Is Manish Maheshwari Liable For Criminal Liability Of Twitter, India?

Recently, a controversy has arisen for the Twitter India Managing Director, Mr. Manish Maheshwari after a distorted map of India showing Jammu and Kashmir and Ladakh as two separate countries appeared under the ‘Career’ section of Twitter website. These days, the famous microblogging website often becomes the topic of discussion among netizens. Let us understand through basic legal principles and various landmark judgments decided by the Apex Court if he is personally criminally liable for the same or not.

Criminal liability of Company and its Directors

Upon incorporation, a company becomes an artificial person in the eyes of law, it has a perpetual succession, meaning that the members may come and go, but the company goes on till its end/winding up. A company is empowered to work in its own name and it can sue others and be sued by others too. A company, unlike a human being, has no physical existence. It has no eyes to see, no brain to think, no hands to execute a document. To facilitate a company to live and achieve its objects as enshrined in the Memorandum of Association, a company depends upon the Board of Directors. The directors of a company are its eyes, ears, brain, hands, and other essential limbs. The directors formulate policies and establish the organizational setup.  

Doctrine of Lifting of Corporate Veil

The separate personality of a company is a provision enshrined under the statute. When some fraud has been committed or there is some improper conduct or some omission or commission of acts, the Court will break the corporate shell and lift the corporate veil and look behind the corporate entity and take action as though no entity separate from the members existed and make the members or controlling person liable for the debts and the obligations of the company. 

The Legislature and the Judiciary have had difficulty in clarifying the principles relating to corporate criminal liability. Over the period of time, the Law Commission of India in their reports specified amendments that could remove this ambiguity. The position with respect to the criminal liabilities of the companies and their directors has been clarified time and again by the Supreme Court in various judgments.

When are the Directors and Companies liable criminally - Supreme Court clarifies

In the year 2005 for the first time, the Supreme Court in the case titled as “S.M.S. Pharmaceuticals Limited v. Neeta Bhalla” raised an important question who will be prosecuted when the offense has been done by a company. The matter in question was related to a cheque that was dishonored. It was emphasized by the apex court that merely being a director of the company is not sufficient to make a person liable under Section - 141 of the Negotiable Instruments Act, 1881. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section - 141 of the Negotiable Instruments Act, 1881 is that the person who is in charge and is responsible for the conduct of the business of the company at the time in question shall be liable. The clarification of the criminal liability of a company in its own name was still not there. 

Soon thereafter, in the year 2006, a landmark judgment of the constitutional bench by the name of “Standard Chartered Bank v. Directorate of Enforcement” came and the apex court addressed the major question - whether a company can be prosecuted for an offense in which sentence of imprisonment is a mandatory punishment. It was clarified by the apex court that there is no blanket immunity to the companies from prosecution. It was emphasized by this judgment that the law applies equally to natural persons and juristic corporations and that there is no distinction in their criminal liability. The apex court also elucidated that a fine can be imposed and the sentence of imprisonment can be ignored with respect to the corporations. This decision of the apex court articulated the foundations of Criminal Liability with respect to the Corporations in India. 

All this while the foreign investment in India increased as a result of which many new ventures came into our country. While society was developing and making progress in the commercial arena, there were rigid laws that were making the growth of business in the country slow. As a result of which, the root cause of the crime was struck off. 

In the year 2012, in another landmark judgment “Aneeta Hada v. M/s Godfather Tours and Travels Private Limited” the apex court shed light on the issue - whether a company could be prosecuted in the case of Section - 138 of the Negotiable Instruments Act, 1881 (popularly known as the dishonor of cheques) and whether directors of the company could be prosecuted. Answering these questions in positive the apex court said that a company is an Accused and that the directors are vicariously liable for the acts of the company. The law with respect to this provision is also unequivocally clear in Section - 141 of the Negotiable Instruments Act, 1881.

Understanding the perspective of the business and companies in the country, the apex court eased the law which was making the directors criminally liable merely on the ground of their designation and not catching hold of the person actually involved. In the year 2015 in a famous case, the Supreme court upheld the earlier verdicts and clarified that the Directors are not liable for the acts of the company. The case was titled as “Sunil Bharti Mittal v. Central Bureau of Investigation”. This case is popularly known as the 2-G Spectrum Case. 

In this case, the special investigating court had asked CBI to bring under its scanner corporate houses which were beneficiaries of the 2-G Spectrum allotted in the year 2007 because of which the Public Exchequer was under huge losses as there were irregularities while granting the spectrum. According to a report of the CAG, the loss was estimated at Rs. 1.76 Lakh Crores. 

As a result of which criminal investigations were initiated against various companies across the countries. In such investigation, their directors were also in question. One of these companies was Bharti Cellular Ltd. whose Chairman cum Managing Director, Sunil Bharti Mittal was made an accused by the special court which in turn was challenged before the apex court as the mistake of law. 

In this case, the earlier judgments were overturned and the principle of alter ego was clarified. It was observed by the apex court that a company cannot be held liable for the actions of the employees. The Supreme Court further noted that directors of the company can be held responsible for the wrong done by the company only where there is sufficient evidence to prove that such persons played an active role and they had criminal intent. 

Other situations when the Director may be liable

As per section - 128(6) of the Companies act, 2013 the Managing director may be liable if he is charged with the duty of complying with the provisions of maintaining appropriate books of accounts with a fine of Rs. 50,000/- which may extend to Rs. 5,00,000/- 

In addition to this, the corporate criminal liability is imposed on the corporations through various legislations such as the Income Tax Act, 1961, the Securities and Exchange Board of India Act, 1992, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Negotiable Instruments Act, 1881 and the Prevention of Corruption Act, 2013.

Where the Central Government is of the opinion that investigation is required in the books of accounts of a company, Serious Fraud Investigation Office (SFIO) may interrogate the books of accounts. The provisions of bail under the companies act investigated by SFIO are stringent.

Present Scenario

In the present case, two FIR’s have been lodged (one in Uttar Pradesh and the other in Madhya Pradesh) under Section 505 (2) of the Indian Penal Code, 1860 and Section 74 of Information Technology (Amendment) Act 2008. The summons to appear as a witness were served upon him under Section -160 of the Code of Criminal Procedure, 1973. He replied negatively to this summon by saying that he is merely an employee of Twitter and is not acquainted with the facts and circumstances of the case and hence has no information relevant to the facts and circumstances, therefore he isn’t the relevant person to provide any details in relation to the subject matter of the case under investigation. He further stated that he is not in a position to travel from Bengaluru to Ghaziabad. Following this reply a notice under Section - 41(A) of the Code of Criminal Procedure, 1973 was served upon him threatening arrest. 

The legal provisions with respect to the situation is clear that if the omission or commission of an act is the result of an action directed by the key managing personnel then they shall be liable for criminal prosecution. As per judicial directions of the Supreme Court the criminal liability of the director/manager/secretary has to be ascertained whether their action or decision directly leads to the offense being committed. Large corporations consist of plethora of directors, board members, company secretary etc. but for imputing criminal liability all cannot be treated with same yard stick and a direct imputation of criminal act is to ascertained.  

Conclusion

For committing a crime it is important that two ingredients should be there - mens rea (guilty mind) and actus reus (act of crime). In simple words, the company can not have mens rea of its own however the actus reus of the person responsible affects the identity and existence of the company. Criminal liability of directors stands true on the legal maxim - actus non facit reum nisi mens sit rea (act is wrongful when it is done with a wrongful state of mind).

In the present case, Twitter MD Mr. Manish Maheshwari is, as per reports directly responsible for the sales of Twitter India and is not directly involved in policy decision making and key managerial decisions which may have imputed the criminal acts for which the FIR’s in India are registered. Nevertheless Twitter India MD will have to undergo the judicial scrutiny of direct/ indirect criminal liability imputed towards him by the Indian investigative authorities. But, he will certainly have the support of landmark judgments of Sunil Bharti Mittal vs. CBI and various other judgments.