Quashed order THE HONOURABLE MR.JUSTICE VIVEK KUMAR SINGHCrl.O.P.Nos.394 & 1535 of 2022 andCrl.M.P.Nos.133 & 615 of 2022In Crl.O.P.No.394 of 2022:-Harsh Charandas MariwalaManaging Director of M/s.Kaya Ltd.,Unit: Kaya Skin Clinic,AC-15, First Floor, 2nd Avenue, Anna Nagar, Chennai – 600 040. andGala no.8E, City Link Warehousing, Thane – 421 302.… PetitionerVs.Tamil Nadu State rep. byN.Vijayananth, Drugs Inspector,Anna Nagar Range,
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 18.12.2023
Delivered on 22.02.2024
CORAM
THE HONOURABLE MR.JUSTICE VIVEK KUMAR SINGH
Crl.O.P.Nos.394 & 1535 of 2022 and
Crl.M.P.Nos.133 & 615 of 2022
In Crl.O.P.No.394 of 2022:-
Harsh Charandas Mariwala
Managing Director of M/s.Kaya Ltd.,
Unit: Kaya Skin Clinic,
AC-15, First Floor, 2nd Avenue, Anna Nagar, Chennai – 600 040. and
Gala no.8E, City Link Warehousing, Thane – 421 302.
… Petitioner
Vs.
Tamil Nadu State rep. by
N.Vijayananth, Drugs Inspector,
Anna Nagar Range,
O/o. The Assistant Director of Drugs Control, Zone II, Chennai – 600 006.
… Respondent In Crl.O.P.No.1535 of 2022:-
M/s.Kaya Ltd.,
Unit: Kaya Skin Clinic,
AC-15, First Floor, 2nd Avenue, Anna Nagar, Chennai – 600 040. and
Gala no.8E, City Link Warehousing, Thane – 421 302.
Rep. by its Managing Director
Harsh Charandas Mariwala … Petitioner
Vs.
Tamil Nadu State rep. by
N.Vijayananth, Drugs Inspector,
Anna Nagar Range,
O/o. The Assistant Director of Drugs Control, Zone II, Chennai – 600 006.
… Respondent
COMMON PRAYER: Criminal Original Petitions filed under Section 482 of Criminal Procedure Code, to call for the records and to quash the complaint and all consequential proceedings in C.C.No.7125 of 2018 pending on the file of the Hon’ble X Metropolitan Magistrate, Egmore.
For Petitioner : Mr.K.Krishna Srinivasan Senior Counsel
for Mr.S.Ramasubramanian
(in both petitions)
For Respondent : Mr.L.Baskaran
Government Advocate (Crl.Side)
(in both petitions)
C O M M O N O R D E R
These Criminal Original Petitions have been filed to quash the
Calender Case No.7125 of 2018 pending on the file of the learned X Metropolitan Magistrate, Egmore.
- The germane facts which leads to the filing of these
petitions are as follows:
2.1. The petitioner in Crl.O.P.No.1535 of 2022 is a limited company registered under the Companies Act, 1956 in the name and style of “M/s.Kaya Limited” which is having its Skin Clinic Unit at Anna Nagar, Chennai and Warehouse at Thane. Mr. Harsh Charandas Mariwala is the Managing Director of the said Company. The petitioner company is engaged in the business of providing health and skin care treatment through its various clinics located all over the Country, as well as across the globe.
2.2. One of the branches of ‘Kaya SkinClinic’ is situated at AC-15, 1st Floor, 2nd
Avenue, Anna Nagar Chennai – 40
(hereinafter referred to as “Clinic” for the sake of brevity). The Clinic is duly registered
under the Tamil Nadu Industrial
Establishments (National Festival and Special
Holidays0 Act, 1958 under the Registration Certificate dated 03.07.2009.
2.3. In the said Clinic, the treatment course of the patients usually involves with various drugs by administering injections applied in a medically controlled manner by registered medical practitioners. The drugs required for the treatment are procured by the concerned doctors at their request from the registered warehouse of the petitioner situated at ‘SK Logistics Warehouse premises
at Gala No. 8E, City Link Warehousing, Bhiwandi, Thane, Maharashtra –
421302′ (hereinafter referred to as “Thane Warehouse”). The Thane warehouse is duly registered under license numbers T25/25931 and 25932 dated 10.03.2016 issued by the Food and Drug Administration, Maharashtra
and the same has been renewed periodically.
2.4. Pursuant to ‘an order bearing reference number 10471/IW1/2016 dated 16.06.2016’ (hereinafter referred to as ‘impugned order’ for the sake of convenience and clarity) issued by the Director of Drugs Control, requesting the Drug Inspectors specified therein to cause an in-depth inspection on 17.06.2016 and 18.06.2016 at the premises of the Clinic of the petitioner company to detect the violations under the provision of ‘the Drugs and Cosmetics Act, 1940’ [hereinafter referred to as the ‘Act’ for
the sake of brevity] and ‘the Drugs and Cosmetics Rules 1945’ (for short, ‘the Rules’). Thereby, the Drugs Inspector, Kodambakkam Range, Zone II, Chennai- 600
006, along with the Drugs Inspector, Intelligence Wing entered and inspected the premises of the Clinic of the petitioner
company and drew samples from the
available stock of drugs and seized the
remaining stock of 26 drugs.
2.5. The inspecting team called for the following documents/ particulars from the
petitioner company:
(i) Goods Transfer Note-cum-challan of
Kaya Ltd. Warehouse, Thane (8) Delivery
Notes);
(ii) Sales Invoices of the Clinic; and
(iii) Details of the mode of transport and mode of payment for the Drugs received from the Thane Warehouse and etc.
2.6. During the course of inspection, itwas observed that the drugs were stocked for sale without holding any drug licences. On
verification of the purchase invoices of drugs,
it was confirmed that the drugs were the stocks transferred from the petitioner company. Thus the petitioner Company had
contravened the provision of Section 18(c) of the Act for having stocked drugs for sale
without holding drug licenses.
2.7. On 20.06.2016, the seized drugs
were produced before the learned X Metropolitan Magistrate, Egmore for safe custody and the property is allotted with B.No.836/16 dated 20.06.2016.
2.8. Thereafter on 05.01.2017, a show cause memo was issued to the petitioner company followed by another memo dated
28.03.2018, for the contravention of Section 18 (c) of the Act for having stocked the drugs for sale and sold drugs, without having any drug licenses and directed to disclose the name and address of the person from whom the drugs were acquired under Section 18-A of the Act along with copies of the bills, to which reply letters dated 23.01.2017 and 11.04.2018 have been received from the
petitioner company.
2.9. Since the explanation offered by the petitioner company was not satisfactory,
on 23.05.2018 a detailed report was
submitted to the Director of Drugs Control, Tamil Nadu, Chennai – 6, requesting sanction
order to prosecute the accused namely, M/s.Kaya Ltd., Chennai, Harsh Charandas Mariwala who is the Managing Director of the Company M/s.Kaya Ltd., V.Babu, the person
in-charge of M/s.Kaya Ltd., Chennai, M/s.Kaya Ltd., Thane Ware house, Harsh Charandas Mariwala, Managing Director of M/s.Kaya Ltd., Thane Warehouse and
Dharmendar Jain, Chief financial Officer and authorized signatory of M/s.Kaya Ltd., Thane Warehouse and they have been arrayed as A1 to A6 respectively for violating the contraventions. Thereafter, sanction order was accorded vide R.Dis.No.7879/IW2/2018 (184) dated 11.06.2018 which was received
by the respondent on 14.06.2018.
2.10. In this backdrop, the prosecution
launched the proceedings against the
petitioner company under Section 18(c) of the Act for having stocked drugs for sale and sold drugs, without holding any drug licenses, which is punishable under Section 27(b)(ii) of the Act and Section 18(c) of the Act r/w. Rule 65 of the Rules and read with condition No. 3(ii) of Drug licences in Form 20B for having sold drug specified in other than Schedule C and C1 of the Drugs and Cosmetics Rule, 1945 to the unlicensed person/concern, which is punishable under Section 27(d) of the Act. Section 18(c) of the Act r/w. Rule 65 of the Rules and also r/w. condition No. 4(ii) of Drug Licences in Form 21B for having sold drug specified in Schedule C and C1 of the Rules to the unlicensed person / firm, which is punishable under Section 27(d) of
the Act. - Aggrieved over the same, the petitioner, as well as the petitioner company, have filed these Criminal Original Petitions respectively to quash the proceedings of the respondent police in C.C.No.7125 of 2018.
- Heard Mr.K.Krishna Srinivasan, learned Senior counsel for the petitioner in both the Original Petitions and Mr.L.Baskaran, learned Government Advocate (Criminal Side) appearing on behalf of the respondent State.
- Since the issues involved in both the criminal original petitions are one and the same, they have been taken up together
and disposed of by a common order. - The learned Senior counsel appearing for the petitioners contended that the complaint does not contain even a single allegation as against the petitioner / Harsh Charandas Mariwala (hereinafter referred to as “the petitioner” for the sake of clarity) in Crl.O.P.No.394 of 2022, who is the Managing Director of the petitioner Company / M/s.Kaya Limited, Unit of Kaya Skin Clinic, Anna Nagar, Chennai as well as M/s.Kaya Limited, Warehouse, Thane in Crl.O.P.1535 of 2022. There is no allegations specified in the counter affidavit of the respondent stating that the petitioner had committed any offence as alleged by the prosecution violating the provisions of the Act or the Rules. He is neither in-charge of the Company’s clinic at Anna Nagar, Chennai or the Company’s Warehouse at Bhiwandi, Thane, Maharashtra and hence, the
complaint against the petitioner is nothing but only an abuse of process of law. - He further contended that as per the well settled proposition of law, the Directors and Managing Directors of the Companies cannot be prosecuted in the absence of any specific
allegations against them in the complaint. - In this context, the learned Senior counsel relied upon the
decision of the Hon’ble Supreme Court in the case of M/s. Cheminova India Limited and Another Vs. State of Punjab and Others reported in AIR 2021 SC 3701, wherein the Court has held that, when a person has been nominated as the person, who is in-charge of and responsible to the company for its affairs, the prosecution of the Managing Director is nothing but an abuse of process of law. The relevant portions of the judgment are as
under:-
“6. Learned Counsel for the appellants by referring to Section 33 of the Act has submitted that appellants have already filed an undertaking dated 22.01.2013 before the respondents, nominating the in-charge and responsible officers of the Company to maintain quality of the pesticides manufactured by the Company along with the resolution of the Company’s meeting held on 28.12.2012. Learned Counsel has submitted that by making vague and bald allegations, the appellants, who were the Company and the Managing Director, are also sought to be prosecuted.
6(a). It is submitted that unless there is a clear and categorical averment in the complaint, indicating the role played by the appellants, there cannot be any vicarious liability on the 1st Appellant – Company and the 2nd Appellant–Managing Director for commission of the alleged offence. In support of his arguments, learned Senior Counsel has placed reliance on the judgment of this Court in the case of Managing Director, Castrol India Limited vs. State of Karnataka & Anr.[2018 (17) SCC 275] and also another judgment of this Court in the case of Shiv Kumar Jatia vs. State of NCT of Delhi [2019 (17) SCC 193].” - The very substratum of the offences alleged in the case on hand are non existent and the complaint does not make out even a prima facie case against the petitioner in both the criminal original
petitions. - The learned Senior counsel submitted that the complaint is of two-folds viz., the first offence is a violation of Section 18(c) which bars the sale, stocking or exhibiting or offering for sale. In the present case, there has been no sale or distribution of any drugs by the petitioner Company’s clinic in Anna Nagar and also that, there was neither stocking nor exhibition and hence, it is evident that if no sale, then mere stocking or exhibiting will not attract a
violation under Section 18(c) of the Act. - Furthermore, the petitioner Company’s clinic is managed by a registered Medical Practitioner and there is no Over-TheCounter (OTC) sale of drugs by the Doctor at the alleged premises which is acknowledged in the complaint, as well as in the counter
affidavit itself. - The sum and substance of the complaint predominantly revolves around three invoices mentioned in para 11 of the complaint but the same were issued for the services rendered by the doctor and also that there is no OTC sale as per the complaint itself. The substance mentioned in the invoices are not drugs but
are cosmetics which has been brought to the notice of the respondent through the petitioner’s reply dated 23.01.2017. The administration of a drug by a registered medical practitioner is permitted by Rule 123 of the Drugs and Cosmetics Rules r/w. SI.No.
5 of Schedule K which reads as under:
“123.The drugs specified in Schedule K shall be exempted from the provisions of Chapter IV of the Act and the rules made thereunder to the extent and subject to the conditions specified in that Schedule.
Schedule K Exemption:
SI.No.5.- Drugs supplied by a registered medical practitioner to his own patient or any drug specified in Schedule C supplied by a registered medical practitioner at the request of another such practitioner if it is specially prepared with reference to the condition and for the use of an individual patient provided the registered medical practitioner is not (a) keeping an open shop or (b) selling across the counter or (c) engaged in the importation, manufacture, distribution or sale of drugs in India to a degree which render him liable to the provisions of Chapter IV of the Act and the rules thereunder.
Also the relevant extract of the exemption:-
All the provisions of Chapter IV of the Act and the Rules made thereunder, subject to the following conditions:
(1)The drugs shall be purchased only from a dealer or a manufacturer licensed under these rules and records of such purchases showing the names and quantities of such drugs together with their batch numbers and the names and addresses of the manufacturers shall be maintained. Such records shall be open to inspection by an Inspector appointed under the Act, who may, if necessary, make enquiries about purchases of the drugs and may also take samples for test.
(2) In the case of medicine containing a substance specified in 1 [Schedule G, H or X] the following additional conditions shall be complied with]:
(a) the medicine shall be labelled with the name and address of the registered medical practitioner by whom it is supplied;
(b) if the medicine is for external application, it shall be labelled with the words * * * “For external use only” or if it is for internal use with the dose;
(c) the name of the medicine or ingredients of the preparation and the quantities thereof, the dose prescribed, the name of the patient and the date of supply and the name of the person who gave the prescription shall be entered at the time of supply in register to be maintained for the purpose;
(d) the entry in the register shall be given a number and that number shall be entered on the label of the container;
(e) the register and the prescription, if any, on which the medicines are issued shall be preserved for not less than two years from the date of the last entry in the register or the date of the prescription, as the case may be.
(3)The drug will be stored under proper storage conditions as directed on the label.
(4)… - The above provision would clearly show that there is no legal requirement for the petitioner Company’s Clinic premises at Anna Nagar, Chennai to obtain a license and thus, the legal ground for the complaint itself baseless. It is also to be mentioned that the
respondent has only seized a meagre quantity of drugs. - The second offence was the alleged sale by the Licensed
Thane Warehouse of the petitioner Company to its Clinical Unit at Anna Nagar, Chennai, which does not have a license to procure the drugs which is a contravention to Condition 3(ii) of the license of the Thane Warehouse. As the complaint itself admits that it was not a sale but a stock transfer and the drugs were requisitioned by a registered medical practitioner / doctor for application on patients.
The said provision for a glance is extracted hereunder:
“Condition 3(ii)(b) of Drug License in Form 20B reads as under:
(ii)No sale of any drug shall be made
to a person not holding the requisite licence to sell, stock or exhibit for sale, or distribute the drug. Provided that this condition shall not apply to the sale of any drug to-
a) an officer or authority
purchasing on behalf of Government, or
b) a hospital, medical, educational or research institution or a registered medical practitioner for the purpose of supply to his patients or
(emphasis supplied)
c) a manufacturer of beverages, confectionery biscuits and other nonmedicinal products, where such drugs are required for processing these products.” - Furthermore, he contended that no show cause notice was issued to the petitioner/Managing Director of the Company which is fatal to the prosecution and hence, the complaint itself ought to be
quashed against him. - Moreover, he drew the attention of this Court that there is no allegation either in the show cause notice or in the counter affidavit that there has been any misapplication of any steroids by the petitioner and Company / Clinic. Apparently, there was no mention or any whisper of any steroids in any context whatsoever but it was only at the time of oral arguments that such an allegation is sought to be made and therefore, the same cannot be relied upon by the respondent. During the arguments, the learned counsel for the respondent has raised the issue of death due to steroids is completely irrelevant as the same has no basis and it is also to be noted that as per the well settled principle of law drawn in the case
of Mohinder Singh Gill Vs. Chief Election Commissioner reported in 1978 (1) SCC 405 that fresh reasons and
supplemental reasons cannot be adduced by statutory authorities by way of an affidavit or otherwise. It is to be relevant to point out that the practice of raising fresh grounds in the counter affidavit itself has been deprecated in a long line of decisions starting with the aforesaid judgment of the Hon’ble Supreme Court. In the present case on hand, the plea of steroids have been raised during oral
argument, which is unsustainable. - He further submitted that the learned Magistrate has not followed the mandatory procedure under Section 202 of the Code of Criminal Procedure, 1973 even though all the accused are outside his jurisdiction. The failure to follow the compulsory procedure as prescribed under the said Section vitiates the complaint in its entirety. He also stated that the accused Company and Managing Director have been made as accused twice in the complaint which itself exotic to criminal law in both procedural and substantive and also shows the non application of mind of the respondent and
hence, the same is untenable in the eye of law. - In furtherance of his arguments, the learned Senior counsel contended that the respondent’s jurisdiction does not extend to the premises of M/s.Kaya Ltd., at Thane and therefore, the respondent has no right to prosecute any person for the alleged offences committed therein. The respondent had also not complied with the mandatory provisions of Sections 22 and 23 of the Act, which contemplates detailed procedures while carrying out seizure
and taking samples of products. - In support of his contention, the learned Senior counsel
had drew the attention of this Court to the following decisions:
1) Lalankumar Singh and others Vs. State of Maharashtra reported in 2022 INSC 1061;
2) P.Srinivas Vs. The State of Tamil Nadu in Crl.O.P.No.23856 of 2021 dated
27.06.2023;
3) Crescent Therapeutics Limited Vs. The State of Tamil Nadu in Crl.O.P.No.2547 of 2022, dated
02.08.2023;
4) A.Pavani Vs. State of Andhra
Pradesh reported in 2006 (2) ALD Crl.
204;
5) M/s.Cheminova India Limited and Another Vs. State of Punjab and Others in Criminal Appeal No.750 of 2021;
6) S.Athilakshmi Vs. The State of Tamil Nadu (Criminal Appeal arising out SLP (Crl.) No.9978 of 2022 dated
15.03.2023; and
7)Mohinder Singh Gill Vs. Chief Election Commissioner reported in 1978
(1) SCC 405. - Per contra, the learned counsel for the respondent submitted that as per order dated 16.06.2016, inspection was conducted on 17.06.2016 by the respondents namely, Drugs Inspector, Kodambakkam Range and Intelligence Wing at the
premises of M/s.Kaya Limited, Unit of Kaya Skin Clinic, Anna Nagar, Chennai and during the course of inspection, it was found that the drugs were stocked for sale without holding drug licences. On verification, it came to light that the drugs were stocked for sale and sold without holding drug licences through invoices dated 29.01.2016, 30.01.2016 and 31.05.2016. Thereafter, on the available stock, samples were collected for analysis and the remaining stocks were seized under Form 16 and Mahazar dated
17.06.2016 in the presence of two independent witnesses and one Mr.V.Babu, the Zonal Manager of the Company. The Zonal Manager (South) of the Company produced all the documents sought for by the respondents which have been returned to them as per Section 22 [2-A] of the Act. On 20.06.2016, the seized drugs were produced before the learned X Metropolitan Magistrate, Egmore for safe custody and the property was allotted with B.No.836/16 dated 20.06.2016. On 20.06.2016, samples were sent to Government Analyst, Drug testing Laboratory, Chennai for analysis and the Drugs Inspector had received the analytical report under Form 13 dated 09.12.2016 and transferred the same to the then Drugs Inspector on 30.12.2016 which in turn was sent to the petitioner Company’s Clinic. - A show cause memo dated 05.01.2017 was issued to the
petitioner Company’s Clinic for contravention of Section 18(c) of the Drugs and Cosmetics Act, 1940 for having stocked the drugs for sale and sold drugs, without having any drug licenses and directed them to disclose the name and address of the person from whom the drugs were acquired under Section 18-A of the Act along with copies or bills and also directed them to furnish all the necessary
details. - A reply letter dated 23.01.2017 was received from the M/s.Kaya Limited, petitioner’s Company, Mumbai on behalf of the petitioner’s Clinic, wherein they have stated that the subject drugs were transferred from their licensed Warehouse, Thane and also furnished all the particulars called for in the memo. It was also stated that the drugs were procured through request process by the registered medical practitioner and no drugs were sold through the mentioned invoices. Since the reply sent was not satisfactory, a show cause memo dated 28.03.2018 was sent to M/s.Kaya Limited, the petitioner Company for contravention under Section 18(c) of the Act read with Rule 65 of the Drugs and Cosmetics Rules and read with Condition No.3(ii) of Drug Licences in Form 20B and Condition No.4(ii) of the Drug licences in Form 21B of the said Rule for having sold / supplied drugs to the petitioner Clinic, which is not holding requisite license to sell the drugs. It was further directed to furnish certain other details. In response to the same, M/s.Kaya Limited, the petitioner Company, through its letter dated 06.04.2018 had
submitted that they had already submitted a reply dated
23.01.2017 to the earlier show cause memo sent to them on
05.01.2017 which is agreeable by them, in which, it has been stated that they are having wholesale drug license at the petitioner Company’s Warehouse, Thane in the name of their Company and the drugs were supplied to their branch i.e., the petitioner Company’s Clinic, which is not acceptable by the respondents and hence on 23.05.2018, a detailed report was rendered to the Director of Drugs control, Tamil Nadu, requesting sanction order to
prosecute the accused persons 1 to 6 for the above said
contravention. - Sanction order dated 11.06.2018 was received by the then Drugs Inspector and a case has been registered against the six accused namely, M/s.Kaya Limited, unit of Kaya Skin Clinic, Anna Nagar, Chennai, M/s.Kaya Limited, Warehouse Thane, Harsh Charandas Mariwala as an individual as well as in the capacity of Managing Director of the Company, Dharmendar Jain, Chief Officer cum Official Signatory of M/s.Kaya Limited and V.Babu, Zonal Manager (South) of M/s.Kaya Limited, Chennai, for having
contravened Section 18(c) of the Act, for having stocked drugs for sale and sold drugs without holding any drug licences, which is punishable under Section 27(b) (ii) of the said Act. Based on that, a complaint was filed before the X Metropolitan Magistrate Court, Egmore, Chennai on 31.07.2018 and the same was taken on file in C.C.No.7125 of 2018. - Moreover, the learned counsel for the respondent submitted that the averments made by the petitioner / Company / Clinic in their affidavit in paragraph Nos.11, 22A, H, K, N, O, Q, W, BB and EE are incorrect. The petitioner / Company has stated that the substances mentioned in the invoices are not drugs but are cosmetics, whereas the seized products by the respondents are
drugs. The offences made by the petitioner Company is
differentiated by the contraventions and punishable under two
different sections. - M/s.Kaya Ltd., petitioner Clinic, Chennai was issued with the show cause memo for the contravention of Section 18(c) of the Act for having stocked drugs for sale and sold drugs without holding any drug licences, which is punishable under Section 27(b)(ii) of the Act and further, another show cause memo was issued to M/s.Kaya
Company for the contravention of Section 18(c) of the Act r/w. Rule
65 of the Drugs and Cosmetics Rules and r/w. Condition No.3(ii) of Drug Licences in Form 20B and Condition No.4(ii) of Drug Licences in Form 21B of the said Rule for having sold / supplied drugs to M/s.Kaya Limited, the petitioner Company’s Clinic, which is not holding requisite licence to sell the drugs, which is punishable under Section 27(d) of the Act. - He relevantly pointed out that this case has been filed within the limitation period i.e., within a period of three years from
the date of offence. The offences were made by the Company at two different places and two different contraventions. M/s.Kaya Limited, petitioner Company’s Clinic has contravened Section 18(c) of the Act for having stocked drugs for sale and sold drugs without holding any drug licences, which is punishable under Section 27(b) (ii) of the said Act. M/s.Kaya Limited, the petitioner Company has also contravened Section 18(c) of the Act r/w. Rule 65 of the Drugs and Cosmetics Rules and r/w. Condition No.3(ii) of the Drug licences in Form 20B and Condition No.4(ii) of the Drug licences in Form 21B of the said Rule for having sold / supplied drugs to M/s.Kaya Limited, the petitioner Company’s Clinic, which is not holding
requisite license to sell the drugs, which is punishable under Section 27(d) of the Act. Hence, the sanction for prosecution was sought for and accorded for prosecuting the petitioner as well as the Company as two separated accused for its two different offences at two
different places. - It is also brought to the notice of this Court that at the time of inspection at the petitioner Company’s Clinic, no medical practitioners were present and the invoices were found regarding purchase of drugs in the name of M/s.Kaya Limited, the Unit of Kaya Skin Clinic, Chennai instead of the name of the medical practitioners along with their registration number, which proves the offences were made by the petitioner Company. It also came to light on verification of the invoices that some of the sale invoices of M/s.Kaya Limited, the Unit of Kaya Skin Clinic pertains to the drugs
sold by them which also reveals that purchase invoices were obtained from the premises in the name of M/s.Kaya Limited, Warehouse, Thane to M/s.Kaya Limited, the Unit of Kaya Skin Clinic,
Anna Nagar, Chennai. From this, it is apparently evident that M/s.Kaya Limited, the Unit of Kaya Skin Clinic has purchased the drugs without valid drug license from M/s.Kaya Limited, Warehouse of the Company at Thane. - Continuing his arguments, he drew the attention of the
Court that the stocks of the drugs mentioned below dated 17.06.2016 were seized under Form 16 and Mahazar, both in the presence of two independent witnesses and Zonal Manager (South) by name V.Babu of the petitioner Company. It is proved from the stocks that the petitioner Company had stocked drugs without valid drug licence in the premises of M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai, which is contravention to Section 18(c) of the Act. It is obvious to note that the petitioner Company had sold the drugs to the M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai without valid drug licence. As per Rule 123 of the Rules, the drugs specified in Schedule K are exempted from the application of the provisions of Chapter IV, only the drugs to be purchased in the name of the medical practitioner with their registration number but in this case, the drugs were purchased in the name of M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai, for which the relevant provisions have been stated above. - Furthermore, he pointed out that with respect to para 22BB, Section 19 deals about the quality of the drugs. He further stated that M/s.Kaya Limited, Warehouse of the Company at Thane had supplied the drugs to M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai, which was not having required drug licence to purchase and sale of drugs. Hence, M/s.Kaya Limited, the petitioner Company has contravened of Section 18(c) of the Act r/w. Rule 65 of the Drugs and Cosmetics Rules and r/w. Condition No.3(ii) of Drug Licences in Form 20B and Condition No.4(ii) of Drug Licences in Form 21B of the said Rule for having sold / supplied drugs to M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai, which is not holding requisite licence to sell the drugs which is punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940.
- Supporting his contention, the learned counsel drew the
attention of this Court to the following decisions:
I) This Court, in the case of Vikas Rambal Vs. The State in
Crl.O.P.No.11184 of 2019 dated 12.10.2022, has held that the Directors cannot claim that they are not responsible for the day-today affairs of the Company. The relevant portions of the said decision reads as under:-
“6. As far as Section 34 of the Drugs and Cosmetics Act and the interpretation by the Courts regarding the vicarious liability of the Directors of the Company, being the offence against the person, the interpretation of provision which is in pari materia to Section 34 of Drugs and Cosmetics Act in the other statute dealing with offence against properties cannot be applied. When an offence committed against the Society at large and the said offence is committed by the Company, all the Directors who accrued benefit out of the said act of crime ought to be prosecuted and they are all vicariously liable. They cannot escape from criminal liability by indicating one of the Director as a person responsible for the offence of the Company and they are not connected with the day-to-day affairs of the Company. As long as their names are in the Board of Directors, violation of the provision of the Act concern with the products criminal liability shall fall on all the Directors for an offence committed by the Company as against the society at large. All the Directors are liable whether they have knowledge of the crime or directly involved in the crime. If the submission of the Learned Senior Counsel for the appellant is accepted, then the persons living in abroad can float a Pharma Company in India, supply spurious drugs cause danger to the life of the public and go scotfree stating that they are not directly involved in the affairs of the Company.
….
…. - The offences and the offenders in the case of this nature is manufacturing and distribution of sub-standard drugs by a Company which is managed by its Board of Directors. The decision to manufacture the drugs is the collective decision of the Board of Directors. Therefore, the Directors cannot claim that they are not directly involved in the product of the drugs, when the decision to produce the drugs itself is the out come of their decision. Therefore, the case of Directors signing the cheque on behalf the Company and the case of Directors
participating in the decision to produce substandard drugs are not one and the same to hold that these petitioners are not involved in day-to-day affairs of the Company. 25. This Court, on considering the facts of the case in the light of the judgments discussed above holds that the contention of the petitioners is wholly unsustainable. If the said preposition is accepted it will go against the object and reasons of the legislations namely Drugs and Cosmetics Act. 26. As a result, this Criminal Original Petition is dismissed.” - He also relied upon the order of this Court in the case of M/s. R.K.B. Multispeciality Hospitals (India) Pvt. Ltd., Vs. The Tamil Nadu State in Crl.O.P.No.17039 of 2021 dated 09.10.2023, wherein this Court had reiterated the views observed in the decision of Vikas Rambal’s case as stated supra and
dismissed the petition. - Summarizing his contention, the learned counsel
submitted that the present case has been launched under Section 18(c) of the Drugs and Cosmetics Act, 1940 for having stocked drugs for sale and sold drugs without holding any drug licences, which is punishable under Section 27(b)(ii) of the said Act and Section 18(c) of the Drugs and Cosmetics Act, 1940 r/w. Rule 65 of the Drugs and Cosmetics Rules and read with Condition No.3(ii) of Drug licences in Form 20B for having sold drug specified in other than Schedule C and C1 of the Drugs and Cosmetics Rules, 1945 to the unlicensed person / concern which is punishable under Section 27(d) of the Act and Section 18(c) of the Drugs and Cosmetics Act,
1940 r/w. Rule 65 of the Drugs and Cosmetics Rules and read with Rule 65 of the Drugs and Cosmetics Rules and r/w. Condition No.
4(ii) of Drug Licences in Form 21B for having sold drug specified in Schedule C and C1 of the Drugs and Cosmetics Rules 1945 to the unlicensed person / firm which is punishable under section 27(d) of the Drugs and Cosmetics Act, 1940. The said provision of Conditions 3(ii) and 4(ii) of the Drugs Licences are extracted for useful
reference: - Section 18(c) of the Drugs and Cosmetics Act, 1940 r/w. Rule 65 of the Drugs and Cosmetics Rules and r/w. Condition 3(ii) of
Drug Licences in Form 20B read as follows:-
Conditions of Licence:
3(ii) No sale of any drug shall be made to a person not holding the requisite licence to sell, stock or exhibit for sale or distribute the drug. Provided that the conditions ….
4(ii)No sale of any drug shall be made for purpose of resale to person not holding the requisite licence to sell, stock or exhibit for sale or distribute the drug….
Provided that the conditions shall not apply to the sale of any drug to – … - The learned counsel affirms his contention stating that since the petitioner is the Managing Director of the Company at M/s.Kaya Limited, Unit of Kaya Clinic, Anna Nagar, Chennai, as well as at the premises of M/s.Kaya Limited, Warehouse of the Company at Thane, it is for him to establish before the trial Court that he was not in-charge and responsible for the conduct of its business to the accused company during the relevant point of time. Hence the
present Criminal Original Petitions as against the petitioner as well
as the Company, are liable to be dismissed as devoid of merits. - I have considered the rival submissions made by the respective learned counsels and also perused the materials available
on record. - The complaint was filed under Section 190(a) and 200 of the Code of Criminal Procedure for the contravention of Section 18(c) of the Drugs and Cosmetics Act, 1940 read with Rule 65 of the Drugs and Cosmetics Act, 1945 read with condition 3(ii) of Form 20B for having sold drug specified in other than Scheduled C and C1 of the Drugs and Cosmetics Rules 1945 to the unlicensed person / concern which is punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940 and Section 18(c) of the Drugs and Cosmetics Act, 1940 read with Rule 65 of the Drugs and Cosmetics Act 1945 and read with condition 4(ii) of Form 21B for having sold drug specified in Schedule C and C1 of the Drugs and Cosmetics Rules 1945 to the unlicensed person / firm which is punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940.
- The points for consideration in these Petitions are as
follows:-
1)Whether the Managing Director is directly responsible for the conduct of the
affairs of the Company or not?
2)Whether it is a Clinic or not and is liable to be prosecuted? - On a bare perusal of the complaint, it is obvious that noallegation is levelled against the petitioner / Managing Director of the petitioner Company / Clinic. He has been arrayed as the second and fifth accused in the complaint without any allegations and also that he is neither in-charge of the petitioner Clinic nor Company’s Thane Warehouse at the relevant point of time.
- In this phase, the learned counsel for the petitioner drew the attention of this Court to the decision of the Hon’ble Supreme Court in the case of Lalankumar Singh and Others Vs. State of Maharashtra reported in 2022 INSC 1061, wherein it has held that in the context of Section 34 of the Drugs and Cosmetics Act, 1940, in the absence of specific averments against the directors, they cannot be prosecuted. 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. For the show cause memo issued on 05.01.2017, the Company through in its reply dated 23.01.2017 had revealed the name of the nominated persons, who are in-charge and responsible to the day-to-day
affairs of the Company and its business. - Admittedly, in the case on hand, the offences have been committed by M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai. It is also an admitted fact that the petitioner is the Managing Director of the petitioner Clinic, as well as the Company. Section 34 of the Drugs and Cosmetics Act, provides for prosecuting persons in-charge and responsible to the company for the conduct of its business, as also persons with whose consent or connivance etc.,
the offence has been committed by the company. Merely
mentioning that the present petitioner, being the Managing Director of the accused company, was responsible to the company for the conduct of the business of the company would not be sufficient to initiate proceedings against him. It is submitted that, unless and until there is a specific averment as to what was the role in the conduct of the business of the company, a person cannot be proceeded against solely on the ground that he was a managing director of the company. - In the instant case, it is seen that possession of the drugs is not disputed by either side. There is absolutely no allegation in the impugned complaint as against the petitioner except for stating
that he is the Managing Director of the Company. Necessary averments to invoke Section 34 of the Drugs and Cosmetics Act, to
make the petitioner vicariously liable is absent in the present case. - In this regard, the learned counsel quoted the decision of the Hon’ble Supreme Court in the case of Mohd. Shabir Vs. State of Maharashtra reported in 1979 (1) SCC 568, wherein the Court, while allowing an appeal in part , had directed the release of an Appellant, who had been prosecuted under the provision 18(c) of the 1940 Act and observed that possession simpliciter would not itself be an offence but the prosecution had to prove the essential ingredient under Section 27 which was that even a ‘stock’ of the medicine was for sale. The relevant portion of the decision reads as
under:
‘4. …We, therefore, hold that before a person can be liable for prosecution or conviction under Section 27(a)(i)(ii) read with Section 18(c) of the Act, it must be proved by the prosecution affirmatively that he was manufacturing the drugs for sale or was selling the same or had stocked them or exhibited the articles for sale. The possession simpliciter of the articles does not appear to be punishable under any of the provisions of the Act. If, therefore, the essential ingredients of Section 27 are not satisfied the plea of guilty cannot lead the Court to convict the appellant.’ - The learned Senior counsel while arguing the case cited the decision of the Hon’ble Apex Court in the case of A.Pavani Vs. State of Andhra Pradesh as stated supra wherein, it has held in para 7 that in view of the law laid down by this Court and the Punjab and Haryana High Courts, the accused, who have produced the bill to show that he purchased the food article from the manufacturer or distributor and he sold it in the same form without manipulating the packets supplied to him, is not liable to be prosecuted by virtue of Section 19(2) of the FSS Act. As the petitioner is a distributor, she is protected under Section 19(2) of the Act, therefore, the prosecution against her is liable to be quashed. Since in this case, it has been stated that they have produced the bills procured by them at the request of the registered
medical practitioner. - This Court in its order dated 28.02.2019 in Criminal O.P.No. 16863 of 2014 in the case of M/s. Medplus Pharmacy
and Ors. Vs. State of Tamil Nadu, has held as follows:-
“7. On perusal of records, the petitioners are arrayed as A1 to A3.
According to the complaint, the first accused is the company, and the second and third accused are the Director and General Manager: Insofar as the allegations as against the petitioners are that the first petitioner is the company, and the second and third petitioners are being the Director and General Manager, they have been impleaded as accused. On inspection of the Drug Inspector, it was found irregularities and issued show cause notice dated 03.07.2015. By the reply dated 17.08.2015, the petitioners submitted their explanation and denied the allegations made in the show cause notice. - The points for consideration are that
whether the complaint is sustainable as against the petitioners?” - In the case of State of Haryana vs. Brij Lal Mittal and others reported in 1998 (5) SCC 343, the Hon’ble Supreme Court
observed thus:
“8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act which reads as under: - Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this
sub-section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(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 has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation 1.—For the purposes 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 firm.
Explanation 2. For the removal of doubts, it is hereby clarified that a company may be prosecuted, notwithstanding whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual.” - To understand the true import of the 2nd Explanation, it is necessary to travel back in time to the early years of the 21st century to examine the position of law as it then stood vis-a-vis corporate liability In Assistant Commissioner, Assessment-II,
Bangalore v. Velliappa Textiles Limited [(2003) 11 SCC 405], the Supreme Court held that where the offence complained of is punishable with a mandatory sentence of imprisonment, a company cannot be prosecuted as the sentence of imprisonment cannot be enforced against an artificial juristic entity i.e., a company However, this view was subsequently overruled by a Constitution Bench (by 3 : 2 majority) in Standard Chartered Bank v. Directorate of Enforcement, [(2005) 4 SCC 530], wherein it was held by the majority (K.G.
Balakrishnan, J. as he then was) as under: “31. As the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that there is a blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of mandatory imprisonment. The corporate bodies, such as a firm or company undertake a series of activities that affect the life, liberty and property of the citizens. Largescale financial irregularities are done by various corporations. The corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the corporation to a criminal law is essential to have a peaceful society with stable economy.” - It is thus seen that, the vicarious liability of a person for
being prosecuted for an offence committed under the Act by a company arises if at the material time, he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. From the complaint in question, this Court however, find that except a bald statement that the petitioner is the Managing Director of the Company, there is no other allegation to indicate, even prima facie, that he is in charge of the company and
also responsible to the company for the conduct of its business. - A similar view has been taken by the Hon’ble Supreme Court in Lalankumar Singh’s case as stated supra which has held that simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It has been held that a person cannot be made liable unless, at the material time, he was in-charge of and was also responsible to the company for the
conduct of its business. - In a judgment of the Hon’ble Apex Court in the case of Ashoke Mal Bafna vs. Upper India Steel Manufacturing and Engineering Company Limited reported in 2018 (14) SCC 202 ,
the Court has held as follows:
“9. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a catena of cases that the complainant should specifically show as to how and 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] .) - 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.”
- Likewise in yet another case 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 the Hon’ble Supreme Court that: (SCC
pp. 584-85, para 7)
“7. … it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused is vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the
company.” (emphasis supplied)
By verbatim reproducing the words of the section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the NI Act.” - It is also brought to the notice of this Court that there is a recent judgment of the Hon’ble Apex Court on this issue of liability of the affairs of the Company lies on the directors or the nominated persons, who was responsible at the material time of the conduct of the business in the case of Lalankumar Singh’s case as stated supra. The relevant paragraphs of the said decision reads as
follows:
“33.It can thus be seen that there are no specific averments insofar as the present appellants are concerned. It is further to be noted that the present appellants are neither the managing director nor the whole-time directors of the accused company. - It is further to be noted that, in accordance with the provisions of Rule 76 of the said Rules read with Form 28, the Accused Nos. 9 and 10 have specifically been approved by the licensing authority in Form 28. Accused No.9 was approved as a person under whose active direction and personal supervision the manufacture 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.”
- The Hon’ble Apex Court while dealing with the scope on
Section 34 of the Act has rendered the following finding:
“28. It could thus clearly be seen that 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.” - In terms of the above findings, the Hon’ble Apex Court applied the facts of that case and came to a conclusion that there are no specific averments against the Directors as mandated under Section 34 of the Act. The above judgment of the Hon’ble Apex Court is binding on this Court. A similar view has already been taken by the Hon’ble Apex Court in the case of K.K. Ahuja vs. V.K. Vora and another reported in 2009 (10) SCC 48.
- It is apparent from the above judgment that the Hon’ble Apex Court has also considered the relevant Form that is issued at the time of granting license to the company and has dealt with the same in paragraph 34 of the said judgment. The Hon’ble Apex Court has held that the person whose name has been approved under the relevant Form must be the person, who is in-charge for carrying out the test of the strength, quality and purity of the drug as required under the relevant Rules. The Hon’ble Apex Court held that the same was lacking in the said case and hence the requirement under Section 34 of the Act was not fulfilled.
- The respondent has mechanically implicated the petitioner / Managing Director as accused. He is not the person, who has been named in the license that was given to the Company and that position continues even when it was renewed from time to time. That apart, there are no sufficient allegations against him in the complaint as mandated under Section 34 of the Act. The Hon’ble Apex Court has held that a mere reproduction of the words found in Section 34 of the Act, without a clear statement as to how and in what manner the petitioner was responsible for the conduct of the business of the Clinic/company, is not enough to rope him as an
accused. - The learned Senior counsel added that the respondent has also not complied with the mandatory provisions of Sections 22 and 23 of the Act, which contemplates detailed procedures while carrying out seizure and taking samples of products. The said
provisions of the Act are extracted for ready reference:- - Powers of Inspectors.—
(1) Subject to the provisions of section 23 and of any rules made by the Central Government in this behalf, an Inspector may, within the local limits of the area for which he is appointed,—
(a) inspect,—
(i) any premises wherein any
drug or cosmetic is being manufactured and the means employed for standardizing and testing the drug or cosmetic;
(ii) any premises wherein any
drug or cosmetic is being sold, or stocked or
exhibited or offered for sale, or distributed;
(b) take samples of any drug orcosmetic, —
(i) which is being manufactured or being sold or is stocked or exhibited or offered for sale, or is being distributed;
(ii) from any person who is in the course of conveying, delivering or preparing to deliver such drug or cosmetic to a purchaser or a consignee;
(c) at all reasonable times, with such assistance, if any, as he considers necessary,
(i) search any person, who, he has reason to believe, has secreted about his person, any drug or cosmetic in respect of which an offence under this Chapter has been, or is being, committed; or
(ii) enter and search any place in which he has reason to believe that an offence under this Chapter has been, or is being, committed; or
(iii) stop and search any vehicle, vessel or other conveyance which, he has reason to believe, is being used for carrying any drug or cosmetic in respect of which an offence under this Chapter has been, or is being, committed, and order in writing the person in possession of the drug or cosmetic in respect of which the offence has been, or is being, committed, not to dispose of any stock of such drug or cosmetic for a specified period not exceeding twenty days, or, unless the alleged offence is such that the defect may be removed by the possessor of the drug or cosmetic, seize the stock of such drug or cosmetic and any substance or article by means of which the offence has been, or is being, committed or which may be employed for the commission of such
offence;
(cc) examine any record, register, document or any other material object found with any person, or in any place, vehicle, vessel or other conveyance referred to in clause (c) and seize the same if he has reason to believe that it may furnish evidence of the commission of an offence punishable under this Act or the rules made thereunder;
(cca) require any person to produce any record, register, or other document relating to the manufacture for sale or for distribution, stocking, exhibition for sale, offer for sale or distribution of any drug or cosmetic in respect of which he has reason to believe that an offence under this Chapter has been, or is being, committed;
(d) exercise such other powers as maybe necessary for carrying out the purposes of this Chapter or any rules made thereunder.
(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall, so far as may be, apply to any search or seizure under this Chapter as they apply to any search or seizure made under the authority of a warrant issued under section 94 of the said Code.
(2A) Every record, register or other document seized under clause (cc) or produced under clause (cca) shall be returned to the person, from whom they were seized or who produce the same, within a period of twenty days of the date of such seizure or production, as the case may be, after copies thereof or extracts therefrom certified by that person, in such manner as may be prescribed, have been taken.
(3) If any person wilfully obstructs an Inspector in the exercise of the powers conferred upon him by or under this Chapter or refuses to produce any record, register or other document when so required under clause (cca) of sub-section (1), he shall be punishable with imprisonment which may extend to three years, or with fine, or with both.
Procedure of Inspectors.—
(1) Where an Inspector takes any sample of a drug [or cosmetic] under this Chapter, he shall tender the fair price thereof and may require a written acknowledgment therefor.
(2) Where the price tendered under sub-section (1) is refused, or where the Inspector seizes the stock of any drug 2 [or cosmetic] under clause (c) of section 22, he shall tender a receipt therefor in the prescribed form.
(3) Where an Inspector takes a sample of a drug [or cosmetic] for the purpose of test or analysis, he shall intimate such purpose in writing in the prescribed form to the person from whom he takes it and, in the presence of such person unless he wilfully absents himself, shall divide the sample into four portions and effectively seal and suitably mark the same and permit such person to add his own seal and mark to all or any of the portions so sealed and marked: Provided that where the sample is taken from premises whereon the drug [or cosmetic] is being manufactured, it shall be necessary to divide the sample into three portions only: Provided further that where the drug [or cosmetic] is made up in containers of small volume, instead of dividing a sample as aforesaid, the Inspector may, and if the drug [or cosmetic] be such that it is likely to deteriorate or be otherwise damaged by exposure shall, take three or four, as the case may be, of the said containers after suitably marking the same and, where necessary, sealing them.
(4) The Inspector shall restore one portion of a sample so divided or one container, as the case may be, to the person from whom he takes it, and shall retain the remainder and dispose of the same as follows:—
(i) one portion or container he shall forthwith send to the Government
Analyst for test or analysis;
(ii) the second, he shall produce to the Court before which proceedings, if any, are instituted in respect of the drug 2
[or cosmetic]; and
(iii) the third, where taken, he shall send to the person, if any, whose name, address and other particulars have been disclosed under section 18A.
(5) Where an Inspector takes anyaction under clause (c) of section 22,—
(a) he shall use all despatch in ascertaining whether or not the drug [or cosmetic]; contravenes any of the provisions of section 18 and, if it is ascertained that the drug [or cosmetic]; does not so contravene, forthwith revoke the order passed under the sa id clause or, as the case may be, take such action as may be necessary for the return of the stock seized;
(b) if he seizes the stock of the drug 2 [or cosmetic]; he shall as soon as may be inform 4 [a Judicial Magistrate] and take his orders as to the custody thereof;
21 ( c ) without prejudice to the institution of any prosecution, if the alleged contravention be such that the defect may be remedied by the possessor of the drug [or cosmetic]; he shall, on being satisfied that the defect has been so remedied, forthwith revoke his order under the said clause.
Where an Inspector seizes any record, register, document or any other material object under clause (cc) of sub-section (1) of section 22, he shall, as soon as may be, inform a Judicial Magistrate and take his orders as to the custody thereof.
In the present case, adhering to the provisions of the Act, sanction order has been obtained by the respondent from the competent authorities for search and seizure has been effected in accordance
with law. - The Drugs and Cosmetics Act, 1940 came into force on 10.04.1940. It is an existing law when the Constitution came into force. In the year 1982 there was an amendment to this Act, the statement of Objects and Reasons for the said Amendment, explains
the purpose of the Act as below:-
“Amendment Act 68 of 1982-
Statement of Objects and Reasons:- The Drugs and Cosmetics Act, 1940, regulates the import into, manufacture, distribution and sale of drugs and cosmetics in the country. The problems of adulteration of drugs and also of production of spurious and sub-standard drugs are posing serious threat to the health of the community. It is, therefore considered necessary to amend the Drugs and Cosmetics, Act, so as to impose more stringent penalties on the antisocial elements indulging in the manufacture or sale of adulterated or spurious drugs or drugs not of standard quality which are likely to cause death or grievous hurt to the user. This opportunity is also being availed of to incorporate certain other provisions on the other aspects of effective control on the manufacture, distribution, sale of drugs and cosmetics on the basis of experience gained in the working of the Act.” - In the case on hand, the petitioners are prosecuted for the offence under Section 18(a)(i) of the Drugs and Cosmetic Act, 1940, which is punishable under Section 27(d) of the Act. A glimpse
of the said provisions are read as follows:
“Section 18(a)(i):- - Prohibition of manufacture and sale of certain drugs and cosmetics.—
From such date as may be fixed by the State Government by notification in the Official Gazette in this behalf, no person shall himself or by any other person on his behalf—
(a) manufacture for sale or for distribution, or sell, or stock or exhibit or
offer for sale or distribute—
(i) any drug which is not of a standard quality, or is misbranded, adulterated or spurious;
Section 27(d):- - Penalty for manufacture, sale, etc., of drugs in contravention of this Chapter.—Whoever, himself or by any other person on his behalf, manufactures for sale or for distribution, or sells, or stocks or exhibits or offers for sale or distributes, —
a)…..
b)…..
c)…..
any drug, other than a drug referred to in clause (a) or clause (b) or clause (c), in contravention of any other provision of this Chapter or any rule made thereunder, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to two years [and with fine which shall not be less than twenty thousand rupees]: Provided that the Court may, for any adequate and special reasons, to be recorded in the judgment impose a sentence of imprisonment for a term of less than one year.” - This Court takes aid of the decision of the Hon’ble Supreme Court relied upon by the learned Senior counsel for the petitioner in the case of M/s.Cheminova India Limited as stated supra, which squarely applicable to the facts and circumstances of the present case in hand. The relevant portion of the judgment is in favour of the petitioner, as well as against the Company, which is
extracted as under:
“9. Section 33 of the Act deals with ‘offences by companies’. A reading of Section 33(1) of the Act, makes it clear that whenever 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, or 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. In the case on hand, it is not in dispute that on behalf of the 1 st Appellant – Company, 2nd Appellant – Managing Director has furnished an undertaking dated 22.01.2013, indicating that Shri Madhukar R. Gite, Manager of the Company, has been nominated in the resolution passed by the Company on 28.12.2012 to be in charge of and responsible to the said Company, to maintain the quality of the pesticides manufactured by the said Company and he was authorized to exercise all such powers and to take all such steps, as may be necessary or expedient to prevent the commission of any offence under the Act. Filing of such undertaking with the respondent is not disputed. Even, at Para 5.10 in the counter affidavit filed before this Court, it is pleaded by the Respondents that by appointing persons responsible for affairs of the Company, quality control, etc., 2nd Appellant – Managing Director cannot escape his liability from offences committed by 1st Appellant – Company. In view of the specific provision in the Act dealing with the offences by companies, which fixes the responsibility and the responsible person of the Company for conduct of its business, by making bald and vague allegations, 2nd Appellant – Managing Director cannot be prosecuted on vague allegation that he being the Managing Director of the 1st Appellant – Company, is overall responsible person for the conduct of the business of the Company and of quality control, etc. In the instant case, the Company has passed a resolution, fixing responsibility of one of the Managers namely Mr. Madhukar R. Gite by way of a resolution and the same was furnished to the respondents by the 2nd Appellant in shape of an undertaking on 22.01.2013. When furnishing of such undertaking fixing the responsibility of the quality control of the products is not in dispute, there is no reason or justification for prosecuting the 2nd Appellant – Managing Director, on the vague and spacious plea that he was the Managing Director of the Company at the relevant time. A reading of Section 33 of the Act also makes it clear that only responsible person of the Company, as well as the Company alone shall be deemed to be guilty of the offence and shall be liable to be proceeded against. Though, the Managing Director is overall in-charge of the affairs of the company, whether such officer is to be prosecuted or not, depends on the facts and circumstances of each case and the relevant provisions of law. Having regard to specific provision under Section 33 of the Act, and the undertaking filed in the present case, respondent cannot prosecute the 2nd
Appellant herein. Thus, we find force in the contention of Mr. Sidharth Luthra, learned Senior Counsel, that allowing the prosecution against 2nd Appellant – Managing Director is nothing but, abuse of the process of law. At the same time, we do not find any ground at this stage to quash the proceedings against the 1st Appellant – Company.” - A similar view has been taken in the decision of this Court in the case of Crescent Therapeutics Limited as stated supra, wherein this Court had quashed the petition as against the directors of the Company and ordered to proceed against the Company within
a time frame as fixed therein. - The Hon’ble Supreme Court in a recent judgment in the case of Neeraj Shastri Vs. State (UT of J & K) reported in 2023 SCC Online J & K 78 had observed that in criminal law, there is no concept of vicarious liability and it is only, if there is statute, which makes a person vicariously liable of the act of another person then such a person can be prosecuted for a criminal offence. Section 66 of the Food and Safety Standards Act, 2006 makes a person, who is in-charge of and responsible for conduct of the business of the company, vicariously liable for the offence committed by the company. Also that the law laid down in Lalankumar Singh’s case as stated supra has been followed by the Hon’ble Supreme Court in a recent judgment in the case of Aditya Narayan Vs. Union of India reported in 2023 SCC Online Del 1166.
- After a deep analysis and detailed discussions and also in the light of the various decisions of the Hon’ble Supreme Court as well as this Court as stated supra, this Court is of the considered opinion that the petitioner, being the Managing Director of the Company cannot be vicariously liable to be prosecuted as the name of the nominated person, who was in-charge and responsible of the day-to-day affairs of the conduct of the business of the Company
has already been arrayed as an accused in this case, the
proceedings initiated by the respondent as against the petitioner / Managing Director of the Company is unsustainable in the eye of law. Looking at any angle, in view of the dictum laid down by the Hon’ble Apex Court, as well as this Court which had reiterated the same in its order following the decisions of the Hon’ble Apex Court, the proceedings as against the petitioner in C.C.No.7125 of 2018 is liable to be quashed as the complaint even if read as a whole, will not make an offence against the petitioner. Accordingly, the
Criminal Original Petition in respect of the petitioner/Managing Director in Crl.O.P.No.394 of 2022 stands allowed, as there is no basis to proceed against him to prosecute for the alleged offences. Consequently, all consequential proceedings in C.C.No.7125 of 2018 arising therefrom is hereby quashed. Hence, the point No.1 is
answered accordingly. - Nevertheless, insofar as the petition against M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai / petitioner Company is concerned, as rightly contended by the respondent, the Company in its Clinic at Anna Nagar had stocked the drugs for sale without holding any drug licences. To buttress his submissions, invoices obtained by the respondents substantiated their claim. Adhering to the procedures contemplated under the Act and Rules, the samples were drawn by the respondents for analysis and on verification, the same was proved and a show cause memo was issued to them and in the reply to the show cause memo, it was admitted by the petitioner Company that they had transferred the subject drugs from their licensed petitioner Company’s Warehouse, Thane to the M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar at Chennai at the request of the registered medical practitioner, which is a contravention to the Act and Conditions of the Rules as stated above since the same was procured in the name of the petitioner Company.
- As per Rule 123 of the Rules, the drugs specified in
Schedule K are exempted from the application of the provisions of Chapter IV as the same has to be purchased in the name of the
registered medical practitioner with their registration number but in
the present case, the drugs were procured in the name of the M/s.Kaya Ltd., Kaya Skin Clinic, Anna Nagar, Chennai which proves the offences of the Company. In regard to the statement of the Company that the products are cosmetics and not drugs has been vehemently opposed by the respondent stating that the seized products are drugs for which no license has been obtained by the
M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai. - At this juncture, it is pertinent to note that M/s.Kaya Ltd,Ware house, Thane contravened the Act and Rules by having sold / supplied the drugs to M/s.Kaya Ltd., Kaya Skin Clinic, Anna Nagar, Chennai, which is not holding requisite licence to sell the drugs to the unlicensed person / firm. The drugs mentioned in the counter affidavit of the respondents which were seized under Form-16 in the
presence of two independent witnesses and Mr.V.Babu, Zonal Manager (South) of the Company affirms that the Company had stocked drugs without valid drug licence in the premises of M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai. - The purchase invoices reveals that the drugs were obtained by M/s.Kaya Ltd., Kaya Skin Clinic, Anna Nagar, Chennai from the Warehouse at Thane premises of the petitioner’s Company M/s.Kaya Ltd., which thus establishes that the Company has violated Section 18(c) of the Act and thereby committed the offences at two different places and two different contraventions viz., i) M/s.Kaya Ltd, Unit of Kaya Skin Clinic, Anna Nagar, Chennai has contravened Section 18(c) of the Drugs and Cosmetics Act for having stocked drugs for sale and sold drugs without holding any drug licences, which is punishable under Section 27(b)(ii) of the Act and ii) M/s.Kaya Ltd., Thane Warehouse has contravened Section 18(c) of Act r/w. Rule 65 of the Rules and r/w. Condition No.3(ii) of Drug Licences in Form 20B and Condition No.4(ii) of Drug Licences in Form 21B of the Rule for having sold / supplied drugs to M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai, which is not holding requisite licence to sell the drugs, which is punishable
under Section 27(d) of the Act. - Furthermore, the petitioner Company has specifically averred that the respondent being the sanctioning authority have chosen to ignore their reply stating that apart from the fact that, it is not purchasing or stocking for sale of any drugs, there is no statutory requirement for M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai to hold a licence under the Act as the supply of drugs to the doctors attached to the clinic from the Thane Warehouse is exempted from the application of Chapter IV of the Act (under which Section 18 and 27 falls) in terms of Rule 123 of the Rules r/w. Schedule K and under Section 19(3)(a), the person who is not a manufacturer, distributor shall not be liable for contravention of Section 18, if he has acquired the drug or cosmetics from a duly licenced manufacturer, distributor or dealer as it was properly stored and remained in the same state as when he acquired it, for which the respondent submitted that Section 19 deals about the quality of drugs. Section 19 of the Act reads as
follows:
“19. Pleas.—
(1)Save as hereinafter provided in this section, it shall be no defence in a prosecution under this Chapter to prove merely that the accused was ignorant of the nature, substance or quality of the drug or cosmetic in respect of which the offence has been committed or of the circumstances of its manufacture or import, or that a purchaser, having bought only for the purpose of test or analysis, has not been prejudiced by the sale.
(2)For the purposes of section 18 a drug shall not be deemed to be misbranded or adulterated or spurious or to be below standard quality nor shall a cosmetic be deemed to be misbranded or to be below standard quality only by reason of the fact that—
(a)there has been added thereto some innocuous substance or ingredient because the same is required for the manufacture or preparation of the drug or cosmetic as an article of commerce in a state fit for carriage or consumption, and not to increase the bulk, weight or measure of the drug or cosmetic or to conceal its inferior quality or other defects; or
(b)in the process of manufacture, preparation or conveyance some extraneous substance has unavoidably become intermixed with it: provided that this clause shall not apply in relation to any sale or distribution of the drug or cosmetic occurring after the vendor or distributor became aware of such intermixture.
(3)A person, not being the manufacturer of a drug or cosmetic or his agent for the distribution thereof, shall not be liable for a contravention of section 18 if he proves-
(a)that he acquired the drug or cosmetic from a duly licensed manufacturer, distributor or dealer thereof;
(b)that he did not know and
could not, with reasonable diligence, have ascertained that the drug or cosmetic in any way contravened the provisions of that section; and
(c)that the drug or cosmetic,
while in his possession was properly stored and remained in the same state as when he acquired it.” - To sum up the case in respect of the petitioner Company, in view of the above elaborate discussions and also taking into consideration of the well settled proposition of laws laid down by the Hon’ble Supreme Court, as well as this Court in its various
decisions, it is crystal clear that the petitioner Company has violated Section 18(c) of the Drugs and Cosmetics Act, 1940 for having stocked the drugs for sale and sold drugs without holding any drug licences which is punishable under Section 27(b)(ii) of the Act and Section 18(c) of the Act r/w. Rule 65 of the Drugs and Cosmetics
Rules and r/w. Condition No.3(ii) of Drug Licences in Form 20B and Condition No.4(ii) of Drug Licences in Form 21B of the said Rule for having sold / supplied drugs to M/s.Kaya Ltd., Unit of Kaya Skin Clinic, Anna Nagar, Chennai, which is not holding requisite licence to sell the drugs which is punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940. In view of the above discussions and well settled principles, this Court finds no reasons to quash the case in C.C.No.7125 of 2018 as against the Company namely, M/s.Kaya Limited, Unit of Kaya Skin Clinic, Chennai. Consequently, the learned X Metropolitan Magistrate, Egmore is directed to complete the proceedings as against the petitioner Company, preferably, atleast within a period of three months from the date of receipt of a
copy of this order. Thus, the point No.2 is answered accordingly. - In fine, the Criminal Original Petition filed by the petitioner/Managing Director in Crl.O.P.No.394 of 2022 stands allowed and the Criminal Original Petition filed by the
petitioner/Company in Crl.O.P.No.1535 of 2022 stands dismissed
with the above direction. Consequently, the connected
Miscellaneous Petition is closed. - This Court feels that there is a duty cast upon it to suggest the Government to take necessary steps in the above issue and follow strict restrictions in enacting and implementing the same as in the current scenario, where online transactions of drugs have been prevailing through out the country. A proper legislation has to be enacted so as to curtail the sale, stock or exhibit of unlicensed drugs, which is of paramount in respect of the welfare of the society as well as the stable economy, for which a criminal law is essential
to have a peaceful society.
22.02.2024
NCC : Yes
Index : Yes Order : Speaking
DP
To
1.The Drugs Inspector,
Tamil Nadu State,
Anna Nagar Range,
O/o. The Assistant Director of Drugs Control, Zone II, Chennai – 600 006.
2.The Public Prosecutor,
Madras High Court, Chennai.
VIVEK KUMAR SINGH, J.
DP
Order made in
Crl.O.P.Nos.394 and 1535 of 2022 and Crl.M.P.Nos.133 & 615 of 2022
22.02.2024
