator’s award under Section 10A upheld in Gujarat Steel Tubes[8]—can thus trigger Section 32 consequences.

Status of the Accused

Only persons “in charge of, and responsible to, the company for the conduct of its business” at the material time may be prosecuted. Judicial exposition in Rabindra Chamria[2] clarifies that passive or non-executive directors cannot claim blanket immunity; however, they may rely on the statutory defences embedded in the proviso.

Mens Rea and the Statutory Defences

Although the main clause imposes strict liability, the proviso introduces an objective diligence defence. The accused must establish (a) absence of knowledge or (b) exercise of all due diligence. Courts have interpreted “due diligence” stringently, insisting on positive preventive action rather than mere lack of participation.[12]

Whether the Company Must Be Arraigned: Divergent Jurisprudence

A core controversy is whether prosecution of officers can proceed sans prosecution of the company itself.

Supreme Court Perspective

In Rabindra Chamria the Supreme Court—interpreting Section 633 of the Companies Act—implicitly accepted that Section 32 envisages prior determination of the company’s guilt.[2] While not squarely deciding the arraignment issue, the Court underscored that Section 32 is a “sweeping provision where the burden is upon the person concerned to prove that the offences were committed without his knowledge or consent.”

High Court Streams

  • Bombay View. Girni Kamgar Sangharsha Samiti holds that Section 32 prosecutions must satisfy the twin requirements of arraigning the company and proving its guilt before fastening vicarious liability on officers.[3]
  • Madras Divergence. A single-judge decision in S. Balasubramanian (2013) insisted on arraying the company, but subsequent benches in P. Rajendran[5] and Mrs. Jayanthi[4] rejected that necessity, noting the absence of an express stipulation akin to Section 141 of the NI Act and recommending consideration by a larger bench.
  • Policy Rationale. The P. Rajendran court reasoned that an over-technical requirement would stultify enforcement where the company has dissolved or evades summons.

Critical Assessment

Textually, Section 32 predicates officers’ liability on the company’s commission of the offence, suggesting that a finding qua the company is logically indispensable. The provision’s phrase “in addition to the company” supports dual prosecution. Comparative jurisprudence under Section 141 (NI Act) and Section 278B (Income-tax Act) further favours arraignment of the principal offender, though the Supreme Court has recognised exceptions where trial or conviction of the company is legally impossible (e.g., company under liquidation). Absent an authoritative ruling from the Supreme Court on Section 32, prudence dictates arraying both.

Procedural and Representational Issues

Cognizance and Limitation

Offences are non-cognizable and require complaint by or under the authority of the appropriate government (Section 34 IDA). The period of limitation under the Code of Criminal Procedure, 1973, applies, subject to Section 32’s stricter onus.

Representation before Labour Courts/Tribunals

Section 36 of the IDA governs appearance by legal practitioners. The Himachal Pradesh High Court in HIM Cylinder emphasised that a lawyer cannot appear before an industrial tribunal qua legal practitioner without the opposite party’s consent.[11] In prosecutions under Section 32 arising from non-implementation of an award, compliance with Section 36 safeguards procedural fairness.

“Approval” versus “Permission”

While not directly a Section 32 question, the Supreme Court’s exposition in Lord Krishna Textile Mills on Section 33(2)(b) (requirement of “approval” after dismissal during pendency of proceedings) illuminates how post-facto ratification operates within the IDA.[14] Analogous logic may apply when determining whether belated compliance by a company can mitigate sentencing under Section 32.

Interaction with Industrial Adjudication Mechanisms

Section 32 must be viewed in tandem with the IDA’s dispute-resolution framework:

  • Arbitral Awards (Section 10A). As clarified in Engineering Mazdoor Sabha[6], arbitrators are not “tribunals” under Article 136, but their awards, once published, are binding (Section 17). Non-implementation invites penal consequences under Section 29, and consequently Section 32 if the employer is a company.
  • Illicit Compensation Awards. The Supreme Court in Rohtas Industries[7] struck down an arbitral direction compelling workers to compensate management, reinforcing that only awards intra vires the IDA can ground penal liability.
  • Purposive Interpretation. Gujarat Steel Tubes[8] adopted a “mischief rule” approach, instructing that industrial statutes be construed to fulfil remedial purposes. Reading Section 32 purposively supports a strict compliance ethos.

Sentencing Principles and “Wilful Defiance”

In Kapildeo Prasad the Supreme Court held that only wilful defiance attracts contempt sanctions; the Bombay High Court in Girni Kamgar transplanted this criterion to Section 32, distinguishing bona fide lapses from deliberate default.[3],[12] Yet, the statutory reversal of burden indicates that once contravention is proved, courts should be slow to accept benign explanations absent concrete diligence.

Need for Legislative Clarification

The jurisprudential divide on arraignment, coupled with practical enforcement challenges, warrants parliamentary or apex-court clarification. Possible reforms include:

  • Explicitly mandating joint prosecution, with limited exceptions where company proceedings are impossible;
  • Introducing graded penalties reflecting gravity and duration of non-compliance;
  • Providing statutory guidance on acceptable “due diligence” standards.

Conclusion

Section 32 represents the Legislature’s determination that corporate employers cannot evade accountability for industrial wrongs behind the shield of incorporation. While courts have generally honoured this objective, doctrinal fissures—particularly regarding mandatory arraignment of the company—threaten uniform enforcement. Pending authoritative settlement, practitioners should adopt a cautious approach: prosecute both the company and its responsible officers, meticulously plead the officers’ role “in charge of” business, and anticipate the high evidentiary threshold for the statutory defences. Ultimately, a purposive, worker-protective reading, consonant with the Supreme Court’s industrial jurisprudence, best effectuates the social-welfare aims of the IDA.

Footnotes

  1. Industrial Disputes Act, 1947, s. 32.
  2. Rabindra Chamria v. Registrar of Companies, (1992) Supp 2 SCC 10.
  3. Girni Kamgar Sangharsha Samiti v. Matulya Mills Ltd., 1999 (II) CLR 1056 (Bom).
  4. Mrs. Jayanthi v. State, 2022 SCC OnLine Mad 4329.
  5. P. Rajendran v. The General Manager, 2021 SCC OnLine Mad 3770.
  6. Engineering Mazdoor Sabha v. Hind Cycles Ltd., AIR 1963 SC 874.
  7. Rohtas Industries Ltd. v. Rohtas Industries Staff Union, (1976) 2 SCC 82.
  8. Gujarat Steel Tubes Ltd. v. Gujarat Steel Tubes Mazdoor Sabha, (1980) 2 SCC 593.
  9. Hochtief Gammon v. Industrial Tribunal, Bhubaneshwar, AIR 1964 SC 1746.
  10. Associated Cement Companies Ltd. v. Associated Cement Staff Union, 2001 (1) LLJ (Bom) 530.
  11. HIM Cylinder Pvt. Ltd. v. Janak Raj, 2016 SCC OnLine HP 1228.
  12. Kapildeo Prasad v. State of Bihar, (1999) 7 SCC 569.
  13. U.P. Avas Evam Vikas Parishad v. Friends Coop. Housing Society, 1995 Supp (3) SCC 456.
  14. Lord Krishna Textile Mills v. Workmen, AIR 1961 SC 860.