Biz Laws: Time To Spare The Rod

Law books still prescribe jail terms for trivial business offences and procedural lapses. That's in the way of genuine ease of doing business.

- Joe C. Mathew

AUS CITIZEN representing foreign investors of an Aurangabad-based medical equipment company as non-executive nominee director was shocked when Indian Food and Drugs Administration dragged him into a criminal case. The administration had accused the company of tampering with labels on some packs. The sections of the Drugs and Cosmetics Act under which it filed the police complaint against company directors provided for a jail term. The director approached the high court at Aurangabad for quashing the FIR. The court dismissed the case stating that he was a shareholder and his name was mentioned on the licence. However, in August 2022, on Supreme Court's intervention, it accepted that the director had no role in day-to-day operations and could not be held liable criminally. The complaint against him was quashed. He had to bear the brunt as the company gave his name as one of the directors while applying for a licence. What impression will he take back to foreign investors?” asks Mumbai-based Amit Jajoo, a partner at legal firm Induslaw, which handled the case.

The U.S. citizen was perhaps luckier than many others. It took Raghav Gupta 10 years to get a Delhi government case quashed in Patiala House Court, New Delhi. The state food department had accused Gupta, director of a company that imported Snapple Juice Drink from Schweppes International Rye Brook, of violating labeling requirements as the drink pack bought by the food inspector did not have lot and batch numbers. It did not consider Gupta’s plea that the pack had a barcode with all relevant information. In September 2020, Supreme Court quashed the case saying the information was available in the barcode and no useful purpose is going to be served by allowing the present prosecution to continue.”