Karnataka High Court
M/S Rhydburg Pharmaceuticals Ltd. vs Union Of India on 16 September, 2020
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF SEPTEMBER, 2020
BEFORE
THE HON'BLE MR.JUSTICE B.A. PATIL
CRIMINAL PETITION NO.2853/2016
BETWEEN:
1. M/S RHYDBURG PHARMACEUTICALS LTD.,
C-2 AND 3, SARA INDUSTRIAL ESTATE,
SELAQUI, RAMPUR,
DEHARADUM-248 197.
(UTTARAKHAND STATE)
REPRESENTED BY
PETITONER NOs. 2, 3, 4.
2. MR. ASHOK MONGA,
S/O C.D.MONGA,
DIRECTOR
M/S RHYDBURG PHARMACEUTICALS LTD.,
C-2 AND 3, SARA INDUSTRIAL ESTATE,
SELAQUI, RAMPUR,
DEHARADUM-248 197.
(UTTARAKHAND STATE)
3. MR. SURJEET SING SAHNI,
S/O PRAIKASH ARORA,
DIRECTOR,
M/S RHYDBURG PHARMACEUTICALS LTD.,
C-2 AND 3, SARA INDUSTRIAL ESTATE,
SELAQUI, RAMPUR,
DEHARADUM-248 197.
(UTTARAKHAND STATE)
4. MRS. SEEMA MONGA,
D/O PRAKASH ARORA,
M/S RHYDBURG PHARMACEUTICALS LTD.,
C-2 AND 3, SARA INDUSTRIAL ESTATE,
SELAQUI, RAMPUR,
DEHARADUM-248 197.
(UTTARAKHAND STATE) ...PETITIONERS
(BY SRI DESU REDDY G., ADVOCATE
[THROUGH VC])
2
AND:
UNION OF INDIA
MINISTRY OF HEALTH AND FAMILY WELFARE,
OFFICE OF CENTRAL DRUG STANDARD CONTROL
ORGANIZATION,
THE DIRECTOR OF HEALTH SERVICES,
2ND FLOOR, O/O. DRUG CONTROLLER
FOR THE STATE OF KARNATAKA,
PALACE ROAD,
BENGALURU - 560 001.
REP. BY ITS DRUG INSPECTIOR,
CDSCO, SUBZONE,
BENGALURU. ...RESPONDENT
(BY SMT.M.BIRDY AIYAPPA, CGC
[THROUGH VC])
THIS CRIMINAL PETITION IS FILED UNDER SECTION
482 OF CR.P.C., PRAYING TO QUASH THE ENTIRE
PROCEEDINGS PENDING ON THE FILE OF SPL. COURT FOR
ECONOMIC OFFENCES, BENGALURU IN C.C.NO.396/2015.
THIS CRIMINAL PETITION COMING ON FOR
ADMISSION THIS DAY, THROUGH VIDEO CONFERENCE, THE
COURT MADE THE FOLLOWING:
ORDER
This petition has been filed by the petitioners - accused Nos.1 to 4 under Section 482 of Cr.P.C. praying this court to quash the proceedings in C.C.No.396/2015 pending on the file of Special Court for Economic Offences, Bengaluru, for the offences punishable under Sections 18(a)(i), 18(b) and 18(c) read with Sections 16 and 17A of the Drugs and 3 Cosmetics Act, 1940 ('the Act' for brevity) and Sections 27(a) and 27(d) of the said Act.
2. I have heard Sri.G.Desu Reddy, learned Counsel for the petitioners/accused.
3. The brief facts of the case are that petitioner No.1/accused No.1-Company is a manufacturing unit of drugs under the name and style as M/s Rhydburg Pharmaceuticals Ltd. Petitioner Nos. 2 to 4 are the Directors of the said Company and accused Nos. 5 and 6 are the manufacturing chemists and accused No.7 is the Analytical Chemist of the accused/petitioner No.1 - Company. It is submitted that Drug Inspector, CDSCO, Sub-Zone, Bangalore on 23.05.2012 had drawn the sample of the drug in four portion viz., AMLI+AT (Amlodipine and Atenolo Tablets), BatchNo.T11-11713, D/M: 11/2011, D/E:
07/2013, manufactured by M/s. Rhydburg Pharmaceuticals Ltd.,C-2 and 3, SARA Industrial Estate, Selaqui, Rampur, Deharadun-248 197 (Uttarakhand State), from E.S.I Dispensary Rm, II 4 Queen's Road, Opp. Sanje Vani, Bangalore - 560 052 drawn under Section 23 of The Drugs and Cosmetics Act, 1940 and sent said sampled drug to Government Analyst on24.05.2012, Central Drugs Laboratory, Kolkatta for the purpose of test and Memorandum (Form No.18) No.ADC/BSZ/KTK/7-2/5686. It is submitted that on 05.11.2012, the respondent has received the test report in Form No.13 dated 17.10.2012 from Government Analyst, Central Drugs Laboratory, Kolkata and the test report indicated that the drug was not of standard quality. On the basis of the said report, a complaint has been registered.
4. It is the submission of the learned counsel for the petitioners/accused that the report of Analysts has been submitted on 17.10.2012 in Form No.13 and the result of the test or analysis indicates that the sample referred is not of standard quality as defined in Drugs & Cosmetics Act, 1940 and Rules framed thereunder and it is his further submission that the said report under Form No.13 does not contain the ingredients of Section 17A of the Act. In 5 that light, it is his submission that the provisions of Section 27A of the Act are not attracted. It is his further submission that accused Nos.2 to 4 are the Directors and they are not in any way concerned to the manufacturing aspects and they are mere Directors of the Company and they committing the offence does not arise at all and that it is only the technical staff, who are looking after the day-to-day affairs of the Company, will be the manufacturing persons and they are alone responsible for the alleged act. In that light, it is his submission that petitioners/accused Nos.2 to 4 are not liable to be prosecuted for the alleged offence and it is accused Nos.5 to 7, who are to be prosecuted in this behalf. In order to substantiate such argument, he relied upon the decision of the Co-ordinate Bench of this Court in Sanjay G. Ravankar & etc. -vs- State of Karnataka, etc. reported in 2002 CRI.L.J. 1353. On these grounds, he prayed to allow the petition and to quash the proceedings.
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5. I have carefully and cautiously gone through the submissions made by learned counsel appearing for the parties and perused the records.
6. It is the first contention of the learned counsel for the petitioners that the provisions of Section 27A of the Act are not attracted in view of the report given in Form No.13. On perusal of the test report dated 17.10.2012, it indicates that the samples referred are not of standard quality as defined in the Act of 1940 and the Rules thereunder for the reasons given therein.
7. It is the specific contention of the learned counsel for the petitioners/accused that the said Form No.13 report does not contain the ingredients of Section 17A of the Act. For the purpose of brevity, I quote Section 17A of the Act, which reads as under:
"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 it has been prepared, packed or stored under insanitary 7 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 purpose of 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".
Keeping in view of the said definition under Section 17A and on perusal of Form No.13, it does not contain ingredients of Section 17A of the Act.
8. The learned counsel for the petitioners/accused fairly conceded that the provisions of Section 27(a) of the Act are not attracted and at the most, if any offence has been committed, then that it will be only under Section 27(d) of the Act. For the purpose of brevity, I quote Sections 27(a) and 27(d) of the Act, which read as under: 8
"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 and 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 (45 of 1860) 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 ten years but which may extend to imprisonment for life and shall also be liable to fine which shall not be less than ten lakh rupees or three times value of the drugs confiscated, whichever is more;
........
(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 there under, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to two years and with fine which shall not be less than twenty thousand rupees."
9. By taking into consideration the said provision of law, if the report is closely perused, it attracts the provisions of Section 27(d) of the Act and in that light, the provisions of Section 27(a) is not 9 attracted. However that is the matter, which has to be considered and appreciated during the course of framing of the charge and at this juncture, it cannot be liable to be quashed in this behalf.
10. The next contention of the learned counsel for the petitioners/accused is that, Accused Nos. 2 to 4 are the Directors and they are not active participants for the purpose of chemical analysis and they are not concerned in this behalf. It is his further submission that no allegations have been made in the complaint about the role of each of the Directors except baldly stating in the complaint that they are the Directors of the accused/Company.
11. I have carefully and cautiously perused the contents of the complaint and other materials on record.
12. On a close reading of the complaint and the material, it depicts that they are only the Directors; except baldly stating in the complaint that they are the Directors, no accusation has been made as against them. However, it indicates that 10 petitioner/accused No.2 is the active participant and a Director in the Company. Under such circumstances, they will be liable for any act, which are going to be done in the course of employment by the other accused persons. By taking into consideration the fact that the Directors/petitioner/accused Nos.3 and 4 are concerned, there is no allegation and in that regard, the inclusion of the Directors/accused Nos.3 and 4 itself appears to be not fair. The order taking the cognizance and issuing process against the petitioners/accused Nos.3 and 4 is not in accordance with law.
13. For the purpose of brevity, the decision in the case of Sanjay G. Ravankar quoted supra, at para Nos.17, 18 and 20, it has been observed as under:
"17. Taking into consideration the Director, Manager, Secretary or other officers of a company are made vicariously liable to the collective action of a company, who itself would be an accused in the offences like one on hand, there are certain restrictions and preventive 11 measures placed by the legislation itself for making them co-accused along with the company. Prima facie requirement is that the complainant to substantiate the basic requirements like the present accused is, to show he is in charge of, or responsible for the conduct of the business of the company, be it in any capacity and if he is the Director, Manager, Secretary or officer of the company it should be averred and shown that the offence took place with his consent or connivance or is also attributable to the neglect on the part of such person (Director, Manager, Secretary and other officer). Keeping in view the observations of the Apex Court in the case of Sham Sundar and Ors. V. State of Haryana, AIR 1989 SC 1982: (1989 Cri LJ 2201) which are to the following effect.--
"More often it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day in the firm. There may be partners, better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove under the proviso to Sub-section (1) that the offence was committed without their knowledge. It is significant to note that the obligation for the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in Sub-section (1) is established".
(emphasis supplied) It is to be noted that unlike the first information as required under Section 154 of the Criminal Procedure Code which need not be elaborate 12 and contain all the history of the case, this complaint under Section 200 of the Criminal Procedure Code filed for specific and substantial offences under the independent acts like Drugs and Cosmetics Act. In the present case it is the public servant on his own investigation in respect of commission of offences under the Act lodges a complaint under Section 200, of the Criminal Procedure Code. In such an event the accused person who is to be vicariously liable and this aspect he may come to know only after taking of cognizance and issuance of process against him and only when he can either state that he does not fall either under Sub-section (1) of Section 34of the Act viz., that he is not a person in charge of, and was responsible to the assets of the company or the alternate arguments that even though he is the Director, Manager, Secretary or other officer of the company, it is not shown that the offence was committed with his consent or connivance or is attributable to any neglect on his part. As observed by the Apex Court in the case of Giridhari Lal Gupta v. D.N. Mehta, followed in the subsequent pronouncements in the case of Sham Sundar, supra, merely because a person is a Director may not be concerned with day-to- day working of the company and as such only because of his holding of position, he cannot be straightaway arrayed as accused unless prima facie there is averment to clearly indicate what exactly is the role played by such Director, which resulted in the commission of the offence.
18. In the present case petitioners (accused 4 to 6 and 8) are the Directors of the company. There is no specific averment about the role of each of Directors except baldly stating in the complaint that these are the Directors of accused 1-company and hence they are to be held responsible for the day-to-day affairs of the firm or company. In my view, this would not be a sufficient averment. From the words used in the complaint, for example at para 7 that accused 4 to 6 are working partners of the firm and are held responsible for the day-to-day affairs 13 indicate that the complainant wants to infer the fact that merely because such person is a director, he is deemed to be responsible for the commission of the offence. As observed by the Apex Court in the aforesaid decisions, there are number of different types of partners in a firm or a company. He may be working partner, sleeping partner or partners who are minors. Merely because he is a partner, it cannot be straightaway inferred that he is responsible for the day-to-day working or he is in charge of and responsible for the very operation of the company and more so towards the commission of the crime in question. No doubt the proviso to Section 34(1) leaves it open to such co-accused to prove before the Trial Court such offence was committed without his knowledge or in spite of his exercising due diligence in proving the commission of such offence but that is at the trial stage. As observed by the Apex Court in the case of M/s. Pepsi Foods Limited v Special Judicial Magistrate, AIR 1998 SC 128 : (1998 Cri LJ 1)if there is absence of such prima facie allegation or averment why the person should be asked to undergo the agony of a criminal trial and make him to prove the fact which was not even averred basically by the complainant in his complaint filed under Section 200 of the Criminal Procedure Code. Hence, in my view, that apart from saying that the co-accused is holding certain posts like Director, Manager or Secretary or any other officer of the company, the main accused, it must be clearly averred in the complaint itself as to whether he was in charge of the company or its affairs and how he was concerned with the commission of the offence itself. Taking into consideration the various pronouncements of the Apex Court in this regard in respect of similar provisions arising under the different special enactments creating various liabilities on the partners of a firm or Directors of a company, I hold that the complainant in his complaint should mention and aver the details as to how the particular vicariously liable person or accused is concerned with the commission of the crime itself and unless and until the same is 14 done, merely because he is a Director or an officer cannot be held to be straightaway as an accused.
.....
20. In the present case as noted except vague and bald averments in paragraphs 7 to 9 and paragraph 44 insofar as accused 4 to 6 and 8 are concerned, I do not find any necessary basic averments except stating that they are the Directors and hence are deemed to be guilty, There are absolutely no material averments to hold with guilt of each of the accused on prima facie material. As these are the specific offences making liability of persons concerned with a company (the main accused) principally in criminal case, the learned Magistrate at the time of taking of cognizance itself is required to apply his mind in this regard as it is open for him not to take cognizance at the initial stage itself or taking cognizance of only such persons against whom there is prima facie material. In the present case except a bare and bald statement of the complaint insofar as accused 4 to 6 and 8 are concerned that it is deemed that they are liable to be arrayed as accused merely because they are Directors of the company, is not a prima facie indication of their committing the offence vicariously. In my view, there is no sufficient application of mind on the part of the learned Magistrate in this regard. This action of taking cognizance and issuing process insofar as accused 4 to 6 and 8 are concerned, in my view, is without application of mind in the absence of availability of or making out prima facie case is concerned and hence liable to be set aside or quashed."
14. By keeping in view the said proposition of law, the case registered against the petitioners/accused Nos.3 and 4 only as Directors is 15 not sustainable in law. On perusal of the material and the complaint, it indicates that accused Nos.5 to 7 are the persons who are responsible for the purpose of manufacturing of the drugs and in that light, the active role has also been played by the said accused persons. In that light, I am of the considered opinion that no case has been made out as against the petitioner Nos.3 and 4/Accused Nos.3 and 4 and a case has been made out as against the petitioners/accused Nos.1, 2 and 5 to 7 in this behalf.
15. Taking into consideration the above factual matrix of the case on hand, I pass the following order:
The petition is partly allowed.
The proceedings initiated as against the petitioner Nos.3 and 4/accused Nos.3 and 4 alone is hereby quashed in C.C.No.396/2015 pending on the file of Special Court for Economic Offences, Bengaluru, for the offences punishable under Sections 18(a)(i), 18(b) and 18(c) read with Sections 16
16 and 17A of the Drugs and Cosmetics Act, 1940 and Sections 27(a) and 27(d) of the said Act.
Insofar as the petitioners/accused Nos.1, 2 and 5 to 7 are concerned, there is material to proceed against them. The trial Court is hereby directed to keep in view the above observation and proceed with the matter in accordance with law.
With the above observations, this petition is disposed of.
Sd/-
JUDGE KNM/-