Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Criminal Miscellaneous (Petition) No. 4276/2018
1. M/s Inven Pharmaceuticals Private Limited , Kalsada
Khurd, District Dhar, Mp, Through Its Director Ms.
Urvarshi Patni, D/o Shri L.c. Patni, R/o 77, Janki Nagar
Main, Indore, Mp.
2. L.c. Patni S/o Shri Kesrimal Patni , R/o 77, Janki Nagar
Main, Indore, Mp, Chief Managing Director, M/s. Inven
Pharmaceuticals Private Limited, Kalsada Khurd, District
Dhar, Mp.
3. Smt. Manju Patni W/o Shri L.c. Patni , R/o 77, Janki
Nagar Main, Indore, Mp, Director M/s Inven
Pharmaceuticals Private Limited, Kalsada Khurd, District
Dhar Mp.
----Petitioners
Versus
State Of Rajasthan Through Shri Prahlad Meena, Drug Control
Officer, Rajasthan Headquarter , Kota.
----Respondent
For Petitioner(s) : Mr. AK Sharma Sr. Counsel with Mr. Rachit Sharma For Respondent(s) : Ms. Meenakshi Pareek PP HON'BLE MR. JUSTICE KANWALJIT SINGH AHLUWALIA
-/Order/-
30/07/2018 The present petition has been filed under Section 482 Cr.P.C. seeking quashing of Complaint alongwith all proceedings arising out of Criminal Case No. 1013/2015 titled State of Rajasthan vs. M/s. Inven Pharmaceuticals Pvt. Ltd. & Ors., pending in the court of Chief Judicial Magistrate, Kota City, Kota.
Inven Pharmaceuticals Pvt. Ltd. are manufacturers of various drugs.
(2 of 8) [CRLMP-4276/2018] On 28.2.2011, Drug Control Officer, Kota seized sample of Injection Entigyl. On the said injection, manufacturing date was given as December, 2010 and expiry date as November, 2012. The drug carrying name/brand as Entigyl contained Metronidazole and Sodium Chloride. As per the certificate of test or analysis by Government Analyst, under Section 25(1) of the Drugs Act, 1940, the sample was declared of not standard quality because it did not conform to IP (Indian Pharmacopoeia) standard and it contained Bacterial Endotoxins.
Mr. A.K. Sharma, learned Senior Counsel assisted by Mr. Rachit Sharma appearing for the petitioners has firstly contended that under rule 46 of Drugs and Cosmetics Rules, 1940, Government Analyst is bound to disclose the test and method of analysis prescribed, and whether same is in consonance with India Pharmacopoeia or not and whether requisite protocol was followed or not.
From the perusal of the report, which is given in FORM 13 in consonance with rule 46 of Drugs and Cosmetics Rules, 1940 (hereinafter called 'Rules'), it is evident that as per Indian Pharmacopoeia, test prescribed is called 'Bacterial Endotoxins Test'. Therefore, the method of analysis has been given in report as "Bacterial Endotoxins Test". Therefore, there is no breach of rule 46 of the 'Rules'.
Secondly, the learned counsel for the petitioners has submitted that if the sample has been declared as sub-standard, it will not amount to adulterated drug and therefore, in the complaint wrongly section qua adulterated drug has been mentioned.
(3 of 8) [CRLMP-4276/2018] Merely on this ground, the entire complaint cannot be quashed. The petitioners will have the opportunity to argue at the time of consideration of charges and at that stage while formulating charge, the court may not frame a charge qua offence which is not made out.
Lastly, the learned counsel for the petitioners has contended that Smt. Manju Patni is lady and she is not in-charge of, and is not responsible to the conduct of the business of the company. It is further submitted that so far petitioner no.2 L.C.
Patni is concerned, he is Chief Managing Director, whereas Smt. Manju Patni is Managing Director of the company.
In the present petition in Para-3 following averment has been made:-
"3. That it may be relevant to state here that the petitioner company is a Private Limited company incorporated under the Companies Act. Petitioner No.2 was Chief Managing Director of the petitioner company and petitioner No.3 happens to be the wife of petitioner No.2 and was Managing Director in the company at the relevant time."
The learned counsel for the petitioners has relied upon State of Haryana vs. Brij Lal Mittal & Ors, reported as AIR 1998 SC 2327 to contend that Chief Managing Director and Managing Director cannot be prosecuted. The judgment relied was rendered in appeal against acquittal. Section 34 of India Drugs and Cosmetics Act, 1940 (hereinafter called '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 (4 of 8) [CRLMP-4276/2018] 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."
The wording given in Section 34 of the 'Act' is para-
materia to Section 141 of Negotiable Instruments Act.
Furthermore, Section 34(2) in its sweep make Chief Managing Director and Managing Director responsible qua the offence committed.
Supreme Court in the case of K.K. Ahuja vs. V.K.
Vora & Anr., reported as (2009) 10 SCC 48, by examining para-materia provisions under the various Acts referred to provisions of Companies Act and held as under:-
"19. This takes us to the next question under Sub-section (1) of Section 141, as to (i) who are the persons who are responsible to the company for the conduct of the business of the company, and
(ii) who could be said to be in charge and was responsible to the company for the conduct of the business of the company. The words "every person who, at the time of the offence was committed, was in charge of, and was responsible for the conduct of the business of the company" occurs not only in Section 141(1) of the Act but in several enactments dealing with offences by companies, to mention a few - Section 278B of the Income Tax Act, 1961, Section 22C of Minimum Wages Act, 1948, Section 86A of the Employees State Insurance Act, 1948, Section 14A of Employees Provident Fund and Miscellaneous Provisions Act, 1952, Section 29 of Payment of Bonus Act, 1965, Section 40 of The Air (Prevention and Control of Pollution) Act, 1981 and Section 47 of (5 of 8) [CRLMP-4276/2018] Water (Prevention and Control of Pollution) Act, 1974. But neither Section 141(1) of the Act, nor the pari materia provisions in other enactments give any indication as to who are the persons responsible to the company, for the conduct of the business of the company. Therefore, we will have to fall back upon the provisions of Companies Act, 1956 which is the law relating to and regulating companies.
20. Section 291 of the said Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company (Empasis Supplied). But insofar as other directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business.
21. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company :
(a) the managing director/s;
(b) the whole-time director/s;
(c) the manager;
(d) the secretary;
(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;
(f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf to the Board); and
(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors.
It follows that other employees of the company, cannot be said to be persons who are responsible to the company, for the conduct of the business of the company.
22. Section 141 uses the words "was in charge of, and was responsible to the company for the conduct of the business of the (6 of 8) [CRLMP-4276/2018] company" (Emphasis Supplied). It is evident that a person who can be made vicariously liable under Sub-section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company. There may be many directors and secretaries who are not in charge of the business of the company at all. The meaning of the words "person in charge of the business of the company" was considered by this Court in Girdhari Lal Gupta v. D.H. Mehta followed in State of Karnataka v. Pratap Chand and Katta Sujatha v. Fertiliser & Chemicals Travancore Ltd. This Court held that the words refer to a person who is in overall control of the day to day business of the company. This Court pointed out that a person may be a director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a Manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business.
23. Therefore, if a person does not meet the first requirement, that is being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under Sub-section (1) of Section 141 arises. To put it differently, to be vicariously liable under Sub-section (1) of Section 141, a person should fulfill the 'legal requirement' of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfill the 'factual requirement' of being a person in charge of the business of the company.
24. Therefore, the averment in a complaint that an accused is a director and that he is in charge of and is responsible to the company for the conduct of the business of the company, duly affirmed in the sworn statement, may be sufficient for the purpose of issuing summons to him. But if the accused is not one of the persons who falls under the category of 'persons who are responsible to the company for the conduct of the business of the company' (listed in para 21 above), then merely by stating that 'he was in charge of the business of the company' or by stating that 'he was in charge of the day to day management of the company' or by stating that he was in charge of, and was responsible to the company for the conduct of the business of the company', he cannot be made vicariously liable under Section 141(1) of the Act.
(7 of 8) [CRLMP-4276/2018]
25. It should, however, be kept in view that even an officer who was not in charge of and was responsible to the company for the conduct of the business of the company can be made liable under Sub-section (2) of Section 141. For making a person liable under Section 141(2), the mechanical repetition of the requirements under Section141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under Sub-section (2) of Section 141 of the Act.
26. Another aspect that requires to be noticed is that only a Director, Manager, Secretary or other officer can be made liable under Sub-section (2) of Section 141. But under Sub-section (1) of Section 141, it is theoretically possible to make even a person who is not a director or officer, liable, as for example, a person falling under categories (e) and (f) of Section 5 of Companies Act, 1956. When in SMS Pharma (I), this Court observed that '10....conversely, a person not holding any office or designation in a company may be liable if he satisfies the requirement of being in charge of and responsible for conduct of the business of the company', this Court obviously had in mind, persons described in clauses (e) and
(f) of Section 5 of Companies Act. Be that as it may.
27. The position under Section 141 of the Act can be summarized thus :
(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix `Managing' to the word `Director' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company (Emphasis Supplied).
(ii) In the case of a director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the (8 of 8) [CRLMP-4276/2018] company, would give rise to responsibility under Sub-section (2) of Section 141.
(iii) In the 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 Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that Sub-section.
(iv) Other Officers of a company can not be made liable under Sub-section (1) of Section 141. Other officers of a company can be made liable only under Sub-section (2) of Section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence."
Since, the petitioner no.2 LC Patni is Chief Managing Director and petitioner no.3 Manju Patni is Managing Director of the company, read with provisions of Companies Act, they fall in the category of Directors who are in-charge of and are responsible to the company for the conduct of the business of the company.
In view of above, the arguments raised cannot be accepted, the present petition being devoid of merits is dismissed.
(KANWALJIT SINGH AHLUWALIA),J Mak/-
Powered by TCPDF (www.tcpdf.org)