Report No. 41
General Provisions as to Inquiries and Trials
24.1. Procedure when accused is a corporation or association.-
Before considering in detail the various general provisions contained in this Chapter as to inquiries and trials, it is necessary to deal with a lacuna in the Code as regards the procedure when "persons" other than individuals are accused of offences. Section 11 of the Indian Penal Code states that the word "person" includes any company or association or body of persons, whether incorporated or not.
The definition in section 3(42) of the General Clauses Act, 1897, is almost the same except that, instead of "persons", it refers to "individuals". While the context of most of the provisions of the Indian Penal Code referring to a person being punishable for doing or failing to do a specific thing would normally exclude their application to a body of individuals, there is no doubt that a company or association can be prosecuted for certain offences under the Indian Penal Code and other laws which are punishable with fine.
24.2. Penal provisions applying to companies and associations.-
Certain syecial laws specifically provide for the application of the penal provisions contained i.-them to companies and associations. The standard form which has been adopted for this purpose in recent legislation) runs as follows.-
"If the person committing an offence under this Act is a company, the company as well as every person in charge of, and responsible to, the company for the conduct of its business at the time of the commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly etc.
Explanatio.-For the purpose of this sectio.-
(a) 'company' means any body corporate, and includes a firm or other association of individuals; and
(b) 'director' in relation to a firm, means a partner in the firm."
24.3. Service of summons on corporations: section 69(3).-
Provision is made in section 69, su.-section (3) as to how service of a summons is to be effected on an incorporated company or other body corporate. This may be done either by serving it personally on the secretary, local manager or other principal officer of the corporation or by registered post letter addressed to the chief officer of the corporation in India. In the latter case, service is deemed to have been effected when the letter would arrive in ordinary course of post. The Code is, however, silent as to how the corporation is to appear in court through a representative, how the person who may come forward as a representative of the corporation is to be recognised as such by the court, what will happen if after due service no one appears in court as the authorised representative of the corporation, etc.
1. E.g., section 23C of the Foreign Exchange Regulation Act, 1947; section 17 of the Prevention of Food Adulteration Act, 1954; section 88 of the Trade Marks Act, 1958; section 140 of the Customs Act, 1962; section 32 of the Gold Control Act, 1965 and section 61 of the Maharashtra Industrial Development Act, 1962.
24.4. History of sections 69(3).-
In the code of 1882, section 69 did not contain a su.-section (3); this was added for the first time in the Code of 1898. It was briefly explained in the Statement of Objects and Reasons that "this amendment provides for service of summons on a company or other body corporate in such cases as public nuisance under Chapter X". The possibility of a corporation being summoned to answer to a charge of an offence before a criminal court was apparently not visualised and consequently no other provision was made in the Code for this purpose.
24.5. Lacuna noticed in a Calcutta case.-
It appears that this lacuna has not given rise to any serious practical difficulty in the courts. In a Calcutta case,1 however, where a conviction had to be set aside and the case remanded because the summons was served on one individual and there was no evidence to show any relationship between him and the company, these observations were made.-
"The difficulty is caused by the circumstance that while the Indian Penal Code, as well as the General Clauses Act, provides that a person includes a company and there are decisions that a company can be prosecuted for an offence punishable with fine, there is no clear provision in any law as to the proper representative of the company when a company has to be prosecuted for an offence under the Indian Penal Code or an offence under other Acts like the Bengal Municipal Act.
In view of the terms of section 69(3), Criminal Procedure Code, showing that summons on a company may be served on the Secretary or the local manager or other principal officer, it may be held by analogy that the secretary or the local manager or the principal officer of the company will represent the company in such a prosecution.
Accordingly, when summons is issued against a company, some competent representative like the secretary, local manager or other principal officer must be described both by name and by designation as representing the company and there must be some evidence of his representative character. Only in such a case the conviction would be proper"
1. Commissioner of South Dum Dum Municipality v. Om Khosla, AIR 1956 Cal 237 (238), para. 5 (S.K. Sen J.).
24.6. Evolution of law in England.-
The evolution of the law on the subject in England shows how certain difficulties were experienced in this respect to start with and how those were gradually surmounted. First it was felt that a corporation "having no muscles" could not act except through the individuals who were its servants. In the last century the courts got over this difficulty, in cases of no.-feasance, by emphasising that an artificial legal entity is not incapable of failing to act,1 and in cases of nuisance (e.g., obstructing the highway), on the principle that even at common law it was a crime of vicarious responsibility.2 But the major development in juristic approach to the problem took place in this century.
In a judgment relating to civil liability in tort, the House of Lords, taking a step which extended beyond the boundaries of vicarious liability, enunciated the doctrine that the active and directing will of a corporation, which was "an abstraction", must be sought in the person of somebody who "for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the corporation."3 This fiction was later extended to criminal law.
In 1939, it was held4 that a corporation could be indicted for a libel. In 1944, it was held5 that a company alongwith its managing directors and others, could be indicted for conspiracy, the fraud of the director being imputed to the company. The action of the director, it was stated, "is the very action of the company itself". The objection that a corporation could not commit crimes because it would be ultra vires for it to authorise the commission of crimes, was also overruled.6
Because the corporation has no mind and, therefore, no guilty mind, it was thought that it could not be held liable for any crime involving intention, knowledge or deceit. This difficulty was solved, first by holding a corporation liable for crimes of absolute prohibition, next by holding it liable in cases where vicarious criminal liability was permissible, and lastly, by imputing the state of mind of the directors to the corporation. Thus, the scope of criminal liability of corporations widened in course of time. It was held that even a local authority could be convicted of a crime.7 In 1951, the Yorkshire Electricity Board was fined £ 20,000 for committing breach of a Defence Regulation by unauthorised building.8
1. R. v. Birmingham & Gloucester Rly., (1840) 2 QB 47.
2. Great North of England Rly., (1846) 9 QB 315: 115 ER 1294.
3. Lennards' Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., (1915) AC 705 (713) (per Lord Haldane).
4. Triplex Safety Glass Co. Ltd. v. Lansgage Safety Glass Ltd., (1939) 2 All ER 613 (620, 621) (CCA).
5. R. v. I.C.R. Haulage Ltd., 1944 KB 551: (1944) 1 All ER 691.
6. Harker v. Brittonic Assurance Co., (1928) 1 KB 766.
7. Wursel v. Houghton Main Home Delivery Service, (1937) 1 KB 380.
8. Glanville Williams Criminal Law, (1961), p. 164.
24.7. Corporations punishable only with fine.-
As it is impossible to imprison a corporation, practically tie only punishment which can be imposed on it for committing an offence is fine. If the penal law under which a corporation is to be prosecuted does not provide for a sentence of fine, there will be a difficulty. As aptly put by a learned writer,.-
"Where the only punishment which the court can impose is death, penal servitude, imprisonment or whipping, or a punishment which is otherwise inappropriate to a body corporate, such as a declaration that the offender is a rogue and a vagabond, the court will not stultify itself by embarking on a trial in which, if the verdict of guilt is returned no effective order by way of sentence can be made"
In order to get over this difficulty we recommend that a provision should be made in the Indian Penal Code e.g., as section 62 in Chapter III relating to punishments, on the following lines.-
"In every case in which the offence is only punishable with imprisonment or with imprisonment and fine and the offender is a company or other body corporate or an association of individuals, it shall be competent to the Court to sentence such offender to fine only".
1. Welsh Criminal Liability of Corporations, (1945) 62 LQR 363.
24.8. Procedure in English Law.-
Since a corporation cannot be physically present in court, procedural difficulties may arise which in England have been got over by legislation. Thus at common law, a corporation could not be committed for trial; consequently it was provided by statute that in place of "commitment" there would be an order empowering the prosecutor to prefer a bill of indictment against the offending corporation. Statute also provides for the appearance in court through an authorised representative of the corporation to answer to the charge brought against it.
24.9. Registered societies.-
We have noticed above that in recent legislation some penal provisions are expressly made applicable to companies as well as to unincorporated associations of individuals. The Code, however, contains no provisions at all in regard to such associations. Even section 69(3) which provides for the service of a summons covers only corporate bodies. Societies registered under the Societies Registration Act, 1860, though not formally incorporated, possess some of the attributes of a corporation, and it appears desirable that they should be treated on a par with corporations in criminal proceedings.
24.10. New section 336 recommended.-
We accordingly recommend the insertion of a new section at the beginning of Chapter XXIV of the Code. The section (which is provisionally numbered 336) may be as follows.-
"336. Procedure when corporation or a registered society is an accused.- (1) In this section, "corporation" means an incorporated company or other body corporate, and includes a society registered under the Societies Registration Act, 1860.
(2) Where a corporation is the accused person of one of the accused persons in an inquiry or trial, it may appoint a representative for the purpose of the inquiry or trial. Such appointment need not be under the real of the corporation.
(3) Where a representative of a corporation appears, any requirement of this Code that anything shall be done in the presence of the accused or shall be read or stated or explained to the accused, shall be construed as a requirement that that thing shall be done in the presence of the representative or read or stated or explained to the representative, and any requirement that the accused shall be examined, shall be construed as a requirement that the representative shall be examined
(4) Where a representative of a corporation does not appear, any such requirement as is referred to in su.-section (3) shall not apply.
(5) Where a statement in writing purporting to be signed by the managing director of the corporation or by any person (by whatever name called) having, or being one of the persons having, the management of the affairs of the corporation, to the effect that the person named in the statement has been appointed as the representative of the corporation for the purposes of this section, is filed, the Court shall unless the contrary is proved, presume that such person has been so appointed.
(6) If a question arises as to whether any person appearing as the representative of a corporation in an inquiry or trial before a court is or is not such representative the question shall be determined by the Court".