Director Of Company Can Be Made An Accused Along With It Only If There Is Sufficient Material To Prove His Active Role And Criminal Intent

In CRIMINAL APPEAL NO.1263 OF 2019, Shiv Kumar Jatia vs State of NCT of Delhi,  criminal cases were filed alleging negligence on the part of hotel, against the company, its managing director and its officers who are incharge of day to day affairs of the hotel. The petition seeking to quash FIR against the managing director was turned down by the High Court.

Examining the dictum laid down in earlier judgments including in Sunil Bharti Mittal vs. Central Bureau of Investigation, the bench observed that by applying the ratio laid down by this Court in the case of Sunil Bharti Mittal, it is clear that an individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused. Further in the case of Maksud Saiyed vs. State of Gujarat & Ors. , this Court has examined the vicarious liability of Directors for the charges levelled against the Company. In the aforesaid judgment this Court has held that, the Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company, when the accused is a Company. It is held that vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the Statute. It is further held that Statutes indisputably must provide fixing such vicarious liability. It is also held that, even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.

It is clear that principally the allegations are made only against the company and other staff members who are incharge of day to day affairs of the company. In absence of specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned