Page 113 - ELT_15th August 2020_Vol 373_Part 4

2020 ] SHAILENDRA SWARUP v. DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE 447

“12. It is very clear from the above provision that what is required is that
the persons who are sought to be made vicariously liable for a criminal of-
fence under Section 141 should be, at the time the offence was committed,
was in-charge of, and was responsible to the company for the conduct of
the business of the company. Every person connected with the company
shall not fall within the ambit of the provision. Only those persons who
were in-charge of and responsible for the conduct of the business of the
company at the time of commission of an offence will be liable for criminal
action. It follows from the fact that if a Director of a Company who was not
in-charge of and was not responsible for the conduct of the business of the
company at the relevant time, will not be liable for a criminal offence under
the provisions. The liability arises from being in-charge of and responsible
for the conduct of the business of the company at the relevant time when
the offence was committed and not on the basis of merely holding a desig-
nation or office in a company.
13. Section 141 is a penal provision creating vicarious liability, and which,
as per settled law, must be strictly construed. It is therefore, not sufficient to
make a bald cursory statement in a complaint that the Director (arrayed as
an accused) is in charge of and responsible to the company for the conduct
of the business of the company without anything more as to the role of the
Director. But the complaint should spell out as to how and in what manner
Respondent No. 1 was in-charge of or was responsible to the accused com-
pany for the conduct of its business. This is in consonance with strict inter-
pretation of penal statutes, especially, where such statutes create vicarious
liability.”
36. In the above case, this Court held that Directors can be prosecuted
only if they were in-charge and responsible for the conduct of the business of the
company. In paragraph 36, following has been laid down :-
“36. Section 291 of the Companies Act provides that
“291. General powers of Board. - (1) Subject to the provisions of that Act,
the Board of Directors of a company shall be entitled to exercise all such
powers, and to do all such acts and things, as the company is authorized to
exercise and do.
A company, though a legal entity, can act only through its Board of Direc-
tors. The settled position is that a Managing Director is prima facie in-charge
of and responsible for the company’s business and affairs and can be prose-
cuted for offences by the company. But insofar as other Directors are con-
cerned, they can be prosecuted only if they were in-charge of and responsi-
ble for the conduct of the business of the company.”
37. Section 68 of FERA, 1973 deals with “Offences by companies”. Sec-
tion 68(1) provides that “………… every person who, at the time of the contra-
vention was committed, was in-charge of, and was responsible to, the company
for the conduct of business of the company as well as the company, shall be
deemed to be guilty of the contravention…….. . .” Section 68(1) creates a legal
fiction, i.e., “shall be deemed to be guilty”. The legal fiction triggers on fulfilment
of conditions as contained in the section. The words “every person who, at the
time of the contravention was committed, was in charge of, and was responsible
to, the company for the conduct of business” has to be given some meaning and
purpose. The provision cannot be read to mean that whosoever was a Director of
a company at the relevant time when contravention took place, shall be deemed

EXCISE LAW TIMES  15th August 2020  113