Karnataka High Court
M/S Mercury Laboratories Limited vs Union Of India on 10 March, 2026
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NC: 2026:KHC:14362
CRL.P No. 9113 of 2018
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF MARCH, 2026
BEFORE
THE HON'BLE MR. JUSTICE R. NATARAJ
CRIMINAL PETITION NO. 9113 OF 2018
BETWEEN:
1. M/S. MERCURY LABORATORIES LIMITED
UNIT-I, 2/13-14
GORWA INDUSTRIAL ESTATE,
GORWA, DISTRICT VADODARA
GUJARAT - 390016
REPRESENTED BY ITS MANAGING DIRECTOR
MR. RAJENDRA RAMANLAL SHAH
2. MR. RAJENDRA RAMANLAL SHAH
AGED ABOUT 67 YEARS
S/O. RAMANLAL SHAH,
MANAGING DIRECTOR OF
PETITIONER NO.1 COMPANY,
"KUSURAM"
NEAR SEVASI BUS STOP
AT AND PO SEVASI,
DISTRICT VADODARA - 391101
Digitally GUJARAT
signed by ...PETITIONERS
SUMA
Location: (BY SRI. DESU REDDY G., ADVOCATE)
HIGH
COURT OF
KARNATAKA AND:
UNION OF INDIA
MINISTRY OF HEALTH AND FAMILY WELFARE
O/O THE CENTRAL DRUGS STANDARD
CONTROL ORGANISATION,
DIRECTORATE GENERAL OF HEALTH SERVICES
O/O OF ASSISTANT DRUGS CONTROLLER (I),
2ND FLOOR, O/O DRUGS CONTROLLER
FOR THE STATE OF KARNATAKA
PALACE ROAD,
BENGALURU - 560001
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NC: 2026:KHC:14362
CRL.P No. 9113 of 2018
HC-KAR
REPRESENTED BY THE DRUGS INSPECTOR
CDSCO, SUB-ZONE, BENGALURU - 560001
REPRESENTED BY
CENTRAL GOVERNMENT PUBLIC PROSECUTOR
HIGH COURT BUILDINGS,
AMBEDKAR VEEDHI
BENGALURU - 560001
...RESPONDENT
(BY SRI. THIMANNA BHAT, CENTRAL GOVERNMENT COUNSEL)
THIS CRL.P IS FILED UNDER SECTION 482 OF THE CODE OF
CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ENTIRE
PROCEEDINGS IN C.C.NO.167/2018 ON THE FILE OF THE LEARNED
PRESIDING OFFICER, SPECIAL COURT FOR ECONOMIC OFFENCES AT
BENGALURU.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE R. NATARAJ
ORAL ORDER
The petitioners have challenged the prosecution launched against them by the respondents in C.C No.167/2018 for an offence punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940 (henceforth referred to as 'Act, 1940' for short).
2. (i) The petitioner No.1 claims that it is a Public Limited Company incorporated under the Companies Act, 1956 and is -3- NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR represented by accused No.2/petitioner No.2 and accused Nos.3, 4 and 6 are the Directors of the Company, while accused No.5 is an Additional Director. Accused No.7 is stated to be the authorized person responsible for the day to day activities of the company. Petitioner No.1 further claims that it is engaged in the manufacture and sale of drugs and pharmaceuticals in terms of a valid licence granted in Form No.28.
(ii) The petitioners contend that the Drugs Inspector, Central Drugs Standard Control Organization (CDSCO), drew samples of a drug, named, STAT injection (Tranexamic Acid Injection BP), Batch No.15302016, manufactured by petitioner No.1, from Dr. Ramesh, Store Manager, ESIC, Model Hospital and MC-PGIMSR, Rajajinagar, Bengaluru in Forms No.17 and 17-A for the purpose of testing. The samples were drawn in four portions. On 18.02.2016, one portion of the sample was forwarded for analysis to the Government Analyst, Central Drugs Laboratory (CDL) Chennai.
(iii) On 11.04.2016, the Drugs Inspector received the signed Test Report in Form-13 (in triplicate) from Government Analyst of the CDL, Chennai, vide report dated 23.03.2016, -4- NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR wherein it was stated that the drug seized was 'Not of Standard Quality (NSQ)' and that the sample did not conform to the BP standards with respect to 'Test for Sterility'. Thereafter, the Drugs Inspector issued a notice dated 15.04.2016 to Dr. Ramesh calling upon him to disclose the names and particulars of the supplier of T-Stat injection (Tranexamic Acid Injunction BP). Dr. Ramesh, in terms of his reply dated 15.04.2016, disclosed that his organization had acquired the incriminating drug from the petitioner No.1. Subsequently, on 18.04.2016, the Drugs Inspector addressed a notice to petitioner No.1 directing it to forthwith stop the distribution/sale of the drug and to withdraw supply of all drugs of the same batch. Along with the said notice, the Test Report in Form-13 and one sealed portion of the subject drug were also forwarded.
(iv) On 25.04.2016, the Drugs Inspector served an alert notice to the Drug Controller, State Drug Control Department, Karnataka, about the said drug and also enclosed a copy of the letter to all CDSCO officers and Drug Inspectors for necessary action. Thereafter, the Drug Inspector received a letter dated 02.05.2016 from the manufacturer i.e., petitioner No.1 stating that they disagree with the report of the Government Analyst -5- NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR and requested a second sample to be sent to CDL, Kolkata for analysis for 'Test of Sterility'. The Drugs Inspector then filed a petition on 06.06.2016 before the Special Court for Economic Offences, Bengaluru to send a sample to the Director, CDL, Kolkata for 'Test of Sterility', which was numbered as Cr.Misc.No.7/2016. Consequent to an order passed in Cr.Misc.No.7/2016, on 21.07.2018 the sealed samples were forwarded to the Director, CDL, Kolkata.
(v) On 06.10.2016, the Drugs Inspector received a report dated 21.09.2016 from CDL, Kolkata, which disclosed that the subject drug was 'not of standard quality' (NSQ), as it did not conform to BP standards with respect to 'test for sterility'. The Drugs Inspector then requested for permission to launch prosecution against the petitioner No.1 and thereafter permission was granted by the Drugs Controller General of India (DCGI) in terms of a letter dated 08.03.2017 to launch prosecution. Accordingly the Drugs Inspector filed a complaint on 20.07.2018 alleging contravention of Section 18(a)(i) and Section 18(b) read with Section 16 of Act, 1940 and which is punishable under Section 27(d) of the Act, 1940. The Trial Court took cognizance and issued process to the petitioners. -6-
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3. Being aggrieved by the same, the petitioners are before this Court.
4. (i) The learned counsel for the petitioners contend that the respondent roped in all the directors of the company without indicating how each of them were in charge of, and responsible to the company for the conduct of its business. He therefore contends that the launching of prosecution against all the directors of the petitioners is wholly illegal. He further contends that for the purposes of Act, 1940, it is accused No.7 who is responsible for the business and the day to day affairs of the company and therefore the prosecution ought to have been restricted to accused No.7 and not to all the accused.
(ii) He also submits that the respondent has failed to comply Rule 46 of the Drugs and Cosmetics Rules, 1945. He contends that the violation of Rule 46 of the Rules, 1945, vitiates the prosecution and consequently, the prosecution launched against the petitioners is liable to be set at nought.
5. (i) Per contra, learned Central Government Counsel submits that under Section 34 of the Act, 1940, it is -7- NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR the person who was in charge of, and responsible to the company for the conduct of its business who is liable to be prosecuted. He invited the attention of the Court to Annexure R4 where the petitioner, while seeking a second test of the sampled drug, had disclosed that the petitioner No.2 was responsible for the manufacturing activities and conduct of the business of the company. He therefore submits that the first contention urged by the petitioners is without any basis, since the petitioner No.2 is the Managing Director of the petitioner No.1 and in view of the judgment of the Hon'ble Apex Court in the case of K.K.Ahuja Vs. V.K.Vora - (2009) 10 SCC 48, the petitioner No.2 is deemed to be in charge and responsible for the day to day affairs of the company and for the conduct of its business.
(ii) He submits that there are other directors who are also responsible for the affairs of the company and therefore they were also arraigned as accused in the private complaint. He therefore, contends that the contention of the petitioners that they are not responsible or are not in charge of the conduct of the business of the company is without any basis. -8-
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(iii) As regards the second contention relating to the alleged violation of Rule 46 of the Rules, 1945, he contends that the petitioners had sought a second test of the sampled drug and the request was allowed by the Trial Court in Cr.Misc.No.7/2016 pursuant to which the sample drug was referred to CDL, Kolkata for testing. He therefore contends that the question whether Rule 46, Rules 1945 was complied with or not, is a matter of trial and this Court cannot set aside the prosecution launched against the petitioners on the said ground.
6. I have considered the submissions of the learned counsel for the petitioners and the learned Central Government Counsel for the respondents.
7. Petitioner No.2 has described himself as the managing director of the petitioner No.1. It is not in dispute that the sample drug was manufactured by the petitioner No.1. The samples drawn from the Employee's State Insurance Corporation Hospital were subjected to test and the test revealed that the sample drug was 'Not of Standard Quality' (NSQ) in as much as, it did not pass the test for sterility. A -9- NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR copy of the said test report was furnished to the petitioners who are the manufacturers of the said drug. The petitioners disputed the said test report and sought a second test of the sample drawn. Accordingly, the Drugs Inspector made a request before the Court for a second test of the sample and the Trial Court allowed the said request. Pursuant thereto, the sample drug was forwarded for a second test to the Directorate of CDL, Kolkata.
8. (i) The second test report also indicted the petitioners in as much as, it was found that the sample drug did not conform to the prescribed standards and that it did not pass the test for sterility. It is on this basis that the prosecution was launched against the petitioners for manufacturing a drug which was not of standard quality.
(ii) In so far as offences committed by companies under Act, 1940, Section 34 of the Act, 1940 deals with the procedure that is to be adopted when offences are committed by companies. The said provision specifically provides that when an offence under the Act is committed by a company, every person, who, at the time the offence is committed, is in
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NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR charge of and responsible to the company for the conduct of its business shall be deemed to be guilty of the offence along with the company and shall be liable to be proceeded against and punished accordingly.
(iii) In the case on hand, petitioner No.2 has described himself as the Managing Director of petitioner No.1- company and is responsible for the conduct of its business. As rightly contended by the learned Central Government Counsel, the Hon'ble Apex Court in the case of K.K. Ahuja referred supra, had specifically held that in case of a Managing Director, it is deemed that he is in charge and responsible to the company for the conduct of its business. Therefore, the first contention urged by the learned counsel for the petitioners is without merit and since the petitioner No.2 is the managing director of petitioner No.1, he is liable to be proceeded against in accordance with law. In so far as the other contention that the other directors are not responsible for the business of the petitioner No.1, they are not before this Court and that being the question of fact has to be thrashed out after a trial.
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(iv) As regards the next contention regarding non- compliance of Rule 46 of the Rules, the said question should indeed be established during trial and certainly not in a petition under Section 482 of Cr.P.C. For the sake of convenience, Rule 46 of the Rules 1945 is extracted below:
46. Procedure on receipt of sample.− On receipt of a package from an Inspector containing a sample for test or analysis, the Government Analyst shall compare the seals on the packet or on portion of sample or container with the specimen impression received separately and shall note the condition of the seals on the packet or on portion of sample or container. After the test or analysis has been completed, he shall forthwith supply to the Inspector a report in triplicate in Form 13 of the result of the test or analysis, together with full protocols of the tests or analysis applied:
Explanation.― It shall be deemed to be full and sufficient compliance with the requirement of the rule in respect of the supply of "protocols of the tests or analysis applied", if ― (1) for pharmacopoeial drug, where the tests or methods of analysis prescribed in the official pharmacopoeia are followed, references to the specific tests or analysis in the pharmacopoeias are given in the report;
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NC: 2026:KHC:14362 CRL.P No. 9113 of 2018 HC-KAR (2) for patent or proprietary medicines for which the tests and methods prescribed in any of the official pharmacopoeias are applicable and are followed, references to the specific tests or analysis in the pharmacopoeias are given in the report;
(3) for patent or proprietary medicines containing pharmacopoeial drugs for which the official tests or analysis or methods of assays are modified and applied, a description of the actual tests or, as the case may be, analysis or methods of assays so applied is given in the report;
(4) for patent or proprietary medicines for which no pharmacopoeial tests or methods of analysis are available or can be applied but for which tests or methods of analysis given in standard books or journals are followed, a description of such tests or methods of analysis applied together with the reference to the relevant books or journals from which the tests or methods of analysis have been adopted, is given in the report;
(5) for those drugs for which methods of test are not available and have been evolved by the Government Analyst, a description of tests applied is given in the report.
9. The contention that Rule 46 of the Rules, 1945 is not complied is therefore, not a ground to quash the prosecution against the petitioners.
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10. In that view of the matter, this petition fails and is dismissed.
11. In view of disposal of main petition, pending interlocutory applications, if any, do not survive for consideration and the same stands disposed off.
Sd/-
(R. NATARAJ) JUDGE HJ List No.: 1 Sl No.: 19