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Section 55: Offences by companies

The Code on Wages, 2019 (Act No. 29 of 2019) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter VIII: Offences and Penalties
Competent Labour Forum
Act No. 29 of 2019
Section 54 All 67 Sections of Code on Wages, 2019 Section 56

Legal Commentary & Landmark Judgments: Section 55

Section 55 of the Code on Wages, 2019 articulates the corporate criminal liability and vicarious liability regime, holding both the corporate legal entity and every individual who was in charge of, and responsible to, the company for the conduct of its business liable for offenses, while providing statutory defenses of due diligence and absence of knowledge.

  • Dual Corporate and Managerial Vicarious Liability: Where an offense under the Code is committed by a company, firm, or association of individuals, both the legal entity itself and every person in charge of and responsible to the company for the conduct of its business at the time of the offense are deemed guilty and liable to be prosecuted and punished.
  • Statutory Defenses: Lack of Knowledge and Due Diligence: A director, manager, or corporate officer can escape vicarious liability by proving that the offense was committed without their knowledge, or that they exercised all due diligence to prevent the commission of such offense. The burden of establishing this statutory defense rests upon the accused officer.
  • Direct Culpability of Directors, Managers, and Officers: Sub-section (2) provides that where an offense is proved to have been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary, or other officer of the company, such individual shall also be deemed guilty and proceeded against personally.
Key Landmark Precedents:
  • SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89: Landmark Supreme Court ruling on corporate vicarious liability; held that there must be specific, clear, and unambiguous averments in the complaint explaining how the accused director was in charge of and responsible for the company's daily business operations.
  • Aneeta Hada v. Godfather Travels & Tours (P) Ltd. (2012) 5 SCC 661: Landmark 3-judge bench ruling establishing that the corporate principal offender must be arraigned as an accused for vicarious liability to be fastened on its directors or officers.
  • Sunil Bharti Mittal v. CBI (2015) 4 SCC 609: The Supreme Court held that an individual cannot be prosecuted merely because they occupy a senior corporate position; vicarious liability must be explicitly created by statute and substantiated with specific factual allegations of active participation.
Courtroom Practice & Strategic Litigation Guidance:

Corporate boards must formally designate a specific Director or Head of Human Resources under a board resolution as the 'Occupier / Employer' responsible for labor law compliance under the Code on Wages. General independent and non-executive directors should maintain board minutes reflecting the establishment of automated compliance oversight systems to substantiate the 'due diligence' defense under Section 55(1) if complaints are mistakenly filed against them.

Section 54 All 67 Sections of Code on Wages, 2019 Section 56