Gujarat High Court
Alkem Laboratories Limited vs State Of Gujarat on 11 April, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/6989/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION No. 6989 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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ALKEM LABORATORIES LIMITED
Versus
STATE OF GUJARAT
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Appearance:
MR YH MOTIRAMANI(3720) for the PETITIONER(s) No.1,2
MR DEVANG VYAS(2794) for the RESPONDENT(s) No.2
PUBLIC PROSECUTOR(2) for the RESPONDENT(s) No.1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 11/04/2018
ORAL JUDGMENT
1. By this application under Section 482 of the Code of Criminal Procedure, 1973, the applicants have prayed for the following reliefs:
"(a) To allow this application;
(b) To quash and set aside the impugned complaint being
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Criminal Case No.510/2016 pending in the Court of learned Additional Chief Metropolitan Magistrate, Ahmedabad as well as the order dated 17.09.2016 issuing process in connection with the Criminal Case No.510/2016 pending in the Court of learned Additional Chief Metropolitan Magistrate, Ahmedabad and to pass all other incidental and consequential orders as may be deemed fit and proper;
(c) Pending admission, hearing and final disposal of this petition, to stay further proceedings of Criminal Case No.510/2016 pending in the Court of learned Additional Chief Metropolitan Magistrate, Ahmedabad;
(d) To pass any other and further orders as may be deemed fit and proper to this Hon'ble Court."
2. The facts giving rise to the present application are as under:
2.1 The applicants are charged with the offence under Sections 16(1)(a), 18(a)(i) read with Section 32 of the Drugs & Cosmetics Act, 1940, as punishable under Section 27(3) of the Drugs & Cosmetics Act, 1940. A Criminal Case No.510/2016 has been instituted in the court of the Additional Chief Metropolitan Magistrate, Ahmedabad, against the applicants by the respondent No.2 - Central Drugs Standard Control Organization (CDSCO).
2.2 It is the case of the department that the applicants utilized the manufacturing and testing facility of the accused No.3 for manufacturing and testing of GLIMEKEM-2 (Glimeprimide Page 2 of 23 R/CR.MA/6989/2017 JUDGMENT Tablets IP) drug and manufactured for sale not of the standard quality drug.
2.3 The samples (having expiry date of 09/2015) were drawn by the department on 24.07.2014 from the premises of the Additional Chief Medical Superintendent, Western Railways Health Unit, Kalupur, Ahmedabad, and sent for the test/analysis to the Government Analyst, Central Drugs Laboratory at Kolkata. The Government Analyst declared the sample as "Not of Standard Quality" vide test report dated 25.06.2015.
2.4 It appears that after the receipt of the test report, the applicants challenged the test report and declared their intention to adduce evidence in contravention of the test report as per Section 25(3) of the Act.
2.5 The department, vide Criminal Misc. Application No.264/15, applied in the court of the Chief Metropolitan Magistrate at Ahmedabad for retest of sample and the sample was forwarded on 13.08.2015 to the Director, Central Drugs Laboratory, Kolkata. The sample was declared "Not of Standard Quality" by the Director In-charge, Central Drugs Laboratory, Kolkata, vide test report dated 30.09.2015.
2.6 In light of the above, the department filed the impugned complaint alleging that the applicants had a loan license to manufacture and test the impugned drug at the premises of the accused No.3 and the accused have manufactured the impugned batch of the drug declared as not of standard quality by the Director In-charge, Central Drugs Laboratory, Kolkata.
Page 3 of 23R/CR.MA/6989/2017 JUDGMENT 2.7 The trial court issued summons against the accused vide
order dated 17.09.2016 for the offences under Sections 16(1)(a), 18(a)(i) read with Section 32 punishable under Section 27(3) of the Drugs and Cosmetics Act, 1940.
3. Being dissatisfied with the above order issuing summons against the applicants, the applicants have preferred the present application.
4. The learned counsel appearing for the applicants submitted that the the applicants had entered into a contract - manufacturing agreement with the accused No.3, wherein the accused No.3 agreed to manufacture certain products for and on behalf of the applicants in accordance with good manufacturing practices and quality standards and specifications prescribed by the applicants. The agreement highlights the responsibility of the accused No.3 in adhering to the manufacturing standards as prescribed under the Act and also the due precaution and care to be taken by the applicants in ensuring that the manufacturing is conducted in line with the manufacturing standards prescribed under the Act.
5. It is further submitted that the respondent department has admittedly approved the request of the applicant No.1 and issued a loan license to the applicant No.1 to manufacture specified drugs, including the impugned drug, at the premises of the accused No.3 situated at Baddi under the care as well as direction and supervision of the technical staff of the accused No.3.
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6. Insofar as the applicant No.2 is concerned, it is submitted that considering the provisions of Section 34 of the Act, concerning the vicarious liability, there is no allegation in the complaint which would demonstrate the active role and participation of the applicant No.2. It is further submitted that although the applicant No.2 is the Managing Director of the applicant No.1, yet the name of the applicant No.2 admittedly does not figure in the list of disclosed "technical staff" under the loan license granted to the applicant No.1 and that the terms of the contract manufacturing agreement would highlight that there is no liability of the applicant No.2 and he cannot be sought to be roped in the present offence.
7. On the other hand, the present application has been opposed by the learned counsel for the respondents. The learned counsel for the respondent No.2 has taken this Court through the averments in the impugned complaint and has pointed out that there is sufficient material against the applicants to warrant continuation of proceedings against the applicants. The learned counsel has referred to the test reports of the impugned drug and also the provisions of the Act and has submitted that the applicants cannot evade the responsibility for manufacturing of the impugned drug under a loan license and the issues raised by the applicants are to be decided during the trial and there being no merit in the present application, the same be rejected.
8. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for my consideration is, whether any of the offences as alleged are made out against the applicants.
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9. I have gone through the contract manufacturing agreement produced by the applicants as the same has been extensively referred to by the applicants. I have extracted the relevant paragraphs thus:
"3. PERMISSION The necessary drug manufacturing licenses as well as Central Excise Formalities will be undertaken and completed by CACHET. The necessary information and documentation required for the purpose will be provided by ALKEM. CACHET will keep necessary records as per FDA and GMP requirements and Excise Laws and documents to avail Modvat benefits.
6. SPECIFICATIONS Necessary specifications, manufacturing and assay methods for raw materials and finished product will be given by ALKEM. CACHET will ensure that adequate process controls and proper records for the same are maintained and that the finished product meets the specification laid down for the same.
CACHET will also ensure that the manufacturing and assay instructions etc. supplied by ALKEM are treated in confidence. CACHET will conduct total Quality Control Tests as per ALKEM standards and procedures as required by FDA.
7. TESTING All the raw materials supplied by ALKEM whether accompanied by Analytical Reports or not, will be Page 6 of 23 R/CR.MA/6989/2017 JUDGMENT analysed by CACHET. This is applicable to Finished Goods also.
9. QUALITY STANDARDS CACHET shall comply with the manufacturing conditions as mentioned in this Loan License Agreement and Current Good Manufacturing procedures and the statutes applicable thereto shall be strictly adhered to. CACHET shall also make at any time available standard operating procedures, manufacturing records and batch manufacturing records for inspection of ALKEM.
10. INDEMNITY CACHET shall indemnify and keep indemnified ALKEM at all times from and against all actions, suits, proceedings, claims, demands and expenses of whatsoever nature made or suffered or incurred by ALKEM by reason of or by virtue of the manufacturing defect of the said products or by reason of or by virtue of any non-performance or non-observance by CACHET of any terms and conditions of this Agreement. Indemnity shall be limited to the total cost of the goods and for expenses borne by ALKEM on proceedings initiated against it by any third party, if any, on account or arising out of manufacturing defects."
10. I have also gone through the provisions of Sections 16, 17, 17A, 17B, 18, 25, 27 and 34 of the Act, which are also referred Page 7 of 23 R/CR.MA/6989/2017 JUDGMENT to extensively by the advocate for the applicants and which are extracted hereinbelow :
"16. Standards of quality. --
(1) For the purposes of this Chapter, the expression "standard quality" means--
(a) in relation to a drug, that the drug complies with the standard set out in the Second Schedule, and
(b) in relation to a cosmetic, that the cosmetic complies with such standard as may be prescribed.
(2) The Central Government, after consultation with the Board and after giving by notification in the Official Gazette not less than three months' notice of its intention so to do, may by a like notification add to or otherwise amend the Second Schedule for the purpose of this Chapter, and thereupon the Second Schedule shall be deemed to be amended accordingly.
17. Misbranded drugs. --
For the purposes of this Chapter a drug shall be deemed to be misbranded--
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(a) if it is so coloured, coated, powdered or polished
that damage is concealed, or if it is made to appear of better or greater therapeutic value that it really is; or
(b) if it is not labelled in the prescribed manner; or
(c) if its label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or which is false or misleading in any particular.
17A. Adulterated drugs. --
For the purpose of this Chapter, a drug shall be deemed to be adulterated, --
(a) if it consists, in whole or in part, of any filthy, putrid or decomposed substance; or
(b) if has been prepared, packed or stored under insanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health; or
(c) if its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; or
(d) if it bears or contains, for the purpose of Page 9 of 23 R/CR.MA/6989/2017 JUDGMENT colouring only, a colour other than one which is prescribed; or
(e) if it contains any harmful or toxic substance which may render it injurious to health; or
(f) if any substance has been mixed therewith so as to reduce its quality or strength.
17B. Spurious drugs. --
For the purposes of this Chapter a drug shall be deemed to be spurious,-
(a) if it is manufactured under a name which belongs to another drug; or
(b) if it is an intimation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bear upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack identity with such other drug ; or
(c) if the label or container bears the name of an individual or company purporting to be the manufacturer of the drug , which individual or company is fictitious or does not exist; or Page 10 of 23 R/CR.MA/6989/2017 JUDGMENT
(d) if it has been substituted wholly or in part by another drug or substance; or
(e) if it purports to be the product of a manufacturer of whom it is not truly a product.
18. Prohibition of manufacture and sale of certain drugs and cosmetics. --
From such date as may be fixed by the State Government by notification in the Official Gazette in this behalf ,no person shall himself or by any other person on his behalf--
(a) manufacture for sale or for distribution, or sell, or stock or exhibit or offer for sale--
(i) any drug which is not of a standard quality, or is misbranded, adulterated or spurious;
(ii) any cosmetic which is not of a standard quality or is misbranded or spurious;
(iii) any patent or proprietary medicine, unless there is displayed in the prescribed manner on the label or container thereof the true formula or list of active ingredients contained in it together with the quantities thereof;
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(iv) any drug which by means of any
statement, design or device accompanying it or by any other means, purport or claims to prevent, cure or mitigate any such disease or ailment, or to have any such other effect as may be prescribed;
(v) any cosmetic containing any ingredient which may render it unsafe or harmful for use under the directions indicated or recommended;
(vi) any drug or cosmetic in contravention of any of the provisions of this Chapter or any rule made thereunder;
(b) sell, or stock or exhibit or offer for sale, or distribute any drug or cosmetic which has been imported or manufactured in contravention of any of the provisions of this Act or any rule made thereunder;
(c) manufacture for sale or for distribution, or sell, or stock or exhibit or offer for sale, or distribute any drug or cosmetic, except under, and in accordance with the conditions of, a licence issued for such purpose under this Chapter :
Provided that nothing in this section shall apply to the manufacture, subject to prescribed condition of small Page 12 of 23 R/CR.MA/6989/2017 JUDGMENT quantities of any drug for the purpose of examination, test or analysis:
Provided further that the Central Government may, after consultation with the Board, by notification in the Official Gazette, permit, subject to any conditions specified in the notification, the manufacture for sale, or for distribution, sale, stocking or exhibiting or offering for sale or distribution of any drug or class of drugs not being of standard quality.
25. Reports of Government Analysts. --
(1) The Government Analyst to whom a sample of any drug or cosmetic has been submitted for test or analysis under sub-section (4) of section 23, shall deliver to the Inspector submitting it a signed report in triplicate in the prescribed form.
(2) The Inspector on receipt thereof shall deliver one copy of the report to the person from whom the sample was taken and another copy to the person, if any, whose name, address and other particulars have been disclosed under section 18A, and shall retain the third copy for use in any prosecution in respect of the sample.
(3) Any document purporting to be a report signed by a Government Analyst under this Chapter shall be evidence to the facts stated therein, and Page 13 of 23 R/CR.MA/6989/2017 JUDGMENT such evidence shall be conclusive unless the person from whom the sample was taken or the person whose name, address and other particulars have been disclosed under section 18A has, within twenty-eight days of the receipt of a copy of the report, notified in writing the Inspector or the Court before which any proceedings in respect of the sample are pending that he intends to adduce evidence in controversion of the report.
(4) Unless the sample has already been tested or analysed in the Central Drugs Laboratory, where a person has under sub-section (3) notified his intention of adducing evidence in controversion of a Government Analyst's report, the Court may, of its own motion or in its discretion at the request either of the complainant or the accused, cause the sample of the drug or cosmetic produced before the Magistrate under sub-section (4) of section 23 to be sent for test or analysis to the said Laboratory, which shall make the test or analysis and report in writing signed by, or under the authority of, the Director of the Central Drugs Laboratory the result thereof, and such report shall be conclusive evidence of the facts stated therein.
(5) The cost of a test or analysis made by the Central Drugs Laboratory under sub-section (4) Page 14 of 23 R/CR.MA/6989/2017 JUDGMENT shall be paid by complainant or accused as the Court shall direct.
27. Penalty for manufacture, sale, etc., of drugs in contravention of this Chapter. --
Whoever, himself or by any other person on his behalf, manufactures for sale or for distribution, or sells, or stocks or exhibits or offers for sale or distributes, --
(a) any drug deemed to be adulterated under section 17A or spurious under section 17B or which when used by any person for or in the diagnosis, treatment, mitigation, or prevention of any disease or disorder is likely to cause his death or is likely to cause such harm on his body as would amount to grievous hurt within the meaning of section 320 of the Indian Penal Code, solely on account of such drug being adulterated or spurious or not of standard quality, as the case may be, shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to a term of life and with fine which shall not be less than ten thousand rupees;
(b) any drug--
(i) deemed to be adulterated under section
17A, but not being a drug referred to in
clause (a), or
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(ii) without a valid licence as required under clause (c) of section 18, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than five thousand rupees; Provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a term of less than one year and of fine of less than five thousand rupees;
(c) any drug deemed to be spurious under section 17B, but not being a drug referred to in clause (a) shall be punishable with imprisonment for a term which shall not be less than five years and with fine which shall not be less than five thousand rupees;
Provided that the Court may, for any adequate and special reasons, to be recorded in the judgment, impose a sentence of imprisonment for a term of less than three years but not less than one year;
(d) any drug, other than a drug referred to in clause
(a) or clause (b) or clause (c), in contravention of any other provision of this Chapter or any rule made thereunder, shall be punishable with Page 16 of 23 R/CR.MA/6989/2017 JUDGMENT imprisonment for a term which shall not be less than one year but which may extend to two years and with fine;
Provided that the Court may, for any adequate and special reasons, to be recorded in the judgment impose a sentence of imprisonment for a term of less than one year.
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 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 Page 17 of 23 R/CR.MA/6989/2017 JUDGMENT 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."
11. In State of Orissa v. Debendra Nath Padhi, (2005) SCC (Cri.) 415, the Supreme Court held that the High Court could take into account materials of "unimpeachable character of sterling quality" while exercising its inherent powers to quash a criminal proceeding and observed as follows:
"29. Regarding the argument of accused having to face the trial despite being in a position to produce material of unimpeachable character of sterling quality, the width of the powers of the High Court under Section 482 of the Code and Article 226 of Constitution is unlimited whereunder in the interests of justice the High Court can make such orders as may be necessary to prevent abuse of the process of any Page 18 of 23 R/CR.MA/6989/2017 JUDGMENT Court or otherwise to secure the ends of justice within the parameters laid down in Bhajan Lals case."
12. The Supreme Court in PEPSI Foods Ltd. & another v. Special Judicial Magistrate & Ors., (1998) SCC (Cri.) 1400, held as follows:
"28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused."
13. In Inder Mohan Goswami & another v. State of Uttaranchal & others, (2007)12 SCC 1, the Supreme Court analysed inherent powers of the High Court under Section 482 as follows:
Page 19 of 23R/CR.MA/6989/2017 JUDGMENT "23. This court in a number of cases has laid down the scope and ambit of courts' powers under section 482 Cr.P.C. Every High Court has inherent power to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to prevent abuse of the process of the court. Inherent power under section 482 Cr.P.C. can be exercised:
(i) to give effect to an order under the Code;
(ii) to prevent abuse of the process of court, and
(iii) to otherwise secure the ends of justice.
24. Inherent powers under section 482 Cr.P.C. though wide have to be exercised sparingly, carefully and with great caution and only when such exercise is justified by the tests specifically laid down in this section itself. Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the Court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the Statute."
14. From a bare perusal of the liability sought to be imposed upon the applicants on account of the provisions of the Act, I am of the view that once the applicants have exercised due diligence and precaution and having entered into a contract manufacturing agreement with the accused No.3, which provisions categorically require the accused No.3 to comply with the requisite manufacturing and legal requirements, in absence Page 20 of 23 R/CR.MA/6989/2017 JUDGMENT of any other material against the accused highlighting that the applicants have willfully acted in connivance with the accused No.3 in manufacturing the impugned drug so as to be not of a standard quality, it would be an abuse of process of law to require the applicants to face the trial on the basis of the allegations levelled in the impugned complaint.
15. I take notice of the fact that the existence and terms of the contract manufacturing agreement have not been disputed by the respondent No.2 and, in fact, the respondent No.2 has issued a loan license to the applicants to manufacture the impugned drug at the premises of the accused No.3, which also shows the relevant technical personnel of the accused No.3 as being responsible for the manufacturing of the impugned drug and, therefore, it is the accused No.3 who is required to comply with the terms of the loan license and all further manufacturing requirements under the law, including following the compliance with the specifications and provisions of the Act. Once this is established, without there being anything on record, either in the complaint or being pointed out during the oral arguments, to show any involvement or connivance of the applicants, the impugned complaint, as against the applicants, is unsustainable and an abuse of process of law.
16. I am also in agreement with the argument of the learned counsel for the applicants insofar as the provisions of vicarious liability is concerned. The provisions as to the vicarious liability are no longer res integra and have been expounded upon by the Supreme Court in a catena of cases. In the case of State of Haryana v. Brij Lal Mittal, reported in (1998)5 SCC 343, the Supreme Court has held that the vicarious liability of a person Page 21 of 23 R/CR.MA/6989/2017 JUDGMENT for being prosecuted 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. The learned counsel for the applicants has also submitted that Rule 70A of the Drugs and Cosmetics Rules, 1970, provides that a loan license would be issued in Form 25A. Further, Rules 71(1) and (7) provide for conditions for grant or renewal of license in Form 25 or 25F. Form 25A categorically enjoins that the name of the technical staff "under the direction and supervision" of which a drug is manufactured should be disclosed. Since, as per the license and Schedule-M, Clause-6 to the Rules, the drug is manufactured under the "direction and supervision" of disclosed "technical staff" to the exclusion of all others, the legislative intent of Section 34 of the Act can only be to make such staff/officers of a company liable thereunder as are named under the license. It is the condition of license that has the effect of fastening liability. Once the applicant No.1 has entered into a contract manufacturing agreement with the accused No.3 and admittedly the accused No.3 has manufactured the impugned drug in question through a loan license under the care as well as direction and supervision of the technical staff of the accused No.3, there can be no question of invoking vicarious liability against the applicant No.2 on behalf of the applicant No.1 for any alleged breach of the provisions of the Act by the accused No.3 in manufacturing the impugned drug. I have perused the impugned complaint and there is nothing to indicate any overt act on the part of the applicant No.2 to implicate the applicant No.2 in the impugned complaint and, therefore, the proceedings against the applicant No.2 are also required to be quashed.
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17. The learned counsel for the applicants has also stressed upon the violation of the mandatory requirement of Section 202 of the Code of Criminal Procedure, 1973 as well as various technical and fundamental errors in the impugned complaint and the impugned order issuing the process. But, since I am allowing the application on the aforementioned contentions, I am not inclined to address these issues further.
18. In the overall view of the matter, I am convinced that the impugned complaint fails to disclose any offence against the applicants.
19. In the result, this application is allowed. The complaint being Criminal Case No.510 of 2016 pending before the court of the Additional Chief Metropolitan Magistrate, Ahmedabad, and all the proceedings thereto including the order issuing summons dated 17.09.2016 are hereby quashed against the applicants. Rule is made absolute. Direct Service is permitted.
(J.B.PARDIWALA, J.) /MOINUDDIN Page 23 of 23