Annexure P-31

NATIONAL CONSUMER DISPUTES REDRESSAL

COMMISSION NEW DELHI

EXECUTION APPLICATION NO. 80 OF 2016

IN

CC/14/2015

1. RAJNISH KUMAR ROHATGI & ANR. ...........Appellants(s)

Versus

1. M/S. UNITECH LIMITED & ANR. ...........Respondent(s)

BEFORE

HON'BLE MR. JUSTICE R.K.

AGRAWAL,PRESIDENT HON'BLE MR. JUSTICE

V.K. JAIN,MEMBER HON'BLE MRS. M.

SHREESHA,MEMBER

For the Appellant : RAJNISH KUMAR ROHATGI &

ANR. For the Respondent : M/S. UNITECH LIMITED &

ANR.

Dated : 08 Jan

2019

ORDER
For the Complainants : Mr. Sushil Kaushik & Ms. Himanshi

Singh & Mr. Samir Bhalotra, Advts.

(in EA/80/2016 , EA/81/2016, EA/3/2017,

EA/156/2018, EA/81/2017, EA/110/2018,

EA/111/2018, EA/112/2018,

EA/135/2018)

Mr.Vikas Dutta & Mr. Siddharth Silwal

&

Mr. Shiva Sambyal, Advocates (EA/55/2018)

Mr. Vivek Chib, Mr. Kushal Gupta & Mr. Sudhir Mahajan,

Advocates

(in EA/184/2016, EA/100–108/2016, EA/109-

110/2016, EA/94-99/2016)

Mr. Avtar Singh, Advocate

(in EA/29/2017)

Mr. Sanjay Dewan, Advocate

(in EA/59/2017, EA/60/2017, EA/135/2018)

Mr. Akash Tyagi, Mr. Divyam & Mr.

Dhiyani, Advocates (in EA/158/2017)

 Mr. Rohini Prasad & Mr. Akshat

Chaitanya, Advocates (in EA/70/2018)

NEMO for others

For the OP/Unitech Ltd. : Mr. Babanjeet Singh Mew, Advocate

For OP-2/Pioneer

(in EA/80/2016 and

EA/81/2016) : Mr. Nikhil Nayyar & Mr. T.V.S. Raghavendra

Sreyas, Advocates

JUSTICE V.K. JAIN, MEMBER

1. In a large number of consumer complaints, this Commission either directed Unitech Limited and

Pioneer Urban Land & Infrastructure Limited or Unitech Limited or several subsidiary

companies of Unitech Ltd., such as Unitech Hi-Tech Developers and Unitech Reliable Projects

Private Limited, to refund the amount received by them from the allottees of residential flats,

along with compensation etc. or directed them to complete the construction of the residential

flats allotted to the complainants, obtain the requisite occupancy certificate and deliver

possession, along with compensation etc. The aforesaid companies having failed or omitted to

comply with the orders passed by this Commission, execution applications seeking enforcement

of the said order and imposition of penalties in terms of Section 27 of the Consumer Protection

Act, 1986 were filed against them. In several execution applications, the complainants also

sought initiation of proceedings in terms of Section 25 and 27 of the Consumer Protection Act

against the Directors of the

concerned companies, on the allegations that they were the persons managing the affairs of the

company and it were they who had collected money from the complainants.

2. Taking note of the orders dated 30.10.2017, 09.4.2018 and 02.5.2018 passed by the Hon’ble

Supreme Court in SLPs (Cr.) No.5978-5979 of 2017, a Single Member Bench of this Commission

made the following reference to a Larger Bench of this Commission for its decision:

“The core issue involved in these execution applications is as to whether in view of the

above- referred orders of the Hon’ble Supreme Court, proceedings under Section 27 of the

C.P. Act can be initiated against the Directors of Unitech Ltd. and its subsidiary companies

or not.”

3. We have heard the learned counsel for the parties represented before us and have

considered their respective submissions.

4. Before its amendment by Act 62 of 2002 with effect from 15.3.2003, Section 27 of the

Consumer

Protection Act read as under:

“27. Penalties – Where a trader or a person against whom a complaint is made (or the complainant)

fails or omits to comply with any order made by the District Forum, the State Commission or the

National Commission, as the case may be, such trader or person (or complainant) shall be

punishable with imprisonment for a term which shall not be less than one month but which may

extend to three years, or with fine which shall not be less than two thousand rupees but which may

extend to then thousand rupees, or with both:

 Provided that the District Forum, the State Commission or the National Commission, as

the case may be, may, if it is satisfied that the circumstances or any case so require, impose a

sentence of imprisonment or fine, or both, for a term lesser than the minimum term and the

amount lesser than the minimum amount, specified in this section”.

5. After amendment with effect from 15.3.2003, the Section reads as under:

“27. Penalties : (1) Where a trader or a person against whom a complaint is made

(for the complainant) fails or omits to comply with any order made by the District Forum,

the State Commission or the National Commission, as the case may be, such trader or

person (or complainant) shall be punishable with imprisonment for a term which shall not

be less than one month but which may extend to three years, or with fine which shall not be

less than two thousands rupees but which may extend to ten thousand rupees, or with both:

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2

of 1974), the District Forum or the State Commission or the National Commission, as

the case may be, shall have the power of a Judicial Magistrate of the first class for the

trial of offences under this Act, and on such conferment of powers, the District Forum or

the State Commission or the National Commission, as the case may be, on whom the

powers are so conferred, shall be deemed to be a Judicial Magistrate of the first class

for the purpose of the Code of Criminal Procedure, 1973 (2 of

1974).

(3) All offences under this Act may be tried summarily by the District Forum or the

State

Commission or the National Commission, as the case may be.”

6. In this reference, we are dealing with the complaints in which only a company was the opposite

party
in the final order passed by this Commission and the Directors or Managers of the company were

not a party to the said final order.

7. As far as the company is concerned, it cannot be disputed that having failed or omitted to

comply with the order passed by this Commission, it is liable to the penalty prescribed in Section 27

of the Consumer Protection Act, though, the company being a juristic person, penalty can only be

the fine which cannot exceed Rs.10,000/-.

8. The contention of the learned counsel appearing for the companies is that since the order

passed by this Commission required only the company to comply with the same, the company is a

juristic person, independent of its Directors, Managers etc., and unlike the provisions contained in

several statutes such as Negotiable Instruments Act, the Consumer Protection Act does not contain

a deeming provision making the person, who at the time the offence was committed, was in-charge

of and responsible to the company for the conduct of the business of the company, vicariously liable

for the penalty under Section 27 of the Consumer Protection Act, it is the company alone which

would be liable to penalty in terms of Section 27 of the Act. The learned counsel for the

complainants, on the other hand, submitted that such a deeming provision is implicit in Section 27

of the Consumer Protection Act since in the absence of such an inherent deeming provision, it will

not be possible for a Consumer Forum to enforce the order passed by it against a company.

9. In our opinion, this issue is no more res-integra in view of the decisions of the Hon’ble High

Court of Delhi in Byford Leasing Ltd. Vs. Union of India & Ors. 57 (1995) Delhi Law Times

623 (DB), Ravi Kant & Ors. Vs. National Consumer Disputes Redressal Commission & Ors.

66 (1997) Delhi Law Times 13 (DB) and V.P. Mainra (Dr.) Vs. Dawsons Leasing Ltd.,

2004(77) DRJ 727.

10. In Ravi Kant (supra), the complainants obtained Decrees from the State Commission against

two companies. Having not been able to realise their monies under Section 25 of the Consumer

Protection Act, they moved the concerned State Commission under Section 27 of the Act. The
State Commission, applying the principle of lifting the veil, held the petitioners, who were

Directors in the said companies, liable on the finding that they were actually controlling and

running the companies and sentenced them to undergo imprisonment and pay fine. The said order

having been confirmed by this Commission, was challenged before the Hon’ble High Court. The

following inter-alia were the contentions advanced before the Division Bench of the Hon’ble High

Court:

“1. Section 27 of the Act permitting penalties to be imposed by the Commission

does not apply to a “Company” in view of the definition of “person” in Section 2(1)(m)

and also because Section 27 refers to a ‘person’ and not to a company and this is in

contrast to Section 25 which refers to a company.

2. The principle of “lifting the veil” applies only if the concerned statute creates a

penal liability against a company and permits action against those who are in charge of

the affairs or in control of the actions of the company.”

Point 1: Section 27 of the Act deals with penalties to be imposed against a “trader” or

“person” who “fails or omits to comply” with any order passed by the District Forum, the

State Commission or the National Commission, as the case may be. Learned Counsel submits

that this section does not refer to action against a “company”. Reference is also made to

Section 2(m):

“Section 2(m) : “person” includes (i) a firm whether registered or not; (ii) a Hindu

undivided family; (iii) a cooperative society; (iv) every other association of persons whether

registered under the Societies Registration Act, 1860 or not.

It is argued that neither Section 27 nor Section 2(m) refer to a ‘Company’ and hence

Section 27 does not apply to a ‘Company’.

The following was the view taken by the Hon’ble High Court:
 10. In our view, this contention cannot be accepted. The definition of person in

Section 2(m) is an ‘inclusive’ definition and not an exhaustive definition. Question arises

whether, in such a situation, we can bring in the definition of ‘person’ in Section 3(42) of the

General Clauses Act, 1897. The provision defines ‘person’ as follows:

“Person” shall include any company or association or body of individuals,

whether incorporated or not.”

Here it may be noticed that the definition of ‘person’ in the General Clauses Act is also

an ‘inclusive’ definition. Even so, in our view, the said definition can be resorted to

inasmuch as the definition of ‘person’ in the Act before us is an ‘inclusive’ one and not

an exhaustive one. Section 3 of the General Clauses Act clearly says, that: ‘In this Act,

and in all Central Acts and Regulations made after the commencement of this Act, unless

there is anything repugnant in the subject or context, the definitions given in the General

Clauses Act” would apply.”

“13. ………………. ……. Therefore, going by the object and purpose of the Act, it is

clear that Section 27 of the Act applies to failure or omissions on the part of a ‘company’ to

comply with the provisions of orders passed. Point 1 is decided against the petitioners.

Point 2: It is argued that the principle of ‘lifting the veil’ as applied to companies is

attracted only to cases where the concerned statute contains specific provisions for penal

action against those in charge of or controlling the affairs of a company. Reference in this

connection is made by the petitioners’ counsel to the specific provisions in Section 141 of

the Negotiable Instruments Act, Section 10 of the Essential Commodities Act 1955, Section

371 of the New Delhi Municipal Council Act, 1994 and other statues. It is argued that there

is no similar provision in the Act before us.

14. It is true that certain statutes contain specific provision for criminal prosecution of

persons in charge of or controlling companies. But, that in our opinion, makes no difference.
For example, the Contempt of Courts Act, 1952 did not contain any provision like Sub-clause

(4) or (5) of Section 12 of the new Contempt of Courts Act, 1971. The latter made specific

provision for contempt action against persons in charge or the management or control of

companies. Even though, in the 1952

Act, there was no specific provision, it was held by the Supreme Court in Aligarh

Municipality V. E.T. Mazdoor Union, (AIR 1970 S.C.1767) that:

“A Command to a Corporation is in fact a command to those who are officially

responsible for the conduct of its affairs, If they, after being apprised of the order directed

to the Corporation, prevent compliance or fail to take appropriate action, within their

power, for the performance of the duty of obeying those orders, they and the corporate body

are both guilty of disobedience and may be punished for contempt.”

In our view, likewise a penal provision, which as stated above, is applicable to a

“Company” by the Commission in Section 27 must be treated as applicable to those who

are officially responsible for the conduct of its affairs. Here, the two petitioners are the

directors of each of the two companies.

In our view, as per the principle laid down in the above ruling of the Supreme Court,

the penal provisions in Section 27 of the Act can be applied to the Directors of the

Companies,

notwithstanding the absence of a specific provision for action against those in charge of or in

control of the affairs of the company.

14. The same conclusion can be reached by applying the principle of ‘lifting the veil

explained in the recent judgment of the Supreme Court in Delhi Development Authority V.

Skipper Construction Company AIR 1996 SC 2005=62 (1996) DLT 543 (SC) (at p. 2013).

If the corporate personality is used as a cloak for fraud or improper conduct, the Court can

go behind the veil. Where the protection of public interest is of a paramount importance the

Court is entitled to go behind the corporate personality.

 15. In Byford Leasing Ltd. V. Union of India, 57 (1995) DLT 623 a Division Bench of this

Court held that under Section 27 of the Act, the Chairman and Managing Director of a

Company can be proceeded against, he being in charge of the management and control of

the affairs of the company. We respectfully agree with this view.

17. Following the above principles of law, we hold that the State Commission and the

National Commission were right in refusing to permit the two petitioners – the two Sole

Directors of the two companies, being husband and wife – to defend themselves under the

cloak of Corporate entity – and the Commissions were right in lifting the veil and identifying

the petitioners as the persons who were responsible for committing the statutory offences

referred to in Section 27 of the Act. Point No.2 is held against the petitioners.”

11. In Byford Leasing Ltd. (supra), the State Commission had initiated proceedings under Section

27 of the Consumer Protection Act against the petitioner company and also issued warrant of arrest

of its Chairman. The order passed by this Commission was challenged by way of a Writ Petition.

While issuing the warrant for arrest of the Chairman of the petitioner company, the State

Commission had held that persons, who were officially responsible for the conduct of the affairs of

the company were liable to be punished for disobeying the orders of the competent Courts directed

against the company, inasmuch as command to the company is in fact a command to those who are

officially responsible for conduct of its affairs, and after being apprised of the order passed against

the Corporation failed to take appropriate action, within their power, for the performance of the

duties of obeying those orders, and therefore they as well as the company both are guilty of

disobedience. The Hon’ble High Court inter-alia held that so far as personal liability of the

Chairman / Managing Director was concerned, the conclusions arrived at by the State Commission

were perfectly reasonable and a person in charge of and responsible for the conduct of the business

of the company was liable to punishment, for disobedience of the orders made by the concerned

authorities.

12. In V.P. Mainra (supra), the order passed by the District Forum against a company namely

Dawsons Leasing Ltd. was not complied. The District Forum therefore, issued non-bailable warrant
for the arrest of the Managing Director of the said company. The petitions were filed before the

Hon’ble High Court by Ex-Directors of the company, seeking transfer of the proceedings pending

before the District Forum, to the High Court, the company being under the charge of the Official

Liquidator appointed for managing its affairs. One of the questions which came up for

consideration of the Hon’ble High Court was with respect to the nature of the proceedings initiated

under Section 27 of the Consumer Protection Act. The following was the view taken by the

Hon’ble High Court in this regard:

“13. It is clear from the language of Section 27 that, for failure to comply with the

orders of the District Forums, the person who was to comply with such an order, is

punishable with imprisonment or with fine or with both. Obviously, a company incorporated

under the Act, which is juristic or artificial entity, cannot be imprisoned. It is for this reason

that when an order is made against a company, its Directors would be liable for such a

punishment / penalties prescribed under Section 27 of CP Act.

……. However, as far as proceedings / complaints under the CP Act are concerned,

these were filed against the company. Order was passed against the company. It is the

company which was to comply with the said order. Because of non-compliance, applications

under Section 27 of the CP Act have been filed by the complainants. There is no personal

liability of the Directors. If the company pays the amount, there would not be any

proceedings. However, when the company fails to make the payment and since it is an

artificial person and cannot be imprisoned, the Directors are held responsible and it is in this

context that the orders can be passed against the Directors under Section

27 of the CP Act.”

13. In support of his contention that only a company can be liable to the penalty under Section

27 of the Consumer Protection Act, the learned counsel for the Pioneer Urban L and Limited

relied upon the decisions of the Hon’ble Supreme Court in Sunil Bharti Mittal Vs. Central

Bureau of Investigation (2015) 4 SCC 609 and Standard Chartered Bank & Ors. Vs.

Directorate of Enforcement and Ors. Appeal (Civil) 1748 of 1999 decided on 24.2.2006.
14. In Sunil Bharti Mittal (supra), a charge sheet was filed by CBI, inter-alia against three

companies, under Section 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act

and allied offences. The Special Judge while proceeding against those named in the charge sheet,

also recorded that the petitioner Sunil Bharti Mittal was CMD of Bharti Cellular Limited, Mr.

Asim Ghosh was the Managing Director of M/s. Hutchison Max Telecom (P) Ltd. and Mr. Ravi

Ruia was a Director in Sterling Cellular Ltd., the companies which had been charge sheeted by

CBI and that the aforesaid individuals could be treated as controlling the affairs of the respective

companies and represents the directing mind and will of each company. He therefore, decided to

proceed against those individuals as well. Being aggrieved, they approached the Hon’ble Court,

challenging the order passed by the Learned Special Judge. Allowing their petitions, the Hon’ble

Supreme Court, inter-alia observed and held as under:

“42. No doubt, a corporate entity is an artificial person which acts through its officers,

Directors, Managing Director, Chairman, etc. If such a company commits an offence

involving mens rea, it would normally be the intent and action of that individual who would

act on behalf of the company. It would be more so, when the criminal act is that of

conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence

that there is no vicarious liability unless

the statute specifically provides so.

44. When the company is the offender, vicarious liability of the Directors cannot be

imputed automatically, in the absence of any statutory provision to this effect. One such

example is Section

141 of the Negotiable Instruments Act, 1881.”

15. In Standard Chartered Bank (supra), notices to show cause on the adjudication proceedings

for imposition of penalty under Section 50 and 51 of Foreign Exchange Regulation Act (hereinafter

referred to as FERA) and under Section 61 of the said Act were given to the bank and some of its

officers. A Writ Petition was filed by the bank, challenging the constitutional validity of FERA.
Another WP was filed by its officers, challenging the individual notices. The High Court of

Bombay repelled the challenge to the constitutional validity of Section 50, 51, 56 and 68 of FERA

but held that Section 68(1) was confined to a prosecution for penal offences. Being aggrieved from

the order passed by the High Court, both the bank and its officers as well as the Union of India

filed civil appeals before the Hon’ble Supreme Court.

Dismissing the appeals filed by the bank and its officers and allowing the appeal filed by the Union

of India, the Hon’ble Supreme Court inter-alia observed and held as under:

“15. …… All that Section 68(1) says is that if the commission of an offence by the

company is proved, the person who was in charge and was responsible to the company for

the conduct of the business of the company at the time the contravention was committed, was

to be deemed to be guilty of the contravention and was liable to be proceeded against and

punished. He is being punished in view of his status in the company and because it is proved

that the company is guilty of contravention of any of the provisions of FERA. There is

nothing unreasonable in this, since a company normally acts through a person who is in

charge of its affairs and even in that case, the person in charge and responsible to the

company for the conduct of its business, is given an

opportunity to show that the alleged contravention by the company took place without his

knowledge or in spite of the exercise of all due diligence by him to prevent such

contravention. Section 68(2) is attracted in a case where a company has contravened the

provisions of the Act or any rule, direction or order made thereunder and that particular

contravention is proved to have taken place with the consent or connivance or is attributable

to any neglect on the part of any Director, Manager, Secretary or other officer of the

company. In other words, the prosecution, in addition to

prosecuting the company, can also prosecute any particular officer whose action or

inaction or negligence resulted in the commission of the particular offence by the

company. This only means that a person who is instrumental in the commission of an act

by the company that is in contravention of FERA or the rules or directions issued

thereunder, also lays himself open to prosecution. Having done something or omitted to
 do something leading to the company contravening the provisions of the Act, the officer

concerned cannot say that it is unreasonable to prosecute him also, along with the

company and the person in charge of and responsible to the company for the conduct of its

business.”

30. It is true that the entire penalty that may be imposed on adjudication is capable

of being recovered from the company itself. But that does not mean that it cannot be

recovered from the officer incharge of the company or those who connived at or were

instrumental in the contravention of the provisions of the Act by the company. Once the

ingredient of the offence is contravention of

the provisions of the Act and the consequences flowing from the contravention is to make that

person including a company liable for penalty as well as for prosecution, there does not

appear to be any justification in confining the scope of the Section 68 only to prosecutions

under Section 56 of the Act.”

16. Neither the decision in Sunil Bharti Mittal (supra) nor the decision in Standard Chartered Bank

(supra) pertains to the proceedings initiated under Section 27 of the CP Act. On the other hand, the

decisions of the Hon’ble High Court of Delhi Ravi Kant (supra), Byford Leasing Ltd. (supra) and

V.P. Mainra (Dr.) (supra) pertain directly to the aforesaid provision and a consistent view has been

taken by the Hon’ble High Court of Delhi, which also happens to be the concerned jurisdictional

High Court, that if a company fails or omits to comply with an order passed by a Consumer Forum,

not only the company but those individuals who are in charge of and controlling its affairs and

thereby fail to take appropriate action for compliance of the orders passed by the Consumer Forum

would also be liable to be punished in accordance with Section 27 of

the CP Act. In view of the decision of the Hon’ble Supreme Court in Aligarh Municipality (supra),

we hold that when a direction is issued by a Consumer Forum to a company, it is also a direction to

the persons in charge of and responsible to the company for conduct of its affairs to take all such

actions as is required to be taken to ensure compliance of the said order and if they fail or omit to do

so, they would be liable to the penalty prescribed in Section 27 of the CP Act.
17. During the course of arguments reference was also made to Maksud Saiyed Vs. State of

Gujarat & Ors. (2008) 5 SCC 668 and S.K. Alagh Vs. State of Uttar Pradesh & Ors. (2008) 5

SCC 662.

In Maksud Saiyed (s up ra) a criminal complaint was filed by the appellants before the Chief

Judicial Magistrate, who passed an order under Section 156 (3) of the Code of Criminal Procedure,

directing investigations by the police. On a petition filed by the respondent under Section 482 of

the Cr. PC, the complaint and investigation were quashed by the High Court. The appellant then

filed a criminal appeal before the Hon’ble Supreme Court, challenging the order passed by the High

Court. Dismissing the appeal, the Hon’ble Supreme Court inter-alia observed and held as under:

“13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section

156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply

his mind. Indian Penal Code does not contain any provision for attaching vicarious liability

on the part of the Managing Director or the Directors of the Company when the accused is

the Company. The learned Magistrate failed to pose unto himself the correct question viz. as

to whether the complaint petition, even if given face value and taken to be correct in its

entirety, would lead to the conclusion that the respondents herein were personally liable for

any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and

Director would arise provided any provision exists in that behalf in the statute. Statutes

indisputably must contain provision fixing such vicarious liabilities. Even for the said

purpose, it is obligatory on the part of the complainant to make requisite allegations which

would attract the provisions constituting vicarious liability.”

“14. It will bear repetition to state that throughout the complaint petition, no allegation had

been made as against any of the respondents herein that they had anything to deal with

personally either in discharge of their statutory or official duty. As indicated hereinbefore,

 in the prospectus, a bona fide mistake had been committed. The fact that such a mistake had

been committed stands accepted.”

In S.K. Alagh (s up ra), a complaint was instituted before the Chief Judicial Magistrate

against the appellant, who was the Manging Director of the Britannia Industries Ltd. The company

was not impleaded as an accused. He having been summoned, an application for recalling, the

summoning order was filed before the Chief Judicial Magistrate. That application having been

allowed and the appellant having been discharged, a revision petition was filed by the complainant

which was allowed. The petition filed by the appellant under Section 482 of the Cr. P.C. having

been dismissed by the High Court, he approached the Hon’ble Supreme Court by way of an appeal.

Allowing the appeal, the Hon’ble Supreme Court inter-alia held as under:

“19. As, admittedly, drafts were drawn in the name of the company, even if appellant

was its Managing Director, he cannot be said to have committed an offence under Section

406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal

fiction, it provides specifically therefor. In absence of any provision laid down under the

statute, a Director of a company or an employee cannot be held to be vicariously liable for

any offence committed by the company itself. (See Sabitha Ramamurthy

and Anr. v. R.B.S. Channabasavaradhy a).”

Neither of these decisions pertains to a petition under Section 27 of the C.P. Act, 1986.

Whereas the decisions of the Hon’ble High Court of Delhi referred hereinabove, pertain directly to

such proceedings.

No decision of the Hon’ble Supreme Court in the context of vicarious liability under Section

27 of the CP Act having been brought to our notice, we are bound by the aforesaid decisions of the

Hon’ble Delhi High Court.

18. The next question which arises for consideration is as to who can be said to be the persons in

charge of and responsible to the company for conduct of its affairs and that would be liable to

penalty in the event of the order passed by a Consumer Forum against a company, not being
complied. In our opinion, the question as to who can be said to be persons in charge of and

responsible to the company for the conduct of its business is a question of fact to be decided, in the

facts and circumstances of each case. However, only those persons would be liable to penalty

under Section 27 of the Consumer Protection Act, who were in charge of and responsible to the

company for conducts of its business at the time the offence under Section 27 of the Act is

committed. The said offence, in our view, is committed on the date the order is passed by the

Consumer Forum and the said offence continues till the aforesaid order is complied in all respects.

Therefore, the persons who were in charge and responsible to the company for conduct of its

business on and after the date the order came to be passed by the Consumer Forum, till the said

order is complied, shall be liable to be punished under Section 27 of the CP Act.

19. Drawing analogy from Section 141(2) of the Negotiable Instrument Act, we also hold that if it

is proved that offence punishable under Section 27 of CP Act has been committed with the consent

or connivance of or is attributable to any neglect on the part of any Director, Managers, Secretary or

other officer of the company, such Director, Manager, Secretary or other officer shall also be

deemed guilty of that offence and shall be liable to punishment prescribed in Section 27 of the Act,

even if he was not in charge and responsible to the company for the conduct of its business, at the

time the offence under Section 27 of CP Act was committed.

20. Drawing analogy from the second proviso to 141(1) of the Negotiable Instrument Act, we

also hold that a person nominated as a Director of the company by virtue of his holding any office

or employment in the Government or a Financial Corporation owned or controlled by the

Government, shall not be liable for punishment under Section 27 of the CP Act.

21. Drawing analogy from the first proviso to Section 141(1) of the Negotiable Instrument Act,

we also hold that if a person who was in charge of and responsible to the company, for the conduct

of its business at the time the offence was committed proves that the said offence was committed

without his knowledge or that he had exercised all due diligence to prevent the commission of the

said offence, he shall not be liable to punishment under Section 27 of the CP Act.
22. We also hold that the vicarious criminal liability of a Director in a company shall apply to a

partner in a firm where the offence under Section 27 of the CP Act is committed by a partnership

firm.

23. The next question which arises for consideration is as to who can be said to be the person in

charge of and responsible to the company for conduct of its business at the time the offence under

Section 27 of the CP Act is committed. Though, the answer to this question would depend upon the

facts of each case, some guidance in this regard can be found in the judicial precedents, including

the decisions of the Hon’ble

Supreme Court in K.K. Ahuja Vs. V.K. Vohra & Anr. Criminal Appeal Nos. 1130-31 of 2003

decided on

06.7.2009 and Gunmala Sales Private Ltd. Vs. Anu Mehta & Ors. (2015) 1 SCC 103.

24. In K.K. Ahuja (supra), the Hon’ble Supreme Court inter-alia held as under:

“14. ………Therefore, we will have to fall back upon the provisions of Companies Act,

1956 which is the law relating to and regulating companies. Section 291 of the said Act

provides that subject to the provisions of that Act, the Board of Directors of a company shall

be entitled to exercise all such powers, and to do all such acts and things, as the company is

authorized to exercise and do. A company though a legal entity can act only through its

Board of Directors. The settled position is that a Managing Director is prima facie in charge

of and responsible for the company's business and affairs and can be prosecuted for offences

by the company. But insofar as other directors are concerned, they can be prosecuted only if

they were in charge of and responsible for the conduct of the company's business. A

combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in

clauses (24), (26), (30), (31), (45) of section 2 of that Act would show that the

following persons are considered to be the persons who are responsible to the company

for the conduct of the business of the company : --

(a) the managing director/s;

(b) the whole-time director/s;

(c) the manager;

(d) the secretary;

(e) any person in accordance with whose directions or instructions the Board of

directors of the company is accustomed to act;

(f) any person charged by the Board with the responsibility of complying with that

provision (and who has given his consent in that behalf to the Board); and

(g) where any company does not have any of the officers specified in clauses

(a) to (c), any director or directors who may be specified by the Board in this behalf or

where no director is so specified, all the directors. It follows that other employees of the

company, cannot be said to be persons who are responsible to the company, for the conduct

of the business of the company.

15. ……..There may be many directors and secretaries who are not in charge of the business

of the company at all. The meaning of the words "person in charge of the business of the

company" was considered by this Court in Girdhari Lal Gupta v. D.N. Mehta [1971 (3) SCC

189] followed in State of Karnataka v. Pratap Chand [1981 (2) SCC 335] and Katta Sujatha

vs. Fertiliser & Chemicals Travancore Ltd. [2002 (7) SCC 655]. This Court held that the

words refer to a person who is in overall control of the day to day business of the company.

This Court pointed out that a person may be a director and thus belongs to the group of

persons making the policy followed by the company, but yet may not be in charge of the

business of the company; that a person may be a Manager who is in charge of the business

but may not be in overall charge of the business; and that a person may be an officer who

may be in charge of only some part of the business.

16. Therefore, if a person does not meet the first requirement, that is being a person who

is responsible to the company for the conduct of the business of the company, neither the

question of his meeting the second requirement (being a person in charge of the business of

the company), nor the question of such person being liable under sub-section (1) of section

141 does not arise. To put it differently, to be vicariously liable under sub- section (1) of

Section 141, a person should fulfil the 'legal requirement' of being a person in law (under

the statute governing companies) responsible to the company for the conduct of the

business of the company and also fulfil the 'factual requirement' of being a person in

charge of the business of the company.”

20. The position under section 141 of the Act can be summarized thus :

(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary

to make an averment in the complaint that he is in charge of, and is responsible to the

company, for the conduct of the business of the company. It is sufficient if an averment is

made that the accused was the Managing Director or Joint Managing Director at the

relevant time. This is because the prefix `Managing' to the word `Director' makes it clear

that they were in charge of and are responsible to the company, for the conduct of the

business of the company.

(ii) …..

(iii) In the case of a Director, Secretary or Manager (as defined in Sec. 2(24) of the

Companies Act) or a person referred to in clauses (e) and (f) of section 5 of Companies Act,

an averment in the complaint that he was in charge of, and was responsible to the company,

for the conduct of the business of the company is necessary to bring the case under section

141(1). No further averment would be necessary in the complaint, though some particulars

will be desirable. They can also be made liable under section 141(2) by making necessary

averments relating to consent and connivance or negligence, in the complaint, to bring the

matter under that sub-section.

 (iv)Other Officers of a company cannot be made liable under sub-section (1) of section

141. Other officers of a company can be made liable only under sub-section (2) of Section

141, be averring in the complaint their position and duties in the company and their role in

regard to the issue and dishonour of the cheque, disclosing consent, connivance or

negligence.

25. Section 5 of the Companies Act, 1956 which defined the term “officer, who is default” has

been replaced by Section 2 (60) in the Companies Act, 2013, which came into force on 12.9.2013

vide S.O. 2754 (E) dated 12.9.2013 and reads as under:

“(60) “Officer who is in default”, for the purpose of any provision in this Act which

enacts that an officer of the company who is default shall be liable to any penalty or

punishment by way of imprisonment, fine or otherwise, means any of the following officers

of a company, namely :-

1. Whole-time director;

2. Key managerial personnel; Section 2(51)

3. Where there is no key managerial personnel, such director or directors as specified by the

Board in this behalf and who has or have given his or their consent in writing to the Board to

such specification, or all the directors, if no director is so specified;

4. Any person who, under the immediate authority of the Board or any key managerial

personnel, is charged with any responsibility including maintenance, filing or distribution of

accounts or records, authorises, actively participates in, knowingly permits, or knowingly

fails to take active steps to prevent, any defect;

5. Any person in accordance with whose advice, directions or instructions the Board of

Directors of the company is accustomed to act other than a person who gives advice to the

Board in a professional capacity;

6. Every director, in respect of a contravention of any of the provisions of this Act, who is aware

of such contravention by virtue of the receipt by him of any proceedings of the Board or

participation in such proceedings, without objecting to the same, or where such contravention

had taken place with his consent or connivance;

7. In respect of the issue or transfer of any shares of a company, the share transfer agents,

registrars and merchant bankers to the issue or transfer.

In our opinion, after coming into force of Section 2(60) of the Companies Act, 2013, the

following persons will be considered to be the persons responsible to the company for the

conduct of the business of the company.

(i) Managing Director (s) –

1. Whole-time director (s);

2. Key managerial personnel; Section 2(51)

3. Where there is no key managerial personnel, such director or directors as specified by the

Board in this behalf and who has or have given his or their consent in writing to the Board to

such specification, or all the directors, if no director is so specified;

4. Any person who, under the immediate authority of the Board or any key managerial

personnel, is charged with any responsibility including maintenance, filing or distribution

ofaccounts or records, authorises, actively participates in, knowingly permits, or knowingly

fails to take active steps to prevent, any defect;

 5. Any person in accordance with whose advice, directions or instructions the Board of

Directors of the company is accustomed to act other than a person who gives advice to the

Board in a professional capacity;

The term key managerial personnel has been defined in Section 2(51) of the Companies Act, 2013

and the following therefore, would be the key managerial personnel of a company:

“(i) the Chief Executive Officer or the managing director or manager,

(ii) the company secretary,

(iii) the whole time director ;

(iv) the Chief Financial Officer;

(v) such other officer, not more than one level below the directors who is in

Whole time employment, designated as key managerial personnel by the Board;

And

(vi) such other officer as may prescribed.

The above referred persons therefore, shall also be considered to be persons responsible to the

company for the conduct of the business of the company.

The term ‘Manager’ has been defined in Section 2(53) of the Companies Act, 2013 which

reads as under:

“53. ‘Manager’ means an individual who, subject to the superintendence control and

direction of the Board of Directors, has the management of the whole, or substantially the

whole, of the affairs of a company, and includes a director or any other person occupying

the position of a manger, by whatever name called, whether under a contract of service or

not;”

A person who qualifies as Manager in terms of the definition given hereinabove, shall

also be considered to be a person responsible to the company for the conduct of the business

of the company.
26. In Gunmala Sales Private Ltd. (supra), the Hon’ble Supreme Court inter-alia held as under:

“34.1 Once in a complaint filed under Section 138 read with Section 141 of the NI Act the

basic averment is made that the Director was in charge of and responsible for the conduct

of the business of the company at the relevant time when the offence was committed, the

Magistrate can issue process against such Director;

34.3 In the facts of a given case, on an overall reading of the complaint, the High Court may,

despite the presence of the basic averment, quash the complaint because of the absence of

more particulars about role of the Director in the complaint. It may do so having come

across some unimpeachable, un-controvertible evidence which is beyond suspicion or doubt

or totally acceptable circumstances which may clearly indicate that the Director could not

have been concerned with the issuance of cheques and asking him to stand the trial would be

abuse of the process of the court. Despite the presence of basic averment, it may come to a

conclusion that no case is made out against the Director. Take for instance a case of a

Director suffering from a terminal illness who was bedridden

at the relevant time or a Director who had resigned long before issuance of cheques. In such

cases, if the High Court is convinced that prosecuting such a Director is merely an arm-

twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to

establish such case unimpeachable, un-controvertible evidence which is beyond suspicion or

doubt or some totally acceptable circumstances will have to be brought to the notice of the

High Court. Such cases may be few and far between but the possibility of such a case being

there cannot be ruled out. In the absence of such evidence or circumstances, complaint

cannot be quashed;

If the application under Section 27 of the Consumer Protection Act, does contain the

averments referred in para 34.1 of the decision in Gunmala (supra), he can be proceeded against

under the said Section.

27. One of the questions which came up for consideration during the course of hearing was with

respect to the procedure which a Consumer Forum is required to follow in the proceedings initiated

under Section 27

of the CP Act. It was contended on behalf of some of the complainants that the proceedings under

Section

27 are akin to the proceedings under Section 39 Rule 2A of the Cr. PC or the proceedings under

Contempt of Court Act or Section 51 read with Order 21 Rule 37 of the Code of Civil Procedure. A

reference in this regard was made to the following observations made by the Hon’ble Supreme

Court in State of Karnataka Vs. Vishwabharathi House Building Coop. Society & Ors. (2003)

SCC 412:

“58. Furthermore, Section 27 of the Act also confers an additional power upon the

Forum and the Commission to execute its order. The said provision is akin to Order 39 Rule

2-A of the Code of Civil Procedure or the provisions of the Contempt of Courts, Act or

Section 51 read with Order 21

Rule 37 of the Code of Civil Procedure. Section 25 should be read in conjunction with

Section 27. A Parliamentary statute indisputably can create a tribunal and might say that

non-compliance of its order would be punishable by way of imprisonment or fine, which can

be in addition to any other mode of recovery.

Reliance was also placed upon the following view taken by Allahabad High Court in Ghaziabad

Development Authority Vs. Union of India & Anr. 2003 (4) AWC 3078:

“20. A perusal of Section 27 clearly shows that proceedings therein are in the nature of

proceedings for civil contempt, and their object is to compel obedience of the orders of the

District Forum, State Commission or the National Commission.”

“22. ………No doubt under the Contempt of Courts Act, 1971 and Chapter 35E of the

Allahabad High Court Rules, the procedure for contempt of court proceedings in the

Allahabad High Court has been prescribed, but in our opinion, this procedure need not be

followed by the District Forum, State Commission or the National Commission in

 proceedings under Section 27. Hence, the District Forum, State Commission or the National

Commission needs only to follow the rules of natural justice in respect of such proceedings.”

28. In Kamlesh Aggarwal Vs. Narain Singh Dabbas & Anr. (2015) 11 SCC 661, the

appellant before the Hon’ble Supreme Court filed a consumer complaint, which was allowed by

the District Forum. Since

the order passed by the District Forum was not complied, he filed an execution petition, seeking

punishment of the respondents under Section 25 & 27 of the CP Act. The District Forum found the

respondent guilty of non-compliance of its order and ordered for three months imprisonment of the

respondents, along with penalty of Rs.3,000/-. The said order was challenged by the respondents

before the concerned State Commission, which vide its order dated 30.7.2013, set aside the order

passed by the District Forum, holding that the said Forum had not adopted the procedure of

summary trial at the time of passing the order of conviction and sentence imposed upon the

respondent, as provided under the Cr. P.C. It was also observed by the State Commission that at no

point of time the respondents were afforded an opportunity of being heard against the disobedience

of the order passed by the District Forum, which had to try them by

following the summary procedure, empowered as Judicial Magistrate of the First Class for the

purpose of Cr.PC. The appeal filed by the appellant against the order of the State Commission

having been dismissed by this Commission, he approached the Hon’ble Supreme Court and inter-

alia contended that the State Commission ought to have remanded the matter to the District Forum

with a direction to it to follow the procedure and pass the appropriate order. The respondent before

the Hon’ble Supreme Court contended that the District Forum had not followed the provisions of

Criminal Procedure Code while dealing with the application filed by the appellant under Section 27

of the Consumer Protection Act. Allowing the appeal,

the Hon’ble Supreme Court inter-alia observed and held as under:

“13. …..In the facts and circumstances of the case, we are of the view that the State

Commission should have remanded the matter to District Forum after setting aside its order

dated 26.11.2010 with a direction to proceed with the matter in accordance with the

procedure contemplated under the Code of Criminal Procedure referred to supra for taking
 penal action against the respondents who are the concerned officers of Navchetna Sahkari

Awas Samiti Ltd. for non-compliance of the order.” (emphasis supplied)

“16. Having regard to the fact situation that the appellant, who is a consumer, has

been litigating the matter before the District Forum, State Commission and the National

Commission for the last 17 years to get her legitimate right of getting the sale deed

registered in respect of the allotted site made by the Navchetna Sahkari Awas Samiti Ltd. in

her favour who is its member since

1962, therefore, we deem it proper to exercise our power under Article 142 of the

Constitution of India for the reason that the State Commission has erred in not remanding

the case to the District Forum, after it has found fault with the order of the District Forum in

convicting and sentencing the officers of Navchetna Sahkari Awas Samiti Ltd. who are the

respondents herein for not following the procedure as provided under the Criminal

Procedure Code and for that reason we deem it just and proper to remand the case to the

District Forum with a direction to the District Forum to follow the procedure under Section

262 read with Chapter XX, Section 251 of the Code of Criminal Procedure to initiate penal

action against the respondents under Section 27 of the Act for noncompliance of the statutory

provisions”. (emphasis supplied)”

“17. ………………….. Therefore, this Court in exercise of power of this Court under

Article 142 of the Constitution of India, the order of the State Commission is modified to the

extent of remanding

the case to the District Forum to execute the decree and take penal action against the

respondents by following the procedure under Section 262 read with Chapter XX and Section

251 of the Code of

Criminal Procedure in accordance with law.” (emphasis supplied)

29. As noted earlier, Section 27 of the CP Act was amended with effect from 15.3.2003. While

deleting the proviso which permitted imposition of a less than the minimum term of imprisonment

and less than the minimum amount of fine, the legislature also added sub-section(2), thereby
conferring the powers of Judicial Magistrate of the First Class upon the District Forum, the State

Commission or the National Commission, as the case may be, for trial of the offences under the CP

Act and also provided that the District Forum, State Commission or the National Commission shall

be deemed to be a Judicial Magistrate

of the First Class for the purpose of Code of Criminal Procedure. Sub-Section (3) was also added to

provide that the offences under the CP Act may be tried summarily. Considering the aforesaid

amendment, and bound by the decision of the Hon’ble Supreme Court in Kamlesh Aggarwal (supra),

taking therein the view that the District Forum was required to follow the procedure prescribed in

Section 262 read with Chapter

XX and Section 251 of the Code of Criminal Procedure, we have no hesitation in holding that after

amendment with effect from 15.3.2003, the proceedings initiated under Section 27 of the CP Act are

regulated by the procedure prescribed in the above-referred provisions of the Cr.PC. Though, in

Kamlesh Aggarwal (supra), the Hon’ble Supreme Court exercised its plenary powers under Article

142 of the Constitution, what needs to be noted is that the said power was exercised because the

District Forum had not followed the procedure prescribed in Section 262 read with Chapter XX and

Section 251 of the Cr. P.C.

30. Section 251 appears in Chapter XX of the Cr. P.C. and reads as under:

“251. Substance of accusation to be stated – when in a summons-case the accused

appears or is brought before the Magistrate, the particulars of the offence of which he is

accused shall be stated to him, and he shall be asked whether he pleads guilty or has any

defence to make, but shall not be necessary to frame a formal charge.”

Section 262 and 264 find place in Chapter XXI of the Cr. P.C. and read as under:

262. Procedure for summary trials – (1) In trials under this Chapter, the

procedure specified in this Code for the trial of summons-case shall be followed

except as hereinafter mentioned.

 2. No sentence of imprisonment for a term exceeding three months shall be

passed in the case of any conviction under this Chapter.

264. Judgment in cases tried summarily – In every case tried summarily in which

the accused does not plead guilty, the Magistrate shall record the substance of the

evidence and a judgment containing a brief statement of the reasons for the finding”.

Section 313(1)(b), which appears in Chapter XXIV containing general provisions as to

inquiries and trials, reads as under:

313. Power to examine the accused – (1) In every inquiry or trial, for the purpose of

enabling the accused personally to explain any circumstances appearing in the evidence

against him, the Court –

1. < >

Shall, after the witnesses for the prosecution have been examined and before he is called on

for his defence, question him generally on the case:

Provided that in a summons-case, where the Court has dispensed with the

personal attendance of the accused, it may also dispense with his examination

under clause (b).

31. On a conjoint reading of the aforesaid provisions contained in Cr. P.C., we are of the

considered view that when a person accused of having committed an offence punishable under

Section 27 of the CP Act appears or is brought before a District Forum, State Commission or the

National Commission as the case may be, a notice stating the particulars of the offence alleged to

have been committed by him, is required to

be given to him. If he pleads guilty, he can be convicted and punished in terms of Section 27 of the

CP Act. If he does not plead guilty or claims that he has any defence to make, the District Forum,

State Commission or National Commission, as the case may be, shall record the substance of such

evidence as may be produced by the complainant. The evidence may be oral and / or documentary.

In his discretion, the complainant may seek to rely solely upon the order passed by the District

Forum, State Commission or the National Commission, as the case may be, and in such a case, the

aforesaid order would constitute an evidence produced by the complainant in support of his case.

Of course, if he wants to produce other evidence as well, he will be entitled to produce the same so

long as the said evidence is relevant for the purpose of the proceedings initiated under Section 27 of

CP Act. Considering the nature of the evidence, which would be relevant for the purpose of the

proceedings instituted under Section 27 of the CP Act, such evidence, in our opinion, can be given

on affidavits, as provided in Section 296 of the CP Act. The choice will rest with the complainant to

decide whether he wants to give oral evidence or evidence on affidavit (s) or both, oral as well as on

affidavit(s). If oral evidence or evidence on affidavit is given by the complainant, the accused

would be entitled to cross-examine the deponent / witness since, evidence, as defined in Section

3 read with Section 138, 139 of the Evidence Act comprises not only the Examination-in-Chief but

also cross-examination and re-examination if any, permitted by the Court. An evidence in a

criminal trial, without an opportunity to the opposite party to cross-examine the witness will not

constitute legally admissible evidence, the cross-examination of the witnesses being a fundamental

and indefeasible right of the accused. In view of the provisions contained in Section 264 of the Cr.

P.C. it will be sufficient for the District Forum, State Commission or the National Commission, as

the case may be, to record the substance of the evidence, instead of recording a verbatim

examination of the witness. In view of the mandate of the sub-section (3) of Section 27, it will be

competent for the District Forum, State Commission or the National Commission, as the case may

be, to record only the substance of the evidence.

Despite the restriction contained in sub-section(2) of Section 262 of the Cr. P.C., it would be

competent for the District Forum, State Commission or the National Commission as the case may

be, to pass a sentence of imprisonment for term exceeding three months so long as the above

referred summary procedure is followed by it. This is so because the legislature, while permitting
a summary procedure has simultaneously empowered the District Forum, State Commission or the

National Commission, to impose sentence upto three years.

32. Since Section 313 of the Cr. P.C., applies to every inquiry or trial, the aforesaid provision, in

our opinion, is also required to be followed in the proceedings initiated under Section 27 of the CP

Act where the accused pleads not guilty or claims that he has a defence to make. However, if the

personal attendance of the accused has been dispensed with, the District Forum, State Commission

or the National Commission, as the case may be, can also dispense with the aforesaid examination.

33. After examining the accused in terms of Section 313 of the Cr. P.C., except where such an

examination is dispensed with, the District Forum, State Commission or the National Commission,

as the case may, is required to take such evidence as the accused may seek to produce in his defence.

The accused however, cannot be allowed to lead evidence, which is not strictly relevant to the

proceedings initiated against him under Section 27 of the CP Act, and only such evidence can be

allowed to be produced by him as would prove a legal defence to the proceedings initiated against

him under Section 27 of the CP Act. In order to ensure that the accused does not prolong the trial,

which is mandated to be a summary trial, by seeking to produce evidence which may not be relevant

to the proceedings initiated against him, the District Forum, State Commission or the National

Commission, as the case may be, shall require the accused to file a list of his witnesses, indicating

therein, the specific defence he seeks to prove through the witnesses. Wherever,

the nature of the evidence so permits the District Forum, State Commission or the National

Commission, as the case may be, may also ask the accused to file the affidavit of witness by way of

his examination-in-chief instead of bringing him in the witness box. It will always be open to the

District Forum, State Commission or the National Commission as the case may be, to disallow all

such evidence sought to be produced by the accused as is found to be irrelevant or frivolous or

aimed at prolonging the trial, thereby defeating the mandate of the Act, which envisage a summary

trial of such offences. The complainant, of course, would

be entitled to cross-examine the witness of the accused, including those whose affidavits are filed by

him by way of evidence. If the accused decides to enter the witness box, in terms of Section 315 of

the Cr. P.C., the complainant shall be entitled to cross-examine such an accused.
34. After recording the substance of the evidence of the complainant, examination of the

accused, and defence evidence, if any, the District Forum, State Commission or the National

Commission, as the case may be, shall deliver a judgment, which needs to contain only a brief

statement of the reasons for the findings recorded by it.

35. Yet another question which needs to be answered in this reference is as to whether or not,

considering the orders passed by the Hon’ble Supreme Court, from time to time, the proceedings

under Section 27 of the CP Act should continue against the persons, who are in charge of and

responsible to Unitech Limited, its subsidiary companies and M/s. Pioneer Urban Land &

Infrastructure Ltd. for conduct of the business of the company, at the time the office is committed.

36. Mr. Sanjay Chandra and Mr. Ajay Chandra, Managing Directors of Unitech Limited, who

were taken into judicial custody filed SLP(Criminal) No. 5978-5979 of 2017 before the Hon’ble

Supreme Court. Unitech Limited was later impleaded as a party to the said petitions. Vide order

dated 30.10.2017, the Hon’ble Supreme Court inter-alia directed as under:

“If any proceeding is pending against the petitioners and the company, that may

continue and the final order be passed, but no coercive steps will be taken for executing the

said orders.” (emphasis supplied)

Vide order dated 20.11.2017, the Hon’ble Supreme Court reiterated that all the Forums are

bound by its order date 30.10.2017.

Vide its order dated 05.3.2018, the Hon’ble Supreme Court passed the following order on an

application filed by M/s. Pioneer Urban Land & Infrastructure Ltd. etc.:

“It is submitted by Mr. Sundaram, learned senior counsel that the execution

proceedings are going on against the applicants before the National Consumer Disputes

Redressal Commission, New Delhi (for short, the National Commission’). The said

proceedings shall be stayed, subject to the applicants depositing a sum of Rs.40,00,00,000/-

(Rupees forty crores) before the Registry of this Court. A sum of Rs. 30,00,00,000/- (Rupees

thirty crores) be deposited by 30th March, 2018 and the balance Rs.10,00,000,000/- (Rupees

ten crores) be deposited by 5th April, 2018. Be it noted, the said amount shall be distribute

amongst the home buyers, who have claimed refund in respect of the concerned project

before the National Commission.

We may clarify that the proceedings shall remain stayed where there is collaboration

of the applicants with the Unitech Limited. The other proceedings against the applicants

barring which is not covered by the collaboration agreement shall continue.”

On 12.3.2018, the following direction was given by the Hon’ble Supreme Court:

“It is directed that the petitioners shall not encumber any asset and also their

personal assets because, if necessary, the personal assets shall also be auctioned.”

Vide order dated 09.4.2018, the Hon’ble Supreme Court directed as under:

“As an interim protection, it is directed that no other court or authority shall take any

coercive steps against petitioner No.3 and its subsidiary companies except for production of

petitioner Nos.1 and 2 in the concerned criminal courts.”

Vide order dated 02.5.2018, the Hon’ble Supreme Court directed as under:

“In the meantime, the petitioner shall file a list of encumbered properties and the

extent of encumbrance therein so that this Court can take appropriate steps against the

company and its subsidiary companies.

 In addition to the aforesaid, the Directors of all the companies, namely Unitech and

all the subsidiary companies, shall file a list of their personal properties before this Court

so that in case
 the amount obtained does not meet the requirement, this Court may direct for sale of the

personal properties of the Directors.

The Directors or any of their agent or Power of Attorney holder or any assignee of the

Directors shall not create any third party right or alienate the property, failing which they

shall face contempt of this Court.”

37. Thus, as far as the Unitech Limited is concerned, no coercive steps can be taken, for executing

the orders passed against the said comp any. This would mean that neither a recovery certificate in

terms of Section 25(3) of the CP Act can be issued nor any proceedings under Section 27 of the CP

Act can continue for execution of an order passed against Unitech Limited, so long as the order

dated 13.10.2017 of the Hon’ble Supreme Court is in force. This would also include proceedings

under Section 27 of the CP Act against a person in charge of and responsible to Unitech Limited for

the conduct of its business, the purpose of such proceedings being to execute the orders passed

against Unitech Limited.

38. As far as Pioneer Urban Land & Infrastructure Limited is concerned, the execution proceedings

against the applicants in Crl. M.P. No. 29029 of 2018 have been stayed by the Hon’ble Supreme

Court, vide its order dated 05.3.2018. It is not known who the applicants in Crl. M.P. No.

29029/2018 were, but since the company Pioneer Urban Land & Infrastructure Ltd. was amongst

those who were impleaded as parties,

it is evident that the execution proceedings stands stayed against the said company as well as the

others, who were applicants in Crl. M.P. No.29029 of 2018, though the said stay is applicable

only to the cases where Pioneer Urban Land & Infrastructure Ltd. had a collaboration with

Unitech Ltd. However, proceedings which are not covered by the collaboration agreement

between the Unitech Ltd. and Pioneer Urban Land & Infrastructure Ltd. have to continue.

39. As far as the orders passed against the subsidiary companies of Unitech Limited are concerned,

as noted earlier, vide its order dated 09.4.2018, the Hon’ble Supreme Court directed that no coercive

action shall be taken against the petitioner No.3 (Unitech Ltd.) and its subsidiary
companies, except for production of Ajay Chandra and Sanjay Chandra in the concerned criminal

courts. Thus, coercive steps against the subsidiary companies of Unitech Limited stand stayed,

though no order expressly staying coercive steps against the persons incharge of and responsible to

the said subsidiary companies for conduct of their business has been brought to our notice. As noted

earlier, there is a stay against the execution of any order passed against the Unitech Ltd., but there is

no identical order as far as the subsidiary companies of Unitech Limited are concerned. In other

words, there is no express order staying execution of any order passed against the subsidiary

companies of Unitech Ltd., though, such an order has been passed in respect of the Unitech Ltd. It

was therefore contended by the learned counsel for some of the complainants that the proceedings

under Section 27 of the CP Act can continue against the person in charge of and responsible to the

subsidiary companies of Unitech Limited for conduct of their business, even if it cannot proceed

against the said subsidiary Companies. We however, find ourselves unable to accept the said

contention, considering that not only the coercive action against the subsidiary companies of Unitech

Ld., has been stayed vide order dated 09.4.2018 the Directors of all such companies have been

directed not to create any third-party right or alienate their personal properties. They have also been

directed to file a list of their personal properties before the Hon’ble Supreme Court so that in case,

the amount obtained from the companies does not meet the requirement, the Hon’ble Court may

direct the sale of the personal properties of the Directors. In our opinion, it would not be just, fair

and reasonable to continue the proceedings under Section 27 of the CP Act against the persons in

charge of and responsible to the subsidiary companies of the Unitech Ltd. when no coercive action

against the said companies can be taken and the Directors of the aforesaid subsidiary companies have

also been restrained from creating any third party right in their

personal properties or alienating the said properties. Such a course of action if taken will

not be in consonance with the spirit of the orders passed by the Hon’ble Supreme Court

from time to time.

40. For the reasons stated hereinabove, we answer the reference and related questions as under:

(1) A company, or a partnership firm, which fails or omits to comply with any order

made by a District Forum, State Commission or National Commission, as the

 case may be, will be liable to the penalty prescribed in Section 27 of the

Consumer Protection Act.

(2) The date on which the order is passed by the District Forum, State Commission

or the National Commission, as the case may be shall be deemed to be the date

on which the offence under Section 27 of the C.P. Act is committed. The said

offence will be deemed to continue till the order passed by the District Forum,

the State Commission or the National Commission is complied in all respects.

(3) If the offence, punishable under Section 27 of the Consumer Protection Act is

committed by a company, with the consent or connivance or is attributable to

any neglect on the part of any Director, Manager, Secretary or other officer of

the company such Director, Manager, Secretary or other officer shall also be

deemed guilty of that offence, even if he was not incharge of and responsible to

the company for conduct of its business, at the time offence was committed.

(4) All the persons who were incharge of and responsible to the company for the

conduct of its business at the time the offence under Section 27 of the C.P. Act

is committed shall be liable to punishment under the aforesaid Section.

(5) The persons mentioned in Para-25 above shall be deemed to be the persons

incharge of and responsible to the company for the conduct of its business.

(6) If a person who was incharge of and responsible to the company for the

conduct of its business at the time the offence was committed, proves that the

said offence was committed without his knowledge or that he had exercised all

due diligence to prevent the commission of the offence, he shall not be liable to

punishment under Section 27 of the C.P. Act.

(7) A person nominated as Director of the company by virtue of his holding any

office or employment in the Government or a Financial Corporation owned or

 controlled by the Government, shall not be liable for punishment under Section

27 of the CP Act.

(8) The vicarious criminal liability of a Director in a company shall apply to a

partner in a firm where the offence under Section 27 of the CP Act is

committed by a partnership firm.

(9) The procedure as outlined in paras 29 to 34 hereinabove shall be followed

in the proceedings under Section 27 of the CP Act.

(10) Unless permitted by the Hon’ble Supreme Court, the proceedings instituted

under Section 27 of the Consumer Protection Act, against Unitech Ltd., and its

subsidiary companies of as well as against the persons incharge of and

responsible to the company for the conduct of its business shall be kept in

abeyance, so long as the orders pertaining to them and mentioned in para 35

hereinabove remain in force.

(11) Unless permitted by the Hon’ble Supreme Court, the proceedings instituted

under Section 27 of the C.P. Act, against Pioneer Urban Land &

Infrastructure Limited and other applicants in Crl. M.P. No.29029/2018

before the Hon’ble Supreme Court, shall remain stayed so long as the order

dated 05.3.2018 is in force.

The matters be now listed before the concerned Bench, for appropriate directions, in the

light of the answer to the reference.

......................J
R.K. AGRAWAL
PRESIDENT
......................J
V.K. JAIN
MEMBER
......................
M. SHREESHA
MEMBER