Jharkhand High Court

Nitin Raojibhai Desai vs The State Of Jharkhand on 10 August, 2022

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        IN THE HIGH COURT OF JHARKHAND AT RANCHI
                     Cr.M.P. No. 2410 of 2018

     Nitin Raojibhai Desai, son of late Mr. Raojibhai Desai, aged about 75 years,
     resident of 457, Sindh Housing Society, Aundh, P.O. and P.S. Aundh, District-
     Pune-411007, Maharashtra ...... Petitioner
                            Versus

1.The State of Jharkhand
2. Deputy Director, Food & Drugs Administration, Govt. of Jharkhand at Jilla-
Yakshma Hospital, Rajendra Nagar, Sakchi, Jamshedpur, P.O.+ P.S. Sakchi, District-
East Singhbhum                         ...... Opposite Parties
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CORAM:        HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI
                         ---------
For the Petitioner       : Mr. Indrajit Sinha, Advocate
                          Mr. Saket Upadhyay, Advocate
For the State            : Mr. Suraj Verma, Spl. P.P.
                         .........
03/Dated: 10/08/2022

Heard Mr. Indrajit Sinha assisted by Mr. Saket Upadhyay, learned

counsel for the petitioner and Mr. Suraj Verma, learned counsel for the State.

2. The present petition has been filed for quashing entire criminal

proceeding arising out of Complaint Case C-2 Case No. 21/2014, including order

taking cognizance dated 15.01.2014 whereby cognizance under sections 17, 18(a)

(i) and 27(d) of the Drugs and Cosmetics Act, 1940 has been taken against the

petitioner, pending in the Court of learned Judicial Magistrate, Ist Class at

Jamshedpur.

3. O.P. No. 2 has filed complaint alleging therein that 3 batches of Zyrop

2k injection of Batch No. BL113 & BL117 and Zyrop 4k injection of Batch No. BM

103 were inspected at the premises of warehouse located at Jamshedpur and

found that the storage instruction on the inner zipper that the medicine to be

stored at 2 degree Celsius to 8 degree Celsius is not given on the outer package

therefore the medicine labeling norms are violated and the medicine is

misbranded.

4. Mr. Indrajit Sinha, learned counsel appearing for the petitioner

submits that on lodging of the complaint, the learned CJM, Jamshedpur has taken

cognizance under sections 17, 18(a)(i) and 27(D) of the Drugs and Cosmetics Act,

1940 against the petitioner. He further submits that the petitioner is independent

director in Cadila Healthcare Ltd. He submits that there is no averments on the

allegation in the complaint against the petitioner, who is Director of the said

company/firm. He submits that in view of section 34 of the Drugs and Cosmetics

Act, 1940 (hereinafter referred to be as the Act.), the persons, who are Incharge

and looking after the day to day affairs of the company is only required to be

prosecuted. He submits that there is no averments in this regard. In the complaint

there is no averments that the petitioner is looking after the day to day affairs of

the company. To buttress this argument he relied in the case of State of Haryana

v. Brij Lal Mittal and Others, (1998) 5 SCC 343 and relied on paragraph no. 8

of the said judgment, which is quoted hereinbelow:-

"8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads as under:

"34. Offences by companies.--(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence."

It is thus seen that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. From the complaint in question we, however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its business."

5. He further submits that the company is not made an accused and in

absence of the company, being made an accused in the complaint, the vicarious

liability cannot be fastened against the petitioner, who is Director of the company.

To buttress his argument, he relied in the case of Sunil Bharti Mittal v. Central

Bureau of Investigation, (2015) 4 SCC 609, paragraph nos. 42, 43, 44 and

48 of the said judgment are quoted hereinbelow:-

"42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.

43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.

44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada, the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.

48. Sine qua non for taking cognizance of the offence is the application of mind by the Magistrate and his satisfaction that the allegations, if proved, would constitute an offence. It is, therefore, imperative that on a complaint or on a police report, the Magistrate is bound to consider the question as to whether the same discloses commission of an offence and is required to form such an opinion in this respect. When he does so and decides to issue process, he shall be said to have taken cognizance. At the stage of taking cognizance, the only consideration before the court remains to consider judiciously whether the material on which the prosecution proposes to prosecute the accused brings out a prima facie case or not."

6. On the same point he further relied in the case of Shiv Kumar Jatia v.

State of NCT of Delhi, (2019) 17 SCC 193 and relied on paragraph Nos. 21

and 22 of the said judgment, which are quoted hereinbelow:-

"21. By applying the ratio laid down by this Court in Sunil Bharti Mittal it is clear that an individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused. Further in Maksud Saiyed v. State of Gujarat this Court has examined the vicarious liability of Directors for the charges levelled against the Company. In the aforesaid judgment this Court has held that, the Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company, when the accused is a company. It is held that vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further held that statutes indisputably must provide fixing such vicarious liability. It is also held that, even for the said purpose, it is obligatory on the part of the

complainant to make requisite allegations which would attract the provisions constituting vicarious liability.

22. In the judgment of this Court in Sharad Kumar Sanghi v. Sangita Rane while examining the allegations made against the Managing Director of a Company, in which, company was not made a party, this Court has held that when the allegations made against the Managing Director are vague in nature, same can be the ground for quashing the proceedings under Section 482 CrPC. In the case on hand principally the allegations are made against the first accused company which runs Hotel Hyatt Regency. At the same time, the Managing Director of such company who is Accused 2 is a party by making vague allegations that he was attending all the meetings of the company and various decisions were being taken under his signatures. Applying the ratio laid down in the aforesaid cases, it is clear that principally the allegations are made only against the company and other staff members who are incharge of day-to-day affairs of the company. In the absence of specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned."

7. Learned counsel, accordingly, submits that Section 34 of the said Act,

the petitioner is not vicariously liable, as company is not made accused and in view

of the above judgments, this petition is fit to be allowed.

8. Per contra, Mr. Suraj Verma, learned Spl.P.P. appearing for the State

submits that in view of Section 34 of the said Act, whereunder the offence under

this Act is committed by any person when the offence was committed and was the

Incharge and responsible for the company for conduct of the day to day affairs of

the company as well as the company shall be deemed to be liable and punished

accordingly. He submits that vicarious liability is there. The learned court has

rightly taken cognizance.

9. The Court has gone through the materials on record. On perusal of the

complaint petition, contained in Annexure-1, which has been minutely placed by

the learned counsel for the petitioners, the Court finds that there is no averment in

the entire complaint about the role played by the petitioner who is Director of

Cadila Healthcare Ltd. For correct appreciation, section 34 of the Cosmetics and

Pharmaceuticals Act is quoted below:

"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 subsection 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. On a plain reading of the said Section, it appears that vicarious liability

on a person is prescribed for an offence committed under the Act by a company

arises, if at material time he was Incharge and was also responsible for the day to

day affairs of the company. In the entire complaint, there is no averment as to

what are the role played by the petitioner, who happened to be the Director of the

said company. If the company is responsible, the law is well settled that the

company is required to be made an accused in the case and in the case in hand

the company has not been made an accused and the case of the petitioner is

covered in the light of the judgment of Hon'ble Supreme Court in the cases of

'State of Haryana v. Brij Lal Mittal and Others' and 'Shiv Kumar Jatia v.

State of NCT of Delhi' (supra).

11. In view of the above facts and the reasons and analysis, the complaint

as well as the entire criminal proceeding arising out of Complaint Case C-2 Case

No. 21/2014, including order taking cognizance dated 15.01.2014 whereby

cognizance under sections 17, 18(a) (i) and 27(d) of the Drugs and Cosmetics Act,

1940 has been taken against the petitioner, pending in the Court of learned

Judicial Magistrate, Ist Class at Jamshedpur, are hereby, quashed.