Bombay High Court
A. P. HINDUJAversusTHE STATE OF MAHARASHTRA AND ANR
- Decided
- Disposal
- Allowed
Holding
A managing trustee cannot be held liable under Section 34 (or Section 27) of the Drugs and Cosmetics Act absent specific averments of control or participation, and the petition for discharge is granted.
Summary
The petitioner, a managing trustee of Hinduja Hospital Trust, was charged under the Drugs and Cosmetics Act for alleged distribution of a spurious ophthalmic drug. The prosecution relied on Section 34 (vicarious liability) and Section 27, treating the trust as a "company" and the petitioner as a director. The court examined whether the complaint contained the requisite averments to invoke vicarious liability against a trustee and whether a trust falls within the definition of a company under Section 34. Relying on Supreme Court precedents that a trust is not a juristic person and that penal provisions must be strictly construed, the court found no prima facie case against the petitioner. Consequently, the petition for discharge was allowed, quashing the criminal proceedings against him.
Issues considered
- The applicability of Section 34 of the Drugs and Cosmetics Act to a managing trustee of a trust
- Whether Section 27 of the Act can be invoked against a trustee without specific pleading of involvement
- Whether the complaint sufficiently alleged a prima facie case of the petitioner's participation in the alleged offence
- Whether the lower courts erred in equating a trust with a company and an association of individuals
- Interpretation of the definition of "company" under Section 34 in light of Supreme Court judgments
Legislation cited
- Bharatiya Nagarik Suraksha Sanhita, 2023 — s. 528
- Code of Criminal Procedure, 1973 — s. 227, 239, 245, 482
- Drugs and Cosmetics Act, 1940 — s. 17A(e), 17(b), 17B(a), 18(a)(i), 27, 34
- Drugs Rules, 1945 — s. Rule 59, Rule 61
- Indian Trusts Act, 1882
- Maharashtra Public Trusts Act, 1950
- Negotiable Instruments Act, 1881 — s. 141
Subjects
- trust law
- managing trustee
- vicarious liability
- Drugs and Cosmetics Act
- Section 34
- Section 27
- prima facie case
- discharge of accused
- Criminal Procedure Code
- Section 482
Judgment
SKN / SAGAR WP-525-2018.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO. 525 OF 2018
1. Shri. A. P. Hinduja
Age : 67 years, Occupation : Business,
Add. P. D. Hinduja Hospital &
Medical Research Centre,
Mahim, Mumbai-400 016
And
Office at : Hinduja House,
171, Dr. Annie Besant Road,
Worli, Mumbai 400 018 … Petitioner
V/s.
1. State of Maharashtra
2. Drugs Inspector (HQ)
Food and Drug Administration,
M. S., Survey No. 341,
Bandra Kurla Complex,
Bandra East, Mumbai-51. … Respondents
______________________
Mr. Amit Desai, Senior Advocate with Mr.Gopalakrishna Shenoy
i/b. Pawan Mali for the Petitioner.
Ms. Mahalaxmi Ganpathy, APP with Ms.Megha Bajoria, APP
for the Respondent-State.
______________________
CORAM : RANJITSINHA RAJA BHONSALE, J.
RESERVED ON : 1st JULY 2026.
PRONOUNCED ON : 1st OCTOBER 2026.
JUDGMENT: -
1) By the present Petition filed under Article 227 of the Constitution
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of India and section 482 of the Code of Criminal Procedure, 1973 (For Short
‘CrPC’)/now section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, the
Petitioner/ accused No. 3 seeks to challenge the Order dated 3 rd September
2015 passed by the learned Metropolitan Magistrate in CC No.632/SW/2005
thereby rejecting the discharge application of the Petitioner and the Order
dated 2nd December 2017 passed by the Sessions Court, in Criminal Revision
Application No.1446 of 2015, thereby dismissing the Revision Application
filed by the Petitioner.
2) Heard Mr. Amit Desai, learned Senior Advocate for the Petitioner
and Ms. Mahalaxmi Ganpathy, learned APP for the Respondent-State.
FACTUAL MATRIX
3) The facts as alleged in the complaint are as under:
3.1) The Petitioner/accused No.3 is the Managing Trustee of the P. D.
Hinduja Hospital & Medical Research Centre (for short ‘Hinduja
Hospital’/accused No.4). The accused Nos.1 and 2 are the pharmacist and
Deputy Director (material) respectively of accused No.4. The accused Nos.5 to
7 are the partners of accused No.8, i.e., Segal Optics (dealer/ distributer).
Accused No.9 is the proprietor of M/s Shah & Shah (manufacturer). Accused
Nos.10 and 11 are the Directors of M/s. Ointment & Cosmetics India Pvt. i.e.
Accused No.12 who is also manufacturer.
3.2) On 15th June 1992, a complaint was received from Dr. Sunil U.
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Patil regarding ophthalmic drug Visilon. It was alleged that, drug Visilon
B.No.24190 manufactured by Shah & Shah was used during cataract surgery
of Mr. Umakant S. Patil after which a fungal infection developed in the
operated eye. The infection resulted into blindness.
3.3) Based on the said complaint, on 22nd June 1992 the Drugs
Inspector visited Hinduja Hospital for conducting an investigation. A sample
of the said drug Visilon-Hydroxypropyl Methyl Cellulose 2% B.No.24190
manufactured by Shah & Shah was drawn by the Drugs Inspector. One unit of
the said drug was procured in prefilled syringe for further investigation. That,
one counterpart of the sample was sent to the Government Analyst. The
Government Analyst’s report dated 20th August 1992 declared that, the sample
of the drug was not of standard quality, and that the same was misbranded
vide rule 96 and section 17(b) of the Drugs and Cosmetic Act, 1940 (For short
“the said Act”), as the content of Methyle Cellulose in the sample was less
than the labelled amount. That, when the sample was tested for sterility,
microbial growth was observed.
3.4) On 4th September 1994, orders of prosecution were received from
Joint Commissioner, H.Q., Food and Drug Administration. That, on 7 th
October 1994, Respondent No. 2 visited the premises of manufacturer and
distributor and collected documents. The documents would indicate that, the
Visilon eye lotion Methyl Cellulose 2% I.P. was permitted on 10 th March 1986
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th
under license No.337 MB(L). On 4 August 1988, it was endorsed as Methyl
Cellulose usp Eye drops 2%. On 26 th December 1989, Director Drugs Control,
West Bengal permitted to manufacture Visilon in prepacked syringes of 2ml.
3.5) It is alleged that, though the licensed name of the drug is Visilon-
Methyl Cellulose eye drops 2% Methyl Cellulose usp., the sample carton is
labeled as Hydroxypropyl Methyl Cellulose 2%. It is contended that as the
drug is manufactured under name which belongs to another drug it is
spurious under section 17B (a) of the said Act.
3.6) That, the report of the Government Analyst declared the said
drug Visilon B. No. 24190 to be not of standard quality and also as
misbranded. That, it showed microbial growth when tested for sterility i.e. it
contained harmful or toxic substances which may render it injurious to health.
Therefore, the drug was termed as adulterated under section 17A (e) of the
said Act. That, while the manufacturers i.e. accused Nos.10 to 12 claim to
have manufactured the said drugs in vials only, accused No.9 informed that it
was received from the manufacturers in pre-filled syringe.
3.7) On the basis of above allegations, it was alleged that, accused
Nos. 1 to 4 acquired, stocked and distributed the drug Visilon B.No.24190 at
Bombay during the period from 7 th March 1991 to 23rd June 1992 and
contravened section 18(a)(i) read with section 17(b)(c), 17A(c), 17B(a)(c)
punishable under section 27(a) and section 16 punishable under section
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27(d) read with section 34 of the said Act.
3.8) On the basis of the aforesaid alleged facts, Respondent No.2 filed
a complaint vide CC No.632/SW/2005 before the learned Metropolitan
Magistrate, 6th Court, Mazgaon, Mumbai. The learned Magistrate was pleased
to issue process against the Petitioner and others for the alleged offences. The
only allegation against the Petitioner is that, he is Managing Trustee of
accused No. 4. The averment made in support of the allegation only states
that the Petitioner was the Managing Trustee.
SUBMISSIONS OF PETITIONER:
4) The learned Senior Advocate appearing for the Petitioner
submitted that,
4.1) The only allegation against the Petitioner is that he is a Managing
Trustee of Hinduja Hospital. The Petitioner has been arraigned as an accused
only on the basis of section 34 of the said Act. The allegations/charges against
the Petitioner and accused Nos.1, 2 and 4 are that they (Hospital and the
Pharmacy) acquired, stocked and distributed the drug Visilon B. No. 24190 at
Bombay during the period from 7 th March 1992 to 23rd June 1992 and
contravened section 18(a)(i) read with section 17(b)(c), 17A(c), 17B(a)(c)
punishable under section 27(a) and section 16 of the said Act punishable
under section 27(d) read with section 34 of the said Act.
4.2) The provisions of section 34 of the said Act are not applicable to
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a Trust or the employees of the Trust. There is no averment as is required to
attract or invoke the provisions of section 34 of the said Act. The Petitioner
has been made an accused only on the basis of information given by accused
No.4/ Hinduja Hospital vide letter dated 30 th November 1994, which was in
reply to the Complainant’s letter dated 17 th November 1994 calling for some
information. By the letter dated 30 th November 1994, accused No.4- Hinduja
Hospital only gave names and addresses of the Managing Trustee, Senior
Supervisor, Pharmacy and particulars of payment and nothing more.
4.3) The order dated 3rd September 2015 passed by the learned
Metropolitan Magistrate rejecting the Discharge Application of the Petitioner,
proceeds on erroneous assumption that a Trust is included in the definition of
company and comes under the term “association of individuals”. It is,
therefore, concluded that the Petitioner is responsible for day-to-day conduct
of the Hospital and can be prosecuted.
4.4) By the Order dated 11th November 2012 passed by the learned
Metropolitan Magistrate, 15th Court, Mazgaon, Mumbai in C.C. No.
632/SW/2005 accused Nos. 5 to 7 were discharged. Being aggrieved by the
said Order the state preferred a Criminal Revision Application No. 45 of 2012.
By an Order dated 12th February 2013, the Criminal Revision Application
No.45/2012 was partly allowed whereby the Order dated 11 th November
2012 was set aside as against accused No. 6 and confirmed as regard accused
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No. 5 and 7. In effect, the Order of discharge passed in favour of accused
Nos. 5 and 7 (partners of the firm dealing with the drug) was confirmed on
the ground that, there was no allegation that they were in-charge of accused
No. 8 firm and/or conducting day to day business of the said firm.
4.5) While referring to the order dated 2 nd December 2017 passed by
the Sessions Court it was submitted that, while rejecting the Petitioner’s
Revision Application reliance was placed on the Judgment of Madras High
Court in the case of M/S. Abraham Memorial Educational Trust v. C. Suresh
Babu reported in 2012 SCC OnLine Mad 2986 which equated a “company” to
a “Trust”. Further a Trust has also been equated to “association of individuals”.
4.6) It was submitted that, the judgment in the case of M/S.
Abraham Memorial Educational Trust (supra) has now been overruled by the
Hon’ble Supreme Court in the case of Sankar Padam Thapa v. Vijaykumar
Dineshchandra Agarwal, reported in 2025 SCC OnLine SC 2194.
4.7) The Petitioner has been roped in only because he is termed as the
Managing Trustee of the Trust. There is no evidence of any direct involvement
or being incharge of the hospital pharmacy. That, under the Trust law the term
‘Managing Trustee’ is not defined as the term ‘Managing Director’ is defined
under the Companies Act ,2013. The term ‘Managing Trustee’ of the Trust
cannot be equated with the ‘Managing Director’ of the Company. That, the
term ‘Managing Trustee’ is only used as a term of convenience. A Trust cannot
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be equated to a company.
4.8) Section 34 of the said Act refers to vicarious liability of the
director, which has to be strictly construed as is laid down by the Hon’ble
Supreme Court in its various cases including in the case of S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla and another reported in (2005) 8 SCC
89. That, the principle of vicarious liability is an exception to the general rule
and therefore, when a statute provides for the same the provision has to be
strictly construed. A Trust cannot be equated to a Company registered under
the Companies Act. A Trust is not a juristic person as a company. Therefore,
invoking the provisions of section 34 of the said Act is misconceived and
improper. That, the provisions of section 34 cannot be made applicable to the
Trust. That, if a Trust cannot be prosecuted or sued, then the principle of
vicarious liability also cannot be applicable to a Trust.
4.9) There is no averment or pleading whatsoever made against the
Petitioner that the Petitioner was incharge and was responsible for the
conduct of business or the day-to-day administration of the
Hospital/Pharmacy.
SUBMISSIONS OF RESPONDENT-STATE:
5) The learned A.P.P. appearing on behalf of the Respondent- State
submitted that,
5.1) The Petitioner being the Managing Trustee of the Trust has
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overall general control and is responsible for and aware of all the affairs and
activities of the Trust. A Managing Trustee/Trustee acts either through himself
or through other employees of the Trust. Under section 27 of the said Act, the
Managing Trustee can act through himself or any other person. That, for the
acts of the Trust, the Trustees are the persons who have the overall
responsibility, along with the other concerned employee or authorised person.
The Trustees represent the Trust.
5.2) The Petitioner, being the Managing Trustee, was responsible for
and aware of the affairs and activities of the Trust. During the course of
enquiry made with the Hospital, Respondent No.2 was informed that the
Petitioner was the Managing Trustee. Therefore, the Petitioner is made
accused. In response to the queries, the Hospital itself addressed a letter dated
30th November 1994 confirming that the Petitioner was functioning as its
Managing Trustee. A Trustee is responsible for the affairs of the Trust.
5.3) The Ld. Magistrate has rightly observed that, a person who is "in
charge" means a person who is in overall control of the day-to-day affairs and
functioning of the establishment. In the present case, the Petitioner was
admittedly the Managing Trustee of the Trust, thereby demonstrating that he
exercised overall supervision and control over its day-to-day activities.
5.4) The judgment in the case of Sankar Padam Thapa (supra) is
restricted only to and is relation to the Negotiable Instruments Act, 1881 (for
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short ‘NI Act’) and therefore it cannot be applicable to the present case.
5.5) The details provided by accused No.4 in its letter dated 30 th
November 1994 clearly make out a case against the Petitioner as he is the
Managing Trustee of accused No.4. That, in view of the said letter, it is not
necessary that the rule regarding pleadings and averments has to be complied
with.
SUBMISSIONS IN REJOINDER
6) Mr. Amit Desai, learned Senior Advocate appearing for the
Petitioner in rejoinder submitted that: -
6.1) In the complaint, there is also no pleading in respect of the
applicability of Section 27 of the said act, apart from being mentioned in the
complaint. That, the pharmacist and the director (material) have been made
accused as they were the persons directly connected with the procurement,
distribution and selling of the drugs.
6.2) It is necessary and a requirement in law including Section 27 of
the Act that the essential and necessary averments are made to show that the
concerned person was incharge of or responsible for the day-to-day affairs of
the concerned entity. There is no such averment. Only the Petitioner’s
designation is stated.
6.3) The Trust cannot be equated to a company and that the term
“Managing Trustee” is a term of convenience and not a term defined under the
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Trust law. On the other hand, the term “Managing Director” is a term
specifically defined under the Companies Act.
REASONING
7) Perused the entire record. The present petition is filed
challenging orders rejecting the application of the petitioner filed for recall of
process and seeking discharge. It is therefore required to be seen whether the
Petitioner has made out a case seeking discharge, in as much as, no case is
made out against the Petitioner. In short, it is required to be seen if any prima
facie case is made out against the Petitioner. In this regard it would be
necessary to state the law on discharge as laid down by the Hon’ble Supreme
Court.
7.1) A useful reference can be made to the decision of the Hon'ble
Supreme Court in the case of Union of India Vs. Prafulla Kumar Samal ,
reported in AIR 1979 SC 366. It is necessary and useful to refer to paragraph
10 of the said judgment which reads as under:-
"10. Thus, on a consideration of the authorities mentioned above, the
following principles emerge:
(1) That the Judge while considering the question of framing
the charges under section 227 of the Code has the undoubted power
to sift and weigh the evidence for the limited purpose of finding out
whether or not a prima facie case against the accused has been made
out:
(2) Where the materials placed before the Court disclose
grave suspicion against the accused which has not been properly
explained the Court will be, fully justified in framing a charge and
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proceeding with the trial
(3) The test to determine a prima facie case would naturally
depend upon the facts of each case and it is difficult to lay down a
rule of universal application. By and large however if two views are
equally possible and the Judge is satisfied that the evidence produced
before him while giving rise to some suspicion but not grave suspicion
against the accused, he will be fully within his right to discharge the
accused
(4) That in exercising his jurisdiction under section 227 of
the Code the Judge which under the present Code is a senior and
experienced Judge cannot act merely as a Post office or a mouth-piece
of the prosecution, but has to consider the broad probabilities of the
case, the total effect of the evidence and the documents produced
before the Court, any basic infirmities appearing in the case and so
on. This however does not mean that the Judge should make a
roaming enquiry into the pros and cons of the matter and weigh the
evidence as if he was conducting a trial"
7.2) The Supreme Court in the case of R.S. Nayak vs. A.R. Antulay
and Anr. reported in, AIR 1986 SC 2045, while analysing provisions of
Sections 227, 239 and 245 of Cr.P.C., in unequivocable terms in Para 44 has
held as under:-
"The Code contemplates discharge of the accused by the Court of
Sessions under Section 227 in a case triable by it; cases instituted
upon a police report are covered by Section 239 and cases instituted
otherwise than on police report are dealt with in Section 245. The
three sections contain some what different provisions in regard to
discharge of the accused. Under Section 227, the trial Judge is
required to discharge the accused if he 'considers that there is not
sufficient ground for proceeding against the accused.’ Obligation to
discharge the accused under Section 239 arises when "the Magistrate
considers the charge against the accused to be groundless." The power
to discharge is exercisable under Section 245(1) when "the Magistrate
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considers, for reasons to be recorded, that no case against the accused
has been made out which, if unrebutted, would warrant his
conviction.” It is a fact that Sections 227 and 239 provide for
discharge being ordered before the recording of evidence and the
consideration as to whether charge has to be framed or not is
required to be made on the basis of the record of the case, including
documents and oral hearing of the accused and the prosecution or the
police report, the documents sent along with it and examination of
the accused and after affording an opportunity to the two parties to
be heard. The stage for discharge under Section 245, on the other
hand, is reached only after the evidence referred to in Section 244 has
been taken. Notwithstanding this difference in the position there is no
scope for doubt that the stage at which the Magistrate is required to
consider the question of framing of charge under Section 245(1) is a
preliminary one and the test of “prima facie” case has to be applied.
In spite of the difference in the language of the three sections, the
legal position is that if the trial Court is satisfied that a prima facie
case is made out, charge has to be framed."
7.3) A further reliance can also usefully be placed on the decision of
the Supreme Court in the case of State of Maharashtra Vs. Soma Nath Thapa,
reported in (1996) 4 SCC 659 wherein, the Supreme Court has held that, if
there is ground for presuming that the accused has committed the offence, it
can be said that, a prima facie case has been made out against the accused. It
has been further held that even if the Court finds that the accused might have
committed ar offence, it can frame charge. The Supreme Court has further
clarified in the said case that at the stage of framing of charge probative value
of the statements cannot be gone into.
7.4) The Supreme Court in the case of Palvinder Singh Vs Balwinder
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Singh and others, reported in (2008) 14 SCC 504 while dealing with the
provisions of Section 227 of Cr.P.C., in para 13 has held that, the charges can
also be framed on the basis of strong suspicion. That marshalling and
appreciation of evidence is not in the domain of the Court at that point of
time. Thus, it is clear that the Supreme Court in its various decisions has held
that while considering the application for discharge the Court has to take into
consideration the prima facie case as made out by the
Complainant/prosecution.
8) Section 34 of the said Act deals with Offences by companies. It is
the statutory provision which provides for the vicarious liability. Section 34
specifically provides that, 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. The proviso to sub-section (1) of section 34 of the
said Act, provides that the person so charged shall not be liable to any
punishment under the 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.
9) Sub-section (2) of section 34 of the said Act, provides that
notwithstanding anything contained in sub-section (1), where an offence
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under the 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. It is therefore clear that, for the
purposes of sub-section (2), it is necessary to show that the offence was
committed with the consent or connivance of, or is attributable to any neglect
on the part of the person accused.
10) The explanation to section 34 of the said Act, which defines a
company is in a sense restrictive in nature and only for the purpose of section
34 of the said Act. Clause (a) of the explanation defines a “company” to mean
a body corporate, and includes a firm or other association of individuals; and
clause (b) defines a “director” in relation to a firm to mean a partner in the
firm. For the purposes of the section, what is included to mean a company is a
body corporate, a firm or other association of Individuals. The term Trust is
not included. The term director is defined in relation to a firm and equated to
a partner of the firm. There is no reference to the term Trustee. One must
remember that, Section 34 of the said Act provides and invokes concept of
vicarious liability. The said provision has to therefore strictly construed. In
fact, on a holistic reading of the provision it clearly appears that, the Trust is
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infact excluded. It is also necessary to keep in mind that, Trust is not a juristic
person like a company and therefore also excluded from the explanation and
Section 34 of the said Act.
11) Section 27 of the said Act deals with the penalty for manufacture,
sale etc. of drugs in contravention of the Act. It provides that, whoever,
himself or by any other person on his behalf, manufactures for sale or for
distribution, or sells, or stocks or exhibits or offers for sale or distributes drugs
in contravention of the provisions of Act shall be punishable with the
punishments as provided in the said section. The section is a deeming
provisions and therefore the provisions will have to be strictly construed and
each requirement/ provision followed strictly in its true letter and spirit. To
invoke the provisions of Section 27 of the said Act, it would be necessary that
the pleading and averment prima facie indicating at least to some extent the
manner in which the acts were done through the other. Further, the said
Section is required to be read with the relevant rules under the Drugs Rules
1945. Amongst other rules, the rules in respect of the duties of inspectors of
premises licensed for sale, taking of samples etc. are to be seen. Rule 59 of the
Drug Rules, 1945 deal with the sale of drugs other than homeopathic
medicines. Rule 61, of the Drug Rules, 1945, provides for forms of license to
sell drugs. The Drug Rules, 1945, provide for restricted licences to sell, stock
or distribute drugs.
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12) The case of Respondent No.2 in the complaint is that, the
Petitioner and accused Nos.1, 2 and 4 acquired, stocked and distributed the
drug Visilon B.No.24190 at Bombay during the period from 7 th March 1992 to
23rd June 1992. The said drug was found to be not of standard quality,
misbranded, spurious and adulterated and therefore contravened section
18(a)(i) read with section 17(b)(c), 17A(c), 17B(a)(c) punishable under
section 27(a) and section 16 of the said Act punishable under section 27(d)
read with section 34 of the said Act. Pertinent to note that, the said drug was
manufactured, distributed and dealt with by accused Nos 5 to 12, out of
which accused Nos. 5 and 7, who were the partners of the Segal Optics, i.e.,
accused No.8 the dealer, have been discharged on the ground that, they were
not incharge and responsible for the affairs of accused No.8.
13) Perusal of the complaint would prima facie indicate that, as
against the Petitioner there is no specific allegation or averment that he was
in-charge of or responsible for the day-to-day affairs of accused No.4 i.e.
Hospital or the Pharmacy. The only averment against the Petitioner is in para-
2 of the complaint which reads as under:
“….. The accused No.3 is Managing Trustee of P.D. Hinduja
National Hospital & Medical Research Centre, Mahim, Bombay. i.e.
accused No.4”
Apart from the aforesaid averment, no other averment or allegation made
which would indicate that, the Petitioner being the Managing Trustee of the
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Trust was in any way connected with or incharge of acquiring, stocking or
distribution of drugs in the accused No. 4 Pharmacy including the drug
Visilon. Prima facie the said averment only states the designation of the
Petitioner and no more. I have noted that, Respondent No. 2 has made the
Pharmacist (accused No. 1) and the Deputy Director (Materials) (accused No.
2) of Hinduja Hospital and the Hospital (accused No.4) as accused in the
complaint. Prima facie the Pharmacist and/or the Deputy Director (Materials)
would be incharge of the pharmacy of the hospital and supervise the
procuring, stocking and sale of the drugs in the pharmacy. The Respondent
No. 2 has made the manufacturer, dealer/distributor and their partners and
directors as the case may be as other co- accused in the complaint. Accused
Nos. 5 to 12 were the manufacturers, dealer and/or distributors of the said
drug.
14) The record indicates that the Petitioner is made accused only on
the basis of the Hospitals letter dated 30 th November 1994 issued by accused
No.4 Hospital. The letter was in reply to letter dated 17 th November 1994 of
the Drugs Inspector, where the following information was sought from the
Hospital i.e. (i) Name and address of the Managing Trustee/Chairman,
Executive Council; (ii) Address of Mr. Joseph Mathew – Sr. Supervisor
Pharmacy and (iii) Payment Particulars. In the complaint, there is no
averment or pleading which would show any involvement of the Petitioner in
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procuring the drug. It cannot be that, by merely mentioning the provisions of
sections 27 or 34 of the said Act, the requirement of making the necessary and
essential averments and pleadings is given a go by. It is also well settled that,
even by merely using or employing the language of a Section, it cannot be
said that the required ingredients of the Section are attracted or the necessity
of making the necessary averments and pleading is complied with. In the
present case, as against the Petitioner, I find that there is no averment. In my
opinion, a perusal of the complaint in the present case indicates that, the
complaint lacks the most basic, essential and fundamental averments/
pleadings. In the present case, there is nothing on record to even prima facie
indicate that, any independent enquiries were undertaken by Respondent No.
2 as to fix the vicarious liability or conclude that a particular individual was
incharge of the day-to-day activities of the Hospital/Pharmacy or an act was
done by or through the person. Pertinent to note and very importantly, that
procurement, stocking and selling of drugs is done under the supervision of a
pharmacist an expert person having the requisite knowledge of the medicines,
drugs and the composition/ contents of the drugs. This also the requirement
under the Drug Rules, 1945. The license of the Pharmacy is given based on
the expertise and qualification of the expert person having special knowledge.
15) Prima facie it appears that there is no averment or pleading in
respect of the Petitioner be incharge or in control of the day-to-day affairs of
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the hospital, pharmacy or directly supervising the same with the accused
Nos.1 and 2. There is a complete silence. There is a complete absence of the
required and essential averments. Even if one were to invoke the provisions of
section 27 of the said Act, there is a complete absence of the required and
essential averments. It is settled law that, vicarious liability provisions have to
be strictly construed. It was necessary for the Respondent No. 2 plead and at
least prima facie demonstrate that, the Petitioner was responsible and
incharge of the pharmacy i.e. procurements, stocking and selling. There is no
such averment or pleading. Simply because a person is a Trustee and
termed/called as Managing Trustee of a Trust, he cannot and does not become
liable for each and every act by an employee in a pharmacy. Pertinent to note
that, even a non-designate person, if involved or the acts can be attributed to
the said person would be liable for prosecution. What is necessary is that the
basis averment and pleadings are made. In the present complaint, apart from
mentioning the designation of the Petitioner there is not even a whisper in
respect of the role, part played or act attributed to the Petitioner. Bald,
general, sweeping or vague pleadings, in my considered view are not enough
to invoke a vicarious liability.
16) I have also noted that, both the impugned Orders rejecting the
discharge application of the Petitioner have solely relied upon the judgment
passed by the Madras High Court in the case of M/S. Abraham Memorial
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Educations Trust (supra). The Hon’ble Supreme Court while deciding an issue
in the case of Sankar Padam Thapa (supra) has overruled the judgment of the
Madras High Court in the case of M/S. Abraham Memorial Educations Trust
(supra). The issue before the Hon'ble Supreme Court in Sankar Padam Thapa
(supra) was whether a complaint under the NI Act would be maintainable
against a Trustee in the absence of the Trust being arraigned as an accused.
The Hon'ble Supreme Court framed the issue in Paragraph 2 of the judgment
as under:
"2. The question for consideration in the instant appeal is as to
whether in the absence of a Trust being made an accused in a
complaint under the Negotiable Instruments Act, 1881
(hereinafter referred to as the ‘NI Act’), when a Cheque has been
issued on behalf of a Trust, the said complaint would be
maintainable against the Chairman/a Trustee of the said Trust?"
17) The Hon’ble Supreme Court in the case of Sankar Padam Thapa
(supra), while considering the issues before it, has made certain observations
which are relevant and of importance to the present case. The said
observations are as follows: -
“26. Ergo, it is clear that though a Trust may act or even be treated
as an entity for certain legal purposes and not all legal purposes, a
Trust is an obligation imposed on the ostensible owner of the property
to use the same for a particular object - for the benefit of a named
beneficiary or charity, and it is the Trustee(s) who are bound to
maintain and defend all suits and to take such other steps with regard
to the nature, land or the value of the Trust property, that may be
reasonably required for the preservation of the Trust property, and the
assertion of protection of title thereto, subject to the provisions of the
instructions of Trust to take such other steps.
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28. Though we have delved into the issue of whether a Trust can
sue or be sued on its own, we would make it amply clear (and as
would also become evident from what followsinfra) on this point, that
our view is confined to examination of the subject in the context of the
NI Act alone, in praesenti. We were called upon to consider only as to
whether without making a Trust an accused, a complaint would be
maintainable against a Trustee in the eye of law under the NI Act.
29. Hence, the question posed is answered in the affirmative. When
a cause of action arises due to an alleged dishonour of cheque and a
complaint is initiated under the NI Act, the same is maintainable
against the Trustee who has signed the cheque, without the
requirement to array the Trust also as an accused.
….. ….. ….. ….. …..
34. Clearly, Mukund(supra) principally proceeded on equating a
Trust with a ‘company’, which is a fallacy. If we trace our steps back to
over a century ago, in the locus classicus Salomon v. A Salomon and
Co. Ltd., [1897] A.C. 22, Lord Macnaghten of the House of Lords
opined:
‘…
The company is at law a different person altogether from the
subscribers to the memorandum; and, though it may be that after
incorporation the business is precisely the same as it was before,
and the same persons are managers, and the same hands receive
the profits, the company is not in law the agent of the subscribers or
Trustee for them. Nor are the subscribers as members liable, in any
shape or form, except to the extent and in the manner provided by
the Act. That is, I think, the declared intention of the enactment. If
the view of the learned judge were sound, it would follow that no
common law partnership could register as a company limited by
shares without remaining subject to unlimited liability.…’
(emphasis supplied)
….. ….. ….. ….. …..
36. Therefore, Mukund(supra) does not lay down the correct
position of law having wrongly assigned equivalence between a
‘company’ and a Trust, besides running counter to our exposition qua
Sections 3 and 13 of the Trusts Act. The legal status accorded to a
‘company’ cannot be imported to a Trust, in the eyes of law, in the case
at hand.
….. ….. ….. ….. …..
38. The views expressed by the respective High Courts in Prana
Educational and Charitable Trust(supra); Dadasaheb Rawal Co-op.
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Bank of Dondaicha Ltd.(supra); Abraham Memorial Educational
Trust(supra); Mukund(supra), and; Bijaya Manjari Satpathy(supra)
run counter to what we have held above. The same do not commend
themselves to us and are overruled in law, without disturbing their
effect(s)inter-parties.
….. ….. ….. ….. …..
42. We are conscious that Pratibha Pratisthan(supra) has been
doubted and referred to a Larger Bench vide Order dated 04.10.2019
in Tara Bai Desai Charitable Opthalmic Trust Hospital v. Supreme
Elevators India (P) Ltd., Special Leave Petition (Civil) No. 18636/2019
[since reported as (2025) 3 SCC 80]. In fact, one of us (Ahsanuddin
Amanullah, J.) was nominated by Hon'ble the then Chief Justice of
India to be part of the 3-Judge Bench constituted to hear the afore-
noted reference. As the learned Judge presiding over that 3-Judge
Bench has since demitted office, it would entail nomination of a new
coram. However, till the reference is decided one way or the other, the
law as declared in Pratibha Pratisthan(supra) continues to hold the
field as no order has been passed in Special Leave Petition (Civil) No.
18636/2019 requesting other Benches to await the outcome thereof.
There is no doubt on this, given the clear dicta in Union Territory of
Ladakh(supra) [2-Judge Bench], which after surveying the law, held:
‘35. We are seeing before us judgments and orders by High Courts
not deciding cases on the ground that the leading judgment of this
Court on this subject is either referred to a larger Bench or a review
petition relating thereto is pending. We have also come across
examples of High Courts refusing deference to judgments of this
Court on the score that a later Coordinate Bench has doubted its
correctness. In this regard, we lay down the position in law. We
make it absolutely clear that the High Courts will proceed to decide
matters on the basis of the law as it stands. It is not open, unless
specifically directed by this Court, to await an outcome of a
reference or a review petition, as the case may be. It is also not
open to a High Court to refuse to follow a judgment by stating that
it has been doubted by a later Coordinate Bench. In any case, when
faced with conflicting judgments by Benches of equal strength of
this Court, it is the earlier one which is to be followed by the High
Courts, as held by a 5-Judge Bench in National Insurance Company
Limited v. Pranay Sethi, (2017) 16 SCC 680[See Paragraphs 27 and
28 in the report on this point.]. The High Courts, of course, will do
so with careful regard to the facts and circumstances of the case
before it.’
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(emphasis supplied)
The Hon’ble Supreme Court has clearly observed and concluded that a Trust
cannot be equated to a Company and that doing so would be a fallacy. It is
observed that the legal status accorded to a company cannot be imported into
a Trust. Pertinent to note that a Trust is not a distinct legal entity as different
and distinct from its Trustees.
18) The learned Magistrate in the Order dated 3rd September 2015
has proceeded on the basis that, a Trust is included in the definition of a
company and also comes under association of individuals. It is further
observed that, the Petitioner being described as the Managing Trustee can be
prosecuted. Both the Order dated 3rd September 2015 and the order dated 2nd
February 2017 placed reliance on the Judgment of the Madras High Court in
the case of Abraham Memorial Educations Trust (supra), which is no more
good law as the same has been overruled by the Hon’ble Supreme Court in the
case of Sankar Padam Thapa (Supra).
19) The Impugned Order dated 2nd February 2017, proceeds to
equate the term "Managing Trustee" to the term "Managing Director” and also
to a manager, director and secretary as used in section 141 of the NI Act. It
also holds that a “Trust” is a "Company" under Section 34 of the said Act. This
in my opinion are erroneous findings. The Hon”ble Supreme Court has in the
case of Sankar Padam Thapa (Supra) specifically observed that, equating a
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Trust with a ‘company’, is a fallacy. A Trust is clearly excluded from the scope
and ambit of section 34 of the said Act. Furthermore, the term Managing
Director is a term well defined under section 2(26) of the Companies Act,
1956/now Section 2(54) of the Companies Act 2013. The term “Managing
Trustee” is not defined under the Trust laws and therefore cannot be equated
to the term “Managing Director”.
20) The judgment in the case of M/S. Abraham Memorial
Educational Trust (supra) was thus the sole and exclusive legal foundation for
the Petitioner's implication at every stage of the proceedings under Section 34
of the said Act, which judgement has now been overruled and is no longer
good law. The Impugned Orders do not consider in the proper perspective the
fact that, there is no pleading or averment as to the role of the Petitioner. In
my opinion the Petitioner is sought to be made liable on an erroneous
interpretation of Section 34 of the said Act. There is no reference or
consideration of the Petitioner's role and involvement in procuring the said
drug or being aware of the fact that the drug was spurious, misbranded etc.,
nor is the difference between a Trust and Company considered.
21) Under a Trust, all Trustees are equal and hold property in Trust as
co-owners. There can be no doubt of the fact that in a criminal proceeding,
the Trustees who are liable and answerable, are the ones who have done the
alleged acts of commission and/or of omission. In that view of the matter, it
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therefore becomes all the more imperative to make and have in place the
necessary averments and pleadings in respect of the acts of the Trustees. On
most of the occasions the task and work are assigned to specific individual
employees / representatives under a resolution to carry out the work. In case
like the present one which deals with selling of medicines / drugs
manufactured by a third party through the pharmacy of the hospital, it is
necessary to remember that the same is done through an approval process of
licensing as provided under the Drugs Act 1945. There is specialized and
expert knowledge which is required to procure and dispense drugs. The
knowledge is acquired through a particular course, education etc. The Act and
the rules provide for procedure and safeguards. In such a situation, it cannot
be that all the Trustees are prosecuted for act of any individual, unless there is
a material on record to show the involvement of all Trustees or a particular
Trustee(s) and the same is pleaded.
22) It is also essential to keep one reminded of the fact that, section
34 of the said Act creates a vicarious liability and it is settled law that the
same has to be interpreted and construed strictly.
23) The Hon’ble Supreme Court in the case of Tolaram Relumal v.
State of Bombay, reported in (1954) 1 SCC 961 has observed that: -
“8. The question that needs our determination in such a situation is
whether Section 18(1) makes punishable receipt of money at a
moment of time when the lease had not come into existence, and
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when there was a possibility that the contemplated lease might never
come into existence. It may be here observed that the provisions of
Section 18(1) are penal in nature and it is a well-settled rule of
construction of penal statutes that if two possible and reasonable
constructions can be put upon a penal provision, the court must lean
towards that construction which exempts the subject from penalty
rather than the one which imposes penalty. It is not competent for
the court to stretch the meaning of an expression used by the
legislature in order to carry out the intention of the legislature. As
pointed out by Lord Macmillan in London & North Eastern Railway
Co. v. Berriman [London & North Eastern Railway Co. v. Berriman,
1946 AC 278 at p. 295 (HL)]: (AC p. 295)
“… Where penalties for infringement are imposed it is not
legitimate to stretch the language of a rule, however, beneficent
its intention, beyond the fair and ordinary meaning of its
language.”
24) The Hon’ble Supreme Court in the case of Dilip Kumar Sharma v.
State of M.P., reported in (1976) 1 SCC 560 has observed that: -
“23. It is well settled that such a penal provision must be strictly
construed; that is to say, in the absence of clear compelling language,
the provision should not be given a wider interpretation, and
“no case should be held to fall within which does not come
within the reasonable interpretation of the statute. (M.V. Joshi v.
M.U. Shimpi [AIR 1961 SC 1494: (1961) 3 SCR 986: (1961) 2
Cri LJ 696])”
If two constructions are possible upon the language of the statute,
the Court must choose the one which is consistent with good sense
and fairness, and eschew the other which makes its operation
unduly oppressive, unjust or unreasonable, or which would lead to
strange, inconsistent results or otherwise introduce an element of
bewildering uncertainty and practical inconvenience in the working
of the statute.”
25) As regards the importing of criminal vicarious liability, the
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Hon’ble Supreme Court in the case of Sunil Bharti Mittal v. CBI, reported in
(2015) 4 SCC 609 has observed that: -
“(iii) Circumstances when Director/person in charge of the affairs of
the company can also be prosecuted, when the company is an accused
person
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.”
26) The Hon’ble Supreme Court in the case of Balaji Traders v. State
of U.P., reported in (2025) 10 SCC 638 has observed that: -
“24. A three-Judge Bench of this Court has also observed in Dilip
Kumar Sharma [Dilip Kumar Sharma v. State of M.P., (1976) 1 SCC
560: 1976 SCC (Cri) 85] that a penal provision must be strictly
construed; that is to say, in the absence of clear, compelling
language, the provision should not be given a wider interpretation.”
Considering the aforestated pronouncements, it is necessary that
Section 34 of the Act, being penal provision is required to be strictly
construed.
27) The Hon'ble Supreme Court in Sankar Padam Thapa (supra) has
categorically held in paragraph 23 that. “…. that a Trust does not have a
separate legal existence of its own, making it incapable of suing or being
sued” and in paragraph 25 that it is "not a legal entity” or 'juristic person'. In
paragraph 38, the Hon’ble Supreme Court inter alia expressly overruled
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Abraham Memorial Educational Trust (Supra) the very judgment on which
both courts below exclusively relied. The judgement further has also overruled
the judgment in the case of Mukund v. Eknath, reported in 2023 SCC OnLine
Bom 3015 of this Court, holding that equating a Trust with a "company" for
the purposes of Section 141 of the NI Act was "a fallacy" and held that: -
“36. Therefore, Mukund(supra) does not lay down the correct
position of law having wrongly assigned equivalence between a
‘company’ and a Trust, besides running counter to our exposition qua
Sections 3 and 13 of the Trusts Act. The legal status accorded to a
‘company’ cannot be imported to a Trust, in the eyes of law, in the case
at hand."
28) Section 34 of the said Act provides for Offences by companies
and is applicable to a “company". It deals with offences committed by a
company and every person incharge or responsible for the conduct of the
company. The explanation to the section defines a company to mean a body
corporate, and includes a firm or other association of individuals and a
“director” in relation to a firm means a partner in the firm. The section
provides that a "firm" is also a company and its "partners" will be deemed to
be "directors". The intention of the legislature therefore is clear. The language
of Section is plane, clear and simple. Pertinent to note that legislature in its
wisdom, in the explanation does not however include a "Trust" in the
definition of a company nor is a Trustee included in the definition of a
director. Section 34 of the said Act creates a statutory and vicarious liability,
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and is therefore to be strictly interpreted and construed. It is pertinent to note
that the Hon’ble Supreme Court in Sankar Padam Thapa (supra) has observed
that it will be a “fallacy” to equate a company with a Trust. It is therefore, now
clearly settled by the Hon’ble Supreme Court that a Trust cannot come within
the scope of section 34 of the Act.
29) The explanation of Section 34 of the said Act is identical to
Section 141 NI Act, both provisions fasten vicarious criminal liability in
relation to a "company" on the person "in charge of and responsible for the
conduct of the business of a company or association of individuals". It is a well
settled that Section 34 of the Drugs and Cosmetics Act, 1940, is pari materia
with Section 141 of the Negotiable Instruments Act, 1881.The Hon’ble
Supreme Court in the case of Dilip Hariramani v. Bank of Baroda, reported in
(2024) 15 SCC 443, in paragraph 7 of its judgment, and the Madhya Pradesh
High Court, in the case of Narayanan Ayyar v. State of M.P ., reported in 2006
SCC OnLine MP 189, in paragraph 10 have held that the provisions of Section
34 of the Drugs and Cosmetics Act, 1940, are pari materia with those of
Section 141 of the Negotiable Instruments Act, 1881. Accordingly, the
principles of law laid down in the interpretation of Section 141 of the
Negotiable Instruments Act can be relied upon, to the extent applicable, while
interpreting Section 34 of the Drugs and Cosmetics Act, 1940.
30) During the arguments the learned Advocate appearing for the
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Respondents while referring to the case of Sankar Padam Thapa (Supra)
placed reliance on paragraph 26 to contend that, the Trustees are responsible
for the affairs of the Trust and therefore criminally liable. As laid down by the
Hon’ble Supreme Court in the case of Pepsi Foods Ltd. v. Judicial Magistrate,
reported in (1998) 5 SCC 749, to initiate criminal proceedings is a serious
matter having grave and long-lasting consequences. In my considered view, to
initiated criminal prosecution, and more importantly a criminal prosecution
based on vicarious liability it is absolutely necessary to make essential and
required averments and pleadings in the proper perspective of the case.
Further the penal provisions are to be strictly construed. One cannot by in a
general, bald and casual manner seek to conflate civil obligations of a Trustee
with vicarious criminal liability. Only being a Trustee, in my opinion is not
enough to invoke the provision of a criminal offence much less a vicarious
liability unless clearly provided by a statutory provision. A Trustee or even a
director of a company for that matter only by his position does not become
per se liable or per se vicariously liable for any and every act. This in my
opinion would be a dangerous proposition to accept and would have far
reaching consequences. Something more in the form of reliable and cogent
material is required to connect the person with the act. One cannot assume
and presume that, only because a person is a Trustee or a director of company
the person is aware, has knowledge and has taken part in the day-to-day
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administration and incharge of each and every aspect of the decision or the
decision-making process. Criminal liability is not co-extensive with civil
responsibility. Paragraph 26 of the judgment of Sankar Padam Thapa (Supra),
read in context, deals with the civil law obligation of Trustees to maintain and
defend proceedings concerning Trust property.
31) A Trust cannot be equated or treated as a "company" or
"association of persons" under section 34 of the said Act. Section 34 of the said
Act creates a criminal liability and thereafter has to be strictly adhered to and
complied with. One cannot add, supplement or subtract the ambit, scope and
applicability of the said sections. The Trust Act and the law related to Trust
does not define the term or the designation of “Managing Trustee”. It is only
the Trustees, who hold, the property in Trust and strive to achieve the objects
of the Trust. A Trustee acts for and on behalf of the Trust. To implicate a
Trustee of the Trust, it is necessary that, the complaint has at least the
required prima facie pleadings and averments of the overt act or the
knowledge or of having authority to take the decision or that the decision on
which the impugned action is based was taken by the specific Trustee or
Trustees. "Managing Trustee" is not a designation defined in the Trust Act. The
term Managing Director which is defined in Section 2(54) of the Companies
Act, 2013 as a person in substantial charge of management. There is no
definition much less similar definition of "Managing Trustee" in the Trust Act.
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Consequently, the prosecution cannot rely upon the mere designation to
maintain a criminal prosecution against such a person even if the person is
referred to as a “Managing Trustee”. In the present case, the Petitioner has
been roped in as an accused solely based on the information provided by the
Hospital vide its letter dated 30th November 1994. There is no independent
verification and assertion of facts. There is no material much less credible or
reliable or as even any reasonable material. There is no pleadings. Further a
Trust also cannot be equated to an Association of Persons. A Trust depending
on its objects is governed either by the Indian Trust Act,1882 or the
Maharashtra Public Trust Act, 1950. It is defined under the Acts. There is a
different mechanism for its formation, supervision and administration. It
cannot be equated to an Association of persons, and surely not for the
purposes of section 34 of the said Act.
32) Further, it is pertinent to note that Section 27 of the said Act
which prescribes the penalties for manufacture, sale, stocking, exhibition for
sale or distribution of drugs in contravention of the provisions of the Act,
employs the expression "whoever, himself or by any other person on his
behalf". The legislative intent is therefore explicit that criminal liability under
the Act is not confined only to the person who directly undertakes the
prohibited act, but also extends to a person who causes such acts to be carried
out through another person or entity acting on his behalf. Along with Section
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27 of the said Act, it is necessary to refer to the Drugs Rules, 1945. These
Rules provide that an application is required to be made to seek a license to
operate a pharmacy. The State Government appoints licensing authorities to
whom the application is made. When making an application for the grant of
license to sell, stock, exhibit and/or for sale or distribute drugs, the rules
prescribe different terms depending on the nature of the drug. It is the
requirement of law, that the Applicant provides and gives the names of
qualified person under whose personal supervision the sale and dispensing of
the drugs would be made. It also specifies the category of drugs and the
particulars of the special storage accommodation. If the Applicant chooses to
sell drugs, which do not require the engaging of services of qualified persons,
i.e., drugs which can be sold without supervision of a qualified person, here
also the names of the Drugs and storage details are given. Further, after the
license is granted, if there is any change in qualified staff / incharge of the
pharmacy, it is required that the licensee reports to the license authority, such
change within one month. In case there is a change in the constitution of the
licensed firm, the same shall be informed to the licensing authority. In case the
change takes place in the constitution of the firm, the current license shall be
valid for a period of three months from the date of the change in the
constitution of firm unless a fresh license has been obtained in the name of
the firm with the changed constitution. It is thus, clear that the qualified
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person who is approved by the licensing authority runs and administers the
pharmacy. These are necessary aspects to which are required to be considered
before initiating criminal prosecution which entail serious consequences.
33) The question which is then required to be considered is that, as to
what extent and under what facts and circumstances the said criminal liability
can be invoked. It is settled law that invoking criminal prosecutions is a
serious matter having far reaching and devastating consequences. Criminal
prosecutions based on the principles of vicarious liability can be invoked only
if the statute expressly and clearly provides for the same and the said
provision is to be strictly construed. The required averments and pleadings in
that regard are therefore a must and have to be specifically pleaded and
available.
34) The prosecution, for the first time during the arguments stressed
on the Section 27 of the said Act and the expression "himself or by any other
person on his behalf". Perusal of the complaint would indicate that, the said
Section is only referred to in the complaint. Even in respect of section 27 of
the Act ,there is no specific pleading dealing with provisions/ ingredients
Section 27 or the Rules. Prima facie, there is no averment as is required to
invoke and attract the provisions of Section 27 of the said Act. Even as regards
Section 27 of the said Act, the complaint is dehorse of required and essential
basic averments. The pleading is entirely absent from the complaint. The
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prosecution cannot be permitted to set up and argue a new case at this stage
which is not pleaded in an attempt to cure the deficiency in its complaint.
Further, the expression "by any other person on his behalf" contemplates a
person directing another to undertake the prohibited act on his behalf. At the
very least there should be specific averments of the Petitioner having caused,
authorized or directed the prohibited acts or omissions. No such averments
appear anywhere in the complaint. This submission of the prosecution is a
bald assertion with no foundation or material in the complaint, and a mere
afterthought. This ought not to be permitted. In that view of the matter the
said argument is required to be rejected.
35) I have also noted that accused Nos.5 and 7, who were the
partners of the accused No.8 firm i.e. Segal Optics, who is the dealer of the
said drug, have been discharged by the Sessions Court on the ground that
they were not in-charge and responsible for the day-to-day affairs of the
partnership firm. The same law would be applicable to the present Petitioner
and with greater force.
36) I have also noted that, the presumption of incharge status
requiring no separate pleadings, as held in S.M.S. Pharmaceuticals Ltd
(Supra), is confined to Managing Directors and Joint Managing Directors of
companies as Managing director is a defined term by the Companies Act. No
such presumption applies to a Trustee. There is no term as “Managing
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Trustee” which is defined under the Trust laws. As noted earlier, the Hon’ble
Supreme Court in the judgment of Sankar Padam Thapa (Supra) has held that
a company cannot be equated to a Trust. The corollary which would then
follow is that a defined term such as the “Managing Director” of a company
cannot be equated to the terms Managing Trustee, especially so when one
invokes a vicarious liability under criminal prosecution. A Managing Director
in law is a defined term and is appointed by the procedure as laid down in the
Companies Act and with other duties and obligation.
37) Further even assuming that, Section 27 under Section 34 of the
said Act are, applied to the Petitioner, the complaint is bereft of the averments
necessary to fasten vicarious personal criminal liability on the Petitioner.
Specific averments of active involvement are required. Vicarious liability "must
be pleaded and proved and not inferred.".
38) A useful reference can be made to the Judgment of the Hon’ble
Supreme Court in the case of Lalankumar Singh v. State of Maharashtra,
reported in (2023) 236 Comp Cas 741 where the Hon’ble Supreme Court
while dealing with the provisions of Section 34 of the said Act has made the
following observations:-
“13. In the case of State of Haryana v. Brij Lal Mittal**, this court
observed thus***:
"None the less, 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
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prosecuted as directors of the manufacturers with the aid of
section 34(1) of the Act which reads as under:
'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.
14. It could thus be seen that this court had held that simply
because a person is a director of the company, it does not
necessarily mean that he fulfils
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* See (2010) 11 SCC 125.
** See (1998) 93 Comp Cas 329 (SC); (1998) 5 SCC 343.
*** See page 333 of 93 Comp Cas.
the twin requirements of section 34(1) of the said Act so as to
make him liable. It has been held that a person cannot be made
liable unless, at the material time, he was incharge of and was
also responsible to the company for the conduct of its business.
17. In the case of Pooja Ravinder Devidasani v. State of
Maharashtra* this court observed thus**:
"Every person connected with the company will not fall into
the ambit of the provision. Time and again, it has been
asserted by this court that only those persons who were in
charge of and responsible for the conduct of the business of
the company at the time of commission of an offence will be
liable for criminal action. A director, 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 for an
offence under section 141 of the N.I. Act. In National Small
Industries Corporation Ltd. v. Harmeet Singh Paintal (2010) 3
SCC 330; (2010) 1 SCC (Civ) 677; (2010) 2 SCC (Cri)
1113*** this court observed#: (SCC page 336, paragraphs
13-14)
'Section 141 is a penal provision creating vicarious
liability, and which, as per settled law, must be strictly
construed. It is therefore, not sufficient to make a bald
cursory statement in a complaint that the director
(arrayed as an accused) is in charge of and responsible to
the company for the conduct of the business of the
company without anything more as to the role of the
director. But the complaint should spell out as to how and
in what manner respondent No. 1 was in charge of or was
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responsible to the accused company for the conduct of its
business. This is in consonance with strict interpretation
of penal statutes, especially, where such statutes create
vicarious liability. A company may have a number of
directors and to make any or all the directors as accused
in a complaint merely on the basis of a statement that
they are in charge of and responsible for the conduct of
the business of the company without anything more is not
a sufficient or adequate fulfilment of the requirements
under section 141.' (emphasis in original)
In Girdhari Lal Gupta v. D.H. Mehta (1971) 3 SCC
189; [1971] SCC (Cri) 279; AIR 1971 SC 2162, this
court observed that a person
* See (2015) 190 Comp Cas 106 (SC); (2014) 16 SCC 1.
** See page 116 of 190 Comp Cas.
*** See (2010) 154 Comp Cas 313 (SC).
# See page 320 of 154 Comp Cas.
'In charge of a business' means that the person should
be in overall control of the day-to-day business of the
company.
A director of a company is liable to be convicted for an
offence committed by the company if he/she was in charge
of and was responsible to the company for the conduct of
its business or if it is proved that the offence was
committed with the consent or connivance of, or was
attributable to any negligence on the part of the director
concerned (see State of Karnataka v. Pratap Chand (1981)
2 SCC 335; [1981] SCC (Cri) 453) *.
In other words, the law laid down by this court is that
for making a director of a company liable for the offences
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committed by the company under section 141 of the N.I.
Act, there must be specific averments against the director
showing as to how and in what manner the director was
responsible for the conduct of the business of the company.
In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya
(2006) 10 SCC 581; (2007) 1 SCC (Cri) 621**, it was held
by this court that***: (SCC pages 584-85, paragraph 7)
'.. . it is not necessary for the complainant to specifically
reproduce the wordings of the section but what is required
is a clear statement of fact so as to enable the court to
arrive at a prima facie opinion that the accused is
vicariously liable. Section 141 raises a legal fiction. By
reason of the said provision, a person although is not
personally liable for commission of such an offence would
be vicariously liable therefor. Such vicarious liability can be
inferred so far as a company registered or incorporated
under the Companies Act, 1956 is concerned only if the
requisite statements, which are required to be averred in
the complaint petition, are made so as to make the accused
therein vicariously liable for the offence committed by the
company.' (emphasis supplied)
By verbatim reproducing the words of the section
without a clear statement of fact supported by proper
evidence, so as to make the accused vicariously liable, is a
ground for quashing proceedings initiated against such
person under section 141 of the N.I. Act.””
39) The observations of the Hon’ble Supreme Court in the case of
Sunil Bharti Mittal vs. CBI, reported in (2015) 4 SCC 609, in paragraph No.43
and 44, read as under: -
“43. Thus, an individual who has perpetrated the commission of
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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
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
[aneeta hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC
661: (2012) 3 SCC (Civ) 350: (2012) 3 SCC (Cri) 241], 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.”
40) The Hon’ble Supreme Court in the case of Ravindranatha Bajpe
Vs. Mangalore Special Economic Zone Ltd., reported in 2021 SCC OnLine SC
806 has observed that.
“9. From the order passed by the learned Magistrate issuing
the process against the respondents herein, Accused 1 to 8, there
does not appear that the learned Magistrate has recorded his
satisfaction about a prima facie case against Respondents 2 to 5
and 7 and 8. Merely because Respondents 2 to 5 and 7 and 8 are
the Chairman/ Managing Director/Executive Director/Deputy
General Manager/Planner & Executor, automatically they cannot
be held vicariously liable, unless, as observed hereinabove, there
are specific allegations and averments against them with respect
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to their individual role. Under the circumstances, the High Court
has rightly dismissed the revision applications and has rightly
confirmed the order passed by the learned Sessions Court
quashing and setting aside the order passed by the learned
Magistrate issuing process against Respondents 1 to 8 herein-
original Accused 1 to 8 for the offences punishable under
Sections 427, 447, 506 and 120-B read with Section 34 IPC.”
The observations of the Hon’ble Supreme Court in the aforesaid Judgments
are squarely applicable to the present case.
CONCLUSION
41) To conclude, it is clear that there is no averment or pleading as
against the Petitioner so as to invocation of Section 27 or 34 of the said Act.
The complaint does not contain any pleading or averment whatsoever. Penal
provisions and provisions providing vicarious liability are required to be
strictly construed. I find that, apart from stating the designation of the
Petitioner there is no after pleading or averment. No case is made out against
the Petitioner. In the same criminal proceedings, the dealer of drugs has been
discharged on similar grounds. There are no circumstances or any material on
record on the basis of which any suspicion can be raised as against the
Petitioner.
42) In view of the above facts and circumstance, submissions
advanced by the learned counsels for the parties and the law as laid down by
the Hon’ble Supreme Court, I am of the considered opinion that the facts of
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the present case warrant the exercise of the inherent powers of this Court
under Section 482 of the CrPC. A prima facie case has been made by the
Petitioner to seek discharge. Allowing the continuation of the criminal
proceedings against the Petitioner, without any averment, pleading or material
would amount to abuse of the process of law. In my considered view, it will be
in the interest of justice and to secure the ends of justice, the Petitioner is
discharged from the criminal proceedings.
43) Hence, I pass the following Order: -
i) Petition is allowed in terms of prayer clause (b).
(RANJITSINHA RAJA BHONSALE, J.)
SAGAR
SANTOSH
MAGAR
Digitally signed by
SAGAR SANTOSH
MAGAR
Date: 2026.10.09
20:59:21 +0530
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