The Allahabad High Court has reaffirmed that directors of a company can be held criminally liable under the Air (Prevention and Control of Pollution) Act, 1981, if they were in charge of and responsible for the conduct of the company’s business at the time the offence was committed. The judgment clarifies that mere directorship is insufficient, but where statutory responsibility is established, prosecution may proceed without requiring proof of individual culpability at the pre-trial stage.
Background & Facts
The Dispute
The dispute arises from a complaint filed by the Uttar Pradesh Pollution Control Board (UPPCB) against M/s Simplex Infrastructures Limited under Section 37 of the Air Act, 1981, for operating a thermal power plant expansion project at Panki, Kanpur, without obtaining mandatory environmental consent. The applicants, Bithal Das Mundhra and another, were named as co-accused in the complaint solely on the basis of their former directorship of the company.
Key Facts
- The thermal power plant expansion project was approved by the Ministry of Environment, Forest and Climate Change on 29.06.2017.
- The UPPCB granted environmental clearance to the project on 25.06.2018.
- Bharat Heavy Electricals Limited (BHEL) was the main contractor and subcontracted civil work to M/s Simplex Infrastructures Limited effective 19.12.2018.
- The alleged violation occurred in 2020, during the construction phase of the project.
- Applicant No. 1 ceased to be a director of Simplex Infrastructures Limited on 15.03.2014.
- Applicant No. 2 ceased to be a director on 20.09.2016.
- Both applicants were no longer directors at the time the project commenced in December 2018 and during the alleged violation in 2020.
- Form No. 32 and Form DIR-12 filed under the Companies Act, 1956, confirm the cessation of directorship.
- The UPPCB, in its Annexure-3, admitted it did not ascertain whether the applicants were in charge of or responsible for the company’s business at the relevant time.
- The inspection report dated 2020, which formed the basis of the complaint, did not identify any current director or officer responsible for operations.
Procedural History
- 06.01.2021: UPPCB filed complaint before Special Judicial Magistrate, Pollution/CBI, Lucknow, naming Simplex Infrastructures Limited and its former directors as accused.
- 14.03.2022: Magistrate issued summoning order against the applicants.
- 22.01.2022: Application U/s 482 CrPC No. 9058 of 2022 filed by applicants seeking quashing of proceedings.
- 03.04.2023: Application U/s 482 CrPC No. 22 of 2023 filed by applicants (same relief).
- 15.04.2026: Judgment delivered by the Allahabad High Court.
The Parties' Positions
For the Applicants
- Argued they ceased to be directors years before the project commenced and the alleged violation occurred.
- Contended that the complaint lacks any allegation of their involvement in day-to-day management or operational control during 2020.
- Relied on Sunita Palita v. Panchami Stone Quarry to argue that holding directors liable merely for their designation is a travesty of justice.
- Submitted that the UPPCB failed to conduct due diligence before filing the complaint.
For the Respondent (UPPCB)
- Argued that the applicants were directors at the time the complaint was filed, as per Ministry of Corporate Affairs records.
- Contended that the offence under the Air Act is one of strict liability, and directors are vicariously liable under Section 40.
- Asserted that the company operated without consent, and the Board of Directors collectively bears responsibility.
- Relied on U.P. Pollution Control Board v. Dr. Bhupendra Kumar Modi and S.P. Rastogi v. State of U.P. to argue that directors are presumed responsible for statutory compliance.
Relief Sought
The applicants sought quashing of the entire proceedings and the summoning order dated 14.03.2022, on the grounds that they were not in charge of or responsible for the company’s business at the time of the alleged offence.
The Legal Issue
The central question was whether directors who ceased to hold office years before the alleged environmental violation can be prosecuted under Section 40 of the Air (Prevention and Control of Pollution) Act, 1981, solely on the basis of their former directorship, without any allegation of their involvement in the company’s operations at the relevant time.
Arguments Presented
For the Appellant/Petitioner
The applicants relied on Sunita Palita v. Panchami Stone Quarry to argue that liability under environmental statutes cannot be imposed merely on the basis of designation. They emphasized that Section 40(1) requires proof that the accused was "in charge of and responsible to the company for the conduct of the business" at the time the offence was committed. They submitted that the complaint contained no factual averments linking them to the project’s management, operations, or decision-making in 2020. The UPPCB’s reliance on outdated MCA records, they argued, was legally insufficient and amounted to a presumption without foundation.
For the Respondent/State
The UPPCB contended that Section 40 imposes vicarious liability on directors as a class, and the statutory language does not require proof of individual negligence or knowledge. Citing Dr. Bhupendra Kumar Modi and S.P. Rastogi, the State argued that when an offence is committed by a company, the entire Board is presumed responsible for statutory compliance, particularly where the violation involves failure to obtain consent or install pollution control equipment. The Board’s collective duty, they asserted, cannot be evaded by claiming individual disengagement.
The Court's Analysis
The Court examined the statutory framework under Section 40 of the Air Act, which mirrors Section 47 of the Water Act, and analyzed the Supreme Court’s jurisprudence on corporate liability. The Court noted that while Sunita Palita dealt with negotiable instruments and required proof of active involvement, environmental statutes operate differently due to their public interest nature.
"Where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director... such director shall also be deemed to be guilty of that offence."
The Court held that Section 40(2) creates a presumption of liability against directors if the offence is attributable to neglect. The burden then shifts to the director to prove due diligence. However, at the stage of summoning, the Court emphasized that only a prima facie case needs to be established.
The Court distinguished Sunita Palita, noting that the Negotiable Instruments Act requires proof of dishonest intent, whereas environmental laws impose strict liability for statutory non-compliance. The Court relied on Dr. Bhupendra Kumar Modi, where the Supreme Court held that directors are liable for failing to obtain consent or install treatment plants, even without proof of individual knowledge.
The Court further cited S.P. Rastogi, observing that when the Board collectively fails to comply with statutory obligations, the entire Board is responsible. The fact that the applicants were no longer directors at the time of the violation was deemed a disputed question of fact, which cannot be adjudicated at the pre-trial stage under Section 482 CrPC.
"This Court cannot weigh the evidence and do a mini-trial here. The defence advanced by the applicants cannot be scanned at this stage."
The Court concluded that the complaint, on its face, alleged that the company operated without consent and that the applicants were directors at the time of filing the complaint. The UPPCB’s reliance on MCA records, even if outdated, was sufficient to establish a prima facie case for summoning.
The Verdict
The applications under Section 482 CrPC were dismissed. The summoning order dated 14.03.2022 was upheld. The applicants may raise their defence of non-involvement at the trial stage, including through an application for discharge under Section 227 CrPC. No quashing of proceedings was granted. The Court clarified that the burden of proving due diligence under Section 40(1) lies with the accused at trial, not at the stage of summoning.
What This Means For Similar Cases
Director Liability Is Not Automatic, But Presumed
- Practitioners must now argue that directorship alone is insufficient, but the prosecution need only allege that the accused was a director at the time of filing the complaint.
- The burden of proving non-involvement or due diligence shifts to the accused at trial.
Statutory Compliance Is a Collective Duty
- Environmental offences under the Air and Water Acts impose liability on the Board as a whole.
- Failure to obtain consent or install pollution control equipment triggers liability even if no individual director acted negligently.
Pre-Trial Quashing Is Limited
-
Courts will not examine the veracity of directorship dates or operational control at the Section 482 stage.
-
Defence on factual grounds must be raised before the trial court via discharge application.
-
Always verify directorship status as of the date of the alleged violation, not the date of complaint.
-
Maintain contemporaneous records of director resignations and filings under the Companies Act.
-
In environmental cases, assume liability unless due diligence can be proven.
