On August 23, 2019, the Supreme Court gave a decision in the case of Shiv Kumar Jatia Vs. State (NCT of Delhi). (Criminal Appeal No. 1263 of 2019) where the Supreme Court held that criminal proceedings should be quashed against the Managing Director of the Company when the allegations are vague and there were no allegations of active role in the incident with criminal intent.

Brief facts:

On October 10, 2013, a case was registered by one Gaurav Rishi for an offence under Section 308 of the India Penal Code (Attempt to commit culpable homicide) with an allege history of fall from stairs. During the investigation it was found that Gaurav fell from the 6th floor terrace to 4th floor of the Hotel Hyatt Regency and injured himself.

After the investigation, the investigation agency having found no ingredients for offence under Section 308, charged the Company, M/s Asian Hotels (North) (Company which looks after Hyatt Regency Hotel) and the Managing Director and other staff members for offences under Section 336/338 read with Section 32 of IPC and Section 4 of Cigarettes and Other Tobacco Products (Prohibition of Trade and Commerce, Production, Supply and Distribution) Act, 2003. It was alleged that the terrace was dark and there was no light on the terrace and the hotel staff did not stop Gaurav from going there and there was lapse on the part of the hotel management in taking safety measures for the guests.

The Managing Director and the General Manager of the Hotel filed Section 482 Petition in the Delhi High Court for quashing the proceedings, However, the Delhi High Court refused to the quash the proceedings.

Issue:

The issue that arose before the Supreme Court was, whether by merely occupying the position of a Director/controlling authority of the company, could a person be prosecuted for commission of an offence on behalf of the company.

Decision:

The Supreme Court relying on its decision in Sunil Bharti Mittal Vs. Central Bureau of Investigation (2015) 4 SCC 609 held that an individual, either as a Director or a Managing Director or Chairman of the company can be an accused, along with the company, only if there is sufficient material to prove his active role coupled with  criminal intent in commission of an offense.

The Supreme Court further held that merely because a person holds the position of Managing Director/controlling authority, in absence of specific allegations of negligence with the criminal intent, he is not liable.

This update has been contributed by Shahen Pradhan (Partner).