No criminal liability for post dated cheque bounce: High Court

In a recent decision the Bombay High Court, taking a literal view of the statutory provisions, has declared that a person is not liable under the Negotiable Instruments Act for bouncing of cheques if the liability is alleged on account of post-dated cheques given by such person. The High Court was dealing with the validity of the acquittal order passed by the Magistrate where it was alleged by the Co-operative society which had extended a loan that the person had given post-dated cheques as security for the loan taken which had bounced for insufficiency of funds. 

The High Court, agreeing with the acquittal order passed by the Magistrate, observed as under;

14. Thus the object of the amendment and introduction of Chapter XVII in the Negotiable Instruments Act by Act of 1988 was mainly to encourage all major transactions including commercial or business transactions through cheques and to enforce credibility and acceptability of cheques in settlement of liability in general. Encouragement of payment by cheques/credit cards/debit cards rather than by cash is necessary for healthy economy. That also brings in transparency in transactions and discourages creation of black or unaccounted money through evasion of taxes or other malpractices. So, provisions like Section 138 of Negotiable Instruments Act are salutary to give reliability, credibility and acceptability of negotiable instruments like cheques in daily life. However, the object was not to provide effective and speedy remedy for recovery of loans. Law makers must not have intended or imagined that money lenders or banks would obtain blank or post dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors/borrowers to repay loan under threat of prosecution and punishment under Section 138 of the Negotiable Instruments Act. So, it is doubtful if provisions of Section 138 of the Negotiable Instruments Act would be attracted to a case in which a blank or post dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amount as security for the loan.

...

21. In the present case blank cheques were issued prior to disbursement of loan as a collateral security for loan which was sanctioned. In such case there was no existing debt or liability when the cheque is issued. So, in the facts and circumstances of the case, the case does not fall within four corners of offence punishable under section 138 of the Negotiable Instruments Act. Of course such defence is available against payee and not holder in due course.

Have a look at the decision.

Woman's right to abort the foetus: Revisiting the law

Without indulging in the related debate over its morality, it is noteworthy that the right of a woman to decide by herself whether to continue carry a conceived foetus or to abort the child has received vociferous support amongst the Feministic circles. Being hailed as an important right of woman's self-determination, it is also based on the notion of equality in the social strata. The right, however, has not been vested in the woman for granted. Decisive legal battles have been fought and the decisions that have been rendered on the issue are those which have been hailed as important constitutional bench-marks on personal freedom and the extent of human liberties. In this post, we revisit these decisions which have declared the norm for today's society and the implications on the legal system which they continue to mark.

To begin with, the debate cannot better be revisited rather than by taking note of Roe v. Wade, the decision rendered by the United States Supreme Court in 1973. The case came up before the Court in the background where "Jane Roe, a single woman who was residing in Dallas County, Texas, instituted this federal action in March 1970 against the District Attorney of the county. She sought a declaratory judgment that the Texas criminal abortion statutes were unconstitutional on their face, and an injunction restraining the defendant from enforcing the statutes. Roe alleged that she was unmarried and pregnant; that she wished to terminate her pregnancy by an abortion performed by a competent, licensed physician, under safe, clinical conditions; that she was unable to get a legal abortion in Texas because her life did not appear to be threatened by the continuation of her pregnancy; and that she could not afford to travel to another jurisdiction in order to secure a legal abortion under safe conditions. She claimed that the Texas statutes were unconstitutionally vague and that they abridged her right of personal privacy, protected by the First, Fourth, Fifth, Ninth, and Fourteenth Amendments. By an amendment to her complaint, Roe purported to sue on behalf of herself and all other women similarly situated."

The Court noted the three principal objections made by the State against the challenge; "Three reasons have been advanced to explain historically the enactment of criminal abortion laws in the 19th century and to justify their continued existence. It has been argued occasionally that these laws were the product of a Victorian social concern to discourage illicit sexual conduct. ... A second reason is concerned with abortion as a medical procedure. When most criminal abortion laws were first enacted, the procedure was a hazardous one for the woman. This was particularly true prior to the development of antisepsis. ... The third reason is the State's interest -- some phrase it in terms of duty -- in protecting prenatal life. Some of the argument for this justification rests on the theory that a new human life is present from the moment of conception. The State's interest and general obligation to protect life then extends, it is argued, to prenatal life. Only when the life of the pregnant mother herself is at stake, balanced against the life she carries within her, should the interest of the embryo or fetus not prevail."

In this background the US Supreme Court, declaring the law imposing a blanket ban on abortion as unconstitutional, observed as under;

B. The pregnant woman cannot be isolated in her privacy. She carries an embryo and, later, a fetus, if one accepts the medical definitions of the developing young in the human uterus. See Dorland's Illustrated Medical Dictionary 478-479, 547 (24th ed.1965). The situation therefore is inherently different from marital intimacy, or bedroom possession of obscene material, or marriage, or procreation, or education, with which Eisenstadt and Griswold, Stanley, Loving, Skinner, and Pierce and Meyer were respectively concerned. As we have intimated above, it is reasonable and appropriate for a State to decide that, at some point in time another interest, that of health of the mother or that of potential human life, becomes significantly involved. The woman's privacy is no longer sole and any right of privacy she possesses must be measured accordingly.

Texas urges that, apart from the Fourteenth Amendment, life begins at conception and is present throughout pregnancy, and that, therefore, the State has a compelling interest in protecting that life from and after conception. We need not resolve the difficult question of when life begins. When those trained in the respective disciplines of medicine, philosophy, and theology are unable to arrive at any consensus, the judiciary, at this point in the development of man's knowledge, is not in a position to speculate as to the answer. 

It should be sufficient to note briefly the wide divergence of thinking on this most sensitive and difficult question. There has always been strong support for the view that life does not begin until live' birth. This was the belief of the Stoics. It appears to be the predominant, though not the unanimous, attitude of the Jewish faith. It may be taken to represent also the position of a large segment of the Protestant community, insofar as that can be ascertained; organized groups that have taken a formal position on the abortion issue have generally regarded abortion as a matter for the conscience of the individual and her family. As we have noted, the common law found greater significance in quickening. Physician and their scientific colleagues have regarded that event with less interest and have tended to focus either upon conception, upon live birth, or upon the interim point at which the fetus becomes "viable," that is, potentially able to live outside the mother's womb, albeit with artificial aid. Viability is usually placed at about seven months (28 weeks) but may occur earlier, even at 24 weeks. The Aristotelian theory of "mediate animation," that held sway throughout the Middle Ages and the Renaissance in Europe, continued to be official Roman Catholic dogma until the 19th century, despite opposition to this "ensoulment" theory from those in the Church who would recognize the existence of life from the moment of conception. The latter is now, of course, the official belief of the Catholic Church. As one brief amicus discloses, this is a view strongly held by many non-Catholics as well, and by many physicians. Substantial problems for precise definition of this view are posed, however, by new embryological data that purport to indicate that conception is a "process" over time, rather than an event, and by new medical techniques such as menstrual extraction, the "morning-after" pill, implantation of embryos, artificial insemination, and even artificial wombs. 

In areas other than criminal abortion, the law has been reluctant to endorse any theory that life, as we recognize it, begins before live birth, or to accord legal rights to the unborn except in narrowly defined situations and except when the rights are contingent upon live birth. For example, the traditional rule of tort law denied recovery for prenatal injuries even though the child was born alive. That rule has been changed in almost every jurisdiction. In most States, recovery is said to be permitted only if the fetus was viable, or at least quick, when the injuries were sustained, though few courts have squarely so held. In a recent development, generally opposed by the commentators, some States permit the parents of a stillborn child to maintain an action for wrongful death because of prenatal injuries. Such an action, however, would appear to be one to vindicate the parents' interest and is thus consistent with the view that the fetus, at most, represents only the potentiality of life. Similarly, unborn children have been recognized as acquiring rights or interests by way of inheritance or other devolution of property, and have been represented by guardians ad litem. Perfection of the interests involved, again, has generally been contingent upon live birth. In short, the unborn have never been recognized in the law as persons in the whole sense.

In view of all this, we do not agree that, by adopting one theory of life, Texas may override the rights of the pregnant woman that are at stake. We repeat, however, that the State does have an important and legitimate interest in preserving and protecting the health of the pregnant woman, whether she be a resident of the State or a nonresident who seeks medical consultation and treatment there, and that it has still another important and legitimate interest in protecting the potentiality of human life. These interests are separate and distinct. Each grows in substantiality as the woman approaches term and, at a point during pregnancy, each becomes "compelling."

With respect to the State's important and legitimate interest in the health of the mother, the "compelling" point, in the light of present medical knowledge, is at approximately the end of the first trimester. This is so because of the now-established medical fact, referred to above at 410 U. S. 149, that, until the end of the first trimester mortality in abortion may be less than mortality in normal childbirth. It follows that, from and after this point, a State may regulate the abortion procedure to the extent that the regulation reasonably relates to the preservation and protection of maternal health. Examples of permissible state regulation in this area are requirements as to the qualifications of the person who is to perform the abortion; as to the licensure of that person; as to the facility in which the procedure is to be performed, that is, whether it must be a hospital or may be a clinic or some other place of less-than-hospital status; as to the licensing of the facility; and the like.

This means, on the other hand, that, for the period of pregnancy prior to this "compelling" point, the attending physician, in consultation with his patient, is free to determine, without regulation by the State, that, in his medical judgment, the patient's pregnancy should be terminated. If that decision is reached, the judgment may be effectuated by an abortion free of interference by the State. With respect to the State's important and legitimate interest in potential life, the "compelling" point is at viability. This is so because the fetus then presumably has the capability of meaningful life outside the mother's womb. State regulation protective of fetal life after viability thus has both logical and biological justifications. If the State is interested in protecting fetal life after viability, it may go so far as to proscribe abortion during that period, except when it is necessary to preserve the life or health of the mother.

In short, what the Court did was to declare that while the State did have an interest in protecting the lady, it did not imply that the State could blatantly abolish all forms of abortion. The Court stated that the role of a State came into play only after a particular "point at which the fetus becomes 'viable', that is, potentially able to live outside the mother's womb, albeit with artificial aid". Prior to that, it was the sole dominion of the mother to decide whether to carry the child or abort. The decision has had its own share of heated controversy (aptly noted in its wikipedia article) but then the law is what has been declared in the decision. The determination has been retained in as much as even in a subsequent challenge in Planned Parenthood of Southeastern Pennsylvania v. Casey the US Supreme Court refused to overrule the decision in Roe v. Wade. 

In the Indian context, the law is governed by the 1971 law entitled 'Termination of Pregnancy Act' which imposes a general ban on the termination of pregnancy unless two registered doctors form an opinion "formed in good faith, that the continuance of the pregnancy would involve a risk to the life of the pregnant woman or of grave injury to her physical or mental health; or there is a substantial risk that if the child were born, it would suffer from such physical or mental abnormalities to be seriously handicapped." There is a further restriction that the termination cannot take place after twelve weeks of the conception. This limit is to be strictly observed in terms of the decision of the Indian Supreme Court which refused to break the shackles of this time-limit even for a mentally retarded pregnant mother in a recent decision. Even there the Supreme Court declared that the right to abort the child was a dimension of the right to personal liberty of a woman. The Court observed as under;

There is no doubt that a woman’s right to make reproductive choices is also a dimension of ‘personal liberty’ as understood under Article 21 of the Constitution of India. It is important to recognise that reproductive choices can be exercised to procreate as well as to abstain from procreating. The crucial consideration is that a woman’s right to privacy, dignity and bodily integrity should be respected. This means that there should be no restriction whatsoever on the exercise of reproductive choices such as a woman’s right to refuse participation in sexual activity or alternatively the insistence on use of contraceptive methods. Furthermore, women are also free to choose birth-control methods such as undergoing sterilisation procedures. Taken to their logical conclusion, reproductive rights include a woman’s entitlement to carry a pregnancy to its full term, to give birth and to subsequently raise children. However, in the case of pregnant women there is also a ‘compelling state interest’ in protecting the life of the prospective child. Therefore, the termination of a pregnancy is only permitted when the conditions specified in the applicable statute have been fulfilled. Hence, the provisions of the MTP Act, 1971 can also be viewed as reasonable restrictions that have been placed on the exercise of reproductive choices. 

To similar effect is the decision of the Canadian Supreme Court in Dr. Henry Morgentaler, v. Her Majesty the Queen. Then we have a case pending in the European Court of Human Rights wherein the challenge involved is to the Ireland's law which declare abortion to be illegal. A recent paper on SSRN on this pending case through considerable insight on the possibility of this case becoming the Roe v. Wade of Europe. 

On the related note, however, the Bombay High Court in Vinod Soni v. Union of India refused to declare as unconstitutional the "Prenatal Diagnostic Techniques (Prohibition of Sex Selection) Act of 1994" which imposed use of medical techniques through which the sex of the embryo could be determined in the womb itself. It was sought to be argued before the High Court that "the personal liberty of a citizen of India includes the liberty of choosing the sex of the offspring. Therefore he, or she is entitled to undertake any such medicinal procedure which provides for determination or selection of sex, which may come into existence after conception. The submission is that the right to personal liberty extends to such selection being made in order to determine the nature of family which an individual can have in exercise of liberty quaranteed by Article 21. It inturn includes nature of sex of that family which he or she may eventually decided to have and/or develope." Dismissing the petition, the High Court observed as under;

The right to life or personal liberty cannot be expanded to mean that the right of personal liberty includes the personal liberty to determine the sex of a child which may come into existence. The conception is a physical phenomena. It need not take place on copulation of every capable male and female. Even if both are competent and healthy to give birth to a child, conception need not necessarily follow. That being a factual medical position, claiming right to choose the sex of a child which is come into existence as a right to do or not to do something which cannot be called a right. The right to 

personal liberty cannot expand by any stretch of imagination,to liberty to prohibit coming into existence of a female foetus or male foetus which shall be for the Nature to decide. To claim a right to determine the existence of such foetus or possibility of such foetus come into existence, is a claim of right which may never exist. Right to bring into existence a life in future with a choice to determine the sex of that life cannot in itself to be a right. In our opinion, therefore, the petition does not make even a prima facie case for violation of Article 21 of the Constitution of India.

Thus the law is clear. While the right to terminate the foetus is undoubtedly recognized a part and parcel of the personal liberties of a woman, the same is limited (or rather regulated) under the legislations framed in the country to prevent the misuse of such unfettered right by ensuring that the woman's health and person are equally protected.  

High Courts and Supreme Court can direct CBI to investigate: Constitutional Bench

Bringing its foot down heaving against the argument of the Government of West Bengal that only the Government can direct an investigation to be undertaken by the Central Bureau of Investigation (CBI) and the courts have no jurisdiction to direct any investigation by the CBI, a five-member Constitutional Bench of the Supreme Court in a recent decision has declared the law to be quiet the converse. 

The matters reached the Supreme Court in the following background. A writ petition had been filed by Committee for Protection of Democratic Rights, West Bengal, in public interest, requesting the High Court alleging that in a particular incident "since the police administration in the State was under the influence of the ruling party which was trying to hide the incident to save its image, the investigations in the incident may be handed over to the CBI, an independent agency." The High Court being of the opinion "that in the background of the case it had strong reservations about the impartiality and fairness in the investigation by the State police because of the political fallout, therefore, no useful purpose would be served in continuing with the investigation by the State Investigating Agency ... deemed it appropriate to hand over the investigation into the said incident to the CBI." This order of the High Court was under challenge before the Supreme Court where the Bench being of the opinion that "the question of law involved in the appeals was of great public importance and was coming before the courts frequently and, therefore, it was necessary that the issue be settled by a larger Bench", referred the matter for determination by a Constitutional Bench. 

It was argued on behalf of the Government that the Constitutional set-up of India required "the separation of powers between the three organs of the State, i.e. the Legislature, the Executive and the Judiciary would require each one of these organs to confine itself within the field entrusted to it by the Constitution and not to act in contravention or contrary to the letter and spirit

of the Constitution" and thus where the Constitution conferred "exclusive jurisdiction on the State Legislature in regard to the police, the exclusive jurisdiction of a State Legislature cannot be encroached upon without the consent of the concerned State being obtained."

The Bench also noted the restraining limits sought to be imposed by the State Government in as much as it was sought to be argued on its behalf "that even when the State police is not in a position to conduct an impartial investigation because of extraneous influences, the Court still cannot exercise executive power of directing the police force of another State to carry out investigations without the consent of that State. In such a situation, the matter is best left to the wisdom of the Parliament to enact an appropriate legislation to take care of the situation. According to the learned counsel, till that is done, even such an extreme situation would not justify the Court upsetting the federal or quasi-federal system created by the Constitution." In this context, the issue which the Bench framed for itself was as under;

... the issue we are called upon to determine is that when the scheme of Constitution prohibits encroachment by the Union upon a matter which exclusively falls within the domain of the State Legislature, like public order, police etc., can the third organ of the State viz. the Judiciary, direct the CBI, an agency established by the Union to do something in respect of a State subject, without the consent of the concerned State Government?

In the background, the Constitutional bench went on to restate the basic tenets of the Constitution to repel the challenge made by the State Government. In sum, the Bench concluded as under;

44.Thus, having examined the rival contentions in the context of the Constitutional Scheme, we conclude as follows:

(i) The fundamental rights, enshrined in Part III of the Constitution, are inherent and cannot be extinguished by any Constitutional or Statutory provision. Any law that abrogates or abridges such rights would be violative of the basic structure doctrine. The actual effect and impact of the law on the rights guaranteed under Part III has to be taken into account in determining whether or not it destroys the basic structure.

(ii) Article 21 of the Constitution in its broad perspective seeks to protect the persons of their lives and personal liberties except according to the procedure established by law. The said Article in its broad application not only takes within its fold enforcement of the rights of an accused but also the rights of the victim. The State has a duty to enforce the human rights of a citizen providing for fair and impartial investigation against any person accused of commission of a cognizable offence, which may include its own officers. In certain situations even a witness to the crime may seek for and shall be granted protection by the State.

(iii) In view of the constitutional scheme and the jurisdiction conferred on this Court under Article 32 and on the High Courts under Article 226 of the Constitution the power of judicial review being an integral part of the basic structure of the Constitution, no Act of Parliament can exclude or curtail the powers of the Constitutional Courts with regard to the enforcement of fundamental rights. As a matter of fact, such a power is essential to give practicable content to the objectives of the Constitution embodied in Part III and other parts of the Constitution. Moreover, in a federal constitution, the distribution of legislative powers between the Parliament and the State Legislature involves limitation on legislative powers and, therefore, this requires an authority other than the Parliament to ascertain whether such limitations are transgressed. Judicial review acts as the final arbiter not only to give effect to the distribution of legislative powers between the Parliament and the State Legislatures, it is also necessary to show any transgression by each entity. Therefore, to borrow the words of Lord Steyn, judicial review is justified by combination of “the principles of separation of powers, rule of law, the principle of constitutionality and the reach of judicial review”.

(iv) If the federal structure is violated by any legislative action, the Constitution takes care to protect the federal structure by ensuring that Courts act as guardians and interpreters of the Constitution and provide remedy under Articles 32 and 226, whenever there is an attempted violation. In the circumstances, any direction by the Supreme Court or the High Court in exercise of power under Article 32 or 226 to uphold the Constitution and maintain the rule of law cannot be termed as violating the federal structure. 

(v) Restriction on the Parliament by the Constitution and restriction on the Executive by the Parliament under an enactment, do not amount to restriction on the power of the Judiciary under Article 32 and 226 of the Constitution. 

(vi) If in terms of Entry 2 of List II of The Seventh Schedule on the one hand and Entry 2A and Entry 80 of List I on the other, an investigation by another agency is permissible subject to grant of consent by the State concerned, there is no reason as to why, in an exceptional situation, court would be precluded from exercising the same power which the Union could exercise in terms of the provisions of the Statute. In our opinion, exercise of such power by the constitutional courts would not violate the doctrine of separation of powers. In fact, if in such a situation the court fails to grant relief, it would be failing in its constitutional duty.

(vii) When the Special Police Act itself provides that subject to the consent by the State, the CBI can take up investigation in relation to the crime which was otherwise within the jurisdiction of the State Police, the court can also exercise its constitutional power of judicial review and direct the CBI to take up the investigation within the jurisdiction of the State. The power of the High Court under Article 226 of the Constitution cannot be taken away, curtailed or diluted by Section 6 of the Special Police Act. Irrespective of there being any statutory provision acting as a restriction on the powers of the Courts, the restriction imposed by Section 6 of the Special Police Act on the powers of the Union, cannot be read as restriction on the powers of the Constitutional Courts. Therefore, exercise of power of judicial review by the High Court, in our opinion, would not amount to infringement of either the doctrine of separation of power or the federal structure.

45.In the final analysis, our answer to the question referred is that a direction by the High Court, in exercise of its jurisdiction under Article 226 of the Constitution, to the CBI to investigate a cognizable offence alleged to have been committed within the territory of a State without the consent of that State will neither impinge upon the federal structure of the Constitution nor violate the doctrine of separation of power and shall be valid in law. Being the protectors of civil liberties of the citizens, this Court and the High Courts have not only the power and jurisdiction but also an obligation to protect the fundamental rights, guaranteed by Part III in general and under Article 21 of the Constitution in particular, zealously and vigilantly.

46.Before parting with the case, we deem it necessary to emphasise that despite wide powers conferred by Articles 32 and 226 of the Constitution, while passing any order,the Courts must bear in mind certain self-imposed limitations on the exercise of these Constitutional powers. The very plenitude of the power under the said Articles requires great caution in its exercise. In so far as the question of issuing a direction to the CBI to conduct investigation in a case is concerned, although no inflexible guidelines can be laid down to decide whether or not such power should be exercised but time and again it has been reiterated that such an order is not to be passed as a matter of routine or merely because a party has levelled some allegations against the local police. This extra-ordinary power must be exercised sparingly, cautiously and in exceptional situations where it becomes necessary to provide credibility and instil confidence in investigations or where the incident may have national and international ramifications or where such an order may be necessary for doing complete justice and enforcing the fundamental rights. Otherwise the CBI would be flooded with a large number of cases and with limited resources, may find it difficult to properly investigate even serious cases and in the process lose its credibility and purpose with unsatisfactory investigations.

Have a look at the decision.

Budget 2010-11: What to expect?

Now when the Budget for the Financial Year 2010-11 has been slated to be announced by the Finance Minister, Government of India on the upcoming 26th of February, I pondered over the issue and decided against not writing on it. Given the persistence of our friend and also the importance of the issues at stake in the Budget this year, I thought of putting in the outlook at this end for the year. 

The first and foremost question is whether the 'Direct Tax Code' will be introduced in this year. Promising to revamp the entire structure of Direct taxes in India (subsuming inter alia the Income Tax, Wealth Tax, Dividend Distribution Tax) and proposing to change the legal structure in which Double Taxation Avoidance Agreements work in the country, the Code has been hailed by the Finance Minister as an exercise to "improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base". Unveiled on 12th August last year, sufficient breathing time has been given to the industry and general public at large to make their representations against any of the provisions in the proposed Code which they seek to pitch up for amendment. It is also made known from the commercial circles that the consultative process is long over and the Ministry officials are light-lipped over the issue as to whether it would be introduced in this Budget. The introduction of the Code in the present Budget would imply that all payments made and transactions undertaken from 1st April onwards would be subsequent to the provisions of the Code in as much as they would be taken in the financial year 2011-12. 

However, one thing is for sure. If the Code is introduced in this year's Budget, it will revolutionize the way in which industry and citizens work in India. The Code brings along with it the features which are peculiar to a developed nation. The taxation structure has been worked on the principle of ability to pay principle and thus while it provides the requisite relief to those in the lower-rungs, those higher up in the economic strata will be severely called upon to contribute to the exchequer in the form of taxes. On top of that, the Code also contains stringent Anti-Avoidance Rules which can strip-off any legal construction of a potential tax-avoidance scheme to make liable to tax such transactions which on the face of it are tax-compliant. 

Moving on, another possibility is the onset of the Goods and Service Tax (GST) in the Budget. The possibility, however, is faint in view of the fact that important Constitutional changes are required to be made and also the critical issues require an agreement between the State Governments as well. We had written on GST in detail earlier and so would refrain from commenting on its again. Nonetheless the Direct Tax Code and the GST combined carry the potential to trigger the economic growth of the country in as much as the emphasis is to tax the cream (profits) while leaving the nurturing milk (investments) for being utilized in the progressive growth of the country. If someone envisaged India to be a developed country by 2020, then it is essential that either in this or in any case by the next Budget both the Code and GST become operational.

To make it clear as to why I am discussing the Code and GST in such detail is because of the fact that sooner of later (i.e. in this year or the next) both of these are bound to get implemented given the firm resolve of this Government and the clear-headed policy making being undertaken at the North Block. In this background it is but obvious that the Budget in this year (if it does not carry either of these) would only be a stop-gap arrangement for a year making the way clearer for these two significant legislation. 

And now that I have played my part, I would take liberty to discuss the other issues which are the possibility in this Budget, as my close friend Sumit Agrawal has put, which he claims to be "a discussion based on various media reports and public information". He inter alia states as under;

1. There is an expectation that current individual income tax exemption limit (1.6 lakh rupees for men and 1.9 lakh for women taxpayers) could extend to 2.0 lakh for men and 2.3 lakh for women tax payer. This is expected from the Budget Speech, given the fact that Fringe Benefit is now taxable in the hands of the salaried employee, not raising the slabs significantly will increase the tax burden salaried class. Increasing inflation is another issue which is expected to be factored through this increase.
   
   
2. Deduction for investment in Mutual Fund ELSS Scheme and Insurance Policies to take benefit of section 80C of Income Tax may be reviewed. On the other hand, the limit for tax exempt investments under Section 80C is expected to increase from Rs. 1,00,000 to 1,50,000/-, though the industry seems to be demanding and pushing for more.
   
   
3. The government may come out with a detailed action plan for disinvestment through offloading its stake in many Public Sector Undertakings (PSUs) which would ensure returns for exchequer and assist government in reducing its deficit. There seems to be plans of offloading govt. stake in NMDC and Satluj Jal Vidyut Nigam. However, disinvestment in NTPC and REC is already on track whereby REC is set to come out with an offer for sale of 42,933,000 equity shares by the President of India, acting through the Ministry of Power, Government of India. State-run Satluj Jal Vidyut Nigam (SVJN) may come out with an IPO sooner.
   
   
4. There is also an industry demand of increase in the gratuity limit of Rs 350,000 to 10,00,000/.
   
   
5. In contrast to last year's reduction in excise duty, this year excise may be increased in the range of 1 to 2%. This would mean possible increase in prices of coffee, white goods (cars, refrigerators etc.)
   
   
6. Securities Transaction Tax is now charged at the rate of 0.125% both on the buyer and the seller for equities in the case of delivery-based transactions, a paltry 0.025% for day traders and 0.017% for the derivatives segment. Traders demand that it should be left unchanged. 

One may also take note of the recently published Annual Economic Check-up of India conducted by the IMF which makes interesting observations facing India on the economic front. Nonetheless, we are keeping our fingers crossed for the 26th. 

Arbitration in Three Dimensions: The intermix of laws !!!

While arbitration is naturally seen as a method of alternate dispute resolution and an easy and convenient method to dispute resolution, it also brings with it legal complexities peculiar to its own. In a recent paper entitled 'Arbitration in Three Dimensions', published as a part of 'Law Society and Economy Working Papers' series under the aegis of London School of Economics, Jan Paulsson brings out the complex legal issues involved in such arbitration matters which relate to dispute across citizens of different countries where the applicable law differs (contrast the difference between substantive law and the law governing arbitration) from the law of the forum. 

The paper poses an interesting mix of legal theory and the rules governing determination of such disputes. The abstract of the paper reads thus;

The law applicable to arbitration is different from the law applicable in arbitration. The latter leads arbitrators to decide as they do. The former refers to the source of their authority and the effect of their decision - the legal order that governs arbitration. According to the territorialist thesis, an arbitration can have no foundation other than that of the legal order of the particular state where the arbitration takes place. This outdated conception is disproved by the simple factual observation that a plurality of legal orders may give effect to arbitration. Some French scholars promote the notion of an autonomous arbitral order. Inasmuch as they ultimately seek to establish this order by positing its recognition by the very state orders from which they claim autonomy, their idea is circular and in effect no more than a dressed-up variant of ordinary horizontal pluralism. But the model of horizontal pluralism fails to account for important orderings of arbitral activity. Arbitration in modern society is accurately perceived as a complex, three-dimensional form of pluralism, in which legal orders (i) are not exclusively those of states and (ii) frequently overlap.

In all, the paper provides intriguing insights on the issue. Have a look.

The blog revamped !!!

Taking note of a number of suggestions which this blog has received since the culmination of this attempt to spread the message on law more than two years back, I decided to shed the reigns and adopt a new look for the blog. Accordingly, from a strong black background we have moved to a light sky-bluish background for this blog. Removing the not-so-necessary gadgets - to make the webpage lighter and easier to load - I have tried to maintain and continue with the essence and the substance while the form may have changed. 

In this process, to say the least for them, I thank the followers and readers whose intrigue for knowledge and information on law issues continues to strengthen our resolve to keep updating them with the bit of information of LAW which I always refer to the enlightening and kindling light for the curious soul. In the last two years of this blog, the blog has had over twenty thousand visitors, over 150 regular watchers and innumerable friends and well-wishers who continue to inspire by a word in person or through their commendations on the blog or the web-pages it hosts on social networking sites. But then the quest I have undertaken, doesn't stop at this. This just a beginning and 'I have miles to go before I sleep'. 

If knowledge is empowering, and power carries the ability to mould opinions and command changes in behaviour, then the knowledge of law is definitely the way to go for the like-minded citizens to ensure that the society they strive to become habitable, attains that civilized status in an appreciable way. To say of just one law - the Right to Information Act - as having brought to terms so many erring public servants and ensuring that they work in the correct perspective and a time bound manner, one can only imagine with joy the wonders of a system where the dictates of an enforced legal system brings our society to be governed by the idealized canons of justice of the Dharama as well call it.

I am aware that these very high aims that we attempt and aspire for but then unless we aim we will never reach. I am sure that the motivation and assistance available would only increase to ensure that the attempt to attain the high ideals continues till a satisfactory outcome is attained. So here we go ... striving for the best ... !!!

Dying declaration: The concept understood

In a recently reported decision, the Supreme Court of India has explained the rationale and concept underlying the admissibility and relevance of declaration / statement made by a person on the verge of death for the purpose of determining criminal liability on the basis of such declarations / statements. 

The Supreme Court explained the concept in its decision in Sharda v. State of Rajasthan in the following terms;

32. In the case in hand, the conviction of the appellant is based on the last dying declaration Exh.P- 18, said to have been recorded in presence of Executive Magistrate. The principle on which dying declarations are admitted in evidence is indicated in legal maxim:

“Nemo moriturus proesumitur mentiri – a man will not meet his Maker with a lie in his mouth.”

33. It is indicative of the fact that a man who is on a death bed would not tell a lie to falsely implicate an innocent person. This is the reason in law to accept the veracity of her statement. It is for this reason, the requirements of oath and cross-examination are dispensed with. Besides, if the dying declaration is to be completely excluded in a given case, it may even amount to miscarriage of justice as the victim alone being the eye-witness in a serious crime, the exclusion of the statement would leave the court without a scrap of evidence.

34. Though a dying declaration is entitled and is still recognized by law to be given greater weightage but it has also to be kept in mind that accused had no chance of cross-examination. Such a right of cross-examination is essential for eliciting the truth as an obligation of oath. This is the reason, generally, the court insists that the dying declaration should be such which inspires full confidence of the court of its correctness. The court has to be on guard that such statement of deceased was not as a result of either tutoring, prompting or product of imagination. The court must be further satisfied that deceased was in a fit state of mind after a clear opportunity to observe and identify the assailants. Once the court is satisfied that the aforesaid requirement and also to the fact that declaration was true and voluntary, undoubtedly, it can base its conviction without any further corroboration. It is not an absolute rule of law that the dying declaration cannot form the sole basis of conviction unless it is corroborated. The rule requiring corroboration is merely a rule of prudence.

Have a look at the decision.

Result of crime irrelevant for conviction: Supreme Court

In a recently reported decision, the Supreme Court has declared that the result of the criminal act done by the accused is not relevant for determining the conviction of the accused. The Supreme Court was dealing with an appeal filed by an accused convicted for offence of 'attempt to murder' contending that the victim had only suffered simple injuries and therefore conviction should be set aside. The Supreme Court, however, was not impressed. It declared that in order for a person to be convicted for an offence of murder, it was not essential that bodily injury capable of causing death should have been rendered. The act along was sufficient. 

The decision states as under;

4. It is to be noted that the alleged offences are of very serious nature. Section 307 relates to attempt to murder. It reads as follows: “Whoever does any act with such intention or knowledge, and under such circumstances that, if he by that act caused death, he would be guilty of murder, shall be punished with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine; and, if hurt is caused to any person by such act, the offender shall be liable either to (imprisonment for life), or to such punishment as is hereinbefore mentioned.” 

5. To justify a conviction under this Section, it is not essential that bodily injury capable of causing death should have been inflicted. Although the nature of injury actually caused may often give considerable assistance in coming to a finding as to the intention of the accused, such intention may also be deduced from other circumstances, and may even, in some cases, be ascertained without any reference at all to actual wounds. The Section makes a distinction between an act of the accused and its result, if any. Such an act may not be attended by any result so far as the person assaulted is concerned, but still there may be cases in which the culprit would be liable under this Section. It is not necessary that the injury actually caused to the victim of the assault should be sufficient under ordinary circumstances to cause the death of the person assaulted. What the Court has to see is whether the act, irrespective of its result, was done with the intention or knowledge and under circumstances mentioned in the Section. An attempt in order to be criminal need not be the penultimate act. It is sufficient in law, if there is present an intent coupled with some overt act in execution thereof.

6. It is sufficient to justify a conviction under Section 307 if there is present an intent coupled with some overt act in execution thereof. It is not essential that bodily injury capable of causing death should have been inflicted. The Section makes a distinction between the act of the accused and its result, if any. The Court has to see whether the act, irrespective of its result, was done with the intention or knowledge and under circumstances mentioned in the Section. Therefore, an accused charged under Section 307 IPC cannot be acquitted merely because the injuries inflicted on the victim were in the nature of a simple hurt.

7. This position was highlighted in State of Maharashtra v. Balram Bama Patil and Ors. (1983 (2) SCC 28), Girija Shanker v. State of Uttar Pradesh (2004 (3) SCC 793), R. Parkash v. State of Karnataka (JT 2004 (2) SC 348) and State of M.P. v. Saleem @ Chamaru and Anr. (2005 (5) SCC 554) and, State of Madhya Pradesh v. Imrat and Anr. 2008 (11) SCC 523.

8. In Sarju Prasad v. State of Bihar (AIR 1965 SC 843) it was observed in para 6 that the mere fact that the injury actually inflicted by the accused did not cut any vital organ of the victim, is not by itself sufficient to take the act out of the purview of Section 307.

9. Whether there was intention to kill or knowledge that death will be caused is a question of fact and would depend on the facts of a given case. The circumstances that the injury inflicted by the accused was simple or minor will not by itself rule out application of Section 307 IPC. The determinative question is intention or knowledge, as the case may be, and not nature of the injury. The basic differences between Sections 333 and 325 IPC are that Section 325 gets attracted where grievous hurt is caused whereas Section 333 gets attracted if such hurt is caused to a public servant.

Have a look at the decision.

Rights of slum dwellers: The law revisited

More than two decades back the then Chief Justice of India Y.V. Chandrachud passed the famous decision which is known in law circles as the 'Pavement Dwellers Case' vindicating the rights of those who have no choice but to live on footpaths and pavements and are constantly perturbed by the civic authorities according to whom they are an encroachment on public pathways. The recently retired Chief Justice of Delhi High Court, Justice A.P. Shah passed a judgment in similar lines enunciating the rights of slum-dwellers. On behalf of these slum-dwellers it was submitted before the High Court that the applicants were "mainly from the low income groups engaged in peripheral activities in the neighbourhood of their clusters. They are characterized by the term “city service personnel” whose daily chores ensure the health and cleanliness of the households in the neighbourhood where they are employed. There is an element of indispensability of their services for the resident population in the upper-class apartments and households.". 

In this background it was argued before the High Court that the "action of the government authorities in demolishing the slum clusters without ensuring relocation of its poor residents (“Urban Poor”) in total violation of their fundamental right to shelter enshrined in right to life under Article 21 of the Constitution." The Civic Authorities, called upon to justify their actions, contended that such "petitioners were occupying land which comes under the category of „Right of Way‟ and, therefore are not entitled for any compensation or alternative land under any policy or scheme of the rehabilitation and relocation."

The High Court took stock of the important decisions of the Supreme Court on the issue and Reports of various national and international agencies dealing with the practical problem of urban housing and noted the acute problem in Delhi as under;

44. In the last four decades, on account of pressure on agricultural land and lack of employment opportunities in the rural areas, a large number of people were forced to migrate to large cities like Delhi. However, in cities, their slender means as well as lack of access to legitimate housing, compelled them to live in existing jhuggi clusters or even to create a new one. They turned to big cities like Delhi only because of the huge employment opportunities here but then they are forced to live in jhuggies because there is no place other than that within their means. These jhuggi clusters constitute a major chunk of the total population of the city. Most of these persons living in the slums earn their livelihood as daily wage labourers, selling vegetables and other household items, some of them are rickshaw pullers and only few of them are employed as regular workers in industrial units in the vicinity while women work as domestic maid-servants in nearby houses. Their children also are either employed as child labour in the city; a few fortunate among them go to the municipal schools in the vicinity. The support service provided by these persons (whom the Master Plan describes as „city service personnel‟) are indispensable to any affluent or even middle class household. The city would simply come to halt without the labour provided by these people. Considerations of fairness require special concern where these settled slum dwellers face threat of being uprooted. Even though their jhuggi clusters may be required to be legally removed for public projects, but the consequences can be just as devastating when they are uprooted from their decades long settled position. What very often is overlooked is that when a family living in a Jhuggi is forcibly evicted, each member loses a „bundle‟ of rights – the right to livelihood, to shelter, to health, to education, to access to civic amenities and public transport and above all, the right to live with dignity.

In this factual backdrop, the High Court brushed aside the submissions of the civic authorities seeking refuge under the right to way of other citizens 

50. In our opinion, the stand of the respondents that alternative land is not required to be allotted to the inhabitants of such land which comes under the “Right of Way” is completely contrary to the State‟s policy which governs relocation and rehabilitation of slum dwellers. State‟s policy for resettlement nowhere exempts persons, who are otherwise eligible for benefit of the said policy, merely on the ground that the land on which they are settled is required for “Right of Way”. The respondents‟ have failed to produce any such policy which provides for exclusion of the slum dwellers on the ground that they are living on “Right of Way”. We find force in the submission of the petitioners that even if there is any such policy, it may be for those jhuggi dwellers, who deliberately set up their jhuggies on some existing road, footpath etc, but surely this policy cannot be applied to jhuggi dwellers who have been living on open land for several decades and it is only now discovered that they are settled on a land marked for a road under the Master Plan though when they started living on the said land there was no existing road. ...

52. We fail to appreciate how the above letter of the Principal Secretary spells out any policy decision on 'Right of Way'. The letter merely records oral instructions of the Lt. Governor that the jhuggi dwellers on the „Right of Way‟ will not be entitled to relocation. It is also not clear from the letter as to what constitutes 'Right of Way'. When the petitioners set up their jhuggies several decades ago there was no road. It may be that in some layout plan the land was meant for a road but when they started living there, they could not anticipate that the land will be required in future for a road or for the expansion of an existing road. As long as they were not on an existing road, they cannot be denied the benefit of rehabilitation/relocation. The denial of the benefit of the rehabilitation to the petitioners violates their right to shelter guaranteed under Article 21 of the Constitution. In these circumstances, removal of their jhuggies without ensuring their relocation would amount to gross violation of their Fundamental Rights. ...

55. We find no difficulty in the context of the present case, and in the light of the jurisprudence developed by our Supreme Court and the High Court in the cases referred to earlier, to require the respondents to engage meaningfully with those who are sought to be evicted. It must be remembered that the MPD-2021 clearly identifies the relocation of slum dwellers as one of the priorities for the government. Spaces have been earmarked for housing of the economically weaker sections. The government will be failing in its statutory and constitutional obligation if it fails to identify spaces equipped infrastructurally with the civic amenities that can ensure a decent living to those being relocated prior to initiating the moves for eviction.

56. The respondents in these cases were unable to place records to show that any systematic survey had been undertaken of the jhuggi clusters where the petitioners and others resided. There appears to be no protocol developed which will indicate the manner in which the surveys should be conducted, the kind of relevant documentation that each resident has to produce to justify entitlement to relocation, including information relating to present means of livelihood, earning, access to education for the children, access to health facilities, access to public transportation etc.

57. This Court would like to emphasise that the context of the MPD, jhuggi dwellers are not to be treated as 'secondary' citizens. They are entitled to no less an access to basic survival needs as any other citizen. It is the State‟s constitutional and statutory obligation to ensure that if the jhuggi dweller is forcibly evicted and relocated, such jhuggi dweller is not worse off. The relocation has to be a meaningful exercise consistent with the rights to life, livelihood and dignity of such jhuggi dweller.

58. It is not uncommon to find a jhuggi dweller, with the bulldozer at the doorstep, desperately trying to save whatever precious little belongings and documents they have, which could perhaps testify to the fact that the jhuggi dweller resided at that place. These documents are literally a matter of life for a jhuggi dweller, since most relocation schemes require proof of residence before a 'cut-off date'. If these documents are either forcefully snatched away or destroyed (and very often they are) then the jhuggi dweller is unable to establish entitlement to resettlement. Therefore, the exercise of conducting a survey has to be very carefully undertaken and with great deal of responsibility keeping in view the desperate need of the jhuggi dweller for an alternative accommodation. A separate folder must be preserved by the agency or the agencies that are involved in the survey for each jhuggi dweller with all relevant documents of that jhuggi dweller in one place. Ideally if these documents can be digitalized then there will be no need for repeated production of these documents time and again whenever the jhuggi dweller has in fact to be assigned a place at the relocated site.

59. Each member of the family of the jhuggi dweller is invariably engaged in some livelihood from morning to night. It is, therefore, not uncommon that when a survey team arrives at a jhuggi camp, some or the other member may not be found there. By merely stopping with that single visit, and not finding a particular member of that family, it may not be concluded that no such member resides in that jhuggi. Such an exercise, if it has to be meaningful, has to be undertaken either at the time when all the members of the family are likely to be found. Alternatively there should be repeated visits by the survey team over a period of time with proper prior announcement. If jhuggi dwellers are kept at the centre of this exercise and it is understood that the State has to work to ensure protection of their rights, then the procedure adopted will automatically change, consistent with that requirement.

60. The further concern is the lack of basic amenities at the relocated site. It is not uncommon that in the garb of evicting slums and 'beautifying' the city, the State agencies in fact end up creating more slums the only difference is that this time it is away from the gaze of the city dwellers. The relocated sites are invariably 30-40 kilometers away from a city centre. The situation in these relocated sites, for instance in Narela and Bhawana, are deplorable. The lack of basic amenities like drinking water, water for bathing and washing, sanitation, lack of access to affordable public transport, lack of schools and health care sectors, compound the problem for a jhuggi dweller at the relocated site. The places of their livelihood invariably continue to be located within the city. Naturally, therefore, their lives are worse off after forced eviction.

61. Each of the above factors will have to be borne in mind before any task for forceful eviction of a jhuggi cluster is undertaken by the State agencies. It cannot be expected that human beings in a jhuggi cluster will simply vanish if their homes are uprooted and their names effaced from government records. They are the citizens who help rest of the city to live a decent life they deserve protection and the respect of the rights to life and dignity which the Constitution guarantees them.

Being of this view, the High Court also gave directions to the Municipal Corporation of Delhi to provide for alternate sites for the slum-dwellers according to the Master Plan of 2021. 

Have a look at the decision.

Cannot appoint more than vacancies: Supreme Court

The Supreme Court of India, in a recent decision, has restated the law of the land that it is not permissible for the Government to hand out more appointments than the vacancies that are advertised. The Court noted that the law had been settled by a number of decisions of the Supreme Court itself that it was against the law and also the rights of others to appoint more people than the vacancies advertised. The decision notes as under;

9. It is a settled legal proposition that vacancies cannot be filled up over and above the number of vacancies advertised as “the recruitment of the candidates in excess of the notified vacancies is a denial and deprivation of the constitutional right under Article 14 read with Article 16(1) of the Constitution”, of those persons who acquired eligibility for the post in question in accordance with the statutory rules subsequent to the date of notification of vacancies. Filling up the vacancies over the notified vacancies is neither permissible nor desirable, for the reason, that it amounts to “improper exercise of power and only in a rare and exceptional circumstance and in emergent situation, such a rule can be deviated and such a deviation is permissible only after adopting policy decision based on some rational”, otherwise the exercise would be arbitrary. Filling up of vacancies over the notified vacancies amounts to filling up of future vacancies and thus, not permissible in law. (Vide Union of India & Ors. v. Ishwar Singh Khatri & Ors. (1992) Supp 3 SCC 84; Gujarat State Deputy Executive Engineers’ Association v. State of Gujarat & Ors. (1994) Supp 2 SCC 591; State of Bihar & Ors. v. The Secretariat Assistant S.E. Union 1986 & Ors AIR 1994 SC 736; Prem Singh & Ors. v. Haryana State Electricity Board & Ors. (1996) 4 SCC 319; and Ashok Kumar & Ors. v. Chairman, Banking Service Recruitment Board & Ors. AIR 1996 SC 976).

10. In Surinder Singh & Ors. v. State of Punjab & Ors. AIR 1998 SC 18, this Court held as under: “A waiting list prepared in an examination conducted by the Commission does not furnish a source of recruitment. It is operative only for the contingency that if any of the selected candidates does not join then the person from the waiting list may be pushed up and be appointed in the vacancy so caused or if there is some extreme exigency the Government may as a matter of policy decision pick up persons in order of merit from the waiting list. But the view taken by the High Court that since the vacancies have not been worked out properly, therefore, the candidates from the waiting list were liable to be appointed does not appear to be sound. This practice, may result in depriving those candidates who become eligible for competing for the vacancies available in future. If the waiting list in one examination was to operate as an infinite stock for appointment, there is a danger that the State Government may resort to the device of not holding an examination for years together and pick up candidates from the waiting list as and when required. The constitutional discipline requires that this Court should not permit such improper exercise of power which may result in creating a vested interest and perpetrate waiting list for the candidates of one examination at the cost of entire set of fresh candidates either from the open or even from service…..Exercise of such power has to be tested on the touchstone of reasonableness….It is not a matter of course that the authority can fill up more posts than advertised.”

11. Similar view has been re-iterated in Madan Lal v. State of J & K & Ors. AIR 1995 SC 1088; Kamlesh Kumar Sharma v. Yogesh Kumar Gupta & Ors. AIR 1998 SC 1021; Sri Kant Tripathi v. State of U.P. & Ors. (2001) 10 SCC 237; State of J & K v. Sanjeev Kumar & Ors. (2005) 4 SCC 148; State of U.P. v. Raj Kumar Sharma & Ors. (2006) 3 SCC 330; and Ram Avtar Patwari & Ors. v. State of Haryana & Ors. AIR 2007 SC 3242).

...

14. In view of above, the law can be summarised to the effect that any appointment made beyond the number of vacancies advertised is without jurisdiction, being violative of Articles 14 and 16(1) of the Constitution of India, thus, a nullity, inexecutable and unenforceable in law. In case the vacancies notified stand filled up, process of selection comes to an end. Waiting list etc. cannot be used as a reservoir, to fill up the vacancy which comes into existence after the issuance of notification/advertisement. The unexhausted select list/waiting list becomes meaningless and cannot be pressed in service any more.

Have a look at the decision (starts at page 13). 

Non-controlling directors not liable for cheque bounce: Supreme Court

Saving them from prosecution for bouncing of cheque, the Supreme Court in a recent decision has declared that Directors and such other officers of a company would not be liable for prosecution for bouncing of cheques if they were not in-charge of and also not responsible for the conduct of the company. Reading Section 141 of the Negotiable Instruments Act literally, the Supreme Court declared the law as under;

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 offence 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 designation or office in a company. 

10) 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 company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141.

11) In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company.

In this background, the Supreme Court laid down the principles for determining the liability of the Directors as under;

25) From the above discussion, the following principles emerge :

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. 

(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) The person sought to be made liable should be in-charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

Have a look at the decision.