Individual Criminal Liability Cannot Be Attached to Collective Corporate Decisions of a Municipal Council

The Central Government’s ‘Integrated Development of Small and Medium Towns’ (IDSMT) scheme was implemented by the Municipal Council, Balod.

In 2008, the Collector sanctioned 22.02 acres of land to the Council for constructing residential houses under the scheme.

A lease deed was executed on 17.09.2008, explicitly prohibiting commercial use or sub-leasing without the Governor's permission.

Contrary to these terms, the Council auctioned vacant plots to private individuals (allottees) and diverted the generated revenue to pay salaries and electricity bills.

Consequently, the State issued an order on 10.01.2018 cancelling the lease and directing criminal prosecution against the then President, Rakesh Yadav, and Chief Municipal Officer (CMO), Toran Singh Thakur.

The allottees challenged the cancellation, while the officials challenged the criminal proceedings.

1. Whether the cancellation of the lease by the State was valid due to the alleged breach of lease conditions by the Municipal Council.

2. Whether the individual officials (President and CMO) can be held personally liable and face criminal prosecution for actions taken via a collective corporate resolution of the Municipal Council.

The Court applied the principle of contractual adherence, holding that parties are bound by the specific mandates of an agreement, and any deviation empowers the authority to cancel the grant.

Where a decision is a "collective consensus decision" of a statutory body, individual liability cannot be fastened upon specific members.

Personal responsibility cannot be attributed for a collective Council decision absent specific findings of manipulation or mens rea.

The Court found that the lease deed was clear: the land was for residential construction under the IDSMT scheme and could not be sub-leased as vacant plots.

The Municipal Council committed a "clear contractual infraction" by allotting undeveloped plots and diverting funds for purposes not envisaged in the agreement (salaries/amenities) without prior permission.

Therefore, the State's cancellation was legally sound.

The diversion of funds was based on a unanimous resolution passed by the entire Council body, including the Vice-President and Councillors.

Since the decision was institutional and collective, the President and CMO could not be "singled out" for criminal culpability as the act did not constitute an individual deed but a shared corporate responsibility.

The petitions by the officials (WPC No. 489 of 2018 & WPS No. 1699 of 2018) were partly allowed; the court quashed the direction for initiation of criminal proceedings against Rakesh Yadav and Toran Singh Thakur, holding they were not personally or individually liable for the collective resolution.

The State was granted liberty to resume possession of the vacant land.