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Judgment
This petition is filed by the petitioner-A7 under 482 Cr.P.C. to quash the proceedings against her in S.C. No.2 of 2015 on the file of I-Additional
District Judge, Sanga Reddy, Medak District for the offences under Sections 18(a)(i) read with 17-B for stocking and selling the Spurious/NSQ (Not
of Standard Quality) drug, for violating Section 18A for not disclosing the name of manufacturer and source of supply of said batch of drug punishable
under Section 28, for violation of Section 18B, for not submitting the documents, records and registers of the said drug punishable under Section 28A,
for violating Section 18(a)(vi) read with Rule 65(5)(3) for not submitting the purchase details punishable under Section 27(d) and for violating Section
22(1)(cca) for not submitting the purchase bills, records and registers for the said drug punishable u/s 22(3) of the Drugs and Cosmetics Act, 1940.
The respondent No.2-The Drug Inspector filed a complaint before the Judicial Magistrate of First class, Siddipet, Medak District stating that he
visited the premises of M/s. Mani Sai Sree Medical Agencies, situated at D.No 8-2-101/13, Shivaji Nagar, Siddipet on 12-12-2013 and on suspicion,
taken drug of quantity 20x10 tablets of ZIFI-200 (Cefixime Tablets IP 200 mg), B.No CKM3083, Manufacturing date 08/2013, Expiry date 01.2015,
manufactured by FDC Limited, at Village: Khol-Bhood, Tehsil: Nalagarh, Baddi-173 2015, Dist. Solan (HP) for the purpose of test or analysis under
intimation in Form-17, divided the sampled drug into 4 portions and sealed them. On 13-12-2013, the sampled drug was submitted for analysis to the
Government Analyst, Drug Control Laboratory, Hyderabad. On 16-12-2013, the Government Analyst gave a report that the drug was “not of
standard quality†as the said tablets did not comply for Cefixime as per IP HPLC Method. The Drug Inspector issued a notice to M/s. Mani Sai Sree
Medical Agencies, Siddipet for disclosing the purchase and distribution details of the said drug and they replied that they purchased the same from
M/s. Swathi Medical Corporation, Jawahar Nagar, Hyderabad. The Drug Inspector inspected M/s. Swathi Medical Corporation, Jawahar Nagar,
Hyderabad and they reported that they purchased the said batch of drug from M/s. Shiva Medical Agencies, D.No.8-2-101/4, Shivaji Nagar, Siddipet,
Medak District. On 19-12-2013, the Drug Inspector issued a notice to M/s Shiva Medical Agencies, Siddipet for disclosing the license particulars,
purchase and distribution particulars, conveyance particulars and mode of payment for the supplied drug. K. Sridhar, Managing Partner and competent
person in his letter dated 19-12-2013 stated that he sold the drug only to M/s. Swathi Medical Corporation, Hyderabad.
It was mentioned in the charge sheet that on 8-1-2014, Kalva Sridhar, Managing Partner cum competent person of M/s. Shiva Medical Agencies,
Siddipet in his reply dated 8-1-2014 failed to disclose the name and address of the manufacturer and supplier from whom he acquired the said batch of
drug. He failed to submit the conveyance details for supply of the said drug and also failed to produce the payment details for supply of said drug and
claimed as Managing Partner of M/s. Shiva Medical Agencies, Siddipet and responsible for day to day activities of the firm vide affidavit.
Basing on the same, the Drug Inspector filed the complaint showing Kalva Sridhar as A1 and the petitioner as A7. The same was taken cognizance
by the learned Magistrate, numbered as P.R.C No. 10 of 2014 and committed to the Court of Sessions. The said case was transferred to I-Additional
District Judge, Sanga Reddy, Medak District and numbered as SC No.2 of 2015.
Heard the learned Counsel for the Petitioner and the learned Public Prosecutor.
The learned counsel for the petitioner submitted that the petitioner was only a partner of A1 firm and he was not responsible for the day to day
affairs of the firm, the complainant had not specifically alleged in the complaint the role played by the petitioner and how he was responsible for the
day to day affairs of the firm to attribute any sort of liability on him. Merely because a person was a partner of a firm, it would not make such person
liable for the offence committed by the firm. Liability would lie only on such people as per Section 34 of Drugs and Cosmetics Act, 1940 at the time of
commission of offence were incharge of the conduct of the business of the firm. A1 in his letter dated 8-1-2014 stated that he was the Managing
Partner and competent person and filed affidavit to that effect. The affidavits of A2 and other partners also would disclose that they were not
responsible for the conduct of business of the firm and relied upon the judgment of the Hon’ble Apex Court in SMS Pharmaceuticals Ltd v. Neeta
Bhalla and Another (2005) 8 SCC 89 and of this Court in Crl.P No. 6772 of 2008 dated 1-4-2011.
The learned Public Prosecutor opposed the petition.
Perused the record. The complaint itself would disclose that A1 in his letter dated 8-1-2014 stated that he was the Managing Partner cum
competent person of M/s. Shiva Medical Agencies, Siddipet and was responsible for the day to day activities of the firm vide affidavit. The petitioner
and other partners also filed a joint affidavit stating that they were only sleeping partners and Kalva Sridhar (A1) was looking after the day to day
business of the said firm.
Section 34 of the Drugs and Cosmetics Act, 1940 deals with offences by companies. The same is extracted for perusal.
“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.â€"For the purposes of this sectionâ€
(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.â€
This Court in Crl.P No. 6772 of 2008 while dealing with a petition under Section 482 Cr.P.C. for quashing the proceedings under the Drugs and
Cosmetics Act had taken the support of the judgment of the Hon’ble Apex Court in State of Karnataka v. Pratap Chand and others [1981 SCC
(Crl) 453] wherein it was held that:
“Under Section 34 of the Act, Partner of a firm not in overall control of the day to day business of the firm, was not liable u/s 34 for offences
under the Act.â€
The Hon’ble Apex Court in SMS Pharmaceuticals Ltd., case (supra) while dealing with the offence under Section 138 and 141 of Negotiable
Instruments Act, held in paras-10 to 12 that:
While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company.
The key words which occur in the Section are ""every person"". These are general words and take every person connected with a company within their
sweep. Therefore, these words have been rightly qualified by use of the words:
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 etc.
What is required is that the persons who are sought to be made criminally liable under Section 141 should be at the time the offence was committed, in
charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall
within the ambit of the provision. It is only those persons who were in charge of and responsible for conduct of business of the company at the time of
commission of an offence, who will be liable for criminal action. It follows from this that if a director of a Company who was not in charge of and was
not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being
in charge of and responsible for conduct of business of the company at the relevant time when the offence was committed and not on the basis of
merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a Company may be liable if he
satisfies the main requirement of being in charge of and responsible for conduct of business of a Company at the relevant time. Liability depends on
the role one plays in the affairs of a Company and not on designation or status. If being a Director or Manager or Secretary was enough to cast
criminal liability, the Section would have said so. Instead of ""every person"" the section would have said ""every Director, Manager or Secretary in a
Company is liable""....etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought
to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have
been subjected to action.
A reference to Sub-section (2) of Section 141 fortifies the above reasoning because Sub-section (2) envisages direct involvement of any Director,
Manager, Secretary or other officer of a company in commission of an offence. This section operates when in a trial it is proved that the offence has
been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a
case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them
in cases of their proved involvement.
The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of
holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the
necessary facts which make a person liable.
In the very same judgment para - 15 deals with the similar provisions of vicarious liability in other Acts and particularly of Section 34 of Drugs and
Cosmetics Act and held as follows
“15. Cases have arisen under other Acts where similar provisions are contained creating vicarious liability for officers of a company in cases
where primary liability is that of a company. State of Karnataka v. Pratap Chand and Ors., [(1981 SCC (Cri) 453] was a case under the Drugs and
Cosmetics Act, 1940. Section 34 contains a similar provision making every person in charge of and responsible to the company for conduct of its
business liable for offence committed by a company. It was held that a person liable for criminal action under that provision should be a person in
overall control of day-to -day affairs of the company or a firm This was a case of a partner in a firm and it was held that a partner who was not in
such overall control of the firm could not be held liable.â€
Hence considering the above citations and as there were no specific averments in the complaint that the petitioner was in any way responsible for
the conduct of the business of the firm or incharge of the affairs of the firm and conversely an affidavit was filed by A1 that he was responsible for
the day to day activities of the firm as the Managing Partner of the firm and the petitioner is only a sleeping partner, it is considered fit to quash the
proceedings in S.C. No. 2 of 2015 on the file of I-Additional District Judge, Sanga Reddy, Medak District, against the petitioner herein.
In the result, the Criminal Petition is allowed quashing the proceedings in S.C. No.2 of 2015 on the file of I-Additional District Judge, Sanga Reddy,
Medak District, against the petitioner â€" A7.
Miscellaneous petitions pending, if any, shall stand closed.