Research › Search › Judgment

Andhra High Court · body

2023 DIGILAW 1542 (AP)

Aditya Bhatia v. State of Andhra Pradesh

2023-12-08

K.SURESH REDDY

body2023
JUDGMENT 1. Since similar issue is involved in both these criminal petitions filed under Sec. 482 Cr.P.C., they were heard together and are being disposed of by this common order. 2. Crl.P.No.2894 of 2014 has been filed to quash the proceedings in P.R.C.No.21 of 2013 on the file of the learned II Additional Judicial First Class Magistrate, Machilipatnam, Krishna District, insofar as the petitioners/accused Nos.2 to 4 therein. Crl.P.No.14687 of 2014 has been filed to quash the proceedings in P.R.C.No.18 of 2014 on the file of the learned Additional Munsiff Magistrate, Chirala, insofar as the petitioners/accused Nos.2 to 4 therein. 3. Facts of the cases, briefly stated, are as under: (i) The subject P.R.Cs. have been registered on the complaints filed by the State under Sec. 32 of the Drugs and Cosmetics Act, 1940 (for short, 'the Act of 1940'). (ii) In the complaint, which led to registration of P.R.C.No.21 of 2013 on the file of the learned II Additional Judicial First Class Magistrate, Machilipatnam, it was alleged that on 20/8/2007, Drugs Inspector, Machilipatnam, picked up 4x6x10 Serra-D tablets, Batch No: ZSRT 702 Exp Dt:2/2010, manufactured by M/s. Laborate Pharmaceuticals India Limited (accused No.1-Firm), from the main stores of DMHO, Machilipatnam, duly following the procedure prescribed under the Act of 1940. Out of the said tablets, 1x6x10 tablets were sent for analysis to the Government Analyst, Drugs Control Administration, vide Form 18 dtd. 20/8/2007. Upon analysis, the subject drug was declared as not of standard quality, vide report No.0108/DCL/2008 dtd. 17/1/2008, as it does not meet the labelled claim in respect of Serratiopeptidase and only 5.5 mg. of Serratiopeptidase was found as against the label claim of 10 mg. After securing purchase details and distribution particulars, the Drugs Inspector sent notice dtd. 22/5/2009 to accused No.1-Firm, to which Authorized Signatory of accused No.1-Firm sent reply dtd. 24/6/2009, wherein the Firm had challenged the Government Analyst Report dtd. 17/1/2008 and stated that they were ready to pay the cost of re-analysis. Thereupon, the Drugs Inspector sent Notice dtd. 20/8/2009 to accused No.1-Firm, duly providing clarifications as raised in the reply of the Firm and it was also communicated that the second portion of the sealed sample would be deposited before the concerned court. Accordingly, the second portion of the sealed sample was deposited before the learned II Additional Judicial First Class Magistrate, Machilipatnam, on 20/8/2009. 20/8/2009 to accused No.1-Firm, duly providing clarifications as raised in the reply of the Firm and it was also communicated that the second portion of the sealed sample would be deposited before the concerned court. Accordingly, the second portion of the sealed sample was deposited before the learned II Additional Judicial First Class Magistrate, Machilipatnam, on 20/8/2009. Thereafter, on 1/12/2009, Analytical Report in Form 2 was received from the Director, Central Drug Laboratory, Kolkata, by the Drug Inspector as well as the Court, as per which the reason for declaring the sample as not of standard quality was because the sample does not conform to claim with respect to the tests for Uniformity of Weight and Assay (i.e., content of Serratiopeptidase) and only 3.42 mg. i.e. 34.2% of the labelled claim of Serratiopeptidase as against 10 mg. was found, which infers that it has been substituted in part by another substance. The matter was investigated into and after completion of investigation, the Drugs Inspector, Machilipatnam, filed a complaint before the learned II Additional Judicial First Class Magistrate, Machilipatnam, under Sec. 32 of the Act of 1940, against accused No.1-Firm and accused Nos.2 to 4, who are Directors of the Firm, for violation of Sec. 18(a)(i) r/w Sec. 17B(d) punishable under Sec. 27(c), and also violation of Sec. 18(a)(i) r/w Sec. 16 punishable under Sec. 27(d) of the Act of 1940, for manufacture and sale of spurious and not of standard quality drug. The learned Magistrate took cognizance of the offences and the case was numbered as P.R.C.No.21 of 2013. Seeking to quash the proceedings against them in the said P.R.C., accused Nos.2 to 4- Directors of the Firm approached this Court by filing Crl.P.No.2894 of 2014. (iii) So far as P.R.C.No.18 of 2014 on the file of the learned Additional Munsiff Magistrate, Chirala, is concerned, in the complaint, it was alleged that on 30/5/2012, the Drugs Inspector, Chirala, picked up sample of drug XYLONUMB - 2% (Lignocaine Inj-IP) Batch No.MNL16102, Mfg. dt. 03/2011, Exp. dt.02/2013 manufactured by M/s. Nitin Life Sciences Limited (accused No.1-Firm) for analysis along with another drug from the premises of M/s. Amma Pharmacy (Chemist and Druggist), Chirala, by following the procedure prescribed under the Act of 1940. On 31/5/2012, the Drugs Inspector sent one sealed portion of sample drug to the Government Analyst, Drugs Control Laboratory, Hyderabad. dt. 03/2011, Exp. dt.02/2013 manufactured by M/s. Nitin Life Sciences Limited (accused No.1-Firm) for analysis along with another drug from the premises of M/s. Amma Pharmacy (Chemist and Druggist), Chirala, by following the procedure prescribed under the Act of 1940. On 31/5/2012, the Drugs Inspector sent one sealed portion of sample drug to the Government Analyst, Drugs Control Laboratory, Hyderabad. On 7/9/2012, the Drugs Inspector received analytical report in Form-13 from the Government Analyst, DCL, Hyderabad, declaring the test sample XYLONUMB - 2% (Lignocaine Inj-IP) as not of standard quality, as it does not meet the I.P. requirement in respect of Sodium Chloride content (found 10.48 mg/gm against the label claim of 6mg/gm i.e. 174.66%). After obtaining necessary particulars, on 11/9/2012, the Drugs Inspector issued a letter to accused No.1-Firm, requesting to furnish the manufacturing, analytical and constitution particulars of the company along with attested copy of manufacturing license and approved products list under Sec. 18B of the Act of 1940, while furnishing a copy of the analytical report dtd. 30/8/2012 to accused No.1-Firm. On 10/10/2012, the Drugs Inspector received instructions from the Director General, Drugs and Cosmetics, DCA, to conduct thorough investigation upto manufacturer level on the alleged not of standard quality drug. Accordingly, the matter was investigated into in accordance with the procedure and after completion of investigation, a complaint was filed before the Additional Munsiff Magistrate, Chirala, under Sec. 32 of the Act of 1940, against accused No.1-Firm and accused Nos.2 to 4, who are Directors of Firm, for violation of Sec. 18(a)(i) r/w Sec. 16 punishable under Sec. 27(d) of the Act of 1940. The trial Court took cognizance of the offence and the case was numbered as P.R.C.No.18 of 2014. Seeking to quash the proceedings against them in the said P.R.C., accused Nos.2 to 4-Directors of the Firm filed Crl.P.No.14687 of 2014. 4. Mr. M.S. Srinivasa Iyengar, learned Senior Counsel assisted by Mr. S. Lakshmi Narayana Reddy, learned counsel for the petitioners, contends that the petitioners, who are Directors of the respective Firms, are in no way responsible for the conduct of the business of the respective Firms or day-today affairs of the Firm and, therefore, they cannot be vicariously held liable and prosecuted for the alleged offences. S. Lakshmi Narayana Reddy, learned counsel for the petitioners, contends that the petitioners, who are Directors of the respective Firms, are in no way responsible for the conduct of the business of the respective Firms or day-today affairs of the Firm and, therefore, they cannot be vicariously held liable and prosecuted for the alleged offences. He further contends that it is only the persons who, at the time of commission of the offence, were in-charge of the affairs of the company and were responsible for the conduct of the business of the company, are liable to be prosecuted. It is further contended that in the complaint, specific averments should be made as to the role of the Directors in the day-to-day activities of the company but in neither of the complaints, such averments were made. Learned Senior Counsel, thus, contends that in the absence of specific averments to show that the petitioners are responsible for the day-to-day activities of the Firm and are involved in the offences alleged, continuation of the subject criminal proceedings against them, merely because they are Directors of the Firm, is nothing but an abuse of process of law and, therefore, prays to quash the proceedings against the petitioners. In support of his argument, learned Senior Counsel relies on the judgment of the Hon'ble Supreme Court in Lalankumar Singh v. State of Maharashtra reported in 2022 SCC OnLine SC 1383. 5. On the other hand, learned Assistant Public Prosecutor appearing for the respondent-State opposes the criminal petitions and submits that the petitioners, being Directors of the respective Firms, are responsible for the day-to-day activities of the respective Firms and are, therefore, vicariously liable for the offences committed by the respective Firms. In support of his argument, he places reliance on the judgment of the Hon'ble Supreme Court in Iridium India Telecom Limited v. Motorola Incorporated and others reported in (2011) 1 SCC 74 . 6. This Court has considered the submissions made on either side and perused the entire material available on record. 7. In support of his argument, he places reliance on the judgment of the Hon'ble Supreme Court in Iridium India Telecom Limited v. Motorola Incorporated and others reported in (2011) 1 SCC 74 . 6. This Court has considered the submissions made on either side and perused the entire material available on record. 7. As per Sec. 34 of the Act of 1940, a Director of a company is liable to be convicted for an offence committed by the company, if he/she was in charge of and was responsible to the company for the conduct of its business, at the time the offence was committed, or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned. Thus, the liability under Sec. 34 of the Act of 1940 arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in the company. 8. In Pooja Ravinder Devidasani v. State of Maharashtra reported in (2014) 16 SCC 1 , the Hon'ble Supreme Court, while dealing with Sec. 141 of the Negotiable Instruments Act, which is in pari materia to Sec. 34 of the Act of 1940, and while referring to its earlier decisions on the subject, observed as under at paragraphs 17 to 21: "17....... Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Sec. 141 of the NI Act. In National Small Industries Corporation [National Small Industries Corporation Limited v. Harmeet Singh Paintal (2010) 3 SCC 330 ], this Court observed: "13. Sec. 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. In National Small Industries Corporation [National Small Industries Corporation Limited v. Harmeet Singh Paintal (2010) 3 SCC 330 ], this Court observed: "13. Sec. 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Sec. 141." 18. In Girdhari Lal Gupta v. D.H. Mehta and Anr. (1971) 3 SCC 189 , this Court observed that a person "in charge of a business" means that the person should be in overall control of the day-to-day business of the Company. 19. A Director of a Company is liable to be convicted for an offence committed by the Company if he/she was in charge of and was responsible to the Company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned [See: State of Karnataka v. Pratap Chand & Ors. (1981) 2 SCC 335 ]. 20. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Sec. 141 of the NI Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company. 21. 21. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya (2006) 10 SCC 581 , it was held by this Court that: "7.....it is not necessary for the complainant to specifically reproduce the wordings of the Sec. but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused is vicariously liable. Sec. 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the company." (emphasis supplied) By verbatim reproducing the words of the Sec. without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Sec. 141 of the NI Act." 9. In State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khurana reported in (2010) 11 SCC 469 , the Hon'ble Supreme Court reiterated the position thus: "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 emphasise that in the case of nonDirector officers, it is all the more necessary to 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." 10. If that is the position with regard to a Director, it is needless to emphasise that in the case of nonDirector officers, it is all the more necessary to 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." 10. Having taken note of the above decisions and in the light of the ratio laid down to the effect that mere reproduction of the words of the Sec., without a clear statement of fact as to how and in what manner a Director of the company was responsible for the conduct of the business of the company, would not ipso facto make the Director vicariously liable, the Hon'ble Supreme Court, in Lalankumar Singh (supra), held that the subject complaint therein was totally lacking the requirement of Sec. 34 of the Act of 1940, since no specific averments were made against the appellants therein/Directors of the company. 11. Thus, from the above decisions, it is evident that for making a Director of a company liable for the offences committed by the company, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the company. A company may have a number of Directors and to array them as an accused in a complaint, making them vicariously liable for the offences merely on the basis of a statement to the effect that they are in charge of and responsible for the conduct of the business of the company, without attributing any specific role to them in the conduct of the business of the company, is not a sufficient or adequate fulfillment of the requirements under Sec. 34 of the Act of 1940. 12. Coming to the cases on hand, as seen from the complaint pertaining to P.R.C.No.21 of 2013, there was only a bald statement made to the effect that as per the documents provided by the Drugs Controller, Solan, it was evident that A2 to A4-Directors of A1-Firm are responsible for the day-to-day activities of the Firm. Except the same, there is no clear or cursory statement of fact as to how and in what manner A2 to A4 were responsible for such day-to-day activities of the Firm. Except the same, there is no clear or cursory statement of fact as to how and in what manner A2 to A4 were responsible for such day-to-day activities of the Firm. In the complaint pertaining to P.R.C.No.18 of 2014, except mentioning that A2 to A4 are Directors of the Company, there is no other averment indicating their role in the day-to-day activities of the Firm. Thus, in the absence of specific averments indicating the duties and responsibilities of each of the petitioners in the conduct of business of the Firm, being its Directors, and how and in what manner they are responsible for the day-to-day activities of the Firm, prosecuting them for the offences alleged, would amount to abuse of process of law. Reliance placed by the learned Assistant Public Prosecutor on the judgment of the Hon'ble Supreme Court in Iridium India Telecom Limited (supra), to contend that the petitioners, being Directors of the Firm, can be prosecuted for the offences alleged, does not assist him in any manner, for the reason that the same is distinguishable as in the said case, elaborate details were furnished in the complaint pertaining to allegations of cheating under Sec. 420 r/w Sec. 120-B I.P.C., with regard to the acts of the company and its representatives willfully concealing facts so as to deceive the complainant. 13. For reasons discussed above, proceedings in P.R.C.No.21 of 2013 on the file of the learned II Additional Judicial First Class Magistrate, Machilipatnam, insofar as accused Nos.2 to 4 therein (petitioners in Crl.P.No.2894 of 2014) and the proceedings in P.R.C.No.18 of 2014 on the file of the learned Additional Munsiff Magistrate, Chirala, insofar as accused Nos.2 to 4 therein (petitioners in Crl.P.No.14687 of 2014) are hereby quashed. 14. Both the criminal petitions are, accordingly, allowed. Pending interlocutory applications, if any, shall stand closed.