The Assistant Commissioner, Food and Drug Administration Bombay, North Circle, deposed that the particulars given by the respondents as to the person from whom the drugs were purported to have been acquired were verified by an Inspector who in his report stated that the name and address given by the respondents were fictitious; but the Inspector has not been examined nor was his report proved. The defence version, therefore, remained unrebutted.
The court of the Judicial Magistrate
The Chief Metropolitan Magistrate found respondents 1 and 3, that is, one of the partners and the firm, guilty under Section 18(a) (ii) and Section 18(c) of the Drugs and Cosmetics Act and sentenced respondent No. 1 to suffer rigorous imprisonment for one year under section 18(a) (ii) and to pay a fine of Rs. 500. in default, to suffer simple imprisonment for one month, and sentenced respondents 1 and 3 to pay a fine of Rs. 1,000 each, under section 18(c), in default, to suffer simple imprisonment for three months. The respondent No. 2 was acquitted of these two offences as the Magistrate found that it was respondent no. 1 and not respondent no. 2 who was in charge of the business of the firm. All the respondents were acquitted of the offence under section 18A.
Karnataka High Court
The appellant preferred an appeal before the High Court of Karnataka from the order of acquittal of respondent No. 2 of the offence under Section 18(a) (ii) and 18(c) and of all the respondents under section 18A of the Act.
The High Court summarily dismissed the appeal.
Supreme Court of India
Regarding the acquittal of the 2nd respondent of the offence under section 18 (a) (ii) and section 18(c), the learned counsel for the State of Karnataka submitted that under section 34 of the Drugs 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-section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub- section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purpose of this section-
(a) "company" means a body corporate, and includes a firm or other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm."
The Supreme Court noted that the above foresees that the partner of a firm is also liable to be convicted for an offence committed by the firm if he was in charge of, and was responsible to, the firm for the conduct of the business of the firm 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.
The Supreme Court further noted that the second respondent was sought to be made liable on the ground that he along with the first respondent was in charge of the conduct of the business of the firm.
Upon evaluating the evidence, the Supreme Court found 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. It was added that the second respondent is not liable to be convicted merely because he had the right to participate in the business of the firm under the terms of the Partnership Deed.
All the three respondents (respondents nos. 1 and 2 partners and respondent No. 3, the firm) were prosecuted for the alleged contravention of section 18A, Drugs and Cosmetics Act, 1940 in that when asked by the Drugs Inspector to disclose the name, address and other particulars of the person from whom a certain drug was acquired by them, they gave a fictitious address and that, therefore, they were liable to be convicted under section 18(a) (ii) read with section 18(c) of the Act.
Note that violation of the provisions of section 18A remained unestablished and the defence version remained unrebutted.
Supreme Court of India
This case is of interest given its discussion around the criminal liability of legal persons as regards Drugs and Cosmetics Act, 1940. The Supreme Court referenced G. L. Gupta v. D. N. Mehta, in which Section 23-C of the Foreign Exchange Regulation Act 1947 which was identically the same as section 34 of the Drugs and Cosmetics Act came up for interpretation, and in which the following was observed:
"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 ’company’ 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 the context a person ’in charge’ must mean that the person should be in over all control of the day to day 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 be in charge of only some part of business."