Case Law – CHAPTER 17 – KEY MANAGERIAL PERSONNEL

CHAPTER 17 – KEY MANAGERIAL PERSONNEL

23.08.2019

Shiv Kumar Jatia (Appellant) Vs. State of NCT of Delhi (Respondent)

The Supreme Court of India

Shiv Kumar Jatia is the Managing Director of M/s. Asian Hotels which looks after Hyatt Re-

gency Hotel. He had authorized Mr. PR Subramanian to apply for lodging license of the hotel.

There was a contravention the condition of the lodging license which led to a hotel guest

enter into a semi lit under-construction terrace for smoking. The guest fell from the terrace

of 6th floor to the 4th floor and got injured. Case was brought before the High Court which

ordered for prosecution of the Managing director along with the other three accused by rely-

ing on the case of Sushil Ansal vs. State through CBI.

The Apex Court held that vicarious liability on the part of Managing Director and the Direc-

tors would arise provided any provision exists in that behalf in the statute. Further, the alle-

gations made on the Managing Director could not establish any active role coupled with

criminal intent having direct nexus with the accused.

Court observed that an individual who has perpetrated the commission of an offence on be-

half of the company can be made an accused, along with the company, if there is sufficient

evidence of his active role coupled with criminal intent. Further it is also held that an indi-

vidual can be implicated in those cases where statutory regime itself attracts the doctrine of

vicarious liability, by specifically incorporating such a provision.

Though there are allegations of negligence on the part of hotel and its officers who are in-

charge of day to day affairs of the hotel, so far as appellant Mr. Shiv Kumar Jatia is con-

cerned, no allegation is made directly attributing negligence with the criminal intent attract-

ing provisions under Sections 336, 338 read with Section 32 of IPC. There is no reason and

justification to proceed against him only on ground that he was the Managing Director of

M/s Asian Hotels (North) Limited, which runs Hotel Hyatt Regency. The mere fact that he was chairing the meetings of the company and taking decisions, by itself cannot directly link

the allegation of negligence with the criminal intent.

The Court has held that the Penal Code does not contain any provision for attaching vicari-

ous liability on the part of the Managing Director or the Directors of the Company, when the

accused is a Company. The allegations made on the Managing Director was vague in nature

and the criminal proceedings against Shiv Kumar Jatia as passed by the High Court, New

Delhi were quashed.