Verdict

In the Supreme Court of India, Criminal Appellate Jurisdiction
Criminal Appeal No.11 of 2025

Sanjay Dutt –     M.D. & C.E.O. of Tata Housing Development Co Ltd) 
Kamal Sehgal – General Manager of Tata Housing Development Co Ltd)
Satpal Singh –   Senior Manager of Sector 113 Gatevida Developers Pvt Ltd) 
[subsidiary company of Tata Housing Development Co Ltd) . . . . . . . . . . . . . . Appellants
Vs
The State of Haryana & Another  . . . . . . . . . . . . . . Respondents

Recently, the Supreme Court delivered a verdict providing clarity on the ‘vicarious liability’ of Managing Directors, Directors and other Executives of a Company for offenses committed in the course of company work by its employees. 

A look at the highlights of the case:

Facts and Background

• Tata Housing Development Co Ltd [Company] had obtained a license from the Forest Department of  Haryana government [Department] for the work of ‘development of land’ in ‘Sector-113, Gate Vida, Gurugram, Haryana’ [Area]. This work was executed on site by Sector 113 Gatevida Developers Pvt Ltd, a subsidiary of the Company.
• During the course of the work, several trees and plants were uprooted in the Area by the Company, using JCB (earth moving equipment), in violation of Section 4 of the Punjab Land Preservation Act, 1900 under the Indian Forest Act [Act].
• In September 2021, concerned officials of the Forest Department registered a formal complaint against the Appellants for above violation of the Act. In the absence of proper response from the Appellants, the complaint was escalated to District Court of Judicial Magistrate 1st Class, Gurugram which upheld the complaint.   
• The Appellants appealed to Punjab & Haryana High Court to quash the complaint of the Department. In December 2022, HC upheld the complaint and declared the Appellants liable for punishment under Section 19 of the Act. 
• The Appellants then approached Supreme Court seeking the quashing of the High Court.    

Issue(s) 

1. Whether the Directors or other Executives of a Company can be held liable for offenses committed by their employees?
2. When does ‘vicarious liability’ become applicable to a Company’s Directors and Executives?  

Analysis & Judgment  
The Hon’ble Supreme Court considered its own judgement in the case Maharashtra State Electricity Distribution Company Limited and Another v/s Datar Switchgear Limited and Others (2010) 10 SCC 479

With regard to the present case, the Court considered the following:
Department’s complaint was made against the Appellants and not against the persons who committed the offence of uprooting of the trees and plants at the site. 

• The complaint has not been made against the Company, in which case the Appellants could have been considered to be vicariously liable for the offence.
• While a company may be held liable for the offences of its employees, this liability does not automatically extend to its Directors or Executives.    
• A Director or Executive can be held vicariously liable only if the company itself is liable in the first place and only if the personal conduct of the Director or Executive connects him directly to the offence.
• In the present case, the lower courts were wrong in assuming that the Appellants were vicariously liable for the offence, over which they had no prior knowledge or any control whatsoever.  
• Mere authorisation of a work or merely being in a supervisory role over the company’s activities does not make a Director or Executive vicariously liable for any offences committed.
• Vicarious liability can be applied only if there is a specific provision in the concerned statute or law. Even if such a provision of vicarious liability exists, it does not automatically apply to all Directors or Executives of the company.
• The cardinal principle of criminal jurisprudence is that there is no vicarious liability unless the statute specifically provides so. There is no presumption that every officer of a company has knowledge about every transaction of the company. 
• It is the responsibility of a complainant to establish the involvement of those whom he intends to make vicariously liable, by (a) checking for existence of a statutory provision of vicarious liability (b) verifying their direct involvement, if any, in the offence. In the present case, Respondents have failed to do so. Even the District Court and High Court have not followed due process in establishing vicarious liability of the Appellants. 

Based on the above analysis, the Supreme Court upheld Appellant’s appeal by setting aside High Court’s decree and dismissing complaint made by the Department. 

For full text of the judgement:

https://api.sci.gov.in/supremecourt/2024/10067/10067_2024_15_43_58197_Judgement_02-Jan-2025.pdf