Mohamad Ibrahim and another vs State

The accused 2 and 3 against whom and three others, the respondent has filed a charge-sheet under Clauses 7(2) and 7(3) of the Tamil Nadu

Scheduled Commodities (Regulation of Distribution by Card system) order, 1982 read with Sections 3 and 7 read with S. 10 of the Essential

Commodities Act, 1955 read with Sections 34 and 107 I.P.C. invoke the inherent powers of this court u/s 482 Cr.P.C. to quash the above

proceedings.

Thiru K. S. Ramachandran, learned counsel for the petitioners would urge that there are no materials in the records furnished u/s 173 Cr.P.C. to

show that the petitioners have committed the offences and the bald statement in the charge sheet that the offences could not have been committed

without the knowledge and connivance of the petitioners, would not be sufficient to prove the case against the petitioners. The learned counsel

would further contend that the petitioners holding the post of President and Secretary respectively in the first accused Society in an honorary

capacity, having only overall control over the affairs of the Society and being employed elsewhere the first petitioner as Pharmacist in the Rajaji

Government Hospital at Madurai and the second petitioner as Assistant in the court of District Munsif, Madurai could not be proceeded against for

any irregularity or any offence committed by the other accused, who are paid employees of the Society. In support of this proposition, the learned

counsel placed reliance upon certain decisions of this court, which I shall refer to later.

The first accused is the State Government Employees Consumers'' Co-operative Stores Limited, Madurai, which is a company u/s 10 of the

Essential Commodities Act (hereinafter referred to as the ''Act'') Accused 2 and 3 present petitioners are the President and Secretary respectively.

Accused 4 and 5 are the salesmen. The prosecution case is that on information that large quantities of kerosene supplied to the first accused-

society were being sold in black market to others, the Inspector of Police, Civil supplies, C.I.D., Madurai on 12-5-1988 at, about 1 p.m.

inspected the first accused society and checked the stock register and other registers of the society. Accused 4 and 5 were present. The stock

register showed that on 11-5-1988, 1,000 litres of kerosene had been taken delivery and received in the society and the bill book showed that the

same had been distributed to 200 card holders on the same day. Investigation disclosed that on 11-5-1988 1,000 litres of kerosene, shown as

having been distributed to card holders on that day, had not in fact been even taken delivery from the kerosene dealer viz. K. Srinivasa Iyengar,

Madurai and that even without taking delivery, the bank draft representing the price for the kerosene had been handed over to the kerosene dealer

and the 4th accused had received a sum in return and both the accused 4 and 5 had made false entries in the bill book and other registers making it

appear as if the entire stock of 1,000 litres had been distributed to 200 card holders on that day itself. The offence had been committed by the first

accused society and the accused 2 and 3 being the President and Secretary respectively and the second accused having overall control over the

properties of the first accused society and the third accused, as Secretary, being requested to prepare indent for the requirement of the fair-price

stock and check the every day sale of essential articles, had failed to exercise due diligence to prevent the commission of the offence, which could

not have been committed without their knowledge and connivance. On these allegations, charge sheet was filed against all the five accused for the

above offences.

It is not denied that during the relevant period, the second accused was the President of the Society and the third accused was the Secretary.

The learned counsel for the petitioners sought to rely upon the decision of a learned judge of this court in Ramamurthy, K. S. v. State by Inspector

of Police 1983 LW 62 wherein a charge sheet against ex-officio president of a co-operative society was quashed on the facts of that case,

particularly when it was shown that on the relevant date when the offence was committed, the bye laws of that society had been amended making

the vice-president responsible for the affairs of the society. The court also felt that the misappropriation related to a paltry sum of Rs. 90/-, which

was of a trivial nature.

The same learned judge in another decision in Viswanathan v. State Superintendent of Police 1982 LW 70 by a common judgment quashed the

prosecutions against the Secretaries and Presidents of cooperative societies, when they were arrayed along with the paid employees for offences

under sections 409 read with 34 and 477A, IPC. In the case dealt with in para 4 of the judgment, the President had not even signed the cash book

on the relevant dates and none of the witnesses implicated him either directly or indirectly. In the case dealt with in para 7 also, it was found that

none of the witnesses either directly or indirectly implicated the President and in the case in para 11, the learned judge felt that it would not be

possible for the President to check each and every entry made by the other staff. On the facts of these cases, the proceedings were quashed.

These cases would stand on an entirely different footing from the present case, in view of the fact that in the present case, the charge sheet is laid

invoking S. 10 of the Act, which introduces a new construction regarding the liability of those who are incharge of and responsible to the company

for the conduct of the business of the company and their liability, therefore, has to be decided, not on the general law but upon the deeming

provision contained in S. 10.

The learned counsel for the petitioners would also place reliance upon another decision of a learned judge of this court in Karuppannan, M. v.

State by Inspector of Police 1988 LW 485 wherein a charge sheet filed against the President for similar offences was quashed particularly because

the learned judge found that charge sheet showed that the President was holding that post only from 30-6-1984 to 30-11-1984 and the

occurrence had taken place on 1-7-1986. The contention of the prosecution that the salesman who actually committed the offences had been

appointed by the President and the President would, therefore, be vicariously liable, was repelled by the learned judge.

In the instant case, the charge sheet having been filed invoking S. 10 of the Act, the decision of the Supreme Court in Municipal Corporation of

Delhi Vs. Purshotam Dass Jhunjunwala and Others, dealing with a similar situation would be more appropriate. That was a prosecution, no doubt,

under the provisions of the Food Adulteration Act wherein the case was instituted on a complaint, unlike the present one, which is on a police

report. However, the fact that S. 10 of the Act was invoked would be a common feature in both the cases, which would make the principles laid

down by the Supreme Court in the above decision applicable to this case also. Therein the Supreme Court set aside the order of the High Court

quashing the prosecution against accused 7 and 12 there who were shown in the complaint, as in charge of and responsible for the conduct of

business of the society. The Supreme Court observed that the complaint clearly that at the relevant time, the above accused were in charge of and

responsible for the conduct of its business and the High Court had failed to consider that the above allegations were quite clear and acceptable and

sufficient for taking cognizance of the offence against the accused and further details would have to be given in the shape of evidence during trial.

S. 10 of the Act is as follows :-

(1) If the person contravening an order made u/s 3 is a company, every person, who, at the time the contravention 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 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-s. (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"".

S. 10 of the Act seeks to make liable, persons in charge of and responsible for the affairs of the company, when the offence is committed by

the company and the company is also arrayed as an accused. Under sub-s. (2) of S. 10 of the Act, prosecution will have to prove 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, who are shown to have been in charge of and responsible to for the conduct of the business of the company. Once the

prosecution establishes this ingredient, the burden then shifts to the accused to show that the contravention took place without his knowledge or

that he exercised all due diligence to prevent such contravention. A reading of these provisions would clearly show, that even when the accused is

shown to be in charge of or responsible to the conduct of the affairs of the company, and the offence ""is attributable to any neglect on the part of

that person he is deemed to be guilty of that offence. S. 10 is a deeming provision. The actual consent of connivance need not be established and it

is enough if the prosecution proves that the offence is attributable to any neglect on the part of the accused. S. 10 does not refer to any degree of

negligence or gross negligence or criminal negligence as distinct from dereliction of duty. It merely refers to ''any neglect'' on the part of those in

charge of or responsible to the company. Direct evidence of this neglect, would be rare. Like any other fact, it could be established by

circumstantial evidence also.

Trial has not commenced and at this stage, we have only to peruse the records u/s 173, Cr.P.C. and the allegations made in the charge-sheet.

If these attract S. 10(2) of the Act, it would be premature for us to go further into the matter and weigh the materials or the incriminating

circumstances to decide, whether the petitioners could be guilty or not. The fact that the posts of the accused-petitioners are honorary or that the

petitioners are employed elsewhere, are considerations totally irrelevant to S. 10.

It is not denied that at the relevant period, the second accused-first petitioner, as the President and the third accused-second petitioner as the

Secretary, were in charge of and responsible to the first accused-society for the conduct of the affairs of the Society. Records u/s 173 show that

on 3-5-1988, 1,000 litres of kerosene were shown as having been taken delivery and distributed to card holders on the same day; on 5-5-1988

another quantity of 1,000 litres of kerosene were taken delivery and shown as distributed to card holders on the same day; on 9-5-1988 another

quantity of 1,000 litres of kerosene have been taken delivery and shown as distributed to card holders the next day; on 11-5-1988 another

quantity of 1,000 litres of kerosene shown as taken delivery and shown as distributed to 200 card holders on the same day. It is in this back

ground that the police made the inspection and detected the crime. It is not necessary that all the accused against whom charge sheet is filed,

should be present at the time when the surprise inspection is made. S. 10 of the Act does not lay down any such contingency.

Prima facie, there is material, to show that if accused 4 and 5 without even taking delivery of 1,000 litres of kerosene, made an illegal gain by

falsifying the accounts as if kerosene was distributed to card holders, the offence was directly attributable to some neglect on the part of the

accused 2 and 3. That is all that S. 10 requires. The contention of the learned counsel that no witness while examined u/s 161 Cr.P.C. has spoken

to about any neglect or consent or connivance of the petitioners would not exonerate the petitioners, since like any fact, that could also be inferred

from circumstances. That the offence was committed without their knowledge and in spite of exercise of due diligence by the petitioners has to be

established by the petitioners, only during trial. The contention of the learned counsel for the petitioners that immediately after the detection of the

offence, accused 4 and 5 were placed under suspension by the first petitioner-President, would only be a self-saving action on the part of the

President. It would be unjust and against law to stifle the prosecution on these considerations.

Hence, this petition is dismissed.

Petition dismissed.