Managing Director Not Automatically Criminally Liable Without Specific Role in Drug Manufacture: Madras High Court Quashes Case Against Cipla MD

Mere Holding of Office Isn’t a Crime — No Presumption of Guilt Without Allegation of Responsibility: In a significant decision Madras High Court quashed criminal proceedings against Umanga Vohra, the Managing Director of Cipla Ltd., who was facing prosecution under the Drugs and Cosmetics Act, 1940, for allegedly selling a batch of the drug Omnigel deemed “Not of Standard Quality.” The Court, however, allowed prosecution against the company M/s Cipla Ltd. to proceed, holding that questions regarding the testing protocol and compliance could be addressed only at trial.

Justice Sunder Mohan, delivering the judgment, drew a sharp distinction between vicarious liability and personal culpability, ruling:
“There is no averment in the complaint that he was in-charge and responsible to the Company for the conduct of its business... In the facts of this case and considering the nature of the offences, that cannot be presumed.”

The case originated in 2019 when a sample of Omnigel was collected from a stockist in Coimbatore and sent to the Government Analyst, who declared it “Not of Standard Quality” for not conforming to the label claim of ingredients like Diclofenac Diethylamine, Methyl Salicylate, and Menthol.

The investigation traced the supply chain back to M/s Cipla Ltd., and notices were issued. Cipla replied that the drug was manufactured by a loan license vendor, but did not provide further details. The prosecution launched under Sections 18(a)(i), 18B, and 27 of the Drugs and Cosmetics Act, included both the company and its Managing Director, citing his position as the basis of liability.

The central issue was whether the Managing Director could be criminally prosecuted in the absence of any allegation that he was directly involved in the day-to-day conduct of business or drug manufacturing.

The Court unequivocally held that mere designation is not sufficient. It noted:
“The second accused is prosecuted since it was mentioned in the website that he is the Managing Director. Apart from that, there are no other allegations.”

Referring to the manufacturing licence issued under Rule 70-A, the Court observed: “The names of the competent technical staff who are in charge of manufacture and analysis of the drug are already mentioned in the licence... Hence the prosecution cannot presume criminal responsibility of the Managing Director.”

The Court placed reliance on the Supreme Court’s ruling in Cheminova India Ltd. v. State of Punjab, where it was held that:
“When responsibility for quality control was expressly vested in a designated officer, there is no reason or justification to prosecute the Managing Director on the spacious plea that he was in charge of the company.”

Similarly, in Swati Ajay Piramal v. State of Tamil Nadu, the Madras High Court had observed:“There is no averment that the petitioner was responsible for the day-to-day management or conduct of the business. Such generalised prosecution without specifics amounts to abuse of process.”

In contrast, the Court allowed the complaint against Cipla Ltd. to proceed, holding that disputes over testing methods, applicability of Rule 46, or compliance with 2008 guidelines were matters of fact and evidence, not suitable for adjudication under Section 482 BNSS.

On Delay, Screening Committee, and Sanction: The company also challenged the prosecution on other grounds — including delayed filing of the complaint after the drug's shelf-life had expired, absence of Screening Committee approval, and sanctioning authority’s alleged non-application of mind.

These were all rejected. The Court noted: “The petitioners never exercised their right under Section 25(3) to challenge the analyst’s report. Hence the right under Section 25(4) to seek reanalysis stood extinguished.”

On the Screening Committee: “The documentary record clearly shows that approval was granted. There is no requirement for the complaint to specifically mention the Committee’s opinion.”

As to the sanction: “Section 33M requiring sanction applies only to Chapter IV-A (Ayurvedic, Siddha, Unani). The present case does not involve that chapter.”

Even assuming sanction was required, the Court clarified: “Invalidity of sanction for non-application of mind cannot be tested at the threshold — it is a matter for trial.”

The Court ultimately refused to allow what it termed a “mechanical and vague prosecution” of a Managing Director without any material linking him to the alleged offence. The proceedings against Cipla Ltd. were permitted to continue, but the Court made it clear that liability in corporate offences cannot be based merely on office held.

Justice Sunder Mohan concluded: “The complaint against A2 is liable to be quashed. However, the complaint against A1 shall proceed. If evidence emerges during trial implicating any officer, the Court is free to summon them under Section 358 BNSS.”

Date of Decision: 14 May 2025