Introduction
Allahabad High Court (Lucknow Bench) in Azim Premji v. State of U.P. Application U/S 3261 of 2017, decided on 29.05.2024, the criminal complaint proceedings along with the summoning order and bailable warrant issued against the Chairman and Managing Director of a company for allegedly violating the Equal Remuneration Act, 1976 by an independent third-party security contractor engaged by the company were quashed. Bench of Hon’ble Shamim Ahmed, J held that there was no finding of any active involvement coupled with criminal intent on the part of the applicant to fix any vicarious liability on him and further that the Magistrate had not used the judicial mind while issuing the process.
Factual Background
The Applicant, who is the Chairman and Managing Director of Wipro Ltd. (“Company”), is a global company, famous for its work in the field of Information Technology and Information Technology enabled Services. The Company had entered into an agreement with a third party security agency, M/s G4S Secure Solutions (India) Pvt. Ltd. (“G4S”) for security services at the various facilities on 18.03.2015. The agreement explicitly stated that G4S and any employee or entertainer on its behalf who worked for Wipro would remain an independent contractor with Wipro and not an employee or agent of Wipro. All responsibility for paying wages, statutory benefits and ensuring adherence to all applicable labour laws had been delegated to G4S under contract.
At an inspection by the Labour Enforcement Officer (“Opposite Party No. 2”) on 02.06.2016, some of the alleged breaches of the Equal Remuneration Act, 1976 were found. This resulted in a complaint dated 26.08.2016, which was lodged with the Chief Judicial Magistrate, Lucknow, under the name of Complaint Case No. 2886 of 2016. Interestingly, the complainant added the name of the Applicant as one of the accused persons, even though the Applicant was not involved in the day to day functioning of the Wipro office in Lucknow, had no managerial control or had any shareholding in G4S.
The Applicant was aware of the criminal proceedings only when a police constable visited Wipro’s Lucknow office on 17.04.2017 to carry out the execution of a bailable warrant issued in the said summons order dated 03.09.2016 and warrant order dated 08.02.2017. No notice had been sent to any establishment of the Wipro Company and the Applicant had received no prior notice in respect of the alleged violations.
Issues Before The High Court
- Is the Chairman and Managing Director of a company liable for an alleged statutory offence of an independent third party contractor working for the company without any express or implied term of vicarious liability in the Equal Remuneration Act, 1976?
- Whether the summoning order and the resulting bailable warrant in the absence of recording reasons for the order and assigning any active part to the accused is sustainable in law?
- Whether the Chief Judicial Magistrate, Lucknow had fulfilled the mandatory requirement under Section 202 Cr.P.C before summoning the accused which resided outside his jurisdiction?
Contentions Of The Parties
Learned counsel for the Applicant, Shri Karunanidhi Yadav, submitted that the Applicant had no administrative or managerial control over G4S, which was an entirely separate legal entity engaged purely as an independent contractor under a written agreement. It was further contended that the summoning order dated 03.09.2016 and the bailable warrant dated 08.02.2017 were passed in a mechanical manner, without assigning any reasons and without the Magistrate examining whether the Applicant could be said to have any incriminating role, active or otherwise, in the alleged violation. An additional ground raised was that the mandatory enquiry contemplated under Section 202 Cr.P.C., in respect of an accused residing outside the court’s jurisdiction, had not been undertaken prior to the issuance of the summoning order.
Learned A.G.A.-I, Shri Ashok Kumar Singh, appearing for the State, opposed the application and submitted that a prima facie offence was made out against the Applicant, and that the trial court had duly considered the material on record before issuing process.
Decision And Findings
The Court allowed the application and set aside the complaint proceedings, the summoning order dated 03.09.2016 and the bailable warrant dated 08.02.2017 to the extent they related to the Applicant.
When it comes to the issue of vicarious liability, the Court went on to refer to the established position set out by the Hon’ble Supreme Court in the case of Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609, where the Supreme Court had reiterated the cardinal principle of criminal law that there is no vicarious liability unless the statute prescribes it. Accused can be made with a company only where evidence is found to show that the individual was involved in the company’s criminal activity with criminal intent, or where a company is liable by law. There is no such provision in the Equal Remuneration Act, 1976 and the terms of the contract between Wipro and G4S clearly made G4S the independent contractor with all the respective statutory compliance obligations.
AMLEGALS Remarks
The judgement in Azim Premji v. State of U.P. again holds that vicarious criminal liability cannot be imposed unless the statute expressly provides for it and that Directors or senior officers can only be prosecuted on the basis of their designation only where the alleged default is traced back to an independent third party contractor. The Court reminded Magistrates that invoking a criminal process was not a mechanical process, but required application of judicial mind, reasons to be recorded and compliance with Section 202 Cr.P.C. The judgment also emphasizes the need for contractual delegation of statutory compliance responsibilities to third party service providers as a valuable defence against inappropriate prosecutions of senior management and that criminal action must be launched by enforcement authorities with clarity and specificity on the part of the service provider, and with proof of the necessary criminal intent on the part of the service provider.
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