1. These two petitions are filed under S. 482 of the Criminal Procedure Code, to quash S.T.C Nos. 3365 and 3366 of 1984 (Summary Trial Cases), on the file of the Special Munsif Magistrate, Vijayawada.
2. The Labour Officer, Nellore, the respondent herein filed two complaints against the petitioner, V.B Sivalingam Chettair, Managing Director, Abirami Cotton Mills, Ltd., Sullurpet, for offences punishable under Ss. 28 and 26 read with rule 4(c) and S. 27(2) of the Payment of Bonus Act. The charge was, that for the accounting years 1980–81 and 1981–82, the petitioners failed to maintain a register in Form C and produce the same on demand by the Inspector. In S.T.C No. 3366 of 1984, the charge was that the petitioner failed to maintain registers in Forms A and B for the accounting years 1980–81 and 1981–82 and produce the same on demand by the Inspector, as required under the provisions of the Payment of Bonus Act, 1965.
3. Section 26 of the Payment of Bonus Act deals with maintenance of registers. It requires every employer to prepare and maintain such registers in such form and in such manner as may be prescribed.
4. Under S. 28 of the Payment of Bonus Act, if any person—
(a) contravenes any of the provisions of this Act or any rule made thereunder; or…
he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one housand rupees, or with both.
5. Section 29 of the Act deals with offences by companies and it is as follows:
“29. Offences by companies.—(1) If the person committing an offence under this Act is 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 he exercised alt due diligence to prevent the commission of such offence.”
6. Section 26 of the Act provides that every employer shall prepare and maintain such registers, records and of her documents in such form and in such manner as may be prescribed. As defined under S. 2(14) “employer” includes,—
(i) in relation to an establishment which is a factory the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and where a person has been named as a manager of the factory under Cl. (i) of Sub-sec. (1) of S. 7 of the Factories Act, 1948 (63 of 1948), the person so named; and
(ii) in relation to any other establishment.
7. In the instant case, the facts admitted are that Abirami Cotton Mills, Ltd., Sullurpet, is a private limited company registered under the Indian Companies Act. It is a factory within the meaning of the Factories Act. An employer is defined under S. 2(14) of the Payment of Bonus Act to mean the owner or occupier of the factory. In the present case, it is the company that is the owner of the factory and under S. 26 the liability is cast upon the employer to maintain the registers. It is, therefore, clear that the offence alleged to have been committed is mainly by the company. But, for reasons best known to themselves, the Labour Officer has not launched any prosecution against the company as such. The complaint is made against an individual, namely, V.B Siva, lingam Chettiar. No doubt, he is described as the Managing Director of Abirami Cotton Mills, Ltd., Sullurpet. But that is not to say that the company is the accused. Under S. 29, where the offence is committed by an employer who happens to be a company, in addition to the 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 business shall be deemed to be guilty of the offence and shall be liable to the proceeded against and punished accordingly. To my mind, it appears, that without there being a prosecution against the company itself who is the employer, no prosecution against one of the directors is permissible. It is only when the principal offender, i.e, the company, is found guilty, that the person who is in charge of and was responsible to the company for the conduct ot business can also be proceeded against. Section 29 does not authorise the prosecution being launched only against the director of the company. A company is a corporate body. It has a legal existence of its own. A director cannot be equated to a company.
8. In Krishna Trading Company v. State of Bihar [1978 B.L.J.R 743], the Patna High Court took the view that in the absence of prosecution against the company, the persons who come within the categories of the persons described in the relevant sections cannot be prosecuted. The learned Judge was dealing with a case under the Essential Commodities Act which is in pari materia with S. 29 of the Payment of Bonus Act. The learned Judge further held that in the absence of an allegation that a partner or a director was incharge of and responsible to the company or the firm for the conduct of the business, the complaint is not maintainable.
9. In State of Madras v. C.V Parekh [(1970) 3 SCC 491 : A.I.R 1971 S.C 447], it was held that conviction cannot be fastened on the directors is liability of persons incharge can arise under that section only when contravention is by the company itself and that in the absence of prosecution against the company, the liability cannot be fastened to the person-incharge of the company.
10. In Kailas Prasad v. State [1984 Crl. L.J 1959], a Division Bench of the Calcutta High Court took the view that prosecution without impleading the company was bad.
11. The principle laid down in all the cases referred to above is that where the owner is a company and the offence alleged is really against the company, it is the company that must be prosecuted. In this case, Abirami Cotton Mills, Ltd., Sullurpel, should have been chargesheeted. Instead of doing that, the respondent-Labour Officer has filed the above case against V.B Sivalingam Chettiar, who is the managing director of the company. It is represented that there are so many other directors. On this ground alone, the complaint is liable to be quashed.
12. There is yet another aspect which requires consideration. I have gone through the complaint. Under S. 29, in addition to the company every person who at the time the offence was committed was incharge of and was responsible to the company for the conduct of business of the company can be prosecuted. It is, therefore, incumbent upon the complainant to allege that the person against whom the complaint was lodged was incharge of and was responsible to the company for the conduct of its business. If that allegation is there in the complaint, latter on it is a matter of proof whether that allegation is correct or not. But even without an allegation that the person was in charge of and was responsible for the conduct of business of the company, the complaint cannot be maintained. These are all criminal proceedings and every technical violation should go in favour of the accused. I am unable to accept the contention of the learned Public Prosecutor that this is a matter which has to be considered at the time of trial having regard to the evidence to be adduced. That is so if an allegation is there to that effect in the complaint. But without there being a foundation and without there being a pleading, there cannot be a proof. In the case of offences by companies, in order to fasten a liability to the director, it must be clearly alleged in the complaint that the said person was incharge of and was responsible for the conduct of the business. This omission on the part of the prosecution is fatal to the case.
13. Further, we are now in 1985 and the case relates to 1980–81 and 1981–82. In the circumstances, the proceedings are quashed.
14. In the result, these two petitions are allowed and S.T.C Nos. 3365 and 3366 of 1984, are quashed.