Important Point
Vicarious liability of a person (e.g. a director in the manufacturing company) for being prosecuted for an offence u/s. 27 of Drugs and Cosmetics Act, 1940 by a company arises if at the material time he was in-charge of and was also responsible to the company for the conduct of the business as per Section 34(1) of the Act.

Headnote:Drugs and Cosmetics Act, 1940 -Sections 17, 17A, 25(4), 27 and 34-Sample of sodium chloride injections lifted from retailer-Found adulterated-Retailer, wholeseller/ Distributor and Manufacturer prosecuted u/s. 27-Petition u/s. 482 Cr.P.C. by directors of manufacturers-Allowed on ground that prosecution was launched after the shelf life of the drugs had expired so they were deprived of their right u/s. 25(4) to get the drug tested by Central Drugs Laboratory-Appeal to Supreme Court-High Court failing to notice, that unless requirement of sub-section (3) is complied with by the person concerned he cannot avail of his right under sub-section (4)-Whether vitiated the quashing of impugned notification by High Court? (No, but on a different ground viz. non-compliance of Section 34) - Result-Appeal dismissed.
       Held that consequent upon their failure to notify the Inspector that they intended to adduce evidence in controversion of the report within 28 days, not only the right of the manufacturers to get the sample tested by the Central Drugs Laboratory through the Court concerned stool extinguished but the report of the Government Analyst also became conclusive evidence under sub-section (3). The delay in filing he complaint till the expiry of the shelf life of the drugs could not, therefore, have been made a ground by the High Court to quash the prosecution. It will not be out of place to mention that the manufacturers’ right under sub-section (3) expired four months before the expiry of the shelf life of the drugs. In view of the above discussion, the reasoning of the High Court for quashing the prosecution against the three respondents cannot at all be sustained. (Para 7)
       Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in-charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of the company it does not necessarily mean that he fulfills both the above requirements so as to make him liable. Conversely, without being a director a person can be in-charge of and responsible to the company for the conduct of its business. From the complaint in question we, however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other allegation to indicate, even prima facie, that they were in-charge of the company and also responsible to the company for the conduct of its business. (Para 8)
       Since we are in respectful agreement with the view so expressed we dismiss this appeal and uphold the order of the High Court quashing the prosecution against the three respondents on a different ground. (Para 10)

Judgement Key Points

The case of State of Haryana versus Brij Lal Mittal involves the prosecution of the respondents as directors of a manufacturing company under the Drugs and Cosmetics Act. The key issue pertains to the vicarious liability of a person for offences committed by a company. The court examined whether the respondents, being directors, were in-charge of and responsible for the conduct of the company's business at the relevant time, which is a prerequisite for establishing liability under the relevant statutory provisions (!) .

The court found that the prosecution was initiated after the expiry of the shelf life of the drugs, which affected the respondents' right to have the drugs tested by the Central Drugs Laboratory, as provided under the relevant section of the Act. The High Court had quashed the proceedings on this basis, but the Supreme Court clarified that the expiration of the shelf life does not automatically invalidate the prosecution if other procedural requirements are met (!) (!) .

However, the court emphasized that the evidence on record did not sufficiently establish that the respondents were in-charge of and responsible for the company's conduct at the time of the offence. The mere assertion that they were directors was insufficient without concrete evidence demonstrating their role in the company's operations (!) (!) .

Furthermore, the court upheld the principle that vicarious liability requires proof of active responsibility and control over the company's conduct, which was lacking in this case. It also reinforced that individuals other than directors could be in-charge and responsible for the business, and such responsibility must be demonstrated with clear evidence (!) (!) .

In conclusion, the court dismissed the appeal, affirming the High Court's decision to quash the prosecution against the respondents due to the lack of sufficient evidence linking them to the conduct of the company's business at the relevant time (!) .

Judgment

M.K. Mukherjee, J.-Leave granted. Heard the learned counsel for the parties.

2. On August 7, 1990 the District Drugs Inspector, Hisar (Haryana_ visited the premises of M/s. Naresh Medical Agencies, (hereinafter referred to as the ‘firm’), purchased two samples of sodium chloride injections (hereinafter referred to as the ‘drugs’) and sent portions of each of those samples to the Government Analyst for analysis. The Analyst submitted his reports on September 10 and 11, 1990 to the effect that both the samples were not of standard quality and were misbranded and adulterated within the meaning of Sections 17 and 17A of the Drugs and Cosmetics Act, 1940 (‘Act’ for short). The Inspector, on receipt of those reports, delivered copies thereof to the firm on September 17, 1990 along with a letter asking it to disclose the names and addresses and other particulars of the persons from whom the drug had been purchased. In compliance therewith the firm, by its letter dated October 1, 1990, intimated the Inspector that M/s. Ajay Medical Agencies, Hisar and National Distributors, Sirsa, were the distributors of the drugs and M/s. Mitson Pharmecutial Pvt. Ltd., Sibian, were the manufacturers. On getting that information the inspector apprised those firms/company of his having purchased the drugs from the firm and the reports of the Analyst.

3. The Inspector then filed a complaint against the above firms/company and their partners/directors in the Court of the Chief Judicial Magistrate, Hisar on August 31, 1992 alleging commission of offence under Section 27 of the Act by them. The Magistrate took cognizance upon the complaint and issued processes against the persons arraigned. Aggrieved thereby the three directors of the manufacturers (the respondents before us) moved the High Court under Section 482 of the Code of Criminal Procedure for quashing the proceeding initiated against them. By the impugned judgment the High Court quashed the proceeding as against the respondents on the ground that the prosecution was launched after the shelf life of the drugs had expired in the month of July, 1991 and as a consequence thereof they were deprived of their right under Section 25(4) of the Act to get the drugs tested by the Central Drugs Laboratory. Hence this appeal at the instance of the State of Haryana.

4. At the outset, it will be apposite to extract Section 25 of the Act. It reads as under:-

“Report of Government Analysts:

(1) The Government Analyst to whom a sample of any drug or cosmetic has been submitted for test or analysis under sub-section (4) of Section 23, shall deliver to the Inspector submitting it a signed report in triplicate in the prescribed form.

(2) The Inspector on receipt thereof shall deliver one copy of the report to the person from whom the sample was taken and another copy to the person, if any, whose name, address and other particulars have been disclosed under Section 18A, and shall retain the third copy for use in any prosecution in respect of the sample.

(3) Any document purporting to be a report signed by a Government Analyst under this Chapter shall be evidence of the fact stated therein, and such evidence shall be conclusive unless the person from whom the sample was taken or the person whose name, address and other particulars have been disclosed under Section 18-A has, within twenty-eight days of the receipt of a copy of the report, notified in writing the Inspector or the Court before which any proceedings in respect of the sample are pending that he intends to adduce evidence in controversion of the report.

(4) Unless the sample has already been tested or analysed in the Central Drugs Laboratory, where a person has under sub-section (3) notified his intention of adducing evidence in controversion of a Government Analyst’s report, the Court may, of its own motion, or in its discretion at the request either of the complainant or th

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