Rajasthan High Court - Jaipur
Harshila Lodha And Anr. vs State Of Rajasthan on 2 May, 2002
Equivalent citations: 2002CRILJ4054, RLW2003(2)RAJ1191, 2002(4)WLC312, 2002(4)WLN543
JUDGMENT Harbans Lal, J.
1. This petition under Section 482 Cr.P.C. has been filed on behalf of petitioners namely Smt. Harshila Lodha and Smt. Vimla Lodha against the order dated 18.31996 taking cognizance of the offences under Section 27(B), 27(D), and 28(A) of the Drugs and Cosmetics Act, 1940 (hereinafter referred to as "the Act") against the petitioners and against the order dated 12.8.1999 rejecting the application under Section 34 of the Act passed by the learned Chief Judicial Magistrate, Udaipur in Criminal case No. 23/96.
2. Briefly stated, the relevant facts are that the Drug Inspector, Udaipur filed a complaint before the learned Chief Judicial Magistrate, Udaipur on 2.3.1996 alleging inter alia therein that M/s. Udaipur Surgicals, Udaipur is a partnership firm and Shailendra Lodha, Smt. Harshila Lodha, Smt. Vimla Lodha and Shri Raj Lodha are its partners. The said firm is doing the business of medicines for the last two years contravention of the provisions of the said Act. Learned Chief Judicial Magistrate, Udaipur took cognizance for the aforesaid offences on 18.3.1996 and summoned the accused persons including the present petitioners. The present petitioners filed an application under Section 34 of the Act before the learned Court below on the ground that they being the sleeping partners of the firm are not directly responsible for the conduct of the business of the firm and, therefore, they cannot be proceeded with in view of the provisions of Section 34 of the Act. So, the proceedings against them may be dropped but the learned Chief Judicial Magistrate, Udaipur by his impugned order dated 12.8.1999 disallowed the application. Hence, this petition.
3. 1 have heard the learned counsel for the petitioners and learned Public Prosecutor on behalf of State and have perused the entire record as also the authorities cited at the Bar.
4. The main contention of the learned counsel for the petitioners is that in view of the clear provisions of Section 34 of the Act neither the cognizance could have been taken against the petitioners nor they could be proceeded against for the alleged offences in this case because they are only sleeping partners and are not in any way directly responsible for the conduct of the business of the firm. He has also contended that in the affidavit filed by partner accused Shailendra Lodha at the time of registration of the firm he has undertaken to be directly and solely responsible for the conduct of the business of the firm and in this View of the matter also the proceedings cannot be continued against the petitioners.
5. In this connection he has placed reliance on State of Karnataka v. Pratap Chand, AIR 1981 SC 872, 1981 SCC Cr. 453, M/s. Mehta and Co. Film Colony, Jaipur and three Ors. v. State of Rajasthan and Anr., 1989 (1) RLR 472 and State of Haryana v. Brij Lal Miltal and Ors., 1998 SCC Cr. 1315.
6. Learned Public Prosecutor could not dispute the legal position laid down in the authorities relied upon by the learned counsel for petitioners.
7. In the instant case, petitioners are being prosecuted as partners of the firm M/s. Udaipur Surgicals, Udaipur with the aid of Section 34(1) of the Act which reads as under:-
"34(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 that sub-sec. shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without has 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 or, or is attributable t 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 purpose of this
(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."
8. It is evident from a perusal of the aforesaid Section that a partner of the firm is also liable to be convicted for an offence committed by the firm if he is, at the relevant time, incharge of a responsible to the firm for the conduct of the business of the firm of if it is proved that the offence is committed with the consent or connivance of, or is attributable to any neglect on that part of such partner.
9. In G.L. Gupta v. D.H. Mehta, 1971 (3) SCC 189, while dealing with Section 23-C of the Foreign Exchange Regulation Act, 1947 which is identically the same as Section 34 of the Act, their Lordships of the Apex Court have interpreted the expression "person in-charge and responsible for the conduct of the affairs of a company" as under:-
"What then does the expression" a person in-charge and responsible for the conduct of the affairs of a company" means? It will be noticed that the word "company" includes a firm or other association, and the same test must apply to a director in- charge and a partner of a firm in-charge of a business. It seems to us that in the context a person 'in-charge' must mean that the person should be in overall control of the day to day business of the company or firm. This inference follows from the wording of Section 23-C(2). It mentions director, who may be a parly to the policy being followed by com pany and yet not be in charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in overall charge. Similarly the other officers may be in charge of only some part of business."
10. While dealing with Section 34(1) of the Act, the Hon'ble Supreme Court in State of Haryana v. Brij Lal Mittal (supra) observed as under:-
"........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 docs not necessarily mean that he fulfills 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. Form the complaint in question we, however, find that except a bald statement that the respondents were directors of the manufactures, 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 for conduct of its business."
11. The case of Mehta and Company, Film Colony, Jaipur and three others v. State of Rajasthan and Anr. is also based on the aforesaid authorities of the Hon'ble Apex Court.
12. In the instant case, besides a bald statement in the complaint that the petitioner are partners of the firm M/s. Udaipur Surgicals, Udaipur there is no allegation to indicate, even prima facie, that they were, at the relevant time, in charge of and responsible to the firm for the conduct of its business. They are both ladies and were living out of India at the relevant lime. It is evident from the affidavit of Shailendra Lodha, at the time of registration of the firm, which is on record to the case, that he undertook to be responsible for the affairs of the said firm for the purpose of Section 34 of the Act to which the said firm and its partners/manager is held liable for any act, and omission, punishable under the Act and other enactments enforced by Drugs Controller and Director of Medical and Health Services (FW) himself or by any officer subordinate to him authorised to do so by law.
13. Thus, it is abundantly clear that Shailendra Lodha is in- charge of a responsible to the firm for the conduct of its business and present petitioners are only sleeping partners and they are not in any way actively participating in the conduct of the business. So, in view of the principles of law laid down in aforementioned authorities and the facts of the case the learned Chief Judicial Magistrate, Udaipur has committed an error in taking cognizance against the petitioners for the alleged offence and in disallowing their application under Section 34 of the Act. S, it would amount to abuse of the process of the Court to allow the continuation of criminal proceedings against them and this petition deserves to be allowed and the proceedings as against them deserve to be quashed.
14. In the result, this petition is allowed and the order dated 18.3.1996 taking cognizance against the petitioners and order dated 12.8.99 refusing to drop the proceedings against them in criminal case No. 23/96 pending before the learned Chief Judicial Magistrate, Udaipur are hereby set aside as regards the petitioners Smt. Harshila Lodha and Vimla Lodha and the proceedings against them are quashed, it is, however, made clear that the proceedings as against other accused persons shall continue as per law.