Section 55 of the Code on Wages, 2019: Offences by Companies
Section 55 of the Code on Wages, 2019 deals with criminal liability where an offence under the Code is committed by a company. The provision identifies when the company itself and persons responsible for conducting its business may be proceeded against, and separately deals with liability arising from the consent, connivance or neglect of directors and other officers.
- The company may be liable when an offence under the Code is committed by it.
- A person who was in charge of and responsible for the conduct of the company's business at the relevant time may also be deemed guilty.
- Such a person can rely on the statutory defence of absence of knowledge or exercise of all due diligence.
- Directors, managers, secretaries and other officers may separately incur liability where consent, connivance or neglect is proved.
- For this section, the expression "company" extends beyond an incorporated company and includes firms, LLPs and other associations of individuals.
Text of Section 55 - Offences by Companies
55. (1) If the person committing an offence under this Code is a company, every person who, at the time the offence was committed was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Code 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, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.-- For the purposes of this section,--
(a) "company" means anybody corporate and includes--
(i) a firm; or
(ii) a limited liability partnership registered under the Limited Liability Partnership Act, 2008; or
(iii) other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm.
Meaning and Scope of Section 55
Section 55 creates a statutory framework for determining responsibility when an offence under the Code on Wages is committed by a company. It does not confine responsibility only to the juristic entity. In the circumstances specified by the section, individuals responsible for the company's business may also be proceeded against.
The provision should be read with the particular offence and penalty provisions of the Code, including Section 54, which prescribes penalties for offences. Section 55 principally addresses who may bear responsibility when the offender is a company.
Liability Under Section 55(1)
Section 55(1) applies where the person committing an offence under the Code is a company. It covers the company itself and every person who, when the offence was committed, was both in charge of and responsible to the company for the conduct of its business.
The statutory language therefore focuses on the person's responsibility for the conduct of the company's business at the time of the alleged offence. Whether an individual falls within the provision depends on the applicable facts and the requirements of Section 55.
Defence of Lack of Knowledge or Due Diligence
The proviso to Section 55(1) provides an important statutory defence. A person otherwise covered by sub-section (1) is not liable to punishment if that person proves either that the offence was committed without his knowledge or that he exercised all due diligence to prevent its commission.
Accordingly, Section 55 expressly recognises both absence of knowledge and exercise of due diligence as grounds relevant to the personal liability of a person covered by sub-section (1).
Liability of Directors and Other Officers Under Section 55(2)
Section 55(2) operates notwithstanding sub-section (1). Where an offence has been committed by a company, a director, manager, secretary or other officer may also be deemed guilty if it is proved that the offence was committed with that person's consent or connivance, or was attributable to neglect on that person's part.
This part of the provision therefore expressly links individual liability to proof of consent, connivance or neglect in relation to the company's offence.
Meaning of "Company" Under Section 55
For Section 55, the expression "company" has an extended meaning. The Explanation states that it means a body corporate and also includes a firm, a limited liability partnership registered under the Limited Liability Partnership Act, 2008, and another association of individuals.
The Explanation further provides that, in relation to a firm, "director" means a partner in the firm. Consequently, Section 55 is relevant not only to incorporated companies but also to the other organisational forms expressly included in the provision.
Relationship With Penalty and Composition Provisions
Section 55 should be read in the context of the surrounding provisions in the Code. Section 54 deals with penalties for specified offences, while Section 56 contains provisions relating to composition of eligible offences.
The nature of the alleged contravention, the applicable penalty provision, the identity and responsibility of the persons concerned, and the statutory requirements governing prosecution or composition should therefore be examined together in an individual case.
Official Legal Resources
For authoritative statutory material and notifications, readers may refer to the Ministry of Labour and Employment and the Gazette of India. The official text of the Code should be consulted where the precise statutory wording is required.
Official Code on Wages, 2019 - Ministry of Labour and Employment