Jharkhand High Court

Mr. Kamal Aksha Uggappa Mada vs The State Of Jharkhand on 23 August, 2022

                                          1

                 IN THE HIGH COURT OF JHARKHAND, RANCHI
                            Cr.M.P. No. 3524 of 2019
                                      ----

1.Mr. Kamal Aksha Uggappa Mada

2.Ms. Vinita Deshbandhu Gupta ..... Petitioners

-- Versus --

1.The State of Jharkhand

2. Inspector of Drugs, Hazaribagh Addl. Charge, Ramgarh, Sadar Hospital Premises, Hazaribagh, P.O. Hazaribagh, P.S. Hazaribagh, District- Hazaribagh, Jharkhand.

...... Opposite Parties With Cr.M.P. No. 3597 of 2019

----

        Mr. Rajendra Ambalal Shah                           ..... Petitioner
                                   --    Versus     --
        1.The State of Jharkhand

2. Inspector of Drugs, Hazaribagh Addl. Charge, Ramgarh, Sadar Hospital Premises, Hazaribagh, P.O. Hazaribagh, P.S. Hazaribagh, District- Hazaribagh, Jharkhand.

...... Opposite Parties

----

CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

---

For the Petitioners :- Mr. Saket Upadhyay, Advocate For the State :- Mr. Jitendra Pandey, A.P.P.

(in Cr.M.P. No. 3524/2019) Mr. Sardhu Mahto, A.P.P.

( In Cr.M.P. No. 3597/2019)

----

5/23.08.2022 Heard Mr. Saket Upadhyay, learned counsel for the petitioners

and Mr. Jitendra Pandey and Mr. Sardhu Mahto, learned counsel for the

State.

2. In both the petitions common facts are involved and similar

complaint has been challenged hence, both the petitions are being heard

together with the consent of the parties.

3. In both these petitions prayers have been made for quashing

the entire criminal proceeding as well as the order dated 28.06.2019

whereby cognizance has been taken under sections 27(d), 28A of Drugs

and Cosmetics Act, 1940 against the petitioners in connection with G

(Drugs and Cosmetics) Case No. 2/2011, pending in the court learned

District & Additional Sessions Judge-II, Ramgarh.

4. The complaint has been filed by the Drug Inspector alleging

therein that on 15.05.2010 the Inspector of Drugs, Hazaribag Addl.

Charge, Ramgarh Sh. Arun Kumar, Poorvi Singhbhum, Jamshedpur along

with Sh. B.K. Singh, Police Inspector, C.B.I., Ranchi inspected and

collected drugs sample of 9 items from the medical store of Central

Hospital, Nai Sarai, Ramgarh in the presence of one Dr. Pran Bandhu

Mahapatra, Dy. C.M.O., I/C Stores, Central Hospital, Nai Sarai, Ramgarh,

allegedly one portion of each sealed sample and one copy of form 17 was

handed over to Dy. C.M.O, I/C stores, Central Hospital, Nai Sarai,

Ramgarh, he was allowed to put his signature and all the sealed samples.

It is alleged that the sample of one medicine Lupidine Solution

(Povidone Iodine Solution I.P.) 500 ml., B.No. 23029B, mfg, date Feb.

2009, Exp. Date January, 2011, Mfd. By M/s Biogenetic Drugs Pvt. Ltd.,

Jharmazri, Baddi, District Solan, (HP)-174103, India having valid

manufacturing Licence No. MNB/05/150, were inspected and after lab

testing by government analyst, CDL Kolkata was declared to be "Not of

Standard Quality" for the reason that " the sample does not confirm to

I.P. with respect to content of "total iodine" As per the government

analyst the iodine in the sample was found to be only 61.0% of declared

amount on the label. On the basis of these allegations, the complaint has

been lodged.

5. Mr. Saket Upadhyay, the learned counsel for the petitioners

submits that in Cr.M.P. No. 3524 of 2019 petitioner no. 1 is independent

Director of Lupidine Company and petitioner no. 2 is Executive Director

of Lupidine Company. He further submits that in Cr.M.P. No. 3597 of 2019

the petitioner is independent director of the said company. He further

submits that learned court has taken cognizance under sections 27(d),

28(A)) of the Drugs and Cosmetics Act, 1940 against the petitioners. He

further submits that the petitioners are the Directors of Lupidine

Company . He submits that there is no averments on the allegation in the

complaint against the petitioners who are the Directors of the said

company. 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 petitioners

are 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."

6. 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 petitioners who are the

Directors 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."

7. 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 Mittal3 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."

8. He submits that under section 34 of the said Act the petitioners

are not vicariously liable as the company is not made accused and in

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

9. Per contra, Mr. Jitendra Pandey, the learned counsel appearing for

the respondent State submit that in view of section 34 of 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 cognizance has rightly been taken by the learned court.

10. 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 and the Court

has also read the same along with the learned counsel for the petitioners

as well as the O.P.No.2 and finds that there is no averment in the entire

complaint about the role played by these petitioners who are the

Directors of Lupidine Company. 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 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.