A Bench of the Supreme Court consisting of Justice R. Subhash Reddy and Justice Sanjiv Khanna has held that in prosecution under the Minimum Wages Act, a person-in-charge or an officer of the company could be held guilty in that capacity only after it has been established that there has been a contravention by the company as well.
The Bench has also held that the criminal law should not be set into motion as a matter of course or without adequate and necessary investigation of facts on mere suspicion, or when the violation of law is doubtful.
"It is the duty and responsibility of the public officer to proceed responsibly and ascertain the true and correct facts. Execution of law without appropriate acquaintance with legal provisions and comprehensive sense of their application may result in an innocent being prosecuted," the Bench stated.
Regarding the duties of the Magistrate while issuing summons, the Bench explained that the summons shouldn't be issued mechanically else the purpose of laying down procedure under the Criminal Procedure Code would be frustrated.
"Equally, it is the court's duty not to issue summons in a mechanical and routine manner. If done so, the entire purpose of laying down a detailed procedure under Chapter XV of the 1973 Code gets frustrated. Under the proviso (a) to Section 200 of the 1973 Code, there may lie an exemption from recording pre-summoning evidence when a private complaint is filed by a public servant in discharge of his official duties; however, it is the duty of the Magistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking cognizance and summoning the accused is made out or not."
In this case, the appellant had challenged the criminal prosecution and bailable warrant issued by the Chief Magistrate for non-compliance with the provisions of the Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950.
The appellant is a Director of the M/s. Writer Safeguard Pvt. Ltd. In 2009. The Company had entered into an agreement titled "Agreement for Servicing and Replenishment of Automated Teller Machines" with M/s. NCR Corporation India Private Ltd., the latter having earlier entered into an agreement with the State Bank of India for maintenance and upkeep of the State Bank of India's ATMs.
On February 19, 2014 the Labour Enforcement Officer (Central) had inspected the State Bank of India's ATM. On March 6, 2014, a notice was issued to the appellants alleging non-compliance with the provisions of the Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950 at the ATM. On 02nd April 2014, the Company responded claiming it neither manage nor work at the ATM and that ATM cannot be treated as a worksite requiring maintenance of certain registers and forms. Thus, a criminal complaint was filed against them. It was challenged before the High Court but dismissed as sans merit.
At the outset, the Bench explained Sub-section (1) and (2) to Section 22C of the Minimum Wages Act.
Sub-section (1) of Section 22 states that where an offence is committed by a company, 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, as well as the company itself shall be deemed to be guilty of the offence.
On this the Bench said, "By necessary implication, it follows that a person who does not bear out the requirements is not vicariously liable under Section 22C(1) of the Act. The proviso, which is in the nature of an exception, states that a person who is liable under sub-section (1) shall not be punished if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence."
Thus, the Bench ruled,
"The onus to satisfy the requirements to take benefit of the proviso is on the accused, but it does not displace or extricate the initial onus and burden on the prosecution to first establish the requirements of sub-section (1) to Section 22C of the Act. The proviso is to give immunity to a person who is vicariously liable under sub-section (1) to section 22C of the Act. The proviso being an exception cannot be made a justification or a ground to launch and initiate prosecution without the satisfaction of conditions under sub-section (1) of Section 22C of the Act. The proviso that places the onus to prove the exception on the accused, does not reverse the onus under the main provision, namely Section 22C(1) of the Act, which remains on the prosecution and not on the person being prosecuted."
Sub-section (2) of Section 22 states that notwithstanding anything contained in sub-section (1), where any offence under the Act has been committed by a company, and it is proved that such offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, then such director, manager, secretary or other officer of the company shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explaining Sub-section (2), the Bench held that, "Without much ado, it is clear from a reading of sub-section (2) to Section 22C of the Act that a person cannot be prosecuted and punished merely because of their status or position as a director, manager, secretary or any other officer, unless the offence in question was committed with their consent or connivance or is attributable to any neglect on their part. The onus under sub-section (2) to Section 22C is on the prosecution and not on the person being prosecuted."
Citing the previous judgments, the Bench noted that the complaint does not satisfy the mandate of sub-section (1) to Section 22C of the Act as there are no assertions or averments that the appellant before the Court was in-charge of and responsible to the company and that in the absence of any specific averment, the prosecution in the present case does not and cannot rely on Section 22C(2) of the Act.
The Bench also noted that the Company has not been made an accused or summoned to be tried for the offence. The Bench held that for that reason also, the prosecution would fail.
"A company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well.", the Bench held.
The Bench took note of the facts that the complaint was silent on the contentions raised by the Company in its reply and on whether the authorities considered the legal provisions in the context of the factual background before initiating prosecution.