Office Location

Delhi:

E-5, 2nd Floor, Defence Colony
New Delhi - 110024
Tel : 011-24336744

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Mumbai:

Office No. 1410, 14th Floor, Maker Chamber V, Nariman Point, Mumbai
Tel : +91 22-22873499

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Gurgaon:

Level 18, One Horizon Center, Golf Course Road, DLF Phase 5, Sector 43, Gurgaon 122002, India
Tel : +91 124 668 8146 / +91 124 668 8147

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Mumbai (Entertainment and Media Practice)

Office No. 213, 2nd Floor, A-wing, Crystal Plaza, Andheri Link Road, Andheri (W), Mumbai.
Tel : 022-62360762

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Mumbai (Corporate and Transactional Practice)

909/A, Capital Building, Bandra Kurla Complex, East Mumbai- 400098

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Bangalore:

21/2, 1st Main Road,
Opp Indian overseas Bank,
Gandhinagar,
Bengaluru - 560009

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Kanpur:

77A, Cantt., Kanpur - 208004

Liability of the Board under Drugs Act

IN A CASE AGAINST THE DRUGS AND COSMETICS ACT, 1940 (The Act)
By Shivani Deshmukh, Associate, Mumbai Office

THE DRUGS AND COSMETICS ACT, 1940 (Act No. 23 of 1940): In order to give effectto the recommendations of the Drugs Enquiry Committee, insofar as they relate to matters with which the Central Government is primarily concerned, a Bill to regulate the import of drugs into British India was introduced in the Legislative Assembly in 1937. It regulates the import into, manufacture, distribution and sale of drugs and cosmetics in the country. The problems of adulterationof drugs and also of production of spurious and sub-standard drugs are posing serious threat to the health of the community.

Section 34 of the Drugs and Cosmetics Act, 1940 deals with offences by companies wherein it is stated that (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;(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 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 of this section.

It is apparent from Hon’ble Supreme Court judgement in Dinesh B. Patel and Ors. Versus State of Gujrat and Ors. (2010) 10 SCR 319where it was observed that since the offence mentioned in section 34 has the direct impact on the public health andthe Courts are also inclined in not interfering with the filling of offence under section 34, that on establishment of prima facie case, even the Board of Directors who were responsible for the commission of offence, are liable under section 34.

Supreme Court inUmesh Sharma versus S.G. Bhakta 2002 CR. LJ 4843(Bom)has held that there is a presumption of being guilty against the person, who is in-charge of and responsible to the company, and such a person is liable to be punished unless he proves that offence was committed, without his knowledge or despite exercise by him of due diligence to prevent the commission of offence. By virtue of sub-section (2) which is given overriding effect over sub-section (1) by non-obstante clause in its opening part, the prosecution is obliged to prove 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, before drawing a presumption of guilt against such individual.

Keeping in view the observations of the Apex Court in the case of Sham Sundar and Ors. v. State of Haryana wherein it was observed that more often it is common that some of the partners of a firm may not even be knowing of what is going on day-to-day basis in the firm. There may be partners, better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all such partners and ask them to prove under the proviso to Sub-section (1) that the offence was committed without their knowledge. It is significant to note that the obligation for the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in Sub-section (1) is established. The onus of proof is thus on the prosecution to establish that the said Directors / Partners were in fact responsible for / In-charge of the routine operations & day-to-functions of the Company / Firm and that they are liable for the offence in question as the same was committed with their active knowledge.

In the alternative, the prosecution may establish that the accused person is a Director, Manager, Secretary or other officer of the company, and that the offence in question was committed with his consent or connivance or is attributable to any neglect on the part of such Director, Manager, Secretary or other officer of the company.

Conclusion:

Where an offence under this Act has been committed by a Company, and where the concerned Director of the Board of Directors was in charge of and was responsible to the company for the conduct of the business of the company, and / or where it is established by the prosecution that the offence in question was committed with the consent or connivance of such Director, then such a Director is liable for the offence in question and can always be prosecuted under Section 34 of the said Act.