Case: HINDUSTAN UNILEVER LIMITED Vs. THE STATE OF MADHYA PRADESH

to the root of the trial, though permissible in law, is justified. 20. A three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours Private Limited (2012) 5 SCC 661 considered the question of conviction of the Directors in the absence of the Company in proceedings under Section 138 of the Negotiable Instruments Act, 1881 (For short, the NI Act) as also in the proceedings under Information Technology Act, 2000. This Court held that Section 141 of the NI Act dealing with offences by companies contemplates that 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. This Court, considering the said provision, held as under: 38. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term deemed has to be read in its context and further, the fullest logical purpose and import are to be understood. It is because in modern legislation, the term deemed has been used for manifold purposes. The object of the legislature has to be kept in mind. xx xx xx 56. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons, whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the section is of immense significance and, in its tentacle, it brings in the company as well as the Director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in the context. xx xx xx 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. ………. 21. Section 17 of the Act reads as under: 17. Offences by companies—(1) Where an offence under this Act has been committed by a company— (a) (i) the person, if any, who has been nominated under sub-section (2) to be in charge of, and responsible to, the company for the conduct of the business of the company (hereinafter in this section referred to as the person responsible), or (ii) where no person has been so nominated, 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; and (b) 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 and that he exercised all due diligence to prevent the commission of such offence. (2) **** ***** 22. Clause (a) of Sub-Section (1) of Section 17 of the Act makes the person nominated to be in charge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of Sub-Section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 141 of the NI Act and Section 17 of the Act which makes the Company as well as the Nominated Person to be held guilty of the offences and/or liable to be proceeded and punished accordingly. Clauses (a) and (b) are not in the alternative but conjoint. Therefore, in the absence of the Company, the Nominated Person cannot be convicted or vice versa. Since the Company was not convicted by the trial court, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant/Nominated Person who has been facing trial for more than last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the Nominated Person as unsustainable.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. We do not find any merit in the arguments raised by Dr. Singhvi with respect to the punishment provided under the 2006 Act. The judgment of this Court in T. Barai is consequent to amendment in the Act when Section 16A was inserted by the Parliament. Similarly, the judgment in Nemi Chand was a judgment arising out of the amendment in the Act only. The benefit of amendments in the Act, has been rightly granted to the accused in an appeal arising out of the proceedings under the Act. But in the present case, the Act has been repealed by Section 97 of the 2006 Act, however, the punishments imposed under the Act have been protected.15. In terms of Section 6 of the General Clauses Act, 1897, unless dif-ferent intention appears, the repeal of a statute does not affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or pun- ishment and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the Repealing Act or Regulation had not been passed. But in the 2006 Act, the re-peal and saving clause contained in Section 97 (1)(iii) and (iv) specifically provides that repeal of the Act shall not affect any in- vestigation or remedy in respect of any such penalty, forfeiture or punishment and the punishment may be imposed,as if the 2006 Act had not been passed. The question as to whether penalty or prosecution can continue or be initiated under the repealed provi- sions has been examined by this Court in State of Punjab v. Mohar Singh AIR 1955 SC 84 , wherein this Court examined Section 6 of the General Clauses Act which is on lines of Section 38(2) of the Interpretation Act of England. It was held as under:6. Under the law of England, as it stood prior to the Interpretation Act of 1889, the effect of repealing a statute was said to be to obliterate it as completely from the records of Parliament as if it had never been passed, except for the purpose of those actions, which were commenced, prosecuted and concluded while it was an existing law [ Vide Craies on Statute Law, 5th edn, p. 323] . A repeal therefore without any saving clause would destroy any proceeding whether not yet begun or whether pending at the time of the enactment of the Repealing Act and not already prosecuted to a final judgment so as to create a vested right [ Vide Crawford on Statutory Construction , p. 599-600w] . To obviate such results a practice came into existence in England to insert a saving clause in the repealing statute with a view to preserve rights and liabilities already accrued or incurred under the repealed enactment. Later on, to dispense with the necessity of having to insert a saving clause on each occasion, Section 38(2) was inserted in the Interpretation Act of 1889 which provides that a repeal, unless the contrary intention appears, does not affect the previous operation of the repealed enactment or anything duly done or suffered under it and any investigation, legal proceeding or remedy may be instituted, continued or enforced in respect of any right, liability and penalty under the repealed Act as if the Repealing Act had not been passed. Section 6 of the General Clauses Act, as is well known, is on the same lines as Section 38(2) of the Interpretation Act of England.9. The offence committed by the respondent consisted in filing a false claim. The claim was filed in accordance with the provision of Section 4 of the Ordinance and under Section 7 of the Ordinance, any false information in regard to a claim was a punishable offence. The High Court is certainly right in holding that Section 11 of the Act does not make the claim filed under the Ordinance a claim under the Act so as to attract the operation of Section 7. Section 11 of the Act is in the following terms:The East Punjab Refugees (Registration of Land Claims) Ordinance 7 of 1948 is hereby repealed and any rules made, notifications issued, anything done, any action taken in exercise of the powers conferred by or under the said Ordinance shall be deemed to have been made, issued, done or taken in exercise of the powers conferred by, or under this Act as if this Act had come into force on 3rd day of March, 1948.……………….The truth or falsity of the claim has to be investigated in the usual way and if it is found that the information given by the claimant is false, he can certainly be punished in the manner laid down in Sections 7 and 8 of the Act. If we are to hold that the penal provisions contained in the Act cannot be attracted in case of a claim filed under the Ordinance, the results will be anomalous and even if on the strength of a false claim a refugee has succeeded in getting an allotment in his favour, such allotment could not be cancelled under Section 8 of the Act. We think that the provisions of Sections 47 and 8 make it apparent that it was not the intention of the Legislature that the rights and liabilities in respect of claims filed under the Ordinance shall be extinguished on the passing of the Act, and this is sufficient for holding that the present case would attract the operation of Section 6 of the General Clauses Act. It may be pointed out that Section 11 of the Act is somewhat clumsily worded and it does not make use of expressions which are generally used in saving clauses appended to repealing statutes; but as has been said above the point for our consideration is whether the Act evinces an intention which is inconsistent with the continuance of rights and liabilities accrued or incurred under the Ordinance and in our opinion this question has to be answered in the negative.17. Thus, in view of Section 97 of the 2006 Act, as also under Section 6 of the General Clauses Act, 1897, the proceedings would continue under the Act. No benefit can be taken under the 2006 Act as the prosecution and punishment under the Act is protected.18. The judgment of this Court in Trilok Chand is the only judgment which has given benefit of the 2006 Act and the sentence was imposed by imposing a fine of Rs.5,000/-. The attention of the Court was not drawn to Section 97 of the 2006 Act, which protects the punishments given under the repealed Act. Therefore, the order in Trilok Chand is on its own facts.19. However, we find merit in the argument of Mr. Luthra that the order of remand by the High Court to the trial court against the Company cannot be sustained for the reason that such an order was passed without giving an opportunity of hearing, as contemplated under Section 401(2) of the Code.20. A three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours Private Limited (2012) 5 SCC 661 considered the question of conviction of the Directors in the absence of the Company in proceedings under Section 138 of the Negotiable Instruments Act, 1881 (For short, the NI Act) as also in the proceedings under Information Technology Act, 2000. This Court held that Section 141 of the NI Act dealing with offences by companies contemplates that 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. This Court, considering the said provision, held as under:38. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term deemed has to be read in its context and further, the fullest logical purpose and import are to be understood. It is because in modern legislation, the term deemed has been used for manifold purposes. The object of the legislature has to be kept in mind.56. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons, whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the section is of immense significance and, in its tentacle, it brings in the company as well as the Director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in the context.58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. ……….22. Clause (a) of Sub-Section (1) of Section 17 of the Act makes the person nominated to be in charge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of Sub-Section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 141 of the NI Act and Section 17 of the Act which makes the Company as well as the Nominated Person to be held guilty of the offences and/or liable to be proceeded and punished accordingly. Clauses (a) and (b) are not in the alternative but conjoint. Therefore, in the absence of the Company, the Nominated Person cannot be convicted or vice versa. Since the Company was not convicted by the trial court, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant/Nominated Person who has been facing trial for more than last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the Nominated Person as unsustainable.