Jharkhand High Court
Pradeep Verma vs The State Of Jharkhand on 8 February, 2024
Author: Sanjay Kumar Dwivedi
Bench: Sanjay Kumar Dwivedi
1 Cr.M.P. No. 15 of 2016
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Cr.M.P. No. 15 of 2016
1. Pradeep Verma
2. Manoj Khandelwal
3. Nitin Gujrati
4. K.C. Joshi ... Petitioners
-Versus-
1. The State of Jharkhand
2. The Drug Inspector, East Singhbhum, Jamshedpur
... Opposite Parties
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CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI
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For the Petitioners : Ms. Sharon Kerketta, Advocate
For the State : Ms. Nehala Sharmin, Spl.P.P.
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05/08.02.2024 Heard Ms. Sharon Kerketta, learned counsel for the petitioners and
Ms. Nehala Sharmin, learned counsel for the State.
2. This petition has been filed for quashing of the entire criminal proceeding including the order taking cognizance dated 02.02.2013 in C2- Case No.38/2013, pending in the Court of the learned Judicial Magistrate, 1 st Class, Jamshedpur.
3. The complaint case was filed on the written report of the Drug Inspector, Jamshedpur alleging therein that on 09.03.2011, the inspection of Dextrose batch no.1A007 was inspected at M/s Chemi Equip. Kamani Centre and the Xexox copy of the said letter was handed over to the firm on 07.03.2011. As per the informant, during the inspection it was stated by M/s Chemi Equip. that they had purchased Dextrose Batch No.1A007 total 34x25 bottles and also stated that the said stock was destroyed on 16.03.2011 and in evidence the alleged destroyed Dextrose Batch No.1A0007, 849 empty bottles were seized before the witnesses. The seized empty bottles were handed over to Mr. Rashmi Bhayani, proprietor of M/s Chemi Equip. so that the same may be produced for evidence. It was further stated that the 2 Cr.M.P. No. 15 of 2016 manufacturer of the medicine company did not inform to the informant's office in this regard. It was also stated that the said machine was destroyed on the telephonic direction of Mr. K.C. Joshi (Manager, Stores and Dispatch) of Parenteral Surgical Limited in front of Mr. Sunil Kumar Jha and Vivek Anand Jha, both representatives of the Medicine Manufacturing Co. It was further alleged that 7,500 bottles were supplied whereas M/s Chemi Equip.
stated that the said medicine of 7,500 bottles were directly sold by the manufacturing company to M/s Jagdamba Medicacy, Daltonganj. As per the informant, the medicine manufacturing company knowingly kept in dark to M/s Chemi Equip. and sold the defective medicine. It was further alleged that the medicine manufacturing company had cheated the public and own business partners by manufacturing such spurious medicines and distributing such medicines as a result of which some pregnant women were expired at Umed Hospital, Jodhpur, Rajasthan.
4. Ms. Sharon Kerketta, learned counsel for the petitioners submits that the petitioner nos. 1 to 3 are Directors of Parenteral Surgical Limited and petitioner no.4 is the Manager (Stores and Dispatch) of Parenteral Surgical Limited. She further submits that in the complaint, there is no averment as to how the petitioners are looking after day-to-day affairs of the said company. To buttress this argument, she refers Section 34 of the Drugs and Cosmetics Act, 1940. She also submits that in light of Sub-section (3) of Section 25 of the said Act, sample was not supplied to the petitioners and valuable right of the petitioners has been taken up. By way of referring Section 34 of the said Act, she submits that the person, who is in-charge and looking after day-to-day affairs of the company, is only required to be prosecuted. By way of referring the complaint petition, she submits that 3 Cr.M.P. No. 15 of 2016 there is no averment in this regard in the complaint petition. To buttress this argument, she relied upon the judgment passed by the Hon'ble Supreme Court in the case of State of Haryana v. Brij Lal Mittal and others , reported in (1998) 5 SCC 343. She refers paragraph 8 of the said judgment, which is quoted as under:
"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 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."
5. Ms. Sharon Kerketta, learned counsel for the petitioners further submits that the company is not made an accused and in absence of the company being made an accused in the complaint, the vicarious liability cannot be fastened against the petitioners, who are Directors and Manager 4 Cr.M.P. No. 15 of 2016 of the said company. To buttress this argument, she relied upon the judgment passed by the Hon'ble Supreme Court in the case of Sunil Bharti Mittal v. Central Bureau of Investigation , reported in (2015) 4 SCC
609. She refers paragraphs 42, 43, 44 and 48 of the said judgment, which are quoted as under:
"42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada, the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.
48. Sine qua non for taking cognizance of the offence is the application of mind by the Magistrate and his satisfaction that the allegations, if proved, would constitute an offence. It is, therefore, imperative that on a complaint or on a police report, the Magistrate is bound to consider the question as to whether the same discloses commission of an offence and is required to form such an opinion in this respect. When he does so and decides to issue 5 Cr.M.P. No. 15 of 2016 process, he shall be said to have taken cognizance. At the stage of taking cognizance, the only consideration before the court remains to consider judiciously whether the material on which the prosecution proposes to prosecute the accused brings out a prima facie case or not."
6. On the same point, Ms. Sharon Kerketta, learned counsel for the petitioners further relied upon the judgment passed by the Hon'ble Supreme Court in the case of Shiv Kumar Jatia v. State of NCT of Delhi, reported in (2019) 17 SCC 193. She refers paragraphs 21 and 22 of the said judgment, which are quoted as under:
"21. By applying the ratio laid down by this Court in Sunil Bharti Mittal3 it is clear that an individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused. Further in Maksud Saiyed v. State of Gujarat this Court has examined the vicarious liability of Directors for the charges levelled against the Company. In the aforesaid judgment this Court has held that, the Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company, when the accused is a company. It is held that vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further held that statutes indisputably must provide fixing such vicarious liability. It is also held that, even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.
22. In the judgment of this Court in Sharad Kumar Sanghi v. Sangita Rane while examining the allegations made against the Managing Director of a Company, in which, company was not made a party, this Court has held that when the allegations made against the Managing Director are vague in nature, same can be the ground for quashing the proceedings under Section 482 CrPC. In the case on hand principally the allegations are made against the first accused company which runs Hotel Hyatt Regency. At the same time, the Managing Director of such company who is Accused 2 is a party by making vague allegations that he was attending all the meetings of the company and various decisions were being taken under his signatures. Applying the ratio laid down in the aforesaid cases, it is clear that principally the allegations are made only against the company and other staff members who are incharge of day-to-day affairs of the company. In the absence of 6 Cr.M.P. No. 15 of 2016 specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned."
7. Ms. Sharon Kerketta, learned counsel for the petitioners further submits that under Section 34 of the said Act, the petitioners are not vicariously liable as the company is not made an accused and in view of the above judgments, this petition may kindly be allowed.
8. Ms. Sharon Kerketta, learned counsel for the petitioners also submits that in view of Section 23(4)(iii) of the said Act, it was not complied in view of that Section. She submits that the sample was to be sent to the manufacturer after seizing the same as the name and particular of the manufacturers are available on the label of the subject drug, which are not done in the present case. She submits that the valuable right of the petitioners has been taken for non-compliance of Sub-section (3) of Section 25 of the said Act. To buttress this argument, she relied upon the judgment passed by the Hon'ble Supreme Court in the case of Medicamen Biotech Limited and another v. Rubina Bose, Drug Inspector , reported in (2008) 7 SCC 196. She refers paragraphs 13, 16 and 18 of the said judgment, which are quoted as under:
"13. As would be evident, the matter would turn on an examination of the legal provisions. Section 23 of the Act provides the procedure for taking of samples and subsection (4) thereof, as already mentioned above, provides that the sample shall be divided into four portions and be kept/disposed of in the manner laid therein including one sample to be produced before the Magistrate. Section 25 is reproduced below:
"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.7 Cr.M.P. No. 15 of 2016
(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 18-A, 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 of the facts stated therein, and 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 18-A 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) shall be paid by the complainant or accused as the court shall direct. A reading of the aforesaid provisions would reveal that they lay certain obligations as well as provide safeguards for a person from whom a drug has been seized for analysis or testing as Section 25(3) specifies that unless such a person controverts the correctness of the report submitted by the Government Analyst within 28 days in writing that he intends to adduce evidence to controvert the report of the analyst, it would be deemed to be conclusive evidence of the quality of the drug whereas sub-section (4) of Section 25 obliges the Magistrate on the request of the complainant or the accused or on his own motion to send the fourth sample which has been disputed for fresh testing to the Director of the Central Drugs Laboratory.
16. It is, therefore, evident that the appellant had not once but on at least two occasions and within 28 days of the receipt of the show-cause notice clarified that it 8 Cr.M.P. No. 15 of 2016 intended to adduce evidence to show that the test report of the Government Analyst was not correct. The judgments cited by the learned counsel for the respondent, therefore, do not apply to the facts of the case as they were given in the context where the dealer/manufacturer had not expressed its desire to challenge the veracity of the report of the Drugs Analyst.
18. In Unique Farmaid case [(1999) 8 SCC 190 : 1999 SCC (Cri) 1404] which was a case under the Insecticides Act which has provisions analogous to Section 25(4) of the Act, the Court found that the accused had indeed made a request to the Inspector for sending the sample for retesting within the prescribed time-limit and as this request had not been accepted an important right given to an accused had been rendered ineffective on which the proceedings could be quashed. This is what the Court had to say: (SCC p. 197, paras 12-13) "12. It cannot be gainsaid, therefore, that the respondents in these appeals have been deprived of their valuable right to have the sample tested from the Central Insecticides Laboratory under sub- section (4) of Section 24 of the Act. Under sub- section (3) of Section 24 report signed by the Insecticide Analyst shall be evidence of the facts stated therein and shall be conclusive evidence against the accused only if the accused do not, within 28 days of the receipt of the report, notify in writing to the Insecticides Inspector or the court before which proceedings are pending that they intend to adduce evidence to controvert the report. In the present cases the Insecticides Inspector was notified that the accused intended to adduce evidence to controvert the report. By the time the matter reached the court, the shelf life of the sample had already expired and no purpose would have been served informing the court of such an intention. The report of the Insecticide Analyst was, therefore, not conclusive. A valuable right had been conferred on the accused to have the sample tested from the Central Insecticides Laboratory and in the circumstances of the case the accused have been deprived of that right, thus, prejudicing them in their defence.
13. In these circumstances, the High Court was right in concluding that it will be an abuse of process of court if the prosecution is continued against the respondents, the accused persons. The High Court rightly quashed the criminal complaint. We uphold the order of the High Court and would dismiss the appeals."
We find that this judgment helps the case of the appellant rather than that of the respondent because in spite of two communications from the appellant that it intended to adduce evidence to controvert the facts given in the report of the Government Analyst, the fourth sample 9 Cr.M.P. No. 15 of 2016 with the Magistrate had not been sent for reanalysis. The observations in Amery Pharmaceuticals case [(2001) 4 SCC 382 : 2001 SCC (Cri) 724] are also to the same effect. We find that the aforesaid interpretation supports the case of the appellants inasmuch they had been deprived of the right to have the fourth sample tested from the Central Drugs Laboratory. It is also clear that the complaint had been filed on 2-7-2002 which is about a month short of the expiry date of the drug and as such had the appellant accused appeared before the Magistrate even on 2-7-2002 it would have been well-nigh impossible to get the sample tested before its expiry."
9. Ms. Sharon Kerketta, learned counsel for the petitioners submits that the same view has been taken by the Hon'ble Supreme Court in the case of Laborate Pharmaceuticals India Limited and others v. State of Tamil Nadu, reported in (2018) 15 SCC 93. She refers paragraph 8 of the said judgment, which is quoted as under:
"8. All the aforesaid facts would go to show that the valuable right of the appellant to have the sample analysed in the Central Laboratory has been denied by a series of defaults committed by the prosecution; firstly, in not sending to the appellant manufacturer part of the sample as required under Section 23(4)(iii) of the Act; and secondly, on the part of the Court in taking cognizance of the complaint on 4-3- 2015 though the same was filed on 28-11-2012. The delay on both counts is not attributable to the appellants and, therefore, the consequences thereof cannot work adversely to the interest of the appellants. As the valuable right of the accused for reanalysis vested under the Act appears to have been violated and having regard to the possible shelf life of the drug we are of the view that as on date the prosecution, if allowed to continue, would be a lame prosecution."
10. Ms. Sharon Kerketta, learned counsel for the petitioners further submits that even the order taking cognizance has been passed without applying judicial mind as the name and relevant sections have been filled up in blank space.
11. Ms. Nehala Sharmin, learned counsel for the State submits that there is no illegality in the order taking cognizance and the learned Court has rightly taken cognizance.
10 Cr.M.P. No. 15 of 201612. It is admitted position that petitioner nos. 1 to 3 are Directors and petitioner no.4 is the Manager of the said company. There is no averment in the complaint petition that these petitioners were looking after day-to-day affairs of the company and even the company is not made accused in the complaint case and if the company is not accused, in absence of the company vicarious liability cannot be fastened against the petitioners, who happened to be Directors and Manager of the said company. The law on this point is well settled. Further, there is non-compliance of Sub-section (3) of Section 25 of the said Act and as such the case of the petitioners are covered in light of the judgments of the Hon'ble Supreme Court in the cases of Medicamen Biotech Limited and Laborate Pharmaceuticals India Limited (supra).
13. Further, the Court has looked into the order taking cognizance dated 02.02.2013 and finds that the said order is not in accordance with law. It transpires that the said order has been passed in format and name of the accused and relevant Sections have been filled up in blank space, which further suggests that without applying judicial mind, the cognizance has been taken.
14. In view of the above facts, reasons and analysis, the entire criminal proceeding including the order taking cognizance dated 02.02.2013 in C2-Case No.38/2013, pending in the Court of the learned Judicial Magistrate, 1st Class, Jamshedpur are quashed.
15. Accordingly, this petition is allowed and disposed of.
(Sanjay Kumar Dwivedi, J.) Ajay/