DINESH B. PATEL & ORS.versusSTATE OF GUJARAT & ORS.

                [2010] 10 S.C.R. 319


                DINESH 8. PATEL & ORS.                       A
                            v.
              STATE OF GUJARAT & ORS.
           (Criminal Appeal No. 1464 of 2010)
                    AUGUST 6, 2010
                                                             B
     [V.S. SIRPURKAR AND CYRIAC JOSEPH, JJ.]

     Code of Criminal Procedure, 1973 - s. 482 - Criminal
complaint - Against a Company, which manufactured
medicines, and its Directors - Alleging defect in the C
manufactured medicines - Petition for quashing the
complaint - Dismissed by High Court - On appeal, held:
Complaint not liable to be quashed - The complaint
suggested that the Directors were privy to the manufacturing
of medicine by the Company - Allegations were serious in .D
nature - It is open to the Directors to show before trial court
that they were not liable u/s. 34(2) of Drugs and Cosmetics
Act - Drugs and Cosmetics Act, 1940 - s. 34(2).

     A compliant was filed against a medicine
manufacturing Company and its Directors, alleging defect E
in the medicines manufactured. The Company :and ·the
Directors filed petition u/s. 482 Cr.P.C. seeking quashing
of the complaint. High Court dismissed the petition
holding that all the Directors were liable to be prosecuted
and the complaints against them could not be disposed F
of u/s. 482 Cr.P.C., as it required appreciation ofthe facts
on the basis of evidence to be led before the trial·court.
Therefore, the Company and the Directors approached
Supreme Court. The Court dismissed the SL:.P as regards
the Managing Director. Notice was issued in respect of G
the other appellants.

    Dismissing the appeal, the Court

                           319                               H
     320      SUPREME COURT REPORTS                (2010] 10 S.C.R.


A         HELD: 1. The respondent-Directors of the Company
     were not arrayed only because they were the Directors.
     In addition to that, a statement has been i;nade in the
     complaint that by manufacturing of the concerned
     medicine for sale, the Company and its Directors had
,a   committed the breach of the Drugs and Cosmetics Act.
     Thus, there was an allegation that the Directors were privy
     to the manufacturing of medicine by the Company. The
     averments in the complaint cannot be described as bald
     statements. The complaint suggests manufacturing of the
c    medicine by the Company and its Directors. The instant
     case was the case of manufacture of the drug for human
     consumption and, after it was tested in laboratory, was
     found to be defective since there was a growth of fungus,
     which is a very serious matter related to public health.
     [Paras 7 and 8] [324-D-H; 325-A-B]
 0
           State of Haryana vs. Brij lat Mittal and Ors. 1998 (5) SCC
     · 343, distinguished.

        2. Under the peculiar circumstances of the instant
 E case and in view of the seriousness of the allegations, a
   technical view cannot be taken. "the logic, in the law laid
   down in complaint cases u/s~ 138 of the Negotiable
   Instruments Act requiring specific averment about the
   active role of the Directors in running the Company,
 F would not apply in the instant case. Firstly, the lpnguage
   of Section .34(2) of the Drugs and Cosmetics Act
   substantially differs from the language of Section 141 of
   the Negotiable Instruments Act. Secondly, the instant
   case relates to the offence which has the direct impact
 G on the public health. Therefore, the o~der of the High
   Court is not interfered with. It will be open'for the
   Directors to show to the trial court that they had nothing
   to do with the manufacture process and, therefor~, they
   should not be held liable u/s. 34(2) of the DruglS and
   Cosmetics Act. [Para 9] [325-B-E]
H
DINESH B. PATEL & ORS. v. STATE OF GUJARAT &321
                    ORS.
                     Case Law Reference:                        A
    1998 (5) sec 343          Distinguished.        Para 4

    CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 1464 of 2010.
                                                                B
    From the Judgment & Order dated 29.07.2008 of the High
Court of Gujarat at Ahmadabad in Criminal Misc. Application
No. 5711 of 2008.

    H.A. Raichura for the Appellants.
                                                                c
    K. Enatoli Serna (for Hemantika Wahi) for the
Respondents.

    The Judgment of the Court was delivered by

    V.S. SIRPURKAR, J. 1. Leave granted.                         D

      2. The present appeal challenges the order of the High
Court whereby the petition under Section 482 Cr.P.C. filed by
the company and its directors (appellants herein) was
dismissed by the High Court. The High Court took the view that E
the directors are responsible for the affairs of the company and,
therefore, when a drug manufactured by the company was
found to be defective, all the directors could be prosecuted. The ·
High Court, however, left it to the concerned parties to prove
before the Trial Court that they were not in any way responsible F
for the manufacture process. \he High Court proceeded on the
basis of specific language of Section 34(2) of the Drugs &
Cosmetics Act, 1940 (for short "the Act") and proceeded to hold
that the complaint filed against the directors could not be
disposed of under Section 482 Cr.P.C. as it required G
appreciation of the facts on the basis of the evidence to be led
before the Trial Court.

    3. When the matter came up before this Court, the Special
Leave Petition filed on behalf of the company and Managing
Director - Himanshu C. Patel was dismissed. However, notice      H
    322      SUPREME COURT REPORTS                  [201.0) 10 S.C.R


A   was issued in case of the remaining appellants No. 3 to 7.

         4. Mr. H.A. Raichura, learned Counsel appearing for the
    appellants contends before us that from the reading of language
    of Section 34(2) of the Act, it would be apparent that thereby
    criminal liability is created against the directors but their active
B
    involvement in the offence has to be pleaded and established.
    He contends that, in fact, the complaint was totally silent about
    such involvement of any of the directors and a mere bald
    statement appeared in the complaint in para 6. He, therefore,
    prays that the High Court erred in not quashing the complaint.
c   He relied on the decision of this case in the State of Haryana
     Vs. Brij /al Mittal & Ors. [1998 (5) SCC 343) and argues that
    the said case squarely covers the present case also.

          5. Para 6 of the complaint reads as under:-
D
          "Looking to the testing report of above medicine Denilyte
          M 506072, presence of fungus is noted, hence it has been
          declared as uneven. Therefore, by manufacturing of this
          medicine for sale, firm of Mis. Denis Chem Lab. Ltd.,
          Chhatral, Ta. Kaloi, District Gandhinagar and its Directors
E
          have made breach of this act. Therefore, this is punitive
          offence at first sight." (Emphasis supplied).

               In para 8 of the complaint, it has been contended as
          under:-
F
          "Thus, I request to carry out legal proceedings against
          above accused M/s. Denis Chem Lab Ltd., Block No. 457,
          Chhatral, Ta. Kalal, District Gandhinagar and its directors."

                Earlier to that, in para 4 of the complaint, the
G         complainant had referred to the written representation
          given by accused No. 1 - director of the firm and accused
          No. 2 Himansu C. Patel and Quality Assurance Manager
          - Mr. Mehul M. Rao during the inspection to the inspecting
          authorities. That representation is not before us.
H
DINESH B. PATEL & ORS. v. STATE OF GUJARAT & 323
           ORS. [V.S. SIRPURKAR, J.]
     6. We have gone through the decision of Brij Lal Mittal A
(supra). In Brij Lal Mittal case (supra), the offence complained
of was under Section 27 of the Act. The High Court had
quashed the proceedings therein on the ground that the
prosecution was launched after shelf-life of drugs had expired
in the month of July, 1991 and as a consequence thereof, the B
accused were deprived of their right under Section 25 (4) of
the Act to get the drugs tested by Central Drugs Laboratory.
This Court did not agree with the reasoning of the High Court,
however, upheld the quashing of the proceedings. The Court
went on to hold as under:                                        c
    "Nonetheless, we find that the impugned judgment df the
    High Court has got to be upheld for an altogether different
    reason. Admittedly, the three respondents were being
    prosecuted as directors of the manufacturers with the aid
    of Section 34(1) of the Act which reads as under:             D

    'OFFENCES BY COMPANIES:

          (1) Where an offence under this Act has been
    committed by a company, every person who at the time          E
    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 ~ .. e company shall be deemed
    to be guilty of the offence and shall be liable to be
    proceeded against and punished accordingly:
                                                                  F
           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 ~iligence to prevent the commission of such offence_.'   G

     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 H
    324       SUPREME COURT REPORTS                (201 OJ 10 S.C.R.


A         conduct of its business. Simply because a person is a
          director of the company it does not necessarily mean that
          he fulfills 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
c         company for the conduct of its business."

        7. In our opinion, the factual situation in both the matters
  Js quite different which is apparent from the fact that firstly the
  ,controversy of the complaint not having any necessary
   ave'rments was not present before the High Court in the
D reported decision. Secondly, in that case, there was only a bald
   statement that the respondents were directors of the
   manufacturers. In the present matter, however, the respondents
   were not arrayed only because they were the directors. That is
   certainly one reason. However, in addition to that, a statement
E has been made in paragraph 6 of the complaint that by
   manufacturing of the concerned medicine for sale, the company
   and its directors had committed the breach of the Act. Thus,
   there was an allegation that the directors were privy to the
   manufacturing of medicine by the company.
F
        8. In our opinion, the averments in paras 4, 5, 6 and 8 of
   the complaint cannot be described as the bald statements. The
   emphasized portion in p'ara 6 of the complaint suggests
   manufacturing of the medicine by the company and its directors.
G The averments in all these paras would have to be read together
   and the para 6 of the complaint would have to be read in the
   light of the other averments. It seems that in the reported
   decision in the complaint, there was no link pleaded in the
   directors and the manufacturing process. That is not the
   situation here. This was the case of the manufacture of the drug
H
DINESH B. PATEL & ORS. v. STATE OF GUJARAT & 325
           ORS. [V.S. SIRPURKAR, J.]
for human consumption and, after it was tested in laboratory,   A
was found to be defective since there was a growth of fungus,
which is a very serious matter related to public health.

      9. Under the peculiar circumstances of this case and
realizing the seriousness of the allegations, we would not take 8
a technical view based on pleadings in the complaint. Mr.
Raichura contended that as per the settled law by this Court in
complaints under Section 138 of the Negotiable Instruments Act
against company and directors also specific averment about
the active role of directors in running the company has to be C
made, failing w]lich the directors cannot be proceeded against.
Same logic should apply even in the present case. We cannot
agree. Firstly, the language of Section 34 (2) of the Act
substantially differs from the language of Section 141 of the
Negotiable Instruments Act. Secondly, here we are dealing with
the offence which has the direct impact on the public health. D
We, therefore, would choose not to interfere with the order of
the High Court. It will be open for the directors to show to the
Trial Court that they had nothing to do with the manufacture
process and, therefore, they should not be held liable under
Section 34 (2) of the Act.                                       E

    10. With these obse~ations, the appeal stands dismissed.

K.K.T                                     Appeal dismissed.