Kishori Lal Gupta alias K.L.Gupta v. State of Kerala and Drug Inspector

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN** **MONDAY, THE 24TH DAY OF FEBRUARY 2020 / 5TH PHALGUNA, 1941** ## **Crl.MC.No.6884 OF 2016** **AGAINST THE PROCEEDINGS IN C.C. NO.1888/2014 ON THE FILES OF THE JUDICIAL FIRST CLASS MAGISTRATE COURT, THALASSERY** ## **PETITIONER/2ND ACCUSED** **SRI KISHORI LAL GUPTA @ K.L.GUPTA S/O.LATE SRI.GULABCHAND, FLAT NO.A1-601, MAHINDRA CHLORIS, SECTOR 19, FARIDABAD - 121 002, HARYANA** **BY ADVS. SRI.B.S.SYAMANTHAK SRI.P.V.SURENDRANATH (SR.)** ## **RESPONDENT/STATE AND ACCUSED:** **1 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM, KOCHI 682 031. 2 DRUG INSPECTOR OFFICE OF THE ASSISTANT DRUG CONTROLLER, MUFEEDA COMPLEX, KAKKAD ROAD, KANNUR -2. R1-2 BY SMT.PUSHPALATHA M.K.,PP** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 24.02.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** Crl.M.C. No.6884 of 2016 2 ## **O R D E R** The petitioner is the second accused in C.C. No.1888 of 2014 on the files of the Judicial First Class Magistrate Court, Thalassery. 2. The above case is registered on a complaint filed by the 2[nd] respondent Drug Inspector against the petitioner and another. The prosecution case is that, the first accused in the case is M/s. Skymap Pharmaceuticals, a partnership firm engaged in the manufacture and sale of drugs. The petitioner is one among the partners of the firm. On 23.07.2012, the Drug Inspector took the sample of the drug “ELPRIL-5, Batch No.SK2303, Manufacturing date: 04/12, Expiry date: 03/14, Manufactured by: M/s Skymap Pharmaceuticals, B-3, Dev Bhoomi Industrial Estate, PuhanaIqbalpur Road, Roorkee, 247667 from M/s. Debonair Pharma, Thalassery. The sample was forwarded to the Government Analyst, Drugs Testing Laboratory, Thiruvananthapuram. The sample was declared as “not of standard Quality” for the reason that, sample fails to comply with the test assay when tested as given in IP. After the formalities are complied, the complaint was filed before the court concerned alleging ofence punishable under Section 18(a)(i) r/w Section 27 of the Drugs and Cosmetics Act, 1940 [Hereinafter mentioned as Act 1940]. The learned Magistrate took Crl.M.C. No.6884 of 2016 3 cognizance of the offence and registered the case as C.C. No.1888 of 2014. The petitioner wants to quash the proceedings on various contentions. 3. Heard the learned counsel for the petitioner as also the learned Public Prosecutor. 4. The main contention raised by the learned counsel for the petitioner is that, he is only one among the partners of the firm and he was not in charge of and was not responsible for the conduct of the business of the firm at the time the alleged offence was committed. According to the petitioner, there was no averment in Annexure A-1 complaint that, the petitioner was in charge and responsible for the conduct of the business of the firm at the time when the alleged offence was committed. He relied on the decision of the Apex Court in **State of NCT of Delhi Through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khurana** (2010) 11 SCC 469[1] , **S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another** (2005) 8 SCC 89[2] , and **Rahul Sehgal v. State of Kerala and Another** [2014 (2) KHC 11][3] to support his contention. 5. The learned Public Prosecutor opposed the contention of the petitioner and submitted that, there are sufficient averments > 3[2014(2)KHC 11 1(2010)11 SCC 469 2(2005)8 SCC 89 Crl.M.C. No.6884 of 2016 4 in the complaint and it is a matter of evidence. Therefore, the prosecution may not be terminated at this stage. ## 6. Section 34 of the Drugs and Cosmetics Act, 1940 reads thus: _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 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 sub-section (1), where an offence under this Act has been committed by a company and it is provided 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 purpose of this section-_ _(a) “company” means a body corporate, and includes a firm or other association of individuals; and_ _(b) “director” in relation to a firm means a partner in the firm._ Crl.M.C. No.6884 of 2016 5 A reading of the above Section, it is clear that if an office under the Act 1940 has been committed by a company, every person who at the time of 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 proceeded against and punished accordingly. Explanation (A) to the Section says that the “company” means a body corporate, and includes a firm or other association of individuals; and Explanation (B) says that “director” in relation to a firm means a partner in the firm. 7. The Apex Court in **S.M.S. Pharmaceuticals Ltd.** (Supra) considered the similar point when there was a conflicting decision between two Benches of the Supreme Court. The matter was heard by a three Bench and the questions referred are extracted in the first paragraph of the judgment. That was a case under the provisions of the Negotiable Instruments Act. Section 141 of the Negotiable Instruments Act is similar to Section 34 of the Drugs and Cosmetics Act, 1940. The point referred to the three Bench of the Apex Court are extracted hereunder: “ _(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the_ Crl.M.C. No.6884 of 2016 6 _complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company._ _(b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary._ _(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors of joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against”._ ## The Supreme Court answered these points in the following manner: _“(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._ Crl.M.C. No.6884 of 2016 7 _(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 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.”_ ## The same point was considered in **State of NCT of Delhi** (Supra). The relevant portion of the same is extracted hereunder: _“20. The legal position which emerges from a series of judgments is clear and consistent that it is imperative to specifically aver in the complaint that the accused was in charge of and was responsible for the conduct of the business of the company. Unless clear averments are specifically incorporated in the complaint, the respondent cannot be compelled to face the rigmarole of a criminal trial.”_ This Court in **Rahul Sehgal** 's case (Supra) also considered a similar contention in a matter involves the offence under the Drugs and Cosmetics Act, 1940 itself. The relevant portion of the said decision is extracted hereunder: _“10. There is no averment in Annexure-1 that the petitioner was in charge of day-to-day business of the company_ Crl.M.C. No.6884 of 2016 8 _and was the person responsible for the conduct of the business of the Company. The petitioner is the Chairman of the Company and simply because a person become Chairman or a Director of the Company does not mean that he is fully responsible for the day-to-day affiars of the company. Vicarious liability can be inferred against a company or its Directors only after satisfying the condition under Section 34 of the Drugs and Cosmetic Act. Person made liable should be in charge of the company at the relevant time, which cannot be presumed from the complaint. Otherwise it may result in implication of innocent Chairman and Directors who have no connection with the offence and thereby cause miscarriage of justice._ _12. Therefore, this is a fit case to invoke the inherent jurisdiction under the Code to quash the criminal proceedings against the petitioner. It is clarified that, while quashing the proceedings, there is no bar for the 2[nd] respondent to prosecute the person in charge of and was responsible to the company for the conduct of the business of the company, according to law.”_ 8. In this case a reading of Annexure A1 complaint, it can be seen that there was no averments in tune with Section 34 of the Drugs and Cosmetics Act, 1940. The only averment in Annexure A1 complaint is extracted hereunder: _“The first accused (A1) is a partnership firm engaged in the manufacture and sale of drugs represented by Sri. K.L.Guptha (Partner), S/o. Late Sri.Gulabehand, M/s. Skymap Pharmaceuticals, B-3, Dev Bhoomi Industrial Estate, PuhanaIqbalpur Road Roorkee, 247667, Second accused (A2) is the partner of the accused partnership firm (A1).”_ The above averment is not enough to sustain a case against the Crl.M.C. No.6884 of 2016 9 petitioner under the provisions of Drugs and Cosmetics Act, 1940. It is necessary to specifically aver in the complaint that, at the time of offence was committed, the person accused of was in charge of, and responsible for the conduct of the business of the company. This averment is an essential requirement of Section 34 of the Drugs and Cosmetics Act, 1940. Unless this averment is urged in the complaint, no prosecution can lie against the petitioner. Therefore, the petitioner is succeeded in this case. The Crl.M.C. is allowed. All further proceedings in C.C. No.1888 of 2014 on the files of the Judicial First Class Magistrate Court, Thalassery in so far as it relates to the petitioner/2[nd] accused are quashed. **Sd/-** **P.V.KUNHIKRISHNAN** pkk **JUDGE** Crl.M.C. No.6884 of 2016 10 ## **APPENDIX** ## **PETITIONER'S ANNEXURES:** **ANNEXURE A1:** **A TRUE COPY OF THE COMPLAINT IN CC NO.1888/2014 DATED 05/06/2014 FILED BEFORE THE JUDICIAL FIRST CLASS MAGISTRATE COURT, THALASSERY ALONG WITH ALL THE DOCUMENTS PRODUCED BY THE COMPLAINANT**