Holding

Section 10 of the Essential Commodities Act does not require the company to be prosecuted; the person‑in‑charge or any officer may be prosecuted independently.

Summary

The Managing Director and Production Manager of M/s 5‑S Limited were prosecuted under the Essential Commodities Act for alleged violations of state licensing and price‑control orders. They contended that, under Section 10 of the Act, they could not be prosecuted unless the company itself was also prosecuted. The High Court rejected this contention and the appellants appealed to the Supreme Court. The Court examined the language of Section 10 and held that it expressly lists the company, the person‑in‑charge, and any officer as separately liable persons, without requiring the company to be prosecuted alongside them. Consequently, the prosecutions of the two individuals were deemed maintainable. The appeals were dismissed.

Issues considered

Whether Section 10 of the Essential Commodities Act bars the prosecution of a person‑in‑charge or an officer of a company unless the company itself is also prosecuted.

Legislation cited

Subjects

Essential Commodities ActCorporate liabilitySection 10Prosecution of directorsCriminal lawStatutory interpretationSeparate prosecution

Judgment

719

A

.. SHEORATAN AGARWAL & ANOTHER
v.
B
STATE OF MADHYA PRADESH
September 12, 1984

(0. CHiNNAPPA REDDY AND D.P. MADON, JJ.]

c
Essential Commodities Act. 1955-Section JO-Interpretation of-Company
contravening an order made under s.3-Whether the person in-charge or an officer
of the company at the relevant period can be prosecuted separately without pro-
secuting the company.

The two appellants, who were the Managing Director and the Production-
Manager of a public limited company, were prosecuted by the respondent for D
• alleged violations by their company of clauses 2 (c) (i) and 3 of the Madhya
Pradesh Pulses. Edible Oil Seeds and Edible Oil Dealers Licensing Order, 1977
and clause 3 of the Madhya Pradesh Essential Commodities (Price Exhibition and
Price Control) Order, 1977 read with sections 3 and 7 of the Essential Commodi-
ties Act (the Act, for short). The appellants moved the High Court under
sections 397 and 482 of the Code of Criminal Procedure to quash the procee-
dings against them on the ground that they could not, in Jaw, be prosecuted un- E
less the company itself was prosecuted. The High Court over-ruled this con-
tention and hence these appeals by special leave.

Dismissing the appeals,

HELD : I. Section 10 of the Act lists the persons who may be held guilty
and punished when it is a company that contravenes an order made under F
Section 3 of the Act. They are : (1) the company itself (2) 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,
that is, the person-in-charge of the company, and (3) any director, manager,
secretary or other officers of the company with whose consent or connivance or
because of neglect attributable to whom the offence has been committed, that is,
an officer of the company. [722C-FJ G
'
2. It is clear from the language of Section 10 that there is no statutory com-
pulsion that the person.in-charge or an officer of the company may not be pro-
secuted unless he be ranged alongside the company itself. Each or any of
them may be separately prosecuted or along with the company if there is a
contravention of an order made:under Section 3 of the Act by tho:: company.
lt does not lay down any concUtion that the person-ill-charge Ur an officer of ff
720 SUPREME COURT REPORTS (1985] 1 s.c.R.

A the company 1nay not be separately prosecuted if the con1pany itself is not
prosecuted. Therefore the prosecutions of the appellants are maintainable and
that there is nothing in Section 10 of the Act which bars such prosecution
[722 G,H, 723FJ

State of Madras v C.V. Parekh and another, AIR 1971 S.C. 447, State of
Gujarat v. Chandulal Jethalal, (1980) 21 Gujarat Law Reporter 353, Mirji
B Brothers Oil Mill v. State of f(arnataka, 1980 (2) Knrnataka Law Journal 35
and Santi Kumar Agarwala v. State, ILR. 1975 Cuttack 86, distinguished.

Durgamata Oil Mill v. Calcutta Municipality, 1978 Cr!. L.J. 222, D.K. Jain
v. State, AIR 1965 All. 525 and Chander Bhan v. The State, 1975 All India
Prevention of Food Adulteration, held inapplicable.

G CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.
452-453 of 1984.
•
Appeals by Special leave from the Judgment and Order dated
the !st July, 1983 of the Madhya Pradesh High Court in Criminal
Revision No. 105 of 1983 and Misc. Cr!. Case No. 366 of 1983.
D •
S.T. Desai, M.S. Ganesh and S.C. Dagadiya, for the appellants.

Ravindra Bana and A.K. Sanghi for the respondents.

The Judgment of the Court was delivered by
•
E C!uNNAPPA REDDY, J. Special Leave granted.

A complaint was laid by the State of Madhya Pradesh through
the Inspector, Food and Civil Supplies, Dewas against the two
petitioners Sheoratan Agarwal and Raghunandanlal Chaturvedi, the
•
Managing Director and the Production Manager of M/s 5-S Limited,
F a public Limited Company with its registered office at Calcutta, for
alleged violations of clause 2 (c)(i) and 3 of the Madhya Pradesh
Pulses, Edible Oil Seeds and Edible Oil Dealers Licensing Order,
1977 and clause 3 of the Madhya Pradesh Essential Commodities
(Price Exhibition and Price Control) Order. I 977 read with sections
3 and 7 of the Essential Commodities Act. The petitioners moved
G the High Court of Madhya Pradesh under sections 397 and 482 of
the Code of Criminal Procedure to quash the Proceedings against
them on the ground that they could not, in law, be prosecuted unless
the Company itself was procsecuted. The High Court overruled the
contention raised on behalf of the petitioners. Hence these two •
H appeals by Special Leave under Article 136 of the Constitution.
s. AGARWAL v. M.P. STATE (Chlnnappa Reddy, J.) 721
Shri S.T. Desai, learned counsel for the petitioners, urged th• A
same contention before us, relying for that purpose upon the langu-
age of s. 10 of the Essential Commodities Act, and the decision of
this Court in State of Madras v. C.V. Parekh and anorher(') and the
decision of some High Courts: State of Gujarat v. Chandulal Jetha-
/al('), Mirji Brothers Oil Mill v. State of Karnataka(•), Santi Kumar
Agarwala v. State('). B

' We do not think that the language of s. 10 of the Essential
Commodities Act justifies the submission made on behalf of the
petitioners that if it is alleged that the person contravening the
Order made under the Essential Commodities Act is a Company,
the prosecution of the Directors, the Officers, and servants of 0
the Company or other persons is precluded unless the Company
itself is prosecuted. We are afraid the submission made.on behalf of
the peti1ioners proceeds upon a misunderstanding of the decision of
this Court in State of Madras v. C. V. Parekh. (supra). So do the
various other decisions of High Courts cited before us.
D
'
Section 10 of the Essential Commodities Act is as follows :

"(!) If the person contravening an order made under Sec.
3 is a company, every person who, at the time the contra-
vention was committed, was in charge of, and was responsi-
E
ble to, 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 F
proves that the contravention took place without his know-
ledge or that he exercised all due diligence to prevent such
contravention.
(2) Notwithstanding anything contained in sub-section
(1 ), where an offence under this Act has been committed by
G
a company and it is proved that the offence has been com-
mitted with the consent or connivance of, or is attributable

(I) AIR 1971 S.C. 447
(2) 1980 21 Gujarat Law Reporter 353.
(3) 1980 (2) Karnataka Law Journal 35.
(4) !LR, 1975 Cuttack 86.
H
722 SUPRBMB COURT REPORTS [1985] l s.c.R.

to any neglect on the part of, any director, manager,
A
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.

B Explanation-For the purpose of this section,-

(a) "company" means any body corporate, and includes a
firm or other association of individuals ; and
•
(b) "director" in relation to a firm means a partner in the
firm."
c The Section appears to our mind to be plain enough. If the contra-
vention of the order made under Section 3 is by a Company, the
persons who may be held guilty and punished are (I) the Company
itself (2) every person who, at the time the contravention was com-
mitted, was in charge of, and was responsible to, the Company for
the conduct of the business of the Company whom for short we shaJI •
D
describe as the person-in-charge of the Company, and (3) any
director, manager, secretary or other officer of the Company with!
whose consent or connivance or becauie of neglect attributable to
whom the offence has been committed, whom for short we shal
describe as an officer of the Company. Any one or more or all of
•
them may be prosecuted and punished. The Company alone may·
E
be prosecuted. The person-in-charge only may be prosecuted. The
conniving officer may individually be prosecuted. One, some or all
may be prosecuted. There is no statutory compulsion that the person-
in-charge or an officer of the Company may not be prosecuted '
unless he be ranged alongside the Company itself. Section 10 indi-
cates the persons who may be prosecuted where the contravention
F
is made by the Company. It does not lay down any condition that
the person-in-charge or an officer of the Company may not be sepa-
rately prosecuted if the Company itself is not prosecuted. Each or
any of them may be separately prosecuted or alongwith the Com-
pany. Section 10 lists the person who may be held guilty and
punished when it is a Company that contravenes an order made
G
under Section 3 of the Essential Commodities Act. Naturally,
before the person-in-charge or an officer of the Company is held
gnilty in that capacity it must be established that there has been a
contravention of the Order by the Company. That should be axio-
matic and that is all that the Court laid down in State of Madras v.
H C. V. Parekh (supra) as a careful reading of that case will show and
$, AGARWAL v. M.i>. STATE (Chinnappa Reddy, J.) 12~

not that the person-in-charge or an officer of the Company must be
arraigned simultaneously along with the Company if he is to be A
• found guilty and punished. The following observations made by the
court clearly bring out tJie view of the Court :-
'~It was urged that the two respondents were in charge of,
and were responsible to, the company for the con-
duct of the business of the Company and, consequently,
B
they must be held responsible for the sale and for thus
contravening the provisions of clause 5 of the Iron and
Steel (Control) Order. This argument cannot be accepted,
because it ignores the first condition for the applicability of
S. I 0 to the effect that the person contravening the order
must be a company itself. In the presont case, there is no
finding either by the Magistrate OR by the High Court that c
the sale in convention of clause 5 nf the Iron & Steel (Control)
Order waJ made by the Company. In fact, the Company was
• not charged with the offence at all. The liability of the per-
sons in charge of the Company only arises when the contra-
vention is by the Company itself. Since, in this case, there
is no evidence and no finding that the Company contravened D
Cl. 5 of the lion & Steel (Control), Order the two respon-
dents could not be held responsible. The actual contraven-
tion was by Kamdar and Villabhadas Thacker and any
contravention by them would not fasten responsibility on
the respondents."
• The sentences underscored by us clearly show that what
sought to be emphasised was that there should be a finding
that the contravention was by the Company before ·the accused
could be convicted and not that the Company itself should have
been prosecuted along with the accused. We are therefore clearly
of the view that the prosecutions are maintainable and that there
is nothing in section 10 of the Essential Commodities Act which F
bars such prosecutions.
, y The learned counsel also invited our attention to the decisions
in Durgamata Oil Mill v. Calcutta Municipality('), D.K. Jain v. State(')
and Chander Bhan v. The State.<') None of these cases has any appli-
cation. They arose under the Prevention of Food Adulteration Act G
and it is unnecessary for us to consider them. The appeals are
rejected. -
M.L.A. Appeals dismissed.
(I) 1978 Cr!. L.J. 222.
(2) AIR 1965 All. 525.
(3) [1975] All India Prevention of Food Adultratlon cases. H