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Issues: (i) Whether the directors could be prosecuted in the absence of any averment that they were in charge of, and responsible for, the day-to-day business of the company; (ii) Whether issuance of process was vitiated for non-compliance with the mandatory inquiry under section 202 of the Code of Criminal Procedure, 1973 when the accused resided outside the magistrate's territorial jurisdiction.
Issue (i): Whether the directors could be prosecuted in the absence of any averment that they were in charge of, and responsible for, the day-to-day business of the company.
Analysis: Section 34 of the Drugs and Cosmetics Act, 1940 fastens liability on persons who were in charge of and responsible to the company for the conduct of its business at the time of the offence, and also on directors or officers where consent, connivance, or neglect is shown. The complaint contained no specific allegation that the petitioners were managing the day-to-day affairs of the company or were otherwise responsible for the conduct of its business. In the absence of such foundational averments, vicarious criminal liability could not be attached to them.
Conclusion: The directors could not be proceeded against on the basis of the complaint as framed, and this issue was decided in favour of the petitioners.
Issue (ii): Whether issuance of process was vitiated for non-compliance with the mandatory inquiry under section 202 of the Code of Criminal Procedure, 1973 when the accused resided outside the magistrate's territorial jurisdiction.
Analysis: Section 202 of the Code of Criminal Procedure, 1973, as amended, makes inquiry mandatory before issuing process where the accused resides beyond the territorial jurisdiction of the Magistrate. The record showed that the petitioners were stationed outside the local jurisdiction, yet no such inquiry was conducted before cognizance and issuance of summons. The omission amounted to non-compliance with a mandatory procedural safeguard.
Conclusion: The cognizance and process were vitiated for want of compliance with section 202, and this issue was decided in favour of the petitioners.
Final Conclusion: The criminal proceeding and the cognizance order were quashed because the complaint lacked the necessary averments for fastening company-related criminal liability and the Magistrate failed to follow the mandatory pre-process inquiry requirement.
Ratio Decidendi: Vicarious criminal liability of company directors requires specific averments showing that they were in charge of and responsible for the conduct of business, and where the accused resides outside territorial jurisdiction, compliance with section 202 of the Code of Criminal Procedure, 1973 is mandatory before issuing process.
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