Burden of Person In Charge of Company – Proviso to Section 22(C) does not reverse onus of proof: Supreme Court

by Tisa Padhy

INTRODUCTION

In the recent judgement of Dayle De’souza v. Government of India through the Chief Labour Commissioner, the Hon’ble Supreme Court, held that the burden to prove innocence under the provisions of the Minimum Wages Act, 1948 can shift from the accused only under the circumstance that all the ingredients of Section 22C (1) of the Minimum wages Act, 1948 are fulfilled. Sub-section (1) to Section 22C of the said Act talks about when 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. This decision lays down that the onus is on the accused to meet the conditions in order to benefit from the proviso, but at the same time, this does not relieve the prosecution of the initial onus and burden of establishing the requirements of sub-section (1) of Section 22C of the Act.

FACTS

The factual matrix of the case dates back to 2009. The appellant in the matter, Dayle De’souza is the director of the company named M/s. Writer Safeguard Pvt. Ltd. (hereinafter ‘Company’). The Company had entered into an agreement with M/s. NCR Corporation India Private Ltd. This company had earlier entered into an agreement with the State Bank of India (hereinafter ‘SBI’) for the maintenance and upkeep of all the ATMs of the SBI. On 19th February 2014, the Labour Enforcement Officer (Central) had inspected the SBIs ATM at AST, Komal Chand Petrol Pump, Civil Lines, Sagar, Madhya Pradesh (hereinafter ‘the ATM’). Following this, the appellant and the head of the Madhya Pradesh branch of M/s. Writer Safeguard Pvt. Ltd., Mr Vinod Singh received a notice on March 6, 2014, alleging non-compliance with the provisions of the Minimum Wages Act, 1948 (hereinafter, ‘the Act’) and Minimum Wages (Central) Rules, 1950 (hereinafter ‘the Rules’) at the said ATM. To which the Company replied that they neither work nor manage the ATM. The appellant and Mr Vinod Singh were brought before the Court of the Chief Judicial Magistrate, Sagar, Madhya Pradesh on 14^th August 2014 on criminal charges filed under Section 22A of the Act. Following that, on August 1, 2015, the appellant filed a petition before the High Court of Madhya Pradesh at its Principal Bench at Jabalpur, seeking to dismiss the complaint in the Criminal Case under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter ‘Code’). The petition was dismissed as without merit by the High Court. As a result, the current appeal was filed.

JUDGEMENT & ANALYSIS

The matter in the Supreme Court was heard by a two judge bench composed of Justice Sanjiv Khanna and Justice Shubhash Reddy. Firstly on perusal of the complaint, it was observed that the company has not been enlisted as an accused. The complaint was filed for violations of Rules 21(4), 22, 25(2), 26(1), and 26(5) due to failure to keep and display, as appropriate, the Fine Registers the notice of minimum wages, Rule, and abstract of the Act, overtime register, wages payment register, and attendance register and name of Inspectors with address in Hindi and English at the worksite. The Court placed reliance on various precedents including the cases of Aneeta Hada v. Godfather Travels, Municipal Corporation of Delhi v. Ram Kishan Rohtagi, State of Karnataka v. Pratap Chand, Municipal Corporation of Delhi v. Purshotam Dass Jhunjunwala & Others, Girdhari Lal Gupta v. D.H. Mehta and Tours Private Limited, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla.

Based on these, the court held that the fact that the proviso is an exception cannot be used as a rationale or ground for launching and initiating prosecution without first satisfying the conditions set out in Section 22C (1) of the Act. The proviso, which places the onus of proving 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.

Further after reading of sub-section (2), it was observed that as per the subsection a person cannot be prosecuted or penalised only because of their rank or position as a director, manager, secretary, or other officials, unless the offence was committed with their permission or connivance, or is related to any negligence on their part, according to the Act. The prosecution, not the person being prosecuted, bears the burden of proof under Section 22C, sub-section (2). Thus the Court after thoroughly analysing all the precedents concluded that in this instance, the proviso to sub-section (1) would not apply.

It is a rare exception that applies and takes effect only if the conditions of Section 22C sub-section (1) are met. Notably, the prosecution, in this case, does not and cannot even rely on Section 22C(2) of the Act in the absence of any explicit averment. Further, the court observed that a company, as a juristic person, cannot be imprisoned, but it can be fined, which is a punishment in and of itself. Because every punishment has unfavourable effects, the corporation must be prosecuted. If the corporation has ceased to exist or cannot be prosecuted due to a legislative bar, this could be an exemption. Exceptions like this, however, are irrelevant in this circumstance. As a result, the current prosecution must also fail for this reason. 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. Unlike Section 22C(2) Section 22C(1) does not use the term ‘director, manager, secretary or other officer of the company‘ to imply vicarious liability, and neither the appellant nor Mr. Vinod Singh was alleged to be in-charge of and responsible to the company.

Delving into the territory of personal liberty under Article 21 of the Constitution, the Court went on to state that prosecution of such nature has adverse and harsh consequences for the accused and is in the teeth of the judgment delivered by the Court in Directorate of Revenue and Another v. Mohammed Nisar Holia, which recognises the right to not to be disturbed without sufficient grounds. Thus, the Court in its final judgement while allowing the appeal and quashing the complaint against both the appellant and Mr. Vinod Singh observed and ruled that the Courts should refrain from issuing summons in a mechanical and routine manner, without applying their minds to see if a prima facie case for taking cognisance is at all made out, as it frustrates the entire purpose of laying down a detailed procedure under Chapter XV of the Code.