State of Karnataka v. Pratap Chand & Ors.

BAHARUL IsLAM, J. This appeal by special leave has been preferred by the State of Karnataka. 2. The three respondents being the partners of the firm, M/s. l>fafatlal and Co., and the firm itself were charged for offences under ~ · Sections l 8(c), 18(a) (ii) and 18A of the Drugs and Cosmetics Act, 1940 read with Section 27(a) (ii), 27(a) (i) and Section 28 of the Drugs Control Act, (hereinafter, the Act). The defence was a plea of "Not Guilty". The Chief Metropolitan Magistrate found respondents 1. and 3, that is, one of the partners and the firm, guilty under Sec- 1100 18(a) (ii) and Section 18(c) of the Drugs and Cosmetics Act and 5entenced respondent No. I to suffer rigorous imprisonment for one ~ear under 'ection 18(a) (jj) and to pay a fine of Rs. 500. m default, to suffer simple imprisonment for one month, and ltlltenctd ~spondents 1 and 3 to pay a nne of Rs. l,OOO tach, Under section 18(c) in default to sutTer simple imprison­ ment r ' . . d f th or three months. The respondent No. 2 was acquttte 0 ~two offences as the Magistrate found that it was respondent :~ 6 1r and not respondent no. 2 who was in char go of the business of , , . m. All the respond~nts were acquitted of the offence under ectJon U!A. ltil.rtJ;~~·he appellant preferred an appeal before the High Court of a from the order of acquittal of respondent No. 2 of the .I •j l ' ~ 1 j ' l j 202 SU1'R£ME COURT REPORTS (1981) 3 S.C.R. offence under Section 18(a) (ii) and J8(c) and of all the respondents under section 1 SA of the Act. The High Coun summarily dismissed the appeal. 4. Section 18A of the Act requires that every person who bas acquired drug or cosmetic, if required, shall disclose to the inspector the name, address and other part iculars of the persons from whom the drug or cosmetic was acquired. The respondents pleaded that they did disclose to the Drugs Inspector, the name, addre ss and other particulars of the person from whom the drugs were acquired, by section 18A of the Act and in suppo rt of their defence they rely on Exhibit P. 20, a letter dated 17.7.1971 addressed to the Drugs Controller. The learned Chief Metropolitan Magistrate has found that Exhibit P.20 contained the name, address and othe r particulars of the person from whom the drugs were claimed to have been acquired as M/s. Mangilal Jayantilal & Company, 65 Princess Street, Second Floor, Bombay, which name and address, according to the prosecution, were fictitious. P. W.3, the Assistant Commissioner, Food and Drug Administration, Bombay North Circle, has deposed that he got it verified by his Inspector who submitted a report that the above name and address were fictitious. But the Jnspetor bas not been examined, nor his report proved. Obviously, there fore, the defence version remained unrebutted and violation of section 18A remained unesta blished. 5. Regarding the acquitta l of the 2nd res~ondent of the offence under section 18 (a) {ii) and section J 8{c), the learned counsel for the State of Karnataka submitt ed that under section 34 of the Dmgs and Cosmetics Act the firm, as well as its partners were liable to be convicted. Section 34 may be extracted here :- · .. s. 34. {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 the sub·s~ction shall render any such person liable to any pun ishment pro vided in this Act if he proves tllat the offence was committed without ·') KARNATAKA v. PRATAP CHAND (Baharu/ls/am1 J.) 203 his knowledge or that he exercised all due diligence to prevent A 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 bas 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 punish­ ed accordingly. Bxplanation.-For the purpose of this section- (a) "com pany" means a body corporate, and includes a firm or other association of individuals ;and (b) "di rector" in relation to a firm means a partner in the D firm." lt is seen that the partner of a firm is alo;o liable to be con­ victed for an offence committed by the firm if he was in charge of, and was responsible to, the firm for tbe conduct of the business of the finn or if it is proved that the offence was committed · with. the consent or connivance of, or was attributable to any neglect on the part of the partner concerned . In the present case the second respondent was sought to be made liable on the ground that he aJongwith the first respondent was in charge of the conduct of the business of the firm. Section 23-C of the Foreign Exchange Regu­ lation Act 1947 which was identically the same as section 34 of the Drugs and Cosmetics Act came up for interpretation in G. L. Gupta v. D. N. Mehta(l) it was observed as follows : "What then does the expression " a person in-charge and responsible for the conduct of the affairs of a company mean"? It will be noticed that the word 'com pany· includes a firm or other association and the same test must apply to a· director in-charge and a partner of a firm incharge of a business. It seems to us that in tbe context a person 'in-charge' must mean that the person should be in over all control of the day to day (1) (197JJ 3 S.C,R. 748. 204 sun.EME COURT RE'PORT [1981] 3 S.C.R . A business of the company or firm. This inference follows from the wording of S. 23C(2). It mentions director, who may be a party to the policy being followed by a company and yet not be in-charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in over-all-charge. Similarly the other officers may B be in charge of only some part of business." The evidence in the present case shows that it was respondent No. 1 and not respondent No. 2 who was in over all control of the day to day business of the firm. The second respondent is not liable to be convicted merely because he bad the right to participate in the business of the finn under the terms of the Partn ership Deed. 6. This appeal has no merit and is dismissed. P.B.R. Appeals dismissed. ' .