In a significant ruling, the Himachal Pradesh High Court has clarified that vicarious liability under Section 34 of the Drugs and Cosmetics Act, 1940, cannot be imposed on individuals unless it is clearly established that they were directly in charge of and responsible for the conduct of the company’s business. This judgment came in the case of M/s VADSP Pharmaceuticals & Ors. vs. Union of India (Cr. MMO No. 92 of 2022), decided on May 15, 2025.
Key Observations by the Court
Justice Rakesh Kainthla, while delivering the verdict, emphasized that:
“The complainant must specifically aver in the complaint that the person sought to be vicariously liable is not only in charge but also responsible to the company for its affairs.”
The Court reiterated that mere designation or status within a company is not sufficient to establish liability. There must be a clear allegation that the individual was actively managing the company’s day-to-day operations related to the alleged offence.
Background of the Case
The case arose when the Drugs Inspector, Sub Zone Baddi, collected a sample of a drug named Lycoyat, manufactured by M/s VADSP Pharmaceuticals, for quality testing. The sample was taken in the presence of Mr. Premnath, the Analytical Chemist of the firm. Subsequent testing declared the sample as sub-standard.
After receiving the report, the company requested a re-test, and a second sample was sent to the Central Drugs Testing Laboratory, Kolkata, which confirmed the initial result. Based on these findings, the Drugs Inspector filed a criminal complaint against the company and its partners, alleging their responsibility for manufacturing and distributing substandard drugs.
Petitioners’ Arguments
The partners of the pharmaceutical firm contended that they were neither in charge nor responsible for the company’s operations. They submitted that Mr. Premnath, the Analytical Chemist, was solely responsible for quality control and related matters.
Importantly, the petitioners argued that the complaint lacked specific allegations against them regarding their role in the company’s operations—an essential requirement under Section 34 of the Act for establishing vicarious liability.
Legal Analysis and Findings
The Court examined Section 34 of the Drugs and Cosmetics Act, which provides for the liability of companies and persons responsible for the conduct of their business. It held that:
- A company is primarily liable for offences under the Act.
- Individuals such as partners, directors, or officers can only be held liable if it is shown that they were in charge of and responsible for the company’s conduct at the time of the offence.
- No such specific averments were made in the complaint against the partners of the petitioner firm.
The Court relied on landmark Supreme Court rulings such as:
- Pawan Kumar Goel v. State of U.P. (2022) – where it was held that only persons in charge of and responsible for the company’s affairs can be punished for its acts.
- Siby Thomas v. Somany Ceramics Ltd. (2024) – which reaffirmed the requirement for specific averments in complaints involving vicarious liability.
Verdict
The Himachal Pradesh High Court partially allowed the petition. It quashed the proceedings against the partners of M/s VADSP Pharmaceuticals, citing the absence of specific allegations linking them to the offence. However, it allowed the proceedings to continue against the company itself, holding it primarily liable under the Act.
Case Summary:
- Case Name: M/s VADSP Pharmaceuticals & Ors. v. Union of India
- Case No.: Cr. MMO No. 92 of 2022
- Court: Himachal Pradesh High Court
- Judgment Date: 15th May 2025
- Judge: Hon’ble Justice Rakesh Kainthla
- Legal Provision Involved: Section 34, Drugs and Cosmetics Act, 1940
- Key Outcome: Proceedings quashed against the company’s partners; continued against the company
Conclusion
This judgment reinforces the principle that vicarious liability in criminal law requires clear and specific allegations. It protects individuals from being roped into criminal proceedings solely based on their association with a company, ensuring that only those genuinely accountable face legal consequences.
For legal professionals and pharmaceutical companies alike, this ruling serves as an essential precedent in understanding corporate criminal liability under the Drugs and Cosmetics Act.