1. Sale of pre-packaged Pepsi can above MRP by resort restaurant — Inspection under Legal Metrology Act, 2009. (Para 3 , 4 , 5 )
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2025 Supreme(UK) 553
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Ashish Naithani, J.
Radhika Shastry And Another - Applicants
Versus
State Of Uttarakhand And Another - Respondents
CRIMINAL MISCELLANEOUS APPLICATION NO. 2883 OF 2019, CRIMINAL MISCELLANEOUS APPLICATION NO. 2805 OF 2019, CRIMINAL MISCELLANEOUS APPLICATION NO. 2806 OF 2019
Decided On : 16-05-2025
Advocates Appeared:
For the Applicant : Mr. Avtar Singh Rawat, learned senior counsel
For the Respondent: Mr. Vipin Painuli, learned AGA, Mr. Prateek Tripathi, learned counsel
For the Applicant : Mr. Avtar Singh Rawat, learned senior counsel
For the Respondent: Mr. Vipin Painuli, learned AGA, Mr. Prateek Tripathi, learned counsel
Important Points
Retail sales of pre-packaged commodities in hospitality establishments are governed by the Legal Metrology Act. Directors face a statutory presumption of liability under Section 49, and such criminal proceedings should not be quashed prematurely under Section 482 CrPC unless they are manifestly frivolous or malicious.
Subject
Criminal Law - Quashing of Proceedings
Act Referred
CRIMINAL PROCEDURE CODE : S.177, S.200, S.202, S.482
LEGAL METROLOGY PACKAGED COMMODITIES RULES : R.18(2), R.32
LEGAL METROLOGY ACT : S.49, S.49(1)
LEGAL METROLOGY PACKAGED COMMODITIES RULES : R.18(2), R.32
LEGAL METROLOGY ACT : S.49, S.49(1)
Headnote
(A) Legal Metrology Act, 2009 - Sections 2(j), 2(l), 18 and 49 - Legal Metrology (Packaged Commodities) Rules, 2011 - Rules 6, 18(2) and 32 - Code of Criminal Procedure, 1973 - Section 482 - Sale of pre-packaged commodities above Maximum Retail Price (MRP) in a resort - Applicability of the Act to hospitality services - Whether sale of carbonated beverages in a resort constitutes a retail transaction or part of a composite service - Retail sale of pre-packaged goods within a hospitality establishment falls within the regulatory ambit of the Legal Metrology framework - Physical materials, such as welcome kits delivered as part of a paid contract, are pre-packaged commodities requiring mandatory declarations under Rule 6 (Paras 28-33, 40).
(B) Liability of Directors - Section 49, Legal Metrology Act, 2009 - Statutory presumption of liability created towards directors - Whether non-executive or independent status exempts directors from prosecution at the preliminary stage - Factual questions regarding consent, connivance, or negligence to be decided at trial; statutory presumption shifts the burden of proof to the directors (Paras 38, 41).
(C) Quashing of Summoning Order - Section 482, Code of Criminal Procedure, 1973 - Scope of judicial interference at the preliminary stage - Magistrate's application of mind to be determined from the records - Interference under inherent jurisdiction is premature unless the complaint is manifestly frivolous or malicious (Paras 34, 35, 39, 41).
Facts of the case:
A hospitality establishment was inspected, and it was found that a carbonated beverage was sold at a price exceeding the MRP. Additionally, welcome kits provided to members were alleged to lack mandatory declarations prescribed under the Rules. The company and its directors sought to quash the summoning order, arguing that the offerings formed part of a composite hospitality service, thus exempting them from the Act, and that the non-executive directors could not be held liable for day-to-day operations.
Findings of Court:
The Court found that the sale of a pre-packaged commodity for distinct consideration, even within a resort, constitutes a retail transaction governed by the Legal Metrology Act. Welcome kits are not merely service accessories but are packaged goods part of a commercial transaction. The summoning order was based on objective evidence and was not mechanical. The liability of directors is subject to a statutory presumption that can only be rebutted during trial.
Issues: Whether the Legal Metrology Act applies to standalone retail sales of packaged goods within hospitality establishments, and whether a summoning order against non-executive directors can be quashed at the preliminary stage based on a statutory presumption of liability.
Ratio Decidendi: The MRP regime serves critical consumer protection and transparency objectives, which cannot be bypassed by labeling a business as service-based when physical packaged goods are sold. Under Section 49 of the Act, a statutory inference of director liability exists, making the challenge to such liability a matter for trial. Interference under Section 482 CrPC is only permissible in exceptional circumstances, not to pre-empt a statutory trial process.
Result: All three applications stand dismissed.
(B) Liability of Directors - Section 49, Legal Metrology Act, 2009 - Statutory presumption of liability created towards directors - Whether non-executive or independent status exempts directors from prosecution at the preliminary stage - Factual questions regarding consent, connivance, or negligence to be decided at trial; statutory presumption shifts the burden of proof to the directors (Paras 38, 41).
(C) Quashing of Summoning Order - Section 482, Code of Criminal Procedure, 1973 - Scope of judicial interference at the preliminary stage - Magistrate's application of mind to be determined from the records - Interference under inherent jurisdiction is premature unless the complaint is manifestly frivolous or malicious (Paras 34, 35, 39, 41).
Facts of the case:
A hospitality establishment was inspected, and it was found that a carbonated beverage was sold at a price exceeding the MRP. Additionally, welcome kits provided to members were alleged to lack mandatory declarations prescribed under the Rules. The company and its directors sought to quash the summoning order, arguing that the offerings formed part of a composite hospitality service, thus exempting them from the Act, and that the non-executive directors could not be held liable for day-to-day operations.
Findings of Court:
The Court found that the sale of a pre-packaged commodity for distinct consideration, even within a resort, constitutes a retail transaction governed by the Legal Metrology Act. Welcome kits are not merely service accessories but are packaged goods part of a commercial transaction. The summoning order was based on objective evidence and was not mechanical. The liability of directors is subject to a statutory presumption that can only be rebutted during trial.
Issues: Whether the Legal Metrology Act applies to standalone retail sales of packaged goods within hospitality establishments, and whether a summoning order against non-executive directors can be quashed at the preliminary stage based on a statutory presumption of liability.
Ratio Decidendi: The MRP regime serves critical consumer protection and transparency objectives, which cannot be bypassed by labeling a business as service-based when physical packaged goods are sold. Under Section 49 of the Act, a statutory inference of director liability exists, making the challenge to such liability a matter for trial. Interference under Section 482 CrPC is only permissible in exceptional circumstances, not to pre-empt a statutory trial process.
Result: All three applications stand dismissed.
Legal Category Hierarchy
- practice and procedure
- consumer protection
- company law
Table of Contents
2. Sale as composite hospitality service versus standalone retail transaction — Applicability of Act to hotels and restaurants. (Para 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 )
3. MRP regime applies to independent sale of packaged commodities; hospitality label cannot shield statutory obligations. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 )
4. Service character of establishment does not exclude standalone sale of packaged commodity from Legal Metrology Act. (Para 28 , 29 , 30 , 40 )
5. Does the Legal Metrology Act apply to sale of packaged commodities by a resort restaurant?
Yes. Where a pre-packaged commodity is sold independently and for distinct consideration, the Act applies irrespective of the hospitality service. (Para 28 , 29 , 30 , 40 )
6. Are independent or non-executive directors liable under the Legal Metrology Act?
Section 49 creates a statutory presumption of liability for all directors. Whether a director had knowledge or exercised diligence is a trial issue. (Para 11 , 21 , 22 , 38 , 41 )
7. What is the standard for summoning under Section 482 CrPC when the complaint alleges violation of the Legal Metrology Act?
The magistrate must apply a judicial mind to whether a prima facie case exists; a mechanical reproduction of allegations justifies quashing. (Para 8 , 12 , 23 , 35 , 41 )
8. Can criminal proceedings under the Legal Metrology Act be quashed at the threshold for a civil or regulatory dispute?
No, unless the complaint is manifestly frivolous or malicious. Overcharging is a regulatory issue, but quashing under Section 482 is exceptional. (Para 14 , 37 , 39 , 41 )
9. Does a welcome kit provided as part of a holiday membership attract the Legal Metrology (Packaged Commodities) Rules?
Yes. If the welcome kit forms part of a paid transaction and is physically delivered in packaged form, it falls within the Rules. (Para 27 , 29 , 30 , 31 , 32 , 33 )
JUDGMENT :
Ashish Naithani, J.
1. These three Criminal Miscellaneous Applications, viz., Criminal Miscellaneous Application No. 2883 of 2019, No. 2805 of 2019, and No. 2806 of 2019, have been filed under Section 482 of the Code of Criminal Procedure, 1973 . Since the applications arise from a common factual matrix and involve overlapping legal issues, they are being decided by this common order.
2. The applicants in these connected matters are Ms. Radhika Shastry and Mr. Sridar Iyengar, both serving as independent and non-executive directors of Mahindra Holidays and Resorts India Limited, along with Mahindra Holidays & Resorts India Limited & Another, as well as Parthasarathy Vankipuram Srinivasa & Ors. The respondents include the State of Uttarakhand through the Principal Secretary of the Department of Food and Civil Supply Uttarakhand Secretariat, Dehradun, Inspector Legal Metrology, and the Controller/Director of Legal Metrology for the Government of Uttarakhand.
3. The facts leading to the present application are as follows. On 18.06.2019, the Legal Metrology Inspector inspected “Bird Song”, a multi-cuisine restaurant situated within Club Mahindra Binsar Valley Resort, which is operated by the applicant company. During the inspection, a 250 ml can of Pepsi was allegedly sold at Rs. 99.12, which was above the maximum retail price (MRP) of Rs. 25 printed on the can. Based on this transaction, an inspection report was prepared, and subsequently, a show cause notice was issued to the applicant company.
4. In response, the company submitted detailed replies dated 08.07.2019 and 31.07.2019, contending that the resort, including its restaurant, functions as part of an integrated hospitality service. It was asserted that the sale of beverages within the resort premises forms an incidental component of the composite service rendered to guests, and therefore, does not fall within the purview of the Legal Metrology Act, 2009 or the Packaged Commodities Rules, 2011.
5. Following the inspection, notices were served to the company. Upon receiving what the authorities deemed an "unsatisfactory explanation" from the applicants, a complaint was filed before the Chief Judicial Magistrate, Almora. The magistrate subsequently took cognizance of the matter and issued a summoning order against the applicants.
6. The arguments advanced by learned counsel have been heard,and the records perused.
7. On behalf of the applicants, it is contended at the outset thatthe complaint fails to establish any statutory violation under the Legal Metrology Act, 2009, or the Rules framed thereunder. Rule 32 of the Legal Metrology (Packaged Commodities) Rules, 2011, under which cognizance has been taken, is a residuary provision prescribing punishment only for contraventions where no specific penalty is provided elsewhere in the Rules.
8. The summoning order does not identify which provision of the Rules has been contravened, nor does it explain how the transaction in question, a sale within a resort restaurant, falls within the ambit of the Act. The absence of any reference to a specific violation demonstrates non-application of mind and renders the proceedings liable to be quashed.
9. Another contention which the learned counsel for the applicants stressed upon is that the doctrine of mala fides and abuse of process bars the complaint. Reliance was place on Hon'ble Supreme Court Judgement Federation of Hotels and Restaurants Association of India vs. Union of India (2018) 2 SCC 97 stating that, the Inspector, Legal Metrology, proceeded with the complaint despite being fully aware of the settled legal position under the Federation judgment, which explicitly excludes hotels and restaurants from the purview of the Legal Metrology Act.
10. The deliberate disregard for binding precedent, coupled with the suppression of the company's replies, which squarely relied on the Federation judgment, demonstrates a malicious intent to harass the applicants. This Hon'ble Court has consist
