Iridium India Telecom Ltd. vs. Motorola Inc and Ors.

AIR 2005 SC 514

In this case, it had been held that, in all jurisdictions across world governed by rule of law, companies and corporate houses could no longer claim immunity from criminal prosecution on ground that they were not capable of possessing necessary mens rea for commission of criminal offences. Therefore, Company could have criminal liability and, if a group of persons that guided business of companies had criminal intent that would be imputed to body corporate. Section 141 of Act 1881 provided that, when a person which was a company committed an offence, then certain categories of persons in charge as well as company would be deemed to be liable for offences under Section 138 of Act 1881.

Thus, statutory intendment was plain and provision made functionaries and companies to be liable and that was by deeming fiction. A deeming fiction had its own signification. It was bounden duty of Court to ascertain for what purpose legal fiction had been created. It was also duty of Court to imagine fiction with all real consequences and instances unless prohibited from doing so. The use of term 'deemed' had to be read in its context and fullest logical purpose and import were to be understood. The object of legislature had to be kept in mind. The word 'deemed' used in Section 141 of Act 1881, applied to company and persons responsible for acts of company. It crystallized corporate criminal liability and vicarious liability of a person who was in charge of company. There had to be strict observance of provisions regard being had to legislative intendment because it dealt with penal provisions and a penalty was not to be imposed affecting rights of persons whether juristic entities or individuals, unless they were arrayed as Accused. Commission of offence by company was an express condition precedent to attract vicarious liability of others. Thus, words "as well as company" appearing in Section 141 of Act 1881, made it clear that, when company could be prosecuted, then only persons mentioned in other categories could be vicariously liable for offence subject to averments in Petition and proof thereof. One could not be oblivious of fact that company was a juristic person and it had its own respectability. If a finding was recorded against it, it would create a concavity in its reputation. There could be situations when corporate reputation was affected when a director was indicted. Hence, for maintaining prosecution under Section 141 of Act 1881, arraigning of a company as an Accused was imperative. Other categories of offenders could only be brought in dragnet on touchstone of vicarious liability because same had been stipulated in provision itself. Proceedings initiated under Section 138 of Act 1881 were quashed .Appeal allowed Criminal liability to Offence under Sections 67 and 85 of Information Technology Act, 2000. The High Court directed offences under Section 67 read with Section 85 of Act 2000. It was held that analysis pertaining to Section 141 of Act 1881 would squarely apply to Act 2000. Thus, director could not have been held liable for offence under Section 85 of Act 2000. Company was not arraigned as an Accused. Hence, proceeding as initiated in existing incarnation was not maintainable either against company or against director. Proceedings initiated against Appellants/Managing Director of company, as well as company in present form, were quashed.