PETITIONER:
RAJASTHAN PHARMACEUTICAL LABORATORY, BANGALORE AND TWOOTHERS
Vs.
RESPONDENT:
STATE OF KARNATAKA
DATE OF JUDGMENT14/01/1981
BENCH:
GUPTA, A.C.
BENCH:
GUPTA, A.C.
SARKARIA, RANJIT SINGH
CITATION:
1981 AIR 809 1981 SCR (2) 604
1981 SCC (1) 645 1981 SCALE (1)139
ACT:
Drugs and Cosmetics Act, 1940-Offences under sec. 18
(c), (Sale without licence); under sec. 18(a)(i), (Selling
sub-standard quality drugs); under sec. 28 (non-disclosure
of source of purchase of drugs exhibited for sale); and
under sec. 18(a)(vi), (disposing of drugs against
prohibitory orders) under sec. 22(1)(c) of the Act and Rule
54A of the rules framed thereunder-Sentences validity of-
Vicarious liability of partners under sec. 34 of the Act-
Fine ordered in excess of the statutory maximum under sec.
18A is not in order-Whether the additional sentence of
imprisonment on one of the accused for the same offence was
illegal-Plea of ignorance about the sub-standard quality
would be a valid defence only as provided by sub-see. (2)
and (3) of sec. 19 of the Act-Sec. 22(1)(c) of the Act does
not provided for a separate punishment in addition to sec.
27(b) of the Act.
HEADNOTE:
M/s. Rajasthan Pharmaceutical Laboratory, first
appellant in Criminal Appeal No. 120 of 1975 is a firm of
which the second appellant is a partner and the third
appellant is a manager. The first appellant holds a licence
under the Drugs and Cosmetics Act, 1940 for re-packing of
drugs mentioned in the list which forms part of the licence
and, therefore, is a manufacturer of the said drugs for the
purposes of the Act in view of the definition of the term
"manufacture" occurring in sec. 3(f) of the Act. The second
and the third appellant are also a partner and a manager
respectively of the first appellant, M/s. Manoj Drug House &
others, in Criminal Appeal No. 96 of 1975.
A search of the business premises in Criminal Appeal
120 of 1975 resulted in seizure of sub-standard drug,
"Sodium Bromide I.P." Batch No. 1 and in Criminal Appeal 96
of 1975 of a sub-standard drug "Liquid Paraffin I.P. 450 ml.
Batch No. 1'.
Besides the three appellants in these two appeals,
another partner of these two firms figured as an accused in
the complaint but as he was absconding the trial could not
proceed against him. In Criminal Appeal 120 of 1975 the
appellants were charged under sections 18(c), 18(a)(1) and
28 of the Drugs and Cosmetics Act, 1940 and in Criminal
Appeal 96 of 1975 they were charged under sections 18(a)(i)
and 18(a)(ii).
The appellants in both the appeals were acquitted by
the trial court. But in appeals preferred by the State, the
High Court in Criminal Appeal 120 of 1975, sentenced each of
the three appellants to pay a fine of Rs. 2,000 on each of
the counts in default appellants Nos. 2 and 3 were to
undergo simple imprisonment for three months "for each non-
payment of line". For the same offences the High Court
further sentenced the third appellant "by virtue of sec.
34(2) of the Act to undergo simple imprisonment for three
months on each
605
count and to pay a fine of Rs. 500 on each count and in
default of payment to simple imprisonment for one month for
"each non-payment of fine". The substantive sentences passed
on the third appellant were directed to run concurrently. In
Criminal Appeal 96 of 1975 the High Court convicted the
accused under sec. 18(a)(i) and sec. 18(a)(vi) and sentenced
each of them to pay a fine of Rs. 1,000 on each count, the
second and the third appellants were to undergo simple
imprisonment for one month in default of payment. The High
Court further convicted them "for having committed the
offence punishable under sec. 22(1)(c)" and sentenced "each
one of the accused to pay a fine of Rs. 1000 for the offence
under sec. 22(1)(c)".
Allowing both the appeals in part and remanding
Criminal Appeal 120 of 1975 to the High Court for proper
sentences, the Court.
^
HELD: (1) The additional sentence of imprisonment on
the third appellant for the same offence is illegal. But in
sentencing the second and the third appellants to pay a fine
only for the offence under sec. 18(c); the provisions of
sec. 27 (a) (ii) which make a sentence of imprisonment
compulsory has been overlooked. [612B]
(2) Sec. 27(a) (ii) of the Act makes a sentence of
imprisonment of not less than one year compulsory for an
offence under s. 18(c) in addition to fine unless for
special reasons a sentence of imprisonment for a lesser
period was warranted. Of course, in the nature of things a
company or a firm could not be sent to jail but that does
not apply to the other two appellants in the instant case.
[611E-F]
(3) By virtue of sec. 34(1) of the Drugs and Cosmetics
Act, the appellants 2 and 3 are accused to be guilty of the
offences committed by the first appellant, as the
explanation appended to sec. 34 makes its provisions apply
to a firm and its partners. [611A-B]
(4) The non-obstante clause with which sub-sec. (2) of
sec. 34 begins does not permit the court to punish the
offender twice for the same offence. It is plain that sec.
34(2) imposes a liability on those directors or officers of
the company who are not directly in charge of the management
of the company and as such could not be held guilty with the
help of sub-section (1) of sec.34, if they were responsible
for the commission of the offences by consent, connivance or
neglect. It would be incongruous if a man found to be
directly responsible for the commission of the offence could
at the same time be held guilty of contributing to the
commission of the offence by his consent, connivance or
neglect. [611 B-C]
There is nothing in the language of sec. 34 to warrant
a construction, that the words "punished accordingly" in
clause (2) of sec. 34 of the Act mean that the persons
mentioned therein can be punished only in the same way as a
company would be punishable, that is, only with a fine and
not with an imprisonment. The words "punished accordingly"
in the context mean that a person deemed to be guilty of an
offence committed by a company shall receive the punishment
that is prescribed by the Act for that offence. [611G]
The State of Maharashtra v. Joseph Anthony Pereira,
(1971) 73 B.L.R. 613, overruled.
606
(6) For the contravention of provisions of sec. 18A,
sec. 28 prescribed imprisonment for a term which may extend
to one year or with fine which may extend to five hundred
rupees or with both. Clearly therefore no fine in excess of
five hundred rupees could be imposed for an offence under
sec. 18A. The imposition of a fine of Rs. 2,000 for the
offence under sec. 18A which is punishable under sec. 28, in
the instant case, is not in order. [611H]
(7) The plea of ignorance of the nature, sub-stance or
quality of the drug in view of the fact that accused got the
supplies of these drugs from the firm Rajasthan
Pharmaceutical Laboratory, who are the packers, is not only
not covered by sub-sec. (2) and (3) of sec. 19 which
enumerate the cases in which general rule continued in sub-
sec. (1) would not apply, but also factually incorrect
because appellants 2 and 3 in Criminal Appeal 96 of 1975,
are respectively a partner and the manager of both the
firms, Rajasthan Pharmaceutical Laboratory and Manoj Drug
House. [613 F-H]
(8) Sec. 22(1)(c) does not provide for a separate
punishment. Rule 54A of the rules framed under the Drugs and
Cosmetics Act prohibits contravention of the prohibitory
order made under sec. 22(1)(c) and sec. 27(b) itself makes
such contravention punishable with imprisonment or with fine
or with both. [614 G-H]
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
120 of 1975.
Appeal by special leave from the Judgment and Order
dated 29-1-1975 of the Karnataka High Court in Criminal
Appeal No. 274/74.
AND
Writ Petition No. 2929 of 1980.
(Under Article 32 of the Constitution).
AND
Criminal Appeal No. 96 of 1975.
Appeal by special leave from the Judgment and Order
dated 13-9-1974 of the Karnataka High Court in Criminal
Appeal No. 168/74.
S. K. Bisaria for the appellant in Cr. A. No. 96/75.
A. K. Sen and S. K. Bisaria for the appellant in Cr. A.
120/75 and for the Petitioner in W.P. 2929/80.
N. Nettar for the respondent in all the matters.
607
The Judgment of the Court was delivered by
Criminal Appeal No. 120 of 1975
GUPTA, J.- This is an appeal by special leave from a
judgment of the Karnataka High Court by which the High Court
set aside the acquittal of the three appellants before us
ordered by the Judicial Magistrate, 1st Class, (4th Court),
Bangalore and convicted them of various offence under the
Drugs and Cosmetics Act, 1940 (hereinafter referred to as
the Act). The first appellant M/s. Rajasthan Pharmaceutical
Laboratory is a firm of which the second appellant is a
partner and the third appellant is the Manager. The first
appellant holds a licence under the Act for repacking of
drugs mentioned in the list which forms part of the licence.
For purposes of the Act the first appellant is a
manufacturer of the said drugs in view of the definition of
the term ‘manufacture’ occurring in section 3(f) of the Act
which is as follows:-
“manufacture in relation to any drug or cosmetic
includes any process or part of a process for making,
altering, ornamenting, finishing, packing, labelling,
breaking up or otherwise treating or adopting any drug
or cosmetic with a view to its sale and distribution
but does not include the compounding or dispensing of
any drug, or the packing of any drug or cosmetic in the
ordinary course of retail business; and ‘to
manufacture’ shall be construed accordingly;”
On February 27, 1970 on a search of the business premises of
the first appellant, a Drugs Inspector seized 42 items of
drugs from a room, 33 of which were not in the approved list
of drugs appended to the licence issued to the first
appellant. The third appellant who is the Manager of the
firm and was present during the search failed to disclose
the source from which these drugs had been acquired. To a
notice issued under section 18A of the Act calling upon the
first appellant to disclose the source of acquisition of the
drugs seized, the reply, signed by the third appellant on
behalf of the firm, was a denial of the fact that the drugs
were found in their possession and that they were seized.
Samples were taken from the seized drugs which were sent to
the Government Analyst and from his report it was found that
one of the drugs, Sodium Bromide I.P. Batch No. 1 was sub-
standard. On the aforesaid facts the Drugs Inspector filed a
complaint in the court of the Judicial Magistrate, First
Class (4th Court), Bangalore alleging that the appellants
before us were guilty of having committed offences under
sections 18(c), 18(a)(i) and 18A punishable respectively
under sections 27(a)(ii), 27(b) and 28 of the Act. Another
partner of the firm also figured as an accused in the
complaint but as he was absconding the trial could
608
not proceed against him. As already stated the magistrate
acquitted the appellants.
On the facts on record the High Court found:
(a) 33 out of the 42 items of drugs seized from the
business premises of the first appellant do not figure in
the approved list of drugs which forms part of the licence
issued to the first appellant. These 33 items had been kept
in the premises for sale without the requisite licence. This
constitutes an offence under section 18(c) of the Act for
which all the appellants are punishable under section 27(a)
(ii).
(b) Of the samples of the drugs seized and sent to the
Government Analyst, one sample of Sodium Bromide I. P. Batch
No. 1 was found to be sub-standard. An offence under section
18 (a) (i) has therefore been committed for which the
appellants are punishable under section 27(b).
(c) The appellants failed to disclose the source of
acquisition of the aforesaid 33 items of drugs which were
not in the approved list. This constitutes an offence under
section 18A which makes the appellants punishable under
section 28 of the Act.
For these offences the High Court sentenced each of the
three appellants to pay a fine of Rs. 2000 on each of the
counts, in default appellants nos. 2 and 3 were to undergo
simple imprisonment for three months ‘for each non-payment
of fine’. For the same offences the High Court further
sentenced the third appellant “by virtue of section 34 (2)”
of the Act to undergo simple imprisonment for three months
on each count and to pay a fine of Rs. 500 on each count, in
default of payment to simple imprisonment for one month for
‘each non-payment of fine’. The substantive sentences passed
on the third appellant were directed to run concurrently.
The only contention raised before us by Mr. A. K. Sen
for the appellants was that the additional sentence of
imprisonment on the third appellant for the same offences
was illegal. Mr. Sen’s contention is right. But in
sentencing the second and the third appellants to pay a fine
only for the offence under section 18(c), the High Court
appears to have overlooked the provisions of section 27 (a)
(ii) which makes a sentence of imprisonment compulsory.
Chapter IV of the Act, headed “Manufacture, Sale and
Distribution of Drugs and Cosmetics” includes section 16 of
section 33A. Section 18 provides inter alia : “no person
shall himself or by any other person on his behalf:
609
(a) Manufacture for sale, or sell, or stock or exhibit
for sale or distribute-
(i) any drug or cosmetic which is not of standard
quality:
(b) x x x
(c) manufacture for sale, or sell, or stock or exhibit
for sale or distribute any drug or cosmetic,
except under, and in accordance with the
conditions of a licence issued………
x x x
Section 18A in these terms:
“Disclosure of the name of manufacture:-
Every person not being the manufacturer of a drug or
cosmetic or his agent for the distribution thereof,
shall, if so required, disclose to the Inspector the
name, address and other particulars of the person from
whom he acquired the drug or cosmetic.”
Section 27 which enumerates the penalties for illegal
manufacture, sale, etc of drugs reads-
“Whoever himself or by any other person on his behalf
manufactures for sale, sells, stocks or exhibits for
sale or distributes-
(a) any drug-
(i) x x x
(ii) without a valid licence as required
under clause (c) of section 18.
shall be punishable with imprisonment for a term which
shall not be less than one year but which may extend to
ten years and shall also be liable to fine:
Provided that the Court may, for any special
reasons to be recorded in writing, impose a sentence of
imprisonment of less than one year;
(b) any drug other than a drug referred to in
clause (a) in contravention of any of the provisions of
this Chapter or any rule made thereunder shall be
punishable with imprisonment for a term which may
extend to three years, or with fine or with both.”
610
Section 28 provides for “penalty for non-disclosure of the
name of the manufacturer etc.” and states
“Whoever contravenes the provisions of section 18A
shall be punishable with imprisonment for a term which
may extend to one year, or with fine which may extend
to five hundred rupees, or with both.”
In this case the offences mentioned above had been
committed by the appellant firm which was engaged in the
business of repacking of drugs. In view of the definition of
the term ‘manufacture’ in section 3(f), packing amounted to
manufacture in relation to the said drugs for the purposes
of the Act. It is necessary to refer to the provisions of
section 34 of the Act which creates vicarious liability for
an offence under the Act committed by a body corporate
including a firm:
“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.
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.”
611
The High Court held and rightly that “by virtue of
section 34(1) of the Act, it will have to be held that both
respondents 2 and 3 [present appellants 2 and 3] are deemed
to be guilty of these offences committed by respondent No. 1
[the first appellant in this Court]”. In view of the
explanation appended to section 34 its provisions will apply
to a firm and its partners. But having found the third
appellant guilty with the aid of sub-section (1) of section
34, the High Court appears to have misdirected itself in
thinking that the non-obstante clause with which sub-section
(2) of the section begins permitted the court to punish the
appellant twice for the same offence. It is plain that
section 34(2) imposes a liability on those directors or
officers of the company who were not directly in charge of
the management of the company and as such could not be held
guilty with the help of sub-section (1) of section 34, if
they were responsible for the commission of the offence by
consent, connivance or neglect. It would also be a little
incongruous if a man found to be directly responsible for
the commission of the offence could at the same time be held
guilty of contributing to the commission of the offence by
his consent, connivance or neglect. The further punishment
awarded to the third appellant with the aid of section 34(2)
is therefore set aside. But this does not conclude the
matter. The High Court imposed a fine of two thousand rupees
on each of the three appellants for the offence under
section 18(c). Section 27(a) (ii) makes a sentence of
imprisonment of not less than one year compulsory for such
offence in addition to fine unless for special reasons a
sentence of imprisonment for a lesser period was warranted.
Of course in the nature of things a company or a firm could
not be sent to jail but that does not apply to the other two
appellants. Mr. Sen referred to a decision of the Bombay
High Court reported in (1971) 73 B.L.R. 613 which holds that
the words “punished accordingly” in clause (2) of section 34
of the Act mean that the persons mentioned therein can be
punished only in the same way as a company would be
punishable, that is, only with a fine and not with
imprisonment. We are unable to agree. There is nothing in
the language of section 34 to warrant such a construction.
It seems clear to us that the words “punished accordingly”
in the context mean that a person deemed to be guilty of an
offence committed by a company shall receive the punishment
that is prescribed by the Act for that offence. It appears
that the High Court was also in error in imposing a fine of
two thousand rupees for the offence under section 18A which
is punishable under section 28. For the contravention of
provisions of section 18A, section 28 prescribes
imprisonment for a term which
612
may extend to one year or with fine which may extend to five
hundred rupees or with both. Clearly therefore no fine in
excess of five hundred rupees could be imposed for an
offence under section 18A.
In the result, while maintaining the conviction of the
appellants, we remit the case to the High Court; the High
Court will consider again on the findings already recorded
the question of sentence-(a) for the offence under section
18(c) punishable under section 27(a) (ii) so far as
appellants 2 and 3 are concerned, and (b) for the offence
punishable under section 28 of which all the three
appellants have been found guilty,-and pass appropriate
sentences. The appeal is allowed to the extent and in the
manner indicated above.
Writ Petition No. 2929 of 1980
The writ petition questions the validity of the order
of the High Court punishing the third appellant in the above
appeal (Criminal appeal No. 120 of 1975) twice for the same
offences with the aid of section 34(2) of the Act. In view
of our decision in the appeal no order is necessary on the
writ petition.
Criminal Appeal No. 96 of 1975
By the judgment impugned in this appeal which is also
by special leave, the Karnataka High Court set aside an
order of acquittal passed by the Judicial Magistrate, Ist
Class (Ist Court), Bangalore City and convicted the
appellants before us for having committed offences under
section 18(a) (i) and 18(a) (vi) of the Drugs and Cosmetics
Act, 1940 (hereinafter referred to as the Act). Of the three
appellants in this appeal the second and the third
appellants are the same persons as in the other appeal. The
second appellant is a partner and the third is the manager
of the first appellant, a firm called M/s. Manoj Drug House.
The absconding partner of the other firm is also a partner
of the first appellant here. The firm possessed valid
licence to sell, stock and exhibit for sale drugs. The
magistrate before whom the appellants were tried for the
aforesaid offences acquitted them; the High Court on appeal
set aside the order of acquittal as already stated.
The facts found by the High Court in this case are as
follows. On July 17, 1970 the Assistant Drug Controller for
the State of Mysore who had been appointed as Inspector
under section 21 of the Act took samples of “Liquid Paraffin
I.P.” Batch I, and “Formaline I.P.” Batch 1 which, as the
labels on these drugs showed, had been repacked by M/s.
Rajasthan Pharmaceutical Laboratory, the first appellant in
the other case. The Inspector sent the samples to the
613
Government Analyst and the report received from him showed
that the products were not of standard quality. On September
9, 1970 the Drugs Inspector, Bangalore Division, found that
the firm M/s. Manoj Drug House was exhibiting for sale
stocks of the drugs which the Government Analyst had
declared as not of standard quality. He therefore issued an
order under section 22(1)(c) of the Act prohibiting the sale
of the said drugs for a certain period which was extended
from time to time. On October 28, 1970 the Inspector asked
the third appellant who was the Manager of the firm to
produce the stock of the prohibited drugs. The Inspector
seized the stock produced before him but this was found to
be short by 57 bottles of Liquid Paraffin I.P. 450 ml. Batch
No. 1. On these facts a complaint was filed in the court of
the City Magistrate, Bangalore alleging that the appellants
were guilty of an offence under section 18(a)(i) of the Act
for having in their stock and exhibiting for sale drugs not
of standard quality and further that they were guilty of an
offence under section 18(a)(vi) for disposing of the
aforesaid quantities of Liquid Paraffin I.P. Batch No. 1 in
spite of the prohibitory order under section 22(1) (c) thus
contravening rule 54A of the Rules framed under the Act.
Both these offences are punishable under section 27(b) of
the Act. The trial court acquitted the accused but on appeal
preferred by the State of Karnataka the High Court set aside
the order of acquittal and convicted the accused under
section 18(a)(i) and section 18(a)(vi), and sentenced each
of the accused to pay a fine of Rs. 1000/- on each count :
the second and the third appellants were to undergo simple
imprisonment for one month in default of payment. We see no
reason to interfere with the findings of fact recorded by
the High Court. The only point argued before us on behalf of
the appellants which was also urged in the High Court was
that they got the supplies of these drugs from the firm
Rajasthan Pharmaceutical Laboratory who were the packers and
the appellants did not know that the drugs were sub-
standard. The High Court rightly pointed out that this did
not constitute a valid defence in view of section 19(1) of
the Act which is as follows.
“19. Pleas.-(1) Save as hereinafter provided in this
Section, it shall be no defence in a prosecution under
this Chapter to prove merely that the accused was
ignorant of the nature, substance or quality of the
drug or cosmetic in respect of which the offence has
been committed or of the circumstances of its
manufacture or import, or that a purchaser, having
bought only for the purpose of test or analysis, has
not been prejudiced by the sale.”
614
The High Court found that the case of the accused was not
covered by sub-sections (2) and (3) of section 19 which
enumerate the cases in which the general rule contained in
sub-section (1) would not apply. In this connection it is to
be noted that appellants Nos. 2 and 3 are respectively a
partner and the manager of both the firms, Rajasthan
Pharmaceutical Laboratory, and Manoj Drug House. This appeal
therefore must fail. It appears however that the High Court
having convicted the appellants as aforesaid and sentenced
them under section 27(b) of the Act further convicted them
“for having committed the offence punishable under sec.
22(1)(c)” and sentenced “each one of the accused to pay a
fine of Rs. 1,000/- (Rupees One thousand) for the offence
under Sec. 22(1) (c)”. Section 22(1) deals with the powers
of Inspectors, clause (c) of which states that an Inspector
may within the local limits of the area for which he is
appointed.
“enter and search at all reasonable times, with such
assistants. if any, as he considers necessary, any
place in which he has reason to believe that an offence
under this Chapter has been or is being committed and
order in writing the person in possession of any drug
or cosmetic in respect of which the offence has been or
is being committed, not to dispose of any stock of such
drug or cosmetic for a specified period not exceeding
twenty days, or unless the alleged offence is such that
the defect may be removed by the possessor of the drug
or cosmetic seize the stock of such drug or cosmetic.”
Rule 54A of the Rules framed under the Act provides:
“54A. Prohibition of sale.- No person in possession of
a drug in respect of which an Inspector has made an
order under clause (c) of sub-section (1) of Section 22
of the Act shall in contravention of that order sell or
otherwise dispose of any stock of such drug.”
Rule 54A prohibits contravention of a prohibitory order made
under section 22(1) (c) and section 27(b) itself makes such
contravention punishable with imprisonment or with fine or
with both Section 22(1) (c) does not provide for a separate
punishment. Accordingly we set aside the conviction of the
appellants purported to be under section 22(1)(c) of the Act
and the sentences passed in respect of the said ‘offence’.
Subject to the modification indicated above the appeal
is dismissed.
S.R. Appeals partly allowed.
615