Jharkhand HC: No Vicarious Liability of Company Managers When Their Role Not Disclosed in Complaint

LI Network

Published on: 10 April 2023 at 10:38 IST

The Jharkhand High Court Bench of Justice Sanjay Kumar Dwivedi clarified that the entire criminal action, including the cognizance ruling, should be quashed if Managers of Company role was not stated in the complaint petition .

Court said an accused-Manager of the company cannot be held liable for vicarious liability if his role was not stated in the complaint petition and was not disclosed during the solemn affirmation or by the inquiry witnesses.

High Court in its order said, “The role of these petitioners was not stated in the complaint petition, and neither was it disclosed in the solemn affirmation as well as by inquiry witnesses, and in that view of the matter vicarious liability cannot be fastened on these two petitioners.”

The observation was made by a bench led by Justice Sanjay Kumar Dwivedi while hearing a criminal writ petition seeking the quashing of the entire criminal proceeding, including the order taking cognizance issued by the Chief Judicial Magistrate of Jamshedpur under sections 406, 420, and 120B of the Indian Penal Code, 1860.

A complaint was brought against two accused persons, saying that in January 2010, they approached the complainant with an offer to be their sales distributor for newly introduced herbal personal care goods in the Jamshedpur region.

The complainant was promised a promotional commission, prompt payment, and compensation for damaged or unsold inventory. The plaintiff agreed to become the sales distributor based on these assurances.

However, the accused failed to pay the commission on time and did not return the damaged products as promised. There was no response when the complaint reported the problem to the company’s Area Sales Manager. One of the accused asked for the complainant’s assistance in selling new products, but the complainant refused until his previous claims were resolved.

Thereafter, an email was sent by the accused persons seeking details of the complainant’s claim, with a promise to adjust it against future orders subject to a minimum order value condition. The complainant submitted the claim via email but expressed their inability to place a risky order.

The accused persons informed the complainant about a new billing slab, claiming that all pending dues were cleared. The complainant requested for settling the pending claim, but no response was given by the accused. A legal notice was served but returned due to a change in address. Thus, a criminal complaint was filed against all the accused persons.

Initially, Court noted that the complainant had admitted in his solemn statement that a specific amount had already been paid. The bench thus decided that the component of cheating, which is the purpose to cheat from the start, is not made out by the definition of cheating under section 415 IPC.

High Court said,

“In view of the above facts and submission of learned counsels appearing for the parties, the Court has gone through the contents of the complaint petition and the order taking cognizance and finds that for dispute with regard to payment, the complaint case was filed,”.

It has been alleged that certain stock was not acquired by the petitioners and a certain amount has also not been paid and the complaint case has been filed. It appears that for the commercial transaction, the criminal case has been put into motion,”.

The complainant in solemn affirmation has admitted that on the oral agreement, it was provided and he has also admitted that a certain amount has been paid thus, the ingredient of cheating being the intention of cheating from the very beginning is not made out in view of definition of cheating under section 415 IPC,”.

What is the role of these petitioners has not been stated in the complaint petition and it has also not been disclosed in the solemn affirmation as well as by inquiry witnesses and in that view of the matter vicarious liability cannot be fastened on these two petitioners.”

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