Delhi Development Authority vs Vandana Gupta
Background
The DDA had prosecuted a company, M/s Dhampur Alco Chem. Ltd., and four of its directors for misusing a property in Bengali Market, New Delhi, contrary to the purpose for which it was sanctioned, under the Delhi Development Act, 1957. At trial, the company and two directors were convicted, while two other directors (including the respondent, Vandana Gupta) were acquitted after they showed they were not involved in the company's day-to-day management. The DDA's request to the Delhi High Court for leave to appeal against this acquittal was declined, leading to the present appeal before the Supreme Court.
Decision Breakdown
The Supreme Court held that since it was the company, as a legal entity, that was primarily being prosecuted, the directors could only be held liable vicariously under Section 32 of the Delhi Development Act if they were shown to be in charge of and responsible for the company's day-to-day affairs. The trial court had found nothing on record to establish that the acquitted directors were involved in daily management, and the acquitted directors had been able to lead evidence establishing this. Finding no error of law in the High Court's refusal to grant leave to appeal, the Supreme Court dismissed the DDA's appeal.
Lesson Learnt
A company director cannot automatically be held criminally liable for the company's wrongdoing merely because of their position. The prosecution must show they were actually in charge of and responsible for the day-to-day affairs of the company at the relevant time.