LALANKUMAR SINGH & ORS.versusSTATE OF MAHARASHTRA

                        [2022] 14 S.C.R. 573                               573


                 LALANKUMAR SINGH & ORS.                                   A
                                   v.
                   STATE OF MAHARASHTRA
                 (Criminal Appeal No. 1757 of 2022)
                         OCTOBER 11, 2022                                  B
          [B. R. GAVAI AND C. T. RAVIKUMAR, JJ.]
        Drugs and Cosmetics Act, 1940: ss.34, 16, 18 – Vicarious
liability – Appellants are the directors of M/s Cachet
Pharmaceuticals Private Ltd. (CPPL) – Test report of the sample of
                                                                           C
the drug manufactured by CPPL stated that it was not of standard
quality – Complaint filed before CJM u/s.18(a)(i) r/w ss. 16 and 34
of the Act – CJM issued summons to all the accused including the
appellants – Appellants filed revision petition against the summoning
order before the Sessions Judge which was rejected on the ground
that there was a specific averment in the complaint that the appellants    D
were concerned with the manufacture, distribution and sale of drug
in question – Writ petition by appellants before High Court was
also dismissed – On appeal, held: A person cannot be made liable
u/s.34 of the Act unless at the material time, he was in-charge of
and was also responsible to the company for the conduct of its
                                                                           E
business – Merely because a person is a director of a company, it is
not necessary that he is aware about its day-to-day functioning –
There is no universal rule that a director of a company is in-charge
of its everyday affairs – It is necessary to aver as to how the director
of the company was in charge of day-to-day affairs or responsible
to the affairs of the company – The managing director or a joint           F
managing director in a company, as the designation of their office
suggests, are in-charge of a company and are responsible for the
conduct of the business of the company – Appellants are neither
the managing director nor the whole-time directors of the accused
company – Complaint totally lacked requirement of s.34 of the Act
                                                                           G
– Order of issuance of process quashed – Negotiable Instruments
Act,1881 – s.141 – Companies Act, 1956 – s.2(13).
      Practice and Procedure: Criminal procedure – Issue of Process
by Magistrate – Held: The order of issuance of process is not an
empty formality – The Magistrate is required to apply his mind as to
                                                                           H
                                  573
574            SUPREME COURT REPORTS                    [2022] 14 S.C.R.


A     whether sufficient ground for proceeding exists in the case or not –
      The formation of such an opinion is required to be stated in the
      order itself – The order is liable to be set aside if no reasons are
      given therein while coming to the conclusion that there is a prima
      facie case against the accused.
B           Allowing the appeal, the Court
            HELD : 1. In the present case, there are no specific
      averments insofar as the appellants are concerned. It is further
      to be noted that the appellants are neither the managing director
      nor the whole-time directors of the accused company. It is further
C     to be noted that, in accordance with the provisions of Rule 76 of
      the said Rules read with Form 28, the Accused Nos. 9 and 10
      have specifically been approved by the licensing authority in Form
      28. Accused No.9 was approved as a person under whose active
      direction and personal supervision the manufacture would be
      conducted as required under sub rule (1) of Rule 76 of the said
D     Rules. Similarly, Accused No.10, who was approved as a head of
      the testing unit, was to be incharge for carrying out the test of
      the strength, quality and purity of the substances as may be
      required under the provisions of Part X of the said Rules. The
      Court was therefore of the considered view that the complaint is
E     totally lacking the requirement of Section 34 of the said Act.
      [Paras 23 & 24][587-F-H; 588-A-B]
            2. The order of issuance of process is not an empty
      formality. The Magistrate is required to apply his mind as to
      whether sufficient ground for proceeding exists in the case or
F     not. The formation of such an opinion is required to be stated in
      the order itself. The order is liable to be set aside if no reasons
      are given therein while coming to the conclusion that there is a
      prima facie case against the accused. No doubt, that the order
      need not contain detailed reasons. In instant case, it is clear from
      the order of the Single Judge of the High Court, that there was
G     no such order passed at all. The Single Judge of the High Court,
      based on the record, has presumed that there was an order of
      issuance of process. Such an approach is unsustainable in law.
      [Paras 28 & 30][588-G-H; 590-A-B]

H
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                        575


      S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and                  A
      another (2005) 8 SCC 89 : [2005] 3 Suppl. SCR 371;
      Pooja Ravinder Devidasani v. State of Maharashtra and
      another (2014) 16 SCC 1 : [2014] 14 SCR 1468; K.K.
      Ahuja v. V.K. Vora and another (2009) 10 SCC 48 :
      [2009] 9 SCR 1144; State of NCT of Delhi through
                                                                       B
      Prosecuting Officer, Insecticides, Government of NCT,
      Delhi v. Rajiv Khurana (2010) 11 SCC 469 : [2010] 9
      SCR 387; Ashoke Mal Bafna v. Upper India Steel
      Manufacturing and Engineering Company Limited
      (2018) 14 SCC 202; Sunil Bharti Mittal v. Central
      Bureau of Investigation (2015) 4 SCC 609 : [2015] 1              C
      SCR 377 – relied on.
      U.P. Pollution Control Board v. Mohan Meakins Ltd.
      and others (2000) 3 SCC 745 : [2000] 2 SCR 566;
      Dinesh B. Patel and others v. State of Gujarat and
      another (2010) 11 SCC 125 : [2010] 10 SCR 319; State             D
      of Haryana v. Brij Lal Mittal and others (1998) 5 SCC
      343 : [1998] 3 SCR 104 – referred to.
                      Case Law Reference
[2000] 2 SCR 566                  referred to             Para 12
                                                                       E
[2010] 10 SCR 319                 referred to             Para 12
[1998] 3 SCR 104                  referred to             Para 13
[2005] 3 Suppl. SCR 371           relied on               Para 15
[2014]14 SCR 1468                 relied on               Para17
                                                                       F
[2009] 9 SCR 1144                 relied on               Para19
[2010] 9 SCR 387                  relied on               Para 20
(2018) 14 SCC 202                 relied on               Para 21
[2015] 1 SCR 377                  relied on               Para 28      G
      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1757 of 2022.
      From the Judgment and Order dated 25.06.2015 of the High Court
of Judicature at Bombay at Aurangabad in CRLWP No.288 of 2015.
                                                                       H
576              SUPREME COURT REPORTS                        [2022] 14 S.C.R.


A          C.U. Singh, Anupam Lal Das, Sr. Advs., Arun Siwach, Kunal
      Cheema, Ms. Aditi Deshpande Parkhi, Anirudh Singh, Krishanu Barua,
      Amjid Maqbool, Advs. for the Appellants.
            Siddharath Dharmadhikari, Aaditya Aniruddha Pande, Bharat
      Bagla, Advs. for the Respondent.
B              The Judgment of the Court was delivered by
               B. R. GAVAI, J.
               1. Leave granted.
             2. This appeal arises out of the judgment and order dated 25th
C     June 2015 passed by the learned Single Judge of the High Court of
      Judicature of Bombay, at Aurangabad, in Criminal Writ Petition No.288
      of 2015, thereby dismissing the said criminal writ petition filed by the
      appellants herein and upholding the order of issuance of process dated
      30th March 2009 passed by the learned Chief Judicial Magistrate, Beed
D     (hereinafter referred to as “the learned CJM”) and the order passed by
      the learned Sessions Judge, Beed dated 25th November 2014 dismissing
      the Criminal Revision being Criminal Revision Petition No.115 of 2013
      filed by the appellants there against.
               3. The facts, in brief, giving rise to the present appeal are as
      under:
E
             3.1 The Appellants are the Directors of M/s Cachet
      Pharmaceuticals Private Ltd. (hereinafter referred to as “CPPL”). CPPL
      was granted permission to manufacture ‘Hemfer Syrup’ which falls under
      Schedule C & C(1) to the Drugs & Cosmetics Rules, 1945 (hereinafter
      referred to as “the said Rules”).
F
              3.2 On 30th August 2006, Sh. N. A. Yadav, the then Drugs Inspector,
      Food and Drugs Administration, Beed, Maharashtra, visited the premises
      of M/s. Priya Agencies at Beed and purchased ‘Hemfer Syrup’, from
      which he had drawn samples of the drug. On 31st August 2006, he sent
      one such sample to the Government Analyst, Maharashtra State Drug
G     Control Laboratory Mumbai so as to have the drug tested. On 26th
      February 2007, he received a test report dated 13th February 2007 from
      the Government Analyst stating that the sample was not of standard
      quality as the content of Cyanocobalamin was less than the permissible
      limit, i.e., 39% of the label amount. On the same day, the manufacturer
H
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                               577
                [B. R. GAVAI, J.]

of the drug, i.e., CPPL, was informed by a registered post about the test     A
report.
       3.3 On 29th March 2007, Sh. Vijay Jain, Deputy Manager, QA of
CPPL requested the Drug Inspector to send the samples again for analysis.
Pursuant to an application filed by M/s Alkem Laboratories, the distributor
of CPPL, the learned CJM, Beed sent the samples of ‘Hemfer Syrup’             B
for re-analysis on 24th April 2007. On 10th July 2007, the Learned CJM,
Beed received the test report from the Central Drug Laboratory, Calcutta
stating therein that the sample was not of standard quality as it did not
conform to the accepted limits of Cyanocobalamin content.
      3.4 Vide letter dated 21st August 2008, the Drug Inspector called       C
upon CPPL to furnish the particulars of Directors, Articles of Association,
Memorandum of Association, copies of License to manufacture and sell
drugs, particulars of technical persons, and all such information as was
needed to be provided under the Drugs & Cosmetics Act, 1940
(hereinafter referred to as “the said Act”). In reply to this letter, CPPL
informed the Drug Inspector that the report dated 10th July 2007 was          D
signed by “In-Charge Director” and not the Director of Central Drugs
Laboratory and thus requested him to send a proper report signed by the
Director of the Central Drugs Laboratory.
       3.5 Vide letter dated 12th January 2009, the Drug Inspector again
called upon CPPL to furnish particulars that were previously sought.          E
Vide letter dated 12th February 2009, CPPL provided the information
and documents requested by the Drug Inspector and it was categorically
stated therein that the ‘Hemfer Syrup’ was manufactured under the
supervision and technical guidance of Sh. Ashok Kumar, the FDA
approved manufacturing chemist for liquid orals.                              F
       3.6 Mr. Ashok Kumar (Accused No. 9) wrote an individual letter
dated 13th February 2009 to the Drug Inspector stating therein that the
said batch of ‘Hemfer Syrup’ was manufactured under his supervision
and that the drug complied with the requisite standards. Similarly, Mr.
Naresh Roy (Accused No. 10) also wrote a letter dated 13th February           G
2009 to the Drug Inspector stating therein that the said batch of the
‘Hemfer Syrup’ was tested under his supervision and from the test results
it appeared that the drug complied with the requisite standards.
     3.7 Pursuant to the orders to take legal action against the
manufacturer of the drug by the Joint Commissioner (H.Q.) and
                                                                              H
578            SUPREME COURT REPORTS                          [2022] 14 S.C.R.


A     Controlling Authority, Food & Drug Administration, Mumbai, the
      Complaint bearing RCC No. 233 of 2009 came to be filed before the Ld.
      Chief Judicial Magistrate, Beed under Section 18(a)(i) read with Sections
      16 and 34 of the said Act and punishable under Section 27(d) of the said
      Act. In the said complaint, the present Appellants being Directors of the
      Company were arrayed as Accused Nos. 5 to 8.
B
             3.8 The learned CJM, Beed issued Summons to all the accused,
      including the Appellants herein vide Order dated 30th March 2009. The
      Appellants filed a Criminal Revision Petition against the summoning order
      before the learned Sessions Judge, Beed on the ground that there are no
      specific averments in terms of Section 34 of the said Act as to the role
C     played by the Directors and thus sought for the Summoning Order to be
      quashed. However, the learned Sessions Judge, Beed rejected the said
      Criminal Revision Petition noting that there is a specific averment in the
      complaint that the appellants are concerned with the manufacture,
      distribution and sale of ‘Hemfer Drug’.
D           3.9 The Appellants preferred a Criminal Writ Petition before the
      Bombay High Court assailing the order passed by the learned Sessions
      Judge. The High Court, vide the impugned judgment, dismissed the said
      Criminal Writ Petition on the ground that all the Directors were conducting
      the business of CPPL and thus, they were involved in the manufacturing
E     process.
            3.10 Hence, the present appeal.
            4. We have heard Shri C.U. Singh and Shri Anupam Lal Das,
      learned Senior Counsels appearing on behalf of the appellants and Shri
      Siddharath Dharmadhikari, learned counsel appearing on behalf of the
F     respondent-State of Maharashtra.
             5. Shri C.U. Singh and Shri Anupam Lal Das, learned Senior
      Counsels submit that Section 34 of the said Act specifically provides
      that only such person who, at the time of the commission of the offence,
      was in-charge of, and was responsible to the company for the conduct
G     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.
            6. Shri C.U. Singh, learned Senior Counsel, further submits that
      Rule 76 of the said Rules prescribes a Form of licence to manufacture
H     drugs specified in Schedule C and C(1), excluding those specified in
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                                  579
                [B. R. GAVAI, J.]

Part XB and Schedule X, or drugs specified in Schedule C, C(1) and X             A
and the conditions for the grant of such licence. He further submits that,
before a license in Form 28 or Form 28B is granted, certain conditions
are required to be complied with by the applicant. He submits that under
sub-rule (1) of Rule 76 of the said Rules, the manufacture is required to
be conducted under the active direction and personal supervision of
                                                                                 B
competent technical staff consisting at least of one person who is a
whole-time employee and who possesses the requisite qualification as
prescribed under the said Rules. He further submits that under sub-rule
(4) of Rule 76 of the said Rules, an applicant is required to provide and
maintain adequate staff, premises and laboratory equipment for carrying
out such tests of the strength, quality and purity of the substances as          C
may be required to be carried out by him under the provisions of Part X
of the said Rules. He further states that under sub-rule (4A) of Rule 76
of the said Rules, the head of the testing unit is required to possess a
degree in Medicine or Science or Pharmacy or Pharmaceutical Chemistry
of a University recognised for the said purpose. He is also required to
                                                                                 D
have experience in the testing of drugs, which in the opinion of the licensing
authority is considered adequate. He submits that Form 28 is a license to
manufacture for sale or distribution of drugs in accordance with Rule 76
of the said Rules. Learned Senior Counsel submits that in Form 28, the
names of the approved competent technical staff are required to be
given. He further submits that condition No.3 of the Conditions of Licence       E
requires that if there is any change in the competent technical staff, the
same shall be forthwith reported to the licensing authority.
      7. Learned Senior Counsel submits that Schedule M to the said
Rules provides for good manufacturing practice and requirements of
premises, plant and equipment for pharmaceutical products. Learned               F
Senior Counsel submits that clause 6.1 of Part I of Schedule M specifically
provides that the manufacture shall be conducted under the direct
supervision of competent technical staff with prescribed qualifications
and practical experience in the relevant dosage form and/or active
pharmaceutical products. It is further the submission of the learned Senior
Counsel that as per clause 6.2 thereof, the head of the Quality Control          G
Laboratory is required to be independent of the manufacturing unit. It
also requires that the testing shall be conducted under the direct
supervision of competent technical staff, who shall be whole time
employees of the licensee.
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580             SUPREME COURT REPORTS                          [2022] 14 S.C.R.


A            8. Shri Singh further submits that in the licence which is duly
      signed by the designated licensing authority, the names of the approved
      competent technical staff are already given. It is further submitted that
      in the reply dated 13th February 2009 to the Drug Inspector, Food &
      Drug Administration, M.S. Beed, Mr. Naresh Roy, Assistant Manager
      Q.A. (Accused No.10) had stated that the raw material was analysed in
B
      the Quality Control Department by Mr. Aftab, Chemist under his
      supervision. It is further informed that the finished product of the said
      batch of the drug was analysed by Mr. M.K. Sharma under his
      supervision. Mr. Naresh Roy (Accused No.10) further informed that he
      was approved by the Rajasthan FDA as a competent person.
C            9. Learned Senior Counsel submits that similarly, Mr. Ashok Kumar,
      Assistant Manager, Production (Accused No.9) had also informed the
      Drug Inspector by communication dated 13th February 2009 that he was
      approved by the Rajasthan FDA. The goods were released after the
      final approval from Quality Control. He further states that the
D     manufacturing record of the said batch was prepared by him and it bears
      his signature.
             10. Shri Singh further submits that merely mentioning that the
      present appellants, being the Directors of the accused company, were
      responsible to the company for the conduct of the business of the company
E     would not be sufficient to initiate proceedings against them. It is submitted
      that, unless and until there is a specific averment as to what was the role
      in the conduct of the business of the company, a person cannot be
      proceeded against solely on the ground that he was a director of the
      company. He relies on various judgments of this Court in support of this
      proposition.
F
              11. Shri C.U. Singh further submits that there is no formal order
      of issuance of the process passed by the learned CJM. It is submitted
      that, while issuing process, a duty is cast upon the Magistrate to arrive at
      a subjective satisfaction that there is sufficient ground to proceed. He
      submits that there is no such order which would reflect the application
G     of mind by the learned CJM and on this ground also, the impugned order
      is liable to be set aside.
             12. Shri Siddharath Dharmadhikari, learned counsel, on the contrary,
      submits that perusal of the complaint, and specifically paragraphs 3 and
      25 thereof would reveal that there is sufficient compliance of requirement
H     of Section 34 of the said Act. He submits that the complaint has to be
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                                581
                [B. R. GAVAI, J.]

read as a whole and cannot be read in a piecemeal manner. Learned              A
counsel relies on the judgment of this Court in the case of U.P. Pollution
Control Board vs. Mohan Meakins Ltd. and others 1 in support of the
proposition that there is no legal requirement for the trial Court to pass a
detailed order while issuing process. He also relies on the judgment of
this Court in the case of Dinesh B. Patel and others vs. State of Gujarat
                                                                               B
and another2 to buttress his submission that the averments made in the
complaint are sufficient to proceed against the present appellants.
      13. In the case of State of Haryana vs. Brij Lal Mittal and
others3, this Court observed thus:
       “8. Nonetheless, we find that the impugned judgment of the High         C
       Court has got to be upheld for an altogether different reason.
       Admittedly, the three respondents were being prosecuted as
       directors of the manufacturers with the aid of Section 34(1) of
       the Act which reads as under:
             “34. Offences by companies.—(1) Where an offence                  D
          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:                          E

              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.”                                     F
       It is thus seen that the vicarious liability of a person for being
       prosecuted for an offence committed under the Act by a company
       arises if at the material time he was in charge of and was also
       responsible to the company for the conduct of its business. Simply
       because a person is a director of the company it does not               G
       necessarily mean that he fulfils both the above requirements so

1
  (2000) 3 SCC 745
2
  (2010) 11 SCC 125
3
  (1998) 5 SCC 343                                                             H
582                SUPREME COURT REPORTS                         [2022] 14 S.C.R.


A              as to make him liable. Conversely, without being a director a person
               can be in charge of and responsible to the company for the conduct
               of its business. From the complaint in question we, however, find
               that except a bald statement that the respondents were directors
               of the manufacturers, there is no other allegation to indicate, even
               prima facie, that they were in charge of the company and also
B
               responsible to the company for the conduct of its business.”
             14. It could thus be seen that this Court had held that simply
      because a person is a director of the company, it does not necessarily
      mean that he fulfils the twin requirements of Section 34(1) of the said
      Act so as to make him liable. It has been held that a person cannot be
C     made liable unless, at the material time, he was in-charge of and was
      also responsible to the company for the conduct of its business.
            15. In the case of S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla
      and another4, this Court was considering the question as to whether it
      was sufficient to make the person liable for being a director of a company
D     under Section 141 of the Negotiable Instruments Act, 1881. This Court
      considered the definition of the word “director” as defined in Section
      2(13) of the Companies Act, 1956. This Court observed thus:
               “8. ……. There is nothing which suggests that simply by being a
               director in a company, one is supposed to discharge particular
E              functions on behalf of a company. It happens that a person may
               be a director in a company but he may not know anything about
               the day-to-day functioning of the company. As a director he may
               be attending meetings of the Board of Directors of the company
               where usually they decide policy matters and guide the course of
F              business of a company. It may be that a Board of Directors may
               appoint sub-committees consisting of one or two directors out of
               the Board of the company who may be made responsible for the
               day-to-day functions of the company. These are matters which
               form part of resolutions of the Board of Directors of a company.
               Nothing is oral. What emerges from this is that the role of a director
G              in a company is a question of fact depending on the peculiar facts
               in each case. There is no universal rule that a director of a
               company is in charge of its everyday affairs. We have discussed
               about the position of a director in a company in order to illustrate

      4
H         (2005) 8 SCC 89
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                                      583
                [B. R. GAVAI, J.]

         the point that there is no magic as such in a particular word, be it        A
         director, manager or secretary. It all depends upon the respective
         roles assigned to the officers in a company. …..”
       16. It was held that merely because a person is a director of a
company, it is not necessary that he is aware about the day-to-day
functioning of the company. This Court held that there is no universal               B
rule that a director of a company is in charge of its everyday affairs. It
was, therefore, necessary, to aver as to how the director of the company
was in charge of day-to-day affairs of the company or responsible to the
affairs of the company. This Court, however, clarified that the position
of a managing director or a joint managing director in a company may be
different. This Court further held that these persons, as the designation            C
of their office suggests, are in charge of a company and are responsible
for the conduct of the business of the company. To escape liability, they
will have to prove that when the offence was committed, they had no
knowledge of the offence or that they exercised all due diligence to
prevent the commission of the offence.                                               D
    17. In the case of Pooja Ravinder Devidasani vs. State of
Maharashtra and another5 this Court observed thus:
         “17. …… Every person connected with the Company will not
         fall into the ambit of the provision. Time and again, it has been
         asserted by this Court that only those persons who were in charge           E
         of and responsible for the conduct of the business of the Company
         at the time of commission of an offence will be liable for criminal
         action. A Director, who was not in charge of and was not
         responsible for the conduct of the business of the Company at the
         relevant time, will not be liable for an offence under Section 141          F
         of the NI Act. In National Small Industries Corpn. [National
         Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010)
         3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113]
         this Court observed: (SCC p. 336, paras 13-14)
                  “13. Section 141 is a penal provision creating vicarious           G
             liability, and which, as per settled law, must be strictly construed.
             It is therefore, not sufficient to make a bald cursory statement
             in a complaint that the Director (arrayed as an accused) is in
             charge of and responsible to the company for the conduct of
5
    (2014) 16 SCC 1                                                                  H
584      SUPREME COURT REPORTS                         [2022] 14 S.C.R.


A        the business of the company without anything more as to the
         role of the Director. But the complaint should spell out as to
         how and in what manner Respondent 1 was in charge of or
         was responsible to the accused Company for the conduct of
         its business. This is in consonance with strict interpretation of
         penal statutes, especially, where such statutes create vicarious
B
         liability.
             14. A company may have a number of Directors and to
         make any or all the Directors as accused in a complaint merely
         on the basis of a statement that they are in charge of and
         responsible for the conduct of the business of the company
C        without anything more is not a sufficient or adequate fulfilment
         of the requirements under Section 141.”
                                                   (emphasis in original)
      18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal
D     Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279 :
      AIR 1971 SC 2162] , this Court observed that a person “in charge
      of a business” means that the person should be in overall control
      of the day-to-day business of the Company.
      19. A Director of a company is liable to be convicted for an
E     offence committed by the company if he/she was in charge of
      and was responsible to the company for the conduct of its business
      or if it is proved that the offence was committed with the consent
      or connivance of, or was attributable to any negligence on the
      part of the Director concerned (see State of Karnataka v. Pratap
      Chand [State of Karnataka v. Pratap Chand, (1981) 2 SCC
F     335 : 1981 SCC (Cri) 453] ).
      20. In other words, the law laid down by this Court is that for
      making a Director of a company liable for the offences committed
      by the company under Section 141 of the NI Act, there must be
      specific averments against the Director showing as to how
G     and in what manner the Director was responsible for the
      conduct of the business of the company.
      21. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya
      [Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006)
      10 SCC 581 : (2007) 1 SCC (Cri) 621], it was held by this Court
H     that: (SCC pp. 584-85, para 7)
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                                    585
                [B. R. GAVAI, J.]

                “7. … it is not necessary for the complainant to specifically      A
             reproduce the wordings of the section but what is required is a
             clear statement of fact so as to enable the court to arrive at a
             prima facie opinion that the accused is vicariously liable. Section
             141 raises a legal fiction. By reason of the said provision,
             a person although is not personally liable for commission
                                                                                   B
             of such an offence would be vicariously liable therefor.
             Such vicarious liability can be inferred so far as a company
             registered or incorporated under the Companies Act, 1956
             is concerned only if the requisite statements, which are
             required to be averred in the complaint petition, are made
             so as to make the accused therein vicariously liable for              C
             the offence committed by the company.”
                                                          (emphasis supplied)
         By verbatim reproducing the words of the section without a clear
         statement of fact supported by proper evidence, so as to make
         the accused vicariously liable, is a ground for quashing proceedings      D
         initiated against such person under Section 141 of the NI Act.”
       18. It could thus clearly be seen that this Court has held that
merely reproducing the words of the section without a clear statement
of fact as to how and in what manner a director of the company was
responsible for the conduct of the business of the company, would not              E
ipso facto make the director vicariously liable.
      19. A similar view has previously been taken by this Court in the
case of K.K. Ahuja vs. V.K. Vora and another6.
       20. In the case of State of NCT of Delhi through Prosecuting                F
Officer, Insecticides, Government of NCT, Delhi vs. Rajiv Khurana 7,
this Court reiterated the position thus:
         “17. The ratio of all these cases is that the complainant is required
         to state in the complaint how a Director who is sought to be made
         an accused, was in charge of the business of the company or
                                                                                   G
         responsible for the conduct of the company’s business. Every
         Director need not be and is not in charge of the business of the
         company. If that is the position with regard to a Director, it is

6
    (2009) 10 SCC 48
7
    (2010) 11 SCC 469                                                              H
586               SUPREME COURT REPORTS                        [2022] 14 S.C.R.


A              needless to emphasise that in the case of non-Director officers, it
               is all the more necessary to state what were his duties and
               responsibilities in the conduct of business of the company and
               how and in what manner he is responsible or liable.”
            21. Recently, in the case of Ashoke Mal Bafna vs. Upper India
B     Steel Manufacturing and Engineering Company Limited8, this Court
      observed thus:
               “9. To fasten vicarious liability under Section 141 of the Act on a
               person, the law is well settled by this Court in a catena of cases
               that the complainant should specifically show as to how and in
C              what manner the accused was responsible. Simply because a
               person is a Director of a defaulter Company, does not make him
               liable under the Act. Time and again, it has been asserted by this
               Court that only the person who was at the helm of affairs of the
               Company and in charge of and responsible for the conduct of the
               business at the time of commission of an offence will be liable
D              for criminal action. (See Pooja Ravinder Devidasani v. State
               of Maharashtra [Pooja Ravinder Devidasani v. State of
               Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015)
               3 SCC (Cri) 378 : AIR 2015 SC 675] .)
               10. In other words, the law laid down by this Court is that for
E              making a Director of a Company liable for the offences committed
               by the Company under Section 141 of the Act, there must be
               specific averments against the Director showing as to how and in
               what manner the Director was responsible for the conduct of the
               business of the Company.”
F           22. In the light of these observations, let us examine the averments
      made in the complaint insofar as the present appellants are concerned:
               “3. That, Accused no. 5 to 8 are the Directors of the M/s Cachet
               Pharmaceuticals Pvt. Ltd. village Thana Baddi, Tehsil Nalagarh
               dist. Solan (H.P.) Pin code 173205 head office 415, Shahanahar,
G              Worli, Mumbai - 400018, and looking after day to day activities of
               the company.
               That, Accused no. 4 is the Pvt. Ltd. Company and is doing the
               business of manufacturing, buying, selling, importing and exporting
      8
H         (2018) 14 SCC 202
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                               587
                [B. R. GAVAI, J.]

      of and/or dealers in Pharmaceuticals, Cosmetics, Beauty aids,           A
      Oils, Chemicals, Food products and provisions, Veterinary and
      Surgical Equipments, Medicinal preparations including Spirit.
      That, Accused no. 4 has mfg. unit at no. (1) Village Thana Baddi,
      Tehsil Nalagarh Dist. Solan (H.P.) Pin code 173205 and no. (2) at
      C-582, Ricco Ind. Area Bhiwadi, Dist. Alwar, Rajasthan.                 B
      That, Accused no.4 are holding drug mgf. License No. MNB/05/
      267 in form 25 and licence no. MB/05/268 in form 28 granted on
      17.3.2006 valid upto 16.3.2011.
                              ***        ***       ***
                                                                              C
      25. That, on 12.2.2009, the complainant visited and inspected the
      premises of M/s Cachet Pharmaceuticals Pvt. Ltd. village Thana
      Baddi, Tehsil Nalagarh Dist. Solan (H.P.) Pin code 173205 that is
      accused no.4. At the time of inspection, Shri Ajay Prakash Gupta
      Vice President Technical, accused no. 9 and 10 were present.
                                                                              D
      During enquiry, it was revealed that Accused no. 4 to 10
      manufactured “Hemfer syrup Mfg. Lic. No. MB/05/268/B. No.
      HMS/6015 CMfg. Date May-2006 which has been declared to
      be NOT OF STANDARD QUALITY at the premises of M/s
      Cachet Pharmaceuticals Pvt. Ltd. village Thana Baddi, Tehsil
      Nalagarh Dist. Solan (H.P.) Pin code 173205 that is accused no.4        E
      under licence No. MB/05/268 and sold the above said drugs to
      M/s Priya Agencies Behind Dr. Vaidya Hospital Jalna Road, Beed,
      Dist. Beed through M/s Alkem Laboratories Ltd. situated at reality
      warehousing Pvt. Ltd., Gut No.2323/1 property no. 115, Pune
      Nagar road, At. Post Wagholi, Tai. Haveli, Dist. Pune - 412207.”
                                                                              F
       23. It can thus be seen that there are no specific averments insofar
as the present appellants are concerned. It is further to be noted that the
present appellants are neither the managing director nor the whole-time
directors of the accused company.
      24. It is further to be noted that, in accordance with the provisions   G
of Rule 76 of the said Rules read with Form 28, the Accused Nos. 9 and
10 have specifically been approved by the licensing authority in Form
28. Accused No.9 was approved as a person under whose active direction
and personal supervision the manufacture would be conducted as required
under sub-rule (1) of Rule 76 of the said Rules. Similarly, Accused No.10,
                                                                              H
588             SUPREME COURT REPORTS                          [2022] 14 S.C.R.


A     who was approved as a head of the testing unit, was to be in-charge for
      carrying out the test of the strength, quality and purity of the substances
      as may be required under the provisions of Part X of the said Rules. We
      are therefore of the considered view that the complaint is totally lacking
      the requirement of Section 34 of the said Act.
B           25. The impugned orders are liable to be quashed and set aside on
      another ground also.
             26. Perusal of the order passed by the learned Single Judge of the
      High Court would itself reveal that the learned CJM has not even cared
      to pass a formal order of issuance of process. It will be relevant to refer
C     to the following part of the judgment and order of the learned Single
      Judge of the High Court:
            “….Though, it is true that on the certified copy produced by the
            petitioners there is no such formal order but copy of Roznama
            (daily notings of the proceeding) shows that such order was made
D           on 30-3-2009. The Roznama dated 30-3-2009 reads as follows :
            (i) Complaint filed by Vilas Vishwanath Dusane.
            (ii) Copy of list of documents containing 44 document.
            Order was made on Exhibit 1 (of issue process). Take entry in
E           register of criminal cases and issue summons against accused.
            List the matter for appearance of accused on 18-6-2009.
            This record is sufficient to infer that the order of issue process
            was made and after that summons were issued against accused
            to ask them to appear in the Court.”
F           27. It could thus clearly be seen that the learned Single Judge of
      the High Court held that though there was no formal order of issuance
      of process, the record was sufficient to infer that the order of issue
      process was made.
            28. The order of issuance of process is not an empty formality.
G     The Magistrate is required to apply his mind as to whether sufficient
      ground for proceeding exists in the case or not. The formation of such
      an opinion is required to be stated in the order itself. The order is liable
      to be set aside if no reasons are given therein while coming to the
      conclusion that there is a prima facie case against the accused. No
H     doubt, that the order need not contain detailed reasons. A reference in
LALANKUMAR SINGH & ORS. v. STATE OF MAHARASHTRA                                   589
                [B. R. GAVAI, J.]

this respect could be made to the judgment of this Court in the case of           A
Sunil Bharti Mittal vs. Central Bureau of Investigation9, which reads
thus:
         “51. On the other hand, Section 204 of the Code deals with the
         issue of process, if in the opinion of the Magistrate taking
         cognizance of an offence, there is sufficient ground for proceeding.     B
         This section relates to commencement of a criminal proceeding.
         If the Magistrate taking cognizance of a case (it may be the
         Magistrate receiving the complaint or to whom it has been
         transferred under Section 192), upon a consideration of the
         materials before him (i.e. the complaint, examination of the
                                                                                  C
         complainant and his witnesses, if present, or report of inquiry, if
         any), thinks that there is a prima facie case for proceeding in
         respect of an offence, he shall issue process against the accused.
         52. A wide discretion has been given as to grant or refusal of
         process and it must be judicially exercised. A person ought not to
                                                                                  D
         be dragged into court merely because a complaint has been filed.
         If a prima facie case has been made out, the Magistrate ought to
         issue process and it cannot be refused merely because he thinks
         that it is unlikely to result in a conviction.
         53. However, the words “sufficient ground for proceeding”
                                                                                  E
         appearing in Section 204 are of immense importance. It is these
         words which amply suggest that an opinion is to be formed only
         after due application of mind that there is sufficient basis for
         proceeding against the said accused and formation of such an
         opinion is to be stated in the order itself. The order is liable to be
         set aside if no reason is given therein while coming to the              F
         conclusion that there is prima facie case against the accused,
         though the order need not contain detailed reasons. A fortiori, the
         order would be bad in law if the reason given turns out to be ex
         facie incorrect.”
     29. A similar view has been taken by this Court in the case of               G
Ashoke Mal Bafna (supra).
     30. In the present case, leaving aside there being no reasons in
support of the order of the issuance of process, as a matter of fact, it is
9
    (2015) 4 SCC 609                                                              H
590             SUPREME COURT REPORTS                        [2022] 14 S.C.R.


A     clear from the order of the learned Single Judge of the High Court, that
      there was no such order passed at all. The learned Single Judge of the
      High Court, based on the record, has presumed that there was an order
      of issuance of process. We find that such an approach is unsustainable
      in law. The appeal therefore deserves to be allowed.
B            31. In the result, the appeal is allowed. The impugned order of
      issuance of process dated30th March 2009 passed by the learned Chief
      Judicial Magistrate, Beedand the order passed by the learned Sessions
      Judge, Beed dated 25th November 2014 dismissing the Criminal Revision
      being Criminal Revision Petition No.115 of 2013 are quashed and set
      aside. The complaint against the present appellants is dismissed. Needless
C     to state that the complaint shall proceed against rest of the accused in
      accordance with law.

      Devika Gujral                                               Appeal allowed.
      (Assisted by : Neha Sharma, LCRA)
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