The Himachal Pradesh High Court has clarified that a Managing Director cannot be prosecuted under the Drugs and Cosmetics Act, 1940, merely by virtue of their designation, absent specific allegations demonstrating active responsibility for the company’s day-to-day operations at the time of the alleged offence.
Background & Facts
The Dispute
The petitioner, Amit Kumar Bansal, is the Managing Director of M/s Theon Pharmaceuticals Limited. Two criminal complaints were filed against him and the company under Sections 18(a)(i) and 18(a)(vi) read with Section 16, punishable under Section 27(d) of the Drugs and Cosmetics Act, 1940, for the manufacture and distribution of substandard drugs. The complaints named the petitioner as an accused alongside the company and Mr. Puran Chand Joshi, the Wholetime Director.
Key Facts
- On 27.03.2018, a sample of "Diclofenac Sodium with Thiocolchicoside tablet (Theomove-4)" was drawn from the Main Drugs Store, Government Multi-specialty Hospital, Chandigarh, by Drug Inspector Mr. V. Kaviyarasan.
- On 27.07.2018, a sample of "Montelukast Sodium and Levocetirizine Hydrochloride tablet (Lookast-LC)" was drawn from the premises of M/s Theon Pharmaceuticals Limited, Saini Majra, Solan.
- Both samples were tested by government laboratories, with adverse reports dated 09.08.2018 and 27.03.2019 respectively, concluding the drugs were of substandard quality.
- The company had appointed Mr. Puran Chand Joshi as Wholetime Director via a Board Resolution dated 07.09.2017, which was duly communicated to the Central Drug Standard Control Organisation (CDSCO).
- The petitioner was not named as an authorized signatory on any invoices or documents related to the sampled drugs.
- The petitioner was not present at the time of sample collection in either instance.
- The complaints contained no specific averments regarding the petitioner’s involvement in manufacturing, quality control, or day-to-day operations of the company.
Procedural History
- 27.03.2018: Sample of Theomove-4 drawn from Chandigarh hospital.
- 27.07.2018: Sample of Lookast-LC drawn from company premises.
- 09.08.2018: Adverse analysis report received for Theomove-4.
- 27.03.2019: Adverse analysis report received for Lookast-LC.
- 31.12.2021: Complaint No. 8/3 of 2022 filed against M/s Theon Pharmaceuticals Limited, Mr. Puran Chand Joshi, and the petitioner.
- 30.12.2021: Complaint No. 13/3 of 2022 filed against the same accused for the second sample.
- 10.01.2022: Additional Chief Judicial Magistrate, Nalagarh, issued summons to the petitioner in Complaint No. 8/3 of 2022.
- 11.01.2022: Additional Chief Judicial Magistrate, Nalagarh, issued summons to the petitioner in Complaint No. 13/3 of 2022.
- 20.03.2026: Petitions under Section 482 Cr.P.C. heard together by the Himachal Pradesh High Court.
- 09.04.2026: Judgment delivered quashing proceedings against the petitioner.
The Parties' Positions
For the Petitioner: The petitioner argued that he was not involved in the day-to-day manufacturing or quality control of the drugs. He relied on the Board Resolution appointing Mr. Puran Chand Joshi as Wholetime Director, which was disclosed to CDSCO. He contended that the complaints failed to allege any specific role or responsibility on his part, making the prosecution legally unsustainable.
For the Respondent (Union of India): The Respondent submitted that as Managing Director, the petitioner was overall in charge of the company’s affairs and therefore liable under Section 34 of the Act. The reply was silent on the issue of limitation.
Relief Sought
The petitioner sought quashing of both complaints (No. 8/3 of 2022 and No. 13/3 of 2022) and the summoning orders dated 10.01.2022 and 11.01.2022, on the grounds of lack of specific averments and limitation.
The Legal Issue
Can a Managing Director of a company be prosecuted under Section 34 of the Drugs and Cosmetics Act, 1940, for offences committed by the company, when the complaint contains no specific averments demonstrating that he was in charge of and responsible for the day-to-day conduct of the business at the time of the offence?
Arguments Presented
For the Appellant/Petitioner
The petitioner’s counsel, Mr. N.S. Chandel, relied on multiple judgments of the Supreme Court, including Susela Padmavathy Amma v. Bharti Airtel Ltd., Pawan Kumar Goel v. State of U.P., and Siby Thomas v. Somany Ceramics Ltd., to argue that vicarious liability under Section 34 requires two cumulative conditions: (1) the person must have been in charge of the company’s business, and (2) must have been responsible for its conduct. Mere designation as Managing Director is insufficient. The complaint contained no factual averments regarding the petitioner’s role in manufacturing, quality assurance, or operational control. The Board Resolution appointing Mr. Joshi as Wholetime Director, communicated to CDSCO, further negated any basis for imputing liability to the petitioner. The counsel also argued that the complaints were barred by limitation, as cognizance was taken on 10.01.2022 and 11.01.2022, beyond the three-year period from the date of the adverse reports (09.08.2018 and 27.03.2019).
For the Respondent/State
The Respondent, represented by Mr. Shashi Shirshoo, contended that as Managing Director, the petitioner was inherently responsible for the company’s affairs and that the issue of liability should be decided at trial. The reply did not address the limitation argument or the absence of specific averments in the complaint.
The Court's Analysis
The Court began by reaffirming the scope of Section 482 Cr.P.C., emphasizing that the High Court may quash proceedings where continuation would amount to an abuse of process or where the complaint, on its face, fails to disclose a cognizable offence. The Court cited Amish Devgan v. Union of India, Kaptan Singh v. State of Uttar Pradesh, and Abhishek Singh v. Ajay Kumar to underscore that at the stage of summoning, the Court must examine whether the complaint discloses prima facie ingredients of the offence, without entering into the merits of evidence.
The Court then turned to Section 34 of the Drugs and Cosmetics Act, 1940, which imposes vicarious liability on persons in charge of and responsible for the conduct of a company’s business at the time of the offence. The Court held that the Supreme Court has consistently ruled that this liability cannot be inferred from mere designation. As held in Susela Padmavathy Amma v. Bharti Airtel Ltd., "Simply because a person is a director of the company, it does not necessarily mean that he fulfils both the above requirements so as to make him liable."
"The complainant is required to state in the complaint how a Director who is sought to be made an accused was in charge of the business of the company or responsible for the conduct of the company's business. Every Director does not need to be and is not in charge of the business of the company."
The Court noted that the complaints contained only a bald assertion that the petitioner was a Managing Director, with no factual details regarding his involvement in manufacturing, quality control, or operational decisions. The appointment of Mr. Puran Chand Joshi as Wholetime Director, with formal communication to CDSCO, further indicated that operational responsibility had been delegated. The Court also relied on Siby Thomas v. Somany Ceramics Ltd., which held that the primary responsibility lies with the complainant to make specific averments.
The Court further held that the complaints were barred by limitation under Section 468 Cr.P.C. The maximum punishment under Section 27(d) is two years, attracting a three-year limitation period. The offence was deemed to have been committed on the date the adverse reports were received - 09.08.2018 and 27.03.2019. Cognizance was taken on 10.01.2022 and 11.01.2022, which is beyond the three-year window. The trial court’s failure to consider this was a grave legal error.
The Court concluded that the absence of specific averments and the clear bar of limitation rendered the proceedings against the petitioner unsustainable and an abuse of process.
The Verdict
The petitioner succeeded. The Himachal Pradesh High Court quashed Complaint No. 8/3 of 2022 and Complaint No. 13/3 of 2022, along with the summoning orders dated 10.01.2022 and 11.01.2022, against the petitioner, Amit Kumar Bansal. The petitioner is discharged in both cases. All pending applications are disposed of.
What This Means For Similar Cases
Vicarious Liability Requires Specific Averments, Not Just Designation
- Practitioners must ensure that complaints under Section 34 of the Drugs and Cosmetics Act specifically allege how the accused was involved in day-to-day operations - not merely state their title.
- A Managing Director cannot be prosecuted unless the complaint details his role in manufacturing, quality control, or decision-making related to the substandard product.
- Blanket impleadment of directors without factual basis invites quashing under Section 482 Cr.P.C.
Limitation Period Is a Jurisdictional Bar - Not a Defence to Be Raised at Trial
- The limitation period under Section 468 Cr.P.C. for offences punishable with up to three years’ imprisonment is three years from the date of knowledge of the offence.
- In drug cases, the date of the adverse laboratory report, not the date of sample collection, is the trigger for limitation.
- Courts must examine limitation at the stage of summoning; failure to do so renders proceedings void.
Company Must Be Arrayed as Accused Before Individuals Can Be Prosecuted
- The Court referenced Ashish Mittal v. State of Himachal Pradesh, holding that prosecution of individuals under Section 34 is contingent on the company being named as an accused.
- If the company is not impleaded, proceedings against individuals are legally unsustainable.
- Practitioners should file applications to implead the company before seeking to prosecute officers.
