A landmark ruling by the Jammu & Kashmir and Ladakh High Court has clarified the legal threshold for prosecuting corporate officers under the Drug and Cosmetics Act, 1940. The Court held that mere designation as a director or manager is insufficient to attract criminal liability; specific allegations linking the individual to the commission of the offence are mandatory. This decision significantly curtails the practice of indiscriminate prosecution of corporate functionaries based on hierarchical position alone.
Background & Facts
The Dispute
Five connected petitions under Section 482 of the CrPC were filed by directors, managers, and officers of M/s Theon Pharmaceuticals Ltd challenging the issuance of process against them in criminal complaints alleging violations of Section 18(a)(i) read with Section 27(d) of the Drug and Cosmetics Act, 1940. The complaints arose from the detection of substandard drug samples - Ceftriaxone Injections and Glimepiride-Metformin tablets - manufactured by the company and found non-conforming upon government analysis.
Key Facts
- The offending drug samples were manufactured between January 2016 and February 2016, with expiry dates ranging from December 2017 to April 2018.
- The samples were tested by the Government Analyst and found to be "not of standard quality" under Section 27(d) of the Act.
- The accused company, M/s Theon Pharmaceuticals Ltd, was named in all complaints.
- Sh. Puran Chand Joshi, a Director of the company, was formally nominated by the company as the person responsible for the conduct of its business under Section 34 of the Act.
- A communication dated 21.02.2015 from the State Drugs Controller, Baddi, H.P., confirmed that Sh. Puran Chand Joshi was endorsed as the person responsible under Section 34.
- The petitioners included Managing Directors, Whole Time Directors, Additional Directors, AGM-Production, Senior Manager (Quality Control), and the company itself.
- No individual petitioner was named in the company’s internal resolution or official communication as the person responsible under Section 34, except Sh. Puran Chand Joshi.
Procedural History
- 01.06.2017: Sample of Ceftriaxone Inj. Batch CFXM 16031 collected and tested.
- 09.06.2017: Complaint No. 28/Complaint filed before CJM, Jammu (CRMC No. 44/2018).
- 09.06.2017: Complaint No. 27/Complaint filed before CJM, Jammu (CRMC No. 64/2018).
- 31.08.2017: Complaint No. 31/2017 filed before JMFC, Kishtwar (CRMC No. 690/2017 and CRMC No. 720/2017).
- 10.04.2018: Complaint No. 1208/Complaint filed before CJM, Jammu (CRMC No. 450/2018).
- 10.04.2018: Process issued against all accused persons in CRMC No. 450/2018.
- 2018 - 2023: Multiple petitions filed under Section 482 CrPC before the High Court challenging the maintainability of complaints against individual officers.
- 30.03.2026: Arguments concluded.
- 02.04.2026: Judgment pronounced.
The Parties' Positions
For the Petitioners
The petitioners contended that the complaints lacked specific allegations attributing personal involvement or culpable negligence to them. They argued that Section 34 of the Act creates a rebuttable presumption only against the person formally nominated by the company as responsible for business conduct. They relied on M/s Cheminova India Limited v. State of Punjab (2021) 8 SCC 818 to assert that mere designation as a director or manager cannot substitute for specific averments of role in the offence.
For the Respondent
The State contended that directors and officers of pharmaceutical companies are inherently responsible for quality control and that their positions alone justify prosecution. It argued that the company’s structure and the nature of the offence warranted holding all senior officers accountable.
Relief Sought
The petitioners sought quashing of the complaints against them under Section 482 CrPC, arguing that the proceedings were an abuse of process. They sought dismissal of all charges against them except where specific allegations of involvement were pleaded.
The Legal Issue
The central question was whether Section 34 of the Drug and Cosmetics Act, 1940 permits the prosecution of company officers solely on the basis of their designation, or whether specific allegations linking them to the commission of the offence are mandatory.
Arguments Presented
For the Petitioner
The petitioners relied on M/s Cheminova India Limited v. State of Punjab to argue that Section 34(1) creates a presumption only against the person formally nominated by the company as responsible for business conduct. They emphasized that the Supreme Court held that vague allegations against a Managing Director, without specific role attribution, constitute an abuse of process. They further submitted that the company had duly nominated Sh. Puran Chand Joshi as the responsible person under Section 34, and no other officer was so designated. Therefore, prosecution of others without specific allegations violated the statutory framework.
For the Respondent
The State contended that directors and senior officers of pharmaceutical companies bear collective responsibility for product quality. It argued that the nature of the offence - manufacturing substandard drugs - necessarily implicates those in charge of production and quality control. The State maintained that the complaints, though general, were sufficient to initiate proceedings given the public health implications.
The Court's Analysis
The Court undertook a detailed interpretation of Section 34 of the Drug and Cosmetics Act, 1940, distinguishing between the statutory presumption under sub-section (1) and the independent liability under sub-section (2). It held that sub-section (1) creates a rebuttable presumption only against the person formally nominated by the company as responsible for the conduct of its business. The Court emphasized that this presumption is triggered only upon proof of such nomination, and not by virtue of hierarchical position.
"In the instant case, the Company has passed a resolution, fixing responsibility of one of the Managers namely Mr. Madhukar R. Gite by way of a resolution and the same was furnished to the respondents by the 2nd Appellant in shape of an undertaking on 22.01.2013. When furnishing of such undertaking fixing the responsibility of the quality control of the products is not in dispute, there is no reason or justification for prosecuting the 2nd Appellant - Managing Director, on the vague and spacious plea that he was the Managing Director of the Company at the relevant time."
The Court applied this principle to all five petitions, noting that only Sh. Puran Chand Joshi was formally designated under Section 34. For all other petitioners, the complaints contained only bald assertions of their positions - Managing Director, Director, AGM, Senior Manager - without any specific averment of their role in the manufacture, testing, or release of the substandard drugs.
The Court further held that sub-section (2) of Section 34 permits prosecution of directors or officers if the offence is attributable to their consent, connivance, or neglect. However, such liability requires specific allegations in the complaint. The Court found that in CRMC No. 44/2018 and CRMC No. 64/2018, petitioners No. 8 and 9 were specifically alleged to be "approved technical employees actively involved in manufacturing and production" - thus satisfying the threshold under sub-section (2). For all others, the absence of such allegations rendered the prosecution unsustainable.
The Court concluded that allowing prosecution based on designation alone would lead to indiscriminate targeting of corporate officers, contrary to the principle of personal culpability in criminal law.
The Verdict
The petitions were partly allowed. The complaints against the following petitioners were quashed:
- In CRMC No. 450/2018: Petitioners No. 1 to 7.
- In CRMC No. 690/2017: Petitioners No. 1 to 7.
- In CRMC No. 720/2017: Petitioners No. 1, 2, and 4.
- In CRMC No. 44/2018: Petitioners No. 1 to 7.
- In CRMC No. 64/2018: Petitioners No. 1 to 7.
The complaints against Sh. Puran Chand Joshi and M/s Theon Pharmaceuticals Ltd shall proceed in all cases. Additionally, in CRMC No. 44/2018 and CRMC No. 64/2018, the complaints against petitioners No. 8 and 9 (AGM-Production and Senior Manager, Quality Control) and petitioner No. 10 (the company) shall proceed, as specific allegations of involvement were pleaded.
What This Means For Similar Cases
Designation Alone Cannot Trigger Criminal Liability
- Practitioners must now challenge complaints that name directors or officers without specific allegations of personal involvement in the alleged offence.
- The burden shifts to the prosecution to plead facts showing the accused’s direct role in the commission of the offence, not merely their title.
- In corporate prosecutions under regulatory statutes, the absence of a formal nomination under Section 34 renders prosecution of non-nominated officers legally unsustainable.
Specific Allegations Are Mandatory Under Section 34(2)
- For prosecution under Section 34(2), the complaint must explicitly state that the officer’s consent, connivance, or neglect led to the offence.
- Vague phrases like "in charge of operations" or "responsible for quality" are insufficient without concrete factual assertions.
- Practitioners should scrutinize complaints for the presence of operative language such as "approved technical employee," "directly supervised production," or "failed to conduct quality checks" to determine maintainability.
Corporate Compliance Documentation Is Critical
- Companies must maintain and formally submit Section 34 nominations to regulatory authorities.
- Such documentation creates a legal shield against indiscriminate prosecution of senior officers.
- Legal advisors should advise clients to designate and document one responsible officer per facility or product line to limit exposure.
