Shri Ramprakash Gulati vs This Application Is Filed With A ...
2009 Latest Caselaw 122 Bom

                                         1

          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    NAGPUR BENCH NAGPUR




                                                                                    
                   Criminal Application No. 768/2009




                                                            
     1.      Shri Ramprakash Gulati,
             s/o Shri A. N. Gulati, 82, 117/H-1/192,
             Pandunagar Kanpur-208 005.




                                                           
     2.      Shri Kewal K. Gulati s/o R.P. Gulati,
             48, 117/H-1/192, Pandunagar,
             Kanpur- 208 005.                      .. APPLICANTS

                             .. Versus ..




                                             
             State at the instance of S.B. Ghotkar,
                           
             Drugs Inspector, Yavatmal Office of Assistant
             Commissioner, Food and Drug Administration,
             Shivaji Nagar, Yavatmal.      .. NON APPLICANTS
                          
     ---------------------------------------------------------------------------------
     Mr. S. V. Sirpurkar, Advocate for applicants.
     Mr. S. S. Doifode, A.P.P. for State.
     ---------------------------------------------------------------------------------
      


     CORAM:- S. S. SHINDE, J.
   



     Date of Reserving the Judgment:-   07.12.2009
     Date of Pronouncing the Judgment:- 17.12.2009





     JUDGMENT

1. This application is filed with a prayer to quash

and set aside the complaint against applicants and further

to quash and set aside proceedings in Criminal Complaint

Case No. 271/1996 pending before the Chief Judicial

Magistrate, Yavatmal.

2. Non applicant/complainant filed complaint

bearing No.271/1996 before Chief Judicial Magistrate,

Yavatmal against the applicants along with other accused

for the offence punishable under Section 18 (a) (i) read

with Section 16 and 17B of the Drugs and Cosmetics Act,

1940 punishable under Section 27 (c) of Section 34 of

Drugs and Cosmetics Act, 1940 (Hereinafter referred to as

"the Act"). The applicants herein are arrayed as accused

nos. 1 and 4 in the said complaint.

3. Perusal of the complaint would show that non

applicant, who is Drug Inspector, appointed under Section

21 of the Act while applicants are shown as Directors of

M/s. Pilco Pharma Pvt. Ltd. Kanpur. It is alleged in the

complaint that complainant visited the premises of

accused no. 6 on 09.06.1995, who is a Distributor and

drew sample of Inframycin Skin Cream bearing Batch No.

IC-12 manufactured in August-1994 having expiry date

July-1996 and the said product is said to be manufactured

by Pilco Pharma Pvt. Ltd. 123/37, Saresh Bagh, Kanpur.

The complaint further disclosed that complainant followed

further procedure to send sample for analysis. The

samples were also drawn from the other distributors. The

complainant even came to the conclusion that the sample

does not contain with the standards and hence an offence

is alleged to have been committed under Section 18(a) (i)

of the said Act.

                                     
     4.          Trial
                         
                         Court     had   issued    summons            on

31.09.1996. However, applicants herein have not been

served with the said summons. The applicants came to

know through other accused that prosecution is pending

against them and the Court has issued warrants against

all the accused. Hence,the applicants are constrained to

file this application.

5. The learned counsel for the applicants invited

my attention to Section 34 of the Act, which deals with

offence by Company. Section 34 of the Act 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.

(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."

On plain reading of Section 34 of the Act, the

learned counsel appearing for the applicants urged that

the other person, who is associated with the company,

cannot be made accused and only those persons, who

were incharge of or who are responsible for conduct of

business of the company on the date on which offence is

alleged to have taken place, can be arrayed as accused.

Therefore, the learned counsel would submit that the

entire complaint does not disclose any offence as against

the present applicants hence prosecution as against

applicants is liable to be quashed and set aside only on

this count.

6. It is further stated that perusal of complaint

would show that the applicants are Directors of Pilco

Pharma Ltd., which is also a misstatement of fact. It is

submitted that the complainant, who is also Investigating

Officer, conferred with powers and duties by Act had

failed to enquire as to who was incharge of the Company

as Director on the date when offence took place. It is

further submitted that the applicants were not Directors

of Pilco Pharma Pvt. Ltd. in the year 1994-95 when the

offence is said to have been committed. The applicants

were earlier Directors of above said Company. However,

they have resigned from the Directorship on 21.04.1989

and in their place Smt. Poonam Gulati and Smt. Ragini

Gulati have been appointed as Director with effect from

05.05.1989. The learned counsel invited my attention to

the True Copy of Form 32 maintained with Registrar of

Companies. Learned counsel, on the basis of copy of

Form 32 at Annexure-ii, contended that the applicants

were not responsible for the conduct of business of the

company after 21.04.1989. It is further submitted that in

the absence of allegations in the complaint that the

applicants were responsible for the conduct and business

of company and further placing reliance on Form 32,

which shows that applicants resigned from Directorship

and new Directors were appointed in the year 1989 no

summons should have been issued to the applicants.

Thus, the prosecution launched against the applicants for

the above offences committed by Pilco Pharma Pvt. Ltd. is

abuse of the process of Court and hence interest of justice

requires that proceedings against the applicants be

quashed and set aside. It is further submitted that it was

for the non applicant-Investigating Officer to enquire from

the Registrar of Companies as to who were Directors of

the said Company. It is further submitted that it appears

that the Investigating Officer has failed to do so even

otherwise there are no allegations in the said complaint

about involvement of applicants in day-to-day conduct of

the business of the company and hence the complaint

raised does not make out any offence against above

applicants and the same is liable to be quashed and set

aside at the threshold itself.

7. It is further submitted that applicant no.1 is an

old aged person of 82 years and not in a position to

attend proceedings in Yavatmal from Kanpur due to ill

health. Several prosecutions are pending against the said

company for which the applicants are being troubled. It is

further submitted that when, in fact, there is no

relationship with said company of the applicants from way

back in 1989 and for that to face prosecution and attend

the dates of the prosecution would cause serious

prejudice to the applicants, who have no concern with the

company. Therefore, learned counsel would submit that

this application may be allowed.

8. Learned A.P.P., on the basis of affidavit-in-reply

filed on behalf of the complainant-State, would submit

that the complaint is filed on 14.10.1997 on the basis of

information given in Memorandum of Association, which

was registered on 23.01.1987 against the present

applicants as well as other two accused persons. On the

basis of affidavit-in-reply it is further submitted that on

05.05.1989, Smt. Poonam Gulati was appointed in place

of Director, R. P. Gulati i.e. accused no.1. It is mentioned

by accused that on 05.05.1989, wife of Mr. J. K. Gulati was

appointed in place of Director Shri J. K. Gulati i.e. accused

no.4 as per Form 32 of the Companies Act, 1956.

(Annexure 2, page no. 24). According to learned A.P.P. the

information was sought in respect of resignation of the

applicants from Registrar of Companies by complainant

and list of Directors was received on 31.03.1996 in which

name of Smt. Poonam Gulati is mentioned as Director

(Correspondence and Attending the visitors) and

appointed on 05.05.1989. It is further submitted that it is

nowhere mentioned that on the date of offence i.e. on

09.05.1995 or prior, accused no.1 i.e. Ramprakash Gulati

was not Director. Moreover, his date of resignation is not

given and documents to that effect were not provided.

He further submitted that Mr. Keval Kumar Gulati is

appointed on 21.04.1989 and under brief particulars of

change, it is mentioned that he has resigned from

Directorship and Smt. Pushpawant Gulati was appointed

as Director (No active duty) on 13.02.1989. Learned

A.P.P., therefore, would submit that as per information

received from the Registrar of Companies, it does not

mention the name of Smt. Ragini Gulati. There is only

mention of name of Smt. Poonam Gulati appointed on

05.05.1995 or prior to that accused no.4 i.e. Kewalkumar

Gulati was not Director. His date of resignation is not

mentioned and supporting documents are not provided.

It is further submitted that five applicants have been

charged and made accused nos.1 and 4 on the basis of

information in Memorandum of Association. It is pertinent

to note that in due course of time, if there is any change

in Directorship, then the documents to that effect were

not submitted by the accused. It is the responsibility of

the accused persons to submit documentary evidence

before the Chief Judicial Magistrate, Yavatmal, if they were

not Directors on or before 09.05.1995, and prayed for

appropriate relief. Therefore, the learned A.P.P. would

submit that burden is on the applicants to prove that they

were not Directors at the relevant time.

9. Learned A.P.P further submitted that whether

the applicants herein were responsible and incharge of

day-to-day affairs of the company has to be proved by

them and burden lies on the applicants/accused to prove

said fact by leading evidence before the Court below. In

support of his contention, learned A.P.P. invited my

attention to judgment of in N. Rangachari..vs..Bharat

Sanchar Nigam Ltd.; 2007 (2) Mh.L.J.(Crim.) 248;

Raghu Lakshminarayanan ..vs.. Fine Tubes; 2007

(2) Mh.L.J.(Cri.) 257; U. P. Pollution Control

Board ..vs.. Messrs Modi Distillery and others;

(1987) 3 Supreme Court Cases 684; and Prafulla

Maheshwari and others ..vs.. State of Maharashtra

and another; 2008(1) Mh. L. J. (Cri.) 211.

10. I have heard learned counsel for the

applicants and learned A.P.P. for the State. Contentions

raised by learned counsel for the applicants is two fold.

Firstly, when alleged offence took place, at the relevant

time, the applicants, who are original accused nos. 1 and

4, were not Directors of the Company. And secondly,

without admitting but assuming that they were Directors

at the relevant time when alleged offence took place,

there is no categorical averment in the complaint that

applicants were incharge of and were responsible to the

Company for the conduct of business of the company at

the time when offence was committed. Learned counsel

in support of his first contention invited my attention to

Annexure-ii, at page no.24 of the compilation i.e. Form 32

and submitted that both the applicants have resigned

from Directorship on 21.04.1989 and in their place Smt.

Poonam Gulati and Smt. Ragini Gulati have been

appointed as Directors with effect from 05.05.1989.

11. On careful perusal of Annexure-ii, Form 32,

said document would reveal that Ram Prakash Gulati and

Kewal Kumar Gulati have resigned with effect from

21.04.1989. The affidavit-in-reply filed on behalf of the

State in para 3, contends that name of Poonam Gulati as

Director (correspondence and attending the visitors) is

appointed on 05.05.1989. Said paragraph further

mentions that Keval Kumar Gulati's date of appointment

or change is 21.04.1989 and under brief particulars of

change it is mentioned that he has resigned from

directorship and Smt. Pushpawant Gulati was appointed

as Director (No active duty) on 13.02.1989. Therefore,

though it is vehemently argued by learned A.P.P. that the

basis of Annexure-ii, it cannot be said that the applicants

have resigned as contended by them and Smt. Poonam

Gulati and Pushpawant Gulati are appointed in their place,

perusal of affidavit-in-reply filed by State would clearly

show that Smt. Poonam Gulati came to be appointed on

05.05.1989, Smt. Pushpawant Gulati came to be

appointed on 13.02.1989. Case of the applicants is that

in their place, these two ladies came to be appointed.

12.

On careful perusal of the affidavit-in-reply filed

by non applicant-State, it would reveal that complainant

has grievance against Registrar of Companies for not

supplying adequate information. It is an admitted position

that the complainant has charged accused nos. 1 and 4

on the basis of information in Memorandum of

Association. It is also admitted position that the

Memorandum of Association is prepared in the year 1987

and even according to the complainant, alleged offence

had taken place on 09.05.1995. On perusal of affidavit-in-

reply filed by non applicant-State and upon hearing

learned A.P.P. for the State, it clearly emerges that the

complainant has not verified record from the Registrar of

Companies and without verifying the record only on the

basis of Memorandum of Association, which was prepared

in 1987 in which name of the applicants were mentioned

as Directors have been taken as base to add the

applicants as accused. In fact, case of the applicants is

that they have resigned from the Directorship of the

Company on 05.05.1989 and to that effect, Registrar of

Companies was informed by them. Therefore, it can safely

be said that the complainant, without application of mind

and verifying that at the relevant time i.e. on the date of

alleged offence whether applicants were Directors or not,

has added them as accused persons merely on the basis

of Memorandum of Association, which was prepared in

1987. Though, learned A.P.P. submitted that burden lies

on the applicants to prove that they have resigned on

05.05.1989, in my view, it was not difficult for the

complainant at least to have prima facie and preliminary

search before filing the complaint to see that who are the

persons responsible and incharge of the day-to-day affairs

of the company. After all, the record maintained by the

Director of Companies is public document/record.

13. Coming to the second contention raised by

learned counsel for the applicants that without admitting

but assuming that the applicants were Directors on the

date of offence, in that case provisions of Section 34 of

the Act are necessarily to be looked into. Section 34

mandates that the complaint should specifically state that

the applicants were responsible and incharge of the day-

to-day affairs and in the absence of such specific

averments in the complaint, the Magistrate should not

have issued summons and there is no question of

entertaining the complaint where specific statement is not

made.

14. It is an admitted position that in the

complaint, which is placed on record at Annexure-i from

pages 11 to 21, there is no averment that the applicants/

accused are Directors and they are incharge and

responsible to the conduct of the business of Company for

the date of alleged offence. The Hon'ble Supreme Court,

in number of reported pronouncements held that, it is

necessary to specifically aver in the complaint that when

the offence was committed accused was incharge of and

responsible for the conduct of business of company. This

averment is an essential requirement of relevant

provision of the Act and has to be made in the complaint.

Unless such averment is made in complaint, requirement

of said section cannot be said to be fulfilled.' It is further

held that, 'Merely being a Director of Company is not

sufficient to make a person liable unless he is responsible

and incharge of the day-to-day affairs of the company.'

This view is taken by the Hon'ble Supreme Court as well

as this Court in various cases.

Judgment of this Court in H. M. Dave ...vs..

Gitanjali Shah & Anr.; 1998 (4) L J 830; is also

founded on same footing i.e. presence of averments in

the complaint. In para 5 of the judgment, this Court has

held that, 'the averments against the petitioner-accused

No.4 having been found insufficient, the petition

succeeds..."

In K.P.G. Nair ..vs.. M/s. Jindal Menthol

India Ltd. 2001 (2) Supreme 311; Hon'ble Apex Court

observed in the facts and circumstances of that case that,

it is clear that the allegations made in the complaint do

not either in express words or with reference to the

allegations contained therein, make out a case that at the

time of commission of the offence, the appellant was in

charge of and was responsible to the Company for the

conduct of business. And, the Hon'ble Supreme Court

allowed the appeal taking note of the fact of absence of

pleadings in the complaint.

In case of Katta Sujatha ..vs.. Fertilizers &

Chemicals Travancore Ltd. & another; 2003 (1)

Bom. C. R. 517, Hon'ble Apex Court, after elaborating

the term "person in charge" held that, "the partner of a

firm is liable to be convicted for an offence committed by

the firm if he was in charge of and was responsible to the

firm for the conduct of the business of the firm or if it is

proved that the offence was committed with the consent

or connivance of, or was attributable to any neglect on

the part of the partner concerned."

In Monaben Ketanbhai Shah ..vs.. State

of Gujarat; 2004-JT-6-309; the Supreme Court while

interpreting provisions of Section 141 of the Negotiable

Instruments Act held that the present case is of total

absence of requisite averments in the complaint.

In S. M. S. Pharmaceuticals Limited ..vs..

Neeta Bhalla and another; 2005 (4) Mh. L. J. 731,

Larger Bench of the Hon'ble Supreme Court held that, "A

director in a company cannot be deemed to be in charge

of and responsible to the company for conduct of its

business. The requirement of section 141 is that the

person sought to be made liable should be in charge of

and responsible for the conduct of the business of the

company at the relevant time. This has to be averred as

a fact as there is no deemed liability of a director in such

cases."

In Sabitha Ramamurthy and anr. ..vs..

R.B.S. Channabasavaradhya; (2006) 10 Supreme

Court Cases 581; The Hon'ble Supreme Court held that

the vicarious liability can be inferred so far as a company

registered or incorporated under the Companies Act,

1956, is concerned, only if the requisite statements,

which are required to be averred in the complaint petition,

are made so as to make the accused therein vicariously

liable for the offence committed by the company.

It is also necessary to take note of judgment

in N. K. Wahi ..vs.. Shekhar Singh and others;

(2007) 9 Supreme Court Cases 481. The Hon'ble

Supreme Court, in para 8 held that, "To launch a

prosecution, therefore, against the alleged Directors

there must be a specific allegation in the complaint as to

the part played by them in the transaction. There should

be clear and unambiguous allegation as to how the

Directors are incharge and responsible for the conduct of

the business of the company. The description should be

clear. It is true that precise words from the provisions of

the Act need not be reproduced and the court can always

come to a conclusion in facts of each case. But still, in

the absence of any averment or specific evidence the net

result would be that the complaint would not be

entertainable."

In Saroj Kumar Poddar ..vs.. State (NCT

of Delhi) and another; 2007 SCCL.COM 22; the

Hon'ble Supreme Court held in para 5 that, "With a view

to make a Director of a Company vicariously liable for the

acts of the Company, it was obligatory on the part of the

complainant to make specific allegations as are required

in law.

In S. M. S. Pharmaceuticals Ltd. ..vs..

Neeta Bhalla & Anr.; 2007 ALL MR (Cri) 870 (SC),

also, it is held that, "only because respondent no.1 was a

party to said resolution it by itself did not lead to an

inference that she was actively associated with

management of the affairs of the Company."

Yet in another reported judgment in

Ramrajsingh ..vs.. State of Madhya Pradesh and

another; (2009) 6 Supreme Court Cases 729. Here,

the Hon'ble Supreme Court, placing reliance on its earlier

decisions and law laid down from time to time held that it

is necessary to specifically aver in a complaint under

Section 141 that at the time of offence was committed,

the person accused was in charge of, and responsible for

the conduct of business of the company.

In K. K. Ahuja ..vs.. V. K. Vora and

another; (2009) 10 Supreme Court Cases 48; Their

Lordships have held that, "In case of a Director, secretary

or manager [as defined in Section 2 (24) of the

Companies Act] or a person referred to in clauses (e) and

(f) of Section 5 of the Companies Act, an averment in the

complaint that he was in charge of, and was responsible

to the company, for the conduct of the company is

necessary to bring the case under Section 141(1) of the

Act."

15.

Taking over all view of the matter, it will not be

out of place to mention that provisions of Section 34 of

the Act is pari materia to provisions of Section 141 of the

Negotiable Instruments Act and, therefore, case in hand is

squarely covered by judgments of the Apex Court cited

supra.

16. Now, in the light of above cited judgments,

let's have a look to the facts and circumstances of the

present case. It would be appropriate to test the case in

hand on the touchstone of law laid down in the above

referred pronouncements. It is admitted position that in

the complaint there are no averments that the applicants/

accused were incharge and responsible for the conduct of

business of company at the time of commission of the

alleged offence. Therefore, the case in hand is squarely

covered by the various pronouncements by the Hon'ble

Supreme Court.

17. Though learned A.P.P has invited my attention

to judgments of this Court and judgments of Hon'ble

Supreme Court in N. Rangachari ..vs.. Bharat Sanchar

Nigam Ltd. supra, on perusal of said judgment, it reveals

that there was specific averment in the complaint that the

accused therein were responsible and incharge of the

day-to-day affairs of the society. So also, judgment of this

Court in Prafulla Maheshwari and others; supra, has

no application in the facts and circumstances of the case

since in that case also there was averment in the

complaint that accused nos. 2 to 9 therein are looking

day-to-day business of the Company. This Court, in the

said judgment, in para 7 has taken a note of averments in

the complaint that the applicants therein, who are original

accused nos. 2 to 4 and 8, are looking day-to-day

business of the company. It is also noteworthy that in

view of the larger Bench judgment of the Hon'ble

Supreme Court in the case of S. M. S. Pharmaceuticals

Limited (supra), the judgments cited by learned A.P.P. in

case of U. P. Pollution Control Board cited supra will

have no application because said judgment is earlier in

point of time to the larger Bench Judgment of the Hon'ble

Supreme Court.

18. In the result, the application succeeds. Rule

made absolute in terms of prayer clause 1 and 2 of the

application. The main complaint no. 271/1996 is quashed

and set aside qua present applicants.

The application is allowed and disposed of

accordingly. Miscellaneous applications, if any stand

disposed of.

JUDGE

kahale