Directors Dodging Drug Quality Charges: J&K High Court Draws the Line on Vague Prosecutions

In a significant ruling for pharmaceutical companies, the High Court of Jammu & Kashmir and Ladakh at Jammu has quashed criminal proceedings against several directors and executives of M/s Theon Pharmaceuticals Ltd, emphasizing that mere designations like Managing Director or Director aren't enough to hook them for substandard drugs. Justice Sanjay Dhar, in a consolidated judgment on five petitions under Section 482 CrPC, allowed cases to proceed only against the company, its nominated responsible person, and staff with specific roles in manufacturing faulty batches.

Faulty Batches Spark Multi-Complaint Probe

The saga began with government analysts flagging samples of drugs like Ceftriaxone Injection and Glimepiride-Metformin Tablets as "not of standard quality." Complaints filed between 2017 and 2018 before magistrates in Jammu and Kishtwar accused the company and its leadership under Sections 18(a)(i) and 27(d) of the Drugs and Cosmetics Act, 1940. Batches manufactured in 2016 had expiry dates into 2018, but quality tests failed, prompting prosecutions against the firm, its MD Amit Kumar Bansal, whole-time directors, additional directors, AGM-Production, Senior Manager-Quality Control, and others. Petitioners, represented by Senior Advocate Sunil Sethi, challenged the summonses, highlighting a key defense: the company had officially nominated Director Puran Chand Joshi as the person "in charge and responsible" under Section 34 of the Act via a 2015 communication endorsed by the State Drugs Controller in Baddi, Himachal Pradesh.

Petitioners' Shield: Nomination Trumps Designation

The petitioners argued there were no specific averments in the complaints linking them to the offences—only bald claims of their board positions. They stressed the company's declaration naming Joshi as the sole responsible figure for business conduct, invoking Section 34's mechanism to limit liability. Without evidence of consent, connivance, or neglect under Section 34(2), they claimed prosecution was an abuse of process, especially since the presumption under Section 34(1) was rebuttable and squarely applied to Joshi.

State's Pushback: Directors Are Inherently Accountable?

The respondent, represented by Additional Advocate General Raman Sharma, defended the complaints, insisting directors' roles inherently made them accountable for the company's actions. They argued the broad sweep of Section 34(1) deemed those "in charge" guilty alongside the firm, downplaying the nomination as a mere formality that couldn't absolve top brass.

Unpacking Section 34: Nomination is King, Roles Matter

Justice Dhar dissected Section 34, noting its twin prongs: Subsection (1) presumes guilt against anyone "in charge of and responsible to the company for the conduct of its business" at the time of offence—a rebuttable presumption triggered by company nomination. Subsection (2) separately targets directors etc., proven to have consented, connived, or neglected. Drawing from the Supreme Court's 2021 verdict in M/s Cheminova India Limited v. State of Punjab ((2021) 8 SCC 818), the court rejected vague prosecutions. There, the Apex Court quashed charges against a MD after the firm nominated a manager via resolution and undertaking, calling broader liability an "abuse of process."

Applying this, the court verified the 2015 endorsement of Joshi across all cases. Against MDs, whole-time, and additional directors, complaints offered zilch beyond titles—no specific roles in manufacturing or quality lapses. But for technical staff like AGM-Production and Senior Manager-Quality Control in some complaints, explicit allegations of "active involvement in manufacturing and production" passed muster.

Key Observations from the Bench

“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.”

“From the aforesaid analysis of legal position, it becomes clear that 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.”

“If there are specific allegations leveled against any officer or functionary of the company relating to commission of an offence by the company, of course the said officer or functionary of the company is liable to be prosecuted.”

As noted in contemporaneous coverage like LiveLaw's report (2026 LiveLaw (JKL)), this aligns with the Cheminova principle: nominations shield others unless specifics stick.

Tailored Relief: Quashed for Most, Green Light for Key Players

The petitions met mixed fates: - CRMC 450/2018, 690/2017, 44/2018, 64/2018 : Quashed against directors (petitioners 1-7); proceed against company, Joshi, and technical staff (where specified). - CRMC 720/2017 : Quashed against AGM-Production, Senior Manager-QC, and proprietor; others proceed.

This nuanced verdict, pronounced April 2, 2026, shields corporate leaders from rote impleadment while ensuring accountability pins quality culprits. For pharma firms, it's a blueprint: nominate responsibly, document diligently. Future cases may see stricter scrutiny of complaint specifics, curbing fishing expeditions in drug quality probes.