Liability of a director of a company for wrongful acts committed by employees is not automatic

Jharkhand High Court Quashes Criminal Proceedings Against Company Director. Court Rules No Vicarious Liability Without Specific Allegations Under Indian Forest Act

In a significant ruling, the Jharkhand High Court has quashed criminal proceedings against Ayush Agrawal, a director of PRA India Private Limited, who was wrongly alleged to be the proprietor of the company in an offence report under the Indian Forest Act, 1927. The judgment, delivered by Justice Anil Kumar Choudhary, underscored that the liability of a director for wrongful acts committed by employees is not automatic and requires specific circumstances, particularly in the absence of statutory provision for vicarious liability.

The case revolved around an allegation that PRA India Private Limited had constructed a culvert as part of the NH-75 (New NH-39) four-lane road construction project, allegedly violating Section 33 of the Indian Forest Act, 1927. However, the High Court found that the petitioner, Ayush Agrawal, was erroneously named as the company's proprietor, whereas he is one of its directors.

The court highlighted that the Indian Forest Act, 1927 does not provide for vicarious liability, and there were no specific allegations against Agrawal of directly indulging in any wrongful act. Citing precedents, including the Supreme Court's ruling in Sanjay Dutt v. State Haryana, the High Court reiterated that vicarious liability cannot be presumed unless explicitly provided by statute. The court emphasized the necessity for specific allegations and personal involvement in wrongful acts to establish such liability.

The judgment brings relief to Agrawal, as the court deemed the continuation of criminal proceedings against him an abuse of the legal process. The ruling underscores the judiciary's stance on ensuring that corporate officers are not automatically held liable for the actions of a company without clear and specific evidence of personal involvement.

Bottom Line:

Liability of a director of a company for wrongful acts committed by employees is not automatic and depends on specific circumstances; there is no provision for vicarious liability under the Indian Forest Act, 1927.

Statutory provision(s): Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528, Indian Forest Act, 1927 Section 33

Ayush Agrawal @ Ayush Agarwal v. State of Jharkhand, (Jharkhand) : Law Finder Doc Id # 2804740