Section 38: Offences by companies

(1) Where an offence under Chapter IV has been committed by a company, 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 as well as 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 if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where any offence under Chapter IV has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.— For the purposes of this section,–

(a) “company” means any body corporate and includes a firm or other association of individuals; and

(b) “director”, in relation to a firm, means a partner in the firm.

Simplified Explanation

Key Provisions:

1. Responsibility of Company Officials:
   • If an offence under Chapter IV of the Narcotic Drugs and Psychotropic Substances Act is committed by a company, those in charge of the company at the time of the offence (e.g., directors, managers, etc.) will be held personally liable for the offence.
   • These individuals are considered guilty and can be prosecuted and punished as if they were the ones who committed the offence themselves.
2. Defence for Company Officials:
   • A person in charge of the company can defend themselves if they prove that:
     • The offence occurred without their knowledge, or
     • They took all necessary steps to prevent the offence, showing due diligence.
3. Officers Complicit in the Offence:
   • If the offence was committed with the consent or connivance of any director, manager, secretary, or other officers of the company, or if it was due to their neglect, then those individuals are also deemed guilty and can be punished accordingly.

Explanation of Terms:

• Company: Includes any body corporate (like a corporation), a firm, or other associations of individuals.
• Director: In the case of a firm, this refers to a partner in the firm.

Simplified Explanation:

• If a company commits an offence under the Act, the individuals responsible for the company’s operations (like its directors or managers) will also be held accountable for the crime.
• These individuals can be excused if they prove they didn’t know about the offence or took all possible steps to prevent it.
• If any officer of the company (such as a director) knowingly allowed or ignored the offence, they too will face legal consequences.