REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 836 OF 2010

PEPSICO INDIA HOLDINGS PVT. LTD. … APPELLANT

Vs.

FOOD INSPECTOR & ANR. … RESPONDENTS

WITH

CRIMINAL APPEAL NOS.837, 838-840, 841, 842,

843, 844 AND 845 OF 2010

J U D G M E N T

ALTAMAS KABIR, J.

1.All these appeals are directed against the

judgment dated 19

th

February, 2009, passed by a

learned Single Judge of the Kerala High Court

dismissing the several petitions filed by the

Appellants under Section 482 of the Code of

Criminal Procedure, 1973, for quashing of the

several prosecutions commenced against them. The

Appellants in Criminal Appeal No.836 of 2010,

Pepsico India Holdings Pvt. Ltd., is the

manufacturer of Sweetened Carbonated Water and is

being prosecuted for the presence of Carbofuran in

its product. These appeals throw up certain

questions relating to the maintainability of the

criminal prosecutions launched against the

Appellants, namely :

(1)In the absence of any prescribed and validated

method of analysis under Section 23(1-A)(hh) of

the Prevention of Food Adulteration Act, 1954,

hereinafter referred to as “the 1954 Act”,

could a prosecution have been launched against

the Appellants based on a report submitted by

the Public Analyst using the method of the

Directorate General of Health Services

(D.G.H.S.) ?

2

(2)Could a prosecution have been launched against

the Appellants in the absence of any validated

method of analysis to ascertain the percentage

of pesticide residue present in a Carbonated

beverage, which renders the report of the

Public Analyst unreliable, particularly when it

does not indicate that such percentage of the

pesticide residue is injurious to health and,

therefore, adulterated within the meaning of

Section 2(ia)(h) of the aforesaid Act?

(3)What is the effect of non-specification of the

level of tolerance in respect of the presence

of pesticide residue in Sweetened Carbonated

Water in the Table appended to Rule 65(2) of

the Prevention of Food Adulteration Rules,

1955, hereinafter referred to as “the 1955

Rules”? and

3

(4)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. Vs.

Neeta Bhalla & Anr. [2005 (8) SCC 89], when

they were neither in charge of nor responsible

for the conduct of the business of the Company?

2.On 25

th

October, 2006, the Food Inspector of

Mobile Vigilance, Kozhikode, inspected the premises

of Star Marketing, Ashoka Puram, Door No.5/1589,

under Kozhikode Municipal Corporation and purchased

three two-litre bottles of Pepsi on payment of the

price. The said bottles were sealed and

subsequently, on 26

th

October, 2006, one part of the

sample was forwarded to the Public Analyst,

Kozhikode. On 28

th

November, 2006, the Public

Analyst submitted his report stating that upon

analysis of the sample of Pepsi Sweetened

4

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

cognizance of the offence and issued process

against the Appellants.

4.The Appellants moved the Kerala High Court

under Section 482 Cr.P.C. for quashing of the

aforesaid order of the Chief Judicial Magistrate,

Kozhikode. The learned Single Judge by his order

dated 19

th

February, 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,

5

M/s. Pepsico India Holdings Pvt. 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,

appearing for the Appellants questioned the

cognizance taken against the Appellants and urged

that in the absence of any prescribed method of

analysis under Section 23(1-A)(hh) of the 1954 Act

by the Central Government, the Public Analyst had

not been following any uniform method of analysis,

but resorted to whatever method was convenient. It

was submitted that the said approach was entirely

wrong and the result of the analysis could not be

accepted as valid. Furthermore, there being no

validated method of analysis to ascertain the

percentage of pesticide residue present in a

carbonated beverage, the report of the Public

Analyst could not be relied upon for launching

6

prosecutions against the Appellants under the

provisions of the 1954 Act, especially when such

report did not even indicate that the presence of

the amount of pesticide residue detected is

injurious to health and that the sample of Pepsi

submitted for analysis would, therefore, have to

be considered as adulterated under Section 2(ia)(h)

of the 1954 Act.

6.It was strenuously urged that even if it be

assumed that the Public Analyst had detected the

presence of pesticide residue, his opinion that the

presence of the pesticide residue at such levels

rendered the articles injurious to health under

Section 2(ia)(h) of the 1954 Act, cannot be

accepted in the absence of a validated method of

analysis. Mr. Chagla submitted that whether an

article of food is adulterated or not has to be

determined under the Rules framed by the Central

Government under Section 23 of the 1954 Act. Under

7

Section 23(1A) the Central Government is empowered

to make rules, inter alia, for defining the

standards of quality and fixing the tolerance

limits of pesticide permissible in any article of

food. The Rule-making authority, in consultation

with the Central Committee and the Central

Government has defined the standards of quality and

has also fixed the limits of pesticide residue

permissible for various articles of food, including

carbonated water, within which entry the product of

the Appellants is also included. It is also

universally accepted that even the water which is

used for manufacturing carbonated water, has to

comply with the standards of packaged drinking

water. Rule 65 is found in Part XIV of the 1955

Rules under the heading “Insecticides and

Pesticides”. Rule 65(2) makes it mandatory that

the level of insecticide presence, mentioned in the

Table in respect of various articles of food, shall

8

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 threreunder.

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 1

st

April, 2004, a standard was included which

9

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 15

th

October, 2004, the water used in the

manufacture of carbonated beverage was required to

conform to the standards prescribed for packaged

drinking water. While the carbonated water could

contain sugar, water, liquid glucose, honey,

natural flavours, fruit and vegetable extracts, the

water to be used would have to conform to the

standards prescribed for packaged drinking water,

but no separate standard of pesticide residue was

prescribed.

8.Mr. Chagla submitted that the water used by the

manufacturer in the process of manufacturing its

carbonated drink, conforms to the standards

prescribed for packaged drinking water and no one

has contended to the contrary, nor is the

10

Appellants being prosecuted for violating such

standard. He contended that the complaint is based

exclusively on the Public Analyst’s report, which,

in fact, stood vitiated for various reasons. It

was urged that to the extent the report indicates

that the product manufactured by the Appellants is

adulterated as per Rule 65 and A.01.01, the same

was misconceived since neither Rule 65 nor A.01.01,

at the relevant point had prescribed a tolerance

limit for carbonated water. It was contended that

the High Court has, in fact, recorded that the

prosecution proceeded on the sole allegation that

the samples of carbonated beverages purchased by

the Food Inspectors are adulterated under Section

2(ia)(h) of the Act. Based on the said

submissions, the High Court confined the

allegations only to violation of the aforesaid

provision of the Act and the same is also reflected

in the impugned judgment of the High Court.

11

9.As will appear from the report of the Public

Analyst filed in connection with Criminal Appeal

No.836 of 2010, a pesticide residue of Carbofuran

amounting to 0.001 mg/litre was detected in the

sample of sweetened carbonated water manufactured

by the Appellant, by employing the “DGHS Method”.

10.Mr. Chagla contended that in 2007, in an

affidavit filed before the Kerala High Court, it

had been indicated by the Union of India that the

standards for pesticide residue for sweetened

carbonated water have not been prescribed in any

country of the world and that a manual of analysis

for testing of pesticide residue was under

preparation of the Ministry of Health and Family

Welfare. The same sentiments regarding the absence

of validated methods for detection of pesticides

were also discussed by the Central Committee for

Food Standards on 16

th

April, 2007, and the Minutes

of the meeting recorded that validated methods for

12

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

13

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 was

adulterated.

11.Mr. Chagla pointed out that when the tolerance

limit of Carbofuran in infant milk has been set at

0.05 mg/litre, the presence of 0.001 mg/litre of

Carbofuran in the carbonated water manufactured by

the Appellants, could certainly not have been more

injurious to public health than infant milk.

12.In support of his submissions, Mr. Chagla

referred to the decision of this Court in Hindustan

Lever Limited Vs. Food Inspector & Anr. [(2004) 13

SCC 83], wherein, this Court was considering the

judgment of the Kerala High Court rejecting

petitions filed by the Appellants therein for

quashing the proceedings pending before the

Judicial Magistrate, First Class, Alwaye. The

14

proceedings had been initiated on the complaint

filed by the Food Inspector, Edapally Circle,

Ernakulam District, under Sections 2(ia)(a) and

(m), 7(1) and 16(1)(a)(i) and Section 17(1) of the

Prevention of Food Adulteration Act, 1954 read with

Rule 5 of the Prevention of Food Adulteration

Rules, 1955, which were ultimately quashed, inter

alia, on the ground that no prosecution would be

maintainable where no standard is prescribed under

the Rules. It was urged that the report not having

disclosed any material to support the opinion,

stood clearly vitiated and ought not to have been

relied upon.

13.On the question of maintaining an appeal under

Section 13(2) of the P.F.A. Act, 1954, Mr. Chagla

contended that the courts below had erred in

holding that the Appellant ought to have challenged

the report by filing an appeal to the Central Food

Laboratory and not having done so, was not entitled

15

to such relief. Learned counsel submitted that the

Court did not appreciate the futility of preferring

an appeal under Section 13(2) of the 1954 Act,

since admittedly, no validated method of analysis

exists for detecting the presence of pesticide

residue in carbonated water. Learned counsel also

submitted that since the report of the Public

Analyst does not disclose any violation of the

provisions of the 1954 Act, there was no reason for

the Appellants to approach the Central Food

Laboratory under Section 13(2) of the 1954 Act.

14.On the question of the liability of the

Directors of the Appellant-Company on account of

the alleged violation of the provisions of the 1954

Act, Mr. Chagla submitted that except for a bald

statement that Accused No.3 to Accused No.9 were

the Directors of the Company and that Shri Rajeev

Bakshi was the Chairman and Managing Director of

the Company, nothing else had been stated in the

16

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:

17

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 and

that he exercised all due diligence to

prevent the commission of such offence.

(2) Any company may, by order in

writing, authorise any of its directors or

managers (such manager being employed

mainly in a managerial or supervisory

capacity) to exercise all such powers and

take all such steps as may be necessary or

expedient to prevent the commission by the

company of any offence under this Act and

may give notice to the Local (Health)

Authority, in such form and in such manner

as may be prescribed, that it has

nominated such director or manager as the

person responsible, along with the written

consent of such director or manager for

being so nominated.

Explanation.- Where a company has

different establishments or branches or

different units in any establishment or

branch, different persons may be nominated

under this sub-section in relation to

different establishments or branches or

units and the person nominated in relation

to any establishment, branch or unit

shall be deemed to be the person

responsible in respect of such

establishment, branch or unit.”

18

15.It was firstly submitted that one Somesh

Dahale, Manager, Quality Control, of the Company,

had been nominated under Sub-section (2) of Section

17 to be in-charge and responsible for the conduct

of the business of the Company and was, therefore,

the person responsible within the meaning of Sub-

section (1).

16. In addition to the above, Mr. Chagla submitted

that since no allegation had been made in the

complaint against the Directors of the Company as

to whether they were either in charge or

responsible to the Company for its day-to-day

management, the liability of the offence alleged to

have been committed by the Company, could not be

extended to them. Reference was made to the

decision of this Court in S.M.S. Pharmaceuticals

Ltd.’s case (supra), wherein the question of

vicarious liability in criminal jurisprudence had

been considered and it was held that a Director

19

cannot ipso facto be deemed to be in charge of and

responsible to the Company for the conduct of its

business. Such fact has to be specifically averred

in the complaint. Mr. Chagla submitted that the

High Court did not also appreciate the fact that

the decision in S.M.S. Pharmaceuticals Ltd.’s case

(supra) was based on the judgment of this Court in

Municipal Corpn. of Delhi Vs. Ram Kishan Rohtagi

[(1983) 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

20

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. Vs. State, Govt. of NCT of Delhi & Ors.

[(2007) 5 SCC 54], 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 Analyst in

the product of the Appellant-Company on the basis

of the DGHS method, was within the tolerance limits

as was prescribed under the amended provisions of

21

Rule 65 of the 1955 Rules, with effect from

17.6.2009. Mr. Chagla submitted that after such

amendment sweetened carbonated water was included

in the Table appended to Rule 65(2) under the

heading of “Chlorpyrifos” at Serial No.23, wherein

the tolerance limits of the presence of insecticide

residue in carbonated water was shown as 0.001

mg/litre. Mr. Chagla submitted that the several

prosecutions commenced against the Appellants and

its Directors and employees for alleged violation

of the provisions of Section 16(1)(a)(i) read with

Section 2(ia)(a), 2(ia)(h), 7(1) of the 1954 Act

and Rule 65 of the 1955 Rules, were, therefore,

liable to be quashed.

20.Ms. Indu Malhotra, learned Senior Advocate,

appearing for Pepsico India Holdings Pvt. Ltd. in

Criminal Appeal No.842 of 2010 (arising out of

SLP(Crl.)No.5818/2009), while adopting Mr. Chagla’s

submissions re-emphasised the decision of this

22

Court in Everest Advertising (P) Ltd.’s case

(supra)with regard to the question of vicarious

liability of the Directors of a Company in regard

to offences which may have been committed without

their knowledge or consent. Ms. Malhotra submitted

that it was well-established through judicial

precedent that while the Managing Director or

Deputy Managing Director of a Company would be

deemed to be aware of actual transactions in a

given situation, the Chairman of a large company or

a Director of a Company may not be so aware, as in

the instant case.

21.In this regard, Ms. Malhotra also referred to

the provisions of the Insecticide Act, 1968, which

by virtue of the Explanation to Rule 65 has been

made applicable to the said Rule regarding usage of

the expression “insecticide”, and, in particular,

Section 33 thereof, which relates to offences so

committed by a company. Section 33 provides that

23

in regard to offences by companies a person

connected with the Company’s affairs could not be

made liable if he proved that the offence was

committed without his knowledge or that he

exercised all due diligence to prevent such

offence. Ms. Malhotra submitted that from the

facts as revealed in the instant case, no liability

could be foisted on the Directors of the Company

when Somesh Dahale had been nominated under Sub-

Section (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 analyzed by Public Analysts

under the Act and also to define the method of

24

analysis under Sub-section (1-A)(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 Rule 65,

carbonated water had not been included, the said

item was included in the said Table under Item

No.23 dealing with Chlorpyrifos by G.S.R. 427(E)

dated 17.6.2009. It was submitted that it was the

25

intention of the Legislature that sweetened

carbonated water should not have any insecticide

residue in it at all, but a specific tolerance

limit was included in order to provide a margin on

account of the use of various agents in the

manufacture of sweetened carbonated water. Mr.

Bhat urged that the submissions made on behalf of

the Appellants in this regard that in the absence

of any Rules framed under Section 23(1-A)(ee) and

(hh), the methods of analysis resorted to by the

Public Analyst, could not be relied upon, was

considered at length by the High Court.

Considering the provisions of Section 23(1-A)

(ee)(hh) of the 1954 Act, the High Court held that

in the event the argument advanced on behalf of the

Appellants was to be accepted, it would lead to an

anomalous situation. On the other hand, the High

Court was of the view that the said provisions

would be applicable in respect of certain tests

26

which could not be conducted and permitted to be

conducted in every laboratory. The non-formulation

of Rules under Section 23(1-A)(ee)(hh) for analysis

of carbonated beverages, could not, therefore, be

construed as being fatal to the prosecution.

23.Mr. Bhat then submitted that Rule 4 of the 1955

Rules, provides for analysis of food samples and

under Sub-rule (9) provides that the “Manual of

Method of Analysis” brought out by the Ministry of

Health and Family Welfare, is to be adopted for

analysing the samples of food articles. However,

in case no parameter is available in the manuals

for the methods of analysis, the other methods of

analysis indicated therein are to be adopted.

Accordingly, in the absence of any standard

prescribed under the existing Rules, it was open to

the Public Analyst to resort to the DGHS method for

analysing the sample which had been forwarded and

the adoption of such a method was valid and had

27

been rightly relied upon by the courts below. In

support of his submissions, Mr. Bhat referred to

the decision of this Court in Prem Ballab & Anr.

Vs. State (Delhi Admn.) [(1977) 1 SCC 173], wherein

this Court was called upon, inter alia, to examine

the question as to whether an article of food could

be found to be adulterated under more than one

clauses of 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

28

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 been committed by the

Company, Mr. Bhat submitted that although it had

been held in Ram Kishan Rohtagi’s case (supra) that

the complaint being vague as regards the Directors

and no offence having been revealed against them,

the High Court had not only quashed the proceedings

29

against the Directors, it had also considered the

question of vicarious liability, but had found that

such liability did not extend to the Directors of

the Company, who were not responsible to the

Company for its day-to-day business.

26.Mr. Bhat also relied upon another decision of

this Court in Municipal Corporation of Delhi Vs.

Purshotam dass Jhunjunwala & Ors. [(1983) 1 SCC 9],

in which the Chairman, Managing Director and

Director of the Mill were found to be in-charge of

and responsible for the conduct of its business at

the time of commission of offence and, accordingly,

their prayer for quashing the complaint was

rejected.

27. Mr. Jaideep Gupta, learned Senior Advocate, who

appeared for State of Kerala in Criminal Appeal

No.837 of 2010, adopted Mr. Bhat’s submissions.

30

28.In reply to Mr. Bhat’s submissions, Mr. Chagla

while reiterating his earlier submissions,

contended that the submissions with regard to Rule

65 of the 1955 Rules had been given up by the State

of Kerala before the High Court, though such

submission was disputed by Mr. Bhat. He also added

that Rule 65 deals with raw products and not

finished products and the decision in Prem Ballab &

Anr.’s case (supra) dealt with the addition of

colour to a food article which has no relevance as

far as the facts of these Appeals are concerned,

since it is not the case of the prosecution that

any insecticide had been directly introduced in

sweetened carbonated water manufactured by the

Company.

29.From the submissions made on behalf of the

respective parties, it is apparent that the width

of the dispute to be settled in these Appeals is

not very wide. We are only required to consider as

31

to whether the presence of 0.001 mg of Carbofuran

per litre found in the sweetened carbonated water,

manufactured by the Appellant-Company, can be said

to be adulterated as per Rule 65 of the 1955 Rules

and under Section 2(ia)(h) of the 1954 Act,

particularly in the absence of any validated

standard of analysis provided for under the 1954

Act or 1955 Rules.

30.The Public Analyst found the sample of Pepsi to

be covered by the definition of non-alcoholic

beverages 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.

32

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 17

th

June, 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 the Public Analyst in

the sample of Pepsi submitted for such analysis.

31.Ordinarily, since the level of insecticide

residue was within the limits of tolerance

33

prescribed for carbonated water with effect from

17

th

June, 2009, the same would not attract the

provisions of Section 2(m) of the 1954 Act or the

consequences thereof, but the finding of the Public

Analyst was rendered in the year 2006, at a time

when sweetened carbonated water was not included in

the Table appended to Rule 65(2). After the

tolerance limit was prescribed, the sample of Pepsi

could not be said to be adulterated being within

the prescribed tolerance limit.

32.The entire controversy arises out of the fact

that no specific tolerance limit had been

prescribed for sweetened carbonated water under

Rule 65 and it was, therefore, presumed that trace

of any insecticide would amount to adulteration of

the final product. In fact, the High Court, while

considering the matter, seems to have misconstrued

the submissions made on behalf of the Appellants

that the mere presence of insecticide residue does

34

not render the article of food as being

adulterated. The presence of insecticides within

the limits prescribed in the Table to Rule 65

cannot, therefore, be said to have caused

adulteration of the article of food in question.

In fact, in paragraph 21 of its judgment, the

learned Single Judge of the High Court observed

that he was inclined to agree with the learned

counsel for the Petitioners that the mere presence

of insecticide residue could not ipso facto justify

the conclusion that the article of food has become

injurious to health.

33.The High Court summarised its view into several

grounds of challenge. Grounds 1 and 2 relate to

the non-framing of Rules under Section 23(1-A)

(ee) and (hh) of the 1954 Act. Grounds 3, 4

and 5 deal with the challenge thrown on behalf

of the Appellants to the submissions that the

report of the Public Analyst was not final and

35

that the same could be challenged under Section

13(2) of the said Act. Ground 6 deals with the

criminal liability of the Directors of the

Company on account of the allegations against

the Company.

34.As far as Grounds 1 and 2 are concerned, the

High Court was not convinced with the submission

made on behalf of the appellants that in the

absence of any prescribed and validated method of

analysis under Section 23(1-A)(ee) and (hh) of the

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

36

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 17

th

June, 2009.

35.The High Court also misconstrued the provisions

of Section 23(1-A)(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. Consequently, the

High Court also erred in holding that the non-

formulation of Rules under the aforesaid provisions

37

of the 1954 Act could not be said to be fatal for

the prosecution.

36.As far as Grounds 3, 4 and 5 are concerned, the

High Court failed to consider the reasons given on

behalf of the Appellants for not sending the

Company’s sample to the Forensic Laboratory, to the

effect that, since neither any validated method of

analysis had been prescribed under Section 23(1-

A)(ee) and (hh) of the 1954 Act, nor had any

Laboratory been particularly specified for such

examination, such an exercise would have been

futile. In our view, no useful purpose could have

been served by sending the second sample to the

Forensic Laboratory, unless a defined tolerance

limit of the presence of the pesticides was

available in regard to Sweetened Carbonated Water.

It may be noted that the High Court had itself

observed that mere presence of insecticide residue

to any extent could not justify an allegation that

38

the article of food was adulterated, but contrary

to such observation, the High Court went on to hold

that the Sweetened Carbonated Water manufactured by

the Appellants was adulterated within the meaning

of Section 2(ia)(h) of the 1954 Act.

37.On the question of liability of the Directors

of the Company with respect to an offence alleged

to have been committed by the Company, the High

Court went beyond the ratio of the decision of this

Court in S.M.S. Pharmaceuticals Ltd.’s case (supra)

upon holding that the principles set out in the

said decision could not be understood in any

mechanical or rigid manner. Instead, the High

Court based its judgment on the decision of this

Court in N. Rangachari Vs. Bharat Sanchar Nigam

Ltd. [(2007) 5 SCC 108], which was a case where the

complaint clearly and categorically alleged that

the named Directors were in charge of and

responsible to the Company for the conduct of its

39

business. It is in such circumstances that the

prayer for quashing of the proceedings was

rejected.

38.Both the questions regarding the failure of the

Central Government to frame Rules to define the

Laboratories, where samples of food could be

analysed by the Public Analyst, or to define the

validated methods of analysis and the liability of

the Directors, who are the Appellants before us,

are of great importance for the purpose of bringing

home a charge against 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

40

appended to Rule 65(2) with effect from 17

th

June,

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

of the Appellants. The High Court also appears to

have overlooked the fact that the percentage of

pesticides found by the Public Analyst in the

41

Sweetened Carbonated Water manufactured by the

Appellants was within the tolerance limits

subsequently prescribed in respect of such product.

39. As mentioned hereinbefore, the High Court

erred in giving its own interpretation to the

decision of this Court in S.M.S. Pharmaceuticals

Ltd.’s case (supra), which was reiterated

subsequently in several judgments, some of which

have been indicated hereinabove, and relying

instead on the decision of Rangachari’s case

(supra), the facts of which were entirely different

from the facts of this case. It is now well

established that in a complaint against a Company

and its Directors, the Complainant has to indicate

in the complaint itself as to whether the Directors

concerned were either in charge of or responsible

to the Company for its day-to-day management, or

whether they were responsible to the Company for

the conduct of its business. A mere bald statement

42

that a person was a Director of the Company against

which certain allegations had been made is not

sufficient to make such Director liable in the

absence of any specific allegations regarding his

role in the management of the Company.

40.It has to be kept in mind that although an

argument was advanced with regard to the

restrictions imposed on the use of insecticides

under Rule 65 of the 1955 Rules, it is apparent

from the order of the learned Single Judge that

such a ground was given up by the respondents and

the arguments were confined only with regard to the

alleged violation of Section 2(ia)(h) of the 1954

Act.

41.Having considered the matter in its totality

and also having regard to the fact that Somesh

Dahale had been nominated under Sub-section (2) of

Section 17 of the 1954 Act to be a person in charge

43

of and responsible to the Company for the conduct

of its business, we are of the view that the

Appeals have to be allowed.

42.We, accordingly, allow the appeals and set

aside the judgment and order of the learned Single

Judge impugned in these proceedings and quash the

prosecution of the Appellants in respect of the

various complaints challenged before the High Court

in its inherent jurisdiction.

…………………………………………J.

ALTAMAS KABIR)

…………………………………………J.

(CYRIAC JOSEPH)

…………………………………………J.

(DEEPAK VERMA)

New Delhi

Dated:18.11.2010

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