The question in St. Regis pertained to whether the company could be liable under certain pollution-control Regulations for the offence of “intentionally making a false entry”. The company owned five mills. The smallest of these five was the Cullompton Mill. The Cullompton Mill had 129 employees; amongst them was one Mr. Steer, the technical manager. Mr. Steer deliberately falsified records, and intentionally made a false entry. The question was whether this could be attributed to the company, such that the company could be said to have committed the offence. It was argued that (following Meridian
Instinctively, one is drawn towards this argument; for it stands to reason that particularly in areas such as environmental protection, companies should not be able to evade obligations by pointing out to a lower-level functionary who actually performed these acts. However, in a considered judgment, the Court of Appeal rejected this argument, and held that the company could not be liable in the facts of the case. The Court gives several reasons for this. First, the Regulations would not be emasculated – the Regulations provided several strict-liability offences; and the Court held that these strict-liability offences would serve to uphold the purpose of the Regulation and would prevent companies from evading the Regulations. Thus, the effectiveness of the Regulations would not be eroded by refusing to adopt a flexible approach to attribution. Secondly, it was held that Mr. Steer was far too low in the corporate hierarchy. Mr. Steer was the technical manager of the smallest of the five mills. He reported to the Mill’s (not the company’s) Managing Director. That Managing Director reported to divisional technical officers and divisional environment officers, who in turn reported to the senior management of the company. In the absence of any fault with any of these intervening functionaries, Mr. Steer’s actions could not be attributed to the company. Further, the directors had expressly set out an environmental policy; under this policy, no discretion in respect of maintaining records was given to Mr. Steer. Under the policy, the Court held, Mr. Steer was simply not one who was in actual control of the operations of the company or part of the operations. The Court of Appeal held, “The importance of avoiding environmental pollution cannot be overstated. But the Regulation has sought to meet that danger in a carefully graduated way imposing both offences of strict liability and those which require proof of intention such as in 32(1)(g) and (h)…” Accordingly, it was held that the more flexible approach of Meridian
The decision reiterates that Tesco operates as the default rule; and ordinarily only the acts of the senior management can be attributed to the company. This default rule can be displaced (by following the Meridian approach) only when the policy or words of the statute are clear in this regard. Further, the creation of an extensive strict-liability regime also played an important part in the Court’s reasoning: the policy of the statute would not require the flexible approach to mens rea being adopted, as the statute itself completely dispensed with mens rea in several situations, meaning thereby that the company could not automatically avoid responsibility by pointing towards a lower-level functionary. Whether the Meridian rules are attracted in the context of criminal law depends on a careful analysis of the relevant statute. [The approach in India is not yet clear – the Supreme Court in Iridium v. Motorola approved Tesco, but did not cite Meridian Meridian flexibility to yet be imported. A discussion of the Indian position can be found in these two posts and this article.]
COMMENTS (IMPROMPTU)
1. INVOKING THE “THEORY OF ATTRIBUTION” MAY NOT, ONE STRONGLY FEELS, AT ALL ARISE , RATHER BE A NONSTARTER SHOULD THE APPLICABLE LAW CONTAINS SPECIFIC PROVISION (S) LAYING DOWN WHO CAN BE PROCEEDED AGAINST FOR ANY ‘OFFENCE’ COMMITTED (WITHIN THE SPECIAL MEANING OF ‘OFFENCE’ AND AS ENVISAGED THEREUNDER), BY A ‘CORPORATE’.
BROADLY SPEAKING, MANY OF THE INDIAN STATUTES, INCLUDING THE ONES IMPINGING ON/IMPACTING THE NATION’S ECONOMY, ARE SEEN TO HAVE SUCH CLEARCUT PROVISIONS.
FOR INSTANCE, UNDER THE IT ACT, THERE IS A WHOLE SET OF SPECIALLY GOVERNING PROVISIONS (CHAPTER XXII); BESIDES, ON THE OTHER PLEA OF ‘mens rea’, A FAVOURITE PLEA SOUGHT TO BE RAISED BY OFFENDERS, ALBEIT INVARIABLY WITH NO SUCCESS (SEE SECs. 278 A to 278 E of THE IT ACT).
AS IS COMMON KNOWLEDGE, THERE HAVE BEEN QUITE A FEW CASES REPORTED IN RECENT TIMES AGAINST CORPORATE FOR OFFENCE(S) COMMITTED IN VIOLATION OF STATES’ ENACTMENTS ON ‘FLATS’ AND ‘APARTMENTS’.
A RECENT ONE CITED IN THE ARTICLE @ http://www.lawyersclubindia.com/news/PROSECUTION-AGAINST-GODREJ-amp-BOYCE-MFG-CO-LTD–9418.asp> MAY PROVIDE SOME FOOD FOR USEFUL THOUGHTS.
NO DOUBT, IT IS A COMMONLY ACCEPTED PROPOSITION THAT – A COROPORATE HAS NEITHER A BODY TO BE KICKED NOR A SOUL TO BE CONDEMNED. NONETHELESS, IN ONE’S WELL-FOUNDED CONVICTION, IT WOULD BE A MOCKERY OF THE LEGAL SYSTEM, ALSO GO AGAINST THE VERY BASIC PRINCIPLES / TENETS OF JURISPRUDENCE, FOR THAT MATTER EVEN AGAINST THE GRAIN OF COMMON LAW PRINCIPLES / OR OF NATURAL JUSTICE, TO HOLD OUT OR SUPPORT A VIEW THAT ONCE THE ‘OFFENDER’, BY CONSTRUING IN ITS NARROW AND TECHNICAL SENSE, IS A ‘COROPORATE’, ALL PENAL AND OTHER ATTENDANT CONSEQUENCES SHOULD BE REGARDED NOT TO COME INTO PLAY AND THE OFFENDER SHOULD BE LET OFF SCOT FREE.
THE OTHER RELATED POINTS TO BEAR IN MIND/BE KEPT IN SHARP FOCUS ARE THESE :-
1) THE ONEROUS RESPONSIBILITIES/ANSWERABILITY IN LAW OF THE DIRECTORS, -ACTING IN A FIDUCIARY CAPACITY / AS ‘TRUSTEES’ OF A CORPORATE, IN ESSENCE OF ALL ITS STAKEHOLDERS, – BOTH AS A BODY IE JOINTLY, ALSO SEVERALLY /INDIVIDUALLY ; and
2) SIMILARLY, THOSE OF OTHER OFFICERS, IN PARTICULAR OF CORPORATE’S CEO, CFO, NOT BUT NOT LEAST, HOLDER OF OFFICE OF ‘COMPANY SECREATARY’.
ONE MAY LOOK FOR MORE RELATED INFORMATION IN THE BLOG@
http://vswaminathan-vswaminathan-swamilook.blogspot.com/2011/08/cci-slaps-penalty-notice-on-nse-times.html