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2023 DIGILAW 535 (HP)

Sameen Ahmad v. State of H. P.

2023-12-14

RAKESH KAINTHLA

body2023
JUDGMENT : (Rakesh Kainthla, J.) The petitioner has filed the present petition for quashing Complaint No. 4 of 2018 titled State versus Norang Raj Aggarwal and others pending before the learned Judicial Magistrate, First Class, Nahan and summons dated 8.5.2018 against the petitioner. It has been asserted that a complaint was filed by the Drug Inspector before the learned Judicial Magistrate, First Class, Nahan for the commission of offences punishable under Section 18(a)(i) read with Sections 17 and 27(d) of the Drugs and Cosmetic Act, 1940 and Rules framed thereunder. As per the prosecution, the Chief Medical Officer, Sirmour at Nahan placed a supply order on 12.7.2016 with M/s Novex Healthcare, Parwanoo, District Solan, H.P. to purchase certain drugs. The Drug Inspector saw some reports published on the social media that wrapper containing tablet Dicyclomine was also shown to be containing Dexamethasone. He directed the Chief Pharmacist, office of Chief Medical Officer to inform whether said medicine was purchased by the office of Chief Medical Officer or not. Chief Pharmacist replied that one lakh tablets of Dicyclomine tablets IP (Dexamethasone I.P. 0.5 mg) were received vide Bill No. 3122, dated 11.8.2017. 65,050 drugs were lying in the District Drug Store. Two cartons were manufactured by M/s Therawin Formulations and they were found to be properly labeled. The drug Inspector drew the sample of the drugs for testing. He filed a complaint stating that the supply order was placed with M/s Novex Healthcare, Parwanoo and they are also liable. Learned Judicial Magistrate, First Class, Nahan issued the summons. The manufacturers filed a petition under Section 482 of Cr.P.C., which was allowed by this Court on 6.9.2022 and the complaint was quashed against the manufacturers. Learned Trial Court erred in summoning the petitioner because there was no evidence to connect the petitioner with the commission of the crime. The petitioner is a chemist and he has no role to play in misbranding the drugs. The complaint against the manufacturers was quashed. Therefore, it was prayed that the present petition be allowed and the complaint pending before the learned Trial Court and order dated 8.5.2018 passed by the learned Trial Court be set aside. 2. The petition is opposed by filing a reply asserting that the chemist is responsible for the quality of the product and adhering to the provisions of the Drugs and Cosmetics Act and Rules. 2. The petition is opposed by filing a reply asserting that the chemist is responsible for the quality of the product and adhering to the provisions of the Drugs and Cosmetics Act and Rules. The drugs supplied by the petitioner’s Firm were not of standard quality. Hence, the petitioner is liable to be prosecuted. The drug falls within the definition of misbranded drug and the complaint was rightly filed. Therefore, it was prayed that the present petition be dismissed. 3. A rejoinder denying the contents of the reply and affirming those of the petition was filed. 4. I have heard Ms. Shalini Thakur, learned Counsel for the petitioner and Mr. Jitender Sharma learned Additional Advocate General for the respondent-State. 5. Ms. Shalini Thakur, learned counsel for the petitioner submitted that this Court had quashed the proceedings against the company and the proceedings cannot continue against the present petitioner. Hence, she prayed that the present petition be allowed and the proceedings against the petitioner be quashed. 6. Mr. Jitender Sharma, learned Additional Advocate General for the respondent-State submitted that the petitioner is a chemist and he is responsible for maintaining the quality of the drugs. The drugs were misbranded and the petitioner cannot escape from the liability. Hence, he prayed that the present petition be dismissed. 7. I have given considerable thought to the submissions at the bar and have gone through the records carefully. 8. A copy of the order passed by this Court in Cr.MP(M) No. 362 of 2019, decided on 6.9.2021 shows that the proceedings were quashed against Virender Kansal, Partner of the Firm and M/s Therawin Formulations. The present petitioner is sought to be prosecuted because he was a quality control chemist of Therawin Formulations. 9. Section 34 of the Drugs and Cosmetics Act reads as under:- 34. The present petitioner is sought to be prosecuted because he was a quality control chemist of Therawin Formulations. 9. Section 34 of the Drugs and Cosmetics Act reads as under:- 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 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, 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 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. 10. It is apparent from the bare perusal of this Section that when an offence has been committed by a company, every person who was in charge 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. Thus, it is apparent that the company and the person who is in charge of the affairs of the company are to be prosecuted. The primary liability is that of the company and the persons who are in charge and responsible to the company are vicariously liable. Thus, it is apparent that the company and the person who is in charge of the affairs of the company are to be prosecuted. The primary liability is that of the company and the persons who are in charge and responsible to the company are vicariously liable. In U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684 , a similar provision was considered by the Hon’ble Supreme Court and it was held that prosecution of the company is necessary before the prosecution of the officers and it is not possible to prosecute the officers of the company without prosecuting the company. It was observed:- “4. The question that arises in the appeal is whether the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors are liable to be proceeded against under Section 47 of the Act in the absence of a prosecution of the Company owning the said industrial unit. Section 47 in so far material reads as follows: “47. 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 subsection (1), 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, 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.” 5. 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.” 5. On a plain reading of sub-section (1) of Section 47 of the Act, where an offence has been committed by a company, every person who at the time of the commission of the offence was ‘in charge of and 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. Proviso to sub-section (1) however engrafts an exception in the case of any such person if he were to prove that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. It would be noticed that sub-section (1) of Section 47 is much wider than subsection (4) of Section 17 of the Prevention of Food Adulteration Act, 1954 which fell for consideration in I.K. Nangia case [ (1980) 1 SCC 258 :1980 SCC (Cri) 220]. Furthermore, the proviso to sub-section (1) shifts the burden on the delinquent officer or servant of the company responsible for the commission of the offence. The burden is on him to prove that he did not know of the offence or connived in it or that he had exercised all due diligence to prevent the commission of such offence. The non-obstante clause in sub-section (2) expressly provides that notwithstanding anything contained in sub-section (1), where an offence under the 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, 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. 11. 11. In Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 a similar provision enacted in the Negotiable Instruments Act was considered by the Hon’ble Supreme Court and it was held that prosecution of the company is sine qua non for prosecuting the officials of the company. It is not permissible to prosecute the officials without prosecuting the company. It was observed:- “58. Applying the doctrine of strict construction, we are of the considered opinion that the commission of an offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words “as well as the company” appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [ (1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a three-judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [ (1984) 4 SCC 352 : 1984 SCC (Cri) 620] does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [ (2000) 1 SCC 1 : 2001 SCC (Cri) 174] is overruled with the qualifier as stated in para 51. The decision in Modi Distillery [ (1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove. 12. A similar view was taken in Dayle De'souza v. Govt. The decision in Modi Distillery [ (1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove. 12. A similar view was taken in Dayle De'souza v. Govt. of India, 2021 SCC OnLine SC 1012, wherein it was observed:- “24. There is yet another difficulty for the prosecution in the present case as the Company has not been made an accused or even summoned to be tried for the offence. The position of law as propounded in State of Madras v. C.V. Parekh (1970) 3 SCC 491 , reads: “3. Learned Counsel for the appellant, however, sought conviction of the two respondents on the basis of Section 10 of the Essential Commodities Act under which, if the person contravening an order made under Section 3 (which covers an order under the Iron and Steel Control Order, 1956), is a company, every person who, at the time the contravention 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 contravention and shall be liable to be proceeded against and punished accordingly. It was urged that the two respondents were in charge of, and were responsible to, the Company for the conduct of the business of the Company and, consequently, they must be held responsible for the sale and for thus contravening the provisions of clause (5) of the Iron and Steel Control Order. This argument cannot be accepted, because it ignores the first condition for the applicability of Section 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of clause (5) of the Iron and Steel Control Order was made by the Company. In fact, the Company was not charged with the offence at all. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The actual contravention was by Kamdar and Vallabhdas Thacker and any contravention by them would not fasten responsibility on the respondents. The acquittal of the respondents is, therefore, fully justified. The appeal fails and is dismissed.” 25. However, this proposition was later deviated from in Sheoratan Agarwal v. State of Madhya Pradesh (1984) 4 SCC 352 . This case pertained to the pari materia provision under Section 10 of the Essential Commodities Act, 1955. The court held that anyone among the company itself; every person in charge of and responsible to the company for the conduct of the business; or any director, manager, secretary or other officers of the company with whose consent or connivance or because of whose neglect offence had been committed, could be prosecuted alone. However, the person in charge or an officer of the company could be held guilty in that capacity only after it has been established that there has been a contravention by the company as well. However, this will not mean that the person in charge or an officer of the company must be arraigned simultaneously along with the company if he is to be found guilty and punished. 26. Relying upon the reasoning in Sheoratan Agarwal (supra) and limiting the interpretation of C.V. Parekh (supra), this Court in Anil Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1 had held that: “13. If the offence was committed by a company it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category, the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such a company is not made an accused, and hence the prosecuted accused is not liable to be punished. In such a prosecution the accused can show that the company has not committed the offence, though such a company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act.” 27. However, subsequent decisions of this Court have emphasised that the provision imposes vicarious liability by way of deeming fiction which presupposes and requires the commission of the offence by the company itself as it is a separate juristic entity. Therefore, unless the company as a principal accused has committed the offence, the persons mentioned in sub-section (1) would not be liable and cannot be prosecuted. Section 141(1) of the Negotiable Instruments Act, extends vicarious criminal liability to the officers of a company by deeming fiction, which arises only when the offence is committed by the company itself and not otherwise. Overruling Sheoratan Agarwal and Anil Hada, in Aneeta Hada v. Godfather Travels and Tours Private Limited (2012)5 SCC 661 , a 3-judge bench of this court expounding on the vicarious liability under Section 141 of the Negotiable Instruments Act, has held: “51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted. xxxxxxxxx 59. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted. xxxxxxxxx 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a three-judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove.” 28. The proposition of law laid down in Aneeta Hada (supra) was relied upon by this Court in Anil Gupta v. Star India Private Limited (2014) 3 SCC 373 : “13. In the present case, the High Court by the impugned judgment dated 13-8-2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] held that the complaint against Respondent 2 Company was not maintainable and quashed the summons issued by the trial court against Respondent 2 Company. Thereby, the Company being not a party to the proceedings under Section 138 read with Section 141 of the Act and in view of the fact that part of the judgment referred to by the High Court in Anil Hada has been overruled by a three-judge Bench of this Court in Aneeta Hada, we have no other option but to set aside the rest part of the impugned judgment [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] whereby the High Court held that the proceedings against the appellant can be continued even in the absence of the Company. We, accordingly, set aside that part of the impugned judgment dated 13-8-2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] whereby the High Court held that the proceedings against the appellant can be continued even in the absence of the Company. We, accordingly, set aside that part of the impugned judgment dated 13-8-2007 [Visionaries Media Network v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-8-2007 (Del)] passed by the High Court so far as it relates to the appellant and quash the summons and proceeding pursuant to Complaint Case No. 698 of 2001 qua the appellant.” 29. In Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781 , this Court observed that: “11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881. xxxxxxxxx 13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vulnerable and accordingly, we set aside the same and quash the criminal proceedings initiated by the respondent against the appellant.” 30. This position was again clarified and reiterated by this Court in Himanshu v. B. Shivamurthy (2019) 3 SCC 797 . The relevant portion of the judgment reads thus: “6. The judgment of the High Court has been questioned on two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, the appellant could not be prosecuted without the company being named as an accused. The cheque was issued by the company and was signed by the appellant as its Director. The judgment of the High Court has been questioned on two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, the appellant could not be prosecuted without the company being named as an accused. The cheque was issued by the company and was signed by the appellant as its Director. Secondly, it was urged that the observation of the High Court that the company can now be proceeded against in the complaint is misconceived. The learned counsel submitted that the offence under Section 138 is complete only upon the issuance of a notice of demand and the failure of payment within the prescribed period. In the absence of compliance with the requirements of Section 138, it is asserted, that the direction of the High Court that the company could be impleaded/arraigned at this stage is erroneous. 7. The first submission on behalf of the appellant is no longer res integra. A decision of a three-judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. governs the area of dispute. The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. The three-judge Bench held thus : (SCC p. 688, para 58) “58. Applying the doctrine of strict construction, we are of the considered opinion that the commission of an offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words “as well as the company” appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.” In similar terms, the Court further held : (SCC p. 688, para 59) “59. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.” In similar terms, the Court further held : (SCC p. 688, para 59) “59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself.” xxxxxxxxx 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or 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. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused.” 31. Applying the same proposition of law as laid down in Aneeta Hada (supra), this Court in Hindustan Unilever Limited v. State of Madhya Pradesh (2020) 10 SCC 751 applying pari materia provision in Prevention of Food Adulteration Act, 1954, held that: “23. Clause (a) of sub-section (1) of Section 17 of the Act makes the person nominated to be in charge of and responsible to the company for the conduct of business and the company shall be guilty of the offences under clause (b) of sub-section (1) of Section 17 of the Act. Therefore, there is no material distinction between Section 141 of the NI Act and Section 17 of the Act which makes the company as well as the nominated person to be held guilty of the offences and/or liable to be proceeded and punished accordingly. Therefore, there is no material distinction between Section 141 of the NI Act and Section 17 of the Act which makes the company as well as the nominated person to be held guilty of the offences and/or liable to be proceeded and punished accordingly. Clauses (a) and (b) are not in the alternative but conjoint. Therefore, in the absence of the company, the nominated person cannot be convicted or vice versa. Since the Company was not convicted by the trial court, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant-nominated person who has been facing trial for more than the last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the nominated person as unsustainable.” 32. In terms of the ratio above, a company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well. 13. Thus, it is not permissible to prosecute the petitioner without prosecuting the company. Since the proceedings against the company have been quashed and they have attained finality, therefore, it is not permissible to prosecute the petitioner in the absence of the company in view of the binding precedents of the Hon’ble Supreme Court. 14. Consequently, the present petition is allowed and Complaint No. 4 of 2018, pending before the learned Trial Court qua the petitioner is ordered to be quashed. 15. A copy of this order be sent to the learned Trial Court for information.