Merely Being Director Or MD Does Not Attract Liability Under Drug And Cosmetics Act Without Specific Allegations: J&K&L High Court

The Jammu & Kashmir and Ladakh High Court has held that merely being a Managing Director or Director of a company does not make a person liable for prosecution under the Drug and Cosmetics Act, 1940, in the absence of specific allegations ascribing a role in the commission of the offence. The Court clarified that the presumption under Section 34 of the Act arises only against the person nominated by the company as being in charge and responsible for the conduct of its business.The Court was hearing five petitions under Section 482 of the Code of Criminal Procedure challenging complaints filed against the petitioners, who were directors, managers, and other officers of a pharmaceutical company, for offences under Section 18(a)(i) read with Section 27(d) of the Drug and Cosmetics Act, 1940, alleging that samples of drugs manufactured by the company were not of standard quality.The bench of Justice Sanjay Dhar observed, “Merely on the basis of bald allegations made in the complaint against a functionary or officer of the company does not make the said officer/functionary responsible for the conduct of business of the company. 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 person responsible to the company for conduct of business under Section 34 of the Act of 1940.”Background:Multiple complaints were filed against M/s Theon Pharmaceuticals Ltd and its officers alleging that samples of drugs including Ceftriaxone Im. I.P and Glimepiride with Metformin Hydrochloride Tablets manufactured by the company were found to be not of standard quality upon analysis by the government analyst. The complaints impleaded the Managing Director, Whole Time Directors, Additional Directors, and other functionaries including AGM Production and Senior Manager (Quality Control) as accused.The petitioners challenged the complaints and the process issued by the trial courts, contending that there were no specific averments ascribing any role to them. They placed on record a communication issued by the State Drugs Controller, Baddi, noting that one Sh. Puran Chand Joshi, Director of the accused company, had been endorsed as the person responsible to the company for conduct of its business under Section 34 of the Act of 1940.Court's Observation:The Court examined Section 34 of the Drug and Cosmetics Act, 1940, which deals with offences by companies. Sub-section (1) provides that when an offence has been committed by a company, every person who at the time was in charge of and responsible to the company for the conduct of its business, as well as the company, shall be deemed to be guilty. Sub-section (2) provides that if the offence is committed with the consent or connivance of, or is attributable to neglect on the part of, any director, manager, secretary or other officer, such person shall also be deemed to be guilty.The Court noted that the presumption under Section 34(1) extends only to the person who was in charge and responsible to the company at the relevant time, and such presumption is rebuttable. Once a person has been nominated by the company to be in charge and responsible, the presumption gets triggered against that person, and he must be arraigned as an accused, the court said. Referring to the Supreme Court judgment in M/s Cheminova India Limited v. State of Punjab (2021) 8 SCC 818, the Court observed that where a company has passed a resolution fixing responsibility on a particular manager and furnished an undertaking to the authorities, the Managing Director cannot be prosecuted on vague allegations that he was overall responsible for the conduct of the business. The Supreme Court had held that allowing such prosecution would be an abuse of process of law.Applying these principles to the facts, the Court found that the accused company had informed the respondent that Sh. Puran Chand Joshi was the person in charge and responsible for manufacturing and analysis of the offending drug, and the communication from the State Drugs Controller endorsed this position. Therefore, the presumption under Section 34 arose only against him and the company, the Court maintained. The Court examined each complaint and found that against the petitioners who were Managing Director, Whole Time Directors, and Additional Directors, there were no specific allegations ascribing any role in the commission of the offence. The complaints only stated their designations. The Court held that on the basis of such bald allegations, prosecution against them could not proceed.However, with respect to petitioners who were approved technical employees such as AGM Production and Senior Manager (Quality Control), the complaints contained specific allegations that they were actively involved in manufacturing and production of the offending drug. The Court held that the complaints against them could proceed.The Court thus disposed of all five petitions. It ...

Merely Being Director Or MD Does Not Attract Liability Under Drug And Cosmetics Act Without Specific Allegations: J&K&L High Court

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