Supreme Court Quashes Conviction of Nominee Officer Due to Non-Conviction of Company in Food Adulteration Case (5 November 2020)

Introduction

Date of the Judgment: 5 November 2020

Citation: 2020 INSC 837

Judges: L. Nageswara Rao, Hemant Gupta, Ajay Rastogi, JJ.

Can a company’s nominated officer be held liable for food adulteration when the company itself is not convicted? The Supreme Court of India recently addressed this critical question in a case concerning the Prevention of Food Adulteration Act, 1954. The Court’s decision clarifies the relationship between a company and its nominated officer in cases of food adulteration, emphasizing that both must be held accountable for a conviction to stand. This judgment was delivered by a three-judge bench comprising Justices L. Nageswara Rao, Hemant Gupta, and Ajay Rastogi, with the opinion authored by Justice Hemant Gupta.

Case Background

On 7 February 1989, a sample of Dalda Vanaspati Khajoor Brand Ghee, manufactured by Hindustan Unilever Limited, was collected by Shri H.D. Dubey, Inspector, Food and Health, under the Prevention of Food Adulteration Act, 1954. The sample was found to be adulterated because its melting point was 41.8 degrees centigrade, exceeding the normal range of 31-41 degrees centigrade. The complaint was initially filed against the Directors of both Hindustan Unilever Limited and Lipton India Limited. However, the Supreme Court, in an earlier judgment, directed the trial court to determine if the nomination forms for H. Dayani and Dr. Nirmal Sen were acknowledged by the Local (Health) Authority. If acknowledged, proceedings against the Directors, other than the company and nominated persons, were to be dropped.

Following this directive, the trial court absolved the Directors, and the prosecution continued against the nominated officer, Nirmal Sen. However, the company, Hindustan Unilever Limited, was not formally convicted in the trial court’s judgment. The trial court convicted Nirmal Sen under various provisions of the 1954 Act. The Additional Sessions Judge upheld the conviction of Nirmal Sen but acquitted other accused. The High Court, in revision, noted that if the company is acquitted, the benefit should extend to the nominated officer, and thus remitted the matter to the trial court for a fresh judgment.

Timeline

Course of Proceedings

The trial court convicted the appellant, Nirmal Sen, under various sections of the Prevention of Food Adulteration Act, 1954, finding him guilty of selling adulterated vanaspati ghee. The Additional Sessions Judge upheld this conviction, noting that the company, Hindustan Unilever Limited, was also an accused but was not mentioned in the trial court’s judgment. The High Court, in its revisional jurisdiction, observed a defect in the judgments of both the trial court and the appellate court. It noted that if the company were to be acquitted, the benefit would directly extend to the nominated officer. Consequently, the High Court set aside the conviction and remanded the matter to the trial court for a fresh judgment, directing the trial court to consider the case against both the nominated officer and the company.

Legal Framework

The case primarily revolves around the Prevention of Food Adulteration Act, 1954 (the ‘1954 Act’), and the subsequent Food Safety and Standards Act, 2006 (the ‘2006 Act’). The 1954 Act penalizes the sale of adulterated food. Specifically, the trial court convicted Nirmal Sen under Section 2(1G)(K) read with Section 32(F)/7(i)/16(A)(i) and Section 2(ia)(m) read with 7(i)/16(1)/(a)(i) of the 1954 Act, and Section 14 read with Rule 2(A) read with Section 7(v)/16(1C) of the same Act. Section 17 of the 1954 Act deals with offences by companies, stipulating that both the company and the person in charge of the company’s business can be held liable. The 2006 Act, which repealed the 1954 Act, also contains provisions for penalties for food adulteration and includes a saving clause under Section 97, which protects actions taken under the repealed Act. Section 97 of the 2006 Act states that the repeal of the 1954 Act shall not affect any penalty, forfeiture, or punishment incurred under the repealed Act, and such penalties can be imposed as if the 2006 Act had not been passed. Section 6 of the General Clauses Act, 1897, also supports the continuation of proceedings under repealed statutes.

Section 17 of the 1954 Act states:
“17. Offences by companies —(1) Where an offence under this Act has been committed by a company—
(a) (i) the person, if any, who has been nominated under sub-section (2) to be in charge of, and responsible to, the company for the conduct of the business of the company (hereinafter in this section referred to as the person responsible), or
(ii) where no person has been so nominated, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company; and
(b) the company,
shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent the commission of such offence.”

Arguments

Arguments by the Appellant (Nominated Officer):

• The appellant, Nirmal Sen, argued that he was charged under Section 2(ia)(m) read with Section 7(i) of the 1954 Act, which carries a punishment of not less than six months and up to three years imprisonment and a fine of Rs. 1,000 under Section 16(1)(a)(i). In contrast, the 2006 Act prescribes a fine of Rs. 5 lakhs and Rs. 1 lakh for similar adulteration (related to higher melting point) under Sections 3(1)(zx) and 3(1)(i), respectively. Therefore, the appellant should receive the benefit of the reduced penalty under the 2006 Act. Reliance was placed on T. Barai v. Henry Ah Hoe & Anr. [(1983) 1 SCC 177], Nemi Chand v. State of Rajasthan [(2018) 17 SCC 448], and Trilok Chand v. State of Himachal Pradesh (Criminal Appeal No. 1831 of 2010 decided on 1.10.2019).

Arguments by the Appellant (Company):

• The company argued that it was not convicted by the trial court. Therefore, the High Court could not have ordered a retrial, especially without giving the company a notice of being heard. This contravenes Section 401(2) of the Code of Criminal Procedure, 1973, which requires that no order should be made to the prejudice of the accused unless they have had an opportunity to be heard.

Arguments by the Respondent (State of Madhya Pradesh):

• The State argued that the punishments under the 1954 Act are protected by Section 97 of the 2006 Act. Therefore, the appellant cannot claim the benefit of the reduced penalties under the 2006 Act. The State also argued that the High Court’s order for retrial was justified.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the High Court was justified in remanding the matter to the trial court for a fresh judgment, considering that the company, Hindustan Unilever Limited, was not convicted by the trial court and whether the nominated officer could be convicted in the absence of the company’s conviction.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• R. Banerjee & Ors. v. H.D. Dubey & Ors. [(1992) 2 SCC 552] – Supreme Court of India: This case directed the trial court to inquire into the acknowledgment of nomination forms by the Local (Health) Authority.

• Nemi Chand v. State of Rajasthan [(2018) 17 SCC 448] – Supreme Court of India: This case dealt with the benefit of amendments in the Act, but was distinguished in the present case due to the repeal of the 1954 Act.

• T. Barai v. Henry Ah Hoe & Anr. [(1983) 1 SCC 177] – Supreme Court of India: This case discussed the benefit of amendments in the Act, which was distinguished in the present case.

• Trilok Chand v. State of Himachal Pradesh (Criminal Appeal No. 1831 of 2010 decided on 1.10.2019) – Supreme Court of India: This case granted the benefit of the 2006 Act, but the Supreme Court noted that the attention of the Court was not drawn to Section 97 of the 2006 Act.

• State of Punjab v. Mohar Singh [AIR 1955 SC 84] – Supreme Court of India: This case examined the effect of repeal of a statute and the applicability of Section 6 of the General Clauses Act, 1897.

• Tiwari Kanhaiyalal & Ors. v. Commissioner of Income Tax, Delhi [(1975) 4 SCC 101] – Supreme Court of India: This case discussed the effect of repeal under the Income Tax Act and the General Clauses Act, 1897.

• Aneeta Hada v. Godfather Travels & Tours Private Limited [(2012) 5 SCC 661] – Supreme Court of India: This case discussed the conviction of directors in the absence of the company in proceedings under Section 138 of the Negotiable Instruments Act, 1881.

Legal Provisions:

• The Prevention of Food Adulteration Act, 1954: Sections 2(1G)(K), 32(F), 7(i), 16(A)(i), 2(ia)(m), 16(1)(a)(i), 14, Rule 2(A), 7(v), 16(1C), and 17.

• The Food Safety and Standards Act, 2006: Sections 3(1)(zx), 3(1)(i), and 97.

• The Code of Criminal Procedure, 1973: Section 401(2).

• The General Clauses Act, 1897: Section 6.

• The Negotiable Instruments Act, 1881: Section 138 and 141.

Judgment

The Supreme Court allowed the appeals and set aside the High Court’s order. The Court held that the conviction of the nominated officer, Nirmal Sen, was unsustainable because the company, Hindustan Unilever Limited, was not convicted by the trial court. The Court emphasized that Section 17 of the 1954 Act makes both the company and the nominated person liable, and these are not alternative but conjoint liabilities. The Court also rejected the argument that the appellant should receive the benefit of reduced penalties under the 2006 Act, citing Section 97 of the 2006 Act and Section 6 of the General Clauses Act, 1897, which protect the punishments under the repealed 1954 Act. The Court noted that the judgment in Trilok Chand v. State of Himachal Pradesh was passed without considering Section 97 of the 2006 Act and was therefore specific to its facts.

How each authority was viewed by the Court?

• R. Banerjee & Ors. v. H.D. Dubey & Ors. [(1992) 2 SCC 552]* – This case was followed to establish the initial direction of the case.

• Nemi Chand v. State of Rajasthan [(2018) 17 SCC 448]* – This case was distinguished as it was based on an amendment, whereas the present case involves a repeal.

• T. Barai v. Henry Ah Hoe & Anr. [(1983) 1 SCC 177]* – This case was distinguished as it was based on an amendment, whereas the present case involves a repeal.

• Trilok Chand v. State of Himachal Pradesh (Criminal Appeal No. 1831 of 2010 decided on 1.10.2019)* – This case was distinguished as the Court did not consider Section 97 of the 2006 Act.

• State of Punjab v. Mohar Singh [AIR 1955 SC 84]* – This case was relied upon to interpret the effect of repeal and the applicability of Section 6 of the General Clauses Act, 1897.

• Tiwari Kanhaiyalal & Ors. v. Commissioner of Income Tax, Delhi [(1975) 4 SCC 101]* – This case was relied upon to interpret the effect of repeal and the applicability of Section 6 of the General Clauses Act, 1897.

• Aneeta Hada v. Godfather Travels & Tours Private Limited [(2012) 5 SCC 661]* – This case was relied upon to establish the principle that a company must be arraigned as an accused for the conviction of its directors/officers.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Conjoint Liability under Section 17 of the 1954 Act: The Court emphasized that Section 17 of the 1954 Act makes both the company and the nominated person liable for offences, and these liabilities are conjoint, not alternative. Therefore, the conviction of the nominated officer cannot stand without the conviction of the company.

• Protection of Punishments under the Repealed Act: The Court held that Section 97 of the 2006 Act and Section 6 of the General Clauses Act, 1897, protect the punishments imposed under the repealed 1954 Act. This means that the appellant could not claim the benefit of reduced penalties under the 2006 Act.

• Procedural Fairness: The Court found that remanding the matter to the trial court after more than 30 years to cure a defect that went to the root of the trial was not fair to the appellant. The failure to convict the company rendered the conviction of the nominated person unsustainable.

Logical Reasoning:

The Court considered the argument that the appellant should receive the benefit of the reduced penalties under the 2006 Act but rejected it based on the saving clause in the 2006 Act and Section 6 of the General Clauses Act, 1897. The Court also considered the procedural aspect of remanding the case after 30 years, deeming it unfair to the appellant.

The Court quoted:

“The question thus now narrows down as to whether the course adopted by the High Court to remand the matter to the trial court after more than 30 years to cure the defect which goes to the root of the trial, though permissible in law, is justified.”

“Therefore, in the absence of the Company, the Nominated Person cannot be convicted or vice versa. Since the Company was not convicted by the trial court, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant/Nominated Person who has been facing trial for more than last 30 years.”

“Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the Nominated Person as unsustainable.”

There was no minority opinion in this case. The three-judge bench unanimously agreed on the decision.

Key Takeaways

• Conjoint Liability: A nominated officer of a company cannot be convicted under the Prevention of Food Adulteration Act, 1954, if the company itself is not convicted. Both the company and its nominated officer must be held liable for a conviction to stand.

• Protection of Punishments: The punishments imposed under the repealed Prevention of Food Adulteration Act, 1954, are protected by Section 97 of the Food Safety and Standards Act, 2006, and Section 6 of the General Clauses Act, 1897. Therefore, the accused cannot claim the benefit of reduced penalties under the new Act.

• Procedural Fairness: Courts should not remand cases for retrial after long periods, especially when the defect goes to the root of the trial and is prejudicial to the accused.

Potential Future Impact: This judgment clarifies the legal position regarding the liability of companies and their nominated officers in food adulteration cases. It reinforces the principle that a company must be held accountable for the actions of its officers and that the liability is conjoint. This ruling will likely impact future cases involving similar offences and ensure that companies are not able to evade liability by not being formally convicted.

Directions

The Supreme Court set aside the order passed by the High Court and dismissed the complaint against the appellant, Nirmal Sen.

Specific Amendments Analysis

Not Applicable.

Development of Law

The ratio decidendi of this case is that under Section17 of the Prevention of Food Adulteration Act, 1954, the company and the nominated person are conjointly liable, and the conviction of the nominated person is unsustainable if the company is not convicted. This judgment clarifies the legal position and sets a precedent that ensures both the company and its nominated officers are held accountable in cases of food adulteration. The case also reinforces the principle that the punishments prescribed under the repealed Act continue to be valid and applicable due to the saving provisions in the repealing Act and the General Clauses Act, 1897.