1. Prosecution of a company director for offences under the Drugs & Cosmetics Act, 1940 — Challenge to summoning order based on vicarious liability. (Para 3 , 4 , 5 , 6 , 7 , 8 , 10 , 11 )
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2025 Supreme(SC) 1217
SUPREME COURT OF INDIA
Vikram Nath, Sandeep Mehta, JJ.
Shailyamanyu Singh – Appellant
Versus
State of Maharashtra – Respondent
Criminal Appeal No(s). 3104 of 2025 (Arising out of SLP(Crl.) No (s). 5618 of 2023)
Decided On : 22-07-2025
Advocates appeared:
For the Petitioner(s): Mr. Sidharth Luthra, Sr. Adv. Mr. Dheeraj Nair, AOR Mr. Kumar Kislay, Adv. Ms. Vishrutyi Sahni, Adv. Ms. Ridhima Sharma, Adv.
For the Respondent(s): Ms. Rukhmini Bobde, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Shrirang B. Varma, Adv. Ms. Soumya Priyadarshinee, Adv. Mr. Vinayak Aren, Adv. Mr. Amlaan Kumar, Adv. Mr. Jatin Dhamija, Adv. Mr. Naveen Kumar Bhardwaj, Adv.
For the Petitioner(s): Mr. Sidharth Luthra, Sr. Adv. Mr. Dheeraj Nair, AOR Mr. Kumar Kislay, Adv. Ms. Vishrutyi Sahni, Adv. Ms. Ridhima Sharma, Adv.
For the Respondent(s): Ms. Rukhmini Bobde, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Shrirang B. Varma, Adv. Ms. Soumya Priyadarshinee, Adv. Mr. Vinayak Aren, Adv. Mr. Amlaan Kumar, Adv. Mr. Jatin Dhamija, Adv. Mr. Naveen Kumar Bhardwaj, Adv.
Important Points
Prosecution of a Non-Executive Director for corporate offences requires specific averments of involvement; absence of such averments renders the prosecution unjustified.
Subject
Criminal Law - Vicarious Liability
Act Referred
Headnote
(A) Drugs and Cosmetics Act, 1940 - Sections 18, 18B, 22(1)(cca), 27(d), and 34(1) and (2) - Vicarious liability of directors - Prosecution of a Non-Executive Director for offences committed by company without prima facie evidence of consent, connivance or neglect is unjustified - The High Court's rejection of the appellant's petition under Section 482 CrPC is set aside as there were no sufficient averments against him for vicarious liability. (Paras 20-30)
(B) Criminal Procedure Code, 1973 - Section 482 - Scope of quashing - Jurisdiction to quash criminal proceedings exists where no proper foundation is laid in the complaint to justify the initiation of the proceedings against an individual. (Paras 20-30)
Facts of the case:
The appellant, a Non-Executive Director of the accused company, was summoned for criminal prosecution related to the distribution of expired drugs. The appellant contended there was no material in the complaint connecting him to the alleged offence.
Findings of Court:
The court held that to prosecute a director vicariously, there must be specific averments linking them to the offence, which were absent in this case. The High Court's order allowing the prosecution was erroneous.
Issues: The main issue addressed was whether a Non-Executive Director could be held vicariously liable for the company's alleged offences in the absence of specific averments of involvement.
Ratio Decidendi: The court held that a complaint must include clear allegations regarding the director's involvement in the company’s day-to-day affairs to support a claim of vicarious liability. Without such allegations, the prosecution is unwarranted.
Result: Appeal allowed; summoning order quashed.
(B) Criminal Procedure Code, 1973 - Section 482 - Scope of quashing - Jurisdiction to quash criminal proceedings exists where no proper foundation is laid in the complaint to justify the initiation of the proceedings against an individual. (Paras 20-30)
Facts of the case:
The appellant, a Non-Executive Director of the accused company, was summoned for criminal prosecution related to the distribution of expired drugs. The appellant contended there was no material in the complaint connecting him to the alleged offence.
Findings of Court:
The court held that to prosecute a director vicariously, there must be specific averments linking them to the offence, which were absent in this case. The High Court's order allowing the prosecution was erroneous.
Issues: The main issue addressed was whether a Non-Executive Director could be held vicariously liable for the company's alleged offences in the absence of specific averments of involvement.
Ratio Decidendi: The court held that a complaint must include clear allegations regarding the director's involvement in the company’s day-to-day affairs to support a claim of vicarious liability. Without such allegations, the prosecution is unwarranted.
Result: Appeal allowed; summoning order quashed.
Judgement Key Points
Key Points: - The appellant, a Non-Executive Director, was summoned for criminal prosecution regarding the distribution of expired drugs by the company [5][12]. - To establish vicarious liability under the relevant Act, there must be prima facie evidence or specific allegations of consent, connivance, or neglect on the part of the director [21][22]. - A complaint must contain specific averments linking a director to the day-to-day affairs of the company to justify their prosecution [23][24]. - The court found that the complaint was silent on the appellant's role in the company's day-to-day operations and lacked evidence of his active involvement in the alleged offence [12][25]. - Allegations in a complaint that are omnibus and lack specific details regarding a director's individual responsibility are insufficient to sustain criminal proceedings [27]. - The court held that there is no presumption that every director is aware of or responsible for all transactions of a company [23]. - The High Court's decision to reject the petition for quashing the proceedings was set aside because the summoning order against the appellant was found to be unjustified [29][30]. - The criminal proceedings against the appellant were quashed, while the case continues against the other accused parties [30].
What is the scope of vicarious liability for a Non-Executive Director under the Drugs and Cosmetics Act, 1940?
What are the requirements for specific averments in a complaint to justify the prosecution of a company director?
What is the jurisdiction of the court under Section 482 of the Code of Criminal Procedure to quash criminal proceedings against a director?
Legal Category Hierarchy
Table of Contents
2. Whether a Non-Executive Director can be held vicariously liable without specific averments of active involvement, consent, connivance, or neglect in the company's day-to-day affairs. (Para 13 , 14 , 15 , 16 , 17 , 18 )
3. The complaint contained only omnibus allegations and lacked specific averments regarding the director's active role, consent, connivance, or neglect necessary to invoke vicarious liability. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 )
4. Vicarious liability of directors under Section 34 of the Drugs & Cosmetics Act requires specific averments of active involvement or neglect; bald assertions are insufficient for prosecution. (Para 21 , 23 , 24 )
5. Appeal allowed — Impugned judgment set aside — Summoning order and criminal proceedings against the appellant quashed. (Para 30 , 31 )
6. Who is deemed guilty when a company commits an offence under the Drugs & Cosmetics Act?
Every person who, at the time of the offence, was in charge of and responsible to the company for the conduct of its business is deemed guilty, unless they prove the offence occurred without their knowledge or they exercised due diligence. (Para 20 , 21 )
7. Under what conditions can a director not in charge of day-to-day affairs be prosecuted under the Drugs & Cosmetics Act?
Such a director can be prosecuted if it is proved that the offence was committed with their consent, connivance, or is attributable to any neglect on their part. (Para 20 , 21 )
8. Are bald assertions in a complaint sufficient to fasten vicarious criminal liability on a company director?
No. The complainant must make specific averments in the complaint to establish the director's active involvement, consent, connivance, or neglect. Bald assertions are insufficient to justify a summoning order. (Para 22 , 23 , 24 , 27 )
JUDGMENT :
Mehta, J.
1. Heard.
2. Leave granted.
3. The instant appeal is preferred against the judgment and order dated 12th April, 2023 passed by the High Court of Judicature at Bombay1[Hereinafter, being referred to as the ‘High Court’] whereby the Criminal Application No. 1422 of 2019 filed by the appellant under Section 482 of Code of Criminal Procedure, 19732[For short “CrPC”] came to be rejected.
4. By way of the said petition filed under Section 482 CrPC, the appellant had challenged the order dated 3rd December, 2016 passed by the Metropolitan Magistrate 15th Court, Mazgaon, Mumbai in Criminal Case No. 1500201/SW/2016, taking cognizance of the offences under Section 18 B punishable under Section 28A, Section 18 (a)(vi) and Section 22 (1)(cca) punishable under Section 27 (d) of the Drugs & Cosmetics Act, 19403[Hereinafter being referred to as the ‘D&C Act’] and issuing process against numerous accused including the appellant.
Brief Facts: -
5. The appellant (accused No.6) was summoned as an accused in the complaint case in capacity of the Director of Procter and Gamble Hygiene and Healthcare Limited4[Hereinafter, referred to as the ‘P&G Ltd. or Company’] (accused No.7), which was the distributor of the drug in question, i.e., Vicks Multi Pain Relief Gel. The said drug was manufactured by its licensed manufacturer, Akums Drugs and Pharmaceuticals Ltd. (accused No. 8). The expiry date of the drug was January, 2016. As per the Standard Operating Procedure (SOP) of P&G Ltd., drugs set to expire within the next six months were required to be destroyed. Accordingly, the company initiated the process of recalling and destroying the said batch of the subject drug in May 2015.
6. On 3rd June, 2016, upon receiving information from the Vigilance Department, the Drug Inspector visited the premises of an enterprise namely, M/s Action Soap Center. The inspection revealed that a stock of the aforesaid drug of which expiry date had already lapsed, was illegally stored in the godown. On questioning the person-in-charge of M/s Action Soap Center, it came to light that the drug had been procured from P&G Ltd. Subsequently, on 7th June, 2016 a notice was sent by the Drug Inspector to P&G Ltd. inquiring about the drugs seized from the premises of M/s Action Soap Center.
7. The inquiry notice dated 7th June, 2016 was responded to vide letter dated 13th June, 2016, by Ms. Saumya Ranjan in the capacity of the competent person acting on behalf of P&G Ltd. explaining that the purchase and sale of the drug was being carried out under her supervision. Thereafter, two further show cause notices dated 15th June, 2016 and 17th June 2016 were issued to P&G Ltd. seeking explanation for supply of drug to M/s Star Express, an enterprise which did not possess a valid license under the D&C Act.
8. The appellant in discharge of his duties as the legal officer of the company responded to these show cause notices and the queries raised therein by the Drug Inspector vide letter dated 5th July, 2016. It was stated in the reply that the drugs in question were in the legal custody of the Clearing and Forwarding Agent (C&F) i.e. M/s. KD Supply Chains Solution Pvt. Ltd. and were forwarded to M/s Star Express by the said C&F Agent.
9. However, it is not necessary to delve into the above aspect of the matter, as the controversy in the present appeal is confined to the question as to whether the appellant, being a Non-Executive Director of the company, can be held vicariously liable and prosecuted for the alleged offences committed by the company.
10. Pursuant to the completion of the inquiry, the Drug Inspector proceeded to file a complaint in the Court of Metropolitan Magistrate, Mazgaon, Mumbai which came to be registered as Criminal Case No. 1500201/SW/2016. The array of the respondents in the aforesaid complaint is as below: -
| S. No. | Name | Description |
| 1. | Yusuf Khan | Person-in-charge of M/s Action Soap Center |
| 2. | Rahis Gaman Khan | |
