Ajay Bhatia and others v. Drugs Inspector (Intelligence Branch), Office of the Assistant Drugs Controller, Ernakulam and State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR. JUSTICE P.D.RAJAN** ## **THURSDAY, THE 20TH DAY OF FEBRUARY 2014/1ST PHALGUNA, 1935** ## **Crl.MC.No. 1183 of 2012** ## **---------------------------------** **AGAINST THE ORDER IN CC 1290/2011 of JUDICIAL FIRST CLASS MAGISTRATE COURT-1, PERUMBAVOOR** **-------------** ## **PETITIONER(S)/ACCUSED NO.2-5:** **------------------------------------------------** ## **1. AJAY BHATIA,** - **DIRECTOR, LABORATE PHARMACEUTICALS LIMITED RESIDING AT 584-L , MODEL TOWN, PANIPAT, HARYANA 132103.** ## **2. SANJAY BHATIA,** - **DIRECTOR, LABORATE PHARMACEUTICALS LIMITED, RESIDING AT 584-L, MODEL TOWN, PANIPAT, HARYANA 132103.** ## **3. ANITA BHATIA,** - **DIORECTOR, LABORATE PHARMACEUTICALS LIMITED, RESIDING AT 584-L, MODEL TOWN, PANIPAT, HARYANA 132103.** ## **4. ADITHYA BHATIA,** - **DIRECTOR, LABORATE PHARMACEUTICALS LIMITED, RESIDING AT 584-L, MODEL TOWN, PANIPAT, HARYANA 132103.** ## **BY ADV. SRI.MILLU DANDAPANI** ## **RESPONDENTS/COMPLAINANT(S) & STATE:** **---------------------------------------------------------------** ## **1. THE DRUGS INSPECTOR (INTELLIGENCE BRANCH), OFFICE OF THE ASSISTANT DRUGS CONTROLLER, ERNAKULAM.** **2. STATE OF KERALA,** - **REP.BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** **BY PUBLIC PROSECUTOR SRI.GITHESH.R.** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 20-02-2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **PJ** **Crl.MC.No. 1183 of 2012** ## **---------------------------------** ## **APPENDIX** ## **PETITIONER(S) ANNEXURES** **-----------------------------------------** **ANNEXURE A TRUE COPY OF THE COMPLAINT IN CC NO.1290/2011 ON THE FILES OF THE JUDICIAL FIRST CLASS MAGISTRATE COURT-1, PERUMBAVOOR.** **ANNEXURE B TRUE COPY OF THE RESOLUTION PASSED IN THE METING OF BOARD OF DIRECTORS OF THE 1ST ACCUSED COMPANY HELD ON THE 25TH SEPTEMBER 2004 AT ITS REGISTERED OFFICE** **ANNEXURE C TRUE COPY OF THE AFFIDAVIT SWORN BY THE 6TH ACCUSED ON 6.12.2010** **RESPONDENTS' ANNEXURES** **--------------------------------------------** **NIL.** **/ TRUE COPY /** **P.S. TO JUDGE** **PJ** ## **P.D. RAJAN, J.** ------------------------------------------Crl.M.C. No.1183 of 2012 ---------------------------------------------Dated this the 20[th] day of February, 2014 ## **ORDER** This is a petition filed by four persons under S.482 of Code of Criminal Procedure requiring to quash Annexure A and further proceedings in C.C.No.1290/2011 of the Judicial First Class Magistrate Court-I, Perumbavoor, which was filed U/s.18(a)(1) of the Drugs and Cosmetics Act, 1940, which is punishable u/s.27(d) of the Act. Petitioners are Managing Director of 1[st] accused company, who are accused 2 to 5 in the above case. The allegation is that on 7.11.2008, Drugs Inspector(Intelligence Branch), Office of the Assistant Drugs Controller visited the sales premises of English Company, Perumbavoor, Ernakulam and took sample of Pantazole, a drug batch number PNCT001, manufacturing date 3/07, expiry date 2/10, manufactured by the 1[st] accused company Crl.M.C.No.1183/12 2 as per Section 23 of the Drugs and Cosmetics Act 1940. After complying with all statutory formalities, on 10.11.2008 the Drug Inspector forwarded the sample to the Government Analyst, Drugs testing laboratory, Thiruvananthapuram for analysis and after analysis, Government analyst declared that the drug was not standard quality drug as per the Act. On the basis of that, he filed Anneuxre-A before J.F.C.M.-I, Perumbavoor. In the circumstances, the petitioners, who were Directors of the Company, approached this Court with this petition for invoking the inherent jurisdiction. 3. The inherent jurisdiction u/s.482 Cr.P.c. can be invoked only for the three grounds mentioned therein, that is to make such orders as may be to give effect to any order under the Code or to prevent abuse of process of any Court or otherwise to secure ends of justice. The Apex Court in In the _**State of Haryana**_ V. _**Bhajanlal**_ , [1992 SCC 9 (Crl) 426] the Supreme Court pointed out that: Crl.M.C.No.1183/12 3 “where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused, the proceedings are liable to be quashed”. Therefore, it is clear that the inherent powers mentioned u/s.482 Cr.P.C. has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the test specifically laid down in the section itself. 4. The petitioners submit that they are Directors of the 1[st] accused company and they were not in charge of the affairs of the Company and they are not responsible for the conduct of its business at the time offence. Simply because a person is a Director or Chairman of the company, it does not necessarily mean that they are responsible for such violation. Therefore, Annexure-A was initiated arbitrarily without any lawful ground and is liable to be quashed. The learned counsel relied the Apex Courts decisions in _**State of Haryana**_ v. _**Brijlal Mittlal and**_ Crl.M.C.No.1183/12 4 _**others**_ [(1998) 5 SCC 343], _**National Small Industries**_ v. _**Corporation Limited Harmeet Singh Paintal and another**_ [(2010) 3 SCC 330], _**State of NCT of Delhi**_ v. _**Rajiv Khurana**_ [(2010) 11 SCC 469]. 5. The respondents contended that the 1[st] respondent enquired about the responsibility of the petitioners before initiating Annexure-A. The report received from the Registrar of Companies shows that the petitioners are responsible for the day-to-day business and in charge of the company. The 6[th] accused is merely official staff of the Company and the 7[th] accused is the distributor. 6. Section 34 of the Drugs and Cosmetics Act, 1940 reads as under: “34. Offences by companies.- (1) Where an offence under this Act has been committed by 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 the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be Crl.M.C.No.1183/12 5 proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act 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 subsection (1), where an offence under this Act 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.” A perusal of the above Section shows the responsibility of a Company and its Directors when an offence under the Act has been committed by a company. Section 34 (1) mandates that where an offence under this Act has been committed by 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 the business of the company. Every Directors and other Crl.M.C.No.1183/12 6 person connected with the company shall not be fall within the ambit of Section 34(1). Only those persons, who were in charge and responsible for the conduct of the business of the company at the commission of the offence will be liable for criminal action. If a Director of the Company was not in charge of and responsible for the conduct of the business of the company at the relevant time, it is not possible to prosecute him for a criminal offence. ## 7. The Apex Court in _**Brijlal Mittlal's**_ case (supra) held that: “8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads as under: 34. xxx xxx _(omitted)_ It is thus seen that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the time he was in charge of and was also responsible to the company for the conduct of i ts business. Simply because a person is a director of the company it does not necessarily Crl.M.C.No.1183/12 7 mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. From the complaint in question, we however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its business.” While discussing S.141 of Negotiable Instruments Act, this question has been eloquently answered by three Judge bench of the apex Court in _**S.M.S. Pharmaceuticals Ltd.,**_ ## v. _**Neeta Bhalla**_ [(2007) 4 SCC 70], in which it is held that: “19. In view of the above discussion, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in-charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirement of Section 141 cannot be said to be satisfied.” 8. In the above decision, the Apex Court held that when a legal fiction is raised, ingredients, therefore, must be satisfied. In another decision, _**State of NCT of Delhi's**_ Crl.M.C.No.1183/12 8 ## case (supra) in paragraphs 14 &17 held as follows: “14. The respondent placed reliance on S.M.S. Pharmaceuticals Ltd. , wherein this Court has held as under: “19. In view of the above discussing, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a Director of a company is not sufficient to make the person liable under Section 141 of the Act. 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 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases. (c) The answer to Question (c) has to be in the affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Crl.M.C.No.1183/12 9 Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.” xxx xxx xxx xxx 17. The ratio of all these cases is that the complainant is required to state in the complaint how a Director who is sought to be made an accused, was in charge of the business of the company or responsible for the conduct of the company's business. Every Director need not be and is not in charge of the business of the company. If that is the position with regard to a Director, it is needless to emphasis that in the case of non-Director officers, it is all the more necessary o state what were his duties and responsibilities in the conduct of business of the company and how and in what manner he is responsible or liable.” 9. It is settled by various decisions of the Apex Court that the liability of the person responsible and in charge of the company must be construed. A vague averment in a complaint that the Directors in charge were responsible to the company for the conduct of the business is not sufficient. Therefore, the responsible Drug Inspector has to conduct a detailed enquiry from the competent authority regarding that aspect. If such an Crl.M.C.No.1183/12 10 enquiry is not conducted, it is not fair to prosecute all the Directors of the Company on the basis of vague allegation. Therefore, while considering the penal provision, especially as a special statute, the Drug Inspector has to show more vigilance in prosecuting the person in charge of the company. From the aforesaid facts, it is clear that the 1[st] respondent filed Annexure-A complaint against the company, its Directors, General Manager and a wholesale dealer of drugs alleging the commission of offence u/s.27 (d) of the Drugs and Cosmetics Act. The Magistrate took cognizance of the offence upon the complaint and issued process against the persons concerned. Now, the petitioners have approached this Court with the above averments. Accepting the above legal principle, I am of the view that this is a fit case to invoke the inherent jurisdiction. 10. For invoking inherent jurisdiction U/s.482 Cr.P.C. the directions issued by the the Apex Court are Crl.M.C.No.1183/12 11 ## very relevant. Apex Court in _**Madhu Limaye v. State of**_ ## _**Maharashtra**_ [(1977) 4 SCC 551] held that: “The following principles in relation to the exercise of the inherent power of the High Court have been followed ordinarily and generally, almost invariably, barring a few exceptions: (1) That the power is not to be resorted to if there is a specific provision in the Code for the redress of the grievance of the aggrieved party. (2) That it should be exercised very sparingly to prevent abuse of process of any court or otherwise to secure the ends of justice. (3) That it should not be exercised as against the express bar of law engrafted n any other provision of the Code.” 11. Anneuxre-B is the resolution of the 1[st] accused Company entrusting Sri. Sunil Vashishth, the 6[th] accused appointed as the General Manager of the Company, who is the responsible person to represent the company in all aspect before the authorities, bodies, court of law etc. As per Annexure-C, the 6[th] accused accepted the entrustment as General Manager of the Company, which shows that he is the responsible person of the company. Therefore, Crl.M.C.No.1183/12 12 petitioners are not responsible for the company's day-today business and they are not in charge of the company. For fastening criminal liability, there is no presumption that every Director knows about the transaction of the Company and Section 34 does not make all the Directors liable for the offence. The criminal liability can be fastened only to those persons, who at the time of commission of offence were in charge of and responsible for the conduct of the business of the Company. When vicarious liability is attributed against a registered Company, the 1[st] respondent has to plead in his complaint that how the accused fastened with such liability for offence committed by the company. Therefore, invoking the inherent jurisdiction, I quash Anneuxre-A complaint and further proceedings in C.C.No.1290/2011 against the petitioners. The 1[st] respondent is at liberty to proceed with the responsible persons, i.e, 6[th] and 7[th] accused in the complaint, as per Crl.M.C.No.1183/12 13 law. This order will not affect the prosecution of the person in charge of and responsible for the company as per Annexures-B & C. **P.D. RAJAN, JUDGE.** acd Crl.M.C.No.1183/12 14