Specific Averments Required for Vicarious Liability of Non-Executive Directors under the Drugs & Cosmetics Act

Commentary on Shailyamanyu Singh v. State of Maharashtra (2025 INSC 995)

Introduction

The Supreme Court of India's decision in Shailyamanyu Singh v. State of Maharashtra establishes a crucial clarification on corporate criminal liability under the Drugs & Cosmetics Act, 1940 (“D&C Act”). The Court emphatically held that a Non-Executive Director cannot be arrayed as an accused solely on account of his/her designation; a complaint must contain specific averments demonstrating that the offence was committed with that Director’s consent, connivance, or neglect as required by Section 34(2) of the Act.

The appellant, Mr. Shailyamanyu Singh, was summoned for offences regarding the distribution of expired “Vicks Multi Pain Relief Gel.” The sole ground for his arraignment was his position as a Director of Procter & Gamble Hygiene and Health Care Ltd. (“P&G”). The Metropolitan Magistrate issued process, and the Bombay High Court refused to quash the order under Section 482 CrPC. On appeal, the Supreme Court reversed, quashing the proceedings against Mr. Singh.

Summary of the Judgment

• The Court reiterated that Section 34(1) fastens liability on those “in charge of and responsible to the company for the conduct of its business.”
• Section 34(2) operates only when it is proved that the offence occurred with the Director’s consent, connivance, or attributable neglect.
• Because the complaint lacked any material to show Mr. Singh’s active role or neglect, the prosecution was held to be an abuse of process.
• The High Court’s reliance on broad, omnibus statements in the complaint was deemed erroneous.
• Consequently, the Supreme Court set aside both the High Court order and the Magistrate’s summoning order, permitting the case to proceed only against the remaining accused.

Analysis

Precedents Cited and Their Influence

1. National Small Industries Corp. Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330
   — Reaffirmed that mere designation is insufficient; complaint must spell out the role of each accused Director.
2. Dayle De’Souza v. Union of India (2021) 20 SCC 135
   — Emphasised the necessity of “specific averments” and that corporate criminal liability does not automatically extend to every Director.
3. Lalankumar Singh v. State of Maharashtra 2022 SCC OnLine SC 1383; Sunita Palita v. Panchmani Stone Quarry (2022) 10 SCC 135; Siby Thomas v. Somay Ceramics Ltd. (2024) 1 SCC 348
   — These decisions collectively reinforce strict scrutiny before invoking vicarious liability under statutes analogous to the Negotiable Instruments Act and others. They guided the Court in insisting on particularised pleadings.

Legal Reasoning

The judgment systematically distinguishes between subsections (1) and (2) of Section 34:

• Under s.34(1), the prosecution must identify who was in overall control of day-to-day affairs when the offence occurred.
• Under s.34(2), prosecution of other Directors is permissible only if the complaint demonstrates consent, connivance, or neglect attributable to them.

At the cognizance stage, the threshold is prima facie satisfaction; however, the Court insisted that the complaint must at least allege how and why the Director is culpable. Bald, formulaic assertions fall short. The Court scrutinised:

1. Absence of any inquiry by the Drug Inspector into Mr. Singh’s role;
2. Letters and replies relied upon by prosecution did not attribute decision-making authority or direct involvement to him;
3. The fact that Mr. Singh was designated as a Non-Executive Director, typically not involved in operational matters.

Given these lacunae, the Court found the Magistrate’s process order “ex facie unjustified” and the High Court’s refusal to quash “unsustainable.”

Impact of the Judgment

• Corporate Governance & Compliance: Offers clarity to boards that non-executive and independent directors are shielded from criminal process unless active complicity is specifically alleged and prima facie shown.
• Investigative Protocol: Drug Inspectors and similar regulatory officers must conduct and record role-specific inquiries before implicating individuals under vicarious liability provisions.
• Judicial Filtering: High Courts exercising Section 482 CrPC jurisdiction must undertake a careful role-based analysis; perfunctory allegations cannot survive.
• Cross-statutory Persuasion: Though rendered under the D&C Act, the reasoning will likely influence jurisprudence under other regulatory enactments with similar liability clauses (FSS Act, Environmental laws, Companies Act offences, etc.).
• Ease of Doing Business: The decision may reduce perceived criminal-law risks for professional, non-executive directors, encouraging qualified individuals to accept board positions.

Complex Concepts Simplified

• Vicarious Liability: Holding one person legally responsible for another’s act. In corporate offences, liability travels from the company to directors/officers only if statutory conditions are met.
• Cognizance: A Magistrate’s formal acknowledgment that an offence appears to have been committed, enabling initiation of proceedings.
• Section 482 CrPC: Inherent power of High Courts to quash criminal proceedings to prevent abuse of process or to secure justice.
• Non-Executive Director: A board member not involved in daily management; expected to provide oversight and independent judgment.
• Consent, Connivance, Neglect (s.34(2)): Consent – active approval; Connivance – knowledge with tacit agreement; Neglect – culpable inattention leading to the offence.

Conclusion

Shailyamanyu Singh v. State of Maharashtra cements an important checkpoint in corporate criminal jurisprudence: a complaint must articulate concrete facts indicating a Director’s active role or culpable neglect before criminal process can issue under Section 34(2) of the Drugs & Cosmetics Act. The ruling not only protects individuals from unwarranted prosecution but also urges regulatory authorities to adopt meticulous, evidence-based investigations. In the broader legal landscape, it reiterates that criminal law’s severe consequences demand specific pleadings, thereby harmonising corporate accountability with principles of fairness and due process.