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2010 DIGILAW 565 (AP)

Sushil Mehta v. State of Andhra Pradesh

2010-07-05

SAMUDRALA GOVINDARAJULU

body2010
ORDER :- The petitioners in this batch of four petitions are A6 to A9 in CC No.98 of 2009 on the file of Judicial Magistrate of the First Class, Armor relating to offence punishable under Section 32(1) of the Drugs and Cosmetics Act, 1940 (in short, the Act) for violation of Sections 18(c), 18A and Section 22(1)(cca), of the Act. A6 who is the petitioner in Criminal Petition No.3961 of 2010 is Managing Director and the petitioners in other three petitions are Directors of M/s. RFCL Limited. The said company is shown as A5 in the charge-sheet. 2. It is alleged that Parth Parenteral (P) Limited (A 1) manufactured and sold Lemosal-P Powder for veterinary use without drug manufacturing licence and that A-S viz., M/s. RFCL Limited did not disclose the source of supply of records of purchase and sale of Lemosal-P Powder. On 22.11.2007, Drugs Inspector, Nizamabad found Lemosal-P Powder stock for sale in Sri Sapathagiri Veterinary and General Store, Armoor and it was observed that the label of the said product claimed the same as feed supplement, but as per composition label, it contains Levamisole Hydrochloride, B.P.30% w/w. It is stated that British Fharmacopoeia prescribes standards of drugs and that the said product is for deworming and immnostimulation for birds and that the said product attracts definition of drug under Section 3(b) of the Act. The Drugs Inspector had drawn the above drug and sent the same to the Government Analyst, Drugs Control Administration, Hyderabad for analysis. It is stated that partners of Sri Sapathagiri Veterinary and General Store, Armoor disclosed that the said batch number product was sold by M/s. Bhavani Veterinary Medical Hall, Karimnagar vide a Bill No.3293 dated 30.10.2007. When letter was addressed by the Drugs Inspector, M/s. Bhavani Veterinary Medical Hall, Karimnagar disclosed that they have purchased the same from A5 vide bill dated 22.9.2007. The Drugs Inspector addressed letter dated 26.12.2007 to A5 requesting them to disclose the source of supply etc., of the said batch number. AS did not furnish reply to the said letter. But, the complainant received letter dated 29.2.2008 from A5's Delhi office stating that their product cannot be covered within the scope of drug formulation. Test Report received from Government Analyst is to the effect that the said product contained 29.9% Levamisol HCL B.P. and it is standard quality as per the Act. But, the complainant received letter dated 29.2.2008 from A5's Delhi office stating that their product cannot be covered within the scope of drug formulation. Test Report received from Government Analyst is to the effect that the said product contained 29.9% Levamisol HCL B.P. and it is standard quality as per the Act. Finally, it is stated by the complainant in the complaint that AS to A9 did not disclose source of supply of Lemosal-P Powder and it violated Section l8A punishable under Section 28 of the Act and that they did not produce records of purchase and sale of the said drug and thereby violating Section 22(l)(cca) which is punishable under Section 22(3) of the Act. 3. Relying on Pepsi Foods Limited v. Special Judicial Magistrate, 1997 (2) ALD (Crl.) 840 (SC) = (1998) S SCC 749 and MN Ojha v. Alok Kumar Srivastav, (2009) 9 SCC 682 , of the Supreme Court, it is contended by the petitioners' Counsel that the Magistrate did not apply his mind while taking cognizance of the case against the petitioners/A6 to A9. It is further contended that simply on the basis of A6 being Managing Director and A 7 to A9 being Directors of A5 company, no personal liability is attached to any of them for the alleged criminal activity of A5 comp my unless it is averred and material is placed to show that any of them was in-charge of day-to-day affairs of A5 company and was responsible for business being conducted by AS company. The petitioners Counsel placed reliance on several reported decisions on this aspect. In Shanmugha Sundera Raja v. State of Andhra Pradesh, 2010 (1) ALD (Crl.) 434 (AP), of this Court and National Small Industries Corporation Limited v. Harmeet Singh Paintal, 2010 (2) SCALE 372, of the Supreme Court the question was liability of Partnership Firm and Directors of a company in the light of Section 141 of the Negotiable Instruments Act which is a Special Provision relating to prosecution of offenders for offence punishable under Section 138 of the Negotiable Instruments Act. 4. 4. The Supreme Court in State of Haryana v. Brij Lal Mittal, 1998 (1) ALD (Crt.) 883 (SC) = (1998) 5 SCC 343 , while dealing with a case of prosecution of the accused under the Drugs and Cosmetics Act, 1940 considered effect of Section 34 of the Act relating to offences by companies and observed as follows: "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 conduct of its business Simply because a person is a Director of the company it does not necessarily 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." The Supreme Court in State of Karnataka v. Pratap Chand, (1981) 2 SCC 335 quoted the following passage from an earlier pronouncement of the same Court in G.L. Gupta v. D.H. Mehta, (1971) (3) SCC 189, with approval: "What then does the expression "a person in-charge 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 in-charge and a partner of a 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 overall control of the day-to-day business of the company or firm. This inference follows from the wording of Section 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 overall charge. This inference follows from the wording of Section 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 overall charge. Similarly the other officers may be in charge of only some part of business." With the above legal aspects in mind, if the present complaint is examined, it is evident that except mentioning A 7 to A9 as Directors of A5 company nothing else is mentioned about their participation in day-to-day affairs of the company or any of them being responsible for conduct of business of the company. In that view of the matter, the Additional Public Prosecutor fairly stated that insofar as A 7 to A9 are concerned, it is left to discretion of the Court to continue the prosecution against them. Consequently, this Court finds that the prosecution cannot lie against A 7 to A9. 5. Insofar as A6 is concerned, it is contended by the petitioners' Counsel that there is also no specific averment in the complaint that he was in-charge of day-to-day affairs of A5 company and was responsible for conduct of business of A5 company. It is contended by the petitioners Counsel that even though A6 is a Managing Director of A5 company, he cannot be prosecuted on the above ground. In Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 , of the Supreme Court, the offence complained is one under Section 500 IPC for defamation. It was alleged therein that in the correspondence between the loanee and the bank there was some statement which was defamatory in nature. In those circumstances, Chairman and Managing Director and also nine other Directors of that Bank were 'being prosecuted for the offence. In those circumstances, the Supreme Court held: "The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the company. The learned Magistrate failed to pose unto himself the correct question viz., as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. The learned Magistrate failed to pose unto himself the correct question viz., as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability." 6. In Keki Hormusji Gharda v. Mehervan Rustom Irani, (2009) 6 SCC 475 , of the Supreme Court, originally charge-sheet was filed against officers of the company and representatives of the contractor who were indulging in demolishing a building belonging to that company and which caused hindrance to neighbours and public at large. One month after filing of charge-sheet by the police, another private complaint was filed by the neighbour imp-leading the original accused and also Managing Director and Directors of the Company. Having regard to the said fact situation, the Supreme Court held: "The Penal Code, 1860 save and except in some matters does not contemplate any vicarious liability on the part of a person. Commission of an offence by crating a legal fiction or by creating a vicarious liability in terms of the provisions of a statute must be expressly stated. The Managing Director or the Directors of the Company thus cannot be said to have committed an offence only because they are holders of offices. The learned Additional Chief Metropolitan Magistrate, therefore, in our opinion, was not correct in issuing summons without taking into consideration this aspect of the matter. The Managing Director and the Directors of the Company should not have been summoned only because some allegations were made against the company." In my opinion, neither Maksud Saiyed (supra) nor Keki Hormusji Gharda (supra) can be made applicable to facts of the present case to relieve A6 who is Managing Partner of A5 Company from being prosecuted, having regard to allegations in the complaint. In the above two reported decisions, the persons who issued legal notice containing defamatory statement and the persons who were in-charge of demolition work on behalf of the company and the contractor were identifiable and they were also being prosecuted. But, the case on hand is one where the allegations are inaction by way of not disclosing source of supply and non-production of records of purchase and sale of the drug. There is no dispute that A6 is Managing Director of A5 Company. This is not a case where the company is being prosecuted for manufacture of a spurious drug or a sub-standard drug. The allegations against A5 being administrative lapses• by way of not furnishing information which is required to be furnished by the statute, A-6's role as Managing Director directly attracts liability. In Cyper Drugs and Pharmaceuticals Pvt. Ltd., New Delhi v. State, 2007 (1) ALD (Crl.) 862 (AP), of this Court, the Managing Director and Manufacturing Chemist of the company along with the company were prosecuted--for offences punishable under Sections 18(a)(i)/16 and 27(d) of the Act and under Section 18-B/28 of the Act. It was contended by the Managing Director and Manufacturing Chemist that in the absence of any allegations in the complaint about they being in-charge of day-to-day affairs of the company, no prosecution can be maintained qua them in view of Section 34 of the Act. It was held by this Court that the said plea is not available to persons who are directly in control of the company and that such plea can validly be taken by other Directors who are not in-charge of affairs of the company. 7. It is contended by the petitioners' Counsel that Lemesol-P marketed by A5 company is not a 'drug' within the meaning of Section 3(b) of the Act inasmuch as Clause (ii) of Section 3(b) of the Act excludes food substances. It is pointed out that it was printed on the container that it is only a poultry feed supplement. Simply because the manufacturer or a marketer prints on the label that it is a poultry feed supplement, it will not take away Lemesol-P from the definition of 'drug'. According to prosecution, as per composition label, it contains Levamisole Hydrochloride, B.P.30% w/w and 'that the said product is for deworming and immunostimulation for birds and therefore attracts definition of 'drug' contained in Section 3(b) of the Act. According to prosecution, as per composition label, it contains Levamisole Hydrochloride, B.P.30% w/w and 'that the said product is for deworming and immunostimulation for birds and therefore attracts definition of 'drug' contained in Section 3(b) of the Act. B.P. means British Pharmacopoeia which prescribes standards for pharmaceutical products. Therefore, this Court cannot accept contention of the petitioners' Counsel that Lemesol-P is not a drug and is only a . poultry feed supplement. 8. It is contended by the petitioners' Counsel that Section 18-A of the Act is not applicable to A5 company because A5 is only agent for distribution of the product. Reliance was placed on State of Orissa v. Janmejoy Dinda, 1998 (1) ALD (Crl.) 519 (SC) = (1998) 3 SCC 63 , on this aspect. It was held therein: "It is obvious that for application of the section, the person concerned shall not be a manufacturer of drug or his agent. In other words, the person to whom Section 18-A applies is anyone other than a manufacturer or his agent for distribution thereof. The raison d' etre of it is that, if he is the manufacturer or his agent he cannot disclose the name of the person from whom he acquired the drug because he himself is its manufacturer. To expect the other way is to expect the impossible. Hence there is no question of requiring him to disclose the identity of the person from whom he acquired the drug. Exclusion of manufacturer and his agent from the purview of Section 18-A is, therefore, on understandable premise." There is no material on record to show that A5 company is agent of the manufacturer. What all printed on label of the product is that it is marketed by A5. It is not known with what understanding or under what agreement with the manufacturer, A5 has been marketing this product. It is a matter of evidence to be produced by A5 and A6 before the trial Court during trial and make out their defence on this point. Since it is a question of fact, this Court cannot go into and decide the said question in these petitions filed under Section 482 Cr.P.C. 9. It is a matter of evidence to be produced by A5 and A6 before the trial Court during trial and make out their defence on this point. Since it is a question of fact, this Court cannot go into and decide the said question in these petitions filed under Section 482 Cr.P.C. 9. It is next contended by the petitioners' Counsel that the prosecution did not make out refusal to produce any record etc., by A5 company in violation of Section 22(l)(cca) of the Act inasmuch as 'failure to produce' cannot be equated as 'refusal to produce'. This Court is of the opinion that non-production of the required record etc., in spite of receipt of• notice within the time provided or within reasonable time, would only amount to refusal to produce the same. There need not necessarily be an express refusal; and non-production would surely amount to tacit refusal. For letter dated 26.12.2007 addressed by the complainant/Drugs Inspector to A5 company, the company gave reply dated 29.2.2008 requesting the complainant to reconsider the whole matter about the product being not a medicine under the Act; and also requested the complainant to communicate his decision on this aspect. There is no whisper in the reply of A5 with regard to query Nos.1 to 5 posed by the complainant in his letter to A5 company. This is nothing but refusal on the part of the A5 company to furnish the required information. 10. It is further contended by the petitioners' Counsel that Section 22(1)(cca) is subject to Section 23 of the Act. It is stated so even in opening words of Section 22 of the Act. The said contention in no way relieves the petitioners from prosecution launched by the complainant in the lower Court. 11. Thus, viewed from any angle, A6 who is Managing Director of A5 Company cannot absolve himself from being prosecuted for the above offence under the Act in the lower Court. 12. Criminal Petition No.3961 of 2010: In the result, the petition is dismissed. 13. Criminal Petition Nos.3972 of 2010, 4030 of 2010 and 4919 of 2010: In the result, these three criminal petitions are allowed quashing proceedings in CC No.98 of 2009 on the file of Judicial Magistrate of the First Class, Armoor insofar as the petitioners herein/ A 7 to A9 are concerned.