Mere Authorisation Of An Act At The Behest Of A Company Is Not Enough To Render Director Vicariously Liable: SC Quashes Criminal Proceedings Against TATA Officials
The Supreme Court has held that mere authorisation of an act at the behest of the company or the exercise of a supervisory role over certain actions or activities of the company is not enough to render a director vicariously liable.
The Court quashed the criminal proceedings initiated against three corporate officials (Appellants) under Sections 4 and 19 of the Punjab Land Preservation Act, 1900 (the Act), in a case involving alleged deforestation and environmental damage in Gurugram. The Court held that the principles of vicarious liability cannot be applied in the absence of specific statutory provisions or evidence of active role coupled with criminal intent for the alleged act.
The Bench of Justice J.B. Pardiwala and Justice R. Mahadevan explained, “A director may be vicariously liable only if the company itself is liable in the first place and if such director personally acted in a manner that directly connects their conduct to the company’s liability. Mere authorization of an act at the behest of the company or the exercise of a supervisory role over certain actions or activities of the company is not enough to render a director vicariously liable. There must exist something to show that such actions of the director stemmed from their personal involvement and arose from actions or conduct falling outside the scope of its routine corporate duties.”
Senior Advocate Meenakshi Arora represented the Appellants, while AOR Akshay Amritanshu appeared for the Respondents.
The Range Forest Officer filed a complaint alleging that bulldozers illegally uprooted 256 trees and 62 small plants in Gurugram.
The Special Environment Court took cognizance of the complaint and issued process for the offence punishable under Section 19 of the Act. The Appellants approached the Punjab and Haryana High Court for quashing the proceedings, but their Petition was dismissed.
The Supreme Court pointed out that under the scheme of the Act, no vicarious liability can be attached to any of the directors or office bearers of the company. “It is the individual liability or the act that would make the person concerned liable for being prosecuted for the offence punishable under Section 19 of the Act, 1900,” it stated.
“The persons who were actually found at the site felling the trees have not been arrayed as accused in the complaint. Although the license / necessary permission for development of the land in the specified area had been granted in favour of the company, yet for the reasons best known to the complainant the company has not been arrayed as an accused in the complaint,” the Bench remarked.
The Court explained that vicarious liability would arise only if there were specific and substantiated allegations attributing a particular role or conduct to the directors sufficient enough to attract the provisions and by extension the offence itself.
Consequently, the Court held, “In view of the aforesaid, this appeal succeeds and is hereby allowed. The impugned complaint and order taking cognizance of the said complaint is hereby quashed.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: Sanjay Dutt & Ors. v. State of Haryana & Anr. (Neutral Citation: 2025 INSC 34)
Appearance:
Appellants: Senior Advocate Meenakshi Arora; Advocates Sumesh Malhotra, Vikas Singh, Pawan Bhardwaj, Jayesh Yadav, Yashvi, Russai Sidhu and Chitra Singh; AOR Lokesh Kumar Choudhary
Respondent: AOR Akshay Amritanshu; Advocates Drishti Saraf, Pragya Upadhyay and Swati Mishra
