U.P. Pollution vs Tulsipur Sugar Co. Ltd.

Aditya Nath Mittal, J.—This criminal appeal has been filed against the judgment and order dated 13.10.1993, passed by the Special Judicial Magistrate (Pollution Control), Uttar Pradesh, Lucknow, by which the opposite parties No. 1 to 7 have been acquitted. The prosecution story, in brief, is that M/s. Tulsipur Sugar Company is a body corporate, which was discharging polluted water in the Rapti River without purifying it, by which the water was being polluted. The Company could not discharge the polluted water without consent u/s 25 of the Water (Prevention and Control of Pollution) Act, 1974 (hereinafter referred as the ''Act''). The Company had moved an application for consent, but it was found that the Company was not having water treatment plant. Therefore, the consent was not granted and the decision of the Board was communicated to the Company on 8.9.1982. The Company continued to apply for the consent and again an application dated 15.7.1986 was moved which was also rejected by letter dated 29.11.1986. On 19.3.1987, the work place of the Company was inspected and it was found that the industry was in running condition and the polluted water was being discharged continuously in the drain. Inspection note was prepared on 20.3.1987. The complaint was filed against the Company as well as Director General Manager and Secretary, who are responsible for day-to-day business of the Company.

The accused persons were summoned on the basis of the complaint. Accused Ganpati Parmeshwaran, who was a nominee Director, was discharged u/s 245(2), Cr. P.C. Accused Mata Deen Khetan has died during the pendency of the trial and the case of Suresh Chandra Sharma was separated.

After recording the statement u/s 244, Cr. P.C., the charges were framed and further evidence u/s 246, Cr. P.C. was recorded. B.D. Ratoori, P.W.-1 has stated in his statement on oath that he had inspected the mill on 19.3.1987 after giving notice to the representatives of the Company. At the time of inspection, the factory was in running condition and it was not having any treatment plant. At the time of inspection, the polluted water was being discharged in Nakti drain. The inspection report has been proved as Exhibit Ka-1 and notice as Exhibit Ka-2.

P.W.-2 Kaushal Kishore, Engineer (Pollution) has stated in his statement that the Company had applied for consent of the State Board, which was rejected in the year 1982 as well as on 29.11.1986 because the company was not having water treatment plant.

P.W.-3 C.B. Singh who had filed the complaint, had proved the complaint as well as other documents of the prosecution.

The evidence in defence was adduced in which the defence witness has stated that in the year 1985-86, and 87 Late Mata Deen Khetan was Director of the Company and he was looking after all the work of the Company who has died on 13.2.1991. On 26.2.1982, the Board of Directors had passed a resolution. According to which, all functions were seen by Late Mata Deen Khetan. The copy of the resolution of the Board has been proved as Exhibit Kha-1. This witness has further stated that after the death of Mata Deen Khetan, all the functions of the industries are seen by General Manager.

After appreciating the evidence on record, learned Magistrate came to the conclusion that the Company was not granted consent to discharge the polluted water in the river. Therefore, it was proved that the Company was discharging the polluted water in the river. On the point of liability of the accused persons, learned Court below came to the conclusion that the complainant has not filed any evidence that accused Nos. 2 to 10 were responsible for day-to-day business of the Company. The prosecution has also not filed any oral or documentary evidence and none of the witness has named accused Nos. 2 to 10 in their statements on oath. Therefore, the accused Nos. 2 to 10 were not found guilty personally or jointly. Accordingly, accused persons Mohan Lal Dabriwala, Nirmal Kumar Dabriwala, Vimal Kumar Khetan, Santosh Kumar Dabriwala, B.D. Chomal and C.L. Sarogi were acquitted and the Deputy General Manager P.C. Kanodia was convicted.

During the pendency of appeal, respondent No. 2 Sri Mohan Lal Dabriwala and respondent No. 6 Sri B.D. Chomal had also expired.

Learned Counsel for the appellant has submitted that the learned Court below has not properly appreciated the evidence on record and has wrongly acquitted the respondent Nos. 1 to 7. It has also been submitted that as per the finding of Trial Court, the industry was discharging polluted water without consent as provided u/s 25 of the Act. It has also been submitted that when the Trial Court has come to the conclusion that breach of section 25 was made, then it was incumbent upon the Trial Court to have punished all the Directors, Secretary and General Manager of the Company because it cannot be said by the Board of Directors that they had no knowledge of the pollution.

Learned Counsel for the appellant has further submitted that the section 47 of the Act contained a deeming clause, therefore, the Directors cannot escape their liabilities.

Learned Counsel for the appellant has further relied upon the judgment of this Court passed in Criminal Misc. Case No. 1295 of 2006, S.P. Rastogi v. State of U.P., in which this Court has held as under:

The obtaining of consent is not individual action and the Board of Directors were duty bound to take action in this regard. The Mill was set up and was run without any consent order and the Board of Directors persistently knew that they are running the Mill without any consent order and without setting up any treatment plant. It was also in their knowledge that they have applied for grant of consent and that their application has also been rejected. Whether the running of the Mill without any consent order can be termed to be liability of any one individual of the liability of the entire Board of Directors is a question to be considered in this case. The Mill being run without treatment plant cannot be allowed to run is in the knowledge of the Board of Directors. The Board of Directors is supposed to close the industry at once as and when the consent has been refused or they should apply afresh in the changed circumstances for grant of consent.

This Court has further held that in the case of U.P., Pollution Control Board v. Dr. Bhupendra Kumar Modi and another, (SLP (Crl.) No. 1660 of 2005, decided on 12.12.2008) the Hon''ble Apex Court has held as under:

Where an offence under the Act has been committed by a company every person who was in charge of and was responsible to the company for the conduct of the business of the company is also made guilty of the offence by the statutory creation. Any director, manager or other officer of the company, who has consented to or connived in the commission of the said offence, is made liable for the punishment of the offence.

Learned Counsel for the respondents has submitted that the ratio of Dr. Bhupendra Kumar Modi''s case is not applicable to the present case because in Dr. Bhupendra Kumar Modi''s case the prosecution was challenged u/s 482, Cr. P.C. and the case of S.P. Rastogi v. State of U.P., is also u/s 482, Cr. P.C.

Learned Counsel for the respondents has further submitted that in the case of Dr. Bhupendra Kumar Modi (Supra), the Hon''ble Apex Court has also held as under:

When exercising jurisdiction u/s 482 of the Code, the High Court could not ordinarily embark upon an enquiry whether the evidence in question is reliable or not or whether on a reasonable appreciation of it accusation would not be sustained. To put it clear, it is the function of the trial Judge to do so. The Court must be careful to see that its decision in exercise or its power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. If the allegations set out in the complaint do not constitute offence of which cognizance has been taken by the Magistrate, it is open to the High Court to quash the same in exercise of the inherent powers u/s 482 of the Crl. Procedure Code. However, it is not necessary that there should be meticulous analysis of the case before the trial to find out whether the case would end in conviction or acquittal.

It has also been submitted that in the present case, the accused persons have been acquitted after full trial because there was no evidence against them that the polluted water was being discharged within the knowledge of the said persons. It has also been submitted that at the time of incident, the business of the Company was under the supervision of Sri Mata Deen Khetan, the then Director of the Company, who has since expired on 13.2.1991. It has also been submitted that the vicarious liability has to be strictly proved and there was no reason to disbelieve the defence evidence. It has also been submitted that after the death of Sri Mata Deen Khetan, the work was seen by Deputy General Manager, who has already been convicted. It has also been submitted that the prosecution witnesses have not assigned any individual role to other persons. Therefore, provisions of section 47 of the Act are not applicable. It has also been submitted that the provisions of section 47 of the Act are pari materia with section 141 of the Negotiable Instruments Act and the liability does not arise merely on account of holding a particular office or position. It has also been submitted that the persons sought to be made liable should be in charge of and responsible for the conduct of the business of the Company at the relevant time and the same has to be averred as a fact and there is no deemed liability.

Learned Counsel for the respondents has relied upon S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, in which the Hon''ble Apex Court has held as under:

There is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability u/s 141 of the NI Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable.

Under section 141 what is required is that the persons who are sought to be made criminally liable should be, at the time of offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of any responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. The liability arises on account of conduct, act or omission on the part of a persons and not merely on account of holding an office or a position in a company.

The Hon''ble Apex Court has further held as under:

In view of the above discussion, our answers to the questions posed in the reference are as under:

(a) It is necessary to specifically aver in a complaint u/s 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of section 141 cannot be said to be satisfied.

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable u/s 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable u/s 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered u/s 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of section 141.

Learned Counsel for the respondents has further relied upon S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, in which the Hon''ble Apex Court has held that merely being described as a Director in a Company is not sufficient to satisfy the requirement of section 141 of the N.I. Act. The Hon''ble Apex Court has further held that the averments must state that the person who is vicariously liable for commission of the offence of the Company was in charge of and was responsible for the conduct of the business of the Company.

Learned Counsel for the respondent has further relied upon K.K. Ahuja Vs. V.K. Vora and Another, in which the Hon''ble Apex Court has held as under:

The position u/s 141 of the Act can be summarized thus:

(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or joint Managing Director at the relevant time. This is because the prefix ''Managing'' to the word ''Director'' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

(ii) In the case of a director or an officer of the company who signed-the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of section 141.

(iii) In the case of a Director, Secretary or Manager (as defined in Section 2(24) of the Companies Act) or a person referred to in Clauses (e) and (f) of section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case u/s 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable u/s 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.

(iv) Other Officers of a company cannot be made liable under sub-section (1) of section 141. Other officers of a company can be made liable only under sub-section (2) of section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence.

Learned Counsel for the respondents has further relied upon Pepsico India Holdings Pvt. Ltd. Vs. Food Inspector and Another, in which the Hon''ble Apex Court has held as under:

As mentioned hereinbefore, the High Court erred in giving its own interpretation to the decision of this Court in S.M.S. Pharmaceuticals

Ltd.''s case (supra), which was reiterated subsequently in several judgments, some of which have been indicated hereinabove, and relying instead on the decision of Rangachari''s case (supra), the facts of which were entirely different from the facts of this case. It is now well established that in a complaint against a Company and its Directors, the Complainant has to indicate in the complaint itself as to whether the Directors concerned were either in charge of or responsible to the Company for its day-to-day management, or whether they were responsible to the Company for the conduct of its business. A mere bald statement that a person was a Director of the Company against which certain allegations had been made is not sufficient to make such Director liable in the absence of any specific allegations regarding his role in the management of the Company.

Learned Counsel for the respondents has further relied upon Harshendra Kumar D. Vs. Rebatilata Koley Etc., in which the Hon''ble Apex Court has reiterated the principles laid down in S.M.S. Pharmaceuticals Ltd. (Supra) and K.K. Ahuja V.K. Vora (Supra).

The Hon''ble Apex Court has further held that the vicarious liability on the part of a person must be pleaded and proved and riot inferred.

In National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal and Another, the Hon''ble Apex Court has held as under:

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by, the company alongwith averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.

(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

Learned Counsel for the respondents has further submitted that penal statues providing constructive vicarious liability should be construed much more strictly and there is no question of inferential or implied compliance.

Learned Counsel for the respondents has further relied upon Murugesan and Others Vs. State through Inspector of Police, in which the Hon''ble Apex Court has considered the scope of interference by the High Court in an appeal against acquittal and has held as under:

A concise statement of the law on the issue that had emerged after over half a century of evolution since Sheo Swarupam (supra), is to be found in para 42 of the report in Chandrappa and others v. State of Karnataka. The same may, therefore, be usefully noticed below:

42 From the above decisions, in our considered view, the following general principles regarding powers of the Appellate Court while dealing with an appeal against an order of acquittal emerge:

(1) An Appellate Court has full power to review, re-appreciate and reconsider the evidence upon which the order of acquittal is founded.

(2) The Code of Criminal Procedure, 1973 puts no limitation, restriction or condition on exercise of such power and an Appellate Court on the evidence before it may reach its own conclusion, both on questions of fact and of law.

(3) Various expressions, such as, "substantial and compelling reasons", "good and sufficient grounds", "very strong circumstances", "distorted conclusions", "glaring mistakes", etc. are not intended to curtail extensive powers of an Appellate Court in an appeal against acquittal. Such phraseologies are more in the nature of "flourishes of language" to emphasise the reluctance of an Appellate Court to interfere with acquittal than to curtail the power of the Court to review the evidence and to come to its own conclusion.

(4) An Appellate Court, however, must bear in mind that in case of acquittal, there is double presumption in favour of the accused. Firstly, the presumption of innocence is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a Competent Court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the Trial Court.

(5) If two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should not disturb the finding of acquittal recorded by the Trial Court.

(Emphasis is ours)

I have given my thoughtful consideration to the aforesaid law laid down by Hon''ble Apex Court.

In the present case, it is not disputed that the Company was found discharging polluted water without the consent of the Board and had committed breach of the provisions of section 25 of the Act. Now the main question for consideration is that whether the affairs of the Company were looked after by Mata Deen Khetan and after his depth by Deputy General Manager or not and whether the respondents Nos. 2 to 7 were also vicariously liable.

In the present case, the complainant has made the following averments in the complaint:

That the accused person 2 to 10 are Directors, General Manager & Secretary of M/s. Tulsipur Sugar Co., Ltd., Gonda as mentioned in the complaint are responsible for the conduct of the day to day business of the company and responsible for not obtaining the consent of the Board & discharging the trade effluent without obtaining consent u/s 25/26 and further not constructing the proper effluent treatment plant for treatment of their highly polluted trade effluent so as to conform to the standards laid down by the Board. The accused persons are deliberately avoiding the provisions of section 25/26 of the Act for which they are punishable u/s 44 read with the provisions of section 47 of the Act.

That the time of commission of offence all the opposite parties are incharge of the business of the company and they are responsible for the day to day working of the company and also for conducting of the business of the company and continuous commissioning of offence u/s 44 of this ''Act'' because they have not obtained the consent from the Board and violating the mandatory provisions of the Act. The construction of effluent treatment plant can be taken up only when these senior authorities of the company resolve to do so. Offence mentioned in the complaint is being continuously committed against the society at large, animals and aquatic life in particular because of their personal monitory gains. It is therefore prayed that all opposite parties and other responsible persons of the company be summoned and punished according to law.

The prosecution witnesses have not proved the aforesaid averments of paras-17 and 18 in their statements and have not proved the fact that respondents No. 2 to 7 were responsible for the day to day working of the Company and also for conducting the business of the Company and in continuous commission of the offence u/s 44 of the Act.

In S.M.S. Pharmaceuticals Ltd. of 2005 case (Supra), it has been held that liability arises on account of conduct, act or omission on the part of the person, not merely on account of holding an office or a position in the Company. It has further been held that the liability has to be averred as a fact and there is no deemed liability of a Director in such cases.

Further, in S.M.S. Pharmaceuticals Ltd. case of 2007 (Supra), Hon''ble the Apex Court has held that merely being described as a Director in a Company is not sufficient to satisfy the requirement of section 141 of the N.I. Act. As has been held in S.M.S. Pharmaceuticals Ltd. of 2005 (supra), that the provisions of section 141 N.I. Act are pari materia with section 47 of the Water (Prevention and Control of Pollution) Act, 1974, therefore, the aforesaid law laid down by Hon''ble the Apex Court is fully applicable to the present set of facts.

Further, in K.K. Ahuja case (supra), the Director has been distinguished from Managing Director and it has been held that if the averment is made that the accused was Managing Director or Joint Managing Director at the relevant time, then it is sufficient to make it clear that they were in charge and are responsible to the Company, for the conduct of the business of the Company. In the present case, perusal of the complaint shows that none of the accused respondents have been shown to be Managing Director or Joint Managing Director. Therefore, I find substance in the submission of the learned Counsel for the respondents that merely by holding post of Director, they cannot be deemed to be in charge of the business of the Company.

The law as laid down in S.M.S. Pharmaceuticals Ltd. case of 2005 and 2007 (supra) and K.K. Ahuja case (supra), has been reiterated in Harshendra Kumar D. case (supra).

Further, in view of National Small Industries Corpn. Ltd. (supra), it is the responsibility of the complainant to make specific averments so as to make the accused vicariously liable. Hon''ble the Apex Court in the aforesaid case has held that for fastening the criminal liability, there is no presumption that every Director knows about the transaction and the criminal liability can be fastened only on those who, at the time of commission of the offence, where in charge of and were responsible for the conduct of the business of the Company. It has further been held that vicarious liability on the part of the person must be pleaded and proved and not inferred.

In the present case, although it has been pleaded in paras-17 and 18 of the complaint, but the same has not been proved by the prosecution witnesses. The defence evidence that the affairs of the Company were looked after by Late Mata Deen Khetan and the Company had passed resolution to this effect, which has also been proved, cannot be brushed away. I do not find any reason to disbelieve the defence evidence proving that the affairs of the Company were managed by Late Mata Deen Khetan and after his death by the Deputy General Manager. In this way, the prosecution has failed to prove the vicarious liability of respondent Nos. 2 to 7 and by the defence evidence and it is proved that the affairs of the Company were managed by Late Mata Deen Khetan in view of a resolution of 1982 passed by the Board of Directors of the Company. Therefore, the respondent Nos. 2 to 7 cannot be said to be vicariously liable for the aforesaid act of the Company because it is not proved that they were in charge, or are responsible for the conduct of the business of the Company. Learned Court below has also given a thoughtful consideration to the aforesaid aspect and in view of the above, has come to a right decision that vicarious liability of other co-accused has not been proved. The other co-accused have been rightly acquitted.

For the facts and circumstances mentioned above, I do not find any substance in the present appeal. The appeal is, accordingly, dismissed.