J&K&L High Court Refuses To Quash Drug Quality Case Against Company Directors, Says Responsibility Under Drugs Act Requires Trial
The Jammu & Kashmir and Ladakh High Court has refused to quash criminal proceedings against three Directors of a pharmaceutical company over the manufacture of a drug declared “Not of Standard Quality”, holding that a Director cannot escape prosecution at the threshold merely by claiming that he had no personal role in the manufacturing process.
The Court held that whether a Director was “in charge of, and responsible to the company for the conduct of the business” under Section 34 of the Drugs and Cosmetics Act, 1940 is a factual issue that ordinarily requires examination of evidence at trial.
The Court observed that whether a Director was actually “in charge of, and responsible to the company for the conduct of the business” within the meaning of Section 34 of the Drugs and Cosmetics Act, 1940 is essentially a question of fact requiring appreciation of evidence and, therefore, cannot ordinarily be conclusively adjudicated at the threshold in proceedings for quashing.
A bench of Justice Wasim Sadiq Nargal thus dismissed the petition filed by three Directors of Corona Remedies Pvt. Ltd., who had sought quashing of the complaint and the order whereby the Chief Judicial Magistrate, Jammu had taken cognizance of offences under Section 18(a)(i) read with Section 27(d) of the Drugs and Cosmetics Act and issued process against them.
Background of the case:
The petitioners, Directors of Corona Remedies Pvt. Ltd., challenged proceedings arising from a Government Analyst's report dated August 31, 2016 declaring a drug manufactured by the Company as “Not of Standard Quality.” Following the report, the Company was issued a statutory notice, in response to which it stated that the sale had been stopped, no stock remained, and requested the authorities to take a lenient view.
A subsequent joint inspection found the manufacturing process compliant with GMP norms and the requisite quantity of bulk drug used, but nevertheless recommended action under the applicable guidelines. The Drug Inspector thereafter filed a complaint under Sections 18(a)(i) read with 27(d) of the Drugs and Cosmetics Act, pursuant to which the Chief Judicial Magistrate, Jammu took cognizance and issued process. The Directors then approached the High Court under Section 561-A CrPC seeking quashing of the complaint and proceedings.
After considering the rival submissions, Justice Nargal formulated a few questions for determination, observing that they were closely interlinked.
The first question was whether the petitioners' plea that they were not responsible for the conduct of the Company and were not involved in manufacturing the drug could be accepted at the threshold, or whether the issue was required to be determined by the Trial Court under Section 34 of the Act.
The Court answered the question against the petitioners. It examined Section 34, which provides for liability of persons who, at the time of commission of an offence by a Company, were “in charge of, and responsible to the company for the conduct of the business”. The provision also permits such person to establish that the offence was committed without his knowledge or that he exercised due diligence to prevent its commission.
Relying upon the Supreme Court's decision in Dinesh B. Patel v. State of Gujarat, (2010) 11 SCC 125, the Court noted that a technical approach should not be adopted in proceedings concerning Directors prosecuted under the Drugs and Cosmetics Act. The Supreme Court had left it open to the Directors to establish before the Trial Court that they had nothing to do with the manufacturing process.
Justice Nargal accordingly observed,
“The petitioners cannot, at this stage, avoid the operation of Section 34 of the Act merely by disputing their responsibility for the conduct of the Company's business or by asserting that they had no role in the actual manufacturing process.”
Importantly, the Court clarified that actual physical participation in manufacture is not the sole test under Section 34. Merely because manufacturing activity was carried out under the supervision of qualified technical personnel, the Directors could not automatically disassociate themselves from the Company's affairs and responsibilities. The extent of their responsibility, the nature of their control and whether they satisfy the statutory requirements of Section 34 were matters requiring appreciation of evidence, it underscored.
Thus, while directorship alone does not conclusively establish guilt, non-involvement equally cannot ordinarily be conclusively determined at the quashing stage, he maintained.
The second question concerned the Company's earlier response to the statutory notice. The Court noted that the Company had not disputed the findings communicated by the Department. Instead, it had stopped sale of the batch, confirmed that no stock remained and requested a lenient view after stating that it admired the findings and honored the judgment.
The Court held that such conduct was relevant while examining the subsequent challenge and invoked the doctrine of approbation and reprobation.
The third question required the Court to consider whether, having regard to the public-health object of the Drugs and Cosmetics Act, proceedings involving a drug declared “Not of Standard Quality” could be quashed by adopting a technical approach at the threshold.
The Court answered this question against the petitioners, emphasising that the Act is not merely regulatory legislation. Its purpose is to ensure that drugs made available to the public conform to prescribed standards of quality, safety and efficacy and to prevent manufacture and distribution of sub-standard, adulterated or unsafe drugs.
Justice Nargal further observed that this legislative purpose has a direct nexus with Article 21 of the Constitution, since the right to life encompasses health and well-being. Consumers of medicines are entitled to expect that drugs made available for human consumption meet prescribed standards.
“…The manufacture and distribution of drugs which fail to meet the prescribed standards, therefore, carries a direct bearing upon public health and, consequently, implicates the constitutional concern underlying Article 21. The statutory safeguards contained in the Drugs and Cosmetics Act must accordingly be understood as serving not merely a regulatory purpose, but also as an important legislative mechanism for protecting the health and life” the court remarked.
The Court therefore declined to adopt a hyper-technical approach and held,
“This Court does not find that the proceedings against the petitioners can be quashed by adopting a hyper-technical approach at the threshold.”
Ultimately, the High Court dismissed the petition, holding that the petitioners had failed to demonstrate any ground warranting interference with the complaint or the Magistrate's order. The interim order staying the proceedings before the Trial Court was also vacated.
Case Title: Ankur Kirtikumar Mehta Vs Bharti Bhachloo
Citation: 2026 LiveLaw (JKL) 326