Arraignment of company as principal offender is a condition precedent for vicarious liability of officers under Section 10 of Essential Commodities Act.

In brief

The question

1. Whether the applicant can be held liable for unauthorized possession of an essential commodity when the license renewal rejection was subsequently set aside by an appellate authority

The court held

The Court answered both issues in the negative and held that the deeming fiction of the license renewal negated the allegation of illegality

It also directed

The failure to implead the company as an accused rendered the proceedings against the individual employee unsustainable

The High Court allowed the application and quashed FIR C.R. No. II-05/2016 and all consequential proceedings against the applicant

01Facts

The applicant, a Manager at Reliance Defence and Engineering Limited (RDEL), sought to quash FIR C.R. No. II-05/2016 alleging a violation of Section 7 of the Essential Commodities Act (ECA), 1955

p. 2

RDEL operated a diesel pump for captive consumption for its fleet and vessels

p. 3

While a renewal application for their license (No. 202/11) was pending, the Mamlatdar (Respondent No. 2) rejected the renewal on 15.12.2015 and ordered the removal of stock

p. 4

During the interregnum between the rejection and the filing of an appeal, the Mamlatdar conducted a raid on 13.01.2016, found 6,061 litres of diesel, and registered the FIR

p. 2, 7

Subsequently, the Collector set aside the Mamlatdar’s rejection order on 03.03.2016 and remanded the matter for fresh consideration

p. 5

02Issues

i.1. Whether the applicant can be held liable for unauthorized possession of an essential commodity when the license renewal rejection was subsequently set aside by an appellate authority

pp. 9-10

ii.2. Whether a prosecution under Section 10 of the ECA can be maintained against employees/officers when the company itself has not been arraigned as an accused

p. 6, 15

03Law Applied

The court applied Clause 5(2) of the Gujarat Essential Articles (Licensing, Control and Stock Declaration) Order, 1981, which creates a legal fiction of "deemed renewal" if a renewal application is filed during its validity

p. 5, 10

Regarding vicarious liability, the court applied Section 10 of the Essential Commodities Act, 1955

p. 12

It relied on the Supreme Court precedent in Aneeta Hada v. M/s Godfather Travels & Tours Private Ltd. (2012), which established that arraignment of the principal (the company) is a condition precedent to prosecuting vicarious agents (directors/officers)

pp. 14-15

The court noted the overruling of the contrary view in Sheoratan Agarwal v. State of M.P.

p. 8, 14

Provisions in the judgment · 5 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 482

Essential Commodities Act, 1955 Section 7 Section 10

Negotiable Instruments Act, 1881 Section 138 Section 141

04Reasoning

The Court reasoned that since the Collector quashed the Mamlatdar’s rejection order, the renewal application was restored to its pending status ab initio

p. 10

Consequently, the "deemed renewal" protection under Clause 5(2) of the 1981 Order applied throughout the interregnum period, meaning the applicant was in lawful possession of the diesel at the time of the raid

p. 11

Furthermore, the Court noted that Section 10 of the ECA is analogous to Section 141 of the Negotiable Instruments Act

p. 12

Following Aneeta Hada, the Court observed that the company (RDEL) was not made an accused in the FIR

p. 15

As the company is the primary offender, no vicarious liability can be fastened upon the manager if the company itself is not prosecuted

p. 16