Case summary M/s JMD Ltd, which has been arrayed as accused No.

1 in the complaints, is engaged in

promoting and marketing and construction of commercial complexes.

The Ministry of Environment and Forests, Government of India, New Delhi, issued a
notification, which made it compulsory to obtain an environmental clearance before starting any such operation/project by the interested person or persons.

Accused

No.1 started construction of these projects without obtaining any such environmental clearance and raised the construction in violation of the notification and, as such, committed offence under Section 15 of the Act.1 that violation by taking environmental clearance.

Notices were given to them regarding that violation but they never tried to remove/stop At the time of the commission of the offences, the present petitioners Lalit Gulati, Balraj
Tanwar, Santosh Gadia, Mohinder Kumar Jain and Sunil Bedi, were directors of these companies and were in-charge and responsible persons for day to day functioning of these companies.

Environmental protection act 1986

PENALTY FOR CONTRAVENTION OF THE PROVISIONS OF THE ACT AND THE RULES, ORDERS AND DIRECTIONS.

Issue
Whether the petitioners and the other accused are the directors and responsible for the day to today functioning of the company and controlling day to today affairs at the time of commission of the offence would held liable? Can an application under Section 482 of the Code for quashing the criminal proceedings be dismissed only on the premises that an alternative remedy of filing the revision petition under Section 397 of the Code is available?

Legislations discussed in the said case

Section 482 of the Criminal Procedure Code: Saving of inherent power of High CourtNothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.

Section 15 of the Environment (Protection) Act, 1986: penalty for contravention of the provisions of the act and the rules, orders and direction.

1. Whoever fails to comply with or contravenes any of the provisions of this Act, or the rules made or orders or directions issued there under, shall, in respect of each such failure or contravention, be punishable with imprisonment for a term which may extend to five years with fine which may extend to one lakh rupees, or with both, and in case the failure or contravention continues, with additional fine which may extend to five thousand rupees for every day during which such failure or contravention continues after the conviction for the first such failure or contravention. 2. If the failure or contravention referred to in sub-section (1) continues beyond a period of one year after the date of conviction, the offender shall be punishable with imprisonment for a term which may extend to seven years. Section 16 of the environment (protection) Act, 1986: offences by company: Where any offence under this Act has been committed by a company, every person who, at the time the offence was committed, was directly in charge of, and was responsible to, the company for the conduct of the business of the company.2 Section 141 of the Negotiable Instruments Act, 1881: Offences by companies. If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible .
2

Explanation.- For the purposes of this section,-

(a) " company" means anybody corporate and includes a firm or other association of individuals; and (b) " Director", in relation to a firm, means a partner in the firm.

Discussion of the issue

JMD Promotes Pvt. Ltd., which was converted into a public limited company by the name of JMD Promoters Ltd. in the year 2005 and lastly the name thereof, was changed to JMD Ltd. in the year 2006. The lists of the subscribers so provided with the complaints were nothing but a historical incident and are of no significance. In fact, the petitioners had resigned from the Board of Directors way back in the year 1990 and have no relationship with this company. The documents annexed with the complaints, so as to show that the petitioners were directors of accused No.1 Company, are in fact, lists of subscribers to the Memorandum of Association of JMD Promotes Pvt. Ltd., which was converted into a public limited company. They cannot be said to be the directors in charge and responsible for the conduct of business of the company and, as such, they cannot be prosecuted. The institution of the complaints and continuation thereof against them is gross abuse of the process of the court. Licenses for construction of the said complexes were issued by the Director, Town and Country Planning, Haryana, Chandigarh on 22.7.2005. It has been stated therein that, as per notification issued by the Central Government, from 14.9.2006 no township and area development projects covering an area equal to or greater than 50 hectares and built up area equal to or greater than 20,000 square meters shall be commenced/undertaken in any part of India without taking environmental clearance from the Central Government in accordance with the procedure prescribed in the notification. The company M/s JMD Promoters Ltd., now known as JMD Ltd. (accused No.1), had applied for environmental clearance under the law applicable to the Ministry of Environment and Forests and such clearance was granted vide communication dated 8.1.2008.3 The complaints were rightly filed against them. All the accused, including the petitioners, are directors of accused No.1 Company, as per the official record available with respondent No.2 and they are fully responsible for the day to today functioning of the company.

Notification for environmental clearance certificate was issued on 2006 they got in 2008.

Judgment
It is the admitted case of both the sides that accused No.1 is a public limited company. Therefore, every person, who, at the time the offence was committed, was directly in charge of and was responsible to the company for the conduct of the business thereof, is deemed to be guilty for the offence and is liable to be proceeded against and punished accordingly. The question regarding vicarious liability of such person came up for consideration recently before the Hon'ble Supreme Court in National Small Industries Corporation Ltd. Versus Harmeet Singh Paintal and another 2010 (1) Apex Court Judgment 638.4 A director of the company cannot be deemed to be incharge of and responsible for the conduct of the company. For fastening the criminal liability, there is no presumption that every director knows about the transaction of the company. Section 141 does not make all the directors liable for the offence. 5 According to the petitioners, they ceased to be the directors of accused No.1/company in the year 1990. Certified copies of form 32 have been filed with these petitions, which are admissible under the Companies Act, 1956. As per this document, all these petitioners ceased to be the directors of the accused company in the year 1990. It has been averred by the petitioners that their names appeared amongst the names of the subscribers when the accused No.1/company was initially incorporated as a private limited company. That fact has not been denied by respondent No.2 in his reply. According to that respondent, the petitioners are also directors of the company as per record maintained by it.6 After the petitioners ceased to be the directors of the company, no such criminal liability can be fastened upon them. That is the second ground for quashing the complaints, summoning orders and the consequent proceedings. In the result, these petitions are accepted. The above complaints, summoning orders dated 11.11.2008 and 9.9.2009 and consequent proceedings are ordered to be quashed.

It was also a case relating to the prosecution of the company and its directors. Averment is an essential requirement of Section 141 and has to be made in the complaint. Without this averment made in the complaint, the requirement of that section cannot be said to be satisfied. 6 It is not mentioned in the reply as to which year that record relates.
5

Cases referred
National Small Industries Corporation Ltd. versus Harmeet Singh Paintal and another 2010 (1) Apex Court Judgment 638: In the National Small Industries Corporation (supra), Panta Harmeet Singh Paintal was no more director of the company when the cheques alleged in the complaints were signed. It was also a case relating to the prosecution of the company and its directors. It was held therein that a complaint has to be examined by the Magistrate in the first instance on the basis of the averments contained therein. If the Magistrate is satisfied that there are averments, which bring the case within Section 141, he would issue the process. It is necessary to specifically aver in the complaint that at the time the offence was committed, the accused was in charge of and responsible for the conduct of the business of the company. This averment is an essential requirement of Section 141 and has to be made in the complaint. Without this averment made in the complaint, the requirement of that section cannot be said to be satisfied. A director of the company cannot be deemed to be in charge of and responsible for the conduct of the company. For fastening the criminal liability, there is no presumption that every director knows about the transaction of the company. Section 141 does not make all the directors liable for the offence.