Holding

The violation of section 18A was not established and the second respondent was not a "person in charge" under section 34, so the appeal was dismissed.

Summary

The State of Karnataka prosecuted three respondents – two partners and their firm – for allegedly providing a fictitious address of the supplier of a drug, violating sections 18(a)(ii), 18(c) and 18A of the Drugs and Cosmetics Act, 1940. The prosecution relied on an inspector’s report that the address was fictitious, but the report was neither examined nor proved, leaving the defence version unrebutted. The trial court convicted the partner in charge and the firm, acquitting the second partner, and the High Court dismissed the State’s appeal. On appeal, the Supreme Court held that the violation of section 18A was not established due to lack of proof, and clarified that under section 34 a partner is liable only if he is in overall control of the day‑to‑day business. It found that the second respondent was not the "person in charge" and therefore could not be convicted. The appeal was dismissed.

Issues considered

Whether the prosecution proved a violation of section 18A of the Drugs and Cosmetics Act when the inspector's report was not examined or proved.
How the term "person in charge" under section 34 of the Drugs and Cosmetics Act is to be interpreted for liability of partners in a firm.
Whether the second respondent, as a partner, can be held liable for the offence despite not having overall control of the business.

Legislation cited

Drugs and Cosmetics Act, 1940s. 18A, s. 18(a)(ii), s. 18(c), s. 34
Drugs Control Acts. 27(a)(i), s. 27(a)(ii), s. 28
Foreign Exchange Regulation Act, 1947s. 23-C

Subjects

Drugs and Cosmetics Actsection 18Afictitious addressperson in chargesection 34 liabilitypartner liabilitycriminal prosecutionevidence of inspection report

Judgment

200

A STATE OF KARNATAKA
v
'
PRATAP CHAND & ORS.

March 11, 1981
B ( 0. CHINNAPPA R EDDY AND BAHARUL I SLAM, JJ. )
Dmgs and Cosmetics Act 194G-Section 18A-Scope of-Information furni-
shed under section 18A alleged to be fictitious-Report of Inspector not proved-
ln.rpector not examined-Validity of report.

Section 34-"person incharge"-Meaning of-Tests to he applied.
c
All the three respondents (respondents nos. 1 and 2 partners and respondent
No. 3, the firm) were prosecuted for the alleged· contravention of section I SA,
Drugs and Cosmetics Act, 1940 in that when asked by the Drugs Inspector to
disclose the name, address and other particulars of the person from whom a cer-
tain drug was acquired by them, they gave a fictitious address and that, there-
fore, they were liable to be convicted under section J8(a) (ii) read with section
D 18(c) of the Act

The Metropolitan Magistrate convicted respondent no. l (the partner in-
charge of the business of the firm) and respondent no. 3 (the firm) but acquitted
respondent no. 2 on the ground that it was respondent no. 1 who was incharge
of the firm and sentenced them various ly.

E The High Court summarily dismissed the State's appeal against the acqittaJ
of respondent no. 2 and of all the respondents under section 18A.

Dismissing the appeal,

HELD : Violation of the provisions of section J8A remained unestabli-
shed and the defence version remained unrebutted. [202E]
F The Assistant Commissioner, Food and Drug Administration ~ombay,
North Circle, deposed that the particulars given by the respondents as to the )
person (rom whom the drugs were purported to have been acquired were veri-
fied by an Inspector, who in his report stated that the name and address given
by the respondents were fictitious; but the Inspector has not been examined
nor was his report proved. The defence version, therefore, remained unre-
butted. (202 D-E)
G y
The second respondent was not liable to be convicted merely because he
had the ri'ght to participate in the business of the firm under the terms of the
partnership deed. The term "person incharge" refetred to in section 34 must
mean that the person should be in overall control of the day to day business of
the firm. A person may be a party to the policy being followed by a firm and
H yet not be incbarge of its business or a person may be incharge of a business but
not in overall charge or may be incharge or only some part of the business. In
short, a partner of a firm is liable to be convicted for an offence if he was in
ICARNATAKA V. PRATAP CHAND (Baharulls/arn, J.)
201
f and was responsible to the firm for the conduct of its b t'1
cha!lle ed that the offence was committed with the consent or co~ .ness or irf it
0
is prov t f nJVance o or
A
attributable to any neg1cc on t 11e part o the partner concerned. [204A-.B]
1185

G.L. Gupta v. D.N. Mehta (1971] 3 S.C.R. 748 applied.

In the instant case respor.dent no. 2 was not in overall control of the busi-
ness. It was respondent no. 1, who was in that position. [204 C) B
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 91
of 1976.
Appeal by Special Leave from the Judgment and Order dated
29.7.1975 of the Karnataka High Court in Criminal Appeal No. 364
or 1975. c
N. Nettar for the Appellant.

A.K. Sen, S.K. Bisaria and V.P. Gupta for the Respondents.

The Judgment of the Court was delivered by D
BAHARUL IsLAM, J. This appeal by special leave has been
preferred by the State of Karnataka.

2. The three respondents being the partners of the firm, M/s.
l>fafatlal and Co., and the firm itself were charged for offences under E
~ · Sections l 8(c), 18(a) (ii) and 18A of the Drugs and Cosmetics Act,
1940 read with Section 27(a) (ii), 27(a) (i) and Section 28 of the
Drugs Control Act, (hereinafter, the Act). The defence was a plea of
"Not Guilty". The Chief Metropolitan Magistrate found respondents
1. and 3, that is, one of the partners and the firm, guilty under Sec-
1100 18(a) (ii) and Section 18(c) of the Drugs and Cosmetics Act and F
5entenced respondent No. I to suffer rigorous imprisonment for one
~ear under 'ection 18(a) (jj) and to pay a fine of Rs. 500.
m default, to suffer simple imprisonment for one month, and .I
•j

ltlltenctd ~spondents 1 and 3 to pay a nne of Rs. l,OOO
l '

tach, Under section 18(c) in default to sutTer simple imprison-
ment r ' .
th or three months. The respondent No. 2 was acquttte 0
. d f G
~two offences as the Magistrate found that it was respondent
:~ 61r and not respondent no. 2 who was in chargo of the business of
, , . m. All the respond~nts were acquitted of the offence under
ectJon U!A.
~
H
ltil.rtJ;~~·he appellant preferred an appeal before the High Court of 1
a from the order of acquittal of respondent No. 2 of the j
'
l

j
202 SU1'R£ME COURT REPORTS (1981) 3 S.C.R.
A
offence under Section 18(a) (ii) and J8(c) and of all the respondents
under section 1SA of the Act. The High Coun summarily dismissed
the appeal.

4. Section 18A of the Act requires that every person who bas
B acquired drug or cosmetic, if required, shall disclose to the inspector
the name, address and other particulars of the persons from whom
the drug or cosmetic was acquired.

The respondents pleaded that they did disclose to the Drugs
Inspector, the name, address and other particulars of the person from
c whom the drugs were acquired, by section 18A of the Act and in
support of their defence they rely on Exhibit P. 20, a letter dated
17.7.1971 addressed to the Drugs Controller. T he learned Chief
Metropolitan Magistrate has found that Exhibit P.20 contained the
name, address and other particulars of the person from whom the
drugs were claimed to have been acquired as M/s. Mangilal Jayantilal
D & Company, 65 Princess Street, Second Floor, Bombay, which name
and address, according to the prosecution, were fictitious. P. W.3, the
Assistant Commissioner, Food and Drug Administration, Bombay
North Circle, has deposed that he got it verified by his Inspector who
submitted a report that the above name and address were fictitious.
But the Jnspetor bas not been examined, nor his report proved.
E
Obviously, therefore, the defence version remained unrebutted and
violation of section 18A remained unestablished.

5. Regarding the acquittal of the 2nd res~ondent of the
offence under section 18 (a) {ii) and section J8{c), the learned counsel
for the State of Karnataka submitted that under section 34 of the
F
Dmgs and Cosmetics Act the firm , as well as its partners were
liable to be convicted. Section 34 may be extracted here :-

·.. s. 34. {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
G
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 the sub·s~ction shall
H
render any such person liable to any punishment provided in
this Act if he proves tllat the offence was committed without
KARNATAKA v. PRATAP CHAND (Baharu/ls/am 1 J.) 203

his knowledge or that he exercised all due diligence to prevent A
the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1),
where an offence under this Act has been committed by a
company and it is proved that the offence bas been committed B
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 punish-
ed accordingly. c
Bxplanation.-For the purpose of this section-

(a) "company" means a body corporate, and includes a firm
or other association of individuals ;and
(b) "director" in relation to a firm means a partner in the D
firm."

lt is seen that the partner of a firm is alo;o liable to be con-
victed for an offence committed by the firm if he was in charge of,
and was responsible to, the firm for tbe conduct of the business of
the finn or if it is proved that the offence was committed· with. the E
consent or connivance of, or was attributable to any neglect on the
part of the partner concerned . In the present case the second
respondent was sought to be made liable on the ground that he
aJongwith the first respondent was in charge of the conduct of the
business of the firm. Section 23-C of the Foreign Exchange Regu-
lation Act 1947 which was identically the same as section 34 of the F
Drugs and Cosmetics Act came up for interpretation in G. L. Gupta
v. D. N. Mehta(l) it was observed as follows :

"What then does the expression " a person in-charge and
responsible for the conduct of the affairs of a company mean"?
It will be noticed that the word 'company · includes a firm or G
other association and the same test must apply to a · director
in-charge and a partner of a firm incharge of a business. It
seems to us that in tbe context a person 'in-charge' must mean
that the person should be in over all control of the day to day
(1) (197JJ 3 S.C,R. 748.
H
'.
204 sun.EME COURT RE'PORT [1981] 3 S.C.R.

A business of the company or firm . This inference follows from
the wording of S. 23C(2). It mentions director, who may be
a party to the policy being followed by a company and yet
not be in-charge of the business of the company. Further it
mentions manager, who usually is in charge of the business
but not in over-all-charge. Similarly the other officers may
B be in charge of only some part of business."

The evidence in the present case shows that it was respondent
No. 1 and not respondent No. 2 who was in over all control of the
day to day business of the firm. The second respondent is not
liable to be convicted merely because he bad the right to participate
c in the business of the finn under the terms of the Partnership Deed.

6. This appeal has no merit and is dismissed.

P.B.R. Appeals dismissed.