Who would be the officer in charge of the affairs of a Company, if the Company is found guilt of violating the provision of the Water Act.

Mahumaud Ali v. State of Bihar AIR 1986 Patna 133

S. S Sandhawalia, CJ., P.S. Sahay & S.S.hamshul Hasan, JJ.

The State Pollution Board had filed a cases against M/S Paper and Cardboard Faxtory Pvt. Ltd. under the Water (Prevention and Control of Pollution) Act, 1974 for discharging vast masses of polluted water and other effluents into the river from their factory .During the trial it was determined that Mohumad Ali, the MD was in charge and responsible to the Company for the conduct of business both at the time of the commission of the offence and at the time of his deposition. Thus, he was also charged under S.47 of the Act. The Trial Judge issued an order of process against him. Aggrieved by this the petitioner filed this suit. The primary ground is that this complaint was not included in the plaint submitted earlier.

(1) Whether S. 47(1) of the Water (Prevention and Control of Pollution) Act, li 1974, necessarily mandates the incorporation of the words "he was in charge of and was responsible to the company for the conduct of the business of the company" in all complaints against the Chairman or Managing Director, or General Manager of the Company for offences in contravention of the Act?

(2) Whether S.47(1) of the Water (Prevention and Control of Pollution) Act, 1974, inflexibly mandates the incorporation of the allegation that the offence was committed with the consent and connivance or was attributable to the neglect on the part of the Chairman or MD or GM of the Company in the complaint itself?

(3) Whether R.N. Dutta v. State and a long line of precedent taking a similar view both earlier and subsequent thereto with regard to the pari materia provisions of S.l O of the Essential Commodities Act lay down the law correctly?

The Court considered the scope of Sec. 47, of the 1974 Act. As it is a beneficent legislation it must be liberally construed. Thus, Sec. 47 (1) creates a deeming fiction that all persons who are responsible for the business of the company will be criminally liable for an violations committed by the company under this Act. It held that this section imposes strict vicarious criminal liability. However, 2 defences are available. He can avoid liability if he can prove the acts were done without his knowledge or he exercised all due diligence to prevent the commission of the offence. Deeming fictions need not be expressly pleaded. It was not disputed that Mahumad Ali was the MD of the firm. The factum of being MD is sufficient to impose liability on him. A separate complaint need not be made. As far as he was not accused before the trial started does not prevent the Courts from adding his name to the list of accused at any time during the trial, if the prosecution adduces evidence to show any such person was also guilty of committing the offence. Thus, the Court held that Question no (1) must be answered in the negative.

The Court then Considered the scope of sub sec. (2) of S. 47. They concluded that its scope was slightly different from sub sec. (1 ), as the former was applicable only to persons directly in charge of and responsible to the Company and the latter brought under its purview more officers if it could be proved the act was done with their consent, connivance or neglect. It was thus, both a rule of evidence and a deeming provision for vicarious liability .It had been established earlier that for a deeming provision, the ingredients need not be expressly pleaded. Thus, the Court concluded that sub sec. (2) of S.47 does not require the plaint to plead that the offence was committed with the consent and connivance of the MD or Directors. Thus, the 2nd question was also answered in the negative.

Since the case of the petitioner was based on the law laid down in R.N .Dutta, the I ! Court considered S.10 of the Essential Commodities Act and concluded that barring minor inconsistencies both S.10 of the Essential Commodities Act and S.47 of the Water : (prevention and Control of Pollution) Act, 1974 are pari materia. The Court considered R.N.Dutta and the long line of precedent after it. The Court opined that the decision in R.N.Dutta was specific to the extraordinary facts in that case. Later judgements have misconstrued the ratio in this case, to mean that until it is proved that the act was done with the consent and connivance of the Directors no liability can be imposed on them. This is problematic as S.47 is a deeming provision and thus a presumption is created in law, the moment it is established that certain persons are the Directors of the Company. The Court concluded that the position of law had been wrongly laid down and answer to question 3 is in the negative. The case was dismissed.