Directors Of Pharma Companies Can’t Be Prosecuted Under Drugs & Cosmetics Act Without Specific Allegations: J&K And Ladakh High Court

The Court was hearing a batch of petitions under Section 482 of the CrPC challenging multiple complaints filed against the accused company and its officers for offences under Section 18(a)(i) read with Section 27(d) of the Drugs and Cosmetics Act, 1940.

A Bench comprising Justice Sanjay Dhar, upon examining Section 34 of the Drug and Cosmetics Act, 1940, observed that “when an offence has been committed by a company, every person who, at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company along with the company is deemed to be guilty of the offence and shall be liable to be proceeded against”.

“So far as other officers of the company, whether Managing Directors or other functionaries are concerned, their culpability would depend upon the nature of allegations relating to their role made in the complaint filed against the offender company, … If there are specific allegations levelled against any officer or functionary of the company relating to the commission of an offence by the company, of course the said officer or functionary of the company is liable to the prosecuted in connection with an offence committed by the company”, the Bench added.

Senior Advocate Sunil Sethi, with Advocate Ankesh Chandel, appeared for the appellant, while Raman Sharma, AAG, with Saliqa Sheikh, Assisting Counsel, represented the respondents.

Background

The petitions arose out of multiple complaints filed before different Magistrates alleging that certain drug samples manufactured by M/s Theon Pharmaceuticals Ltd were found to be not of standard quality upon analysis by the government analyst.

In these complaints, apart from the accused company, several individuals, including Managing Directors, Whole Time Directors, Additional Directors, technical staff and other functionaries were arrayed as accused on the basis of their designation within the company.

The petitioners challenged the complaints and the orders issuing process against them on the ground that no specific role had been attributed to them in the alleged offences and that the company had already nominated a particular individual as the person responsible for the conduct of its business under Section 34 of the Act of 1940. It was contended that in the absence of specific allegations and in view of such nomination, prosecution against other officers and directors was not sustainable in law.

Court’s Observation

The High Court first examined the scheme of Section 34 of the Drugs and Cosmetics Act, 1940, which deals with offences by companies. It observed that the provision creates a deeming fiction whereby both the company and the person who was in charge of and responsible for the conduct of its business at the relevant time are deemed to be guilty of the offence.

The Court noted that the provision also contains a safeguard enabling such a person to rebut the presumption by proving a lack of knowledge or due diligence. It further held that the presumption under Section 34 is attracted primarily against the person who has been nominated by the company as being responsible for the conduct of its business.

The Court explained that “once it is shown that a person has been nominated by a company to be in charge and responsible to the company for the conduct of the business, a presumption that he has committed the offence along with the company gets triggered against him.”

The Court then distinguished the position of other officers and functionaries, including Managing Directors and Directors, holding that their liability would depend upon specific allegations relating to their role in the commission of the offence.

Relying upon the decision of the Supreme Court in M/s Cheminova India Limited v. State of Punjab (2021), the Court reiterated that bald and vague allegations against Directors without specifying their role are insufficient to sustain prosecution.

“The presumption of being responsible for the conduct of the business of the company arises only against a person who has been nominated by the company as a person responsible to the company for the conduct of business under Section 34 of the Act of 1940”, the Court further remarked.

Applying these principles to the facts of the case, the Court found that the accused company had nominated a specific individual as the person in charge and responsible for manufacturing and analysis of the drugs in question, and the statutory presumption under Section 34 stood attracted against such nominated person.

The Court further observed that, in several complaints, the only allegation against the petitioners was that they held positions such as Managing Director or Director, without any specific role being attributed to them in the alleged offences.

In such circumstances, the Court held that mere designation or status within the company does not ipso facto render a person liable for prosecution under the Act, and that in the absence of specific allegations, continuation of proceedings against such persons would not be sustainable.

At the same time, the Court noted that where specific allegations had been made against certain technical employees or functionaries directly involved in manufacturing or quality control, proceedings against them could validly continue.

Conclusion

Consequently, the High Court partly allowed the petitions and quashed the impugned complaints and proceedings to the extent they related to Directors and other officers against whom no specific role or allegations had been made.

However, the Court directed that the complaints shall proceed against the accused company, the nominated person responsible under Section 34 of the Act of 1940, and those functionaries against whom specific allegations relating to their role in the offence had been made.

Cause Title: Amit Kumar Bansal & Ors v. Sanjeev Kumar Gupta (Neutral Citation: 2026:JKLHC-JMU:953)

Click Here to Read/Download Judgment