The Supreme Court on Thursday quashed a criminal case of cheating and forgery against directors of the Indian unit of Toyota Motor after the automobile maker promised to compensate the deceased and the owner of the vehicle whose airbags failed to deploy in a road accident in 2012.
Stating that the law with regard to prosecution of directors is already settled, a bench headed by Chief Justice HL Dattu quashed criminal proceedings initiated against Atul C Kirloskar, Vikram S Kirloskar, Shekar Vishwanathan and Sandeep Singh but asked the company to pay compensation of R15 lakh with 9% interest since 2012 to the kin of the deceased driver and R10 lakh to the SUV owner.
Directors cannot be proceeded against vicariously as there is no such thing as vicarious criminal liability, the bench said, adding that all the directors couldn’t have been made party without first making the company a party to the case.
Departing from the rule of vicarious liability, the courts have consistently held that in order to prosecute directors, there have to be specific allegations as to how the directors were involved in and responsible for the offence. Though civil law recognises the principle of ‘vicarious liability’ of directors of companies, the concept is not acknowledged in criminal law. Vicarious liability of the director of a company arises only on account of conduct, act and omission on the part of the director/concerned person and not merely on account of his holding office or position in the company.
The case pertains to an accident of an SUV due to non-functional airbags. Gautam Sharma, owner of the Toyota Fortuner SUV, had alleged that the non-deployment of airbags had led to the death of his driver and he also sustained injuries in a road accident in 2012.
Without making the company an accused, Sharma filed an FIR for cheating, forgery for the purpose of cheating and criminal conspiracy against all the directors and charged them and the dealer for inducing him to buy the car with an objective to getting monetary benefits.
While the Allahabad High Court allowed the prosecution to proceed and dismissed the pleas of the directors for quashing of the FIR, the top brass moved the apex court stating that there was no inducement or deception from inception to make out a cheating case against them.
The Supreme Court quashed the complaint and set aside the high court order on the ground that the law is clear on the issue and directors can’t be roped in for being in the management of the company.
While the company, through its senior advocate Fali Nariman, undertook to compensate, he contended that the top court had settled the legal principle that directors cannot be prosecuted for vicarious liability.
The bench agreed with the senior counsel, but lauded Sharma’s efforts to have fought for a “principle”.