Summary
A sample of a manufacturer's iron syrup was found not of standard quality on both the State and the Central Drugs Laboratory analysis. The Drug Inspector filed a complaint under Section 18(a)(i) read with Sections 16, 27(d) and 34 of the Drugs and Cosmetics Act, 1940, which named the company's directors among the accused. The CJM issued process, and the Sessions Court and the High Court upheld it. The Supreme Court quashed the proceedings against the directors. The complaint only said that they looked after day-to-day activities and did not explain how each was in charge of and responsible for the company's business. They were not managing or whole-time directors, and the approved technical staff named in the Form 28 licence were responsible for manufacture and testing. Further, no order issuing process had actually been passed, and the High Court could not presume one from the roznama.
Issues
- Whether a complaint under the Drugs and Cosmetics Act that only describes the directors as looking after the company's day-to-day activities satisfies Section 34 so as to make them vicariously liable.
- Whether process could stand where the Magistrate passed no order issuing it and the High Court inferred one from the daily proceedings sheet.
Provisions considered
- Section 34(1), Drugs and Cosmetics Act, 1940Vicarious liability of a company's officers requires that the person was both in charge of and responsible to the company for the conduct of its business. The complaint must say how; a bald statement that the accused are directors is not enough. (¶¶ 13, 14, 22, 23, 24)
- Sections 16, 18(a)(i) and 27(d), Drugs and Cosmetics Act, 1940The complaint charged manufacture and sale of a drug not of standard quality. The proceedings were quashed against the directors but allowed to continue against the other accused. (¶¶ 3.7, 31)
- Rule 76 and Form 28, Drugs and Cosmetics Rules, 1945The licence named an approved person to supervise manufacture and an approved head of the testing unit (accused 9 and 10). This underlined that the complaint showed no role for the appellant directors. (¶ 24)
- Section 204, Code of Criminal Procedure, 1973Issuing process requires the Magistrate to apply his mind to whether there is sufficient ground to proceed and to record that opinion, though briefly, in the order. An order cannot be presumed from roznama entries. (¶¶ 28, 30)
Held
- Being a director does not by itself mean a person was in charge of and responsible to the company for its business. The complaint must state clearly how and in what way each director was responsible; repeating the words of the section is not enough (Brij Lal Mittal, S.M.S. Pharmaceuticals, Pooja Ravinder Devidasani, Ashoke Mal Bafna). Managing and whole-time directors may stand differently. (¶¶ 13, 14, 15, 16, 17, 18, 20, 21)
- The complaint only described the appellants as directors looking after day-to-day activities and made no specific averment against them. They were not managing or whole-time directors, and the licence named other approved persons responsible for manufacture and testing. The complaint did not meet Section 34. (¶¶ 22, 23, 24)
- Issuing process is not an empty formality, and the Magistrate's opinion that there is sufficient ground must appear in the order (Sunil Bharti Mittal). Here the CJM passed no such order at all. The High Court was wrong to presume one from the roznama, and this was an independent ground for quashing. (¶¶ 26, 27, 28, 29, 30)
Result
Appeal allowed. The order issuing process of 30 March 2009 and the Sessions Court's revisional order were quashed, and the complaint against the appellant directors was dismissed. It was to proceed against the other accused in accordance with law.