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1997 DIGILAW 139 (RAJ)

L. P. Gupta v. State of Rajasthan

1997-01-24

N.L.TIBREWAL

body1997
Honble TIBREWAL, J.–By this Petition, under Section 482 Cr.P.C. the petitioners are challenging the order dated 6.4.95 whereby cognizance for the offence under Section 7/16 of the Prevention of Food Adulteration Act, 1954 (hereinafter to be referred to as the Act) has been taken by the Chief Judicial Magistrate, Jaipur City, Jaipur. The Food Inspector filed a complaint in the Court of Chief Judicial Magi-strate, Jaipur City, Jaipur against 9 persons, including the six petitioners who have approached this Court for quashing the impugned order and pending criminal proceedings against them. (2). M/s. U.P. Hotels Ltd. is a Public Limited Company incorporated under the Companies Act. This Company runs hotels at several places in India including HotelClarkes Amer at Jaipur. Shri L.P. Gupta (Petitioner No.1) is Chairman-cum-Managing Director of the Company, Shri A.K. Gupta (petitioner No.5) is Vice President and Senior General Manager of the Company i.e. M/s. U.P. Hotels Ltd. Shri Upendra Kumar Gupta (petitioner No.3) and Shri Virendra Kumar Gupta (petitioner No.4) are Directors of the Company, while Shri K.C. Ajmera is Chief Manager (Accounts)in Hotel Clarkes Amer, Jaipur. (3). The prosecution case, as pleaded in the complaint is that on February 17, 1994, the Food Inspector - Prakash Chand inspected hotel Clarkes Amer and found co-accused Ghasi Lal in the Hotel who was the vendor and Store Keeper at that time. The store of the Hotel was inspected in presence of Shri Ghasi Lal and theFood Inspector purchased `Dal Moong-Mogar weighing 750 gms. from him. A sample of the Food article was sent for examination to the State Central Public Health Laboratory, Rajasthan, Jaipur. On examination, the sample was found adulterated for presence of added colour. Thereafter, a complaint was filed against 9 persons as stated earlier. The other three co-accused are (i) Ghasi Lal from whomthe sample was purchased and who was Store Keeper from where sample was taken; (ii) Shri Prem Singh Son of Prahalad Singh, Manager of Hotel Clarkes Amer and (iii) Ram Niranjan son of Shri Mohan Lal Mahajan manufacturer of the food article from whom it was purchased by the hotel management. It may be stated here that the impugned order taking cognizance is not being challenged by the co-accused Ghasi Lal, Prem Singh and Ram Niranjan. It may be stated here that the impugned order taking cognizance is not being challenged by the co-accused Ghasi Lal, Prem Singh and Ram Niranjan. Learned counsel, appearing for the petitioners, contends that in the complaint and `Fard-Report prepared by the Food Inspector at the time of taking sample, the co-accused Prem Singh has been shown to be the nominee of Hotel Clarkes Amer and he being Incharge of and responsible for conduct of business of the hotel, pro-secution of the petitioners is not sustainable in law. Another contention seriously canvassed before me is that the petitioners, except petitioner K.C. Ajmera, are Directors and Chairman-cum- Managing Director or Vice President of the Company M/s. U.P. Hotels Ltd. and there is no averment in the complaint that they or any one of them were/was incharge of and responsible for conduct of business of the Hotel.Elaborating this contention, learned counsel contended that as per the complaint, co-accused Prem Singh was Manager of the Hotel at the relevant time and article of food was purchased from co-accused Ghasi Lal who was vendor and incharge of the Store from where sample of food was taken/purchased by the Food Inspector. Learned counsel, therefore, contended that on admitted facts, as per the com-plaint and documents filed alongwith the complaint, prosecution of the petitioners would amount an abuse of process of the Court. (4). Shri R.S. Agrawal, learned Public Prosecutor, on the other hand vehemently contended that though in `Fard-report and even in complaint, co-accused Prem Singh has been shown as a nominee to be incharge of and responsible for conduct of the business of the Hotel, but this fact is wrongly mentioned as per information supplied to him by the authorities. Learned Public Prosecutor furthercontended that at this initial stage, it is difficult to say that the petitioners or any one of them were/was not Incharge of and responsible for the conduct of the business and this question can be decided only after recording evidence in trial where the petitioners will also have an opportunity to prove that the offence was committed without their knowledge and they exercised due diligence to preventthe commission of the offence. Learned Public Prosecutor, placing reliance on the decision in R. Banerjee and others vs. H.D. Dubey and others (1), contended that the case be remanded to the Magistrate to consider first the question of nomination and if it is found that there is proper nomination in favour of co-accused Prem Singh, proceedings may be dropped against the petitioners. Otherwise, the trialshould proceed against all the accused named in the complaint. (5). I have given my careful consideration to the above submissions. Section 17 of the Act deals with the offences committed by Companies. Relevant portions of Sec. 17 read as under:– ``17. Offence by companies–(1) Where an offence under this Act has been committed by a Company– (a)(i) the person, if any, who has been nominated under sub-section (2) to be in charge of, and responsible to, the company for the conduct of the business of the Company (hereinafter in this section to be referred as the person responsible) or (ii) where no person has been so nominated 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; and (b) 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 and that he exercised all due diligence to prevent the commission of such offence. (2) Any Company may, by order in writing, authorise any of its Directors or Managers (such Manager being employed mainly in a managerial or supervisory capacity) to exercise all such powers and take all such steps as may be necessary or expedient to prevent the commission by the company of any offence under this Act and may give notice to the Local (Health) Authority, in such form and in such manner as may be prescribed, that it has nominated such Director or Manager as the person responsible, alongwith the written consent of such Director for being so nominated. Explanation– Where a Company has different establishments or branches or different units in any establishment or branch, different persons may be nominated under this sub-section in relation of different establishments or branches or units and the person nominated in relation to any establishment, branch or unit shall be deemed to be the person responsible in respect of such establishment branch or unit. (6). A bare reading of the above section shall make it clear that the following categories of persons can be liable to be prosecuted and convicted whenever an offence under the Act is committed by a Company– (i) the Company itself; and (ii) every person who at the time when the offence was committed was incharge of or was responsible to the company for the conduct of the business of the company; (iii) any Director, Manager, Secretary or other officer of the company, if the offence is committed with the consent or connivance or is attributable to any negligence on his part. (7). The above provisions also make it clear that when there is nomination in favour of a person under sub-section (2) to be incharge of and responsible to the company for the conduct of the business of the company, all other persons are notliable for the offence committed by the company. In the instant case, a perusal of the complaint and `Fard-report prepared at the time of taking sample, reveal that co-accused Prem Singh was a nominee of the establishment i.e. M/s. Hotel Clarkes Amer. There is no material on record to show that facts narrated in the complaint or `Fard- report are incorrect. At no point of time later-on these facts have beenwithdrawn by the prosecution. Simply because the authorities now orally intimate the Public Prosecutor that those facts have been incorrectly mentioned by the Food Inspector in the complaint as well as in the `Fard-report has no relevance and no cognizance can be taken of such information which runs counter to the admission in writing. (8). The burden to prove the charge of an offence always lies upon the prose- cution unless under some provision of law it is made for the accused to satisfy the Court that the offence was committed without his knowledge or with his consent or connivance, or it was no attributable to any neglect on his part. (8). The burden to prove the charge of an offence always lies upon the prose- cution unless under some provision of law it is made for the accused to satisfy the Court that the offence was committed without his knowledge or with his consent or connivance, or it was no attributable to any neglect on his part. In companies, there could be directors who are not incharge of and respon-sible to the company for the conduct of the business of the company. There can be directors who merely lay down the policy and are not concerned with the day to day working of the company. Consequently, the mere fact that the accused persons happen to be directors of the company shall not make them ingedients are established which make them criminally liable. To put it differently, no director of thecompany can be prosecuted and convicted for the offence under Sec. 13 of the Act unless it is proved that the sub-standard or misbranded food article was manufactured or sold with his consent or connivance or was attributable to any neglect on his part or it is proved that he was a person incharge of and responsible to the company for the conduct of the business of the company. (9). In Girdhari Lal Gupta vs. D.H. Mehta and another (2), the expression ``a person incharge and responsible for the affairs of the company came for consideration of the Apex Court in a criminal case wherein the accused was convicted under the Foreign Exchange Regulation Act, 1947, being a partner of the firm. Section 23-C(1) and Sec. 23-C(2) of the aforesaid Act are analogous to Sec. 17 ofthe present Act dealing with the offence committed by a company, which include firm under the connotation of company and a `partner under the connotation of a `Director. Dealing with Sec. 23-C(1) of Foreign Exchange Regulation Act, their Lordships observed that it was highly penal section as it makes a person who was incharge and responsible for the conduct of business of the company vicariouslyliable for an offence committed by the company, therefore, in accordance with the well settled principle this section should be construed strictly. Their Lordships fur- ther observed thus– ``What then does the expression `a person incharge and responsible for the conduct of the affairs of a company means? Their Lordships fur- ther observed thus– ``What then does the expression `a person incharge and responsible for the conduct of the affairs of a company means? It will be noticed that the word `company includes a firm or other association, and the same test must apply to a Director incharge and a partner of firm in- charge of a business. It seems to us that in the context a person `in-charge must mean that the person should be in over all control of the day today business of the company of firm. This inference follows from the wording of Sec.23-C(2). It mentions Director, who may be a party to the policy being followed by a company and yet not be in-charge of the business of the company. Further, it mentions Manager, who usually is in charge of the business but not in over-all charge. Similarly, the other officers may be incharge of only some part of business. (10). The same principle was reiterated in State of Karnataka vs. Pratap Chand and others (3) wherein Sec. 34 of the Drugs and Cosmetics Act, 1940 came for interpretation, a provision similar to the one we are concerned and it was held : ``A person `incharge of and `responsible to the company for the conduct of the business of the Company contemplated in Sec. 34(1) must be a person in overall control of the day to day business of the Company or firm. If a partner of a firm is not in such overall control he cannot be liable to be convicted merely because he had the right to participate in the business of the firm under the terms of the partnership deed. (11). In Municipal Corporation of Delhis case (4), a similar question was considered by the Apex Court of the country and it was held as under :- ``So far as the Manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the Directors are concerned there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the com- lainant that there is an act committed by the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the Directors (accused No. 4 to 7) has been made out ex-facie on the allegations made in the complaint and the proceedings against them were rightly quashed. (12). In Govind Lal Agrawal vs. State of Rajasthan & Another the cognizance of the offence was quashed on the ground that there was no allegation that the accused was incharge of and responsible to the firm. (13). Reference was also made by Shri Garg to a decision of Calcutta High Court in G. Atherton and Company Pvt. Ltd. vs. Corporation of Calcutta (5). It was observed in this case that under Sec.17 of the Act a company has been made primarily liable, but to make other persons vicariously liable it has to be shown that such persons were incharge of or were responsible to the company for the conductof its day to day business. In the absence of any mention in the complaint, as to how the accused persons were concerned in carrying on day to day business of the company and process could not have been issued against them. (14). In P.R. Neelkantham vs. State of Rajasthan (6) a learned Single Judge of this Court (M.C. Jain J. as he then was) quashed criminal proceedings against theDirectors and Salesman as they were not incharge of and responsible to the company for the conduct of its business. (15). In Shyam Sunder and others vs. State of Haryana (7) the Apex Court of the country examined Sec. 10 of the Essential Commodities Act `providing offences by companies. Which is similar to the provision of Sec. 33 of the Act. While acqui- tting the partners of the firm against whom there was no evidence that they were incharge of or were responsible to the firm for the conduct of the business of the firm, their Lordships observed as under: ``But we are concerned with criminal liability under penal provisions and not a civil liability. While acqui- tting the partners of the firm against whom there was no evidence that they were incharge of or were responsible to the firm for the conduct of the business of the firm, their Lordships observed as under: ``But we are concerned with criminal liability under penal provisions and not a civil liability. The penal provision must be strictly construed in the first place. secondly, there is no vicarious liability in criminal law unless the statutes takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not. It is, therefore, necessary to add an emphatic note of caution in this regard. More often, it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day in the firm. There may be partners, better known as sleeping partners, who are not required to take any part in the business of the firm. There may be ladies and minors who were admitted for the benefits of partnership. They may not know anything about the business of the firm. It would be a travesty of justice of prosecute all the partners and ask them to prove under the proviso to sub-section (1) that the offence was committed without their knowledge. It is significant to note that the obligation of the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when prosecution establishes that the requisite condition mentioned in sub-section (1) is established. The requisite condition is that the partner was responsible for carrying on the business and was, during the relevant time, in charge of the business. In the absence of any such proof, no partner could be convicted. We, therefore, rejected the contention urged by counsel for the State. (16). The requisite condition is that the partner was responsible for carrying on the business and was, during the relevant time, in charge of the business. In the absence of any such proof, no partner could be convicted. We, therefore, rejected the contention urged by counsel for the State. (16). In Krishna Kumar Bagla vs. B.L. Sharma, Superintendent (Prosecution) Central Excise and Custom, Jaipur (8) a learned Judge of this Court (N.C. Kochhar, J.) quashed criminal proceedings u/S. 482 Cr.P.C. against the Directors of the Company facing trial under the Central Excise and Salt Act, 1944, as there was no allegation in the complaint that they were incharge of the company or were respon-sible to company for the conduct of its business or that the offence was committed with their consent or connivance or because of any neglect on their part. (17). Applying the principles enunciated in the above referred decision, I find that there is no allegation either in the complaint or in any of the documents filed alongwith the complaint that any of the petitioners were incharge of and responsi-ble to the company for the conduct of the business of the establishment by the Company when the sample was taken. Merely because, the petitioners happened to be the Directors or Chairman-cum-Managing Director of the company (not of the establishment at Jaipur) without any evidence or averments in the complaint that they were incharge of and responsible to the company for the conduct of the busi-ness at Jaipur in Hotel Clarkes Amer. Their prosecution is not sustainable in the eye of law. The order taking cognizance against them is without my evidence and without application of mind. The other three co-accused have not approached this Court, as such, the prosecution shall proceed against them in accordance with law. (18). The net result of the above discussion is that the petition deserves to beallowed and it is hereby allowed. The impugned order taking cognizance and pending criminal proceedins against the petitioners are hereby quashed and set aside.