The Legal Metrology Act, 2009 (“the LM Act”) is the primary statute which establishes and enforces the standards of weights and measures and regulates trade in weights and measures in the country.
In a recent development, the Department of Consumer Affairs, Government of India vide Legal Metrology (General) Amendment Rules, 2022 published on October 4, 2022, has amended the Legal Metrology (General) Rules, 2011 which apparently reduces the criminal liability of a director (s) of a company as well as compliance burden for the companies.
Vide the said amendment, the word “Director”, has been substituted with the words “name and designation of the officer nominated under Rule 29”.
The LM Act provides in detail of all compliances and the manners in which declaration of measurements / weight of commodities, etc., is to be made. The LM Act alongwith Legal Metrology (Packaged Commodities) Rules, 2011 provides for standardization of packaging and labelling in India and define the labelling requirements of all packaged commodities manufactured, imported and sold in India. Even small and insignificant deviation from the provisions of the LM Act could amount to offence under the LM Act and lead to imposition of penalties as provided under Chapter V of the Act, besides other actions. The offences under LM Act are also criminal offences and prescribe imprisonment as a punishment for violation of the LM Act.
Whenever any violation is observed by an Inspector (Legal Metrology Officer) during inspection or on a complaint, as the case may be, the officer issues a notice of the violation and if the concerned person (s) to whom a notice is issued, agrees with the notice, he/she may compound the offence in certain cases, by paying the compounding fee. However, if the person to whom notice is issued does not agree with the charges levelled by an officer, then an appeal can be preferred as per provisions of the LM Act, against the decision/ order of Legal Metrology office, before the Controller of Legal Metrology and thereafter, against the orders of Controller to the State Government.
Under the LM Act when a case is booked either as first offence or second or a subsequent offence, there is no provision of arrest. The cases booked by the Inspector, Legal Metrology (LMO) in case of non- compounding of offence and if no appeal is filed to the Controller or State Government, are filed in the Court of Law, and the Court after following the due procedure summons the offenders to defend against the case.
The LM Act deals with the offences by companies and power of the Court to publish the name, place of business, etc., for companies convicted. It further provides the need for nomination of directors to ensure that any breach of the provisions of the LM Act by a company can be taken up with the nominated director (of a company) Thus, similar to the provisions of statutes such as Factories Act and Cinematograph Act, etc., containing the definition of expression “occupier” as a nominated person for ensuring compliance, any company may, by order in writing, authorise any of its directors to exercise all such powers and take all such steps as may be necessary or expedient to prevent the commission by the company of any offence under the LM Act.
Thus, in case of violations under the LM Act, in the past prosecutions were initiated against the directors of several companies for the violation (s) done even by any establishment or branch or unit or branch of a company.
There was, thus, request from various industries/groups to allow nominating the person who is actually having the authority and responsibility of the establishment or branch or unit in any establishment or branch and not the Director, so that the notices for the violation done by the establishments or branches or units are not issued to the directors but to the persons who are responsible for the compliance of LM Act.
Considering that the offences which can be decriminalized should not have (i) larger public interest affected adversely; and (ii) Mens rea (malafide/ criminal intent)– therefore, it was found necessary by the Government of India to evaluate the nature of non-compliance i.e. negligence or inadvertent omission instead of fraud, etc., the Government of India has recently invited stakeholder consultation on proposal of decriminalization of LM Act. It is apparent that the Legal Metrology (General) Amendment Rules, 2022 has been passed in consonance with the said consultation.
Anhad Law’s Perspective
The above amendment is significant as moving forward companies having different establishments or branches or different units in an establishment or branch (s) can now nominate an officer at managerial level, who has the authority and responsibility for the operations and activities of the establishments or branches or different units. This will obliviate the director (s) in a company from being implicated in each non-compliance of the LM Act.
After all, the Courts in India have held in a catena of judgments that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. In each litigation, a person who has been named an account even without any cause of action has to defend himself, from Court to Court, and has to incur expenses towards such defence,
No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director and 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. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
Significantly, when the company is an offender, vicarious liability of the directors cannot be imputed automatically, in the absence of any statutory provision to this effect. There has to be a specific act attributed to a director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.
The words “every person who, at the time of the offence was committed, was in charge of, and was responsible for the conduct of the business of the company” occurs not only in LM Act but in several enactments dealing with offences by companies, to mention a few –Negotiable Instruments Act, 1881, Income Tax Act, 1961, Minimum Wages Act, 1948, Employees State Insurance Act, 1948, Employees Provident Fund and Miscellaneous Provisions Act, 1952, Payment of Bonus Act, 1965, The Air (Prevention and Control of Pollution) Act, 1981 and Water (Prevention and Control of Pollution) Act, 1974, etc. But neither the LM Act, nor the pari materia provisions in other enactments give any indication as to who are the persons responsible to the company, for the conduct of the business of the company.
Considering that it is a known factor that each Director on the Board of a company may not be involved in day to day functioning of the company/ factory and also a director may not be available at the time of occurrence of an offence, thus, the recent action of Central Government to make provision for exonerating criminality of a director of a company for contraventions of LM Act, is a welcome measure.
It is expected that in line with the recent development, the Government of India will soon decriminalize offences under the LM Act as also provide feasible alternative mechanisms to resolve disputes under LM Act for speedy and effective enforcement so as to improve the ease of doing business and reduce pressure on courts.
–Manishi Pathak, Founding Partner and Ranjan Jha, Partner
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