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2006 DIGILAW 746 (GAU)

K. S. Oils Ltd. v. State of Assam

2006-08-10

I.A.ANSARI

body2006
JUDGMENT I.A. Ansari, J. 1. In a prosecution launched under the Prevention of Food Adulteration Act, 1954 (in short, the "PFA Act"), against a company or a firm, a question, which though not very often, arises for determination is as to whether all the directors of a company or all the partners of a firm can be prosecuted and, if so, under what circumstances, such a prosecution is permissible. This very question has, in fact, arisen for determination in the present revision too. The question, so posed, brings us to a more fundamental question and the question is this: when can a person be nominated to represent a company or a firm within the scheme of the PFA Act and what is the effect of such nomination on the prosecution launched against the company or the firm. 2. For answering the questions posed above, it is necessary to take note of the material facts, which have given rise to the present revision. A complaint was made, in the Court of the CJM, Kamrup, by a Food Inspector, working in the Office of the joint Director of Health Services, Kamrup, Guwahati, the complainant's case being, in brief, thus: On 14.09.1994, the complainant, accompanied by his office peon, visited the sale depot of M/s. K.S. Oils Ltd, at Fancy Bazar, Guwahati, (in short,' the accused company') and collected, in accordance with the procedure prescribed in that behalf, a sample of refined Mustard Oil (K.S. Brand) from a sealed container stored there for sale. In course of time, the Public Analyst reported that the sample did not conform to the standard. Thereafter, the complainant obtained requisite sanction for prosecution of not only the accused Company, but also of the vendor, namely, Kapil Jha and of as many as five directors of the accused Company, all these directors being in charge of, and responsible to the said company for the conduct of the business of the accused Company. The complainant accordingly sought for prosecution of the accused aforementioned for offence allegedly committed by them under Section 16 read with Section 7 of the PFA Act. 3. The complainant accordingly sought for prosecution of the accused aforementioned for offence allegedly committed by them under Section 16 read with Section 7 of the PFA Act. 3. On receipt of the summons issued in the case, the accused Company, namely, M/s K.S. Oil Limited, appeared in the Court and submitted to the effect, inter alia, that the accused Company had already nominated, on 02.01.1992, in terms of Section 17(2) of the PFA Act, one Anant Kumar, a Manager of the said Company, functioning in supervisory capacity, as a person responsible to the accused Company for the conduct of the business of the accused Company and that at the relevant time, the said Anant Kumar was in charge of, and responsible to, the said Company for the conduct of the business of the said Company, in general, and for manufacturing of mustard oil, in particular, and as the accused Nos. 2 to 7 were not in charge of, and responsible to, the accused Company for the conduct of the business of the accused Company and as there was no consent or connivance, on their part, in the offence allegedly committed by the accused Company nor is the alleged offence attributable to their negligence, their prosecution was not legally permissible By the petition, so made, the accused Company sought for an order dropping the proceeding or discharging the accused Nos. 2 to 7 from the case. In support of their said petition, the accused Company also filed a copy of the nomination in Form No. VIII. prescribed under the Prevention of Food Adulteration Rules, 1955 (in short, "the PFA Rules"). 4. By order, dated 09.07.2001, passed, in CR Case No. 1778 71994, the learned Additional Chief Judicial Magistrate, Kamrup, rejected the petition aforementioned of the accused Company and directed appearance of the accused Nos. 2 to 7 on the ground that Sub-section (4) of Section 17 of the PFA Act was attracted to the facts of the case and that the provisions of Section 319 Cr.P.C. permitted the Court to proceed against the accused aforementioned. It is the order, dated 09.07.2001, aforementioned, which stands impugned, in the present revision by the accused Nos. 2 to 7 aforementioned, who are all directors of the accused Company. 5. I have heard Mr. D.K. Bhattacharyya, learned Senior Counsel, appearing on behalf of the accused-petitioners, and Mr. K. Munir, learned Additional Public Prosecutor, Assam. 6. It is the order, dated 09.07.2001, aforementioned, which stands impugned, in the present revision by the accused Nos. 2 to 7 aforementioned, who are all directors of the accused Company. 5. I have heard Mr. D.K. Bhattacharyya, learned Senior Counsel, appearing on behalf of the accused-petitioners, and Mr. K. Munir, learned Additional Public Prosecutor, Assam. 6. For the purpose of proper appreciation of the controversy, raised in the present revision petition, necessary it is to take note of the provisions of Section 17 of the PFA Act, which run as follows: 17. Offences 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 (hereafter in this section referred to 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 subsection 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, along with the written consent of such director or manager 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 subsection in relation to 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. (3) The person nominated under Sub-section (2) shall, until- (i) further notice cancelling such nomination is received from the company by the Local (Health) Authority; or (ii) he ceases to be a director or, as the case may be, manager of the company; or (iii) he makes a request in writing to the Local (Health) Authority, under intimation to the company, to cancel the nomination [which request shall be complied with by the Local (Health) Authority], whichever is the earliest, continue to be the person responsible. Provided that where such person ceases to be a director or, as the case may be, manager of the company-- he shall intimate the fact of such cesser to the Local (Health) Authority: Provided further that where such person makes a request under clause (iii), the Local (Health) Authority shall not cancel such nomination with effect from a date earlier than the date on which the request is made. (4) Notwithstanding anything contained in the foregoing sub-sections, 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 [not being a person nominated under sub-section (2)] 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 any body corporate and includes a firm or other association of individuals; (b) "Director", in relation to a firm, means a partner in the [Inn; and (c) "Manager', in relation to a company engaged in hotel industry, includes the person in charge of the catering department of any hotel managed or run by it.] 7. From a careful reading, as a whole, of Section 17, what transpires is that when an offence under the PFA Act has been committed by a company or a firm, not only the company or the firm, as the case may be, but every person, who at the time, when the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, shall be liable for prosecution. However, prosecution of every such person, who was in charge of, and was responsible to, the company for the conduct of the business of the company, is not permissible if the company has, in terms of Section 17(2), authorized, by written order, in terms of Section 17(2), a person to exercise all such powers and take all such steps as may be necessary or expedient to prevent commission by the company of any offence under the PFA Act, the person, so nominated, being referred to in the PFA Act as the person responsible. In order to be valid, such authorization, which is commonly called nomination, must satisfy all such conditions, which are necessary for the purpose of making such authorization or nomination valid under Section 17(2). One of the essential conditions for a nomination to be valid, as Section 17(2) reflects, is that such nomination cannot be in respect of any and every person; rather, such authorization or nomination shall remain confined to the directors of the company or to such managers, who are employed by the company in managerial or supervisory capacity. Yet another condition, for a valid nomination under Section 17(2), is that a notice must have been given to the Local (Health) Authority in such form and in such manner, as may be prescribed, informing the latter that the company has nominated the person concerned as the person responsible under Section 17(2) and that such a notice shall be accompanied by a written consent of the director or the manager concerned to his being nominated, in terms of Section 17(2), as the person responsible. It is the Form VIII, which is the prescribed form under the PFA Rules. This form indicates, inter alia, that apart from the notice, as indicated hereinbefore, the notice must be accompanied by acceptance of nomination by the nominated director/manager and that the Local (Health) Authority must have acknowledged the receipt of such nomination. 8. It is the Form VIII, which is the prescribed form under the PFA Rules. This form indicates, inter alia, that apart from the notice, as indicated hereinbefore, the notice must be accompanied by acceptance of nomination by the nominated director/manager and that the Local (Health) Authority must have acknowledged the receipt of such nomination. 8. A plain reading of Section 17 makes it abundantly clear that when an offence under the PFA Act is alleged to have been committed by a company, which has nominated any person to be in charge of, and responsible to the company for the conduct of the business of the company, it is the nominated person, who shall be proceeded against and punished for commission of offences. It is only when no one has been nominated, as required, every person, who, at the time of commission of the offence, was in charge of, and responsible to, the company for the conduct of the business of the company, shall be proceeded against. Even in a case, where a person, who has been nominated as the person responsible for the purpose of Section 17(2), can prove his innocence by showing that the offence is committed without his knowledge and notwithstanding the exercise of due diligence, on his part, to prevent commission of such offence by the company. Thus, the scheme of Section 17(1), as the Supreme Court held, in B. Benarjee v. H.D. Dubey and Ors. 1992 CriLJ 1523, is that in a case, where a person has been nominated under Section 17(2), such a person, who is termed as person responsible, can alone be proceeded against and punished for the offence and it is only when no such person has been nominated that every person, who was, at the time, when the offence was committed, in charge of, and was responsible to, the company for the conduct of the business of the company, can be proceeded against and punished. This embargo, on the prosecution of the directors or persons, who at the relevant time, was in charge of, and responsible to, the company for the conduct of the business of the company, is, however, lifted in the cases, covered by Section 17(4), which lays down that where an offence under the PFA 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, not being a person nominated under Sub-section (2), 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. (See, in this regard, B. Benarjee (supra). 9. In short, thus, where a company has committed an offence under the PFA Act, the person nominated under Section 17(2) to be in charge of, and responsible to, the company for the conduct of the business of the company can only be proceeded against unless it is shown that the offence was committed with the consent or connivance of any other director, manager, secretary or officer of the company or due to negligence of such a director, manager, secretary or officer of the company. 10. Unless, therefore, material is placed before the Court, by way of accusations made in the complaint or otherwise, that besides the nominated person, any other director, manager, secretary or officer of the company had consented to, or connived at, the commission of the offence or unless the commission of such an offence is shown to be attributable to the neglect on the part of any director, manager, secretary or other officers of the company, prosecution of such a director, manager, secretary or officers of the company, other than the persons nominated under Section17(2), is not permissible. What is also of immense importance to note is that the Explanation to Sub-Section (2) of Section 17 makes it clear that where a company has different establishments or branches or different units in any establishment or branch, different persons may be nominated in relation to different establishments branches or units and the person, so nominated, in relation to any establishments branch or unit shall be deemed to be a person responsible in respect of such establishment, branch or unit. There is, thus, nothing in the Explanation to Sub-Section (2) of Section17 that every establishment or branch or unit of a company must have a person specifically nominated for such establishment, branch or unit. I may also hasten to point out that under the Explanation appended to Section 17(4), a company includes a firm and the partners of a firm stand on the same footing as do the directors of a company. 11. Bearing in mind what have been indicated above, when I revert to the factual matrix of the present case, I notice that there is no dispute that the accused Company has, in terms of Section17(2), nominated one Ananth Kumar as the person responsible within the meaning of Section 17(2)and has given notice, in Form No. VIII, to the Local (Health) Authority at Morena (Madhya Pradesh), and this notice has been duly acknowledged by the Local (Health) Authority concerned. Hence, so long as this nomination remains valid and/or remains in force, no other director of the accused Company can be prosecuted under the PFA Act unless the case against such a director falls within the ambit of Section 17(4) and the prosecution can show, either by making allegations in the complaint or otherwise, that besides the said Anant Kumar, any of the directors of the accused Company had consented to, or connived at, the commission of the offence by the accused Company that the commission of the offence is attributable to the neglect on the part of the director, who is sought to be prosecuted or sought to be impleaded as an accused under the PFA Act. 12. While considering the above aspect of the case, it is also worth noticing that in the complaint, in question, the complainant has merely stated that the accused Nos. 12. While considering the above aspect of the case, it is also worth noticing that in the complaint, in question, the complainant has merely stated that the accused Nos. 2 to 7 (i.e., the petitioners herein), are partners and that they are in charge of, and responsible to the accused Company for the conduct of the business of the accused Company. The mere fact that besides Anant Kumar, who stands already nominated as the 'the person responsible' within the meaning of Section 17(2), the petitioners too are in charge of, and responsible to, the accused Company for the conduct of the business of the accused Company, prosecution of the petitioners would be illegal unless it is further alleged that the present petitioners had consented to, or connived at, the commission of offence by the accused Company and/or that the commission of the offence by the accused Company is attributable to the negligence on the part of the petitioners or any of them. 13. In the present case, except the allegation that the accused Nos. 2 to 7 are in charge of, and responsible to, the accused Company for the conduct of the business of the accused Company, there is nothing on the record to show, even remotely, that the accused-petitioner Nos. 2 to 7 and/or any of them has consented to, or connived at, the alleged commission of the offence and/or that the alleged offence is attributable to the negligence on the part of the accused-petitioner Nos. 2 to 7 or any of them. In such circumstances, prosecution of accused Nos. 2 to 7 would be nothing, but abuse of the process of law. In fact, when such a prosecution is barred by law, the High Court is duly bound to interfere with such a prosecution in exercise of its revisional jurisdiction and, if necessary, under Section 482 Cr.P.C. Reference made, in this regard, by Mr. D.K. Bhattacharjee, learned Senior Counsel, to Nagawwa v. Veeranna Shivalingappa 1976 CriLJ 1533, and State of Haryana v. Bhajan Lal 1992 CriLJ 527 is not misplaced. 14. What emerges from the above discussion is that unless accusations are made or materials are placed before the learned Court below to show that the case of the petitioners or of any of them falls within the ambit of Section 17(4), their prosecution cannot be allowed to proceed. 14. What emerges from the above discussion is that unless accusations are made or materials are placed before the learned Court below to show that the case of the petitioners or of any of them falls within the ambit of Section 17(4), their prosecution cannot be allowed to proceed. This will, however, not debar either prosecution to seek, or the Court to take resort to, the provisions of Section 319Cr. P.C. for issuing summons to any of the petitioners or all of them if and when a case against them is made out within the parameters of the law as embodied in Section 17(4). 15. Considering, therefore, the matter in its entirety and in the interest of justice the impugned order, dated 09.07.2001, is hereby set aside and it is hereby directed that as far as the prosecution against the accused No. 8, namely, M/s/K.S. Oils Ltd. and the accused No. 1, namely, Sri Kapil Jha, is concerned, the same shall proceed in accordance with law. There shall, however, be no bar for the learned trial Court to issue summons to the petitioners herein if and when materials are, in terms of the provisions of Section 17(4) of the PFA Act as indicated hereinabove, made available before the learned Court below. With the above observations and directions, this revision shall stand disposed of. Let the LCR be sent back.