TMI Blog2010 (12) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... Prevention of Food Adulteration Rules, 1955 (hereinafter referred to as "the 1955 Rules")? What is the liability of the directors of a company which is said to have committed defaults within the meaning of section 17 of the 1954 Act, in the light of the decision of this court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT OF INDIA], when they were neither in charge of nor responsible for the conduct of the business of the company? - 836 TO 845 OF 2010 - - - Dated:- 18-12-2010 - ALTAMAS KABIR, CYRIAC JOSEPH AND DEEPAK VERMA, JJ. Iqbal Chagla, Maninder Singh, Rajiv Virmani, Indu Malhotra, Amar Gupta, Riyaz Chagla, Rajesh Batra, Rajiv Talashekhar, Dheeraj Nair and Chetan Chopra for the Petitioners. Jaideep Gupta, K.N. Bhat, G. Prakash, Beena Prakash, V. Senthil, Jayant K. Sud, Atual Sahi, M.P. Vinod, Ajay K. Jain, Vimlesh Kumar, Manu Nair, Ms. Saanjh N. Purohit, Ashok Bhan, Sunita Sharma, R.K. Rahotre, D.S. Mahra and Ms. Sushma Suri for the Respondent. JUDGMENT Altamas Kabir, J. All these appeals are directed against the judgment dated February 19, 2009, passed by a learned single judge of the Kerala High Court dismissing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kozhikode. On November 28, 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 residue-carbofuran, 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 Act. 3. Based upon the report of the Public Analyst, the Chief Judicial Magistrate, Kozhikode, took cognisance of the offence and issued process against the appellants. 4. The appellants moved the Kerala High Court under section 482 of the Cr. P. C., for quashing of the aforesaid order of the Chief Judicial Magistrate, Kozhikode. The learned single judge by his order dated February 19, 2009, dismissed the said application and directed the prosecution to continue with the case. Aggrieved by the order of the learned single judge, the appellant-company, M/s. Pepsico India Holdings P. Ltd., and its directors have filed these appeals challenging the cognizance taken by the learned Magistrate on various grounds. 5. Mr. Iqbal Chagla, learned senior advocate, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presence, mentioned in the Table in respect of various articles of food, shall not exceed the tolerance limit prescribed against that article of food. At the relevant point of time, when disputes arose, "Carbonated Water or Sweetened Carbonated Water" was not included in rule 65 and, hence, no tolerance limit was prescribed for carbonated water thereunder. Furthermore, it was urged by Mr. Chagla that rule 65 essentially applies to raw agricultural products moving in commerce, which will be evident from Explanation (b)(ii) at the end of the Table appended to rule 65(2). Accordingly, as far as finished products are concerned, prior to June 17, 2009, no tolerance limits were prescribed under the Act and/or Rules, except for a few milk products. 7. Mr. Chagla submitted that the standard prescribed for "Mineral Water" was that the pesticide residue should be below detectable limits. However, for the first time, with effect from April 1, 2004, a standard was included which mandated that the total pesticide residue in "packaged drinking water" was not to exceed 0.0005 mg/litre. No such standard was, however, laid down in respect of "Carbonated Water", but with effect from October 15, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Committee for Food Standards on April 16, 2007, and the minutes of the meeting recorded that validated methods for detection of pesticides were not available. Apart from the above, Mr. Chagla also submitted that the opinion of the public analyst that the carbonated water contained an ingredient which was injurious to health, was not supported by any standard and the finding was based merely on account of the presence of Carbofuran therein. In fact, the court also observed that the mere presence of insecticide residue could not ipso facto justify a conclusion that the article had become injurious to health. What the public analyst indicated was that since rule 65 and A.01.01 did not prescribe any tolerance limit for pesticide residue in carbonated water, it pre-supposes that the carbonated water would have to be totally free from pesticide. Mr. Chagla submitted that having observed that the mere presence of insecticide residue could not ipso facto justify the conclusion that the manufactured articles were injurious to health, the High Court ought not to have relied on the report of the public analyst to arrive at a prima facie finding that the sample of sweetened carbonated water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany and that Shri Rajeev Bakshi was the chairman and managing director of the company, nothing else had been stated in the complaint as to how they were liable for the offences complained of. Mr. Chagla referred to sub-sections (1) and (2) of section 17 of the 1954 Act, which deals with the offences committed by a company and provides as follows : "17. Offences by companies.-(1) Where an offence under this Act has been committed by a company- (a)(i) the person, if any, who has been nominated under sub-section (2) to be in charge of, and responsible to, the company for the conduct of the business of the company (hereafter in this section referred to as the person responsible), or (ii) where no person has been so nominated, 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 ; and (b) the company,shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly : 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 SCC 1, which was a decision in the context of the 1954 Act. 17. Mr. Chagla submitted that it had perhaps been presumed that the appellant-company had not nominated an officer under section 17(2) of the 1954 Act and consequently the entire board of directors were responsible for the offence. 18. Mr. Chagla lastly submitted that as far as Mr. Rajeev Bakshi, chairman of the company, is concerned, he too cannot be made liable merely on account of the fact that he was the chairman of the company. It was submitted that the said view had been expressed by this court in Everest Advertising (P.) Ltd. v. State Government of NCT of Delhi [2007] 137 Comp. Cas. 32 (SC) which followed the earlier judgment of this court in S.M.S. Pharmaceuticals Ltd. s case (supra). 19. Mr. Chagla submitted that, the allegations made against the company, its directors and its employees were not maintainable under the provisions of the Prevention of Food Adulteration Act, 1954, not only on the ground of absence of any standard of validated method for the detection of pesticide residue in carbonated water but also on account of the fact that even the quantity of pesticide residue detected by the public anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (2) of section 17 of the 1954 Act to be the person in charge of and responsible to the company for the conduct of its business. 22. Mr. K. N. Bhat, learned senior advocate, who appeared for the State of Kerala in these appeals, firstly contended that section 23 of the 1954 Act empowers the Central Government to make rules to, inter alia, define the laboratories where samples of articles of food may be analysed by public analysts under the Act and also to define the method of analysis under sub-section (1A)(ee)(hh). It was submitted that such a power was discretionary and it was for the Central Government to act on the basis thereof. Accordingly, the Prevention of Food Adulteration Rules, 1955, were framed under section 23 to give effect to the provisions of the 1954 Act. Mr. Bhat submitted that rule 65 of the aforesaid Rules specifically provide for restriction on the use of insecticide and a Table was appended to sub-section (2) which indicates the names of the insecticides, the articles of food and the tolerance limit of the existence of such insecticides in such food items. Mr. Bhat submitted that while in the Table, which had been initially appended to sub-rule (2) of ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(i) of the 1954 Act in the context of colouring matter being used in articles of food. This court held that when no colouring matter is permitted to be used in respect of an article of food, and what is prescribed in respect of the said article is "nil colouring matter", it would be a case of adulteration within the meaning of section 2(j) of the 1954 Act, if the article contains any colouring matter. 24. Mr. Bhat submitted that the question as to whether the insecticide residue found in the product of the appellants amounted to adulteration or not, is a question which would depend to a large extent on the evidence to be adduced during trial having regard to the report of the public analyst that 0.001 mg per litre of insecticide residue had been detected in the sweetened carbonated water manufactured by the appellant-company. Learned counsel submitted that a prima facie case had been made out on behalf of the prosecution against the appellants to go to trial and the same did not merit interference in this case under article 136 of the Constitution. 25. On the question of vicarious liability of the directors of the company, in relation to the evidence alleged to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages defined in Appendix B, as prescribed under rule 5 of the 1955 Rules. Item A.01 deals with non-alcoholic 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 of non-alcoholic 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 June 17, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 June 17, 2009. 35. The High Court also misconstrued the provisions of section 23(1A)(ee) 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. Consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst 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 June 17, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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