Madras High Court holds Directors of Pharma company liable for production of substandard quality of drugs

Madras High Court holds Directors of Pharma company liable for production of substandard quality of drugs

A petition filed by directors of Sunrise International Labs for quashing a criminal proceeding initiated against them alleging that the company supplied drugs of substandard quality, was recently dismissed by the Madras High Court.

Justice G Jayachandran rejected the contention of the directors that the prosecution should be quashed against them since they were not involved in the day to day functioning of the company.

The court observed that the decision to manufacture drugs was a collective decision of the board of directors and thus all the directors will be made liable. The directors could not merely claim that they were not involved in the production of the drugs.

The decision to manufacture the drugs is the collective decision of the Board of Directors. Therefore, the Directors cannot claim that they are not directly involved in the product of the drugs, when the decision to produce the drugs itself is the out come of their decision. Therefore, the case of Directors signing the cheque on behalf the Company and the case of Directors participating in the decision to produce sub-standard drugs are not one and the same to hold that these petitioners are not involved in day-to-day affairs of the Company.

The case was that they were manufacturing and supplying sub-standard medicine (Carbimazole tablets) to the government hospitals that were to be consumed by the general public. The petitioners were thus prosecuted under Section 34 of Drugs and Cosmetics Act.

The petitioners contended that out of the five directors of the company, the present petitioners were not involved in the day to day functioning of the company. Hence, they submitted that they would not be vicariously liable for the alleged act.

The government on the other hand, submitted that the directors will be vicariously liable. Since the offence is committed against the society, the directors, who accrued benefits out of the act of crime ought to be prosecuted. It also submitted that if the contentions of the petitioner were to be accepted, any person living abroad can float a Pharma Company in India, supply spurious drugs causing danger to the life of the public and go scot-free stating that they are not directly involved in the affairs of the Company.

Being contrary to the very object of the Drugs and Cosmetics Act, the court held that the contentions of the petitioner is totally unsustainable.