Company Upon Conviction Can Be Sentenced To Punishment Of Fine Even Though Offence Carries Punishment of Imprisonment As Well: J&K&L High Court

The observations were made by a bench comprising Justice Sanjay Dhar while hearing a plea in terms of which the petitioner, a pharma company, had challenged the complaint filed by respondent Drugs Inspector, Kathua against the petitioners and proforma respondent alleging commission of offences under Section 8(a)(i) read with Section 27 (d) of the Drugs and Cosmetics Act, 1940. Challenge had also been thrown to an order passed by the District Judicial Mobile Magistrate (T), Kathua whereby the Magistrate had opined that, prima facie, offences under Section 8(a)(i) read with Section 27 (d) of the Act of 1940 are made out against the accused and the process has been issued against them.

The petitioner primarily challenged the complaint on the ground that without impleading Directors/office bearers responsible for conducting day to day business of the company, the proceedings against the said company, cannot sustain. Counsel for the petitioner also contended that the Company is a juristic person and it has to be represented by its office bearers or Directors while launching prosecution against it and in view of Section 34 of the Drugs and Cosmetics Act, both the company as well as the persons responsible for conducting its day to day business are the necessary parties to the proceedings. On this ground, the petitioner prayed that the prosecution against the petitioner company is liable to be quashed.

Adjudicating upon the matter Justice Dhar observed that the perusal of Section 34 of the Drugs and Cosmetics Act is amply clear that when an offence has been committed by a company, every person, who, at the time when the offence was committed, was incharge 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. The provision extends the concept of vicarious liability to the persons responsible for conduct of business of the company in a case where the offence has been committed by the company, the bench underscored.

Elaborating on the mandate of the said Section the bench observed that in criminal law, there is no concept of criminal liability and it is only if there is a statute which makes a person vicariously liable for the acts of another person that such a person can be prosecuted for a criminal offence. One such example is the provision contained in Section 34 of the Drugs and Cosmetic Act whereby the persons incharge of and responsible for the conduct of business of the company are made vicariously liable for the offences committed by the company, however, the said provision makes it clear that not only those persons but even the company would be deemed to be guilty of the offence, the court said.

Dealing with the contention of the petitioner that the expression "as well as the company" appearing in Section 34 (1) of the Drugs and Cosmetics Act conveys that both the company and persons who, at the time when the offence was committed, were in charge of and were responsible to the company, have to be necessarily impleaded as the accused, the court observed that where the company is the principal offender, whereas its office bearers or Directors, responsible for conducting its day to day business, become vicariously liable for the acts of the company.

"The expression "as well as the company" connotes that when the offence is committed by the company, it is only if the company is prosecuted, its Directors/officer bearers can be prosecuted. It can, thus, safely be inferred that the company, which is a principal offender can be prosecuted even in the absence of its Directors/persons responsible for conduct of its day to day business, but reverse is not true. Therefore, while the principal offender can be prosecuted without impleading the persons vicariously liable for its acts, the persons, who are vicariously liable for the acts of the principal offender, cannot be prosecuted without prosecuting the principal offender", the bench explained.

Answering the question as to whether a company can be prosecuted for an offence which carries a sentence of imprisonment, besides the sentence of fine as is the case at hand the bench observed that since the company is a juristic person, as such, it is impossible to execute a sentence of imprisonment against the company. Law does not compel performing an impossibility, the court said.

Explaining further the law on the subject the bench took recourse to a Supreme court judgement in Standard Chatered Bank and others vs. Directorate of Enforcement and others, (2005) wherein the Constitution Bench of the Supreme Court, while dealing with this aspect of the case, held that there is no immunity to the companies from prosecution merely because the prosecution is in respect of the offences for which punishment prescribed is mandatory imprisonment and fine.

Summing up, the court stated that the company that is alleged to have committed a criminal offence is liable to be prosecuted even without impleading its Directors/persons responsible for conduct of its day to day business and, upon conviction, the said company can be sentenced to punishment of fine, even though the offence for which the company has been convicted carries punishment of imprisonment as well.

Accordingly the bench did not find any merit in the petition and accordingly, dismissed the same

Case Title : Cadila Pharmaceuticals Ltd Vs Drug Inspector Kathua

Citation : 2022 LiveLaw (JKL) 171

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