Employee not liable for recovery of defaulted amount: Punjab and Haryana High Court

In a significant ruling on the accountability of company officials for criminal offences, the Punjab and Haryana High Court has ruled that no employee can be held liable for the recovery of defaulted amount even if he is working as a company’s director.

The Bench held that any individual in charge of the conduct of business at the time of an offence would be deemed guilty and subject to legal action. The criminal liability would extend to anyone responsible for the company’s operations, including directors and other key officials, if the offence was committed with their consent.

The observation

A person who is a director, but does not fall within the definition of 'employer' cannot be held responsible for recovery of defaulted amount. HC Bench

“If it is proven that the offence has been committed with the consent or connivance, or is attributable to neglect on the part of any director or manager, secretary or other officer of the company, such individual shall be guilty of the offence. It means for criminal liability, every person who is either in charge of and responsible for the conduct of business of the company or any director, manager, secretary or other officer with whose connivance, consent or negligence offence has been committed shall be guilty and proceeded against,” Justice Jagmohan Bansal asserted.

The court, at the same time, ruled that the standards for criminal and civil liabilities would differ as the parameters were different. “A person who is a director, but does not fall within the definition of ‘employer’ cannot be held responsible for recovery of the defaulted amount,” Justice Bansal added. The ruling came on a petition filed against the Regional Provident Fund Commissioner and another respondent.