LALANKUMAR SINGH & ORS. versus STATE OF MAHARASHTRA

LALANKUMAR SINGH & ORS.

STATE OF MAHARASHTRA

(Criminal Appeal No. 1757 of 2022)

OCTOBER 11, 2022

[B. R. GAVAI AND C. T. RAVIKUMAR, JJ.]

Drugs and Cosmetics Act, 1940: ss.34, 16, 18 – Vicariousliability – Appellants are the directors of M/s CachetPharmaceuticals Private Ltd. (CPPL) – Test report of the sample ofthe drug manufactured by CPPL stated that it was not of standardquality – Complaint filed before CJM u/s.18(a)(i) r/w ss. 16 and 34of the Act – CJM issued summons to all the accused including theappellants – Appellants filed revision petition against the summoningorder before the Sessions Judge which was rejected on the groundthat there was specific averment in the complaint that the appellantswere concerned with the manufacture, distribution and sale of drugin question – Writ petition by appellants before High Court wasalso dismissed – On appeal, held: person cannot be made liableu/s.34 of the Act unless at the material time, he was in-charge ofand was also responsible to the company for the conduct of itsbusiness – Merely because person is director of company, it isnot necessary that he is aware about its day-to-day functioning –There is no universal rule that director of company is in-chargeof its everyday affairs – It is necessary to aver as to how the directorof the company was in charge of day-to-day affairs or responsibleto the affairs of the company – The managing director or jointmanaging director in company, as the designation of their officesuggests, are in-charge of company and are responsible for theconduct of the business of the company – Appellants are neitherthe managing director nor the whole-time directors of the accusedcompany – Complaint totally lacked requirement of s.34 of the Act– Order of issuance of process quashed – Negotiable InstrumentsAct,1881 – s.141 – Companies Act, 1956 – s.2(13).

Practice and Procedure: Criminal procedure – Issue of Processby Magistrate – Held: The order of issuance of process is not anempty formality – The Magistrate is required to apply his mind as to

Awhether sufficient ground for proceeding exists in the case or not –The formation of such an opinion is required to be stated in theorder itself – The order is liable to be set aside if no reasons aregiven therein while coming to the conclusion that there is primafacie case against the accused.

BAllowing the appeal, the Court

HELD : 1. In the present case, there are no specificaverments insofar as the appellants are concerned. It is furtherto be noted that the appellants are neither the managing directornor the whole-time directors of the accused company. It is furtherCto be noted that, in accordance with the provisions of Rule 76 ofthe said Rules read with Form 28, the Accused Nos. 9 and 10have specifically been approved by the licensing authority in Form28. Accused No.9 was approved as person under whose activedirection and personal supervision the manufacture would beconducted as required under sub rule (1) of Rule 76 of the saidDRules. Similarly, Accused No.10, who was approved as head ofthe testing unit, was to be incharge for carrying out the test ofthe strength, quality and purity of the substances as may berequired under the provisions of Part X of the said Rules. TheCourt was therefore of the considered view that the complaint isEtotally lacking the requirement of Section 34 of the said Act.[Paras 23 & 24][587-F-H; 588-A-B]2. The order of issuance of process is not an emptyformality. The Magistrate is required to apply his mind as towhether sufficient ground for proceeding exists in the case orFnot. The formation of such an opinion is required to be stated inthe order itself. The order is liable to be set aside if no reasonsare given therein while coming to the conclusion that there is aprima facie case against the accused. No doubt, that the orderneed not contain detailed reasons. In instant case, it is clear fromthe order of the Single Judge of the High Court, that there wasGno such order passed at all. The Single Judge of the High Court,based on the record, has presumed that there was an order ofissuance of process. Such an approach is unsustainable in law.[Paras 28 & 30][588-G-H; 590-A-B]

LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA

S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla andanother (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371;Pooja Ravinder Devidasani v. State of Maharashtra andanother (2014) 16 SCC 1 : [2014] 14 SCR 1468; K.K.Ahuja v. V.K. Vora and another (2009) 10 SCC 48 :[2009] 9 SCR 1144; State of NCT of Delhi throughProsecuting Officer, Insecticides, Government of NCT,Delhi v. Rajiv Khurana (2010) 11 SCC 469 : [2010] 9SCR 387; Ashoke Mal Bafna v. Upper India SteelManufacturing and Engineering Company Limited(2018) 14 SCC 202; Sunil Bharti Mittal v. CentralBureau of Investigation (2015) 4 SCC 609 : [2015] 1SCR 377 – relied on.

U.P. Pollution Control Board v. Mohan Meakins Ltd.and others (2000) 3 SCC 745 : [2000] 2 SCR 566;Dinesh B. Patel and others v. State of Gujarat andanother (2010) 11 SCC 125 : [2010] 10 SCR 319; Stateof Haryana v. Brij Lal Mittal and others (1998) 5 SCC343 : [1998] 3 SCR 104 – referred to.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1757 of 2022.

From the Judgment and Order dated 25.06.2015 of the High Courtof Judicature at Bombay at Aurangabad in CRLWP No.288 of 2015.

AC.U. Singh, Anupam Lal Das, Sr. Advs., Arun Siwach, KunalCheema, Ms. Aditi Deshpande Parkhi, Anirudh Singh, Krishanu Barua,Amjid Maqbool, Advs. for the Appellants.

Siddharath Dharmadhikari, Aaditya Aniruddha Pande, BharatBagla, Advs. for the Respondent.BThe Judgment of the Court was delivered by

B. R. GAVAI, J.

1. Leave granted.

2. This appeal arises out of the judgment and order dated 25[th]CJune 2015 passed by the learned Single Judge of the High Court ofJudicature of Bombay, at Aurangabad, in Criminal Writ Petition No.288of 2015, thereby dismissing the said criminal writ petition filed by theappellants herein and upholding the order of issuance of process dated30[th] March 2009 passed by the learned Chief Judicial Magistrate, BeedD(hereinafter referred to as “the learned CJM”) and the order passed bythe learned Sessions Judge, Beed dated 25[th] November 2014 dismissingthe Criminal Revision being Criminal Revision Petition No.115 of 2013filed by the appellants there against.

3. The facts, in brief, giving rise to the present appeal are asunder:E

3.1 The Appellants are the Directors of M/s CachetPharmaceuticals Private Ltd. (hereinafter referred to as “CPPL”). CPPLwas granted permission to manufacture ‘Hemfer Syrup’ which falls underSchedule & C(1) to the Drugs & Cosmetics Rules, 1945 (hereinafterreferred to as “the said Rules”).F

3.2 On 30[th] August 2006, Sh. N. A. Yadav, the then Drugs Inspector,Food and Drugs Administration, Beed, Maharashtra, visited the premisesof M/s. Priya Agencies at Beed and purchased ‘Hemfer Syrup’, fromwhich he had drawn samples of the drug. On 31[st] August 2006, he sentone such sample to the Government Analyst, Maharashtra State DrugGControl Laboratory Mumbai so as to have the drug tested. On 26[th]February 2007, he received test report dated 13[th] February 2007 fromthe Government Analyst stating that the sample was not of standardquality as the content of Cyanocobalamin was less than the permissiblelimit, i.e., 39% of the label amount. On the same day, the manufacturer

of the drug, i.e., CPPL, was informed by registered post about the testreport.

3.3 On 29[th] March 2007, Sh. Vijay Jain, Deputy Manager, QA ofCPPL requested the Drug Inspector to send the samples again for analysis.Pursuant to an application filed by M/s Alkem Laboratories, the distributorof CPPL, the learned CJM, Beed sent the samples of ‘Hemfer Syrup’for re-analysis on 24[th] April 2007. On 10[th] July 2007, the Learned CJM,Beed received the test report from the Central Drug Laboratory, Calcuttastating therein that the sample was not of standard quality as it did notconform to the accepted limits of Cyanocobalamin content.

3.4 Vide letter dated 21[st] August 2008, the Drug Inspector calledupon CPPL to furnish the particulars of Directors, Articles of Association,Memorandum of Association, copies of License to manufacture and selldrugs, particulars of technical persons, and all such information as wasneeded to be provided under the Drugs & Cosmetics Act, 1940(hereinafter referred to as “the said Act”). In reply to this letter, CPPLinformed the Drug Inspector that the report dated 10[th] July 2007 wassigned by “In-Charge Director” and not the Director of Central DrugsLaboratory and thus requested him to send proper report signed by theDirector of the Central Drugs Laboratory.

3.5 Vide letter dated 12[th] January 2009, the Drug Inspector againcalled upon CPPL to furnish particulars that were previously sought.Vide letter dated 12[th] February 2009, CPPL provided the informationand documents requested by the Drug Inspector and it was categoricallystated therein that the ‘Hemfer Syrup’ was manufactured under thesupervision and technical guidance of Sh. Ashok Kumar, the FDAapproved manufacturing chemist for liquid orals.

3.6 Mr. Ashok Kumar (Accused No. 9) wrote an individual letterdated 13[th] February 2009 to the Drug Inspector stating therein that thesaid batch of ‘Hemfer Syrup’ was manufactured under his supervisionand that the drug complied with the requisite standards. Similarly, Mr.Naresh Roy (Accused No. 10) also wrote letter dated 13[th] February2009 to the Drug Inspector stating therein that the said batch of the‘Hemfer Syrup’ was tested under his supervision and from the test resultsit appeared that the drug complied with the requisite standards.

3.7 Pursuant to the orders to take legal action against themanufacturer of the drug by the Joint Commissioner (H.Q.) and

AControlling Authority, Food & Drug Administration, Mumbai, theComplaint bearing RCC No. 233 of 2009 came to be filed before the Ld.Chief Judicial Magistrate, Beed under Section 18(a)(i) read with Sections16 and 34 of the said Act and punishable under Section 27(d) of the saidAct. In the said complaint, the present Appellants being Directors of theCompany were arrayed as Accused Nos. 5 to 8.B

3.8 The learned CJM, Beed issued Summons to all the accused,including the Appellants herein vide Order dated 30[th] March 2009. TheAppellants filed Criminal Revision Petition against the summoning orderbefore the learned Sessions Judge, Beed on the ground that there are nospecific averments in terms of Section 34 of the said Act as to the roleCplayed by the Directors and thus sought for the Summoning Order to bequashed. However, the learned Sessions Judge, Beed rejected the saidCriminal Revision Petition noting that there is specific averment in thecomplaint that the appellants are concerned with the manufacture,distribution and sale of ‘Hemfer Drug’.

3.9 The Appellants preferred Criminal Writ Petition before theBombay High Court assailing the order passed by the learned SessionsJudge. The High Court, vide the impugned judgment, dismissed the saidCriminal Writ Petition on the ground that all the Directors were conductingthe business of CPPL and thus, they were involved in the manufacturingEprocess.

3.10 Hence, the present appeal.

4. We have heard Shri C.U. Singh and Shri Anupam Lal Das,learned Senior Counsels appearing on behalf of the appellants and ShriSiddharath Dharmadhikari, learned counsel appearing on behalf of theFrespondent-State of Maharashtra.

5. Shri C.U. Singh and Shri Anupam Lal Das, learned SeniorCounsels submit that Section 34 of the said Act specifically providesthat 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 conductGof the business of the company, as well as the company shall be deemedto be guilty of the offence and shall be liable to be proceeded against andpunished accordingly.

6. Shri C.U. Singh, learned Senior Counsel, further submits thatRule 76 of the said Rules prescribes Form of licence to manufactureHdrugs specified in Schedule and C(1), excluding those specified in

Part XB and Schedule X, or drugs specified in Schedule C, C(1) and Xand the conditions for the grant of such licence. He further submits that,before license in Form 28 or Form 28B is granted, certain conditionsare required to be complied with by the applicant. He submits that undersub-rule (1) of Rule 76 of the said Rules, the manufacture is required tobe conducted under the active direction and personal supervision ofcompetent technical staff consisting at least of one person who is awhole-time employee and who possesses the requisite qualification asprescribed under the said Rules. He further submits that under sub-rule(4) of Rule 76 of the said Rules, an applicant is required to provide andmaintain adequate staff, premises and laboratory equipment for carryingout such tests of the strength, quality and purity of the substances asmay be required to be carried out by him under the provisions of Part Xof the said Rules. He further states that under sub-rule (4A) of Rule 76of the said Rules, the head of the testing unit is required to possess adegree in Medicine or Science or Pharmacy or Pharmaceutical Chemistryof University recognised for the said purpose. He is also required tohave experience in the testing of drugs, which in the opinion of the licensingauthority is considered adequate. He submits that Form 28 is license tomanufacture for sale or distribution of drugs in accordance with Rule 76of the said Rules. Learned Senior Counsel submits that in Form 28, thenames of the approved competent technical staff are required to begiven. He further submits that condition No.3 of the Conditions of Licencerequires that if there is any change in the competent technical staff, thesame shall be forthwith reported to the licensing authority.

7. Learned Senior Counsel submits that Schedule M to the saidRules provides for good manufacturing practice and requirements ofpremises, plant and equipment for pharmaceutical products. LearnedSenior Counsel submits that clause 6.1 of Part I of Schedule M specificallyprovides that the manufacture shall be conducted under the directsupervision of competent technical staff with prescribed qualificationsand practical experience in the relevant dosage form and/or activepharmaceutical products. It is further the submission of the learned SeniorCounsel that as per clause 6.2 thereof, the head of the Quality ControlLaboratory is required to be independent of the manufacturing unit. Italso requires that the testing shall be conducted under the directsupervision of competent technical staff, who shall be whole timeemployees of the licensee.

A8. Shri Singh further submits that in the licence which is dulysigned by the designated licensing authority, the names of the approvedcompetent technical staff are already given. It is further submitted thatin the reply dated 13[th] February 2009 to the Drug Inspector, Food &Drug Administration, M.S. Beed, Mr. Naresh Roy, Assistant ManagerQ.A. (Accused No.10) had stated that the raw material was analysed inBthe Quality Control Department by Mr. Aftab, Chemist under hissupervision. It is further informed that the finished product of the saidbatch of the drug was analysed by Mr. M.K. Sharma under hissupervision. Mr. Naresh Roy (Accused No.10) further informed that hewas approved by the Rajasthan FDA as competent person.C

9. Learned Senior Counsel submits that similarly, Mr. Ashok Kumar,Assistant Manager, Production (Accused No.9) had also informed theDrug Inspector by communication dated 13[th] February 2009 that he wasapproved by the Rajasthan FDA. The goods were released after thefinal approval from Quality Control. He further states that theDmanufacturing record of the said batch was prepared by him and it bearshis signature.

10. Shri Singh further submits that merely mentioning that thepresent appellants, being the Directors of the accused company, wereresponsible to the company for the conduct of the business of the companyEwould not be sufficient to initiate proceedings against them. It is submittedthat, unless and until there is specific averment as to what was the rolein the conduct of the business of the company, person cannot beproceeded against solely on the ground that he was director of thecompany. He relies on various judgments of this Court in support of thisproposition.F

11. Shri C.U. Singh further submits that there is no formal orderof issuance of the process passed by the learned CJM. It is submittedthat, while issuing process, duty is cast upon the Magistrate to arrive ata subjective satisfaction that there is sufficient ground to proceed. Hesubmits that there is no such order which would reflect the applicationGof mind by the learned CJM and on this ground also, the impugned orderis liable to be set aside.

12. Shri Siddharath Dharmadhikari, learned counsel, on the contrary,submits that perusal of the complaint, and specifically paragraphs 3 and25 thereof would reveal that there is sufficient compliance of requirementHof Section 34 of the said Act. He submits that the complaint has to be

read as whole and cannot be read in piecemeal manner. Learnedcounsel relies on the judgment of this Court in the case of U.P. PollutionControl Board vs. Mohan Meakins Ltd. and others[1]in support of theproposition that there is no legal requirement for the trial Court to pass adetailed order while issuing process. He also relies on the judgment ofthis Court in the case of Dinesh B. Patel and others vs. State of Gujaratand another[2]to buttress his submission that the averments made in thecomplaint are sufficient to proceed against the present appellants.

13. In the case of State of Haryana vs. Brij Lal Mittal andothers[3], this Court observed thus:

“8. Nonetheless, we find that the impugned judgment of the HighCourt has got to be upheld for an altogether different reason.Admittedly, the three respondents were being prosecuted asdirectors of the manufacturers with the aid of Section 34(1) ofthe Act which reads as under:

“34. Offences by companies.—(1) Where an offenceunder this Act has been committed by company, every personwho at the time the offence was committed, was in charge of,and was responsible to the company for the conduct of thebusiness of the company, as well as the company shall bedeemed to be guilty of the offence and shall be liable to beproceeded against and punished accordingly:

Provided that nothing contained in this sub-section shallrender any such person liable to any punishment provided inthis Act if he proves that the offence was committed withouthis knowledge or that he exercised all due diligence to preventthe commission of such offence.”

It is thus seen that the vicarious liability of person for beingprosecuted for an offence committed under the Act by companyarises if at the material time he was in charge of and was alsoresponsible to the company for the conduct of its business. Simplybecause person is director of the company it does notnecessarily mean that he fulfils both the above requirements so

1 (2000) 3 SCC 745

2 (2010) 11 SCC 125

3 (1998) 5 SCC 343

Aas to make him liable. Conversely, without being director personcan be in charge of and responsible to the company for the conductof its business. From the complaint in question we, however, findthat except bald statement that the respondents were directorsof the manufacturers, there is no other allegation to indicate, evenprima facie, that they were in charge of the company and alsoBresponsible to the company for the conduct of its business.”

14. It could thus be seen that this Court had held that simplybecause person is director of the company, it does not necessarilymean that he fulfils the twin requirements of Section 34(1) of the saidAct so as to make him liable. It has been held that person cannot beCmade liable unless, at the material time, he was in-charge of and wasalso responsible to the company for the conduct of its business.

15. In the case of S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhallaand another[4], this Court was considering the question as to whether itwas sufficient to make the person liable for being director of companyDunder Section 141 of the Negotiable Instruments Act, 1881. This Courtconsidered the definition of the word “director” as defined in Section2(13) of the Companies Act, 1956. This Court observed thus:

“8. ……. There is nothing which suggests that simply by being adirector in company, one is supposed to discharge particularEfunctions on behalf of company. It happens that person maybe director in company but he may not know anything aboutthe day-to-day functioning of the company. As director he maybe attending meetings of the Board of Directors of the companywhere usually they decide policy matters and guide the course ofFbusiness of company. It may be that Board of Directors mayappoint sub-committees consisting of one or two directors out ofthe Board of the company who may be made responsible for theday-to-day functions of the company. These are matters whichform part of resolutions of the Board of Directors of company.Nothing is oral. What emerges from this is that the role of directorGin company is question of fact depending on the peculiar factsin each case. There is no universal rule that director of acompany is in charge of its everyday affairs. We have discussedabout the position of director in company in order to illustrate

the point that there is no magic as such in particular word, be itdirector, manager or secretary. It all depends upon the respectiveroles assigned to the officers in company. …..”

16. It was held that merely because person is director of acompany, it is not necessary that he is aware about the day-to-dayfunctioning of the company. This Court held that there is no universalrule that director of company is in charge of its everyday affairs. Itwas, therefore, necessary, to aver as to how the director of the companywas in charge of day-to-day affairs of the company or responsible to theaffairs of the company. This Court, however, clarified that the positionof managing director or joint managing director in company may bedifferent. This Court further held that these persons, as the designationof their office suggests, are in charge of company and are responsiblefor the conduct of the business of the company. To escape liability, theywill have to prove that when the offence was committed, they had noknowledge of the offence or that they exercised all due diligence toprevent the commission of the offence.

17. In the case of Pooja Ravinder Devidasani vs. State ofMaharashtra and another[5] this Court observed thus:

“17. …… Every person connected with the Company will notfall into the ambit of the provision. Time and again, it has beenasserted by this Court that only those persons who were in chargeof and responsible for the conduct of the business of the Companyat the time of commission of an offence will be liable for criminalaction. Director, who was not in charge of and was notresponsible for the conduct of the business of the Company at therelevant time, will not be liable for an offence under Section 141of the NI Act. In National Small Industries Corpn. [NationalSmall Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010)3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113]this Court observed: (SCC p. 336, paras 13-14)

“13. Section 141 is penal provision creating vicariousliability, and which, as per settled law, must be strictly construed.It is therefore, not sufficient to make bald cursory statementin complaint that the Director (arrayed as an accused) is incharge of and responsible to the company for the conduct of

the business of the company without anything more as to therole of the Director. But the complaint should spell out as tohow and in what manner Respondent 1 was in charge of orwas responsible to the accused Company for the conduct ofits business. This is in consonance with strict interpretation ofpenal statutes, especially, where such statutes create vicariousliability.

14. company may have number of Directors and tomake any or all the Directors as accused in complaint merelyon the basis of statement that they are in charge of andresponsible for the conduct of the business of the companywithout anything more is not sufficient or adequate fulfilmentof the requirements under Section 141.”

(emphasis in original)

18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari LalGupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279 :AIR 1971 SC 2162] , this Court observed that person “in chargeof business” means that the person should be in overall controlof the day-to-day business of the Company.

19. Director of company is liable to be convicted for anoffence committed by the company if he/she was in charge ofand was responsible to the company for the conduct of its businessor if it is proved that the offence was committed with the consentor connivance of, or was attributable to any negligence on thepart of the Director concerned (see State of Karnataka v. PratapChand [State of Karnataka v. Pratap Chand, (1981) 2 SCC335 : 1981 SCC (Cri) 453] ).

20. In other words, the law laid down by this Court is that formaking Director of company liable for the offences committedby the company under Section 141 of the NI Act, there must bespecific averments against the Director showing as to howand in what manner the Director was responsible for theconduct of the business of the company.

21. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya[Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006)10 SCC 581 : (2007) 1 SCC (Cri) 621], it was held by this Courtthat: (SCC pp. 584-85, para 7)

“7. … it is not necessary for the complainant to specificallyreproduce the wordings of the section but what is required is aclear statement of fact so as to enable the court to arrive at aprima facie opinion that the accused is vicariously liable. Section141 raises legal fiction. By reason of the said provision,a person although is not personally liable for commissionof such an offence would be vicariously liable therefor.Such vicarious liability can be inferred so far as companyregistered or incorporated under the Companies Act, 1956is concerned only if the requisite statements, which arerequired to be averred in the complaint petition, are madeso as to make the accused therein vicariously liable forthe offence committed by the company.”

(emphasis supplied)

By verbatim reproducing the words of the section without clearstatement of fact supported by proper evidence, so as to makethe accused vicariously liable, is ground for quashing proceedingsinitiated against such person under Section 141 of the NI Act.”

18. It could thus clearly be seen that this Court has held thatmerely reproducing the words of the section without clear statementof fact as to how and in what manner director of the company wasresponsible for the conduct of the business of the company, would notipso facto make the director vicariously liable.

19. similar view has previously been taken by this Court in thecase of K.K. Ahuja vs. V.K. Vora and another[6].

20. In the case of State of NCT of Delhi through ProsecutingOfficer, Insecticides, Government of NCT, Delhi vs. Rajiv Khurana[7],this Court reiterated the position thus:

“17. The ratio of all these cases is that the complainant is requiredto state in the complaint how Director who is sought to be madean accused, was in charge of the business of the company orresponsible for the conduct of the company’s business. EveryDirector need not be and is not in charge of the business of thecompany. If that is the position with regard to Director, it is

6 (2009) 10 SCC 48

7 (2010) 11 SCC 469

Aneedless to emphasise that in the case of non-Director officers, itis all the more necessary to state what were his duties andresponsibilities in the conduct of business of the company andhow and in what manner he is responsible or liable.”

21. Recently, in the case of Ashoke Mal Bafna vs. Upper IndiaBSteel Manufacturing and Engineering Company Limited[8], this Courtobserved thus:

“9. To fasten vicarious liability under Section 141 of the Act on aperson, the law is well settled by this Court in catena of casesthat the complainant should specifically show as to how and inCwhat manner the accused was responsible. Simply because aperson is Director of defaulter Company, does not make himliable under the Act. Time and again, it has been asserted by thisCourt that only the person who was at the helm of affairs of theCompany and in charge of and responsible for the conduct of thebusiness at the time of commission of an offence will be liableDfor criminal action. (See Pooja Ravinder Devidasani v. Stateof Maharashtra [Pooja Ravinder Devidasani v. State ofMaharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015)3 SCC (Cri) 378 : AIR 2015 SC 675] .)

10. In other words, the law laid down by this Court is that forEmaking Director of Company liable for the offences committedby the Company under Section 141 of the Act, there must bespecific averments against the Director showing as to how and inwhat manner the Director was responsible for the conduct of thebusiness of the Company.”F22. In the light of these observations, let us examine the avermentsmade in the complaint insofar as the present appellants are concerned:

“3. That, Accused no. 5 to 8 are the Directors of the M/s CachetPharmaceuticals Pvt. Ltd. village Thana Baddi, Tehsil Nalagarhdist. Solan (H.P.) Pin code 173205 head office 415, Shahanahar,GWorli, Mumbai - 400018, and looking after day to day activities ofthe company.

That, Accused no. 4 is the Pvt. Ltd. Company and is doing thebusiness of manufacturing, buying, selling, importing and exporting

H8 (2018) 14 SCC 202

of and/or dealers in Pharmaceuticals, Cosmetics, Beauty aids,Oils, Chemicals, Food products and provisions, Veterinary andSurgical Equipments, Medicinal preparations including Spirit.

That, Accused no. 4 has mfg. unit at no. (1) Village Thana Baddi,Tehsil Nalagarh Dist. Solan (H.P.) Pin code 173205 and no. (2) atC-582, Ricco Ind. Area Bhiwadi, Dist. Alwar, Rajasthan.

That, Accused no.4 are holding drug mgf. License No. MNB/05/267 in form 25 and licence no. MB/05/268 in form 28 granted on17.3.2006 valid upto 16.3.2011.

25. That, on 12.2.2009, the complainant visited and inspected thepremises of M/s Cachet Pharmaceuticals Pvt. Ltd. village ThanaBaddi, Tehsil Nalagarh Dist. Solan (H.P.) Pin code 173205 that isaccused no.4. At the time of inspection, Shri Ajay Prakash GuptaVice President Technical, accused no. 9 and 10 were present.During enquiry, it was revealed that Accused no. 4 to 10manufactured “Hemfer syrup Mfg. Lic. No. MB/05/268/B. No.HMS/6015 CMfg. Date May-2006 which has been declared tobe NOT OF STANDARD QUALITY at the premises of M/sCachet Pharmaceuticals Pvt. Ltd. village Thana Baddi, TehsilNalagarh Dist. Solan (H.P.) Pin code 173205 that is accused no.4under licence No. MB/05/268 and sold the above said drugs toM/s Priya Agencies Behind Dr. Vaidya Hospital Jalna Road, Beed,Dist. Beed through M/s Alkem Laboratories Ltd. situated at realitywarehousing Pvt. Ltd., Gut No.2323/1 property no. 115, PuneNagar road, At. Post Wagholi, Tai. Haveli, Dist. Pune - 412207.”

23. It can thus be seen that there are no specific averments insofaras the present appellants are concerned. It is further to be noted that thepresent appellants are neither the managing director nor the whole-timedirectors of the accused company.

24. It is further to be noted that, in accordance with the provisionsof Rule 76 of the said Rules read with Form 28, the Accused Nos. 9 and10 have specifically been approved by the licensing authority in Form28. Accused No.9 was approved as person under whose active directionand personal supervision the manufacture would be conducted as requiredunder sub-rule (1) of Rule 76 of the said Rules. Similarly, Accused No.10,

Awho was approved as head of the testing unit, was to be in-charge forcarrying out the test of the strength, quality and purity of the substancesas may be required under the provisions of Part X of the said Rules. Weare therefore of the considered view that the complaint is totally lackingthe requirement of Section 34 of the said Act.

B25. The impugned orders are liable to be quashed and set aside onanother ground also.

26. Perusal of the order passed by the learned Single Judge of theHigh Court would itself reveal that the learned CJM has not even caredto pass formal order of issuance of process. It will be relevant to referCto the following part of the judgment and order of the learned SingleJudge of the High Court:

“….Though, it is true that on the certified copy produced by thepetitioners there is no such formal order but copy of Roznama(daily notings of the proceeding) shows that such order was madeDon 30-3-2009. The Roznama dated 30-3-2009 reads as follows :

(i) Complaint filed by Vilas Vishwanath Dusane.

(ii) Copy of list of documents containing 44 document.

Order was made on Exhibit 1 (of issue process). Take entry inEregister of criminal cases and issue summons against accused.List the matter for appearance of accused on 18-6-2009.

This record is sufficient to infer that the order of issue processwas made and after that summons were issued against accusedto ask them to appear in the Court.”F27. It could thus clearly be seen that the learned Single Judge ofthe High Court held that though there was no formal order of issuanceof process, the record was sufficient to infer that the order of issueprocess was made.

28. The order of issuance of process is not an empty formality.GThe Magistrate is required to apply his mind as to whether sufficientground for proceeding exists in the case or not. The formation of suchan opinion is required to be stated in the order itself. The order is liableto be set aside if no reasons are given therein while coming to theconclusion that there is prima facie case against the accused. NoHdoubt, that the order need not contain detailed reasons. reference in

this respect could be made to the judgment of this Court in the case ofSunil Bharti Mittal vs. Central Bureau of Investigation[9], which readsthus:

“51. On the other hand, Section 204 of the Code deals with theissue of process, if in the opinion of the Magistrate takingcognizance of an offence, there is sufficient ground for proceeding.This section relates to commencement of criminal proceeding.If the Magistrate taking cognizance of case (it may be theMagistrate receiving the complaint or to whom it has beentransferred under Section 192), upon consideration of thematerials before him (i.e. the complaint, examination of thecomplainant and his witnesses, if present, or report of inquiry, ifany), thinks that there is prima facie case for proceeding inrespect of an offence, he shall issue process against the accused.52. wide discretion has been given as to grant or refusal ofprocess and it must be judicially exercised. person ought not tobe dragged into court merely because complaint has been filed.If prima facie case has been made out, the Magistrate ought toissue process and it cannot be refused merely because he thinksthat it is unlikely to result in conviction.

53. However, the words “sufficient ground for proceeding”appearing in Section 204 are of immense importance. It is thesewords which amply suggest that an opinion is to be formed onlyafter due application of mind that there is sufficient basis forproceeding against the said accused and formation of such anopinion is to be stated in the order itself. The order is liable to beset aside if no reason is given therein while coming to theconclusion that there is prima facie case against the accused,though the order need not contain detailed reasons. fortiori, theorder would be bad in law if the reason given turns out to be exfacie incorrect.”

29. similar view has been taken by this Court in the case ofAshoke Mal Bafna (supra).

30. In the present case, leaving aside there being no reasons insupport of the order of the issuance of process, as matter of fact, it is

9 (2015) 4 SCC 609

Aclear from the order of the learned Single Judge of the High Court, thatthere was no such order passed at all. The learned Single Judge of theHigh Court, based on the record, has presumed that there was an orderof issuance of process. We find that such an approach is unsustainablein law. The appeal therefore deserves to be allowed.

B31. In the result, the appeal is allowed. The impugned order ofissuance of process dated30[th] March 2009 passed by the learned ChiefJudicial Magistrate, Beedand the order passed by the learned SessionsJudge, Beed dated 25[th] November 2014 dismissing the Criminal Revisionbeing Criminal Revision Petition No.115 of 2013 are quashed and setaside. The complaint against the present appellants is dismissed. NeedlessCto state that the complaint shall proceed against rest of the accused inaccordance with law.

Devika Gujral(Assisted by : Neha Sharma, LCRA)

Appeal allowed.