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Haryana Rice Procurement (Levy) Order, 1979: Contraven- tion of by partnership firm--Prosecution of all partners--Maintainability of. Essential Commodities Act, 1955: ss. 7 & 10--Contraven- tion of Haryana Rice Procurement (Levy) Order, 1979 by partnership firm-Liability for--Held, no vicarious liability in criminal law unless statute so specifies.



    The short supply of levy rice to the State Government by
licensed  millers  is a contravention of  the  Haryana Rice
Procurement (Levy) Order, 1979 made under s. 3 of the Essen-
tial  Commodities Act, 1955. The said contravention is pun-
ishable under s. 7 of the Act. Under s. 10(1) of the Act  a
person is deemed to be guilty of contravention of  such  an
order, if  he was in charge of and was responsible  to the
company for the conduct of its business. Under the  proviso
thereto, a person is, however, not liable to any  punishment
if  he proves that the contravention took place without his
knowledge or that he exercised all due diligence to  prevent
such contravention. Under explanation (a) to the section the
term  "company" includes  a firm or  other  association  of
individuals.
    The appellants, partners of a firm running a rice  mill,
were  convicted for contravention of the provisions  of the
procurement  order read with s. 7 of the Act, and  sentenced
to rigorous imprisonment and fine. The High Court  confirmed
the conviction and sentence.
    In this appeal by special leave, it was  contended for
the  appellants that there was no evidence adduced  by the
prosecution that they were in charge of the business of the
firm  when the offence was committed and in the absence  of
any such evidence the conviction could not be sustained.
Partly allowing the appeal,
887
    HELD: 1. There is no vicarious liability in criminal law
unless the statute takes that also within its fold.  Section
10  of the Essential Commodities Act does not provide for
such liability. It does not make all the partners liable for
the offence whether they do business or not. [890C]
    2.1 The obligation for the accused to prove  under the
proviso to s. 10(1) that the offence took place without his
knowledge or that he exercised all due diligence to  prevent
such  offence, arises only when the prosecution establishes
that the requisite condition mentioned in sub-s. 1 that the
partner was responsible for carrying on the business and was
during the  relevant  time in charge of  the  business,  is
satisfied. [890E]
    2.2 In the instant case PW 1 had deposed that the state-
ment regarding purchase of paddy and supply of levy rice was
signed by appellant No. 3 as partner on behalf of the  firm.
There is no other evidence on record to indicate that  other
partners were also conducting the business of the firm when
the offence was committed. [890G-891A]
    The conviction  and sentence of appellant No.  3 are,
therefore, maintained. The conviction and sentence of appel-
lant Nos. 1, 2 and 4 are set aside. They are acquitted from
all the charges. [891C]





1989 AIR 1982, 1989( 3  )SCR 886, 1989( 4  )SCC 630, 1989( 2  )SCALE446 , 1989( 3  )JT 523


PETITIONER:
SHAM SUNDAR & ORS.

Vs.

RESPONDENT:
STATE OF HARYANA

DATE OF JUDGMENT21/08/1989

BENCH:
SHETTY, K.J. (J)
BENCH:
SHETTY, K.J. (J)
PANDIAN, S.R. (J)

CITATION:
 1989 AIR 1982  1989 SCR  (3) 886
 1989 SCC  (4) 630  JT 1989 (3) 523
 1989 SCALE  (2)446


ACT:
    Haryana Rice Procurement (Levy) Order, 1979:  Contraven-
tion   of   by partnership   firm--Prosecution   of all
partners--Maintainability of.
    Essential Commodities Act, 1955: ss. 7 &  10--Contraven-
tion  of  Haryana  Rice Procurement (Levy)  Order,  1979  by
partnership firm-Liability for--Held, no vicarious liability
in criminal law unless statute so specifies.



HEADNOTE:
    The short supply of levy rice to the State Government by
licensed  millers  is a contravention of  the  Haryana Rice
Procurement (Levy) Order, 1979 made under s. 3 of the Essen-
tial  Commodities Act, 1955. The said contravention is pun-
ishable under s. 7 of the Act. Under s. 10(1) of the Act  a
person is deemed to be guilty of contravention of  such  an
order, if  he was in charge of and was responsible  to the
company for the conduct of its business. Under the  proviso
thereto, a person is, however, not liable to any  punishment
if  he proves that the contravention took place without his
knowledge or that he exercised all due diligence to  prevent
such contravention. Under explanation (a) to the section the
term  "company" includes  a firm or  other  association  of
individuals.
    The appellants, partners of a firm running a rice  mill,
were  convicted for contravention of the provisions  of the
procurement  order read with s. 7 of the Act, and  sentenced
to rigorous imprisonment and fine. The High Court  confirmed
the conviction and sentence.
    In this appeal by special leave, it was  contended for
the  appellants that there was no evidence adduced  by the
prosecution that they were in charge of the business of the
firm  when the offence was committed and in the absence  of
any such evidence the conviction could not be sustained.
Partly allowing the appeal,
887
    HELD: 1. There is no vicarious liability in criminal law
unless the statute takes that also within its fold.  Section
10  of the Essential Commodities Act does not provide for
such liability. It does not make all the partners liable for
the offence whether they do business or not. [890C]
    2.1 The obligation for the accused to prove  under the
proviso to s. 10(1) that the offence took place without his
knowledge or that he exercised all due diligence to  prevent
such  offence, arises only when the prosecution establishes
that the requisite condition mentioned in sub-s. 1 that the
partner was responsible for carrying on the business and was
during the  relevant  time in charge of  the  business,  is
satisfied. [890E]
    2.2 In the instant case PW 1 had deposed that the state-
ment regarding purchase of paddy and supply of levy rice was
signed by appellant No. 3 as partner on behalf of the  firm.
There is no other evidence on record to indicate that  other
partners were also conducting the business of the firm when
the offence was committed. [890G-891A]
    The conviction  and sentence of appellant No.  3 are,
therefore, maintained. The conviction and sentence of appel-
lant Nos. 1, 2 and 4 are set aside. They are acquitted from
all the charges. [891C]



JUDGMENT:
    CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 524
of 1989.
    From  the  Judgment and Order dated  25.5.1989  of the
Punjab and Haryana High Court in Criminal Appeal No. 175  of
1986.
      M.C.  Bhandare,  (N.P.) and Gopal K.  Bansal  for the
Appellants.
      Mahabir Singh for the Respondent.
      The Judgment of the Court was delivered by
    K. JAGANNATHA  SHETTY, J. We grant special  leave and
proceed to dispose of this appeal.
    On June  28, 1980 the appellants formed  a partnership
firm for the purpose of running a rice mill in the name and
style of M/s Panna Lal Prem Nath Rice Mills at Shahput. They
have been convicted by the Presiding Officer of the  Special
Court, Karnal by judgment dated March 10, 1986 for  contra-
vention of the provisions of the Haryana
888
Rice Procurement (Levy) Order, 1979, read with section 7  of
the  Essential Commodities Act. They were sentenced  to six
months' rigorous imprisonment and a fine of Rs.2,000  each.
The  High  Court of Punjab and Haryana has  confirmed that
conviction and sentence.
   They now appeal against conviction.
    The facts which gave rise to the charge, in so  far  as
material,  were these: In 1984, the  firm  purchased 5373
quintals  69 kgs. and 400 gms of common paddy from the mar-
ket. By the rate of conversion of paddy into rice an average
3582.49 quintals of rice should have been obtained from that
much of quantity of paddy. As per levy rules the firm  ought
to have supplied 3224.21 quintals of rice to the  Government
but  the firm failed to supply it. Instead it supplied only
15  10 quintals of rice. There was thus a short  supply  of
1714.17 quintals of levy rice to the Government. On  another
occasion  the firm purchased 2353.79 quintals  of  superfine
paddy  out  of which 1566.62 quintals of rice could  be ob-
tained. From  that,  the firm gave  the  Government  933.89
quintals  of  rice as against 1174.96 quintals. Here  again
there  was  a short supply of 241.07 quintals  of  superfine
levy rice.
    The short supply of levy rice is a contravention of the
Haryana Rice Procurement (Levy) Order 1979  and  punishable
under  section 7 of the Essential Commodities Act.  All the
partners  of the firm were charge-sheeted and put  to  trial
for the said offence. They were also convicted and sentenced
as earlier stated.
    Counsel  for the appellants urged that there is no evi-
dence adduced by the prosecution that the appellants were in
charge of  the business of the firm when  the offence was
committed  and in the absence of any such evidence the con-
viction could not be sustained. Counsel rested his  submis-
sion on the text of section 10 of the Essential Commodities
Act. This section provides:
     "10. Offences by companies--(1) If the  person
     contravening an order made under section 3  is
     a company, every person who, at the  time  of
     contravention was committed, was in charge of,
     and  was responsible to, the company  for the
     conduct of the business of the company as well
     as  the company, shall be deemed to be  guilty
     of the contravention and shall be liable to be
     proceeded against and punished accordingly:
     889
      Provided that nothing  contained  in
     this sub-section render any such person liable
     to  any punishment if he proves that the con-
     travention took place without his knowledge or
     that he exercised all due diligence to prevent
     such contravention.
      (2)  Notwithstanding  anything con-
     tained .in sub-section where an offence  under
     this  Act has been committed by a company and
     it is proved that the offence has been commit-
     ted  with the consent or connivance of, or  is
     attributable  to any neglect on the  part of,
     any  director,  manager, secretary  or  other
     officer of the company, such director,  manag-
     er,  secretary or other officer shall also  be
     deemed to be guilty of that offence and  shall
     be liable to be proceeded against and punished
     accordingly."
     Explanation--For the   purposes  of this
     section,--
     (a)  "Company" means any body  corporate, and
     includes a firm or other association of  indi-
     viduals, and
     (b) "director"--in relation to a firm means  a
     partner in the firm.
    From explanation to section 10 it will be seen that the
company includes a firm and other association of  persons.
Section 10 provides that the person shall be deemed  to  be
guilty of contravention of an order made under section 3  if
he  was incharge of and was responsible to the firm for the
conduct of the business of the firm. What is of  importance
to  note  is,  that the person who was entrusted  with the
business of the firm and was responsible to the firm for the
conduct of the business, could alone be prosecuted for the
offence complained of.
    Counsel  for the State, however, relied upon  the  legal
liability of partners and he argued that it would be for the
accused partners  to prove that the offence  was  committed
without their knowledge or in spite of exercising due  dili-
gence  on  their part. He relied upon the  proviso  to sub-
section (1)  of sec. 10. It is true that under the  Indian
Partnership  Act, 1932, a 'firm' or 'partnership' is  not  a
legal entity but is merely an association of persons  agreed
to  carry  on  business. It is only a  collective  name for
individuals, carrying on business in partnership. The essen-
tial  characteristic  of a firm is that each  partner  is  a
representative of other partners. Each of the partners is an
agent as
890
well as a principal. He is an agent in so far as he can bind
the  other  partners  by his acts within the  scope  of the
partnership agreement. He is a principal to the extent that
he is bound by acts of other partners. In fact every partner
is liable for an act of the firm. Section 2(a) of the  Part-
nership Act defines an "act of a firm" to mean any  act  or
omission by all the partners, or by any partner or agent  of
the  firm  which  gives rise to a right enforceable  by  or
against the firm.
    But we  are concerned with a criminal  liability  under
penal provision and not a civil liability. The penal  provi-
sion must be  strictly construed in the first place. Second-
ly,  there is no vicarious liability in criminal law  unless
the statute takes that also within its fold. Section 10 does
not  provide  for such liability. It does not make  all the
partners liable for the offence whether they do business  or
not.
    It is, therefore, necessary to add an emphatic note  of
caution in this regard. More often it is common that some of
the  partners of a firm may not even be knowing of  what  is
going  on  day to day in the firm. There  may  be  partners,
better known as sleeping partners who are not required  to
take  part in the business of the firm. There may be  ladies
and  minors who were admitted for the benefits of  partner-
ship.  They may not know anything about the business of the
firm.  It  would be a travesty of justice to  prosecute all
partners  and  ask them to prove under the proviso  to sub-
section (1)  that the offence was committed  without  their
knowledge. It is significant to note that the obligation for
the accused to prove under the proviso that the offence took
place  without his knowledge or that he exercised  all due
diligence  to  prevent such offence arises  only  when the
prosecution  establishes that the requisite  condition men-
tioned in  sub-section (1) is established.  The  requisite
condition  is that the partner was responsible for  carrying
on  the business and was during the relevant time in  charge
of the business. In the absence of any such proof, no  part-
ner could be convicted. We, therefore, reject the contention
urged by counsel for the State.
    We have perused the evidence of the prosecution. Santlal
Inspector,  Food and Civil Supplies (PW 1) has deposed that
the  accused were partners of the firm. He has stated that
the  statement Ex.  P. 8 regarding purchase  of  paddy and
supply of levy rice was signed by Lajpat Rai as partner  on
behalf of the firm. The rest of his statement relates to the
short  supply  of levy rice, and it does not  indicate that
other partners were also conducting the business during the
relevant  time. The statement of PW-3 who  investigated the
case  does not indicate anything further. He has seized the
relevant docu-
891
ments like stock register and recovery memo and arrested all
the  four  accused.  These documents do not  indicate even
remotely  that all the partners were doing the business  of
the  firm.  There  is no other evidence on  record  on this
aspect. With these tit-bits, it is impossible to hold that
when  the offence was committed all the partners  were con-
ducting the business of the firm. However, Lajpat  Rai ac-
cused  No.  3 cannot escape the liability. The material  on
record indicates that he was conducting the business of the
firm  and in fact, he has signed the statement Ex. P.  8  on
behalf of  the firm. His conviction  cannot  therefore  be
disturbed. But the conviction of other partners is absolute-
ly uncalled for.
    In the result we allow the appeal, set aside the convic-
tion  and sentence of appellant Nos. 1, 2 and 4 and  acquit
them  from all the charges. The conviction and sentence  of
appellant No. 3, however, are maintained.
P.S.S. Appeal allowed.
892