Court Emphasizes Strict Construction of Vicarious Liability Provisions and Distinguishes Trust from Company, Discharging Petitioner for Lack of Prima Facie Case
In a landmark judgment dated October 1, 2026, the Bombay High Court, presided over by Justice Ranjitsinha Raja Bhonsale, discharged Shri A. P. Hinduja, the Managing Trustee of the P. D. Hinduja Hospital & Medical Research Centre, from criminal prosecution under Sections 27 and 34 of the Drugs and Cosmetics Act, 1940. The Court quashed the continuation of proceedings against him on the ground that the Trust, as a legal entity, cannot be equated to a company or association of individuals for the purpose of imposing vicarious liability under Section 34 of the Act.
Background of the Case
The case arose from a complaint concerning the distribution of a misbranded, adulterated ophthalmic drug "Visilon" at the Hinduja Hospital, allegedly causing blindness to a patient following cataract surgery. The complaint implicated several accused, including the pharmacist and Deputy Director (Material) of the Hospital, partners and directors of the manufacturing and distributing firms, and notably, the Managing Trustee of the Hospital Trust, Shri A. P. Hinduja.
The prosecution relied on Section 34 of the Drugs and Cosmetics Act to hold the Managing Trustee vicariously liable for the alleged offence of acquiring, stocking, and distributing the substandard drug. The Trial Court and the Sessions Court had earlier rejected the petitioner's discharge application, relying on a Madras High Court judgment equating a Trust with a company.
Contentions and Legal Issues
The petitioner contended that:
- - Section 34 of the Act, which creates vicarious criminal liability, applies only to companies, firms, or associations of individuals as defined in the Act and does not extend to Trusts.
- - The designation "Managing Trustee" under Trust law is not equivalent to "Managing Director" under the Companies Act; thus, criminal liability cannot be imposed solely based on the petitioner's designation.
- - There were no specific pleadings or averments in the complaint connecting him to the day-to-day affairs of the hospital pharmacy, procurement, stocking, or distribution of the drug.
- - The Supreme Court's recent authoritative judgment in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal (2025) overruled earlier High Court decisions and clarified that a Trust is not a legal entity capable of being sued or prosecuted in the same manner as a company.
The State, on the other hand, argued that:
- - The Managing Trustee has overall control and responsibility for the Trust's affairs and can be held liable under Section 27 and 34 of the Act.
- - The complaint referred to the petitioner as Managing Trustee and relied on a hospital letter confirming this designation to implicate him.
- - The vicarious liability provisions should be applied to ensure accountability.
Key Findings of the Bombay High Court
1. Distinction Between Trust and Company:
The Court emphasized that under the Drugs and Cosmetics Act, Section 34 applies strictly to companies, which includes body corporates, firms, or associations of individuals as defined. Trusts are explicitly excluded from this definition. The Court referenced the Supreme Court's decision in Sankar Padam Thapa, which rejected the fallacy of equating a Trust with a company for criminal liability purposes.
2. Strict Construction of Penal and Vicarious Liability Provisions:
The Court reiterated the settled legal principle that penal statutes and provisions creating vicarious liability must be strictly construed. Mere mention of statutory sections without foundational pleadings and specific averments does not suffice to attract criminal liability.
3. No Pleadings or Material Against the Managing Trustee:
The complaint contained no allegations that the petitioner was in charge of or responsible for the day-to-day management of the hospital pharmacy or involved in procurement, stocking, or distribution of the drug. The designation "Managing Trustee" was used merely as a term of convenience and does not carry statutory definition or liability akin to "Managing Director" of a company.
4. Vicarious Liability Not Attributable Without Specific Averments:
The Court noted that the pharmacist and Deputy Director, who were directly involved with the pharmacy, were appropriately arrayed as accused. The petitioner was implicated solely on the basis of his designation in a hospital letter, without any independent inquiry or material to establish control or responsibility.
5. Precedents and Overruling of Earlier Judgments:
The Court relied heavily on the Supreme Court's overruling of the Madras High Court judgment in M/S. Abraham Memorial Educational Trust v. C. Suresh Babu and other High Court decisions that had equated Trusts to companies. It also drew parallels from Supreme Court decisions interpreting similar provisions under the Negotiable Instruments Act.
6. Discharge of the Petitioner:
Given the absence of any material or pleading connecting the petitioner to the alleged offence and the strict statutory interpretation required, the Court found the continuation of proceedings against him to be an abuse of the process of law. Consequently, the petitioner was discharged from the criminal case.
Significance of the Judgment
This judgment clarifies the scope of Section 34 of the Drugs and Cosmetics Act, emphasizing that vicarious criminal liability under this provision is strictly limited to companies, firms, or associations of individuals and does not extend to Trusts. It protects Trustees from unwarranted criminal prosecution based solely on their designation without evidence of control or involvement in the offence.
The ruling reinforces the principle that criminal liability, especially vicarious liability, must be supported by clear pleadings and material demonstrating responsibility or control. It also reiterates that Trusts are distinct legal entities governed by different laws and cannot be treated as companies for criminal proceedings.
Legal experts view this decision as a significant safeguard against the misuse of criminal provisions to implicate Trustees in cases where there is no direct involvement, thereby upholding the rule of law and preventing harassment through frivolous prosecutions.
Orders Passed
- - The Criminal Writ Petition filed by Shri A. P. Hinduja was allowed.
- - The petitioner was discharged from the criminal proceedings initiated under Sections 27 and 34 of the Drugs and Cosmetics Act, 1940.
- - The impugned orders of the Metropolitan Magistrate and the Sessions Court rejecting the discharge application were set aside.
Bottom Line:
Drugs and Cosmetics Act, 1940 Section 34 creating vicarious liability applies to company, firm or association of individuals as defined in explanation - Trust cannot be equated with company - Mere designation as Managing Trustee, without specific averments showing control over day-to-day affairs of hospital pharmacy or role in procurement, stocking or distribution of drug, is insufficient - Proceedings against Managing Trustee liable to be quashed and petitioner discharged.
Statutory provision(s): Drugs and Cosmetics Act, 1940 Sections 27, 34; Code of Criminal Procedure, 1973 Section 482 (now Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023)
Shri. A. P. Hinduja v. State of Maharashtra, (Bombay) : Law Finder Doc Id # 2994676
