1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 28 TH DAY OF JANUARY 2009 BEFORE THE HON'BLE MR. JUSTICE JAWAD RAHIM CRL.P. NO. 4635/2008 BETWEEN : Dr.R.I.MODI MANAGING DIRECTOR M/s CADILA PHARMACEUTICALS LTD. R/A NO.13, SANJIV BAUG NEW SHARDA MANDIR ROAD AHMEDABAD-380 007 ... PETITIONER (BY SRI SAJAN POOVAYYA, ADV.) AND: STATE OF KARNATAKA AT THE INSTANCE OF DRUG INSPECTOR, BANGALORE CIRCLE-I BANGALORE. ... RESPONDENT (BY SRI RAJA SUBRAHMANYA BHAT, HCGP) CRL.PETITION IS FILED U/S 482, Cr.P.C. PRAYIING TO QUASH THE CASE IN C.C.839/07 PENDING BEFORE THE SPL. COURT (ECONOMIC OFFENCES), BANGALORE. THIS PETITION COMING ON FOR FINAL DISPOSAL THIS DAY, THE COURT MADE THE FOLLOWING
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 28TH DAY OF JANUARY 2009
BEFORE
THE HON'BLE MR. JUSTICE JAWAD RAHIM
CRL.P. NO. 4635/2008
BETWEEN :
Dr.R.I.MODI
MANAGING DIRECTOR M/s CADILA PHARMACEUTICALS LTD.
R/A NO.13, SANJIV BAUG
NEW SHARDA MANDIR ROAD AHMEDABAD-380 007
... PETITIONER (BY SRI SAJAN POOVAYYA, ADV.)
AND:
STATE OF KARNATAKA AT THE INSTANCE OF DRUG
INSPECTOR,
BANGALORE CIRCLE-I BANGALORE.
... RESPONDENT
(BY SRI RAJA SUBRAHMANYA BHAT, HCGP)
CRL.PETITION IS FILED U/S 482, Cr.P.C. PRAYIING TO
QUASH THE CASE IN C.C.839/07 PENDING BEFORE THE SPL. COURT (ECONOMIC OFFENCES), BANGALORE.
THIS PETITION COMING ON FOR FINAL DISPOSAL THIS
DAY, THE COURT MADE THE FOLLOWING
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O R D E R
This petition by the 2nd accused has gained access to this court
under provision of Section 482, Cr.P.C., questioning the
order passed on 01.09.2007 in C.C.839/07 on the file of the
Special Court for Economic Offences, Bangalore, condoning
the delay in filing the complaint and taking cognizance for
the offence punishable under Section 27 (d) of the Drugs
and Cosmetic Act, 1940, (hereinafter referred to as the Act,
for short) against the petitioner, the company, and five
others.
2. Heard the persuasive arguments of Sri Poovayya,
learned counsel for the petitioner and the learned
Government Pleader, Sri Raja Subrahmanya Bhat, in
supplementation to material on record.
3. The contextual facts are:
a) M/s Cadila Pharmaceuticals Limited is a company
incorporated under the Companies Act, 1956, and is in the
business of manufacturing drugs and pharmaceuticals. It
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has business network throughout the Indian territory and
channelises its products for sale through wholesale and
retail network.
b) The complainant-Drugs Inspector in discharge of
duties conferred on him by virtue of Section 23 of the Act,
visited M/s Durga Sales Corporation at Seshadripuram,
Bangalore, and collected 8 legal samples of D.P.Gesic
further particulars about the mode of acquiring such drug,
4
in response to which by letter dated 18.06.2003 the dealer
furnished the source of purchase as M/s. Praveen Pharma,
Bangalore, and also provided necessary documents in
support of such contention. In turn, the Inspector
communicated by letter dated 19.06.2003 and issued a
notice under Section 18A and 18B of the Act to the
wholesaler seeking further details and received the same. It
disclosed that the drug was manufactured by first accused
company M/s. Cadila Pharmaceuticals.
e) Consequent to it, notice under Section 25(2) and
Section 23(4)(iii) of the Act was issued to the company
through its branch and the same was duly acknowledged.
The company responded, confirming manufacture of the
drug as also its sale to the wholesaler and to the retailer
from whom the sample was seized.
f) In the meantime, the Inspector forwarded the
report of investigation to the Drug Controller of Karnataka
on 21.03.2003 and forwarded a copy of the report of the
analyst to the accused company. The company informed the
Inspector that it wishes to challenge the report and based
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on such request, the Inspector approached the jurisdictional
court seeking permission in Crl.Misc.No.8/2004 to forward
the second sealed sample of the drug to the Director,
Central Drugs Laboratory, Calcutta. By order dated
10.03.2004, permission was granted and accordingly
sample was sent to the Director, Central Drugs Laboratory,
Calcutta, who on examination, sent his report certifying that
the drug was not of standard quality.
g) On the basis such material, complaint under
Section 200 of the Cr.P.C. was filed before the Jurisdictional
Magistrate to take cognizance for the offence under Section
27(d) of the Act to prosecute the company and the
petitioner herein and four others.
h) An application under Section 470 (3), Cr.P.C. was
also moved seeking condonation of delay in initiating
prosecution against the petitioner and the company and
other accused. By the impugned order dated 1.9.2007, the
learned jurisdictional magistrate allowed the application
under Section 470(3), Cr.P.C., condoned the delay and has
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taken cognizance. The petitioner who is arraigned as 2nd
accused, is aggrieved by it.
4. The impugned order is assailed on the following
grounds:
• There was procedural irregularity in conducting the
investigation.
• The complaint was filed beyond the period of
limitation prescribed under Section 468, Cr.P.C.
and hence no cognizance could have been taken
for the offence under Section 27(d) of the Act.
• Notice of the application seeking condonation of
the delay under Section 470 (3), Cr.P.C. was not
issued to the petitioner thereby depriving him fair
opportunity.
• Implication of the petitioner only on the basis that
he was a Managing Director of the 1st accused
company does not ipso facto permit his prosecution
without allegation that that he was in charge or
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responsible for the manufacturing process of the
company.
• The computation of the period of limitation was
also not in accordance of provision of Section 468,
Cr.P.C. and the assessment of the material on
record is erroneous.
• The order impugned finds no support from the
material on record and on the other hand, analysis
of the material in the right perspective absolves
the petitioner of all accusations, let alone
imputation of guilt.
5. The State has resisted the petition.
6. Considering the legal issues raised, the petition is
admitted and taken up for final disposal.
7. Learned counsel, Sri Poovayya, at the outset, drew
my attention to material accusations in the private
complaint submitted under Section 200, Cr.P.C. to
demonstrate, against the petitioner there is absolutely no
averment/statement that the petitioner was directly in
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charge or responsible for the manufacturing process of the
drugs. Pertinently he referred to paragraph 5 of the
complaint where reference has been made to the petitioner
as Managing Director of accused No.1 company and
paragraph 53 (b) where there is reiteration of the statement
in para 5 and nothing more.
8. There is no emphasis that Drugs Inspector had,
during the course of the investigation collected information
which reveals accused No.3 Sri Hiren Acharya was the
Manufacturing Chemist, Sri Brijal Motwani, Manufacturing
Chemist, Sri Rahul M.Mehta, Analytical Chemist and Sri
Nilesh Trivedi, was also Analytical Chemist, and they were
in charge of the manufacturing process of various drugs of
the company but not the petitioner. As regards the
petitioner is concerned, the Inspector was in the know of
facts that he was not in charge of the process of
manufacturing drugs, responsibility of which was fastened
by the company itself on accused nos.3 to 6. Thus, it is
urged the facts narrated in the complaint itself make out no
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prima facie case for implication of the petitioner as one of
the accused.
9. The learned counsel has urged several other
grounds which I shall refer to as I deal with these issues. He
draws citational support to his argument relying on the
following decisions:
i) Municipal Corporation, Delhi vs. Ram Kishan Rohtagi and Others (AIR 1983 SC 67),
ii) S. Rajagopalachari vs. Bellary Spinning and Weaving Co. Ltd. and Another. (1997 Company Cases 485),
iii) R.K. Khandelwal and Another vs. State (1965 (2)
Crl.L.J. 439 and
iv) Umesh Sharma and Another vs. S.G. Bhakta and Others (2002 Crl. L.J. 4843)
10. My attention is also drawn to the provision of
Section 34 and Section 27(d) of the Act regarding which
cognizance has been taken.
11. Based on the contentious issues, the following
points arise for consideration:
i) Whether the provision of section 34(1) of the Act permits prosecution of a person by virtue of
his office as Managing Director of the Company
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even in the absence of a allegation he was
incharge of or responsible to the company for the conduct of business of the company?
ii) Whether the presumption of guilt envisaged under 34(1) of the Act could be raised against
the Managing Director or other principal officer only by virtue of his office?
iii) Whether the prosecution against the petitioner
as also others is vitiated as being beyond the period of limitation prescribed? Whether the
accused is to be heard if delay is to be condoned?
iv) Under what circumstances presumption of guilt as envisaged, under section 34(1) could be
raised against managing directors and other officers of the company?
v) Whether prior sanction to prosecute the petitioner and other co-accused for the offence punishable under Section 27(d) of the Act was
necessary?
12. Regarding the first point reference to the
provision of section 34 of the Act is necessary, which read
thus:
’34. Offences by companies-
(1) Where an offence under this Act has
been committed by a company, every person who at the time of 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
11
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 pay punishment provided in the
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.’
13. Sub-section (1) by legal fiction indicts 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 offences and
shall be liable to be proceeded against and punished
according to law. Thus, it is clear the provision of sub-
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section (1) of Section 34 provides for prosecution of juristic
persons like a company as a principal offender as also the
person who was incharge and responsible to the company
for conduct of business of the company. A juristic person,
that is, the company would be de jure offender under the
provision of section 34. At the same time the provision also
postulates that every person, who at the time the offence
was committed, was in charge or responsible to the
company for the conduct of its business shall be deemed to
be guilty and proceeded against.
14. The question is, whether presumption of
guilt envisaged against the category of persons
referred to in sub-section (1) of Section 34, like
managing director as in the instant case, permits
launching of prosecution against him merely by the
office he holds, or is there any other requirement in
law. Sub-section (1) has to be read with sub-section (2) to
understand the distinction. While sub-section (1) postulates
that every person who at the time of the offence was
committed was in charge of or responsible to the company
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for the conduct of its business, as well as the company, shall
be deemed to be guilty and proceeded against, sub-section
(2) of Section 34 brings within its mischief certain other
category of persons like director, manager, secretary or
other officer of the company to be proceeded against along
with the company, if the offence is committed by the juristic
person. But there is a marked difference in the application
of sub-sections (1) and (2) as is noticeable from its
language.
15. While sub-section (1) indicates that an element
of ‘presumption of guilt’ is raised by legal fiction against
persons referred to in the said provision by virtue of the
responsibility cast on him, it also indicates such person or
persons must be shown to be ‘in charge of or responsible
to the company for the conduct of its business.’ Sub-
section (2) envisages ‘notwithstanding anything contained in
sub-section (1), where the offence under this Act is
committed by the company and it is ‘proved’ that the
offence has been committed with the consent or connivance
of, or is attributed to any negligence on the part of any
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director, managing director, secretary or its officer, such
director, managing director, secretary or other officer also
shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished according.’
16. Therefore, it cannot escape our notice that the
principal officers of the company like managing director,
secretary are also referred in sub-section (2). Sub-section
(1) of Section 34 creates a presumption of guilt against the
persons who are responsible for the management of the
company. The words used are ‘where the offence under this
Act has been committed by a company, every person who
at the time 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.’
17. There is no reference in sub-section (1) to the
rank of the person, i.e. managing director or any principal
officer of the company, whereas in sub-section (2) there is
15
reference to such category of persons. The intent of sub-
section (1) is to create ‘legal presumption of guilt’ when
the offence is committed by a company against 'every
person who at the time the offence was committed was in
charge of or responsible for the conduct of its business.'
'The presumption is, such person is 'to be deemed guilty'.
It is a presumption of law and is based only on allegations
on fact that the person against whom prosecution is
launched was 'in charge of responsible to the company for
the conduct of its business.' I do not find any reference to
the rank or designation of a person to permit such legal
presumption of guilt against him except on the allegation he
was in charge of or responsible to the company.
18. So far as sub-section (2) of Section 34 is
concerned, it elaborately refers to the category of persons
like director, manager, secretary or other officer of the
company who can be proceeded against and shall be
deemed to be guilty of the offence and punished along with
the juristic person only if it is 'proved.'
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19. A combined reading of sub-sections (1) and (2)
of Section 34 would show, prosecution can be initiated,
where the offence under this Act has been committed by the
company, against the principal officer and other officers only
if facts and circumstances enumerated in the said provisions
are shown to exist. Similarly it is clear, in order to proceed
against the category of persons mentioned in sub-section
(2), it is incumbent on the prosecution-complainant to prove
consent, connivance or neglect on the part of such
category of persons, which is conspicuous by its absence in
sub-section (1), where a 'presumption of guilt' is raised
against the category of persons mentioned therein.
20. The question would be, whether persons
referred to in sub-section (1) of Section 34 can resist
prosecution on the ground of lack of incriminating material
against him/them, or absence of allegation that he was in
charge of the affairs of the company or was responsible for
the conduct of its business. From the conspectus of sub-
sections (1) of Section 34, it could be affirmatively held, to
proceed against a person like manager, chairman, etc.,
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liability does not go with designation to permit prosecution,
but it goes with the responsibility of the person in the
company in the matter of conduct of its business and
nothing more. In other words, when the State intends
initiation of prosecution against a person by virtue of his
office, sub-section (1) of Section 34 does not permit
initiation of prosecution against him, unless there is a
categoric allegation or averment that he was 'in charge of or
responsible to the company for the conduct of the business
of the company.' Sub-section (2) makes it more stringent.
The category of persons like director, manager, secretary or
other principal officer named therein can be proceeded
against 'only if it is proved' there was consent, connivance
or neglect on their part.
21. I am satisfied that though sub-section (1) of
Section 34 permits prosecution of every person who at the
time the offence was committed was in charge of or was
responsible to the company for the conduct of its business,
it does not permit prosecution of such persons merely by
the office he holds unless there are allegations or statement
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revealing such ………….. . This is because liability does not
go with designation but it goes with proof that he was 'in
charge of and responsible to the company for othe conduct
of its business,' and nothing more.
22. No doubt the proviso to sub-section (1) would
give an impression that 'nothing contained in this section
[i.e. sub-section (1)] shall render any person liable to be
proceeded under the Act if he proves that the offence was
committed without his knowledge or that he had exercised
all due diligence to prevent commission of the offence. But
it would not mean that prosecution can be launched and
initiated against such person by virtue of his office without
there being any categoric statement/accusation that he was
'in charge of or responsible to the company for the conduct
of its business.' I am, therefore, convinced it is difficult to
accept the contention of the State/prosecution that initiation
of prosecution of a person by virtue of his office is
permissible even without the element of allegation against
him that he was ''in charge of or responsible to the company
for the conduct of its business' is permissible in view of the
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right given to him to prove that the offence was committed
without his knowledge or that he had exercised all due
diligence to prevent commission of the offence.
23. Initiation of prosecution will be justified only if
the complainant/proseution makes a categoric statement or
reveals existence of certain facts from which a probable
inference could be drawn that the person was ''in charge of
or responsible to the company for the conduct of its
business.'
24. This view finds support from the decision cited
at the Bar by Mr.Poovaiah, learned counsel for the
petitioner, rendered in the case of S.RAJAGOPALACHARI
(supra) wherein this Court held in the penultimate
paragraph thus:
“If we read the above definition, in my
considered view, it cannot be said that the same can be read into section 14A of the
P.F. Act to say that it is the “managing director” who is in charge of and is
responsible to the company for the conduct of the business of the company, for, under
section 14A(1) of the P.F.Act, the liability therefor does not go with the designation but
it goes with the charge of and responsibility
20
to the company in the person in the matter
of the conduct of business of the company and nothing beyond. It appears to me that
sub-section (2) of section 14A lends support for such a view I have taken, for, in the said
sub-section , when the offence is committed with the consent or connivance of, or is
attributable to any neglect on the part of any director or manager, secretary or other
officer of the company, such director, manager, secretary or other officer shall be
deemed to be guilty of that offence and shall be liable to be proceeded against.
Therefore, it is difficult for me to accept the argument of learned Central Government
standing counsel that when
respondent/accused No.2 had admitted in this statement under section 313 of the
Criminal Procedure Code that he was the managing director, there arose a
presumption that it is he who was in charge of and was responsible to the company in
the matter of the conduct of its business.”
26. Similar view has been taken by the learned
Single Judge of Bombay High Court in the case of UMESH
SHARMA (supra) and discussing the ambit and scope of
section 34 of the Act to initiate prosecution against the
Managing Director it observed thus: 15 & 16.
‘15. In the matter of Ram Kishan Rohatagi (1983
Crl. L.J. 159) (supra), the Apex Court was concerned with the case of Manager and not that of Managing Director. For the purpose of finding out
distinction in the roles played by these two authorities in the life of a company, I have referred
to the definitions of these terms from the
21
Companies Act, 1956, Section 2(24) defines the word “Manager” as follows:
“2 (24) : Manager means an individual
(not being the managing agent) who, subject to the superintendence, control and directions of the Board of
Directors, has the management of the whole or substantially the whole of the
affairs of company, and includes a Director or any other person occupying the position of Manager by
whatever name called and whether under the contract of service or not.”
Section 2(26) defines, “Managing Director” thus:
“2(26) : Managing Director means a Director, who by virtue of an agreement with the company or a
resolution passed by the company in the general meeting or by its Board
of Directors or by virtue of its memorandum or articles of association is entrusted with
substantial powers of the management, which would not
otherwise be exercisable by him and includes the Director, occupying the position of Managing Director by
whatever name called.”
The distinction between Manager and Managing Director is that, while the Manager by virtue of his office has the management of whole or
substantially whole of the affairs of the company, the Managing Director has to be entrusted with
such powers of the management as may be thought fit. The powers of management are
required to be delegated upon the Managing Director, either by an agreement with the company or by a resolution passed by the Board of Directors
in its general meeting or by virtue of its
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memorandum or article of association. It is not the name by which the person is called but the position
he occupies and the functions and duties which he discharges that determines whether in fact, he is in
charge of land responsible to the company or not.
Taking this distinction into consideration, there
need not be presumption of accused No.3 being incharge of or responsible to the company for
production of objectional drug. Although Food Inspector has obtained information from the company itself that the respondent No.3 is the
Managing Director, further details such as agreement between him the company or resolution
passed by the Board of Directors etc. by which substantial powers of management are conferred upon accused No.3, are neither obtained nor
incorporated in the complaint.
16. On reference to Section 34 as a whole, there is a presumption of being guilty against the person,
who is incharge of and responsible to the company, and such a person is liable to be punished unless he proves that offence was committed, without his
knowledge or inspite of exercise of due diligence to prevent the commission of offence. By virtue of
sub-section (1) by non-obstante clause in its opening part, the prosecution is obliged to prove 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, before drawing a presumption of guilty against such individual.
Taking into consideration the over riding effect
given to sub-section (2) it will be responsibility of the prosecution to first indicate and prove that objectionable drug was manufactured with the
consent or in connivance of the Managing Director or production of the said drug is attributable to any
neglect on the part of the Managing Director, only thereafter, he would be presumed to be the person in charge of and is responsible to the company for
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conduct of business and will be obliged to establish absence of knowledge or exercise of due diligence
in order to seek exoneration.”
27. From the extracted portion it is seen that the
learned single judge was of the opinion taking into
consideration the overriding effect given to subsection (2),
it will be the responsibility of the prosecution to firstly
indicate and prove that objectionable drug was manufacture
with the consent and in the connivance of the Managing
Director or production of such drug is attributable to any
neglect on the part of the Managing Director only.
Therefore, he would be presumed to be the person in
charge and responsible to the company for the conduct of
its business and will be obliged to establish absence of
knowledge or due diligence in order to seek exemption.
28. Against such proposition, the State has relied on
the decision in the case of U.P. POLLUTION CONTROL
BOARD VS. MOHAN MEAKINS LIMITED [(2000) 3 SCC
745] held:
‘The complaint contained averments that the
accused-Directors/Managing Directors /partners of M/s. Mohan Meakins Limited were responsible for
constructing proper works and plant for the
24
treatment of their highly polluting trade effluent so as to confirm to the standard laid down by the
Board. It also alleged that accused persons were deliberately avoiding to abide by the provisions of
the said Act.
In the light of factual averments in the complaint, the
Supreme Court was of the view that the Directors and the
Managing Directors of the company were liable to be
proceeded against according to law. This also supports the
view that there should be averments in the complaint
revealing the role of the person. The learned Single Judge
considering that discussion held, ‘except for the statement
that the Accused No.3 and 4 are the Directors of the
company, there are no averments that they are in charge
or responsible not even in the form of bald statement.’
Such view was taken by the learned Single Judge noticing
in that the Apex court had observed in paragraph 12 thus:
‘In the above context, what is to be looked at
during the stage of issuing process is whether there are allegation in the compliant by which the
Managers or Directors of the company can be proceeded against when the company is alleged to the guilty of the offence.’
Thus, it is noticed unless the complaint reveals material
allegations against Directors and Managers sought to be
25
prosecuted that he was responsible for conduct of business
of the company, prosecution would not be tenable.
29. On facts in that case, the learned Single Judge
held:
‘Though the Food Inspector had obtained information from the company itself that
Respondent No.3 is the Managing Director, further details such as agreement between him and the company or resolution passed by the Board of
Directors, etc., by which substantial powers of management are conferred upon respondent No.3
are not obtained nor incorporated in the complaint.’ Thus, it was held that unless prosecution places material before the court that
the person with the designation of Managing Director was in fact responsible for active
management of the company, or that he was directly responsible for the process of manufacturing, he would not be liable to be
proceeded against.’
30. The other decision relied on by the learned
counsel for the petitioner is in the case of R.K.
KHANDELWAL (supra) decided by the Allahabad High Court
in the context of liability of directors in the matter relating
to affairs of the company and is not with reference to the
liability of the managing director, and therefore, may not be
of much avail to us in this case because there is no quarrel
on the point that in order to proceed against the managers
26
and directors, there must be material to show their active
connivance, consent or neglect.
31. What emerges from the discussion as above is, in
sub-section (1) of Section 34 of the Act, no doubt there is a
presumption of guilt against person(s) who is(are) in charge
and responsible to the company for the conduct of its
business, he cannot be proceeded against merely because
the provision of Section 2(26) of the Companies Act, 1956,
defines ‘managing director’ as:
‘Managing Director means a director who by
virtue of the agreement with the company or resolution passed by the company in general body meeting or by its board of directors, was
in charge of or was responsible for the conduct of its business.’
The provision creates presumption of guilt, it is one under
law and when such presumption is raised there should be
existence of facts justifying presumption. It is dealt with by
the apex court in the case of M.S.NARAYANA MENON @
MANI .vs. STATE OF KERALA (AIR 2006 SC 3366).
Reference needs to be made to paragraphs 42 and 43 which
are extracted hereunder:
27
42. A presumption is a legal or factual assumption drawn from the existence or certain
facts.
43. In P.Ramanatha Aiyar’s Advanced Law
Lexicon 3rd Edn.at page 3697, the term ‘presumption’ has been defined as under:
“A presumption is an inference as to the existence of a fact not actually known arising
from its connection with another which is known.
A presumption is a conclusion drawn from
the proof of facts or circumstances and stands as establishing facts until overcome by contrary proof.
A presumption is a probable consequence drawn from facts (either certain, or proved by
direct testimony) as to the truth of a fact alleged but of which there is no direct proof. It follows,
therefore, that a presumption of any fact is an inference that a presumption of any fact is an inference of that fact from others that are known.
The word ‘presumption’ inherently imports an act of reasoning a conclusion of the judgment:
and it is applied to denote such facts or moral phenomena, as from experience we know to be invariably, or commonly, connected with some
other related facts.
A presumption is a probable inference which
common sense draws from circumstances usually occurring in such cases. The slightest
presumption is of the nature of probability and there are almost infinite shades from slight probability to the highest moral certainty. A
presumption, strictly speaking, results from a previously known and ascertained connection
between the presumed fact and the fact from which the inference is made.”’
28
32. Thus, the apex court mandates that presumption
is a probable inference which common sense draws from
circumstances usually occurring in such cases. The slightest
presumption is of the nature of probability and there are
almost infinite shades from slight probability to highest
material certainty. Presumption, strictly speaking, results
from previously known and ascertained connection between
the presumed fact and the fact from which inference is
made.
33. Presumption is a probable consequence drawn
from facts (either certain or proved by direct testimony) as
to the truth of fact alleged, but on which there is no direct
proof. It follows, therefore, that presumption of any fact is
an inference of that fact from others that are known.
Therefore, the irresistible conclusion on a reading of sub-
section (1) of Section 34 of the Act would be, an element of
presumption of guilt under the said provision against the
person designated as ‘Managing Director’ can be raised
when an offence under the Act is committed by the
company, but in order to proceed against such person,
29
firstly in view of the proviso to Section 34, presumption
could be raised, [applying the decision in the case of
M.S.NARAYANA MENON (supra)], only if at the inception
itself, prosecutions brings out circumstances with clarity
from which presumption is necessarily to be raised for the
purpose of initiating presumption. Undoubtedly,
presumption is legal or factual assumption drawn from
existence of certain facts which shall be pleaded or later
proved.
34. When a question arises as to whether in a
given situation, prosecution is justified in a proceeding
against the Managing Director, the observation of the
apex court in the case of M.S.NARAYANA MENON is
applicable and it is incumbent on the prosecution to
show from the facts it collects during investigation that
necessarily presumption under Section 34(1) of the Act
is to be drawn for the purpose to initiate prosecution.
In the instant case, though legally under sub-section
(1) prosecution could be initiated against the managing
30
director (petitioner herein) because of the initial
presumption, but in order to proceed against him, there
is no escape to the prosecution to reveal the existence
of facts which indicate that he was not only holding
such designated post, but was also responsible for the
conduct of the business during which the alleged
offence is said to have been committed.
35. The complaint is bereft of material particulars
even to remotely connect the petitioner with the process of
manufacturing which was undoubtedly under the control of
accused nos.3 to 6. The material collected during
investigation itself has revealed that accused nos.3 to 6
were in charge of the process of manufacture of drugs in
the company and undoubtedly they were responsible to the
company. If these facts are discovered during
investigation, the prosecution was required to mention it in
the complaint. Except for what is stated in paragraph 5 of
the complaint, we find nothing on record to even remotely
connect the petitioner with the alleged process of
31
manufacture and ultimately to the alleged offence. On that
basis itself, prosecution against the petitioner was liable to
be dropped at the earliest point of time as no fruitful
purpose would be served by compelling him to face the
ordeal of trial. Point nos.(1) and (2) are answered
accordingly.
36. The next question is about limitation. We must
notice that Section 467, Cr.P.C. requires prosecution to be
within the time fixed. Chapter XXXVI of the Code of
Criminal Procedure deals with limitation for taking
cognizance of certain offences. It defines ‘period of
limitation’. Section 468 describes the period of limitation
whereunder there is a bar on taking cognizance of certain
offences after lapse of the period of limitation prescribed.
The period of limitation shall be:
a) six months if the offence is punishable with fine only;
b) one year if the offence is punishable with imprisonment for a period not exceeding one
year; and
c) three years if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years.
32
In the instant case, prosecution launched against the
petitioner and others is for the offence punishable under the
provision of Section 27(d) of the Act. Section 27(d)
prescribes punishment for a term which shall not be less
then one year but which may extend to two years and with
fine. Therefore, the offence for which the petitioner and
others are sought to be prosecuted is punishable with a
minimum term of one year imprisonment and which may
extend to two years. Hence, the period of limitation
prescribed under clause (c) of sub-section (1) of Section
468, Cr.P.C. becomes applicable. The prosecution had to be
initiated against the petitioner and others within three
years.
37. The provision of Section 469, Cr.P.C. prescribes
the manner in which the period of limitation has to be
reckoned. Under this provision, the period of limitation in
relation to an offence shall commence:
a) on the date of the offence; or b) where the commission of the offence was not
known to the person aggrieved by the offence or to any police officer, the first day on which
such offence comes to the knowledge of such
33
person or to any police officer, whichever is
earlier; or c) where it is not known by whom the offence
was committed, the first day on which the identity of the offender is known to the person
aggrieved by the offence or to the police officer making investigation into the offence,
whichever is earlier.
In computing the said period, the day from which such period is to be computed shall be
excluded.
38. In the instant case, the Drugs Inspector has
collected samples of the drug in relation to which the
offence is said to have been committed, on 24.2.2003. If
we apply the provision of Section 469 (1)(a), Cr.P.C., this
would be the material date for calculating the period of 3
years within which prosecution had to be initiated.
Consequently, the date before which prosecution should
have been initiated would be 23.2.2006.
39. Learned HCGP, Sri Raja Subrahmanya Bhat
referred to the decision of the apex court in the case of
STATE OF RAJASTHAN .vs. SANJAY KUMAR AND
OTHERS (AIR 1998 SC 1919) where the apex court,
considering a similar question, observed thus:
34
‘8. A plain reading of the provision extracted
above shows that in sub-section (1) three alternative starting points of limitation have
been specified – (1) the date of the offence; (b) the first day on which an offence came to
the knowledge of the person aggrieved by the offence or to any police officer, whichever is
earlier, in case where the commission of the offence was not known to any of them, or (c)
the first day on which the identity of the offender is known to the person aggrieved by
the offence or to the police officer making investigation into the offence, whichever is
earlier, but this can be offence, whichever is earlier, but this can be called in aid in a case
where it is not known by whom the offence
was committed. Basically from the date of the offence the period of limitation will start but
there will be cases where the commission of offence or identity of the offender comes to
knowledge of those concerned with it long thereafter so in such situations clauses (b)
and (c), as the case may be, would be the date of commencement of period of limitation.
9. Now we shall see which clause of sub-section (1) of Section 469 is attracted to the facts of the case.
For this purpose it will be necessary to revert to the facts of this case. The essence of the offences
charged is manufacture of adultered, sub-standard, misbranded, spurious drugs within the meaning of the relevant provisions of the Act
and/or storage, distribution and sale of such drugs in contravention of the provisions of the Act. On
the date of collection of samples from respondent No.16, on February 29, 1988, it could not have been said that any offence was committed as
selling of drugs per se is no offence and the quality of the drugs was not known to the Drugs
Inspector, the complainant on that date. It is only, when the report of the Government Analyst was
35
received, that I came to light that the provisions of the Act are violated and offence is committed. So
on the facts of this case it cannot be said that clause (a) of Section 469(1) is attracted. That the
drugs which were offered for sale were sub-standard / adultered, within the meaning of the Act, came to the knowledge of the Drugs Inspector
only on July 2, 1988 when the report of the Government Analyst was received by him; and
therefore, Clause (b) of Section 469 (1) will be attracted.
Referring to the factual matrix, the apex court opined the
date on which samples were collected would not be
material, but the date on which the Government analyst
submits his report or is received showing that the drub was
adulterated, becomes material as that would be the date of
knowledge of commission of the offence.
40. Even applying the decision of the apex court, it is
noticed that the first report of the Government analyst
certifying that the drug was of substandard quality was
received by the Inspector on 16.6.2003. Though the said
report was questioned by the company and reserved its
right to question its finding consequent to which samples
were sent to the Central Government analyst whose report
was received on 26.4.2004.
36
41. For the purpose of computation, the first report
dated 16.6.2003 would be the material date. Computing the
period of three years therefrom, prosecution should have
been launched by 15.6.2006. As against it, it is noticed the
complaint has been filed before the jurisdictional magistrate
only on 28.10.2006. Undoubtedly it is beyond the period by
4 months after the three-year limitation period. Therefore,
prosecution is certainly barred by the time as prescribed
under clause (c) of sub-section (1) of Section 468, Cr.P.C.
42. I, therefore, discount the contention of the
learned Govt. Pleader to calculate the period of limitation
from the date of receipt of the second report of the analyst
dated 26.4.2004.
43. In the result, it has to be held that the trial court
could not have taken cognizance for the offence under
Section 27(d) of the Act against the petitioner and others.
44. The next question would be whether the period of
limitation prescribed under clause (c) of sub-section (1) of
Section 468, Cr.P.C. could have been enlarged by the
37
jurisdictional magistrate, exercising power conferred by
Section 470 (3) , Cr.P.C. as requested by the prosecution.
45. No doubt the complainant-Inspector had filed an
application under Section 470(3), Cr.P.C. But the cause
shown seeking condonation of delay is conspicuous by its
absence. Secondly, notice of such application was not
issued to the petitioner or the company or any of the
accused against whom prosecution was contemplated.
46. Records reveal when Crl.Misc.No.8/2004 was filed
before the learned magistrate under Section 470 (3),
Cr.P.C., neither the petitioner nor the company nor any of
the accused were in the party array. In the said petition,
the complainant had shown one Pradeep Pandey, General
Manager of M/s Cadila Pharmaceuticals as respondent.
Copy of the said petition is appended to this petition and I
have examined the same. It is also noticed that no fresh
petition came to be filed by the respondent/complainant.
Crl.Misc.No.8/04 has been re-numbered as C.C.839/07 on
the file of the jurisdictional magistrate. The order dated
38
9.3.2004 shows on presentation of such petition, the
magistrate ordered it to be registered and proceeded to
consider it and passed the impugned order condoning delay
mechanically. The application under Section 470 (3),
Cr.P.C. was filed on 28.10.2006, perhaps along with the
private complaint. It reveals notice of it was not issued to
any of the persons arraigned as accused in the complaint
filed on the same day, i.e. 28.10.2006. The grievance of
the petitioner that no notice of the said application was
served on him finds favour from the records and the
contention canvassed on behalf of the State that notice to
the general manager (Pradeep Pandey) should be taken as
sufficient notice to the company, must necessarily be
rejected. This is because when in law a legitimate right has
accrued to the accused, it was incumbent on the trial
magistrate to have notified him/her of the application
which, in fact, takes away a valid defense that had accrued
to them. The observation made in the impugned order that
notice was served is factually incorrect. On this ground
itself, the order passed allowing the application under
39
Section 470 (3), Cr.P.C. and condoning the delay has to be
set aside.
47. Secondly on merit also, perusal of the application
under Section 470 (3), Cr.P.C. indicates that the inspector
concerned has given the chronology of various dates of
stages of investigation till presentation of the complaint, but
it is totally silent as to the cause for the delay in filing the
petition within three years from the date of receipt of the
first report of the analyst and also inaction during
subsequent stages except stating he had submitted his
report to the Drug Controller and was awating for his
permission (sanction) to file the complaint.
48. Thus one more question arises, as to whether
any previous sanction is required for prosecuting the
accused for the offence indicated in the complaint. This is
because if under law any prior sanction is required, then the
period during which the process of seeking and grant of
sanction is consumed, has to be excluded. Learned Govt.
Pleader referred to the provision of Rule 51 of Drug and
40
Cosmetic Rules, 1945, which provides that subject to the
instructions of the controlling authority, it shall be the duty
of the inspector authorised to inspect the premises, used for
sale of drugs for purposes indicated in clause (1) to (8).
This provision does not require any prior permission or
sanction from any controlling authority to prosecute any
person for any of the offences under the Act and this
provision cannot be construed as to mean previous sanction
was required for prosecution of the accused as referred to
under the provision of Section 470, Cr.P.C.
40. Sub-section (3) of Section 470, Cr.P.C. provides:
‘Where notice of prosecution for an offence has
been given, or where, under any law for the time
being in force, the previous consent or sanction of
the Government or any other authority is
required for the institution of any prosecution for
an offence, then, in computing the period of
limitation, the period of such notice or, as the
case may be, the time required for obtaining such
consent or sanction shall be excluded.’
49. The petition filed seeking condonation of delay or
enlargement of time is under Section 470 (3), Cr.P.C. itself
41
and does not show that previous sanction or consent of the
Government or any authority is required. Thus, the said
provision does not come into play and is not available.
Consequently, the request for condonation of delay could
not have been entertained by the magistrate. Since it is not
shown that previous sanction was required, the question of
considering any other aspect would not arise.
50. Be that as it may, I do not find any averment in
the said application which reveals sufficient, much less any
cause requiring indulgence of the court to enlarge time
prescribed to prosecute the petitioner. It cannot be
forgotten that when criminal prosecution is initiated like in
the instant case, on proof of guilt, the consequent result
would be that persons found guilty would be visited with
sentence of minimum imprisonment and therefore, the
doctrine ‘fouler is the offence, stricter is the proof
required’ applies. The respondent/complainant has been
so indiligent, the question of entertaining the prosecution
after a lapse of more than 3 years was certainly unjust, and
in view of the fact that the impugned order has been passed
42
without even hearing the petitioner and other accused, it
can hardly be sustained. The impugned order, therefore,
suffered from legal infirmities as indicated above and is
liable to be quashed, invoking the provision of Section 482,
Cr.P.C. I do so.
51. The petitioner succeeds in his legal pursuit and the
he stands discharged.
52. Though this petition is moved by one of the
persons arraigned as accused, in view of the finding on point
no.(3) that the prosecution was time-barred, I do not find
any reason to permit the trial court to proceed against the
company or others, even though they are not parties to this
