LAW RESOURCE INDIA

Kolkata fire: Knee-jerk reactions stifling due process of law

Posted in ACCOUNTABILITY, TORTS by NNLRJ INDIA on December 12, 2011
AMRI Hospital Salt Lake, Bidhan Nagar, Kolkata

Image by seaview99 via Flickr

A. MATHUR IN THE TIMES OF INDIA

A tragic fire broke out in the Advanced Medicare & Research Institute (AMRI) Hospital in Kolkata early Friday morning in which 91 persons have died, making it one of the worst tragedies in any hospital in India. Many patients died while asleep. The government has ordered a judicial probe which shall run parallel to the inquiry under police’s detective department. AMRI hospital where the unfortunate incident occurred is a private hospital and many prominent persons serve as directors on its board.

Reacting to the outrage triggered by the fire, the police in knee-jerk reaction, bypassed all known precedents and procedures under the existing law and arrested seven directors on the AMRI board. They were produced before the court and were remanded to 10 days’ police custody. The Kolkata Municipal Corporation also cancelled the trade license of the hospital without issuing a show-cause notice, much less a proper inquiry.

The AMRI directors have been charged with offences including culpable homicide not amounting to murder, attracting a maximum punishment of a jail term up to 10 years and fine. A mob comprising several hundred protesters outside the court premises demanded death penalty for them, and lawyers, bowing to the popular sentiment, decided not to defend their case.

The court, without going into the issue of liability/negligence, and without considering prima facie evidence, ordered police remand for all the directors. It did not follow the system of absolute liability, or give serious consideration to investigation/inquiry so that a prima facie case is made out against the accused.

It is highly unlikely that all the directors were in charge of day-to-day functioning of the hospital. It was the same when the Bhopal disaster happened. The government went after Warren Anderson, based in the US, on behalf of Union Carbide, while knowing fully well that the state government of Madhya Pradesh held a majority stake (51%) in the Bhopal unit of Union Carbide.

In the pursuit of senior people/owners of facilities, we end up targeting people who have a paying capacity. So, the vested interest for better compensation overtakes other considerations and the actual offenders often go scot-free. The question to ask is: Should we pursue compensation or criminal justice when criminal negligence occurs?

The manner of arrests in the AMRI case is a shame on criminal liability as well as on the Company Law. In Solomon vs Solomon, the court had declined to pierce the corporate veil even when the two directors of the company were husband and wife, as the court treated the entity called “company” as sacrosanct. In AMRI, instead of proceeding against the occupier or person in charge for day-to-day operations, the corporate veil is being pierced at the very first instance and law is trying to reach to the directors without any basis or evidence aganist them jointly or severally against the established norms. It failed to treat AMRI as a legal entity validly existing under company law as unique and distinct, capable of being sued in its own capacity and directors holding their positions in trust.

What could be the liability of directors of hospitals like AMRI? Many of them are on the board only because of their expertise or technical knowledge, but not engaged in day-to-day decisions of the hospital. Only in rare cases is the corporate veil pierced to look at persons actually on the board of directors of a company.

Look at it another way, how will the law treat a similar incident in a Government hospital? Will the Chief Medical Office, Health Secretary or Health Minister be arrested? In the Managalore Air India crash, or Jnaneswari Express train accident, no member of the Railway Board, or the chairman of Air India, was arrested. Are we saying that law is different for different entities? Are we not living in a country where we boast of the rule of law and equality before law – Article 14 of the Constitution?

It is unheard of that criminal liability is saddled vicariously on persons not actually concerned with the running of an establishment/factory/facility or directly responsible for its functioning. In the AMRI case, the police not only bowed to popular demand, even the court bypassed the set procedures and precedents under criminal law.

If the private sector directors are singled out, then it would get increasingly difficult to get good, qualified people to accept director positions in the private sector, as they may feel threatened and such witch hunt approach would create a fear psychosis which will certainly be a disaster for corporate India, and experts and technocrats may not llike to take that additional liability for any offence caused by the company without even being aware about the same.

Directors are agents for the transactions entered into by a company, though they are not agents for individual shareholders or members.

Directors as such are not liable for the torts or civil wrongs of their company. To make a person liable for a tort, for example, for negligence, trespass, nuisance or defamation, it must be shown that he was himself the wrongdoer or that he was the employer or principal of the wrongdoer in relation to the act complained of, or that the tort was committed on his instructions. The courts have narrowed down the liability of directors over the years. It follows from the fact that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions.

It is a complainant’s responsibility to explain how a director was vicariously liable. There is no presumption that every director knows about or is involved in day-to-day management of the company. Technically criminal liability can be fastened only on those directors who, at the time of the commission of the offence, were in charge of and responsible for the conduct of the business of the company.

In contrast, vicarious liability on the part of a person must be pleaded and proved, and not inferred. In case of factories, law provides that occupier is liable. It is not necessary to make specific averment regarding occupier in the complaint and by virtue of their position they are liable to be proceeded with but that cannot be the case even for the managing director leave apart all directors (including independent directors).

There is a total clarity in law that in respect of such duties as may be properly left to some other official having regard to the exigencies of business or the articles of association of the company, a director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly and cannot be held liable for any offence caused by such person.

While directors serving on the board of government companies are insulated and protected, the directors on private companies are left to the mercy of popular sentiment. Does the law change when many perish and there is a public outcry or do the principles of law remain the same? The larger question is: is our jurisprudence evolving for the good or worse?

6 Responses

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  1. Hari Mohan Meena said, on December 13, 2011 at 00:40

    In my view directors who were managing the day to day arrangement
    should be punished but just for sentiment of the people court should
    not act like arbitrary and the directors who were not involving in the
    directing the mind or will of the corporation they should not be
    punished and also judicial custody should be allowed after made prime
    facie case .

    It was also said in the case of ‘Lennard carrying Ltd. co. v. Asiatic
    petroleum co. Ltd’. that “A Corporation is an abstract. It has no mind
    of its own, its acting and directing will must
    consequently be sought in the person of somebody Who is really the
    directing mind or will of the corporation, the very ego and centre of
    personality of the corporation.”The fault of a corporation is,
    therefore, fault of its superior officers who are the directing mind
    or will of the corporation. so after made a fair investigation it
    should be discovered that who is directing the act of the corporation
    and should be punished.

  2. Mani Ram Sharma said, on December 13, 2011 at 06:25

    This may be termed as a good contemporary but sentimental drama to arrest all the directors and sending them to remand without any fruitful purpose. The denial of advocates to defend these directors is also a departure from their code of conduct. However, more concentrate efforts are required to investigate into the matter and collect evidences to secure conviction of all those responsible for the tragedy. But unfortunately it is feared that the episode may may result into a foil like Bhopas gas disaster in the present rusted and blunt Indian Judicial System.

  3. Pankaj Kumar (@pankaj7379) said, on December 13, 2011 at 14:47

    thnx God people are doing remember and talking about Bhopal gas tragedy. hopefully, after some days everything again will settle down as in earlier such case of Uphaar Cinema case at Delhi etc. When time may come when focus will be given on implementation rather than making mere dialogues. Can anyone may guess the penal amount in a matter of defamation of a Supreme Court Judge for few second on TV; may present incident may get relatively good compensation? A.14 which deals in equality before Law can really work in such circumstances? I understand we also need to remember concept of vicarious liability too in present case. Further, taking an institution such as AMRI as a State, Government must be a party (defendant) in the case.

  4. Sobhana Bardhan said, on December 14, 2011 at 03:41

    It is unfortunate that so many lives were/are lost. Those who are should be held responsible for such injustice of not any preventative measure.

  5. kanta said, on December 19, 2011 at 14:00

    This is India any incident happens every body feel bad but after 2-3 days everybody forget. this is our problem. that we do not learn lesson from one mistake. so first culprit is common men who forgives every culprit.

  6. BA said, on January 4, 2012 at 13:14

    It is sheer bad luck for Indian citizens that they have to hopelessly watch an unwilling administration which does not belives that changes has effected our society, lives, living standards, values etc, so that there is absolutely no shift or change in the part of Indian courts while dealing with social injustice & crimes like that one happened at AMRI hospital. Many organisation like this website is actually directly or indirectly championing the very thought that Board of directors are not punishable as per the law & for greater causes of the society & business brotherhood, they should be set scot free.

    It has been argued that punishment for criminal offences such as imprisonment cannot be conferred on companies and, hence, there cannot be criminal liability on companies. Moreover the directors are only human beings, who actually pumps money to an organisation & does not involves in day to day business – so even if there is a major crime committed – but you can not point your finger to the directors as they are always away from their site. Unfortuantely this actually looks like some gang leader organised a crime and that crime is committed by his appointed men and when law is taking its course it is only seeing that the gang leader is not at the site of crime and hence no offence for him.

    However in the international Scenario, In the US and the UK, it has been a settled principle that corporates can be held criminally liable. Way back in 1909, ( Just think about it , we are now at 2012 – however in India ), in New York Central and Hudson River Rail Road Co vs UN, Supreme Court in the US had held that a corporation is liable for crimes of intent and stated: “We see no good reason why corporations may not be held responsible for and charged with the knowledge and purposes of their agents, acting within the authority conferred upon them. Had it been not so, many offences might go unpunished and acts be committed in violation of law where, as in the present case, the statute requires all persons , corporate or private, to refrain from certain practices, forbidden in the interest of public policy.”

    In HL Bolton (Engg) Co Ltd vs TJ Graham & Sons, it was said, “The state of mind of these managers is state of mind of company, and it is treated by law as such. So, you will find that in case where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of company.”

    It is always a great shame for us Indians about the immence negligence shown in the part of the authorities regarding `Union Carbide’ case. It is infact a shame for us that till date the persons suffering from the holocust are not properly compensated / addressed. The men responsible for such kind of `enormus’ tragedy were not subjected to leagal punishment on one groun or the other (or rather let scot free). It is an instance where law has not taken its natural course.


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