The punishment for a director or officer held liable under Section 34(2) of the Drugs and Cosmetics Act, 1940, is limited to a fine and does not include imprisonment.

Headnote:
DRUGS AND COSMETICS ACT, 1940 - SECTION 34 - PUNISHMENT FOR OFFENCES COMMITTED BY COMPANIES - LIABILITY OF DIRECTORS AND OFFICERS - INTERPRETATION OF SECTION 34(1) AND 34(2) - SCOPE AND EXTENT OF PUNISHMENT - MINIMUM SENTENCE OF IMPRISONMENT UNDER SECTION 27 - APPLICABILITY TO DIRECTORS AND OFFICERS HELD LIABLE UNDER SECTION 34(2).
Fact of the Case:

The accused, a director of a pharmaceutical company, was convicted under various provisions of the Drugs and Cosmetics Act, 1940, for offences related to the manufacture and sale of substandard drugs. The Magistrate imposed a sentence of one day's simple imprisonment and a fine on the accused. The accused challenged the conviction and sentence on the ground that the Magistrate erred in imposing imprisonment as the punishment for a director under Section 34(2) of the Act.
Finding of the Court:

The High Court held that the Magistrate erred in imposing imprisonment on the accused as the punishment for a director under Section 34(2) of the Act. The Court interpreted Section 34(1) and 34(2) of the Act and held that the punishment for a director or officer held liable under Section 34(2) is limited to a fine and does not include imprisonment. The Court further held that the proviso to Section 27, which requires the Court to impose a minimum sentence of imprisonment of one year unless there are special reasons to the contrary, does not apply to the case of a director who is held responsible under Section 34(2) of the Act.
Issues: 1. Whether the Magistrate erred in imposing imprisonment on the accused as the punishment for a director under Section 34(2) of the Drugs and Cosmetics Act, 1940? 2. Whether the proviso to Section 27 of the Act, which requires the Court to impose a minimum sentence of imprisonment of one year unless there are special reasons to the contrary, applies to the case of a director who is held responsible under Section 34(2) of the Act?
Ratio Decidendi: 1. Section 34(1) of the Act makes the company liable to be punished accordingly, which means that the company can only be punished with a fine and not with imprisonment. 2. Section 34(2) of the Act provides that a director or officer of a company who is held liable for an offence committed by the company shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 3. The words "punished accordingly" in Section 34(2) mean that the guilty person is to be punished in the same way as the company would be punished under Section 34(1), which is limited to a fine. 4. The proviso to Section 27, which requires the Court to impose a minimum sentence of imprisonment of one year unless there are special reasons to the contrary, does not apply to the case of a director who is held responsible under Section 34(2) of the Act.
Final Decision: The High Court discharged the rule and upheld the conviction of the accused but set aside the sentence of imprisonment imposed by the Magistrate.

JUDGMENT-[His Lordship after setting out the facts, proceeded]. The conviction is not challenged by accused No.1 before me. It is clear that the learned Magistrate was inclined to hold that the conviction of accused No. 1 is necessary in view of the provisions of section 34 (2) of the Act. It is true that when awarding the sentence, which is less than the minimum sentence, the learned Magistrate has not done his duty of specifying the special reasons, which he ought to have stated under section 27 of the Act. It is also true that the offence under section 18 is a serious offence, as the drugs which are not of standard quality or mis-branded are dangerous to public life and harmful to the community. So far as the offence of absence of licence was concerned, the offence charged against the accused is regarding failure to renew the licence. He originally had a licence; and it appears that he made an application for renewal after the time had expired and obtained the licence in April 1968. Even in regard to the absence of licence the plea of the accused was that he had relied on M. B. jayakar, who is also a chemist, to make the application for renewal.

2. Now, section 34 of the Act is as follows:

"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 this 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."

It is clear from the section that clause (I) makes the company liable to be punished accordingly. The word "punish" with reference to " company would only mean to be punished under section 27, not with imprisonment as a company can in no case be punished with imprisonment. Clause (2) of section 34 also says that in certain circumstances where the offence has been committed by the consent or connivance of the manager, secretary or other officer of the company, such director, manager or the secretary or the other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. In my Judgment, the words "punished accordingly" in clause (2) mean that the guilty person is to be punished in the same way as the company would be punished under clause (1). Thus, unless the director can be directly held to be liable for punishment under section 27 read with section 18 of the Act, the measure of punishment of such guilty person must be determined in accordance with section 34 read with section 27 of the Drugs and Cosmetics Act. He can be punished only with fine and not with imprisonment. In the present case the learned Magistrate convicted accused No. 1 as follows:

"Accused No.1 is convicted under section 18 (a) (i) read with section 27 of the Drugs Act and is sentenced to 1 days S. I. and to pay fine of Rs. 25,000 or in default to undergo one years S. I. Accused No.1 is also convicted under section 18 (ii) read with section 27 of the Drugs Act and is sentenced to one days S. I. and to pay fine of Re. 2.000 or in default to undergo 3 months R. I. Accused No.1 is also convic

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1971 Supreme(Bom) 6

IN THE HIGH COURT OF BOMBAY( G. N. Vaidya J. ) STATE OF MAHARASHTRA- Petitioner. v. JOSEPH ANTHONY PEREIRA - Respondent. Advocates AppearedFor State -V. T. Gambhirwala, Asstt. Govt. Pleader. For petitioner accused No.1- P. A. Mehta with B. M. Patel.

The punishment for a director or officer held liable under Section 34(2) of the Drugs and Cosmetics Act, 1940, is limited to a fine and does not include imprisonment.

IN THE HIGH COURT OF BOMBAY
( G. N. Vaidya J. )
STATE OF MAHARASHTRA- Petitioner.
v.
JOSEPH ANTHONY PEREIRA - Respondent.
Advocates Appeared
For State -V. T. Gambhirwala, Asstt. Govt. Pleader.
For petitioner accused No.1- P. A. Mehta with B. M. Patel.