Drugs and Cosmetics Act, 1940: ss.34, 16, 18 – Vicarious liability – Appellants are the directors of M/s Cachet Pharmaceuticals Private Ltd. (CPPL) – Test report of the sample of the drug manufactured by CPPL stated that it was not of standard quality – Complaint filed before CJM u/s.18(a)(i) r/w ss. 16 and 34 of the Act – CJM issued summons to all the accused including the appellants – Appellants filed revision petition against the summoning order before the Sessions Judge which was rejected on the ground that there was a specific averment in the complaint that the appellants were concerned with the manufacture, distribution and sale of drug in question – Writ petition by appellants before High Court was also dismissed – On appeal, held: A person cannot be made liable u/s.34 of the Act unless at the material time, he was in-charge of and was also responsible to the company for the conduct of its business – Merely because a person is a director of a company, it is not necessary that he is aware about its day-to-day functioning – There is no universal rule that a director of a company is in-charge of its everyday affairs – It is necessary to aver as to how the director of the company was in charge of day-to-day affairs or responsible to the affairs of the company – The managing director or a joint managing director in a company, as the designation of their office suggests, are in-charge of a company and are responsible for the conduct of the business of the company – Appellants are neither the managing director nor the whole-time directors of the accused company – Complaint totally lacked requirement of s.34 of the Act – Order of issuance of process quashed – Negotiable Instruments Act,1881 – s.141 – Companies Act, 1956 – s.2(13). Practice and Procedure: Criminal procedure – Issue of Process by Magistrate – Held: The order of issuance of process is not an empty formality – The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not – The formation of such an opinion is required to be stated in the order itself – The order is liable to be set aside if no reasons are given therein while coming to the conclusion that there is a prima facie case against the accused.
Allowing the appeal, the Court
HELD : 1. In the present case, there are no specific averments insofar as the appellants are concerned. It is further to be noted that the appellants are neither the managing director nor the whole-time directors of the accused company. It is further to be noted that, in accordance with the provisions of Rule 76 of the said Rules read with Form 28, the Accused Nos. 9 and 10 have specifically been approved by the licensing authority in Form
28. Accused No.9 was approved as a person under whose active direction and personal supervision the manufacture would be conducted as required under sub rule (1) of Rule 76 of the said Rules. Similarly, Accused No.10, who was approved as a head of the testing unit, was to be incharge for carrying out the test of the strength, quality and purity of the substances as may be required under the provisions of Part X of the said Rules. The Court was therefore of the considered view that the complaint is totally lacking the requirement of Section 34 of the said Act. [Paras 23 & 24][587-F-H; 588-A-B]
2. The order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not. The formation of such an opinion is required to be stated in the order itself. The order is liable to be set aside if no reasons are given therein while coming to the conclusion that there is a prima facie case against the accused. No doubt, that the order need not contain detailed reasons. In instant case, it is clear from the order of the Single Judge of the High Court, that there was no such order passed at all. The Single Judge of the High Court, based on the record, has presumed that there was an order of issuance of process. Such an approach is unsustainable in law. [Paras 28 & 30][588-G-H; 590-A-B]
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371; Pooja Ravinder Devidasani v. State of Maharashtra and another (2014) 16 SCC 1 : [2014] 14 SCR 1468; K.K. Ahuja v. V.K. Vora and another (2009) 10 SCC 48 : [2009] 9 SCR 1144; State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v. Rajiv Khurana (2010) 11 SCC 469 : [2010] 9 SCR 387; Ashoke Mal Bafna v. Upper India Steel Manufacturing and Engineering Company Limited
(2018) 14 SCC 202; Sunil Bharti Mittal v. Central Bureau of Investigation (2015) 4 SCC 609 : [2015] 1 SCR 377 – relied on.
U.P. Pollution Control Board v. Mohan Meakins Ltd. and others (2000) 3 SCC 745 : [2000] 2 SCR 566; Dinesh B. Patel and others v. State of Gujarat and another (2010) 11 SCC 125 : [2010] 10 SCR 319; State of Haryana v. Brij Lal Mittal and others (1998) 5 SCC
343 : [1998] 3 SCR 104 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.