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
