Karnataka High Court
Smt Seema Chandrashekar vs State Of Karnataka on 7 November, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 15.09.2025
Pronounced on : 07.11.2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 07TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.6147 OF 2024
BETWEEN:
1 . SMT.SEEMA CHANDRASHEKAR
W/O. M.CHANDRASHEKAR,
AGED ABOUT 54 YEARS,
R/AT:NO. 32, MANJUGULABI,
10TH MAIN, NEAR GANESH TEMPLE,
HANUMATHNAGARA,
BENGALURU SOUTH,
BENGALURU - 560 019.
PROPRIETOR AND REGISTERED
PHARMACIST OF
M/S. SREE MANJUNATHA MEDICALS
O/AT:NO.15/5, GROUND FLOOR,
KANAKPURA ROAD,
BASAVANAGUDI,
BENGALURU - 560 004.
2 . SRI RAGHAVENDRA M.,
S/O A.MANJUNATH
AGED ABOUT 44 YEARS,
R/AT:NO.32, MANJUGULABI,
10TH MAIN, SRI RANGA ROAD,
HANUMANTHNAGARA,
2
BENGALURU SOUTH,
BENGALURU - 560 019.
PERSON IN CHARGE OF
M/S. SREE MANJUNATHA MEDICALS
O/AT:NO.15/5, GROUND FLOOR,
KANAKPURA ROAD, BASAVANAGUDI,
BENGALURU - 560 004.
... PETITIONERS
(BY SMT.SHRIDEVI BHOSALE M., ADVOCATE)
AND:
STATE OF KARNATAKA
BY DRUGS INSPECTOR-1
BENGALURU CIRCLE -II
BENGALURU - 560 027
REPRESENTED BY
STATE PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA,
BENGALURU - 560 001.
... RESPONDENT
(BY SRI B.N.JAGADEESHA, ADDL.SPP )
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO i. SET ASIDE THE ORDER DATED 16.12.2023
IN C.C.NO.123/2023 PASSED BY THE SPECIAL COURT FOR
ECONOMIC OFFENCES, BENGALURU, THEREBY TAKING
COGNIZANCE ISSUING SUMMONS, AGAINST THESE PETITIONERS
ARRAYING THEM AS ACCUSED NO.3 AND 4 FOR THE OFFENCE
P/U/S 27(c), 28 AND 28-A OF THE DRUGS AND COSMETICS ACT
VIDE ANNEXURE-A; ii. QUASH THE ENTIRE PROCEEDINGS IN
C.C.NO.123/2023 PENDING ON THE FILE OF SPECIAL COURT FOR
ECONOMIC OFFENCES, BENGALURU, AGAINST THESE PETITIONERS
WHO ARE ARRAYED AS ACCUSED NO.3 AND 4 FOR THE OFFENCE
P/U/S 27(c), 28 AND 28-A OF THE DRUGS AND COSMETICS ACT
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VIDE ANNEXURE-A; iii. QUASH THE COMPLAINT IN
C.C.NO.123/2023 PENDING ON THE FILE OF HON'BLE SPECIAL
COURT FOR ECONOMIC OFFENCES, BENGALURU, AGAINST THESE
PETITIONERS WHO ARE ARRAYED AS ACCUSED NO.3 AND 4 FOR
THE OFFENCE P/U/S 27(c), 28 AND 28-A OF THE DRUGS AND
COSMETICS ACT VIDE ANNEXURE-B.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 15.09.2025, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
Petitioners-accused Nos.3 and 4 are at the doors of this Court
calling in question an order dated 16-12-2023 passed by the
Special Court for Economic Offences, Bengaluru, taking cognizance
of the offence punishable under Section 27(c), 28 and 28-A of the
Drugs and Cosmetics Act, 1940 (hereinafter referred to as 'Act' for
short). The petitioners, as a consequence, have sought for
quashment of the complaint and the entire proceedings in
C.C.No.123 of 2023.
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2. Facts in brief, germane, are as follows:
2.1. A complaint comes to be registered on 14-12-2023
against these petitioners among others, alleging that the accused
No.1-Company by name M/s. Mirana Healthcare Pvt. Ltd., has
manufactured and further sold drugs without having drug
manufacturing licences and accused No.2, is the Director of the said
Company and the authorized person responsible for the day-to-day
activities. Against these petitioners it is alleged that, petitioner
No.1/accused No.3 being the Proprietor and the registered
Pharmacist of M/s. Sree Manjunath Medicals, Bangalore and
petitioner No.2/accused No.4 being the person in-charge of the said
firm, were engaged in purchase, stock and sale of Mirakul sanitizer
manufactured by accused Nos.1 and 2 and New Bioclean nourishing
hand sanitizer, both of which did not qualify as a standard quality
drug and are manufactured at an unlicensed firm. On 26-05-2020,
the then Assistant Drugs Controller-1, Bangalore on a routine
inspection of the medical shops, found 62 Mirakul sanitizer bottles
of 60 ml. each and 41 New Bioclean nourishing hand sanitizer of
100 ml. each in the medical shop run by the petitioners. The
samples were seized and sent for scientific examination in which
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Mirakul sanitizer was reported that it was of standard quality and
the New Bioclean nourishing hand sanitizer was not of standard
quality.
2.2. Upon completion of investigation, a complaint is filed on
the aforesaid allegations against 4 accused, arraigning these
petitioners as accused Nos.3 and 4. On the receipt of the complaint
dated 16-12-2023, the learned Special Judge takes cognizance of
the offence against all the accused for the offences punishable
under Sections 27(c), 28 and 28-A of the Act. It is the taking of
cognizance which has driven the petitioners to this Court in the
subject petition.
3. Heard Smt Shridevi Bhosale M, learned counsel appearing
for petitioners and Sri B N Jagadeesha, learned Additional State
Public Prosecutor appearing for the respondent.
4. The learned counsel appearing for the petitioners would
contend that the sample was seized on 26-05-2020 and sent for
scientific examination. The scientific examination report was
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received on 29-07-2020. The complaint is registered 3 and a half
years after the receipt of the report. It is therefore a case where
the complaint is registered beyond limitation. Even otherwise, the
learned counsel would contend that, the report in respect of New
Bio-clean hand sanitizer is not that of standard quality. The report
is said to be rendered in a format that is not prescribed under the
statute to hold it to be a spurious drug under Section 17B of the
Act. The learned counsel would contend that the complaint and the
entire material does not in any way support the case of the
prosecution, as no document or the ledger record from the
petitioners is seized for either purchase or sale of drug. The
learned counsel submits that the seizing of the drugs from the
premises of the petitioners is itself in contravention of Section 23(4)
of the Act.
5. Per-contra, the learned Additional State Public Prosecutor
Sri B.N.Jagadeesh would submit that the respondent-Drugs
Inspector has, after investigation filed a complaint. It is for the
petitioners to come out clean in a full blown trial, as admittedly one
sample so collected has turned out to be not of standard quality.
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Therefore, the petitioners will have to prove their case before the
concerned Court in a full blown trial.
6. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record.
7. The afore-narrated facts, link in the chain of events are all
a matter of record. A complaint comes to be registered by the
respondent before the Special Court for Economic Offences on
14-12-2023 of a search that is conducted three and a half years
ago. The petitioners are not the manufacturers of the alleged
drugs. They were running a medical shop in which the said drugs
were found. Section 19 of the Act becomes necessary to be noticed
in respect of the petitioners in particular, who are not
manufacturers of the drugs. Section 19 reads as follows:
"19. Pleas--(1) Save as hereinafter provided in this
section, it shall be no defence in a prosecution under this
Chapter to prove merely that the accused was ignorant of the
nature, substance or quality of the drug [or cosmetic] in respect
of which the offence has been committed or of the
circumstances of its manufacture or import, or that a purchaser,
having bought only for the purpose of test or analysis, has not
been prejudiced by the sale.
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(2) [For the purposes of Section 18 a drug shall not be
deemed to be misbranded or adulterated [or spurious] or to be
below standard quality nor shall a cosmetic be deemed to be
misbranded or to be below standard quality] only by reason of
the fact that--
(a) there has been added thereto some
innocuous substance or ingredient because
the same is required for the manufacture or
preparation of the drug [or cosmetic] as an
article of commerce in a state fit for carriage
or consumption, and not to increase the
bulk, weight or measure of the drug [or
cosmetic] or to conceal its inferior quality or
other defects; or
(aa) [* * *]
(b) in the process of manufacture, preparation
or conveyance some extraneous substance
has unavoidably become intermixed with it:
provided that this clause shall not apply in
relation to any sale or distribution of the
drug [or cosmetic] occurring after the vendor
or distributor became aware of such
intermixture.
[(3) A person, not being the manufacturer of a
drug or cosmetic or his agent for the distribution thereof,
shall not be liable for a contravention of Section 18 if he
proves--
(a) that he acquired the drug or cosmetic
from a duly licensed manufacturer,
distributor or dealer thereof;
(b) that he did not know and could not, with
reasonable diligence, have ascertained
that the drug or cosmetic in any way
contravened the provisions of that
section; and
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(c) that the drug or cosmetic, while in his
possession, was properly stored and
remained in the same state as when he
acquired it.]"
(Emphasis supplied)
Sub-section (3) of Section 19 mandates that a person not being a
manufacturer of a drug and despite reasonable diligence, could not
have known that the drug or the cosmetic he is selling in any way
contravened the provisions of the Section, is not liable for any
contravention of Section 18. The petitioners are neither
manufacturers, nor the agents of manufacturers.
8. The drugs involved are hand sanitizers, alleged to have
been seized from the medical shop run by the petitioners. It cannot
be thus said that the petitioners have not exercised due diligence
while selling the said hand sanitizer. The drugs sample was taken
three and a half years prior to the registration of the complaint and
is placed before the Court on a report, which is again 3 years old.
If evidence has to be led or a second scientific examination has to
be done, the sanitizer would have virtually become impossible to be
subjected to another scientific examination.
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9. A coordinate bench of this Court in Crl.P.15263 of 2011
and connected cases disposed on 19-11-2011 considering
identical grounds, has held as follows:
".... ..... ....
10. In order to adjudicate and answer the points
formulated herein above it would be necessary to divide the
following order into Five parts namely History of the
legislation, Relevant Provisions of Drugs and Cosmetics Act,
Authorities on the issue, Facts and Answers to the points
formulated.
I. HISTORY OF LEGISLATION & PROVISIONS OF LAW.
11. The Central Legislative Assembly to give effect
to the recommendations of drugs an enquiry committee
constituted by it to regulate import of drugs into British India
introduced a bill in 1937 which came to be referred to select
committee which opined that a more comprehensive
measure for the uniform control, manufacture and
distribution of drugs as well as import was desirable and as
such the Central Government suggested to Provincial
Governments to pass a resolution empowering the Central
Legislature to pass an Act for regulating such matters
relating to control of Drugs which falls within the Provincial
sphere. On such resolution being passed by the Provinicial
legislatures, the drugs bill was introduced in the Central
Legislative Assembly. After having considered to what extent
the provision can be made to secure the maintenance of
uniformity in standards and any other important matters in
which uniformity is desirable, the Central Legislative
Assembly passed the bill and assent of the then Governor
General of India was given on 10th April 1940 and thus came
on the Statute Book Drugs Act, 1940. Subsequently same
came to be amended by adding the words "and Cosmetics"
and now it stands as "Drugs and Cosmetics Act, 1940".
12. Chapter II of the Act deals with Constitution of
Drugs Technical Advisory Board, Central Drugs Laboratory
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and Drugs Consultative Committee. Chapter III relates to
import of Drugs and Cosmetics, power of Central
Government to make rules, punishment for offences relating
thereto, power of confiscation and jurisdiction of the court to
try the offence punishable thereunder. Chapter IV is the one
which relates to facts and circumstances on hand namely it
relates to manufacture, sale and distribution of drugs and
cosmetics. Section 18A mandates every person not being
the manufacturer of drug or cosmetic to disclose to the
Inspector the name, address and other particulars of the
person from whom he acquired the drug or cosmetic. As per
section 21 Central Government or State Government is
empowered to appoint such persons as it thinks fit as
"Inspectors" by prescribing their qualifications whose duties
are circumscribed by section 22 of the Act. The procedure
required to be adopted by inspectors while taking sample of
drugs under this chapter is regulated by Section 23. Chapter
V relates to Miscellaneous provisions and Section 34 explains
as to who are to be proceeded with when offence has been
committed by a company.
II. "PROVISIONS OF DRUGS & COSMETICS ACT"
Some of the provisions which are relevant for the
purposes of considering rival contentions urged in these
petitions are extracted herein below. Section 18(A), 18(B)
and 21 reads as under:
Section 18A. Disclosure of the name of the
manufacturer, etc. - Every person, not being the
manufacturer of a drug or cosmetic or his agent for the
distribution thereof, shall, if so required, disclose to the
Inspector the name, address and other particulars of the
person from whom he acquired the drug or cosmetic.
Section 18B. - Maintenance of records and furnishing
of information - Every person holding a licence under
clause (c) of section 18 shall keep and maintain such
records, registers and other documents as may be
prescribed and shall furnish to any officer or authority
exercising any power or discharging any function under this
Act such information as is required by such officer or
authority for carrying out the purposes of this Act.
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Section 21:- Inspectors -(1) The Central Government or
a State Government may by notification in the Official
Gazette, appoint such persons as it thinks fit, having the
prescribed qualifications, to be Inspectors for such areas as
may be assigned to them by the Central Government of the
State Government, as the case may be.
(2) The powers which may be exercised by an Inspector and
the duties which may be performed by him, the drugs or
[classes of drugs or cosmetics or classes of cosmetics] in
relation to which and the conditions, limitations or
restrictions subject to which, such powers and duties may
be exercised or performed shall be such as may be
prescribed.
(3) No person who has any financial interest [in the import,
manufacture or sale of drugs or cosmetics] shall be
appointed to be an Inspector under this section.
(4) Every Inspector shall be deemed to be a public servant
within the meaning of section 21 of the Indian Penal Code
(45 of 1860), and shall be officially subordinate to such
authority [having the prescribed qualifications,] as the
Government appointing him may specify in this behalf]
Section 23. Procedure of Inspectors:- (1) Where an
Inspector takes any sample of a drug (or cosmetic) under
this Chapter, he shall tender the fair price thereof and may
require a written acknowledgement therefor.
(2) Where the price tendered under sub-section (1)
is refused or where the Inspector seizes the stock of any
drug (or cosmetic) under clause (c) of section 22, he shall
tender a receipt therefore in the prescribed form.
(3) Where an Inspector takes a sample of a drug (or
cosmetic) for the purpose of test or analysis, he shall
intimate such purpose in writing in the prescribed form to
the person from whom he takes it and, in the presence of
such person unless he wilfully absents himself, shall divide
the sample into four portions and effectively seal and
suitably mark the same and permit such person to add his
own seal and mark to all or any of the portions so sealed
and marked:
Provided that where the sample is taken from
premises wehreon the drug (or cosmetic) is being
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manufactured, it shall be necessary to divide the sample
into three portions only:
Provided further that where the drug (or cosmetic) is
made in containers of small volume, instead of dividing a
sample as aforesaid, the Inspector may, and if the drug (or
cosmetic) be such that it is likely to deteriorate or be
otherwise damaged by exposure shall, take three or four, as
the case may be, of the said containers after suitably
marking the same and, where necessary, sealing them.
(4) The Inspector shall restore one portion of a
sample so divided or one container, as the case may be, to
the person from whom he takes it, and shall retain the
remainder and dispose of the same as follows:-
(i) one portion or container he shall forthwith send
to the Government Analyst for test or analysis;
(ii) the second he shall produce to the Court before
which proceedings, if any, are instituted in
respect of the drug (or cosmetic); and
(iii) the third, where taken, he shall send to the
person, if any, whose name, address and other
particulars have been disclosed under section
18A.)
(5) Where an Inspector takes any action under clause (c) of
section 22.
(a) he shall use all despatch in ascertaining whether or not
the drug (or cosmetic) contravenes any of the
provisions of section 18 and, if it is forthwith revoke
the order passed under the said clause or, as the case
may be, take such action as may be necessary for the
return of the stock seized;
(b) if he seizes the stock of the drug (or cosmetic), he
shall as soon as may be, inform (a Judicial Magistrate)
and take his orders as to the custody thereof;
(c) without prejudice to the institution of any prosecution,
if the alleged contravention be such that the defect
may be remedied by the possessor of the drug (or
cosmetic), he shall, on being satisfied that the defect
has been so remedied, forthwith revoke his order
under the said clause.
(6) Where an Inspector seizes any record, register,
document or any other material object under clause (cc)
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of sub-section (1) of section 22, he shall, as soon as
may be, inform (a Judicial Magistrate) and take his
orders as to the custody thereof)
(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.
AUTHORITIES/CITATIONS:-
(i) 1981(2) SCC 454 -
Drugs Inspector, Palace Road, Bangalore
Vs
Dr.B.K.Krishnaiah and Another
"4. This order of the Magistrate was challenged before the
High Court, The High Court considered Section 34(1) of the
Act and held that the complainant "has not complained
against accused 2 and 4, the petitioners in this case
making out that they were, in any manner, in charge of
and responsible to the firm, namely accused 1 for the
conduct of the business of the firm, namely, accused 1."
6. The only question for consideration for the High Court
in this case was whether the accused or any of them were
liable. In paragraph 17 of the complaint petition the
15
complainant quoted the provisions of the Act. In addition,
he cited the names of witnesses, submitted a list of
documents including a copy of the partnership deed at
Item 13 of the list of documents. The learned Magistrate
perused the partnership deed and prima facie found that
the respondents as well as the deceased accused were
liable for the offence and proceeded for trial. The learned
High Court committed an error in holding that there was
no allegation that the respondents were not (sic)
responsible for the management and conduct of the firm.
The extent of their liability would be established by
evidence during trial. In our opinion the judgment of the
learned High Court is erroneous and is liable to be set
aside".
(ii) AIR 1998 SC 2327 - State of Haryana Vs Brij Lal Mittal
and Others.
"10. Since we are in respectful agreement with the view
to expressed we dismiss this appeal and uphold the
order of the High Court quashing the prosecution against
the three respondents on a different ground".
(iii) 2011 (1) SCC (Crimes) 195 -State of NCT of Delhi
through prosecuting Officer, Insecticides,
Government of NCT, Delhi. Vs Rajiv Khurana
"17. The ratio of all these cases is that the complainant is
required to state in the complaint how a Director who is
sought to be made an accused, was in charge of the
business of the company or responsible for the conduct of
the company's business. Every Director need not be and is
not in charge of the business of the company. If that is the
position with regard to a Director, it is needless to
emphasise that in the case of non-Director officers, it is all
the more necessary to state what were his duties and
responsibilities in the conduct of business of the company
and how and in what manner he is responsible or liable.
20. The legal position which emerges from a series of
judgments is clear and consistent that it is imperative to
specifically aver in the complaint that the accused was in
charge of and was responsible for the conduct of the
business of the company. Unless clear averments are
specifically incorporated in the complaint, the respondent
cannot be compelled to face the rigmarole of a criminal
trial".
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(iv) Pepsico India holdings Vs Food Inspector &
Another- Crl. Appeal No.836/2010-Disposed
of on 18.11.2010
"29. From the submissions made on behalf of the
respective parties, it is apparent that the width of the
dispute to be settled in these Appeals is not very wide.
We are only required to consider as to whether the
presence of 0.001 mg of Carbofuran per litre found in
the sweetened carbonated water, manufactured by the
Appellant-Company, can be said to be adulterated as
per Rule 65 of the 1955 Rules and under Section 2(ia)
(h) of the 1954 Act, particularly in the absence of any
validated standard of analysis provided for under the
1954 Act or 1955 Rules.
37. On the question of liability of the Directors of the
Company with respect to an offence alleged to have
been committed by the Company, the High Court went
beyond the ratio of the decision of this Court in S.M.S
Pharmaceuticals Ltd.'s case (supra) upon holding that
the principles set out in the said decision could not be
understood in any mechanical or rigid manner.
Instead, the High Court based its judgment on the
decision of this Court in N.Rangachari V/s Bharat
Sanchar Nigam Ltd. (2007) 5 SCC 108), which was a
case where athe complaint clearly and categorically
alleged that the named Directors were in charge of and
responsible to the Company for the conduct of its
business. It is in such circumstances that the prayer
for quashing of the proceedings was rejected.
39. As mentioned hereinbefore, the High Court erred
in giving its own interpretation to the decision of this
Court in S.M.S Pharmaceuticals Ltd.'s case (supra),
which was reiterated subsequently in several
judgments, some of which have been indicated
hereinabove, and relying instead on the decision of
Rangachari's case (supra), the facts of which were
entirely different from the facts of this case. It is now
well established that in a complaint against a Company
and its Directors, the Complainant has to indicate in
the complaint itself as to whether the Directors
concerned were either in charge of or responsible to
the Company for its day-to-day management, or
whether they were responsible to the Company for the
conduct of its business. A mere bald statement that a
person was a Director of the Company against which
certain allegations had been made is not sufficient to
make such Director liable in the absence of any specific
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allegations regarding his role in the management of
the Company".
(v) 2010 (11) SCC 125 - Dinesh B.Patel and
Others.Vs State of Gujarat and Another.
"7. We have gone through the decision of Brij Lal
Mittal. In Brij Lal Mittal Case the offence complained of
was under section 27 of the Act. The High Court had
quashed the proceedings therein on the ground that
the prosecution was launched after shelf-life of drugs
had expired in the month of July 1991 and as a
consequence thereof, the accused were deprived of
their right under Section 25(4) of the Act to get the
drugs tested by the Central Drugs Laboratory. This
Court did not agree with the reasoning of the High
Court, however, upheld the quashing of the
proceedings.
8. In our opinion, the factual situation in both the
matters is quite different which is apparent from the
fact that firstly, the controversy of the complaint not
having any necessary averments was not present
before the High Court in the reported decision.
Secondly, in that case, there was only a bald
statement that the respondents were directors of the
manufacturers. In the present matter, however, the
respondents were not arrayed only because they were
the Directors. That is certainly one reason. However, in
addition to that, a statement has been made in Para 6
of the complaint that by manufacturing of the medicine
concerned for sale, the Company and its Directors had
committed the breach of the Act. Thus, there was an
allegation that the directors were privy to the
manufacturing of medicine by the Company.
9. In our opinion, the averments in Paras 4, 5, 6 and
8 of the complaint cannot be described as bald
statements. The emphasised portion in Para 6 of the
complaint suggests manufacturing of the medicine by
the Company and its Directors. The averments in all
these paras would have to be read together and Para 6
of the complaint would have to be read in the light of
the other averments. It seems that in the reported
decision in the Complaint, there was no link pleaded in
the Directors and the manufacturing process. That is
not the situation here. This was a case of the
manufacture of the drug for human consumption and,
after it was tested in laboratory, was found to be
defective since there was a growth of fungus, which is
a very serious matter related to public health".
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(vi) ILR 2002 Karnataka 475 - Sanjay G. Revankar Vs
State by Drug Inspector, Uttar Kannada
District, Karwar
"By looking into the provisions of Section 34 of the Act
it is apparent that vicarious liability of persons for
being punished 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 (as per Section 34(i) of
the Act): Even otherwise under Section 34(2) of the
Act 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, each of them would be
deemed guilty of the offence.
FACTS OF THE CASE:
13. In pursuance of power vested under the Act
Drugs Inspector in the instant case namely Assistant Drugs
Controller and the Drugs Inspector visited A-1 factory took
legal samples of "Folic Acid" and "Ferrous tablet NFI" from
Deputy Director of Education Department, Gulbarga for the
purpose of testing and analysis. The sealed portion of the
sample drawn was forwarded to the Government analyst for
the purpose of test and analysis and on receipt of reports
from the Government analyst, test report was forwarded to
Deputy Director Education Department, Gulbarga District
calling upon it to disclose the name and address of the
person from whom the drug in question was
acquired/purchased as required under Section 18A. On
intimation being received from the Deputy Director Education
Department, Gulbarga, disclosing that Drug in question was
received from "M/s Bright Drug Industry" (A-1 herein) the
above said Assistant Drugs Controller and Drugs Inspector
sent a portion of the sealed sample "Drug in question"
along with test report received from the analyst to A-1 as
required under section 23 and section 25 of the Act and
obtained an acknowledgment for having delivered the sealed
portion of "Drug in question" and its report.
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14. The Assistant Drugs Controller Food, Drugs
Administration, Indore, Madhya Pradesh, submitted a letter
requesting furnishing of information to A-1 factory.
"On receipt of the report from the analyst as referred to
supra namely under section 25 it has been forwarded to A-1
factory".
15. Thereafter a complaint came to be lodged under
Section 200 Cr.P.C by the State through Drugs Inspector,
Gulbarga Circle, Gulbarga against accused No.1 factory and
its Directors A-2 to A-6 and Chemists, Manufacturing
Chemists, Analytical Chemists of A-1 factory for the offences
punishable under section 18(a)(i) of the Drugs and
Cosmetics Act, 1940 punishable under section 27(d) of the
Act. It has been alleged by the prosecution that
petitioners have committed offence punishable under
Section 27(d) of the Act namely manufacturing, sale
and distribution of drugs referred to in Clause (a) and
Clause (b) of section 18 of the same section and thus
the accused persons are liable to be punished with
imprisonment for a term not less than one year but
which may extend upto two years.
16. A careful reading of the complaint in question
when read in the background of the judgments of
Hon'ble Apex Court as well as this court it would go to
show that a omnibus allegations or averments have
been made in the complaint and it would not suffice
for igniting punitive action against the
directors/petitioners. There may be a situation where
a person who has been a director of the accused
factory/industry may not be a person who is incharge
of day to day affairs of the company. For instance a
non-resident person can also be a director of company
under the provisions of Companies Act, 1956. There
may be also a situation where a person may not be a
director but may be incharge of day to day affairs of
Company. Thus, it depends upon the facts and
circumstances of each case which determine as to
whether said person was in charge of day-to-day
affairs of the company. Only then jurisdictional
magistrate would be empowered to take cognizance of
20
alleged offence and this has to be done by careful
reading and by examining the averments made in the
complaint. No Straight Jacket formula can be made
applicable to all the cases and a situation may arise
where the averments made in the complaint is as
vague as vagueness could be or in other words there
may be a situation where the averments made in the
complaint is sufficient to hold that magistrate was well
within his powers to take cognizance of the alleged
offence which ultimately rests on the averments made
in the complaint. Thus, it boils down to the fact, that
averments made in the complaint against accused
persons would be the foundation for the magistrate to
take cognizance. Keeping the principles enunciated in
the above judgments the facts on hand are required to
be examined and it is so examined.
RE: POINT NO.1:
17. It has been contended by the complainant
that "Ferrous Sulphate tablet NFI" is a drug within the
meaning of Section 3(b) of the Act which has been
manufactured and sold and it is not of standard quality
thus attracting section 18(a)(i) of the Act. In the
complaint at paragraph 6 to 10 it has been alleged as
under:
"That the accused persons are responsible for
conducting the business of A-1 factory".
18. Again at paragraph 30(2) to 30(6) it has
been alleged by the prosecution that Accused persons
being the directors of accused No.1 and responsible
for the conduct of business of A-1 are responsible for
the omission and commission of offence and as such it
has been contended that there is vicarious liability.
19. In the light of averments made in the plaint
when the contention raised by learned advocates
appearing for the parties are examined by taking into
consideration the judgments referred to supra. It is
21
noticed that in Rajiv Khurana's case it has been held
that, it is incumbent upon the complainant to state
how a director who is sought to be proceeded as an
accused was incharge of business of the company are
responsible for the conduct of company's business and
it has been further held that complainant has to aver
in the complaint that accused was incharge and was
responsible for the conduct of the business of the
company. It has also been held averments made in the
complaint should be clear and specific. The Hon'ble
Supreme Court in Pepsico Holdings case referred to
supra referring to the earlier judgments has held that
directors who are incharge of day to day affairs of the
company are vicariously liable and a mere bald
statement that a person was the director of the
company would not suffice and it was found on facts
that a particular director had been nominated to be the
person incharge and responsible for the company for
the conduct of its business and he alone being
responsible for day to day affairs, proceedings against
others cannot be proceeded with and as such quashed
the proceedings against the appellants therein.
20. Yet again in Dinesh B.Patel's case the Hon'ble
Supreme Court was considering the very same provision
namely section of 34(2) of the Act, and it has been held
therein that paragraph 6 of the complaint would disclose that
directors therein had manufactured the medicine for sale in
breach of the act and thus it was held that it is a punitive
offence. While examining the facts therein at paragraph 9 it
has been held as under:
"9. In our opinion, the averments in Paras 4, 5, 6 and 8 of
the complaint cannot be described as bald statements. The
emphasised portion in Para 6 of the complaint suggests
manufacturing of the medicine by the Company and its
Directors. The averments in all these paras would have to
be read together and Para 6 of the complaint would have to
be read in the light of the other averments. It seems that in
the reported decision in the Complaint, there was no link
pleaded in the Directors and the manufacturing process.
That is not the situation here. This was a case of the
manufacture of the drug for human consumption and, after
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it was tested in laboratory, was found to be defective since
there was a growth of fungus, which is a very serious
matter related to public health".
21. A perusal of the complaint filed against the
petitioners in the instant case would disclose that only
an assertion has been made in the complainant that
petitioners have committed offence by manufacturing
and selling the drugs that are not of standard quality.
It is nowhere stated in the complaint as to the role of
petitioners in either participating in the day to day
affairs of the A-1 industry and as to their actual role in
manufacturing the drugs in question. It would also be
of relevance to note at this juncture itself that license
issued to A-1 factory would specifically state as to who
are the persons namely persons who are engaged in
the manufacture and it is specifically stated therein
the approved expert staff of A-1 factory and testing
officials and laboratories engaged in testing and
certifying the drug manufactured by A-1 industry are
specified in the License granted who can be construed
as persons manufacturing the drugs in question.
22. Thus, on examination of facts namely the
averments made in the complaint and the case laws
extracted herein above, I am of the considered view
that the averments made in the complaint regarding
the role and responsibilities of the petitioners not
being specific precise, they cannot be proceeded
against and complaint does not reveal that petitioners
herein were incharge and responsible for the conduct
of the business of A-1 firm except a bald and vague
statement made in the complaint stating that
petitioners were the directors of the firm and they
were incharge of day to day affairs when the license
issued goes to show the persons involved in the
Manufacturing process as someone else. In that view
of the matter, I am of the considered view that learned
Magistrate was not justified in taking cognizance of
the offence alleged against petitioners herein and
issuing summons.
23
23. Accordingly point No.1 as answered in favour of the
petitioners and against respondent/complainant.
RE: POINT NO: 2
24. The petitioner in Crl.P. No.15093/2011 was a
director of the accused A-1 company and he ceased to be the
director with effect from 26.08.2006. To evidence this fact
Form No. 32 has been filed before the jurisdictional Registrar
of companies as is evidenced from Annexure-C filed along
with Criminal Petition No.15093/2011. The samples of the
Drug was obtained on 17.10.2006. Petitioner not being a
director of A-1 company as on the date the samples were
drawn i.e., 17.10.2006 no proceedings could have been
continued against the petitioner for the said reason also. In
view of the discussion made hereinabove following order is
passed:
ORDER
25. In the result, petitions are allowed. The
proceedings registered in CC No.179/2009 by I Addl. Civil
Judge (Jr.Dn.) & JMFC, Gulbarga for the offence punishable
under Section 18(a)(1) and 27(d) of the Drugs and
Cosmetics Act, 1940 are hereby quashed in so far as
petitioners are concerned and impugned order of learned
Magistrate taking cognizance and issuing summons to the
petitioners are hereby quashed."
(Emphasis supplied)
The Co-ordinate Bench holds that directors of a company, who are
not involved in the process of manufacturing and testing the quality
of the drug, cannot be held liable for commission of offences under
the Act.
10. In the light of the aforequoted judgment rendered by the
Co-ordinate Bench in a somewhat similar circumstance, I deem it
appropriate to follow the same and obliterate the crime against the
petitioners, more so in the light of the fact that the petitioners are
absolved under Section 19. Unless the prosecution has placed prima
facie material that the petitioners are guilty of storing the material
which was not of standard quality knowing full well that the drug or
cosmetic was manufactured in complete contravention of Section 18
of the Act, the petitioners cannot be held liable for commission of
the offences under the Act.
11. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed.
(ii) Impugned order dated 16-12-2023 passed in
C.C.No.123 of 2023 by the Special Court for Economic
offences, Bengaluru and the entire proceedings taken
thereto stands quashed qua the petitioners.
(iii) It is made clear that the observations made in the
course of the order are only for the purpose of
consideration of the case of the petitioners under
Section 482 of the Cr.P.C. and would not bind or
influence the proceedings pending qua other accused
before any other fora.
Sd/-
(M.NAGAPRASANNA)
JUDGE
bkp
CT:SS
