Drug & Cosmetics Act—Section 34 Nomination as the Primary Anchor of Vicarious Liability; “Bald” Director Averments Insufficient for Prosecution

Case: Amit Kumar Bansal and Ors. v. Sanjeev Kumar Gupta (Jammu & Kashmir High Court, Jammu Bench)
Date: 02-04-2026  |  Coram: Hon’ble Mr. Justice Sanjay Dhar
Connected matters: CRMC No. 450/2018 c/w CRMC Nos. 690/2017, 720/2017, 44/2018, 64/2018

1. Introduction

The High Court decided five petitions under Section 482 of the Code of Criminal Procedure, 1973 (CrPC), all arising from complaints filed by the Drugs Inspector/State (respondent) against M/s Theon Pharmaceuticals Ltd. and multiple individuals associated with it. The complaints alleged manufacture/sale of drugs found “not of standard quality” after analysis by the Government Analyst, constituting offences under Section 18(a)(i) read with Section 27(d) of the Act of 1940.

The petitioners were variously impleaded as Managing Director, Whole-time Directors, Directors, Additional Directors, AGM (Production), Senior Manager (Quality Control), and (in one petition) a “proprietor” of an associated unit. Their central challenge was not to the maintainability of prosecution against the company per se, but to their personal arraignment without specific allegations, especially in view of a Section 34 nomination/endorsement stating that Sh. Puran Chand Joshi (Director) was the person responsible for the company’s business/manufacture/analysis.

The key legal issue thus became: Who, among a company’s officers, can be prosecuted for the company’s alleged offences under the Act of 1940, and what pleading threshold must a complaint meet?

2. Summary of the Judgment

Justice Sanjay Dhar applied Section 34 of the Act of 1940 and quashed proceedings against several officers who were impleaded merely by virtue of their designations, while allowing the complaints to proceed against the company, the Section 34-endorsed “responsible person” (Puran Chand Joshi), and (in two matters) technical employees against whom the complaint contained specific allegations of active involvement in manufacture/production.

Outcome across the five petitions

The judgment is expressly “speaking” and “reportable”, signalling its intended precedential value on Section 34 pleading standards and quashing of company-officer prosecutions under Section 482 CrPC.

3. Analysis

3.1 Precedents Cited

(A) M/s Cheminova India Limited and anr Vs. State of Punjab and Ors, (2021) 8 SCC 818

This was the principal (and effectively sole) external precedent relied upon. The High Court treated Cheminova as establishing a decisive control principle: where a statute contains a specific “offences by companies” provision and the company has formally nominated a person responsible for the conduct/quality control (and such nomination is on record with the regulator), then prosecution of the Managing Director on vague, sweeping allegations that he is “overall responsible” amounts to abuse of process.

Although Cheminova discussed “Section 33” (as quoted in this judgment), the High Court used it as directly analogous to Section 34 of the Act of 1940, because both provisions:

• deem the company and the person in charge/responsible to be guilty; and
• permit extension of liability to other officers only where there is a legally meaningful basis (e.g., consent/connivance/neglect) supported by allegations/material.

The High Court’s operative application of Cheminova is clear in its insistence that “mere bald allegations” tied to designation do not suffice, especially when a Section 34 responsible person is already identified/endorsed.

3.2 Legal Reasoning

(A) The statutory architecture of Section 34: deemed guilt + rebuttable presumption

The Court began with the text of Section 34 (Offences by companies) and drew these steps:

1. Section 34(1) creates a deeming fiction: when a company commits an offence, every person who at the time was “in charge of and responsible to the company for the conduct of its business” is deemed guilty along with the company.
2. The proviso makes that liability rebuttable—such person may avoid punishment by proving lack of knowledge or due diligence.
3. Therefore, once the company has nominated/endorsed a “responsible person” for the conduct of business (as contemplated by Section 34), the presumption under Section 34(1) is principally directed towards that nominee, and that nominee is the natural individual accused alongside the company.

(B) Distinguishing “responsible person” liability from “other officers” liability

The Court then segregated two categories:

• Category 1: Section 34(1) persons — those “in charge of and responsible to” the company for the conduct of business at the relevant time. Where documentary material shows nomination/endorsement, the presumption operates against that individual and prosecution can proceed.
• Category 2: Section 34(2) officers — directors/managers/secretaries/other officers who can be deemed guilty only if the offence is proved to have been committed with their consent/connivance or attributable to their neglect. This necessitates allegations (and eventually proof) connecting them to the offence beyond mere status.

This distinction supplied the Court’s central filter: designation alone is not a substitute for allegations satisfying Section 34(2), nor is it enough to treat every director as “responsible” under Section 34(1) in the face of a specific nominated person.

(C) Pleading threshold: “bald and vague” allegations cannot sustain criminal process

Across the petitions, the Court repeatedly found that complaints contained only a skeletal assertion such as “A is Managing Director; B/C are Whole-time Directors; others are Directors; hence responsible.” In the Court’s view, this is precisely the kind of “bald” pleading rejected in Cheminova.

Where the complaint went further—specifically stating that technical employees were “approved technical employees” and “actively involved in manufacturing and production”—the Court treated that as sufficient at the threshold to allow proceedings to continue (leaving trial-stage proof to follow).

(D) The evidentiary anchor: endorsement of Puran Chand Joshi as Section 34 responsible person

A key factual constant was the presence of communications (noted in the judgment) indicating that the accused company had informed the regulator and that the State Drugs Controller, Baddi, had endorsed Sh. Puran Chand Joshi as the person responsible under Section 34. The Court treated this as triggering the Section 34(1) presumption against him, warranting continuation of prosecution against:

• the company, as principal offender; and
• the endorsed responsible person, as deemed guilty under Section 34(1) (subject to rebuttal/due diligence defence).

(E) Section 482 CrPC as the control mechanism against over-impleadment

The Court used Section 482 CrPC to prevent “abuse of the process of law” in the precise situation where complaints, despite a statutory nomination mechanism, sought to prosecute multiple directors/officers without particularised assertions. The quashing was thus not a merits adjudication on drug quality but a threshold legality review of who can be made to stand trial.

3.3 Impact

(A) On drafting and prosecution strategy under the Act of 1940

• Regulators/complainants must plead role with specificity if they wish to prosecute beyond the company and the Section 34 responsible person—especially for Managing Directors/Directors.
• Complaints should expressly articulate how Section 34(2) is attracted (consent/connivance/neglect) where reliance is placed on it, rather than relying on corporate hierarchy.

(B) On corporate governance and compliance

• Formal Section 34 nominations/endorsements gain practical significance as an enforcement “focal point,” potentially reducing indiscriminate arraignment of boards.
• At the same time, the judgment does not create immunity: it preserves the pathway to prosecute other officers where there are specific allegations (as seen for technical employees in CRMC 44/2018 and CRMC 64/2018).

(C) On future quashing jurisprudence

The decision strengthens a consistent line of principle: where vicarious liability is statutory (not general), courts will insist that the complaint’s averments fit the statute’s conditions. It provides a practical template for High Courts to separate: (i) permissible prosecution of the company + nominated responsible person, from (ii) impermissible “designation dragnet” prosecutions.

4. Complex Concepts Simplified

• “Not of standard quality”: a drug that fails to meet pharmacopoeial/statutory quality parameters upon laboratory analysis by the Government Analyst; this triggers penal provisions under the Act of 1940.
• Vicarious liability (in company offences): liability of individuals for a company’s offence, but only when the statute (here Section 34) expressly creates it and its conditions are satisfied.
• Section 34(1) “in charge of and responsible to”: a functional responsibility standard. In this case, the Court treated formal nomination/endorsement as the key indicator of who fits this role for prosecution.
• Section 34(2) “consent/connivance/neglect”: an additional gateway to prosecute directors/officers other than the nominated responsible person, but it requires allegations (and later proof) that connect the officer’s conduct/omission to the offence.
• “Bald and vague allegations”: statements that merely recite a person’s designation (Managing Director/Director) without describing what they did or failed to do that relates to the offence.
• Section 482 CrPC quashing: the High Court’s inherent power to stop criminal proceedings at the threshold to prevent misuse of process, even before trial, where the complaint does not disclose a legally sustainable case against certain accused.

5. Conclusion

This judgment reaffirms and operationalises a disciplined approach to “offences by companies” under the Drug and Cosmetics Act, 1940: prosecute the company and the Section 34-endorsed responsible person as the default rule, and proceed against other directors/officers only where the complaint contains specific role-based allegations capable of attracting statutory vicarious liability (not mere corporate designation). By partially quashing multiple complaints, the High Court underscored that criminal process cannot be used as a blunt instrument against corporate boards in the face of a statutory nomination structure, while still preserving prosecution against those plausibly connected—by pleading and role—to manufacture/quality functions and statutory responsibility.