THE HONOURABLE SRI JUSTICE A.GOPAL REDDY Crl.P.Nos. 4103 of 2006 and 2720 of 2009 Dt, 4-3-2011 Crl.P.No.4103/2006: 1. Mr. Shah P. Pradip and another ..Petitioners (A-6 and A-7) V. 1. M/s. Greesha Laboratories Limited, Hyderabad, represented by its Managing Director, Dr. U.Ravi Rao and another. ..Respondents The Court made the following: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY Crl.P.Nos. 4103 of 2006 and 2720 of 2009 COMMON ORDER Crl.P.No.4103/2006 by A-6 and A-7 and Crl.P.No.2720/2009 by A-1 to A-5 are filed under Section 482 Cr.P.C., to quash the proceedings initiated against them in CC No.1203/2006 on the file of Additional Chief Metropolitan Magistrate, Hyderabad for the offence under Sec. 500 and 120-B IPC r/w 34 IPC. The Complainant No.1 being a company engaged in manufacture of pharmaceutical preparations and Complainant No.2 being the Managing Director of R-1 filed a complaint under Sec. 2(d) r/w Section 190(1) (a) Cr.P.C., before the trial court alleging that one Parke Davis, Uppal was manufacturing certain pharmaceutical preparations and it entered into an agreement with complainant No.1 for the purpose of getting certain products manufactured by complainant No.1 in the year 2002. One such product was Gelusil MPS Liquid. The technical know-how, formula for the manufacture of Gelusil MPS, both tablets and liquid, had been given to the complainant No.1 by Parke Davis. As per the agreement, the complainant No.1 has to manufacture the products strictly adhering to the formula and the procedure given by Parke Davis. Subsequently, Parke Davis was taken over by the first accused pursuant to the arrangement between them. The first complainant had been asked to undertake certain modifications, additions to the facility in manufacturing Gelusil MPS, which the complainant No.1 successfully carried out, which was duly approved by Parke Davis. There was a defect in manufacturing Gelusil MPS liquid. In the manufacturing process, certain preservatives were added to control bacterial growth in the solution throughout the shelf life of the product. The first complainant had no choice but to manufacture the products strictly in accordance with the technical know-how information and formula given by the first accused. While so, the first accused decided to recall the entire batches of Gelusil MPS Liquid manufactured between 01st May, 2002 and 31st January, 2004 on the basis of certain consumer complaints. A-1 also gave press coverage to the factum of withdrawal of the products manufactured between the said dates. The said coverage appeared in CNBC television on 26-2-2004 and the reports appeared in various newspapers like Business Standard, Business Time and Economic Times on 27-2-2004. Further, A-1 gave information to the press to the effect that the first complainant manufactured the products in question and they are taking steps to terminate the manufacturing agreement between the first accused and the first complainant, but the first accused purposefully did not give the statement that the products were manufactured by the complainants as per the formula and procedures supplied by the first accused to avoid any possible product liability claims. In addition to the above, the first accused addressed letters to various Doctors practicing all over the country informing them about recalling of the Gelusil MPS liquid manufactured between the said dates with a misleading message that “there is no health hazard” which is a false statement, because odour problems are due to high bacteriological growth and the presence of some of the bacteria like pseudomonas species can cause health hazards. The first accused addressed a letter dt. 22-6-2004 to the Director (FAC), Office of the Director General, Drugs and Copy Right, Drugs Control Administration, Hyderabad, stating that the products were manufactured by the first complainant and made a further allegation that there was a lapse on the first complainant on one or more of the following counts: (a) Non-compliance of purified water system; (b) Poor environment controls;(c) Poor equipment/air cleaning practices; (d) Lack of personal hygiene. By the statements issued by the first accused in the newspapers which were widely circulated in the entire country and the letters addressed to the Doctors dt. 22-6-2004 by the first accused, the first accused implied and imputed that the manufacturing practices and procedures, carried out by the first complainants were inadequate, irregular or incorrect and the complainants were solely responsible for the defective products. After making statements implicating the first complainant of wrong manufacturing practices, the first accused proceeded to terminate the agreement between itself and the first complainant. The financial aspects of termination have been worked out by and between the first complainant and the first accused, which is not the subject matter of the complaint. The complainant No.2 is aggrieved with the defamatory remarks made by the first accused, both in pubic and also in private, particularly to the Doctors, which has lowered the prestige/reputation and image of the first complainant in the eyes of all concerned. The first accused represented by the other accused with a dishonest intention imputed wrong manufacturing practices to the first complainant, such as odour, taste etc., The formula or the know-how for the manufacture of the said Gelusil MPS liquid was supplied by Parke Davis which is the predecessor of the first accused was not responsible for the product complaints. The aforesaid imputations and allegations made by the first accused knowing fully well that there was a defect in the formulation of Gelusil MPS liquid, inasmuch as the quantum of preservatives was grossly inadequate to control the growth of microbes, which alone would result in odour being emanated by the product. With a view to save and protect its name and with a view not to incur the wrath of the drugs control administration and also not to face possible product liability claims, the first accused represented by accused 2 to 7 conspired to implicate the first complainant wrongfully by throwing the blame on it. The said conspiracy to defame the complainant No.1 was hatched by the accused 2 to 7 with a view to protect the name and the fame of the first accused. After publication of the slanderous material by the first accused, the complainant No.1 received enquiries from Glaxo India through e-mail on 27-2-2004. The complainant No.1 addressed a suitable reply to Glaxo. Similarly, the complainant No.1 also received enquiries from Abbott (India) Limited, which was suitably answered by e-mail dt.4-3-2004. The complainants have received numerous enquiries from various industrialists, trade bodies, Central and State Drug Departments, etc., as referred to in the complaint, which establishes that on account of the slanderous remarks published by the first accused, the reputation of the first complainant as a quality manufacturer has taken a severe beating and has suffered irreparable loss. Thus, the accused No.1 through A-2 to A-7, have criminally conspired with each other to harm and damage the reputation of the complainants and they have committed the offences, as aforementioned. On taking cognizance and issuing process by the Learned Magistrate, Crl.P.No.4103/2006 has been filed to quash the proceedings initiated against A-6 and A-7 contending that the allegations levelled in the complaint, even if taken at their face value do not constitute any offence, much less an offence under Sec. 120-B and 499 IPC punishable under Sec. 500 r/w 34 IPC. Learned Magistrate mechanically took cognizance of the offence, The complaint does not disclose how A-6 is connected with the first accused company and equally A-7 is described as Director of M/s. Pfizer Inc. New York, which is not A-1 company but it is a foreign company. In the absence of any specific allegation, how they are responsible for the alleged defamatory statements alleged to have been made by the first accused company on the vague allegations, taking cognizance for the offence is abuse of process of law. Crl.P.No.2720/2009 has been filed contending that the impugned publications which are filed as paper cuttings along with the complaint as document Nos.5 to 7, would show that none of the persons who are arrayed as accused in their capacity as Directors of the petitioner No.1 have made the said publications and in such an event, the prosecution of all the Directors of the Board of the first petitioner company on the basis of omni bus allegation of criminal conspiracy without there being any material is nothing but an abuse of process of law. The reason for filing the false complaint against the entire Board was the termination of contract by the petitioner No.1 with respondent No.1 and the said complaint is made with a mala fide intention with an oblique motive to harass the petitioners. In the absence of any reference to the complainant No.2 in the impugned publication, he cannot join with the first complainant and allege that the accused made imputations against him. Sri D. Prakash Reddy, learned Senior Counsel appearing for the petitioners in both the criminal petitions contended that taking everything is to be true will not make no offence under Sec. 499 IPC and withdrawing products manufactured during the period from 01st May, 2002 to 31st January, 2004 and termination of agreement etc., if any, is only a civil dispute between the first accused and the first complainant, and therefore, initiation of criminal proceedings is nothing but an abuse of process of law, therefore, the proceedings initiated against A-6 and A-7 are liable to be quashed. He further contended that the publication of the news has not been spelt out in the complaint and the letter dt. 22-6-2004 is in answer to the query made by the Director (FAC). Since it is an internal correspondence, unless it is published, initiation of criminal proceedings is nothing but an arm-twisting, therefore, the proceedings initiated against the petitioners are liable to be quashed. He further contended that the criminal liability, if any, as per the complaint should be in existence as on the date of offence, and after settling the financial aspects in withdrawing the products manufactured by the complainants and termination of the agreement, lodging of complaint is only with a intention to harass the accused. Sri S. Ravi, learned Senior Counsel for the defacto complainants, in rebuttal, contended that except the complainants’ company, no other pharmaceutical company manufactures Gelusil MPS liquid and as there was a problem in the formula adopted in manufacturing Gelusil MPS liquid, which was earlier manufactured by Parke Devis, the complainants recalled all the batches of Gelusil MPS liquid due to bad odour when the accused had not take any corrective steps to reduce the bad odour; and giving wide publicity about withdrawal of products in newspapers and electronic media attracts explanation-3 to Sec.499 IPC. He further contended that with a view to protect the name of the first accused and not to incur wrath of Drugs Control Administration and also not to face possible product liability claims, A-2 to A-7 conspired with A-1 to implicate the first complainant by throwing the blame on them and as a result of publication of the first accused, the reputation of the first complainant as a quality manufacturer has taken a severe beating in the pharmaceutical industry and that therefore, the complainants should be given an opportunity to establish their case against the accused and the same cannot be thrown out at the initial stage. In support of his submissions, learned counsel relied on the judgment of the Supreme Court in JEFFREY J. DIERMEIER v. STATE OF WEST BENGAL[1] In the light of the above submissions, the question that falls for consideration is “Whether publication made in recalling of Gelusil MPS liquid batches makes out an offence of “defamation” as defined in Sec. 499 IPC and would attract the penal consequences envisaged in Section 500 IPC?” Recall of entire batches of Gelusil MPS liquid manufactured between 1st Mary, 2002 and 31st January, 2004, on the basis of the consumer complaints was published in the newspapers like, Business Standard, Business Times and Economic Times. In Business Standard, on 27-2-2004, under the caption “Pfizer recalls Gelusil batches” it was published as under: “Pfizer India has recalled all unsold stocks of Gelusil MPS liquid, one of its largest selling brands, manufactured between May 1, 2002 and January 31, 2004. These batches of Gelusil MPS were manufactured by a third-party contractor and were recalled after consumer complained of odour related problems. In a notice to wholesalers and stocks on February, 11, 2004, a copy of which is available with Business Standard, Pfizer said, “We are recalling all available market stocks of all lots of Gelusil MPS liquid….This recall is a voluntary action on our part towards our commitment to product quality. It is emphasized that this recall is not related to any concerns as to risk to health. Further the Company advised its wholesalers and stockists to immediately stop sales of Gelusil MPS liquid manufactured between the relevant dates and to return all such stocks to the company. Pfizer will, however, continue to market Gelusil tablets. The Gelusil range of products has an annual turnover of Rs.25 crore. “We have withdrawn the product range till we got another third-party manufacturer” a company executive said. The product batch manufactured by Greesha Laboratories, was bought by Parke-Davis India, which is now merged with Pfizer India. The company is recalling pack sizes of 50 m, 170ml and 400 ml.” In the Business Times on 27th February, 2004, it was published that the Company official confirmed with the Correspondent that Pfizer had discontinued its contract manufacturing agreement with Greesha following the incident. By letter dt. 22-6-2004 addressed to the Director (FAC), Drugs Control Administration, Hyderabad, Director, Quality Operations of the first accused company furnished information to satisfy the queries raised by the Director about notifying the termination of agreement with the first complainant’s company and the quantities recalling from the market, Gelusil MPS liquid 170 ml- 9,07,439 bottles and Gelusil MPS liquid 400 ml-1,21,985 bottles stating that there has not been any recall of Gelusil MPS liquid in the past 10 years and there have been incidences reported since 1978 when an occasional batch not yet distributed as found not to comply with the specifications (bulk and finished product) and was destroyed by obtaining appropriate clearances from the authorities and Parke- David was very much aware about the sensitivity of the product, Gelusil MPS liquid and had taken preventive measures that assured the product quality through its shelf life and also in releasing only product that met all its quality attributes. “Defamation” is defined under Section 499 IPC. It reads as under: “499. Defamation.—Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter excepted, to defame that person.” Explanations 1 and 2: x x x Explanation 3:.—An imputation in the form of an alternative or expressed ironically, may amount to defamation. Explanation 4: x x x x First Exception.—Imputation of truth which public good requires to be made or published.—It is not defamation to impute anything which is true concerning any person, if it be for the public good that the imputation should be made or published. Whether or not it is for the public good is a question of fact. Second Exception to Tenth Exception: x x x x To constitute “defamation” under Section 499 IPC, there must be an imputation and such imputation must have been made with the intention of harming or knowing or having reason to believe that it will harm the reputation of the person about whom it is made. In essence, the offence of defamation is the harm caused to the reputation of a person/company. In the complaint, it was stated thus” “13.The recall of batches of Gelusil MPS liquid manufactured by the first accused between 1st May,2002 and 31st January, 2004, coupled with statement that the first accused was taking steps for termination of contract manufacturing agreement with the first complainant, in the light of the fact that the firs complainant was the only agency manufacturing Gelusil MPS liquid for the first accused establish that a) The first accused represented by other accused with a dishonest intention imputed wrong manufacturing practices to the first complainant as the sole cause of the defect in the product viz., odour, taste etc., b) The formula or the know-how for the manufacture of the said Gelusil MPS liquid was supplied by Parke Davis which is the predecessor of the first accused was not responsible for the product complaints. 16. With a view to save and protect its name and with a view not to incur the wrath of the Drugs Control Administration and also not to face possible product liability claims, the first accused represented by A-2 to A-7 conspired to implicate the first complainant wrongfully by throwing the blame on the first complainant. The said conspiracy to defame the complaiant No.1 was hatched by accused 2 to 7 with a view to protect the name and fame of the first accused. 17. In the process the first complainant has suffered serious damage to the reputation on account of the reckless allegations made by the first accused. The first complainant has been the contract manufacturer of pharmaceutical formulations for and on behalf of several multi-national companies such as Abbott(I) Limited, Glaxo- Smithline India Limited and Dr. Reddy Laboratories Limited. After the publication of the slanderous material by the first accused, the Complainant No.1 received anxious enquiries from Glaxo India by its representative’s e-mail on the 27th February, 2004. The complainant No.1 addressed a suitable reply to Glaxo. Similarly the complainant also received enquiries from Abbott (India) Limited, which the complainant answered on the 4th March, 2004 by e-mail. The complainant has received numerous enquiries from various industrialists, trade bodies, Central and State Drug Departments and list whereof is given below. 1. Glaxo-Smithline (I) Limited. 2. Abott (I) Limited 3. Johnson & Johnson Limited 4. Dr.Reddy’s Laboratories Limtied 5. Universal Medicare Limited 6. Bharat Bio-tech Limited 7. Andhra Pradesh State FDA 8. Central FDA] 9. FICCI,OPPI 10. Surven Life Sciences 11. General Physicians etc 18. The aforesaid facts establish that on account of the slanderous remarks published by the first accused, the reputation of the first complainant as a quality manufacturer has taken a severe beating and has suffered irreparable loss.” Sri S.Ravi, learned Senior Counsel appearing for the defacto complainants emphatically contended that the publication had caused harm to the reputation of the first complainant’s company in the pharmaceutical industry, and said publication made in the newspapers about recalling of drugs falls under explanation 3 to Sec.499 IPC Admittedly, the publication does not make any imputation against the first complainant company or its Managing Director, the second complainant. What all published in the newspaper is about recalling of Gelusil MPS liquid manufactured between 1st May,2002 to 31st January,2004 manufactured by the third party contractor after consumer complaints of odour related problems and they have withdrawn the product range till they get another third party manufacturer. The first accused’s spokesperson told “Business Line” and confirmed with the correspondent that Pfizer had discontinued its contract manufacturing agreement with Greesha following the incident, which is only hearsay as who is the spokesperson confirmed the news and his authenticity is not forthcoming. The news item published in the newspaper do not attribute any other reason nor imputed about the defect in manufacture of the drug by the complainants company or complainant No.1’s company indulging any un-trade practice in not adhering to the formula provided to the first complainant for manufacture of Gelusil MPS liquid. Since the first complainant’s company manufactured drugs in the name of first accused company, if at all withdrawal of Gelusil MPS liquid on the basis of consumer complaints will affect its reputation also. It is well settled that summoning of an accused in a criminal case is a serious matter. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof would be sufficient for the complainant to succeed in bringing charge home against the accused. He cannot be a silent spectator at the time of recording of preliminary evidence before summoning of the accused, but has to carefully scrutinize the evidence brought on record and may even himself put questions to the complainant and his witnesses, when examined before issuing process, to elicit answers to find out the truthfulness of the allegations or involvement of the accused and role played by them in making such publication and writing such letters and examine if any offence is prima facie committed by all or any of the accused. The sworn statement of the second complainant, recorded by the criminal court, do not indicate about involvement of A-2 to A-7 in publication of the news item or writing letters. In view of the same, I have no hesitation to hold that the Magistrate has not applied his mind while taking cognizance of the offences against A-2 to A-7. This court also do not find any merit in the contention that case falls under explanation 3 to Section 499 IPC since the same do not fall under any of the illustrations mentioned in Sec.499 IPC to attract third explanation. In the letter addressed by the first accused company to the Director (FAC), Drugs Control Administration, Andhra Pradesh, the power of attorney authorized to represent on behalf of the first accused while pointing out the lapses committed by first complainant company stating that they received communication from the Joint Commissioner, Greater Mumbai, Food and Drug Administration, M.S. Bandra, vide letter No.Substandard Report/771-04/Zone 3 dated February, 7, 2004, addressed to the wholesaler, M/s. J.K.Agencies, Mahim, Mumbai for Gelusil MPS liquid, Lot No.3183, Manufacturing Date 1/7/03 and Exp.Date 30/06/05 manufactured at M/s. Greesha Stating that the above lot has been declared as “not of standard quality” on account of total microbial count exceeding the limit “microbial limits: Total aerobic microbial count; the sample contains 28.500 living organisms per ml (USP limit: Not more than 100 living organisms per ml)” as per the Government Analyst’s report No.M/4348/2003 dt. 15/1/04, Drug Control Laboratory, Bandra, Mumbai; and reasons for withdrawal mentioned therein, no doubt will have an impact on the reputation of the first complainant’s company, but the said clarification given by the Authorized Representative of the first accused company is as per the queries posed by the Director, Drug Control Administration. Whether it is a privileged communication enjoys a qualified privilege or absolute privilege can be claimed is a matter which has to be decided by the criminal court only against the person who is authorized to write such a letter on behalf of the first accused company, and the 1st accused company. Mere allegation that A-2 to A-7 conspired to implicate the first accused itself is not sufficient to constitute an offence of conspiracy in the absence of any allegation about the role played by A-2 to A-7 in publishing the news item and writing the letter. When the allegations do not disclose how A-6 is connected with the first accused company and A-7 who is Director of M/s. Pfizer INC, New York, which is not A-1 company but is a sister company and how they are responsible for writing such a letter by the authorized representative of the first accused company proceeding against them for the offence under Section 499 IPC punishable under Sec.500 IPC and Sec.120-B r/w 34 IPC is nothing but abuse of process of court. No such allegations are made against A-2 to A-7. Therefore, taking cognizance by the Magistrate against the petitioners/A-2 to A-7 for the offence under Sec.499, 120-B r/w 34 IPC is clearly an abuse of process of court and the proceedings initiated against them are liable to be quashed and they are accordingly quashed. In the result, Crl.P.No.4103/2006, filed by