In a major relief to top officials of companies, the Supreme Court on Tuesday ruled that their chairman, managing and executive directors, deputy general manager, planner and executor cannot be held automatically liable under the criminal law for offences committed by the company.
In a judgment, a Bench of Justices Mukesh R Shah and A S Bopanna said: "Magistrate has to record his satisfaction about a prima facie case against the accused who are managing directors, the company secretary or directors of the company and the role played by them in their respective capacity which is sine qua non for initiating criminal proceedings against them."
"Merely because they are chairman, managing director/executive director or deputy general manager or planner/supervisor -- without any specific role being attributed to them in that capacity -- they cannot be arrayed as the accused," the court said, adding that they cannot be held vicariously liable for the offences committed by the company.
The Bench was hearing a private complaint accusing the accused of conspiracy with common intention to lay a water pipeline beneath the scheduled properties belonging to the complainant without any lawful authority and right.
It was also alleged that they had trespassed the schedule properties and demolished the compound wall and destroyed 100 valuable trees while laying down the pipeline.
The Bench noted that the chairman and executive director were stationed at Hyderabad and not present at the site at the time of the demolition. It also upheld the Karnataka High Court and Sessions Court judgments, setting aside the magistrate's order of issuing summons against the accused.
Dismissing the appeal filed against Mangalore Special Economic Zone Limited, the court said no specific allegations were made on the role attributed to the seniors, except for a bald statement that they had connived with each other.