IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR MONDAY, THE 1ST NOVEMBER 2010 / 10TH KARTHIKA 1932 Crl.MC.No. 2599 of 2010(B) -------------------------------------- [CRL.R.P.NO.55/2004 OF IIND ADDITIONAL SESSIONS COURT, PALAKKAD, CC.NO.479/2002 OF JUDICIAL MAGISTRATE OF FIRST CLASS COURT-III, PALAKKAD] .................... PETITIONERS/REVISION PETITIONERS/PETITIONERS/ACCUSED NOS.3 AND 5: ---------------------------------------------------------------------------------------------------------------- 1. P.K.SIDHEEK, S/O. P.K.ISMAYILKUTTY, PARAKKOTTIL HOUSE, SALEENA MANZIL, OOTTY ROAD, PERINTHALMANNA, MALAPPURAM DISTRICT 2. C.H.FATHIMA, W/O.HAMSAKUTTY MELETHIL HOUSE, POST MANNARMALA, PATTIKKAD, MALAPPURAM DISTRICT. BY SRI.P.VIJAYA BHANU, SENIOR ADVOCATE ADV. SRI.M.REVIKRISHNAN. RESPONDENTS/RESPONDENTS/RESPONDENTS/COMPLAINANT & STATE: ----------------------------------------------------------------------------------------------------------- 1. THE FOOD INSPECTOR, MOBILE VIGILANCE SQUAD, KOZHIKODE (REPRESENTED BY THE FOOD INSPECTOR, PALAKKAD CIRCLE) – 678 001. 2. STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM. R1 & R2 BY PUBLIC PROSECUTOR SRI. P.A. SALIM. THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 01/11/2010, ALONG WITH CRL.M.C NO. 2600 OF 2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: prv. M.SASIDHARAN NAMBIAR, J ........................................... CRL.M.C..NOs. 2599 & 2600 OF 2010 ............................................ DATED THIS THE 1st DAY OF NOVEMBER,2010 ORDER The petitioners in Crl.M.C.2599 of 2010 are accused 3 and 5 and petitioners in Crl.M.C.2600 of 2010 are accused 2 and 6 in C.C.479 of 2002 on the file of Judicial First Class Magistrate-III, Palakkad taken cognizance for the offence under Section 16(1-A)(i) read with Section 7(i), 2(ia)(f) and Rule 5A-18-06-12 of Appendix B of Prevention of Food Adulteration Act (in short, `PFA Act') on a complaint filed by Food Inspector, Mobile Vigilance Squad, Kozhikode. Annexure A complaint was filed alleging that on 7.5.2002 at about 2.30 pm, Food Inspector, Mobile Vigilance Squad, Kozhikode inspected Hotel Tripenta, Malampuzha and first accused was found in charge of the business of the Hotel. Disclosing his identity, Food Inspector purchased bengal gram and prepared three samples and sent one sample to the Public Analyst and sent the remaining two samples to the Local Health Authority. The report received from the Public Analyst shows that the food article is adulterated. Hence a complaint CRMC 2599 & 2600/10 2 was filed. First accused was alleged to be the person in charge of the business of Hotel, in paragraph 6 of the complaint. In paragraph 4, second accused is alleged as the licensee and Managing Director of 6th respondent Company. Accused 3 to 5 are shown as Directors of the Company. Petitioners in Crl.M.C.2600 of 2010 filed CMP 4616 of 2003 and petitioners in Crl.M.C.2599 of 2010 filed CMP 4617 of 2003, to drop the proceedings against them. By Annexure B order, learned Magistrate dismissed the petition. Petitioners in Crl.M.C.2600 of 2010 filed Crl.R.P.55 of 2004 and petitioners in Crl.M.C.2599 of 2010 filed Crl.R.P.5 of 2004 before Additional Sessions Judge, Palakkad. By Annexure C order, the revision petitions were dismissed. These petitions are filed under Section 482 of Code of Criminal Procedure to quash Annexure B and C orders and to drop the proceedings as against them. Learned counsel appearing for the petitioners and learned Public Prosecutor were heard. 2. The learned Magistrate and learned Sessions Judge rejected the claim of the petitioners in Crl.M.C.2599 of 2010. Decision of the Apex Court in SMS Pharmaceuticals V. Neeta Bhalla (2005(4) KLT 209) was not relied on drawing a distinction between Section 17 of the CRMC 2599 & 2600/10 3 PFA Act and Section 141 of Negotiable Instruments Act (in short, `N.I Act'). It was found that when N.I Act does not provide for a nomination, Section 17 of PFA Act provides for nomination, making it further clear that when there is a nomination, only the person so nominated, is put in charge and responsible to the Company for the conduct of the business of the company and he alone could be prosecuted and only in the absence of a nomination, the persons in charge and responsible to the conduct of the business of the company could be prosecuted and under the company law Directors of a company are in charge and responsible for the affairs of the company and therefore even in the absence of an allegation in the complaint that Directors were in charge and responsible for the business of the company, they could be prosecuted as provided under Section 17 and therefore the prayer of the petitioners in Crl.M.C.2599 of 2010 was rejected. 3. Section 17 of P.F.A Act reads:- “Offences by companies - (1) Where an offence under this Act has been committed by a company- (a)(i) the person, if any, who has been nominated under sub-section (2) to be in charge of, and responsible to, the company for the conduct of the business of the company (hereinafter in this section CRMC 2599 & 2600/10 4 referred to as the person responsible), or (ii)where no person has been so nominated, 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; and (b) the company shall be deemed to be guilty of the offence and hsall 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 and that he exercised all due diligence to prevent the commission of such offence. (2) Any company may, by order in writing, authorise any of its directors or managers (such manager being employed mainly in a managerial or supervisory capacity) to exercise all such powers and take all such steps as may be necessary or expedient to prevent the commission by the company of any offence under this Act and may give notice to the Local (Health) Authority, in such form an in such manner as may be prescribed, that it has nominated such director or manager as the person responsible, along with the written consent of such director or manager for being so nominated. Explanation - Where a company has different establishments or branches or different units in any establishment or branch, different persons may be nominated under this sub-section in relation to different establishments or branches or units and the person nominated in relation to any establishment, branch or unit shall be deemed to be the person responsible in respect of such establishment, branch or unit. (3) The person nominated under sub-section (2) shall, CRMC 2599 & 2600/10 5 until- (i) further notice cancelling such nomination is received from the company by the Local (Health) Authority; or (ii) he ceases to be a director or, as the case may be, manager of the company; or (iii) he makes a request in writing to the Local (Health) Authority, under intimation to the company, to cancel the nomination (which request shall be complied with by the Local (Health) Authority), whichever is the earliest, continue to be the person responsible. Provided that where such person ceases to be a director or, as the case may be, manager of the company, he shall intimate the fact of such cesser to the Local (Health) Authority. Provided further that where such person makes a request under clause (iii), the Local ( Health) Authority shall not cancel such nomination with effect from a date earlier than the date on which the request is made. (4) Notwithstanding anything contained in the foreign sub-sections, 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,(not being a person nominated under sub section (2), 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 any body corporate and includes a firm or other association of individuals; (b) “director” in relation to a firm, means a partner in the firm; and c) “Manager” in relation to a company engaged in CRMC 2599 & 2600/10 6 hotel industry, includes the person in charge of the catering department of any hotel managed or run by it”. 4. True, Section 141 of N.I Act does not provide for a nomination or an identical provision like sub-section A(i) of Section 17 of the PFA Act. But, Section 17 of the PFA Act provides for prosecution of the company. Under sub-clause (i) of clause A of sub-section (1), if a person is nominated by the company under sub-section (2) to be in charge of and responsible to the company for the conduct of business of the company, he is liable and he shall be taken guilty of the offence. So also under sub-clause (ii) of clause A, where no person has been so nominated, every person who at the time the offence was commited was in charge of and was responsible for the conduct of business of the company is liable. Therefore, in the absence of a nomination, all persons who are in charge and were responsible to the company for the conduct of the business of the company at the time of commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceeded against. The question is whether a Director of company for the sole reason that he is a Director of the company, in the absence of an allegation in the complaint that he was in charge and CRMC 2599 & 2600/10 7 responsible for the conduct of business of the company, at the time when the offence was committed, is liable to be prosecuted for an offence under the PFA Act. 5. The Honourable Supreme Court in Rangachari V. BSNL (2007(2) KLT 1030) had occasion to consider the responsibility of Directors of the company. Holding that a company, though a legal entity cannot act by itself but can act only through its Directors., relying on Section 291 of the Companies Act which provides that subject to the provisions of the Act, the Board of Directors of a company shall be entitled to exercise all such powers and to do all such acts and things as the company is authorised, held that normally, the Board of Directors act for and on behalf of the company. Quoting from the passages in R.K.Dalmia and others V. The Delhi Administration (1963(1) SCR 253), it was held that “Directors in the eye of law, are agents of the company for which they act, and the general provisions of law of principal and agent regulate in most respects the relationship of the company and its Directors”. But that does not mean that if there is no allegation that a Director of the company was in charge of and was responsible to the company for the conduct of the business of the CRMC 2599 & 2600/10 8 company, at the time of commission of the offence, he could be prosecuted, in the absence of a nomination as provided under sub- clause(ii) of Section 17 of PFA Act. To prosecute the Director for an offence committed by the company, the Director shall be in charge of the company at the time when the offence was committed and was responsible to the company for the conduct of business of the company. 6. The argument of the learned Public Prosecutor that as the Directors of the company are responsible for the business of the company, even in the absence of a specific allegation that the Director was in charge of and responsible for the conduct of the business of the company, he can be prosecuted, as he shall be deemed to be guilty of the offence cannot, be accepted. The deeming provision under sub- section (i) of Section 17 would be attracted only there is an allegation that the person being a Director, was in charge of and was responsible to the company for the conduct of business of the company. The criminal liability cannot be fastened on the Director without the mandatory necessary pleadings. 7. The Honourable Supreme Court in Municipal Corporation of Delhi V. Ram Kishan Rohtagi (AIR 1983 SC 67) had occasion to CRMC 2599 & 2600/10 9 consider a similar case. In that case, third accused was the Manager and second accused, the company and accused 4 to 7, Directors of the company. There was an allegation in the complaint in that case that the accused committed the offence under the PFA Act, contending that third accused as Manager, second accused as the company and accused 4 to 7 as Directors of the company were in charge and responsible for the conduct of the business of the company at the time of sampling. Their Lordships finding that there is no material to show that accused 4 to 7 were in charge and responsible for the conduct of business of the company, held:- “So far as the Manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the Directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the Directors (accused Nos. 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed”. CRMC 2599 & 2600/10 10 8. What is alleged in Annexure A complaint is that first accused was in charge of the Hotel at that time and second accused is the Managing Director. Except alleging that accused 3 to 5 are Directors of the Company, there is no allegation that any of them were in charge and were responsible for the conduct of business of the company at that time. Therefore, when in the absence of an allegation in the complaint that petitioners in Crl.M.C.2599 of 2010 were in charge of and responsible to the company for the conduct of business of the company, they cannot be prosecuted for the offence under the PFA Act as alleged in Annexure A complaint. Therefore, proceedings as against accused 3 and 5 can only be quashed. 9. But the case is different as against the second accused. He is the Managing Director of the company. Though it was contended by the petitioners in Crl.M.C.2600 of 2010 that second accused company has nominated a person as provided under sub-clause (ii) of clause A of Section 17 of the PFA Act, the Food Inspector is disputing the nomination. Hence at this stage, accepting the disputed nomination, it cannot be said that the Managing Director cannot be proceeded. CRMC 2599 & 2600/10 11 Therefore, the plea of the second accused based on the nomination, is left open to be decided at the time of trial after recording the evidence. The case as against 6th accused cannot be quashed as under clause B of sub-section (i) of Section 17, the company shall be deemed to be guilty of the offences. 10. Crl.M.C.2599 of 2010 is allowed. The proceedings in C.C.479 of 2002 on the file of Judicial First Class Magistrate-III, Palakkad as against accused 3 and 5 are quashed. Crl.M.C.2600 of 2010 is dismissed granting liberty to the second accused to raise all the contentions at the time of trial. M.SASIDHARAN NAMBIAR, JUDGE lgk