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2025 DIGILAW 488 (HP)

Symbiosis Pharmaceuticals Pvt. Ltd. v. Union of India

2025-03-25

RAKESH KAINTHLA

body2025
JUDGMENT : (Rakesh Kainthla, J.) The petitioners have filed the present petition for quashing complaint No.5/3 of 2022, summoning order dated 03.06.2022 and consequential proceedings arising out of the same against the petitioners. (Parties shall hereinafter be referred to in the same manner as they were arrayed before learned Trial Court for convenience). 2. Briefly stated, the complainant Drug Inspector filed a complaint before the learned Chief Judicial Magistrate, Sirmaur District at Nahan, asserting that a sample of drug Rabeprazole (EC) and Domperidone (SR) Capsules (Olez-DSR), Batch No. SCO- 587, Date of manufacturing 12-2017, Date of expiry 11-2019, manufactured by petitioner No.1, was drawn for analysis from the premises of petitioner No.1. The sample was sent to Government analyst Regional Drug Testing Laboratory, Chandigarh, who issued a report stating that the sample was not of standard quality. Petitioners No.1 to 3, being the manufacturing firm which had manufactured the drugs in question and which was declared to be not of standard quality, are liable for punishment; hence, the complaint was filed for taking action against the petitioners/accused. 3. Learned Trial Court held that there were sufficient reasons to proceed against the accused for the commission of offences punishable under Section 27(b)(ii) and 27(d) of the Drugs and Cosmetics Act, 1940 and the Rules framed thereunder vide order dated 03.06.2022. 4. Being aggrieved from the order passed by the learned Trial Court, the petitioners have filed the present petition for quashing the proceedings pending before the learned Trial Court. It is asserted that the complaint is not as per the provisions of Section 34 of the Drugs and Cosmetics Act. The report of the Government Analyst is not as per the requirement of Rules 57(1) and 46, and it does not contain the full protocols of the test. The complainant had not sent the sample as per the requirement of Section 23(4) of the Drugs and Cosmetics Act. The sample was not stored as per the requirement mentioned in the label. There is no averment that petitioners were in charge and responsible for the conduct of the business of the firm, and they cannot be prosecuted in the absence of any such averment; hence, it was prayed that the present petition be allowed, complaint and the consequent proceedings pending before the learned Trial Court be quashed. 5. There is no averment that petitioners were in charge and responsible for the conduct of the business of the firm, and they cannot be prosecuted in the absence of any such averment; hence, it was prayed that the present petition be allowed, complaint and the consequent proceedings pending before the learned Trial Court be quashed. 5. The petition is opposed by filing a reply and making a preliminary submission regarding the lack of maintainability. It was asserted that the petitioners had manufactured substandard drugs. The complainant had complied with the requirements of Section 34 of the Drugs and Cosmetics Act. The complainant implicated the petitioners based on the record provided by the Company during the investigation. The documents relied upon by the petitioners are to be examined for their truthfulness by leading the evidence. The complaint was filed after getting due approval from the controlling authority. The samples were stored as per the requirement, and tests were carried out as per the protocol. Therefore, it was prayed that the present petition be dismissed. 6. I have heard Ms. Shalini Thakur, learned counsel for the petitioners and Mr. Shashi Shirshoo, learned Central Government Standing Counsel, for the respondent. 7. Mr Shalini Thakur, learned counsel for the petitioners, submitted that the learned Trial Court erred in ordering the summoning of the petitioners without the specific averments that they are incharge and responsible to the Company for its affairs. The drug was not tested as per the protocol, and the sample was not stored as per the label; therefore, she prayed that the present petition be allowed and the complaint pending before the learned Trial Court be quashed. She relied upon Lalankumar Singh and Ors. vs. State of Maharashtra in Criminal Appeal No. 1757 of 2022 decided on 11 .10.2022, Susela Padmavathi Amma versus M/s Bharti Airtel Limited, 2024 INSC 206 and Jitender Dua versus Union of India and ors, 2024: HHC: 2622 in support of her submission. 8. Mr Shashi Shirshoo, learned Central Government Standing Counsel for the respondent, submitted that the drugs were stored and tests were conducted as per the standard protocol. The drug was found to be substandard. Learned Trial Court had rightly summoned the accused. Therefore, he prayed that the present petition be dismissed. 8. Mr Shashi Shirshoo, learned Central Government Standing Counsel for the respondent, submitted that the drugs were stored and tests were conducted as per the standard protocol. The drug was found to be substandard. Learned Trial Court had rightly summoned the accused. Therefore, he prayed that the present petition be dismissed. He relied upon M/s Marc Laboratories Limited and ors vs. Union of India in Cr.MMO No. 43 of 2019 decided on 18.11.2019, M/s D.M. Pharma and anr. vs. State of Karnataka , in Crl. P No. 101877 of 2021 decided on 30.11.2021, and Vikas Rambal and Ors. Versus State , in Cr. OP No. 11184 of 2019 decided on 12.10.2022 in support of his submission. 9. I have given considerable thought to the submissions made at the bar and have gone through the records carefully. 10. 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. 11. It is apparent from the bare perusal of the Section that a Company is primarily liable for the commission of an offence punishable under the Drugs and Cosmetics Act. Vicarious liability has been fastened upon a person who, at the time of the offence was committed, was in charge of and responsible to the Company for the conduct of its business. It was laid down by the Hon’ble Supreme Court in Susela (supra) that a person cannot be made liable unless, at the material time, he was not only in charge of but was also responsible to the Company for the conduct of its business. It was observed:- 18. In the case of State of Haryana v. Brij Lal Mitta (1998) 5 SCC 343 , this Court observed thus: “8. It was observed:- 18. In the case of State of Haryana v. Brij Lal Mitta (1998) 5 SCC 343 , this Court observed thus: “8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which 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.” 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 for 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.” 19. It could thus be seen that this Court had held that simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It could thus be seen that this Court had held that simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It has been held that a person cannot be made liable unless, at the material time, he was in-charge of and was also responsible to the company for the conduct of its business. 20. In the case of S .M.S. Pharmaceuticals Ltd. (supra), this Court was considering the question as to whether it was sufficient to make the person liable for being a director of a company under Section 141 of the Negotiable Instruments Act, 1881. This Court considered the definition of the word “director” as defined in Section 2(13) of the Companies Act, 1956. This Court observed thus: “ 8. ……. There is nothing which suggests that simply by being a director in a company, one is supposed to discharge particular functions on behalf of a company. It happens that a person may be a director in a company but he may not know anything about the day-to-day functioning of the company. As a director, he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint sub-committees consisting of one or two directors out of the Board of the company who may be made responsible for the day-to- day functions of the company. These are matters which form part of resolutions of the Board of Directors of a company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact depending on the peculiar facts in each case. There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. …..” 21. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. …..” 21. It was held that merely because a person is a director of a company, it is not necessary that he is aware of the day- today functioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver how the director of the company was in charge of the day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence. 22. In the case of Pooja Ravinder Devidasani v. State of Maharashtra (2014) 16 SCC 1 this Court observed thus: “ 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 the 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 Section 141 of the NI Act. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed : (SCC p. 336, paras 13-14) “13. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed : (SCC p. 336, paras 13-14) “13. Section 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 Section 141.” (emphasis in original) 18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279 : AIR 1971 SC 2162 ], 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 [State of Karnataka v. Pratap Chand, (1981) 2 SCC 335 : 1981 SCC (Cri) 453] ). 20. 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 Section 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. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya [Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006) 10 SCC 581 (2007) 1 SCC (Cri) 621], it was held by this Court that : (SCC pp. 584-85, para 7) “7. … it is not necessary for the complainant to specifically reproduce the wordings of the section 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. Section 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 section 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 Section 141 of the NI Act.” 23. It could thus clearly be seen that this Court has held that merely reproducing the words of the section 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. 24. A similar view has previously been taken by this Court in the case of K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 . 25. In the case of State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khurana (2010) 11 SCC 469 , this Court reiterated the position thus: “ 17. 24. A similar view has previously been taken by this Court in the case of K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 . 25. In the case of State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khurana (2010) 11 SCC 469 , this 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 non-Director 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.” 26. In the case of Ashoke Mal Bafna (supra), this Court observed thus: “ 9. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a catena of cases that the complainant should specifically show as to how and in what manner the accused was responsible. Simply because a person is a Director of a defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasaniv. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378 : AIR 2015 SC 675] .) 10. (See Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasaniv. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378 : AIR 2015 SC 675] .) 10. 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 Section 141 of the 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.” 27. A similar view has been taken by this Court in the case of Lalankumar Singh v. State of Maharashtra 2022 SCC OnLine SC 1383 to which one of us (B.R. Gavai, J.) was a party. 12. Thus, it is essential for the complainant to aver in the complaint that the person sought to be vicariously liable is not only in charge but also responsible to the Company for its affairs. In the present case, the complainant asserted in para 10 of the complaint: “That, after completing all the investigation and correspondence under the Act, complainant has found that accused No.1 to 3 being the manufacturing firm which have manufactured drug in question which have been declared as not of standard quality, hence are liable for punishment for the offences committed under the Act.” 13. The averments in this para are silent regarding accused No.2 being in charge of accused No.1 and also responsible to it for its affairs. Therefore, this para does not satisfy the requirement laid down by the Hon’ble Supreme Court in the above-cited judgments. 14. In Vikas Rambal (supra), the Madras High Court held that the Directors could not claim that they were not directly involved in the production of the drugs and that they would be liable by virtue of their position. This judgment runs contrary to the judgment of the Hon’ble Supreme Court and cannot be followed. 15. In D.M. Pharma (supra) and Marc Laboratories ( supra), the specific averment was made that the accused were responsible for the conduct which was held to be sufficient. In the present case, no such averment has been made; hence, these judgments will not help the respondent. 16. 15. In D.M. Pharma (supra) and Marc Laboratories ( supra), the specific averment was made that the accused were responsible for the conduct which was held to be sufficient. In the present case, no such averment has been made; hence, these judgments will not help the respondent. 16. In the present case, the form No.26 annexed to the complaint mentions the names of M/s Giri Raj, M/s Sandeep Saroha and Mr Manikant Mishra. It further mentions the constitution of the firm as Mr Jagbir Singh and Mr V.D. Gupta effective from 23.12.2015. This form is duly signed by the Assistant Drugs Controller-cum-Drug License; hence, this document does not show that the petitioners No. 2 and 3 were in charge and responsible to the firm for its affairs. 17. Thus, the order passed by the learned Trial Court summoning the accused No.2 and 3 is bad and cannot be sustained. 18. It was submitted that the sample was not stored as per the instructions mentioned on the label of the drug. This is a question of fact and cannot be decided in the proceedings under Section 482 of Cr.P.C. It will be open to raise this question before the learned Trial Court, which can determine the same based on the evidence led before it. 19. It was further submitted that the report of the analyst is not as per the requirement of Rules 57 and 46 of the Drugs and Cosmetics Rules. This submission is also not acceptable. Rule 46 deals with the procedure to be adopted after the receipt of the sample. Rule 57 provides for the procedure for the dispatch of samples to the Government analyst. These rules do not contain any requirement that the full protocols of the test are to be mentioned in the report of analysis. Whether the analysis was carried out as per the protocol or not is a question of fact, which can be determined after leading the evidence. Therefore, this submission will also not help the petitioners. 20. The accused No.1 is the firm that had manufactured the drug and is primarily responsible for the violation of the Drugs Act and the Rules framed thereunder. 21. It was submitted that the accused No.1 was wrongly arrayed through its Director. Therefore, this submission will also not help the petitioners. 20. The accused No.1 is the firm that had manufactured the drug and is primarily responsible for the violation of the Drugs Act and the Rules framed thereunder. 21. It was submitted that the accused No.1 was wrongly arrayed through its Director. This submission has to be accepted as correct because, as per Section 305 of Cr.P.C., the option is available to the Company to nominate a person to represent it, and such an option cannot be exercised by the complainant , Cr.MMO no. 1070 of 2022, titled Indusind Bank versus State of H.P., decided on 05.08.2024(HP). 22. No other point was urged. 23. In view of the above, the present petition is partly allowed, and the complaint and consequent proceedings arising out of the same are ordered to be quashed qua petitioner No.2 and 3. However, the complaint shall proceed against accused No.1, and it will be open to the accused No.1 to appoint a person to represent it during the proceedings before the learned Trial Court in terms of the judgment of this Court in Indusind Bank (supra). 24 The parties, through their learned counsel, are directed to appear before the learned Trial Court on 22.04.2025. 25. The present petition stands disposed of, and so are the miscellaneous applications, if any.