PEPSICO INDIA HOLDINGS PVT. LTD.versusFOOD INSPECTOR AND ANR.

               [2010) 13 (ADDL.) S.C.R. 993


           PEPSICO INDIA HOLDINGS PVT. LTD.                   A
                             v.
               FOOD INSPECTOR AND ANR.
             (Criminal Appeal No. 836 of 2010)
                   NOVEMBER 18, 2010
                                                              8
   [ALTAMAS KABIR, CYRIAC JOSEPH AND DEEPAK
                   VERMA, JJ.)

       Code of Criminal Procedure, .1908: s. 482 - Quashing of
 proceedings - A/legation of food adulteration - Report of C
  Public analyst that 'sweetened carbonated water'
 manufactured by appellant-company contained pesticide
  residue Carbofuran, to the extent of 0.001mg per litre and,
  therefore, was adulterated within the meaning of r. 65 of
  Prevention of Food Adulteration Rules, 1955 and s.2(ia)(h) D
  of Prevention of Food Adulteration Act, 1954 - Criminal
 proceedings against the appellant-company and its Directors
 - Petition for quashing the proceedings, dismissed by High
  Court - On appeal, held: Criminal proceedings liable to be
  quashed - Although, carbonated water was not included in the E
  original Table appended to Rule 65 of the 1955 Rules, it was
·,introduced in Item 23 of the Table under the heading
  "Ch1orpyrifos" with effect from 17th June, 2009, and the
  tolerance· li171it of the presence of insecticide residue was
 prescribed as O.OQ1 mg/litre, which, in fact, was the amount F
  of insecticide residu&-fou17d by the Public Analyst - High
  Court had itself observed that mere presence of insecticide
 residue to any extent did not justify an a/legation that the
  article of food was adulterated, but contrary to such
 observation, it went on to hold that the product was adulterated
 - Both the questions regarding the failure of the Central G ·
 Government to frame Rules to define the Laboratories, where
 samples of food could be analysed by the Public Analyst, or
 to define the validated methods of analysis were of great

                            993                               H
    994   SUPREME COURT REPORTS (2010] 13 (AOOL.) S.C.R.


A importance for the purpose of bringing home a charge against
  the accused, but were not considered by High Court - High
  Court also overlooked the fact that the percentage of
  pesticides found by the Public Analyst was within the tolerance
  limits subsequently prescribed in respect of such product -
B The order of the High Court is set aside - Prevention of Food
  Adulteration Rules, 1955 - r.65; Part XIV; Item 23 in Table
  appended to Part XIV - Prevention of Food Adulteration Act,
  1954 - ss.2(ia)(h), 2(m)

C       Prevention of Food Adulteration Act, 1954: s. 17 -
  Vicarious liability of Directors of a Company - Held: In a
  complaint against a Company and its Directors, the
  complainant has to indicate in the complaint itself as to
  whether the Directors concerned were either in-charge of or
  responsible to the Company for its day-to-day management,
D or whether they were responsible to the Company for the
  conduct of its business - A mere bald statement that a
  person was a Director of the Company against which certain
  allegations were made is not sufficient to make such Director
  liable in the absence of any specific allegations regarding his
E role in the management of the Company - In the instant
  case, since Manager, Quality Control was nominated uls. 17(2)
  to be in-charge and responsible to the Company for the
  conduct of its business, the appellant-company and its
  Directors could not be held liable for the adulteration of food
F - Prevention of Food Adulteration Rules, 1955 - r.65 -
  Insecticide Act, 1968 - s.33.

      The appellants were the manufacturer of Pepsi, a
  sweetened carbonated water. On 25th October, 2006, the
G Food Inspector of Vigilance Department purchased three
  bottles of Pepsi. The bottles were sealed. On the next
  day, one part of the sample was forwarded to the Public
  Analyst. On 28th October, 2006, the Public Analyst
  submitted his report stating that upon analysis of the
H sample of Pepsi using the Directorate General of Health
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD          995
             INSPECTOR AND ANR.
Services ·(DGHS) method, pesticide residue Carbofuran,      A
to the extent of 0.001 mg per litre was detected therein
and, therefore, the sample was adulterated within the
meaning of Rule 65 of the Prevention of Food
Adulteration Rules, 1955 and Section 2(ia)(h) of the
Prevention of Food Adulteration Act, 1954. Based upon       B
the report of the Public Analyst, the Magistrate took
cognizance of the offence and issued process against
the appellants.

    The· appellants filed a petition under Section 482
Cr.P.C. for quashing of the order of the magistrate. The    C
Single Judge of the High court dismissed the said
application and directed the prosecution to continue with
the case. The appellant-companland its Directors filed
the instant appeals.
                                                            D
    Allowing the appeals, the Court

     HELD: 1.1. Although, carbonated water was not
included in the original Table appended to Rule 65 of the
Prevention of Food Adulteration Rules, 1955, it was
                                                            E
introduced in Item 23 of the Table under the heading
"Chlorpyrifos" with effect from 17th June, 2009, and the
tolerance limit of the presence of insecticide residue was
prescribed as 0.001 mg/litre, which, in fact, was the
amount of insecticide residue found by the Public Analyst
in the sample of Pepsi submitted for such analysis. F
Ordinarily, since the level of insecticide residue was
within the limits of tolerance prescribed for carbonated
water with effect from 17th June, 2009, the same would
not attract the provisions of Section 2(m) of the 1954 Act
or the consequences thereof, but the finding of the G
Public Analyst was rendered in the year 2006, at the time
when sweetened carbonated water was not included in
the Table appended to Rule 65(2). After the tolerance limit
was prescribed, the sample of Pepsi could not be said
                                                            H
    996   SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A to be adulterated being within the prescribed tolerance
  limit. [Paras 30, 31] [1014-C-G]

         1.2. The High Court erred in not considering the
    reasons given on behalf of the appellants for not sending
    the company's sample to the Forensic Laboratory that
8
    since neither any validated method of analysis was
    prescribed under Section 23(1-A)(ee) and (hh) of the
    Prevention of Food Adulteration Act, 1954, nor any
    Laboratory had been particularly specified for such
    examination, such an exercise would have been futile.
C   Therefore, since a defined tolerance limit of the presence
    of the pesticides was not available in regard to sweetened
    carbonated water during the relevant time, no useful
    purpose could have been served by sending the second
    sample to the Forensic Laboratory. The High Court had
D   itself observed that mere presence of insecticide residue
    to any extent could not justify an allegation that the article
    of food was adulterated, but contrary to such
    observation, the High Court went on to hold that the
    sweetened carbonated water manufactured by the
E   appellants was adulterated within the meaning of Section
    2(ia)(h) of the 1954 Act. Both the questions regarding the
    failure of the Central Government to frame Rules to define
    the Laboratories, where samples of food could be
    analysed by the Public Analyst, or to define the validated
F   methods of analysis and the liability of the Directors-
    appellants were of great importance for the purpose of
    bringing home a charge against the accused for violation
    of the provisions of Rule 65 of the 1955 Rules and
    Section 2(ia)(h) of the 1954 Act and for holding that the
G   sweetened carbonated water manufactured by the
    appellants was adulterated in terms of the said Rules.
    Since the range indicated as to the limits of tolerance of
    the presence of pesticides in different articles of food,
    including sweetened carbonated water, which was
H   included in the Table appended to Rule 65(2) with effect
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD                997
             INSPECTOR AND ANR.

from 17th June, 2009, provided very little or practically no      A
margin for error, the selection of Laboratories and the
prescription of tolerance limits for different articles of
food acquired great significance. The High Court did not
appear to have considered the implications of the failure
of the Central Government to frame Rules for the said             B
purpose. Even the view taken by the High Court that the
report of the Public analyst was not final and same could
be challenged under Section 13(2) was not very
satisfactory, as the mere presence of pesticide residue
would not ipso facto render the article of food                   c
adulterated. The tolerance limits were prescribed in the
Table for this very purpose and the subsequent inclusion
of sweetened carbonated water seemed to indicate so
and leaned more in favour of the appellants. The High
Court also appeared to have overlooked the fact that the          D
percentage of pesticides found by the Public Analyst in
the sweetened carbonated water manufactured by the
appellants was within the tolerance limits subsequently
prescribed in respect of such product. [Paras 36, 38]
[1016-D-G;' 1017-C-H; 1018-A-B]
                                                                  E
    Prem Bal/ab & Anr. v. State (Delhi Admn.) (1977) 1 S~C
173 - referred to.

     2.1. On the questio_n of liability of the Directors of the
Company with respect to an offence alleged to have been           F
committed by the Company, the High Court went beyond
the ratio of the decision of this Court in * S. M. S.
Pharmaceuticals Ltd. 's case upon holding that the
principles set out in the said decision could not be
understood in any mechanical or rigid manner. Instead,            G
the High Court based its judgment on the decision of this
Court in **N. Rangachari v. Bharat Sanchar Nigam Ltd.
which was a case where the complaint clearly and
categorically alleged that the named Directors were in-
c harge of and r_esponsible to the Company for the                H
    998    SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A conduct of its business. It is in such circumstances that
  the prayer for quashing of the proceedings was rejected.
  [Para 37] [1016-H; 1017-A-C]

          **N. Rangachari v. Bharat Sanchar Nigam Ltd. (2007) 5
B SCC 108 - distinguished.

       *S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr.
  2005 (8) SCC 89; Hindustan Lever Limited v. Food Inspector
  & Anr. (2004) 13 SCC 83; Municipal Corpn. of Delhi v. Ram
  Kishan Rohtagi (1983) 1 SCC 1; Everest Advertising (P) Ltd.
C v. State, Govt. of NCT of Delhi & Ors. (2007) 5 SCC 54;
    Municipal Corporation of Delhi v. Purshotam dass
    Jhunjunwala & Ors. (1983) 1 SCC 9 - referred to.

         2.2. It is now well established that in a complaint
D   against a Company and its Directors, the complainant
    has to indicate in the complaint itself as to whether the
    Directors concerned were either in-charge of or
    responsible to the Company for its day-to-day
    management, or whether they were responsible to the
E   Company for the conduct of its business. A mere bald
    statement that a person was a Director of the Company
    against which certain allegations were made is not
    sufficient to make such Director liable in the absence of
    any specific allegations regarding his role in the
    management of the Company. Having considered the
F   matter in its totality and also having regard to the fact that
    one Somesh Dahale was nominated under Sub-section
    (2) of Section 17 of the 1954 Act to be a person in-charge
    of and responsible to the Company for the conduct of its
    business, the judgment and the order of the Single Judge
G   impugned in these proceedings is set aside and the
    prosecution of the appellants is quashed in respect of the
    various complaints challenged before the High Court in
    its inherent jurisdiction. [Paras 39-41] [1018-C-H]

H
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD               999
             INSPECTOR AND ANR.

                     Case Law Reference:                         A
  2005 (8) sec 89          referred to         Paras, 1, 16,
                                               18, 37, 39
  (2004) 13 sec 83         referred to         Para 12
                                                                 B
  (1983) 1 sec 1           referred to         Para 16, 25

  c2001) 5 sec 54          referred to         Para 18, 20

  (1977) 1 sec 113         referred to         Para 23, 28

  (1983) 1 sec 9           referred to         Para 26           c
  c2001) 5 sec 108         referred to         Para 37, 39

    CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 836 of 2010.
                                                                 D
    From the Judgment & Order dated 19.2.2009 of the High
Court of Kerala at Ernakulam in Criminal Miscellaneous Case
No. 1814 of 2007.
         '
                            WITH
                                                                 E
    Crl. A.Nos. 837, 838-840, 841, 842, 843, 845, 844 of
2010.

     Iqbal Chagla, Maninder Singh, Rajeev Virmani, lndu
Malhotra, jaideep Gupta, K.N. Bhat, Amar Gupta, Riyaz            F
Chagla, Rajesh Batra, Rajiv Talashekhar, Dheeraj Nair, Chetan
Chopra, G. Prakash, Beena Prakash, V. Senthil, Jayant K. Sud,
Atul Sahi, M.P. Vinod, Ajay K. Jain, Vimlesh Kumar, Manu Nair,
Saanjh N. Purohit (for Suresh A. Shroff & Co.), Ashok Bhan,
Sunita Sharma, R.K. Rahotre, D.S. Mahra, Sushma Suri for the     G
appearing parties.

    The Judgment of the Court was delivered by

    ALTAMAS KABIR, J. 1. All these appeals are directed
against the judgment dated 19th February, 2009, passed by a      H
    1000 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A learned Single Judge of the Kerala High Court dismissing the
  several petitions filed by the Appellants under Section 482 of
  the Code of Criminal Procedure, 1973, for quashing of the
  several prosecutions commenced against them. The Appellants
  in Criminal Appeal No.836 of 2010, Pepsico India Holdings Pvt.
B Ltd., is the manufacturer of Sweetened Carbonated Water and
  is being prosecuted for the presence of Carbofuran in its
  product. These appeals throw up certain questions relating to
  the maintainability of the criminal prosecutions launched against
  the Appellants, namely :
c        (1)   In the absence of any prescribed and validated
               method of analysis under Section 23(1-A)(hh) of the
               Prevention of Food Adulteration Act, 1954,
               hereinafter referred to as "the 1954 Act", could a
               prosecution have been launched against the
D              Appellants based on a report submitted by the
               Public Analyst using the method of the Directorate
               General of Health Services (D.G.H.S.)?

         (2)   Could a prosecution have been launched against
E              the Appellants in the absence of any validated
               method of analysis to ascertain the percentage of
               pesticide residue present in a Carbonated
               beverage, which renders the report of the Public
               Analyst unreliable, particularly when it does not
               indicate that such percentage of the pesticide
F
               residue is injurious to health and, therefore,
               adulterated within the meaning of Section 2(ia)(h)
               of the aforesaid Act?

         (3)   What is the effect of non-specification of the level
G              of tolerance in respect of the presence of pesticide
               residue in Sweetened Carbonated Water in the
               Table appended to Rule 65(2) of the Prevention of
               Food Adulteration Rules, 1955, hereinafter referred
               to as "the 1955 Rules"? and
H
                               '
                              !.
                              "




  PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD               1001
   INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

     (4)   What is the liability of the Directors of a company   A
           which is said to have committed defaults within the
           meaning of Section 17 of the 1954 Act, in the light
           of the decision of this Court in S.M.S.
           Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr.
           [2005 (8) sec 89], when they were neither in charge   B
           of nor responsible for the conduct of the business
           of the Company?

     ·2. On 25th October, 2006, the Food Inspector of Mobile
Vigilance, Kozhikode, inspected the premises of Star             C
Marketing, Ashoka Puram, Door No.5/1589, under Kozhikode
Municipal Corporation and purchased three two-litre bottles of
Pepsi on payment of the price. The said bottles were sealed
and subsequently, on 26th October, 2006, one part of the
sample was forwarded to the Public Analyst, Kozhikode. On
28th November, 2006, the Public Analyst submitted his report     D
stating that upon analysis of the sample of Pepsi Sweetened
Carbonated Water, using the Directorate General of Health
Services (DGHS) method, pesticide residue-Carbofuran, to the
extent of 0.001 mg per litre was detected therein. The said
sample was, therefore, adulterated within the meaning of Rule    E
65 of the 1955 Rules and Section 2(ia)(h) of the 1954 Act.

     3. Based upon the report of the Public Analyst, the Chief
Judicial Magistrate, Kozhikode, took cognizance of the offence
and issued process against the Appellants.                       F

     4. The Appellants moved the Kerala High Court under
Section 482 Cr.P.C. for quashing of the aforesaid order of the
Chief Judicial Magistrate, Kozhikode. The learned Single
Judge by his order dated 19th February, 2009, dismissed the
said application and directed the prosecution to continue with   Gi
the case. Aggrieved by the order of the learned Single Judge,
the Appellant-Company, M/s. Pepsico India Holdings Pvt. Ltd.,
and its Directors have filed these appeals challenging the
cognizance taken by the learned Magistrate on various grounds.
                                                                 H
    1002 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A       5. Mr. Iqbal Chagla, learned Senior Advocate, appearing
  for the Appellants questioned the cognizance taken against the
  Appellants and urged that in the absence of any prescribed
  method of analysis under Section 23(1-A)(hh) of the 1954 Act
  by the Central Government, the Public Analyst had not been
B following any uniform method of analysis, but resorted to
  whatever method was convenient. It was submitted that the said
  approach was entirely wrong and the result of the analysis could
  not be accepted as valid. Furthermore, there being no validated
  method of analysis to ascertain the percentage of pesticide
c                       a
  residue present in carbonated beverage, the report of the
  Public Analyst could not be relied upon for launching
  prosecutions against the Appellants under the provisions of the
  1954 Act, especially when such report did not even indicate that
  the presence of the amount of pesticide residue detected is
0 injurious to health and that the sample of Pepsi submitted for
  analysis would, therefore, have to be considered as adulterated
  under Section 2(ia)(h) of the 1954 Act.

         6. It was strenuously urged that even if it be assumed that
    the Public Analyst had detected the presence of pesticide
E   residue, his opinion that the presence of the pesticide residue
    at such levels rendered the articles injurious to health under
    Section 2(ia)(h) of the 1954 Act, cannot be accepted in the
    absence of a validated method of analysis. Mr. Chagla
    submitted that whether an article of food is adulterated or not
F   has to be determined under the Rules framed by the Central
    Government under Section 23 of the 1954 Act. Under Section
    23(1A) the Central Government is empowered to make rules,
    inter alia, for defining the standards of quality and fixing the
    tolerance limits of pesticide permissible in any article of food.
G   The Rule-making authority, in consultation with the Central
    Committee and the Central Government has defined the
    ~tandards of quality and has also fixed the limits of pesticide
    residue permissible for various articles of food, including
    carbonated water, within which entry the product of the
H   Appellants is also included. It is also universally accepted that.
    PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD                    1003
     INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

 even the water which is used for manufacturing carbonated               A
 water, has to comply with the standards of packaged drinking
 water. Rule 65 is found in Part XIV of the 1955 Rules under
 the heading "Insecticides and Pesticides". Rule 65(2) makes
 it mandatory that the level of insecticide presence, mentioned
 in the Table in respect of various articles of food, shall not          B
 exceed the tolerance limit prescribed against that article of
 food. At the relevant point of time, when disputes arose,
 "Carbonated Water or Sweetened Carbonated Water" was not
 included in Rule 65 and, hence, no tolerance limit was
 prescribed for carbonated water threreunder. Furthermore, it            c
 was urged by Mr. Chagla that Rule 65 essentially applies to raw
 agricultural products moving in commerce, which will be evident
 from Explanation (b)(ii) at the end of the Table appended to
 Rule 65(2). Accordingly, as far as finished products are
 concerned, prior to June 17, 2009, no tolerance limits were             D
 prescribed under the Act and/or Rules, except for a few milk
 products.

        7. Mr. Chagla submitted that the standard prescribed for
  "Mineral Water'' was that the pesticide residue should be below
. detectable limits. However, for the first time, with effect from 1st   E
  April, 2004, a standard was included which mandated that the
  total pesticide residue in "packaged drinking water" was not
  to exceed 0.0005 mg/litre. No such standard was, however, laid
  down in respect of "Carbonated Water", but with effect from
  15th October, 2004, the water used in the manufacture of               F
  carbonated beverage was required to conform to the standards
  prescribed for packaged drinking water. While the carbonated
  water could contain sugar, water, liquid glucose, honey, natural
  flavours, fruit and vegetable extracts, the water to be used would
  have to conform to the standards prescribed for packaged               G
  drinking water, but no separate standard of pesticide residue
  was prescribed.

    8. Mr. Chagla submitted that the water used by the
 manufacturer in the process of manufacturing its carbonated
                                                                         H
    1004 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A drink, conforms to the standards prescribed for packaged
  drinking water and no one has contended to the contrary, nor
  is the Appellants being prosecuted for violating such standard.
  He contended that the complaint is based exclusively on the
  Public Analyst's report, which, in fact, stood vitiated for various
B reasons. It was urged that to the extent the report indicates that
  the product manufactured by the Appellants is adulterated as
  per Rule 65 and A.01.01, the same was misconceived since
  neither Rule 65 nor A.01.01, at the relevant point had
  prescribed a tolerance limit for carbonated water. It was
c contended that the High Court has, in fact, recorded that the
  prosecution proceeded on the sole allegation that the samples
  of carbonated beverages purchased by the Food Inspectors are
  adulterated under Section 2(ia)(h) of the Act. Based on the said
  submissions, the High Court confined the allegations only to
  violation of the aforesaid provision of the Act and the same is
0
  also reflected in the impugned judgment of the High Court.

       9. As will appear from the report of the Public Analyst filed
  in connection with Criminal Appeal No.836 of 2010, a pesticide
  residue of Carbofuran amounting to 0.001 mg/litre was
E detected in the sample of sweetened carbonated water
  manufactured by the Appellant, by employing the "DGHS
  Method".

       10. Mr. Chagla contended that in 2007, in an affidavit filed
F before the Kerala High Court, it had been indicated by the
  Union of India that the standards for pesticide residue for
  sweetened carbonated water have not been prescribed in any
  country of the world c:nd that a manual of analysis for testing of
  pesticide residue was under preparation of the Ministry of
  Health and Family Welfare. The same sentiments regarding the
G absence of validated methods for detection of pesticides were
  also discussed by the Central Committee for Food Standards
  on 16th April, 2007, and the Minutes of the meeting recorded
  that validated methods for detection of pesticides were not
  available. Apart from the above, Mr. Chagla also submitted that
H
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD                  1005
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

the opinion of the Public Analyst that the carbonated water           A
contained an ingredient which was injurious to health, was not
supported by any standard and the finding was based merely
on account of the presence of Carbofuran therein. In fact, the
Court also observed that the mere presence of insecticide
residue could not ipso facto justify a conclusion that the article    B
had become injurious to health. What the Public Analyst
indicated was that since Rule 65 and A.01.01 did not prescribe
any tolerance limit for pesticide residue in carbonated water,
it pre-supposes that the carbonated water would have to be
totally free from pesticide. Mr. Chagla submitted that having         c
observed that the mere presence of insecticide residue could
not ipso facto justify the conclusion that the manufactured
articles were injurious to health, the High Court ought not to have
 relied on the report of the Public Analyst to arrive at a prima
facie finding that the sample of sweetened carbonated water           D
was adulterated.

    11. Mr. Chagla pointed out that when the tolerance limit of
Carbofuran in infant milk has been set at 0.05 mg/litre, the
presence of 0.001 mg/litre of Carbofuran in the carbonated
water manufactured by the Appellants, could certainly not have        E
been more injurious to public health than infant milk.

     12. In support of his submissions, Mr. Chagla referred to
the decision of this Court in Hindustan Lever Limited Vs. Food
Inspector & Anr. [(2004) 13 SCC 83], wherein, this Court was          F
considering the judgment of the Kerala High Court rejecting
petitions filed by the Appellants therein for quashing the
proceedings pending before the Judicial Magistrate, First
Class, Alwaye. The proceedings had been initiated on the
complaint filed by the Food Inspector, Edapally Circle,               G
Ernakulam District, under Sections 2(ia)(a) and (m), 7(1) and
16(1 )(a)(i) and Section 17(1) of the Prevention of Food
Adulteration Act, 1954 read with Rule 5 of the Prevention of
Food Adulteration Rules, 1955, which were ultimately quashed,
inter alia, on the ground that no prosecution would be
                                                                      H
    1006 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A maintainable where no standard is prescribed under the Rules.
  It was urged that the report not having disclosed any material
  to support the opinion, stood clearly vitiated and ought not to
  have been relied upon.

        13. On the question of maintaining an appeal under
8
  Section 13(2) of the P.F.A. Act, 1954, Mr. Chagla contended
  that the courts below had erred in holding that the Appellant
  ought to have challenged the report by filing an appeal to the
  Central Food Laboratory and not having done so, was not
  entitled to such relief. Learned counsel submitted that the Court
C did not appreciate the futility of preferring an appeal under
  Section 13(2) of the 1954 Act, since admittedly, no validated
  method of analysis exists for detecting the presence of
  pesticide residue in carbonated water. Learned counsel also
  submitted that since the report of the Public Analyst does not
D disclose any violation of the provisions of the 1954 Act, there
  was no reason for the Appellants to approach the Central Food
  Laboratory under Section 13(2) of the 1954 Act.

       14. On the question of the liability of the Directors of the
E Appellant-Company on account of the alleged violation of the
  provisions of the 1954 Act, Mr. Chagla submitted that except
  for a bald statement that Accused No.3 to Accused No.9 were
  the Directors of the Company and that Shri Rajeev Bakshi was
  the Chairman and Managing Director of the Company, nothing
F else had been stated in the complaint as to how they were liable
  for the offences complained of. Mr. Chagla referred to Sub-
  sections (1) and (2) of Section 17 of the 1954 Act, which deals
  with the offences committed by a Company and provides as
  follows:

G       "17. Offences by companies.-(1) Where an offence under
        this Act has been committed by a company-

               (a)(i) the person, if any, who has been nominated
               under sub-section (2) to be in charge of, and
H              responsible to, the company for the conduct of the
PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD              1007
 INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

       business of the company (hereafter in this section      A
       referred to as the person responsible), or

        (ii) where no person has been so nominated, every
       person who at the time the offence was committed
       was in charge of, and was responsible to, the           8
       company for the conduct of the business of the
       company; and

        (b) the company,

 shall be deemed to be guilty of the offence and shall be      C
 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 and that he exercised all     D
 due diligence to prevent the commission of such offence.

 (2) Any company may, by order in writing, authorise any
 of its directors or managers (such manager being
 employed mainly in a managerial or supervisory capacity)      E
 to exercise all such powers and take all such steps as may
 be necessary or expedient to prevent the commission by
 the company of any offence under this Act and may give
 notice to the Local (Health) Authority, in such form and in
 such manner as may be prescribed, that it has nominated       F
 such director or manager as the person responsible, along
 with the written consent of such director or manager for
 being so nominated.

 Explanation.- Where a company has different
 establishments or branches or different units in any          G
 establishment or branch, different persons may be
 nominated under this sub-section in relation to different
 establishments or branches or units and the person
 nominated in relation to any establishment, branch or unit
                                                               H
    1008 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A       shall be deemed to be the person responsible in respect
        of such establishment, branch or unit.;,

        15. It was firstly submitted that one Somesh Dahale,
    Manager, Quality Control, of the Company, had been nominated
    under Sub-section (2) of Section 17 to be in-charge and
8
    responsible for the conduct of the business of the Company and
    was, therefore, the person responsible within the meaning of
    Sub-section (1 ).

        16. In addition to the above, Mr. Chagla submitted that
C since no allegation had been made in the complaint against
  the Directors of the Company as to whether they were either
  in charge or responsible to the Company for its day-to-day
  management, the liability of the offence alleged to have been
  committed by the Company, could not be extended to them.
D Reference was made to the decision of this Court in S.M.S.
  Pharmaceuticals Ltd. 's case (supra), wherein the question of
  vicarious liability in criminal jurisprudence had been considered
  and it was held that a Director cannot ipso facto be deemed
  to be in charge of and responsible to the Company for the
E conduct of its business. Such fact has to be specifically averred
  in the complaint. Mr. Chagla submitted that the High Court did
  not also appreciate the fact that the decision in S. M. S.
  Pharmaceuticals Ltd. 's case (supra) was based on the
  judgment of this Court in Municipal Corpn. of Delhi Vs. Ram
F Kishan Rohtagi ((1983) 1 SCC 1] which was a decision in the
  context of the 1954 Act.

       17. Mr. Chagla submitted that it had perhaps been
  presumed that the Appellant-Company had not nominated an
  officer under Section 17(2) of the 1954 Act and consequently
G the entire Board of Directors were responsible for the offence.

      18. Mr. Chagla lastly submitted that as far as Mr. Rajeev
  Bakshi, Chairman of the Company, is concerned, he too cannot
  be made liable merely on account of the fact that he was the
H Chairman of the Company. It was submitted that the said view
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD                1009
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

had been expressed by this Court in Everest Advertising (P)         A
Ltd. Vs. State, Govt. of NCT of Delhi & Ors. [(2007) 5 SCC
54], which followed the earlier judgment of this Court in S.M.S.
Pharmaceuticals Ltd. 's case (supra).

      19. Mr. Chagla submitted that, the allegations made           B
against the Company, its Directors and its employees were not
maintainable under the provisions of the Prevention of Food
Adulteration Act, 1954, not only on the ground of absence of
any standard of validated method for the detection of pesticide
residue in carbonated water but also on account of the fact that    C
even the quantity of pesticide residue detected by the Public
Analyst in the product of the Appellant-Company on the basis
of the DGHS method, was within the tolerance limits as was
prescribed under the amended provisions of Rule 65 of the
1955 Rules, with effect from 17.6.2009. Mr. Chagla submitted
that after such amendment sweetened carbonated water was            D
included in the Table appended to Rule 65(2) under the heading
of "Chlorpyrifos" at Serial No.23, wherein the tolerance limits
of the presence of insecticide residue in carbonated water was
shown as 0.001 mg/litre. Mr. Chagla submitted that the several
prosecutions commenced against the Appellants and its               E
Directors and employees for alleged violation of the provisions
of Section 16(1}(a)(i) read with Section 2(ia)(a), 2(ia}(h), 7(1)
of the 1954 Act and Rule 65 of the 1955 Rules, were, therefore,
liable to be quashed.
                                                                    F
     20. Ms. lndu Malhotra, learned Senior Advocate,
appearing for Pepsico India Holdings Pvt. Ltd. in Criminal
Appeal No.842 of 2010 (arising out of SLP(Crl.)No.5818/2009),
while adopting Mr. Chagla's submissions re-emphasised the
decision of this Court in Everest Advertising (P) Ltd. 's case      G
(supra) with regard to the question of vicarious liability of the
Directors of a Company in regard to offences which may have
been committed without their knowledge or consent. Ms.
Malhotra submitted that it was well-established through judicial
precedent that while the Managing Director or Deputy
                                                                    H
    1010 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A   Managing Director of a Company would be deemed to be
    aware of actual transactions in a given situation, the Chairman
    of a large company or a Director of a Company may not be so
    aware, as in the instant case.

B       21. In this regard, Ms. Malhotra also referred to the
  provisions of the Insecticide Act, 1968, which by virtue of the
  Explanation to Rule 65 has been made applicable to the said
  Rule regarding usage of the expression "insecticide", and, in
  particular, Section 33 thereof, which relates to offences so
C committed by a company. Section 33 provides that in regard
  to offences by companies a person connected with the
  Company's affairs could not be made liable if he proved that
  the offence was committed without his knowledge or that he
  exercised all due diligence to prevent such offence. Ms.
  Malhotra submitted that from the facts as revealed in the instant
D case, no liability could be foisted on the Directors of the
  Company when Somesh Dahale had been nominated under
  Sub-Section (2) of Section 17 of the 1954 Act to be the person
  in-charge of and responsible to the Company for the conduct
  of its business.
E
        22. Mr. K.N. Bhat, learned Senior Advocate, who appeared
  for the State of Kerala in these appeals, firstly contended that
  Section 23 of the 1954 Act empowers the Central Government
  to make rules to inter alia define the laboratories where
F samples of articles of food may be analyzed by Public Analysts
  under the Act and also to define the method of analysis under
  Sub-section (1-A)(ee)(hh). It was submitted that such a power
  was discretionary and it was for the Central Government to act
  on the basis thereof. Accordingly, the Prevention of Food
G Adulteration Rules, 1955, were framed under Section 23 to
  give effect to the provisions of the 1954 Act. Mr. Bhat submitted
  that Rule 65 of the aforesaid Rules specifically provide for
  restriction on the use of insecticide and a Table was appended
  to Sub-section (2) which indicates the names of the
  insecticides, the articles of food and the tolerance limit of the
H
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD                1011
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

existence of such insecticides in such food items. Mr. Bhat A
submitted that while in the Table, which had been initially
appended to Sub-Rule (2) of Rule 65, carbonated water had
not been included, the said item was included in the said Table
under Item No.23 dealing with Chlorpyrifos by G.S.R. 427(E)
dated 17.6.2009. It was submitted that it was the intention of B
the Legislature that sweetened carbonated water should not
have any insecticide residue in it at all, but a specific tolerance ·
limit was included in order to provide a margin on account of
the use of various agents in the manufacture of sweetened
carbonated water. Mr. Bhat urged that the submissions made         c
on behalf of the Appellants in this regard that in the absence
of any Rules framed under Section 23(1-A)(ee) and (hh), the
methods of analysis resorted to by the Public Analyst, could not
be relied upon, was considered at length by the High Court.
Considering the provisions of Section 23(1-A) (ee)(hh) of the D
1954 Act, the High Court held that in the event the argument
advanced on behalf of the Appellants was to be accepted, it
would lead to an anomalous situation. On the other hand, the
High Court was of the view that the said provisions would be
applicable in respect of certain tests which could not be E
conducted and permitted to be conducted in every laboratory.
The non-formulation of Rules under Section 23(1-A)(ee)(hh) for
analysis of carbonated beverages, could not, therefore, be
construed as being fatal to the prosecution.

     23. Mr. Bhat then submitted that Rule 4 of the 1955 Rules, F
provides for analysis of food samples and under Sub-rule (9)
provides that the "Manual of Method of Analysis" brought out
by the Ministry of Health and Family Welfare, is to be adopted
for analysing the samples of food articles. However, in case no
parameter is available in the manuals for the methods of G
analysis, the other methods of analysis indicated therein are
to be adopted. Accordingly, in the absence of any standard
prescribed under the existing Rules, it was open to the Public
Analyst to resort to the DGHS method for analysing the sample
which had been forwarded and the adoption of such a method H
    1012 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A   was valid and had been rightly relied upon by the courts below.
    In support of his submissions, Mr. Bhat refer.red to the decision
    of this Court in Prem Bal/ab & Anr. Vs. State (Delhi Admn.)
    [(1977) 1 SCC 173], wherein this Court was called upon, inter
    alia, to examine the question as to whether an article of food
B   could be found to be adulterated under more than one clauses
    of Section 2(i) of the 1954 Act in the context of colouring matter
    being used in articles of food. This Court held that when no
    colouring matter is permitted to be used in respect of an article
    of food, and what is prescribed in respect of the said article is
c   "nil colouring matter", it would be a case of adulteration within
    the meaning of Section 2U) of the 1954 Act, if the article
    contains any colouring matter.

          24. Mr. Bhat submitted that the question as to whether the
    insecticide residue found in the product of the Appellants
D   amounted to adulteration or not, is a question which would
    depend to a large extent on the evidence to be adduced during
    trial having regard to the report of the Public Analyst that 0.001
    mg per litre of insecticide residue had been detected in the
    sweetened carbonated water manufactured by the Appellant-
E   Company. Learned counsel submitted that a prima facie case
    had been made out on behalf of the prosecution against the
    Appellants to go to trial and the same did not merit interference
    in this case under Article 136 of the Constitution.

F         25. On the question of vicarious liability of the Directors
    of the Company, in relation to the evidence alleged to have
    been committed by the Company, Mr. Bhat submitted that
    although it had been held in Ram Kishan Rohtagi's case
    (supra) that the~ complaint being vague as regards the Directors
G   and no offence having been revealed against them, the High
    Court had not only quashed the proceedings against the
    Directors, it had also considered the question of vicarious
    liability, but had found that such liability did not extend to the
    Directors of the Company, who were not responsible to the
    Company for its day-to-day business.
H
    PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD               1013
     INSPECTOR AND ANR. [ALTAMAS KABIR, J.]
      26. Mr. Bhat also relied upon another decision of this       A
Court in Municipal Corporation of Delhi Vs. Purshotam dass
Jhunjunwala & Ors. [(1983) 1 SCC 9], in which the Chairman,
Managing Director and Director of the Mill were found to be
in-charge of and responsible for the conduct of its business at
the time of commission of offence and, accordingly, their prayer   B
for quashing the complaint ·was rejected.

     27. Mr. Jaideep Gupta, learned Senior Advocate, who
 appeared for State of Kerala in Criminal Appeal No.837 of
 2010, adopted Mr. Bhat's submissions.
                                                                   c
      28. In reply to Mr. Bhat's submissions; Mr. Chagta while
 reiterating his earlier submissions, contended that the
 submissions with regard to Rule 65 of the 1955 Rules had been
 given up by the State of Kerala before the High Court, though
 such submission was disputed by Mr. Bhat. He also added that      D
 Rule 65 deals with raw products and not finished products and
 the decision in Prem Bal/ab & Anr. 's case (supra) dealt with
 the addition of colour to a food article which has no relevance
 as far as the facts of these Appeals are concerned, since it is
 not the case of the prosecution that any insecticide had been     E
 directly introduced in sweetened carbonated water
 manufactured by the Company.

     29. From the submissions made on behalf of the
respective parties, it is apparent that the width of the dispute
to be settled in these Appeals is not very wide. We are only
                                                                   F
required to consider as to whether the presence of 0.001 mg
of Carbofuran per litre found in the sweetened carbonated
water, manufactured by the Appellant-Company, can be said
to be adulterated as per Rule 65 of the 1955 Rules and under
Section 2(ia)(h) of the 1954 Act, particularly in the absence of   G
any validated standard of analysis provided for under the 1954
Act or 1955 Rules.

      30. The Public Analyst four.id the sample of Pepsi to be
. covered by the definition of non-alcoholic beverages defined     H
    1014 SUPREME COURT REPORTS (2010] 13 (ADDL.) S.C.R.


A   in Appendix-B, as prescribed under Rule 5 of the 1955 Rules.
    Item A.01 deals with non-alcoholic beverages and Item A.01.01
    defines carbonated water to mean water conforming to the
    standards prescribed for Packaged Drinking Water under the
    Prevention of Food Adulteration Rules, 1955, impregnated with
B   carbon dioxide 1,1nder pressure which may contain any of the
    agents mentioned thereunder singly or in combination. Having
    found the sample of Pepsi to fall within the definition of non-
    alcoholic beverages, the Public Analyst by using the DGHS
    method found traces of 0.001 mg of Carbofuran per litre in the
c   said sample of Pepsi and in the absence of any giver.
    standard, was of the opinion that the same was adulterated in
    terms of Rule 65 of the 1955 Rules and Section 2(ia)(h) of the
    1954 Act. Although, carbonated water was not included in the
    original Table appended to Rule 65 of the 1955 Rules, as stated
    hereinbefore, it was introduced in Item 23 of the Table under
0
    the heading "Chlorpyrifos" with effect from 17th June, 2009, and
    the tolerance limit of the presence of insecticide residue was
    prescribed as 0.001 mg/litre, which, in fact, was the amount of
    insecticide residue found by the Public Analyst in the sample
E   of Pepsi submitted for such analysis.

       3~. Ordinarily, since the level of insecticide residue was
  within the limits of tolerance prescribed for carbonated water
  with effect from 17th June, 2009, the same would not attract
  the provisions of Section 2(m) of the 1954 Act or the
F consequences thereof, but the finding of the Public Analyst was
  rendered in the year 2006, at a time when sweetened
  carbonated water was not included in the Table appended to
  Rule 65(2). After the tolerance limit was prescribed, the sample
  of Pepsi could not be said to be adulterated being within the
G prescribed tolerance limit.

        32. The entire controversy arises out of the fact that no
    specific tolerance limit had been prescribed for sweetened
    carbonated water under Rule 65 and it was, therefore,
    presumed that trace of any insecticide would amount to
H
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD              1015
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

adulteration of the final product. In fact, th~ High Court, while A
considering the matter, seems to have misconstrued .the
submissions made on behalf of the Appellants that the mere
presence of insecticide residue does not render the article of
food as being adulterated. The presence of insecticides within
the limits prescribed in the Table to Rule 65 cannot, therefore, B
be said to have caused adulteration of the article of food in ·
question. In fact, in paragraph 21 of its. judgment, the learned
Single Judge of the High Court observed that he was inclined
to agree with the learned counsel for the Petitioners that the
mere presence of insecticide residue could not ipso facto justify c
the conclusion that the article of food has become injurious to
health.

      33. The High Court summarised its view into several
grounds of challenge. Grounds 1 and 2 relate to the non-
framing of Rules under Section 23(1-A) (ee) and (hh) of the      D
1954 Act. Grounds 3, 4 and 5 deal with the challenge thrown
on behalf of the Appellants to the submissions that the report
of the Public Analyst was not final and that the same could be
challenged under Section 13(2) of the said Act. Ground 6 deals
with the criminal liability of the Directors of the Company on   E
account of the allegations against the Company.

     34. As far as Grounds 1 and 2 are concerned, the High
Court was not convinced with the submission made on behalf
of the appellants that in the absence of any prescribed and F
validated method of analysis under Section 23(1-A)(ee) and
(hh) of the 1954 Act, the report of the Public Analyst, who had
used the DGHS method, could not be relied upon, especially
when even the Laboratories, where the test for detection of
insecticides and pesticides in an article of food could be G
undertaken, had not been specified. The observation of the
Single Judge·of the High Court that if the submissions made
on behalf of the Appellants herein were to be accepted, the
mechanism of the Act and the Rules framed thereunder would
come to a grinding halt, is not acceptable to us, since the same
                                                                 H
    1016 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A could lead to a pick and choose method to suit the prosecution.
  However, in any event, the percentage of Carbofuran detected
  in the sample of Pepsico which was sent for examination to the
  Forensic Laboratory is within the tolerance limits prescribed for
  Sweetened Carbonated Water with effect from 17th June, 2009.
B
        35. The High Court also misconstrued the provisions of
  Section 23(1-A)(ee) and (hh) in holding that the same were
  basically enabling provisions and were not mandatory and
  could, in any event, be solved by the Central Government by
  framing Rules thereunder, by which specified tests to be held
C in designated Laboratories could be spelt out. Consequently,.
  the High Court also erred in holding that the non-formulation of
  Rules under the aforesaid provisions of the 1954 Act could not
  be said to be fatal for the prosecution.

D         36. As far as Grounds 3, 4 and 5 are concerned, the High
  · Court failed to consider the reasons given on behalf of the
    Appellants for not sending the Company's sample to the
    Forensic Laboratory, to the effect that, since neither any
    validated method of analysis had been prescribed under
E Section 23(1-A)(ee) and (hh) of the 1954 Act, nor had any
    Laboratory been particularly specified for such examination,
    such an exercise would have been futile. In our view, no useful
    purpose could have been served by sending the second sample
    to the Forensic Laboratory, unless a defined tolerance limit of
F the presence of the pesticides was available in regard to
    Sweetened Carbonated Water. It may be noted that the High
    Court had itself observed that mere presence of insecticide
    residue to any extent could not justify an allegation that the
    article of food was adulterated, but contrary to such observation,
    the High Court went on to hold that the Sweetened Carbonated
G Water manufactured by the Appellants was adulterated within
    the meaning of Section 2(ia)(h) of the 1954 Act.

     37. On the question of liability of the Directors of the
  Company with respect to an offence alleged to have been
H committed by the Company, the High Court went beyond the
   PEPSICO INDIA HOLD'NGS PVT. LTD. v. FOOD                  1017
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

ratio of the decision of this Court in S.M.S. Pharmaceuticals         A
Ltd. 's case (supra) upon holding that the principles set out in
the said decision could not be understood in any mechanical
or rigid manner. Instead, the High Court based its judgment on
the decision of this Court in N. Rangachari Vs. Bharat Sanchar
Nigam Ltd. [(2007) 5   sec    108], which was a case where the        B
complaint clearly and categorically alleged that the named
Directors were in charge of and responsible to the Company
for the conduct of its business. It is in such circumstances that
the prayer for quashing of the proceedings was rejected.

      38. Both the questions regarding the failure of the Central
                                                                      c
Government to frame Rules to define the Laboratories, where
samples of food could be analysed by the Public Analyst, or to
define the validated methods of analysis and the liability of the
Directors, who are the Appellants before us, are of great
importance for the purpose of bringing home a charge against          D
the accused for violation of the provisions of Rule 65 of the 1955
Rules and Section 2(ia)(h) of the 1954 Act and for holding that
the Sweetened Carbonated Water manufactured by the
Appellants was adulterated in terms of the said Rules. Since
the range indicated as to the limits of tolerance of the presence     E
of pesticides in different articles of food, including Sweetened
Carbonated Water, which was included in the Table appended
to Rule 65(2) with effect from 17th June, 2009, provides very
little or practically no margin for error, the selection of
Laboratories and the prescription of tolerance limits for different   F
articles of food acquires great significance. The High Court
does not appear to have considered the implications of the
failure of the Central Government to frame Rules for the
aforesaid purpose. Even the view taken by the High Court with
regard to Grounds 3, 4 and 5 is not very satisfactory, as the         G
mere presence of pesticide residue does not ipso facto render
the article of food adulterated. Tolerance limits have been
prescribed in the Table for this very purpose and the
subsequent inclusion of Sweetened Carbonated Water seems
                                                                      H
    1018 SUPREME COURT REPORTS (201 OJ 13 (ADDL.) S.C.R.


A to indicate so and leans more in favour of the Appellants. The
  High Court also appears to have overlooked the fact that the
  percentage of pesticides found by the Public Analyst in the
  Sweetened Carbonated Water manufactured by the Appellants
  was within the tol.erance limits subsequently prescribed in
B respect of such product.

        39. As mentioned hereinbefore, the High Court erred in
  giving its own interpretation to the decision of this Court in
  S.M.S. Pharmaceuticals Ltd. 's case (supra), which was
C reiterated subsequently in several judgments, some of which
  have been indicated hereinabove, and relying instead on the
  decision of Rangachari's case (supra), the facts of which were
  entirely different from the facts of this case. It is now well
  established that in a complaint against a Company and its
  Directors, the Complainant has to indicate in the complaint itself
D as to whether the Directors concerned were either in charge
  of or responsible to the Company for its day-to-day
  management, or whether they were responsible to the
  Company for the conduct of its business. A mere bald
  statement that a person was a Director of the Company against
E which certain allegations had been made is not sufficient to
  make such Director liable in the absence of any specific
  allegations regarding his role in the management of the
  Company.

F      40. It has to be kept in mind that although an argument was
  advanced with regard to the restrictions imposed on the use
  of insecticides under Rule 65 of the 1955 Rules, it is apparent
  from the order of the learned Single Judge that such a ground
  was given up by the respondents and the arguments were
G confined only with regard to the alleged violation of Section
  2(ia)(h) of the 1954 Act.

        41. Having considered the matter in its totality and also
    having regard to the fact that Somesh Dahale had been
    nominated under Sub-section (2) of Section 17 of the 1954 Act
H
   PEPSICO INDIA HOLDINGS PVT. LTD. v. FOOD               1019
    INSPECTOR AND ANR. [ALTAMAS KABIR, J.]

to be a person in charge of and responsible to the Company        A
for the conduct of its business, we are of the view that the
Appeals have to be allowed.

     42. We, accordingly, allow the appeals and set aside the
judgment and order of the learned Single Judge impugned in
these proceedings and quash the prosecution of the Appellants
                                                                  8
in respect of the various complaints challenged before the High
Court in its inherent jurisdiction.

D.G.                                        Appeals allowed.