Case: Pepsico India Holdings Pvt.Ltd Vs. Food Inspector

2. On 25th October, 2006, the Food Inspector of Mobile Vigilance, Kozhikode, inspected the premises of Star Marketing, Ashoka Puram, Door No. 5/1589, under Kozhikode Municipal Corporation and purchased threee bottles of Pepsi on payment of the price. The said bottles were sealed and subsequently, on 26th October, 2006, one part of the sample was forwarded to the Public Analyst, Kozhikode. On 28th November, 2006, the Public Analyst submitted his report stating that upon analysis of the sample of Pepsi Sweetened Carbonated Water, using the Directorate General of Health Services (DGHS) method, pesticide, to the extent of 0.001 mg per litre was detected therein. The said sample was, therefore, adulterated within the meaning of Rule 65 of the 1955 Rules and Section 2(ia)(h) of the 1954 Act3. Based upon the report of the Public Analyst, the Chief Judicial Magistrate, Kozhikode, took cognizance of the offence and issued process against the Appellants4. The Appellants moved the Kerala High Court under Section 482, Cr.P.C. for quashing of the aforesaid order of the Chief Judicial Magistrate, Kozhikode. The learned Single Judge by his order dated 19th February, 2009, dismissed the said application and directed the prosecution to continue with the case. Aggrieved by the order of the learned Single Judge, the, M/s.. Pepsico India Holdings Pvt. Ltd., and its Directors have filed these appeals challenging the cognizance taken by the learned Magistrate on various grounds.

Court's reasoning:
30. The Public Analyst found the sample of Pepsi to be covered by the definition of, as prescribed under Rule 5 of the 1955 Rules. Item A.01 deals withc beverages and Item A.01.01 defines carbonated water to mean water conforming to the standards prescribed for Packaged Drinking Water under the Prevention of Food Adulteration Rules, 1955, impregnated with carbon dioxide under pressure which may contain any of the agents mentioned thereunder singly or in combination. Having found the sample of Pepsi to fall within the definition ofc beverages, the Public Analyst by using the DGHS method found traces of 0.001 mg of Carbofuran per litre in the said sample of Pepsi and in the absence of any given standard, was of the opinion that the same was adulterated in terms of Rule 65 of the 1955 Rules and Section 2(ia)(h) of the 1954 Act. Although, carbonated water was not included in the original Table appended to Rule 65 of the 1955 Rules, as stated hereinbefore, it was introduced in Item 23 of the Table under the heading Chlorpyrifos with effect from 17th June, 2009, and the tolerance limit of the presence of insecticide residue was prescribed as 0.001 mg/litre, which, in fact, was the amount of insecticide residue found by the Public Analyst in the sample of Pepsi submitted for such analysis31. Ordinarily, since the level of insecticide residue was within the limits of tolerance prescribed for carbonated water with effect from 17th June, 2009, the same would not attract the provisions of Section 2(m) of the 1954 Act or the consequences thereof, but the finding of the Public Analyst was rendered in the year 2006, at a time when Sweetened Carbonated Water was not included in the Table appended to Rule 65(2). After the tolerance limit was prescribed, the sample of Pepsi could not be said to be adulterated being within the prescribed tolerance limit32. The entire controversy arises out of the fact that no specific tolerance limit had been prescribed for Sweetened Carbonated Water under Rule 65 and it was, therefore, presumed that trace of any insecticide would amount to adulteration of the final product. In fact, the High Court, while considering the matter, seems to have misconstrued the submissions made on behalf of the Appellants that the mere presence of insecticide residue does not render the article of food as being adulterated. The presence of insecticides within the limits prescribed in the Table to Rule 65 cannot, therefore, be said to have caused adulteration of the article of food in question. In fact, in paragraph 21 of its judgment, the learned Single Judge of the High Court observed that he was inclined to agree with the learned Counsel for the Petitioners that the mere presence of insecticide residue could not ipso facto justify the conclusion that the article of food has become injurious to health33. The High Court summarised its view into several grounds of challenge. Grounds 1 and 2 relate to theg of Rules under Section) and (hh) of the 1954 Act. Grounds 3, 4 and 5 deal with the challenge thrown on behalf of the Appellants to the submissions that the report of the Public Analyst was not final and that the same could be challenged under Section 13(2) of the said Act. Ground 6 deals with the criminal liability of the Directors of the Company on account of the allegations against the Company34. As far as Grounds 1 and 2 are concerned, the High Court was not convinced with the submission made on behalf of the appellants that in the absence of any prescribed and validated method of analysis under Section) and (hh) of the 1954 Act, the report of the Public Analyst, who had used the DGHS method, could not be relied upon, especially when even the Laboratories, where the test for detection of insecticides and pesticides in an article of food could be undertaken, had not been specified. The observation of the Division Bench of the High Court that if the submissions made on behalf of the Appellants herein were to be accepted, the mechanism of the Act and the Rules framed thereunder would come to a grinding halt, is not acceptable to us, since the same could lead to a pick and choose method to suit the prosecution. However, in any event, the percentage of Carbofuran detected in the sample of Pepsico which was sent for examination to the Forensic Laboratory is within the tolerance limits prescribed for Sweetened Carbonated Water with effect from 17th June, 200935. The High Court also misconstrued the provisions of Section) and (hh) in holding that the same were basically enabling provisions and were not mandatory and could, in any event, be solved by the Central Government by framing Rules thereunder, by which specified tests to be held in designated Laboratories could be spelt out. Consequently, the High Court also erred in holding that then of Rules under the aforesaid provisions of the 1954 Act could not be said to be fatal for the prosecution36. As far as Grounds 3, 4 and 5 are concerned, the High Court failed to consider the reasons given on behalf of the Appellants for not sending the Companys sample to the Forensic Laboratory, to the effect that, since neither any validated method of analysis had been prescribed under Section) and (hh) of the 1954 Act, nor had any Laboratory been particularly specified for such examination, such an exercise would have been futile. In our view, no useful purpose could have been served by sending the second sample to the Forensic Laboratory, unless a defined tolerance limit of the presence of the pesticides was available in regard to Sweetened Carbonated Water. It may be noted that the High Court had itself observed that mere presence of insecticide residue to any extent could not justify an allegation that the article of food was adulterated, but contrary to such observation, the High Court went on to hold that the Sweetened Carbonated Water manufactured by the Appellants was adulterated within the meaning of Section 2(ia)(h) of the 1954 Act37. On the question of liability of the Directors of the Company with respect to an offence alleged to have been committed by the Company, the High Court went beyond the ratio of the decision of this Court in S.M.S. Pharmaceuticals Ltd.s case (supra) upon holding that the principles set out in the said decision could not be understood in any mechanical or rigid manner. Instead, the High Court based its judgment on the decision of this Court in N. Rangachari v. Bharat Sanchar Nigam Ltd., IV (2007) SLT 510=II (2007) DLT (Crl.) 380 (SC)=IV (2007) BC 516 (SC) =II (2007) CCR 258 (SC)=II (2007) CLT 275 (SC)=(2007) 5 SCC 108 , which was a case where the complaint clearly and categorically alleged that the named Directors were in charge of and responsible to the Company for the conduct of its business. It is in such circumstances that the prayer for quashing of the proceedings was rejected38. Both the questions regarding the failure of the Central Government to frame Rules to define the Laboratories, where samples of food could be analysed by the Public Analyst, or to define the validated methods of analysis and the liability of the Directors, who are the Appellants before us, are of great importance for the purpose of bringing home a charge against the accused for violation of the provisions of Rule 65 of the 1955 Rules and Section 2(ia)(h) of the 1954 Act and for holding that the Sweetened Carbonated Water manufactured by the Appellants was adulterated in terms of the said Rules. Since the range indicated as to the limits of tolerance of the presence of pesticides in different articles of food, including Sweetened Carbonated Water, which was included in the Table appended to Rule 65(2) with effect from 17th June, 2009, provides very little or practically no margin for error, the selection of Laboratories and the prescription of tolerance limits for different articles of food acquires great significance. The High Court does not appear to have considered the implications of the failure of the Central Government to frame Rules for the aforesaid purpose. Even the view taken by the High Court with regard to Grounds 3, 4 and 5 is not very satisfactory, as the mere presence of pesticide residue does not ipso facto render the article of food adulterated. Tolerance limits have been prescribed in the Table for this very purpose and the subsequent inclusion of Sweetened Carbonated Water seems to indicate so and leans more in favour of the Appellants. The High Court also appears to have overlooked the fact that the percentage of pesticides found by the Public Analyst in the Sweetened Carbonated Water manufactured by the Appellants was within the tolerance limits subsequently prescribed in respect of such product39. As mentioned hereinbefore, the High Court erred in giving its own interpretation to the decision of this Court in S.M.S. Pharmaceuticals Ltd.s case (supra), which was reiterated subsequently in several judgments, some of which have been indicated hereinabove, and relying instead on the decision of Rangacharis case (supra), the facts of which were entirely different from the facts of this case. It is now well established that in a complaint against a Company and its Directors, the Complainant has to indicate in the complaint itself as to whether the Directors concerned were either in charge of or responsible to the Company for itsy management, or whether they were responsible to the Company for the conduct of its business. A mere bald statement that a person was a Director of the Company against which certain allegations had been made is not sufficient to make such Director liable in the absence of any specific allegations regarding his role in the management of the Company40. It has to be kept in mind that although an argument was advanced with regard to the restrictions imposed on the use of insecticides under Rule 65 of the 1955 Rules, it is apparent from the order of the learned Single Judge that such a ground was given up by the respondents and the arguments were confined only with regard to the alleged violation of Section 2(ia)(h) of the 1954 Act.