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In Absence of Conviction of Company, Nominated Person Cannot Be Convicted or Vice Versa: SC [NI Act]



Hindustan Unilever Limited v. The State Of Madhya Pradesh

Criminal Appeal No. 715 Of 2020 (Arising Out Of SLP (Criminal) No. 578 Of 2020), 5th November, 2020.

Counsel for Appellants: Dr. Abhishek Manu Singhvi, Siddharth Luthra (for Appellant Company)


The Hon'ble Supreme Court Justice L. Nageswara Rao, Justice Hemant Gupta and Justice Ajay Rastogi observed in the present appeal to an order passed by the High Court of Madhya Pradesh that in the absence of the conviction of the Company, the Nominated person cannot be convicted and vice versa.

A complaint was filed by the Inspector of Food and Health, in terms of the provisions of The Prevention of Food Adulteration Act, 1954 regarding the sample of Vanaspati Ghee taken from the godown of Lipton India Limited which was found to be adulterated as the melting point was found to be 41.8 degree centigrade which is higher than the normal range i.e. as against 31-41 degree centigrade. Initially, the complaint was filed against the Directors of the Company as well as that of Lipton India Limited. By directions of the court, it was held that the learned trial court passed an order on 6.7.1993 absolving the Directors of the Company and the prosecution was ordered to continue against the appellant. The order is not on record but no proceedings were pursued against the company.

The Act was then repealed and the Food Safety and Standards Act, 2006 came into force on 23.8.2006. The learned trial court vide judgment dated 16.6.2015 passed no order to convict the appellant-Company of any offence but the appellant contested the proceedings and was convicted by the trial court under provisions of the 1954 Act. In an appeal against the said judgment, the learned Additional Sessions Judge held that the prosecution was found to be maintainable against Rathore Clearing and Forwarding Agency and the Company but the same was not mentioned in the impugned judgment and order.

The learned counsel for the appellant placed reliance on the judgment of this Court in Nemi Chand v. State of Rajasthan (2018) 17 SCC 448, that pursuant to the repeal of the Act, only punishment of fine has been contemplated under the 2006 Act. Thus, since the provisions of the 2006 Act are beneficial to the accused, the accused is entitled to such benefits provided by the 2006 Act. The Court rejected the applicability of the 2006 Act as the punishments imposed under the repealed Act have been saved by Section 97 of the 2006 Act. Consequently, the learned Additional Sessions Judge affirmed the conviction of the appellant/Nominated Officer but the conviction of the accused was set aside and they were acquitted. The High Court in its order noticed that if the Company is acquitted of the charges, the said benefit will also directly go to the appellant/Nominated Officer and hence, the conviction and sentence passed against the appellant, was set aside and the matter was remitted back to the trial Court for passing fresh judgment.

The appellant counsel before this court placed reliance upon T. Barai v. Henry Ah Hoe & Anr. (1983)1 SCC 177 and Nemi Chand & Trilok Chand v. State of Himachal Pradesh for the variations in the provisions of both Acts under which charges for violations are placed. The counsel for appellant company held that since there was no order of conviction by the trial court, as also no opportunity of hearing was given, such order is in contravention of sub-section (2) of Section 401 of the Code of Criminal Procedure, 1973.

The issues raised before this Court based on the contentions are as follows:

1. Whether the penalty or prosecution can continue or be initiated under the repealed provisions?
2. Whether the course adopted by the High Court to remand the matter to the trial court after more than 30 years to cure the defect which goes to the root of the trial, though permissible in law, is justified.

The court held no merits in the aforementioned argument and observed that in the present case, the Act has been repealed by Section 97 of the 2006 Act; however, the punishments imposed under the Act have been protected. In the 2006 Act, the repeal and saving clause contained in Section 97 (1)(iii) and (iv) specifically provides that repeal of the Act shall not affect any investigation or remedy in respect of any such penalty, forfeiture or punishment and the punishment may be imposed, “as if the 2006 Act had not been passed”. Thus, in view of Section 97 of the 2006 Act, as also under Section 6 of the General Clauses Act, 1897, the proceedings would continue under the Act. No benefit can be taken under the 2006 Act as the prosecution and punishment under the Act is protected. The court held that the order in Trilok Chand (Supra) is on its own facts.

Furthermore, the Court finds merit in the say that the order of remand by the High Court to the trial court against the Company cannot be sustained for the reason that such an order was passed without giving an opportunity of hearing, as contemplated under Section 401(2) of the Code. Aneeta Hada v. Godfather Travels & Tours Private Limited (2012) 5 SCC 661, observes that clause (a) of Sub-Section (1) of Section 17 of the Act, 1954 makes the person nominated to be in charge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of Sub-Section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 141 of the Negotiable Instruments Act, 1881 and Section 17 of the Act which makes the Company as well as the Nominated Person to be held guilty of the offences and/or liable to be proceeded and punished accordingly.

The Court held that

Clause (a) of Sub-Section (1) of Section 17 of the Act makes the person nominated to be in charge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of Sub-Section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 141 of the NI Act and Section 17 of the Act which makes the Company as well as the Nominated Person to be held guilty of the offences and/or liable to be proceeded and punished accordingly. Clauses (a) and (b) are not in the alternative but conjoint. Therefore, in the absence of the Company, the Nominated Person cannot be convicted or vice versa. Since the Company was not convicted by the trial court, we find that the finding of the High Court to revisit the judgment will be unfair to 18 the appellant/Nominated Person who has been facing trial for more than last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the Nominated Person as unsustainable. (Para 22)

Hence, the Appeals stand allowed.


M. Maheswari


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