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Citation Codes
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Case Number
Attorney(S)
  • Satish Bagadiya, Senior Counsel with Kapil Jain
  • J.K Jain, Government Advocate
Judges
  • S.L Jain, J.
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Satish Bagadiya, Senior Counsel with Kapil Jain
  • J.K Jain, Government Advocate
Judges
  • S.L Jain, J.
Acts
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The petitioners invoked the extraordinary jurisdiction of this Court under section 482 of the Code of Criminal Procedure to seek quashing of proceedings in Criminal Case No. 867/99 pending before the Court of CJM, Raisen, which arose from a complaint under section 18(a)(i) read with section 27(d) of the Drugs and Cosmetics Act, 1940.

The factual matrix as narrated in the opinion: on 30-3-1996 the Drug Inspector, District Raisen, purchased 200 Betnasol tablets from Raj Medical Stores, Obedullaganj and sent a sample to the Government Analyst, Bhopal, who found the tablets to be of substandard quality. Enquiry revealed that Raj Medical Stores had purchased the tablets from Prakash Medical Stores, which in turn had purchased them from Glaxo India Ltd. (now Glaxo Smith Kline Pharmaceuticals Ltd.). A complaint was filed by the Drug Inspector arraying Glaxo India Ltd. as accused No.1, its directors as accused Nos. 2 to 14, Prakash Medical Stores as accused No.16, and Raj Medical Stores as accused No.15.

Procedurally: Glaxo Smith Kline Pharmaceuticals Ltd. earlier filed a section 482 petition which this Court dismissed; an S.L.P. filed to the Supreme Court was, as stated at bar, dismissed. Three directors (Venkateshwaran Narayanan, Deepak Parekh and Pradip Nayak) successfully obtained quashing of proceedings against them by a learned single Judge by order dated 13-4-2006. The present petitioners (Kishan Gopal Vassal, Sharad Chandra Marathe and H.R. Khusrokhan), who were arrayed as accused Nos. 13, 8 and 4 respectively, filed the present petition under section 482 seeking similar relief.

Legal Issues Presented

  1. Whether the criminal proceedings against the petitioners (who were directors of the manufacturing company) could be maintained when the complaint contains no specific averments that they were "in charge of, and responsible to the company, for the conduct of the business of the company" at the time the offence was committed (as required by the provision quoted in the opinion).
  2. Whether mere designation or description of a person as a "director" in the company, without further averments, is sufficient to attract criminal liability under the statutory provision quoted in the opinion.
  3. Whether parity requires quashing of proceedings against these petitioners in view of an earlier order quashing proceedings against other directors in the same criminal case.

Arguments of the Parties

Petitioners' Arguments

  • The petitioners were impleaded in the complaint merely on the ground that they were directors of the company, and there are no averments against them showing they were in-charge of and responsible for the conduct of the company's business at the time of the alleged offence.
  • Their factual and legal position is similar to the three directors whose proceedings had previously been quashed; therefore, to maintain parity the petitioners should also be granted quashing of the proceedings against them.

The opinion does not contain a detailed account of any arguments advanced by the State or other parties opposing the petition on the record of this judgment.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
State of Karnataka v. Prakash Chand, (1981) 2 SCC 335 Held that liability under the quoted provision requires a person to be in overall control of the day-to-day affairs of the company or firm; a partner not in overall control could not be held liable. The Court relied on this principle to support the proposition that only persons who were in-charge of and responsible for the company's business can be held criminally liable; mere association or title (partner/director) is insufficient.
Municipal Corporation Of Delhi v. Ram Kishan & Ors., (1983) 1 SCC 1 Under the Prevention of Food Adulteration Act (provisions in pari materia with the section quoted), an order issuing process can be quashed under section 482 where allegations, taken at face value, make absolutely no case or the complaint does not disclose essential ingredients of the offence. The Court invoked this precedent to emphasise that a magistrate (or court) may quash proceedings where the complaint lacks essential averments to bring a person within the penal provision; thereby showing the need for proper averments before proceeding against individuals purportedly liable vicariously.
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 Observed that when liability is sought to be fastened vicariously on persons connected with a company, necessary averments must be contained in the complaint; merely being described as a director is not sufficient and the complaint must spell out how the person falls within the statutory parameters so the accused knows the case to be met. The Court held that the legal position established by the three-judge bench in S.M.S. is applicable: the complaint must contain clear averments that the person was in-charge of and responsible for the conduct of business at the relevant time; lacking those averments, proceedings cannot be sustained.

Court's Reasoning and Analysis

The Court proceeded in the following analytical steps, based solely on the material in the opinion:

  1. The Court examined the complaint and the averments therein and found that the petitioners were being prosecuted only on the ground that they were directors of the manufacturing company (i.e., they were impleaded by virtue of their position).
  2. The Court quoted a statutory provision as appearing in the opinion (the opinion states "Section 24 of the Act deals with the offences by the companies and is quoted as under: —" and then reproduces a provision headed "34. Offences by companies," including subsections describing liability of persons in charge and responsible to the company and the proviso and explanation). The Court treated that provision as the statutory basis for extending liability to persons connected with a company.
  3. The Court analysed authoritative decisions interpreting similar provisions. It noted that Prakash Chand requires that the person alleged to be liable be in overall control of day-to-day affairs. It relied on Municipal Corporation Of Delhi to state that process may be quashed where the complaint, taken at face value, does not disclose essential ingredients of an offence. It relied heavily on the three-Judge Bench decision in S.M.S. Pharmaceuticals Ltd. which stresses that necessary averments must be contained in a complaint before subjecting a person to criminal process, and that merely describing someone as a director is insufficient.
  4. The Court articulated the general principle that criminal law is generally hostile to vicarious liability unless a statute clearly and strictly extends such liability. Because section 34 (as quoted) creates criminal liability by reference to being "in charge of, and ... responsible for the conduct of the business of the company," the conditions for attaching liability must be strictly complied with and expressly averred in the complaint.
  5. The Court observed that the petitioners were not alleged to be managing or joint managing directors — positions which by designation suggest being in-charge — and that no averment was made in the complaint that the petitioners were in-charge of and responsible for the conduct of business at the time of the alleged offence.
  6. Finally, the Court noted the earlier order quashing proceedings against other directors in the same criminal case and concluded that, in order to maintain parity and in light of the absence of the requisite averments, the proceedings against the present petitioners should also be quashed.

Holding and Implications

Holding: The petition was allowed and the criminal proceedings pending against the petitioners Kishan Gopal Vassal, Sharad Chandra Marathe and H.R. Khusrokhan in Criminal Case No. 867/99 (State of M.P. Through Drug Inspector, Raisen v. Glaxo India Ltd.) pending before the CJM, Raisen, were quashed.

Implications:

  • Direct effect: The quashing removes the petitioners from the criminal proceedings in Criminal Case No. 867/99 — they will no longer be defendants in that prosecution as a result of this order.
  • Legal reasoning: The decision rests on the absence of specific averments in the complaint that the petitioners were "in charge of, and responsible to the company, for the conduct of the business" at the time of the alleged offence and on established authority that such averments are necessary before extending criminal liability to company officers.
  • Precedential scope: The opinion applies existing precedents (including S.M.S. Pharmaceuticals Ltd.) to the facts and relies on parity with an earlier quashing order for other directors. The opinion does not state that it establishes a new legal principle; rather, it applies settled principles to the records before the Court.
Petition allowed.
Show full summary ...

    Kishan Gopal Vassal And Others v. State Of M.P .

    1. Invoking extraordinary jurisdiction of this Court under section 482 of the Code of Criminal Procedure (hereinafter referred to as the ‘Code’) the petitioners have filed this petition for quashing the proceedings in Criminal Case No. 867/99, pending against them in the Court of CJM, Raisen under section 18(a)(i) read with section 27(d) of Drugs and Cosmetics Act, 1940 (hereinafter referred to as the ‘Act’).

    2. The facts which led to filing of this petition, shortly narrated, are that on 30-3-1996 Drug Inspector of District Raisen purchased 200 Betnasol tablets from Raj Medical stores, Obedullaganj for analysis. After following the required procedure he sent one part of the drug sample to Govt. Analyst, Bhopal along with form No. 18 who found the aforesaid Betnasol tablets to be of substandard quality. On enquiry, it was informed by the proprietor of Raj Medical Stores that the aforementioned Betnasol tablets were purchased by them from Prakash Medical Stores, Bhopal. The proprietor of Raj Medical Stores also produced photostat copies of the bills. On enquiry, the proprietor of Prakash Medical Stores said that the drug, in question, was purchased by them from Glaxo India Ltd. The Drug Inspector filed a complaint against the proprietor of Raj Medical Stores, arraying him as accused No. 15, Prakash Medical Stores, as accused No. 16, Glaxo India, Ltd. as accused No. 1 and Directors of Glaxo India, Ltd. as accused Nos. 2 to 14.

    3. The accused No. 1 of the aforesaid complaint, Glaxo Smith Kline Pharmaceuticals Ltd. (formerly known as Glaxo India Ltd.) filed a petition under section 482 of the Code for quashing the proceedings of aforesaid Criminal Case No. 867/99 inter alia, alleging that accused Nos. 2 to 14, i.e the Directors of the company have been wrongly impleaded as accused without making any averment against them and the Court erred in taking cognizance against them in the complaint. This Court, while dismissing Misc. Cr. Case No. 8526/2004 held that the petition is not on behalf of accused Nos. 2 to 14. The point raised cannot be decided by this Court in the petition filed by Glaxo India Ltd. Accused Nos. 2 to 14 are at liberty to prosecute their application before the trial Court or seek other available remedy. Against the aforesaid order of this Court S.L.P was filed before the Apex Court. As per the statement at Bar the S.L.P has been dismissed by the Apex Court.

    4. Three Directors of the company, namely, Venkateshwaran Narayanan, Deepak Parekh and Pradip Nayak arrayed as accused Nos. 10, 12 and 11, respectively, in the complaint, filed a petition under section 482 of the Code which was registered as Misc. Cr. Case No. 3526/2005 for quashing the proceedings against them. This petition was allowed by a learned single Judge of this Court vide order dated 13-4-2006 and the proceedings in Criminal Case No. 867/99 pending against the aforesaid three directors were quashed. Present petitioners, Kishan Gopal Vassal, Sharad Chandra Marathe and H.R Khusrokhan, who were arrayed as accused Nos. 13, 8 and 4, respectively, in the complaint have filed this petition.

    5. I have heard Shri Satish Bagadiya, senior counsel with Shri Kapil Jain, appearing for the petitioners and Shri J.K Jain, Govt. Advocate for the State and perused the material on record.

    6. Learned senior counsel appearing for the petitioners vehemently submitted that the petitioners have been impleaded in the complaint as accused merely on the ground of their being Directors of the company without making any averment against them. Their case is similar to that of Venkateshwaran Narayanan, Deepak Parekh and Pradip Nayak, therefore, to maintain parity the present petition should also be allowed.

    7. I have perused the averments in the complaint. I find that the petitioners are being prosecuted only on the ground that they are Directors of the manufacturing company. Section 24 of the Act deals with the offences by the companies and is quoted 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 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 be liable to be proceeded against and punished accordingly.

    Explanation. — For the purpose of this section—

    (a) “company” means a body corporate, and includes a firm or other association of individuals; and

    (b) “director” in relation to a firm means a partner in the firm.”

    This section makes every person in-charge of and responsible to the company for the conduct of its business liable for offence committed by the company.

    8. In State of Karnataka v. Prakash Chand, (1981) 2 SCC 335 it was held that a person who is liable for criminal action under the above quoted provision should be a person in overall control of the day-to-day affairs of the company or a firm. This was a case of the partner in a firm and it was held that a partner who was not in such overall control of the firm could not be held liable.

    9. Municipal Corporation Of Delhi… v. Ram Kishan & Ors…, (1983) 1 SCC 1 is a case was under the Prevention of Food Adulteration Act. The provisions under the Food Adulteration Act are in pari materia with the provisions under section 34 of the Act. In this case it was noticed that under section 482 of the Code the order of Magistrate issuing process against an accused can be quashed or set aside in a case where the allegations made in the complaint taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which are arrived at against the accused.

    10. The aforesaid judgments emphasise the need of proper averment in a complainant before a person is tried for the offence alleged in the complaint.

    11. The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for the act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. Section 34 of the Act is an instance of the specific provision which, in case, an offence is committed by a company, extends criminal liability to every person who, at the time the offence was committed, was in charge of and was responsible for the company for the conduct of the business of the company. Section 34 of the Act contains conditions which have to be satisfied before liability can be extended to officers of the company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. In other words, persons who had nothing to do with the matter need not be roped in.

    12. The question as to what should be the averments in the criminal complaint has come up for consideration before various High Courts in the country as also before the Apex Court, S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 was a case under the Negotiable Instruments Act and deal with section 138 and 141 thereof. In this case, a three Judge Bench of the Apex Court observed as under:—

    “To sum up there is almost unanimous juridical opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under section 141 of the Act is sought to be fastened vicariously on a person concerned with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of section 141. Even a non-director can be liable under section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know that is the case which is alleged against him. This will enable him to meet the case at the trial.”

    13. What is required under section 34 of the Act is that the persons who are sought to be made criminally liable should be at the time the offence was committed, in charge of and responsible for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of the business of the company at the time of commission of the offence, are liable for criminal action. The liability arises on account of the conduct, act or omission on the part of a person and not merely on account of holding an office or position in a company.

    14. It is true that the position of the managing director or a joint managing director in a company may be different. 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. It is not alleged against the petitioners that they are managing directors or joint managing directors of the company. In the facts and circumstances of the instant case, the law laid down by a three Judge Bench of the Apex Court in S.M.S Pharmaceutical's case (supra) clearly attracts to the case.

    15. In the present case, there is no averment in the complaint that at the time the offence was committed, the petitioners were in-charge of and responsible for the conduct of the business of the company. Without this averment being made in the complaint the requirement of section 34 of the Act cannot be said to be satisfied.

    16. Therefore, in view of the aforesaid discussion and in view of the fact that the case of the present petitioners is at par to that of petitioners in Misc. Criminal Case No. 3562/2005, decided by this Court on 15-4-2006 wherein the proceedings of Criminal Case No. 867/99 pending against them before CJM, Raisen, were quashed. I am of the opinion that in order to maintain parity, the criminal proceedings against the petitioners in this case should also be quashed.

    17. Accordingly, the petition stands allowed. The proceedings pending against the petitioners namely, Kishan Gopal Vassal, Sharad Chandra Marathe and H.R Khusrokhan in Criminal Case No. 867/99, State of M.P Through Drug Inspector, Raisen v. Glaxo India Ltd. pending before CJM, Raisen are quashed.

    Petition allowed.

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    Comments

    Kishan Gopal Vassal And Others v. State Of M.P .
    (Mar 30, 2007)