Introduction:

In the case M/S Nava Healthcare Pvt. Ltd & M/S Mancare Laboratories Pvt. Ltd v. Union Territory of J&K (Citation: 2025 LiveLaw (JKL)), the Jammu and Kashmir and Ladakh High Court, through Justice Sanjay Dhar, set aside the criminal proceedings initiated against two pharmaceutical companies accused of manufacturing and marketing a substandard drug. The Court clarified that while offences under Chapter IV of the Drugs and Cosmetics Act must be tried by a Court of Sessions, a Magistrate is not barred from taking cognizance of such offences. However, the Court found that the Chief Judicial Magistrate, Anantnag, had failed to conduct a mandatory preliminary inquiry under Section 202(1) of the CrPC before issuing process against the accused, who resided outside its territorial jurisdiction. The matter arose from a complaint by the Drug Control Officer, Anantnag, alleging that the drug “Tab Pantolid” did not meet prescribed quality standards. Based on test reports, a complaint was filed under Sections 18(a)(1), 18A, 27(d), and 28 of the Drugs and Cosmetics Act. The companies challenged the proceedings on grounds of procedural violations, arguing that the sample was improperly stored and the statutory procedures under Section 23 were not followed. The High Court found merit in their claim regarding the lack of preliminary inquiry and directed the trial court to reassess the matter in compliance with Section 202(1) of the CrPC.

Arguments of Both Sides:

The petitioners, M/S Nava Healthcare Pvt. Ltd and M/S Mancare Laboratories Pvt. Ltd, represented by Advocate Sikander Hayat Khan, contended that the complaint suffered from legal infirmities. They argued that the procedure mandated under Section 23 of the Drugs and Cosmetics Act was not followed while seizing and testing the drug sample. Further, they challenged the reliability of the test reports, asserting that the sample was not stored as per the prescribed guidelines, potentially leading to deterioration that could have impacted the results. They also pointed out that the Criminal Procedure Code (CrPC) requires a preliminary inquiry under Section 202(1) before issuing process against individuals or entities residing outside the territorial jurisdiction of the Magistrate, which was not conducted in this case. The respondents, represented by Deputy Advocate General Syed Musaib, defended the complaint and the trial court’s order, arguing that the companies were responsible for manufacturing and marketing a substandard drug, violating provisions of the Drugs and Cosmetics Act. They maintained that the test reports from the Central Drugs Laboratory, Kolkata, conclusively established the quality deficiency of “Tab Pantolid” and, therefore, the prosecution was justified. They also argued that non-compliance with procedural requirements, such as sample storage, could be examined during trial but did not warrant quashing the proceedings at this stage.

Court’s Judgment:

The High Court examined the provisions of the Drugs and Cosmetics Act, specifically Section 32, which governs the jurisdiction of courts in trying offences under the Act. It clarified that while offences under Chapter IV are triable by a Court of Sessions, there is no prohibition on a Magistrate taking cognizance of such offences and committing the case to the Sessions Court under Section 209 of the CrPC. The Court also analyzed the procedural safeguards under Section 202(1) of the CrPC, which mandates a preliminary inquiry when an accused is situated beyond the jurisdiction of the Magistrate. The Court found that the trial Magistrate had erred by failing to conduct this mandatory inquiry before issuing process. Justice Dhar emphasized that such an omission rendered the entire proceedings legally unsustainable. The Court further noted that while directors of a company cannot be prosecuted without specific allegations of their involvement, the present challenge was filed by the companies themselves, making their locus standi different. Despite acknowledging the validity of the test reports, the Court agreed with the petitioners that procedural lapses warranted reconsideration of the matter. Consequently, the Court set aside the trial court’s order and directed it to conduct a preliminary inquiry under Section 202(1) of the CrPC before proceeding further. This ruling underscores the significance of procedural fairness, particularly when dealing with corporate entities accused of regulatory violations.