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TMI Blog2022 (10) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... they exercised all due diligence to prevent the commission of the offence. This Court has held that merely reproducing the words of the section without a clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business of the company, would not ipso facto make the director vicariously liable. The learned Single Judge of the High Court held that though there was no formal order of issuance of process, the record was sufficient to infer that the order of issue process was made - the order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not. The formation of such an opinion is required to be stated in the order itself. The order is liable to be set aside if no reasons are given therein while coming to the conclusion that there is a prima facie case against the accused. In the present case, leaving aside there being no reasons in support of the order of the issuance of process, as a matter of fact, it is clear from the order of the learned Single Judge of the High Court, that there was no such order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible limit, i.e., 39% of the label amount. On the same day, the manufacturer of the drug, i.e., CPPL, was informed by a registered post about the test report. 3.3 On 29th March 2007, Sh. Vijay Jain, Deputy Manager, QA of CPPL requested the Drug Inspector to send the samples again for analysis. Pursuant to an application filed by M/s Alkem Laboratories, the distributor of CPPL, the learned CJM, Beed sent the samples of Hemfer Syrup for re-analysis on 24th April 2007. On 10th July 2007, the Learned CJM, Beed received the test report from the Central Drug Laboratory, Calcutta stating therein that the sample was not of standard quality as it did not conform to the accepted limits of Cyanocobalamin content. 3.4 Vide letter dated 21st August 2008, the Drug Inspector called upon CPPL to furnish the particulars of Directors, Articles of Association, Memorandum of Association, copies of License to manufacture and sell drugs, particulars of technical persons, and all such information as was needed to be provided under the Drugs Cosmetics Act, 1940 (hereinafter referred to as the said Act ). In reply to this letter, CPPL informed the Drug Inspector that the report dated 10th July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.9 The Appellants preferred a Criminal Writ Petition before the Bombay High Court assailing the order passed by the learned Sessions Judge. The High Court, vide the impugned judgment, dismissed the said Criminal Writ Petition on the ground that all the Directors were conducting the business of CPPL and thus, they were involved in the manufacturing process. 3.10 Hence, the present appeal. 4. We have heard Shri C.U. Singh and Shri Anupam Lal Das, learned Senior Counsels appearing on behalf of the appellants and Shri Siddharath Dharmadhikari, learned counsel appearing on behalf of the respondent-State of Maharashtra. 5. Shri C.U. Singh and Shri Anupam Lal Das, learned Senior Counsels submit that Section 34 of the said Act specifically provides that only such person who, at the time of the commission of the offence, 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. 6. Shri C.U. Singh, learned Senior Counsel, further submits that Rule 76 of the said Rules prescribes a Form of licence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of the learned Senior Counsel that as per clause 6.2 thereof, the head of the Quality Control Laboratory is required to be independent of the manufacturing unit. It also requires that the testing shall be conducted under the direct supervision of competent technical staff, who shall be whole time employees of the licensee. 8. Shri Singh further submits that in the licence which is duly signed by the designated licensing authority, the names of the approved competent technical staff are already given. It is further submitted that in the reply dated 13th February 2009 to the Drug Inspector, Food Drug Administration, M.S. Beed, Mr. Naresh Roy, Assistant Manager Q.A. (Accused No.10) had stated that the raw material was analysed in the Quality Control Department by Mr. Aftab, Chemist under his supervision. It is further informed that the finished product of the said batch of the drug was analysed by Mr. M.K. Sharma under his supervision. Mr. Naresh Roy (Accused No.10) further informed that he was approved by the Rajasthan FDA as a competent person. 9. Learned Senior Counsel submits that similarly, Mr. Ashok Kumar, Assistant Manager, Production (Accused No.9) had also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of 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: 34. 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 subsection 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. .. 16. It was held that merely because a person is a director of a company, it is not necessary that he is aware about the day-to-day functioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 [State of Karnataka v. Pratap Chand, (1981) 2 SCC 335 : 1981 SCC (Cri) 453] ). 20. In other words, the law laid down by this Court is that for making a Director of a company liable for the offences committed by the company under Section 141 of the NI 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. 21. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya [Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006) 10 SCC 581 : (2007) 1 SCC (Cri) 621] , it was held by this Court that: (SCC pp. 58485, para7) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in what manner the accused was responsible. Simply because a person is a Director of a defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378 : AIR 2015 SC 675] .) 10. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the 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. 22. In the light of these observations, let us examine the averments made in the complaint insofar as the present appellants are concerned: 3. That, Accused no. 5 to 8 are the Directors of the M/s Cachet Pharmaceuticals Pvt. Ltd. village Thana B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture would be conducted as required under sub-rule (1) of Rule 76 of the said Rules. Similarly, Accused No.10, who was approved as a head of the testing unit, was to be in-charge for carrying out the test of the strength, quality and purity of the substances as may be required under the provisions of Part X of the said Rules. We are therefore of the considered view that the complaint is totally lacking the requirement of Section 34 of the said Act. 25. The impugned orders are liable to be quashed and set aside on another ground also. 26. Perusal of the order passed by the learned Single Judge of the High Court would itself reveal that the learned CJM has not even cared to pass a formal order of issuance of process. It will be relevant to refer to the following part of the judgment and order of the learned Single Judge of the High Court: .Though, it is true that on the certified copy produced by the petitioners there is no such formal order but copy of Roznama (daily notings of the proceeding) shows that such order was made on 3032009. The Roznama dated 3032009 reads as follows : (i) Complaint filed by Vilas Vishwanath Dusane. (ii) Copy of list of documents co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 204 are of immense importance. It is these words which amply suggest that an opinion is to be formed only after due application of mind that there is sufficient basis for proceeding against the said accused and formation of such an opinion is to be stated in the order itself. The order is liable to be set aside if no reason is given therein while coming to the conclusion that there is prima facie case against the accused, though the order need not contain detailed reasons. A fortiori, the order would be bad in law if the reason given turns out to be ex facie incorrect. 29. A similar view has been taken by this Court in the case of Ashoke Mal Bafna (supra). 30. In the present case, leaving aside there being no reasons in support of the order of the issuance of process, as a matter of fact, it is clear from the order of the learned Single Judge of the High Court, that there was no such order passed at all. The learned Single Judge of the High Court, based on the record, has presumed that there was an order of issuance of process. We find that such an approach is unsustainable in law. The appeal therefore deserves to be allowed. 31. In the result, the appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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