Telangana High Court
M/S. Micro Bax India Limited vs The State Of Telangana on 9 November, 2018
HONOURABLE Dr. JUSTICE B.SIVA SANKARA RAO
CRIMINAL PETITION No.9028 OF 2018
ORDER:
This Criminal Petition is filed under Section 482 Cr.P.C by the petitioners/A1 to A5, seeking to quash the proceedings in S.C.No.4 of 2017 on the file of the 1st Additional District and Sessions Judge, Sangareddy, Telangana State, covered by P.R.C.No.53 of 2017 of the Additional Judicial First Class Magistrate, Sangareddy, outcome of the complaint filed by the Drugs Inspector, R.C.Puram-Manufacturing under Section 32 of the Drugs and Cosmetics Act, 1940 (for short 'the Act') and Rules 1945 thereunder, for the alleged offence punishable under Section 17(B)(e) of the Act.
2. The petitioners 1 to 5 herein are A1 to A5 in the above crime, viz. 1) M/s.Micro bax (India) Limited, represented by its Directors, A2 to A5, 2) Mrs.Krutika Sawrikar, Director, 3) Mr.Vikas Rajurkar, Managing Director, 4) Mr.Sadashiv Sawrikar, Director, and 5. Mr.Chandra Sekhar Vaddadi, Director.
3. The contentions in the quash petition are that the 1st petitioner is a limited a company, obtained licence for manufacturing through probiotic product (Form-26) under which, it is entitled to manufacture 13 drugs including 'lactic acid bacillus' earlier known as 'lacto bacillus sporogenes'. 2 The 1st petitioner-company also processed another licence for manufacture of Bio-fertilizers and both these independent facilities are running in the same compound in Sy.No.59, Nandigama Village, Patancheru Mandal, Sangareddy of Medak District. It is further averred that one of the ingredient required for Bio-fertilizers is lactic acid bacillus. If the petitioner company not able to manufacture sufficient lactic acid bacillus required for bio-fertiliser, it can purchase from other manufacturers; probiotics is for human consumption and is also used in bio-fertiliser. The Drug Inspector, by name, Sri Karthik Siva Chaitanya of R.C.Puram along with another Drug Inspector of Ranga Reddy-II-Manufacturing, by name, V.Ajay, inspected the 1st petitioner's company on 19.09.2015 in the absence of petitioners 2 to 5 and allegedly they found some blue coloured drums containing label B.No.MC-1508005 with manufacturing date August 2015, B.No.MC-1509006 with manufacturing date September 2015 and B.No.MC-1509007 with manufacturing date September 2015 respectively of lactic acid bacillus manufactured by M/s.Sanzyme (Pvt.) Ltd. in the ware house of the 1st petitioner-company along with drug of lactic acid bacillus manufactured by the 1st petitioner- company. It is averred that under the illusion that the drug manufactured by M/s.Sanzyme (Pvt.) Ltd. might be using by the petitioner as purported to be manufactured by it and 3 exporting, asked the Analyst, who was at the company premises to produce manufacturing records and the Analyst who do not know anything regarding production area and its records of drug seems to have informed that the said drugs stocked in the warehouse were purchased from M/s.Sanzyme (Pvt.) Ltd., Karakapatla Village, Medak District vide invoice Nos.288 and 159 and exported to M/s.Simpex Pharma Pvt. Ltd. under batch numbers of petitioner-company. Based on the said ill-gotten information obtained from Analyst, who has nothing to do with the manufacturing, the complainant presumed it is an offence referred supra. The complainant seized the drugs stocked in the warehouse and prepared panchanama and lifted the samples and thereafter sent to Government Analyst on 21.09.2015 and the seized drugs produced before the Judicial First Class Magistrate, Sangareddy, who allotted case number to the property. The complainant again came to the company on the same day and gave a letter to the lady Director-A2 supra, who was at the unit and insisted for immediate reply accepting the guilt according to his dictation and under threat, obtained letter dated 21.09.2015 under coercion. After coming out from shock, she had given letter dated 23.09.2015 to the Director, DCA, Hyderabad, stating that the letter dated 21.09.2015 was obtained by the Drug Inspector under threat. The Managing 4 Director (A3) supra has to answer the notice dated 23.09.2015 had given explanation, clarifying that the petitioner-company has been manufacturing the subject drug for the last 18 years, that the material seized is the material manufactured by the 1st petitioner-company for nutraceutical use and that there was no sale effected, that the total quantity of drug was manufactured in 55 batches in A & B blocks from January 2015 onwards, the total quantity of 2619 kgs. and sale effected is only 850-50 kgs, the material purchased from M/s.Sanzyme (Pvt.) Ltd. was for manufacture of bio-fertiliser to which lacto acid bacillus is one of the ingredient that the alleged acceptance letter dated 21.09.2015 from the lady Director is contrary to record and no time was given for explanation as required under law and outcome of misconception of facts and hence to drop the action. It is also averred that the complainant sought information from M/s.Sanzyme (Pvt.) Ltd. regarding the sale and manufacturing of the subject drug vide letter dated 22.01.2016 and the said company furnished the details of manufacture of lactic acid bacillus and right to sell to the 1st petitioner-company vide letter dated 04.02.2016. The complainant asked the Government Analyst to give analysis report and it certified as standard quality by proceedings dated 23.03.2017. The complainant, without proper consideration of the above, lodged the complaint 5 before the Additional Judicial First Class Magistrate, Sangareddy, alleging that the petitioner company and its Directors as if committed the offence referred supra and the learned Magistrate allotted PRC No.53 of 2017 and committed to the Court of Sessions, where the Sessions Division allotted S.C.No.4 of 2017 from the cognizance taken for the offence supra, which are liable to be quashed. It is further averred that the petitioner company is having licence to manufacture lactic acid bacillus, one for usage in probiotics and another for bio-fertilizers in the same premises and under probiotic licence, it can manufacture 13 items, but regularly manufacturing 2 items namely, lactic acid bacillus and Bacillus Clausic in 'A' and 'B' blocks and under the bio-fertilizer licence, it would manufacture in 'C' block fertilizer for which lactic acid bacillus, which is one of the ingredients for making bio-fertiliser i.e., photasium mobilizing bacteria. Whenever sufficient lactic acid bacillus is not manufactured for products of agriculture, the petitioner company would purchase from other manufacturers like M/s.Sanzyme (Pvt.) Ltd. which is permissible under law and the respondent seen the empty drums belonging to M/s.Sanzyme (Pvt.) Ltd. which was purchased and used for bio-fertilizer and suspected that the stock at warehouse might be belonging to M/s.Sanzyme (Pvt.) Ltd., though it was the 6 product of the petitioner company and foisted a false case and the same is thereby liable to be quashed.
4. The learned counsel for the petitioners by reiterating the same, sought for quashing the proceedings saying the private complaint and cognizance taken in committing the proceedings, allotting S.C.Number and its continuation will not survive.
5. The learned Public Prosecutor on the other hand supported the private complaint and the cognizance order in allotting PRC number and committing the case to the Court of Sessions and taken cognizance by the learned Sessions Judge in allotting S.C.number and sought for dismissal of the quash proceeding saying there is nothing to quash the proceedings in question but for to put the accused for framing of charges to trial to prove the facts in respect of their defence if any from there is prima facie accusation against the petitioners, who are not entitled to any concession to come out from the accusation covered by S.C.No.4 of 2017 without framing of charges and trial.
6. Heard and perused the material on record.
7. Before coming to the factual matrix, coming to Section 17 of the Drugs and Cosmetics Act, 1940, out of 38 sections with sub-sections in V chapters among, chapter No.IV deals with manufacture, sale and distribution of drugs and 7 cosmetics, Section 16 deals with 'standards of quality', Section 17 deals with 'misbranded drugs'. 17B deals with 'spurious drugs' besides 17(C) to (E) deals with misbranded, spurious and adulterated cosmetics. We are concerned with Section 17(B), which reads as under:
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 imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears 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 of idcompany 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
(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.
Among Section 17B of the Act, the offence proper mentioned as sub clause (e) referred supra and the core to establish is a drug shall be deemed to be spurious if it purports to be the product of a manufacturer of whom it is not truly a product.
Section 27 of the Act with amendment by Act 26 of 2008 to Section 17B, w.e.f. 10.08.2009 deals with penalty for manufacture, sale, etc., of drugs in contravention of this Chapter, and speaks that 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, any drug deemed to be adulterated under Section 17-A or 8 spurious under Section (17-B 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 India 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). First proviso speaks of payment of compensation out of the fine amount to the person who used the said drug supra. Second proviso speaks the person is dead to pay the fine amount realised from the convict to the relatives of the dead person. Section 27-B speaks punishment for Section 17-A not covered by Section 27-A or 18C. Section 27-C speaks that any drug deemed to be spurious under Section 17-B, but not being a drug referred to in clause (a) shall be punishable with imprisonment not less than seven years but which may extend to life and with fine which shall not be less than three lakh rupees or three times the value of the drugs confiscated, whichever is more. Section 27(c) thereby speaks any drug 9 spurious under Section 17-B irrespective of not used is itself punishable as supra. Section 27(d) deals with 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 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 Rs.20,000/-.
8. Coming to Section 34 under Chapter V of the Act reads as follows:
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.
(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 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.10
9. In M/s.Gaba Pharmaceuticals v. Union of India (Crl.P.No.2178 of 2015 dated 14.08.2018), para-9 reads as follows:
"9. Section 17 of the Act deals with either misbranded drugs or adulterated drugs or spurious drugs, likewise either misbranded cosmetics or spurious cosmetics or adulterated cosmetics. Section 18 speaks prohibition of manufacture and sale of certain drugs or manufacture for sale or for distribution, or stocking, or exhibiting, or distributing any drug which is not of a standard quality, or is misbranded, adulterated or spurious, likewise for cosmetics. Section 27 speaks penalty for manufacture, sale etc., of drugs in contravention of this chapter 4 of the Act. Chapter 4 covers the Section 16 to Section 33A. Chapter 4A covers the Sections 33A to 33O. Section 32 deals with cognizance of offences. Section 32(1) speaks that no prosecution under this chapter shall be instituted except by an Inspector or any Gazetted Officer of the Central/State Government authorized by order in this regard, or aggrieved, or a recognized consumer association. Sub-section (2) of Section 32, incorporated by the amendment as per the Act 26 of 2008, says save as otherwise provided in this Act, no Court inferior to that of a Court of Sessions shall try an offence punishable under this chapter. Section 32(3) speaks besides the offence under this Act, offences under any other law can be tried together. Section 33M(1) speaks no prosecution shall be instituted except by an Inspector with the previous sanction of the authority specified in Section 33G(4). Section 21 speaks about the Central or State Government may by notification in the official gazette, appoint such persons with prescribed qualification as inspectors with duties to be performed, who are within the meaning of public servants. Section 34(1) speaks that where an offence under this Act has been committed by a company, every person who at the time the offence committed, was in-charge of, and was responsible to the company for the conduct of its business, as well as the 11 company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The proviso speaks, if that person proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence, that can save him. Sub-section (2) of Section 34 says notwithstanding anything contained in Section 34(1) where offence committed under this Act by a company and it is proved with the 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 person shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Section 36 of the Act speaks, notwithstanding anything contained in Cr.P.C. it shall be lawful for any Metropolitan Magistrate or any Judicial Magistrate of First Class to pass any sentence authorized by this Act in excess of his powers under Cr.P.C. Section 36A speaks notwithstanding anything contained in Cr.P.C. all offences (except the offences triable by the Special Court under Section 36AB or Court of Sessions) under this Act, punishable with imprisonment for a term not exceeding three years, other than an offence under Section 33I(1)(b), shall be tried in a summary way by a Judicial Magistrate of First Class specially empowered or by a Metropolitan Magistrate and the provisions of Sections 262 to 265 Cr.P.C. shall apply as the case may be to such trial, and it shall be lawful for the magistrate to pass a sentence not exceeding one year, however, if the magistrate feels the sentence to be passed is above one year or not desirable to try the case summarily, after hearing the parties and recording an order to that effect, recall any witness and examine, by hearing or re- hearing the case as provided in Cr.P.C.
Section 36AC speaks notwithstanding anything contained in Cr.P.C. every offence relating to adulterated or spurious drugs and punishable under Sections 13(1)(a) and 13(1)(c), 13(2)(a), 22(3), 27(a) and 27(c), 28, 28A, 28B and 30(1) and 30(2) and other offences relating to adulterated 12 drugs or spurious drugs, shall be cognizable. Clause (b) of Section 36AB speaks a bail to be granted by the Special Court depends upon propensity of the crime or nature of offence as additional provisions to the bail provisions under Cr.P.C. Section 36AD(1) speaks save as otherwise provided in this Act, the provisions of Cr.P.C. shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Sessions."
10. Before coming to any of the Directors among A2 to A4 responsible or not of the day to day affairs of the 1st petitioner-company concerned, the complaint averments show particularly para-2 of A2 to A5 are the directors of the accused firm.............A2 to A5 were in charge of and were responsible to the company for the day to day affairs and conduct of the business of the company at the time of detection of offence. At paras 4 and 5, it was mentioned that LW3-Mrs.T.Sujana, Analytical Chemist of the firms is present at the time of inspection and when asked to produce batch manufacturing records and analytical records of the three batches of the said drugs stocked in raw material warehouse, she stated of the said drugs were purchased from M/s.Sanzyme Pvt. Ltd. Karakapatla Village vide invoice Nos.288 and 159 exporting the same to M/s.Simpex Pharmacem Inc., 2088 US Highway, under the batch numbers of M/s.Micro bax (India) Limited, purporting that the drug is manufactured by M/s.Micro bax (India) Limited. The 13 production register and log books also did not indicate the manufacture of said drugs by the firm and it is thereby, the firm violated Section 17(B)(e) of the Act. Para-6 speaks of there from seized three batches of the drug from the stocks of warehouse under cover of Form-16, dated 19.09.2015, addressed to LW.3-T.Sujana supra in the presence of mediators, LW4-R.Mohan Reddy and LW5-K.Ramesh Kumar and also seized certified attested copies of the invoices 288, dated 07.09.2015 and 159 dated 20.06.2015 of M/s.Sanzyme Pvt. Ltd. issued to M/s.Micro bax (India) Limited, invoice No.MIL/E/019 dated 16.06.2015 of M/s.Micro bax (India) Limited to M/s.Simpex Pharmachem Inc.2088 US Highway, Fermentes log book with entries upto page 140, production register of A-block with entries upto page No.53 and certified attested copies of Drug License in Form-26, copy of approved product list and copy of inclusion of technical staff issued by licensing authority are seized under Form-16. It is further averred copy of Form-16 was handed over to LW.3 supra, who acknowledged so also the lifting of samples under cover of Form-17 and Form-17A addressed to LW.3, which is also acknowledged. It speaks of the samples lifted submitted to the Government Analyst seized the property as listed in Form-16 is produced from Judicial First Class Magistrate, Sangareddy covered by CPR No.388/15/2015 as case property. 14 It is further mentioned notice dated 21.09.2015 under Section 18A and 22(1)(cca) of the Act issued to Mrs.Krutika Sawrikar (A2), Director of 1st petitioner-company(A1) to furnish the information regarding details of the last batch of the drug lactic acid bacillus manufactured by the firm and certified copies of manufacturing, analytical and distribution particulars of the last batch, details of purchase transaction made with M/s.Sanzyme Pvt. Ltd. regarding the drug lactic acid bacillus and details of all purchase and sale transactions made by 1st petitioner-company(A1) with respect to the drug lactic acid bacillus from January, 2015 and the constitution of the firm and A2 acknowledged the same and in her reply, dated 21.09.2015, stated that that the batch No.MC-150 manufactured in the month of March, 2015 is the last batch manufactured by 1st petitioner-company(A1) and submitted standardization sheet, certificate of analysis and test reports of the sad batch and stated that the firm hold drug licence for the drug lactic acid bacillus but due to technical problems, the firm has not manufactured the said drug from March, 2015 and also stated that the said drug from M/s.Sanzyme Pvt. Ltd. with batch Nos.BLK615H21, BLK615H22, BLK20015H03, BLK1515F03, BLK615E14 and BLK 2515F01 vide invoice Nos.288 and 159 are exporting the same drug with batch Nos. MC-1508005, MC-1509006, MC-1509007 seized on 19.09.2015 15 are meant for export only and A2 in her reply submitted that constitution of the firm as on 19.09.2015 and requested time of 7 days in her reply to furnish other particulars. It speaks A3-Vikas Rajurkar, Managing Director submitted reply dated 29.09.2015 to the above notice dated 21.09.2015 and the reply received by the complainant on 06.10.2015. The private complaint averments further speaks that LW7-K.D.P.Murty, Company Secretary of M/s.Sanzyme Pvt. Ltd. submitted reply to the notice issued on 06.02.2016 and 16.02.2016 submitting documents, confirming the sale of the drug lactic acid bacillus to 1st petitioner-company(A1). The samples sent to the Government Analyst received as standard quality from the analytical report in Form-13 respectively dated 23.03.2017 received on 28.03.2017 by the complainant, it is mentioned that accused thereby violated Section 17(B)(e) of the Act, which drug shall be deemed a spurious if it purports to be the product of a manufacturer of whom it is not truly a product and thereby, punishable under Section 27(c) of the Act. Though there is a general allegation of all directors A2 to A5 are in-charges and responsible for the day to day affairs, there are no any specific worth averments as to how they are responsible other than A2 received notice and issued reply referred supra, A3 referred as managing director and also replied to the complainant. So far as A4 and A5 are 16 concerned, there is nothing to show they are anyway responsible for day to day affairs of the firm.
11. The wording of Section 34 of the Act is similar to Section 141 of the Negotiable Instruments Act. The law in this regard is clearly settled from ample expressions of the Apex Court and also of this Court. This Court in Narendra Urangi v. M/s.Greenmint India Agritech Pvt. Ltd (Crl.P.No.11336 of 2014 and batch dated 11.09.2015, held in this regard as follows:
"5) From the above rival contentions to answer in so far as liability of a Company concerned, law is very clear on the principle of alterego. The Constitutional bench in Standard Chartered Bank V. Directorate of Enforcement1 held that Company can be prosecuted and convicted for an offence which requires a minimum sentence of imprisonment. Though it was held that it is not expressing any opinion on the question whether a Corporation could be attributed with requisite Mensrea to prove the guilt the same is later clarified by the subsequent expression of the Apex Court in Iridium India Telecom Ltd. V. Motorola Inc.2 referring to the several expressions of the American and England Courts in paras 59 to 64 of the expression page Nos.98 to 100 in nutshell that a Company in many ways be like a human body they have a brain and nerve centre which controls what they do. Some of the people in the Company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent directing the mind and will of the Company and control what they do. The state of mind of these managers is the state of mind of the Company and is 1 (2005)4 SCC 530 2 (2011)1 SCC 74 17 treated the law as such. The fault of the manager will be the personal fault of the Company. The knowledge and intention must be imputed to the body corporate. It was concluded therefrom by referring to Standard Chartered Bank para No.6 supra of a Company is liable to be prosecuted and punished for criminal offences in deviation to the earlier authorities in India of Corporations cannot commit a crime, for generally accepted modern rule is that except for such crime as a corporation is held incapable of committing by reason of the fact that they involve personally with maliciolus intent, a corporation may be subject to indictment or other criminal process, although the criminal act is committed through its agent. The criminal intent of the alterego of the Company, that is the personnel group of persons that guide, the business of the Company would be imputed to the Company/corporation. It was the observation in Iredium supra that was again followed in latest three Judge bench expression of the Apex Court in Sunil Bharti Mittal V. C.B.I3.
It was observed in Sunil Bharti Mittal (supra) that the corporate entity, an artificial person acts through its officers, directors, managing director, charman etc, if such fact continues an offence involving Mensrea it would normally be evident and action of that individual who would act on behalf of the Company in particular in relation to criminal conspiracy. However, the cordial principle of criminal jurisprudence is that there is no vicarious liability unless the statute specifically provides so. An individual who has perpetrated the commission of an offence on behalf of a Company can be made as an accused along with the Company, if there is sufficient material on his active role. Second situation is knowledge it may be implicated is in those cases where statutory regime itself attracts the doctrine of vicarious liability by specifically incorporating by such a provision. It is therefrom referring the Section 141 of N.I.Act in particular as an example at para No.44 of Sunil Bharti Mittal supra and the expression of the Apex Court in Aneeta 3 (2015)4 SCC 609 18 Hada (II) V. Godfather Travels & Tours (P) Ltd4 held that the group of persons that guide the business of the company if the criminal intent that would be imputed to the body corporate and in this back drop Section 141 of the N.I.Act has to be understood. Such a position is therefore because of statutory intendment making it a deemed fiction. In Sunil Bharti Mittal supra it also referred the three Judge bench expression of the Apex Court in S.M.S.Pharmaceuticals Ltd. V. Neeta Bhalla5. In S.M.S.Pharma supra at para No.8 it is observed that there is no universal rule that a Director of a Company is in-charge of its every day affairs. It all depends upon the respective roles assigned. A company have managers or secretaries for different Departments and may have more than one Manager or Secretary. In Aneeta Hada supra it is observed with reference to Section 141 of N.I.Act that the deeming fiction makes the functionaries of the Companies to be liable as its own signification. In fact before Aneeta Hada, S.M.S.Pharmaceuticals, Standard Chartered Bank and Iridium India supra, some of which referred in Sunil Bharti Mittal, the expression of the Apex Court in Anil Hada V. India Accrelic Limited6 speaks in a case under Section 141 of the N.I.Act that even the Company or Corporation not impleaded as accused the proceedings against a Director can be issued. The same later held not good law in Aneeta Hada (I) V. Godfather Travels & Tours (P) Ltd.7 saying without the Company impleaded as accused on the principle of Lex non cogit ad impossibilia and from that legal snag if the Company is not made accused, the proceedings against others cannot be. The said principle of Aneeta Hada (1) then came before three Judge bench expression in Aneeta Hada (2) supra where the Anil Hada is over ruled and Aneeta Hada (1) is affirmed in saying at paras 51 to 59 the relevancy of which reads the decision in Anil Hada has to be treated not laying down the correct law as far as it states that the Director or 4 (2012)5 SCC 661 5 (2005)8 SCC 89 6 (2000)1 SCC 1 7 (2008)13 SCC 703 19 any other officer can be prosecuted without impleadment of the Company on the doctrine referred supra. Section 141 of the N.I.Act makes the other persons vicariously liable for commission of an offence on the part of the Company and to attract the vicarious liability the condition precedent laid down in Section 141 of the N.I.Act has to be satisfied. Thus, the words as well as the Company used therein makes it absolutely and unmistakably clear that when the Company can be prosecuted, then the only persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereafter. For maintaining prosecution under Section 141 of the N.I.Act, arraying of a Company as an accused is imperative. The other categories of offenders can only be brought in the drag net on the touch stone of vicarious liability as the same has been stipulated in the petition itself as held in State of Madras V. C.V.Parekh8. The same question when again came for consideration before the two Judge bench in Anil Gupta V. Star India Private Limited9, Aneeta Hada (2) of two Judge bench referred supra is reiterated in para No.12 in saying the decision in Anil Hada supra is over ruled with the clarification as stated in Para No.51 of Aneeta Hada (2) and the decision in U.P.Pollution Control Board V. Modi Distillery10 has to be restricted to its own facts. In S.M.S Pharmaceuticals (three Judge bench) supra also it is made clear with reference to section 141 of the N.I.Act that it is necessary to aver that at the time the offence was committed, the person accused was in-charge of and responsible for conduct of business of the Company and without this averment being made in the complaint, the requirements of Section 141 of the N.I.Act cannot be said to be satisfied. A clear case should be spelled out in the complaint against the persons sought to be made liable to show as incharge of and responsible to the Company for the conduct of its business. Every person connected with the Company thereby shall not fall within the ambit of Section 8 1973 SCC 491 9 (2014)10 SCC 373 10 (1987)3 SCC 684 20 141 of the N.I.Act but of those persons who were incharge of and responsible for the conduct of business of the Company at the time of commission of the offence. The liability arises on account of conduct or act or omission on the part of a person and not merely on account of holding an offence or a position in a Company. The complaint therefore must disclose the necessary facts which make a person liable, specifically aver that at the time of offence committed, the person accused was incharge of and responsible for conduct of the business of the company. A director cannot be deemed to be incharge of and responsible to the Company for the conduct of the business for no deemed liability of a Director from that status, unless the aforesaid requirement of Section 141 of the N.I.Act has been averred as a fact in the complaint. In another expression referring to Section 141 of the N.I.Act by the Apex Court in Saroj Kumar Poddar V. State11 referring to S.M.S. Pharmaceuticals supra apart from another expression, that for dishonour of cheque making of requisite averments in the complaint is a statutory requirement and the allegations satisfy the same, in the absence of which the proceedings are liable to be quashed. The other expression of the Apex Court two Judge bench in National Small Industries Corporation V. Harmeet Singh12 also referring to Parekh supra and S.M.S.Pharmaceuticals supra among other expressions held that vicarious liability on the part of any Director or other person as incharge and responsible to the conduct of business be specifically averred, though same is not required against a Managing Director. Section 141 of the N.I.Act is very clear that it must be shown that the person for vicariously liable should be at the time of offence committed incharge of and responsible to the Company for conduct of its business. Otherwise every person connected with the Company shall not be made liable but those persons responsible for conduct of its business. A Director of a Company who is not incharge and not responsible for conduct of business at relevant time will 11 (2007)3 SCC 693 12 (2010)3 SCC 330 21 not be made liable for the criminal offence. As the liability arises from being incharge and responsible for conduct of business of the Company at the relevant time of commission of offence. It is not even sufficient to make a bald and cursory statement in a complaint that the Director is incharge of and responsible to the Company for conduct of its business without saying anything more as to his role. The complaint should spell out as to how and in what manner a co-accused was incharge of or responsible to the accused company for conduct of its business. Same is also reiterated in another two Judge bench expression of the Apex Court in Central Bank of India V. Asian Global Limited13 relying on S.M.S. Pharmaceuticals and those were followed by a single Judge expression of this Court in Arrakuntal V. Ganeshan V. Sai Rama Cotton Syndicate14 . Even other latest expression in Poojari Ravinder Devi Dasani V. State of Maharashtra15 reiterates the same reliance upon National Small Industries Corporation supra.
6) Having regard to the above propositions which are in one line speak that a bald averment in complaint is not even sufficient but for a specific allegation as to how a Director of a company who stands in a different footing to the Managing Director by his status liable or to be made liable for the offences punishable under Section 138 of the N.I.Act." From the above, only the 1st petitioner-company(A1), represented by A2 and A3 at best liable and not A4 and A5, if at all there is any offence under Section 17(B)(e) made out.
12. In this regard, so far as the present quash petition is concerned, in the claim of not made liable, admittedly, the stocks purchased from M/s.Sanzyme Pvt. Ltd. under invoice 13 2010(2) ALD (Crl.) 564 (SC) 14 2013(2) ALD (Crl.) 331 (AP) 15 AIR 2015 SC 675 22 Nos.288 and 159 that is also confirmed by the Company Secretary of M/s.Sanzyme Pvt. Ltd. besides LW.3 and even A3 second reply dated 29.09.2015. A2 as referred supra in her reply also admitted the same of the two consignments purchased with invoice Nos.288 and 159 from M/s.Sanzyme Pvt. Ltd. What she further stated is the said purchased drugs from M/s.Sanzyme Pvt. Ltd. with batch Nos. BLK615H21, BLK615H22, BLK20015H03, BLK1515F03, BLK615E14 and BLK 2515F01 by change of labels with batch numbers of petitioner- company(A1)/M/s.Micro bax (India) Limited, bearing batch No.MC-1508005, MC-1509006, MC-1509007 exported to M/s.Simpex Pharmachem Inc.2088 US Highway, Fermentes vide invoice No.MIL/E/019 dated 16.06.2015 and also stated that M/s.Micro bax (India) Limited not manufactured Lactic acid bacillus after March, 2015. No doubt, it shows the 2nd petitioner/A2 retracted from the said statement subsequently. How far the retracted disclosure statement incriminating the accused can be given credence is a matter for trial and premature to quash by relying on the said retraction so also a subsequent reply of A3 with further details leave about the genuineness, undisputedly, from the different version to what A2 stated and to support the version in her retraction but for to say such a defence is always available. 23
13. Having regard to the above and once Section 17(B)(e) clearly speaks of a drug shall be deemed to be spurious that purports to be a product of manufacture of whom it is not truly a product. For that, what the averments and the material show including from the first statement of A2, no doubt, later retracted is lactic acid bacillus, they did not manufacture after March, 2015 and they purchased under invoice numbers 288 and 159 from M/s.Sanzyme Pvt. Ltd. and the same was used with petitioner-company(A1) labels of batch numbers MC-1508005, MC-1509006, MC-1509007 by exporting the same to M/s.Simpex Pharmachem Inc.2088 US Highway, Fermentes vide invoice No.MIL/E/019 dated 16.06.2015 as if it is the product of M/s.Micro bax (India) Limited (A1). Hence, but for to left open any defence, it is not the case to quash the proceedings insofar as A1 to A3 concerned.
14. Accordingly, the Criminal Petition is partly allowed by quashing the proceedings insofar as A4 and A5 and dismissed insofar as A1 to A3 to putforth in future during trial or the like any available defence.
15. Miscellaneous petitions pending if any, shall stand closed.
_________________________ Dr. B. SIVA SANKARA RAO, J Date: 09.11.2018 Pab L.R.Copy to be marked-yes * HONOURABLE Dr. JUSTICE B.SIVA SANKARA RAO + CRIMINAL PETITION No.9028 of 2018 %09-11-2018 # Between:
M/s.Micro bax (India) Limited and four others ....petitioners Vs. The State of Telangana .... Respondent !Counsel for the petitioners : Sri P.Gangaiah Naidu for Smt.B.Bhanu Priya Counsel for the Respondent: Learned Public Prosecutor <Gist :
>Head Note:
? Cases referred:1
(2005)4 SCC 530 2 (2011)1 SCC 74 3 (2015)4 SCC 609 4 (2012)5 SCC 661 5 (2005)8 SCC 89 6 (2000)1 SCC 1 7 (2008)13 SCC 703 8 1973 SCC 491 9 (2014)10 SCC 373 10 (1987)3 SCC 684 11 (2007)3 SCC 693 12 (2010)3 SCC 330 13 2010(2) ALD (Crl.) 564 (SC) 14 2013(2) ALD (Crl.) 331 (AP) 15 AIR 2015 SC 675 25 IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH ***** CRIMINAL PETITION No.9028 of 2018 Between:
M/s.Micro bax (India) Limited and four others ....petitioners Vs. The State of Telangana .... Respondent DATE OF JUDGMENT PRONOUNCED: 09.11.2018 SUBMITTED FOR APPROVAL:
HONOURABLE Dr. JUSTICE B.SIVA SANKARA RAO 1 Whether Reporters of Local Yes/No newspapers may be allowed to see the Judgments?
2 Whether the copies of judgment may Yes/No be marked to Law Reports/Journals 3 Whether Their Ladyship/Lordship Yes/No wish to see the fair copy of the Judgment?