Analysis of the Drugs and Cosmetics (Compounding of Offences) Rules, 2025

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Notified by the Ministry of Health and Family Welfare, Government of India
Gazette Notification: CG-DL-E-26042025-262711
Effective Date: April 25, 2025

Introduction

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025, notified by the Ministry of Health and Family Welfare, Government of India, under the Drugs and Cosmetics Act, 1940 (hereinafter referred to as “the Act”), provide a framework for compounding certain offences committed under the Act. These RULES aim to reduce litigation, expedite resolution of minor violations, and ensure compliance by allowing offenders to pay a compounding amount in lieu of prosecution. The rules were published in the Gazette of India on April 25, 2025, and came into effect on the same date.

This law note outlines the key provisions, procedures, and implications of these rules, based on the Gazette notification (CG-DL-E-26042025-262711).

Legal Basis

The rules are enacted under:

  • Section 32B of the Act, which allows for compounding of offences.
  • Section 33(2)(d) read with Section 33(1) of the Act, which empowers the Central Government to make rules for the Act’s implementation.

The draft rules were published on July 10, 2024, inviting public objections and suggestions, which were considered before finalizing the 2025 rules.

Key Provisions

1. Short Title and Commencement (Rule 1)

  • Title: Drugs and Cosmetics (Compounding of Offences) Rules, 2025.
  • Effective Date: The rules are effective from the date of publication in the Official Gazette, i.e., April 25, 2025.

2. Definitions (Rule 2)

The rules define critical terms, including:

  • Act: Refers to the Drugs and Cosmetics Act, 1940.
  • Applicant: Any company or person involved in manufacturing, importing, selling, distributing, or other activities under the Act.
  • Compounding Authority: An officer appointed by the Central or State Government to handle compounding processes.
  • Reporting Authority: Licensing authorities (Central or State) or Central License Approving Authority with jurisdiction over the place where the offence occurred.
  • Form: The prescribed application form for compounding (annexed to the rules).
  • Terms not defined in the rules but defined in the Act carry the same meaning as in the Act.

3. Appointment of Compounding Authority (Rule 3)

  • Central Government: May appoint an officer (not below the rank of a reporting authority) as the compounding authority to exercise powers under the rules.
  • State Government: May similarly appoint an officer to exercise state-level powers.
  • Appointments are notified in the Official Gazette.

4. Form and Manner of Application (Rule 4)

  • Who Can Apply: An applicant (company or individual involved in activities under the Act) may apply for compounding either before or after prosecution is initiated.
  • Application Process: The application must be submitted in the prescribed Form (as per Rule 4) with relevant information and documents to the compounding authority.
  • Individual Application: Each application must be made individually by the entity or person involved in the offence.

5. Procedure for Compounding (Rule 5)

The compounding process involves the following steps:

  1. Receipt of Application: Upon receiving an application, the compounding authority requests a report from the reporting authority in whose jurisdiction the offence occurred.
  2. Reporting Authority’s Role: The reporting authority must submit the report within one month (or an extended period as allowed) from the date of the request.
  3. Decision by Compounding Authority:
    • The authority evaluates the application and may:
      • Allow the application, specify the compounding amount, and grant immunity from prosecution (subject to Rule 6).
      • Reject the application, but only after giving the applicant an opportunity to be heard and stating reasons for rejection.
    • A copy of the order is sent to the applicant.
  4. Payment of Compounding Amount:
    • The applicant must pay the specified compounding amount within 30 days of the order.
    • Proof of payment must be submitted to the compounding authority.
    • The paid amount is non-refunded, except if a court rejects the grant of immunity.
  5. No Automatic Right: Applicants cannot claim compounding as a right.

6. Power to Grant Immunity (Rule 6)

  • The compounding authority may grant immunity from prosecution if:
    • The applicant has cooperated fully in the proceedings.
    • The applicant has made a full and true disclosure of facts related to the case.
  • Immunity is subject to conditions deemed fit by the authority.

7. Withdrawal of Immunity (Rule 7)

Immunity may be withdrawn in the following cases:

  1. Non-Payment: If the applicant fails to pay the compounding amount within the specified time or violates any conditions of immunity.
  2. Concealment or False Evidence: If the applicant is found to have concealed material facts or provided false evidence during compounding proceedings.
  3. Consequences: Upon withdrawal, the Act’s provisions apply as if no immunity was granted, and the applicant may face prosecution for the original offence or any related offences uncovered during the process.

8. Application Form (Rule 4, Annexed Form)

The prescribed Form for compounding applications requires detailed information, including:

  • Applicant’s name, address, and contact details.
  • Product name and composition.
  • Manufacturing/import license or registration details.
  • Details of the offence, including contravened provisions of the Act, date of seizure (if any), and whether a show-cause notice or chargesheet was issued.
  • Whether it is the first offence under the Act and details of any prior cases.
  • Declaration by the applicant agreeing to pay the compounding amount and acknowledging that compounding is not a right.

The form must be accompanied by a verification statement, confirming the truthfulness of the provided information and documents.

Analysis and Implications

  1. Objective: The rules aim to streamline the resolution of minor offences under the Drugs and Cosmetics Act by allowing offenders to avoid lengthy prosecutions through monetary penalties. This reduces the burden on courts and regulatory authorities.
  2. Scope: The rules apply to offences under the Act that are compoundable under Section 32B, typically minor or technical violations (e.g., non-compliance with labeling or licensing requirements). Serious offences, such as those involving spurious drugs, may not be compoundable.
  3. Flexibility: The provision to apply for compounding before or after prosecution ensures flexibility for offenders to seek early resolution.
  4. Safeguards: The requirement for a hearing before rejection, mandatory reporting by authorities, and conditions for immunity withdrawal ensure transparency and accountability.
  5. Limitations: The rules clarify that compounding is not a right, and the compounding authority has discretion to accept or reject applications. Non-compliance with payment or disclosure requirements can lead to prosecution.
  6. Impact on Industry: The rules benefit pharmaceutical and cosmetic companies by offering a mechanism to resolve regulatory violations without criminal proceedings, provided they cooperate fully and pay the compounding amount.

Conclusion

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025, provide a structured mechanism for resolving minor offences under the Drugs and Cosmetics Act, 1940, through compounding. By balancing regulatory enforcement with practical resolution, the rules promote compliance while reducing litigation. Stakeholders, including manufacturers, importers, and distributors, must ensure accurate disclosures and timely payments to benefit from this framework. The rules underscore the government’s intent to strengthen regulatory oversight while offering a fair opportunity for offenders to rectify violations.

Multiple Choice Questions (MCQs)

  1. Under which section of the Drugs and Cosmetics Act, 1940, are the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 enacted? a) Section 32A b) Section 32B c) Section 33A d) Section 34 Answer: b) Section 32B
  2. When did the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 come into effect? a) July 10, 2024 b) April 24, 2025 c) April 25, 2025 d) May 1, 2025 Answer: c) April 25, 2025
  3. Who can appoint a compounding authority under the 2025 Rules? a) Only the Central Government b) Only the State Government c) Both Central and State Governments d) The Supreme Court Answer: c) Both Central and State Governments
  4. What is the time limit for the reporting authority to submit a report to the compounding authority after receiving a request? a) 15 days b) 30 days c) 45 days d) 60 days Answer: b) 30 days
  5. What must an applicant do within 30 days of receiving an order allowing compounding? a) File an appeal b) Pay the compounding amount c) Submit a new application d) Request a hearing Answer: b) Pay the compounding amount
  6. Under what condition can the compounding authority grant immunity from prosecution? a) If the applicant pays the compounding amount immediately b) If the applicant cooperates and makes full and true disclosure of facts c) If the applicant is a first-time offender d) If the offence is non-compoundable Answer: b) If the applicant cooperates and makes full and true disclosure of facts
  7. When can immunity from prosecution be withdrawn? a) If the applicant fails to pay the compounding amount within the specified time b) If the applicant is found guilty in another case c) If the applicant requests withdrawal d) If the compounding authority changes its decision Answer: a) If the applicant fails to pay the compounding amount within the specified time
  8. What is the consequence if an applicant conceals material facts during compounding proceedings? a) The compounding amount is increased b) Immunity is withdrawn, and prosecution may proceed c) The application is automatically approved d) The applicant is fined separately Answer: b) Immunity is withdrawn, and prosecution may proceed
  9. Who can apply for compounding of an offence under the 2025 Rules? a) Only individuals b) Only companies c) Any company or person involved in activities under the Act d) Only government entities Answer: c) Any company or person involved in activities under the Act
  10. What is a prerequisite for rejecting a compounding application? a) Payment of a penalty b) Opportunity for the applicant to be heard c) Approval from the reporting authority d) Filing of a chargesheet Answer: b) Opportunity for the applicant to be heard

Frequently Asked Questions (FAQs)

  1. What are the Drugs and Cosmetics (Compounding of Offences) Rules, 2025? The Drugs and Cosmetics (Compounding of Offences) Rules, 2025, are regulations under the Drugs and Cosmetics Act, 1940, that allow certain offences to be resolved by paying a compounding amount instead of facing prosecution. These rules, effective from April 25, 2025, aim to reduce litigation and ensure compliance for minor violations.
  2. Who is eligible to apply for compounding under these rules? Any company or individual involved in manufacturing, importing, selling, distributing, or other activities under the Drugs and Cosmetics Act, 1940, can apply for compounding, either before or after the initiation of prosecution.
  3. What is the role of the compounding authority? The compounding authority, appointed by the Central or State Government, evaluates compounding applications, determines the compounding amount, grants immunity from prosecution (if applicable), and ensures compliance with the rules. It may also withdraw immunity if conditions are not met.
  4. What information must be included in the compounding application? The application, submitted in the prescribed Form, must include:
    • Applicant’s name, address, and contact details.
    • Product name and composition.
    • License or registration details.
    • Details of the offence, including contravened provisions and whether it’s a first offence.
    • Supporting documents like test reports or certificates, if applicable.
    • A declaration agreeing to pay the compounding amount.
  5. What happens after submitting a compounding application? The compounding authority requests a report from the reporting authority within 30 days. After reviewing the application and report, the authority may:
    • Approve the application, specify the compounding amount, and grant immunity.
    • Reject the application after giving the applicant a hearing and stating reasons. The applicant must pay the compounding amount within 30 days of an approval order.
  6. Is compounding an automatic right for offenders? No, compounding is not a right. The compounding authority has discretion to approve or reject applications based on the facts, cooperation of the applicant, and compliance with the rules.
  7. Can the compounding amount be refunded? The compounding amount is non-refunded, except in cases where a court rejects the grant of immunity from prosecution.
  8. What are the grounds for withdrawal of immunity from prosecution? Immunity may be withdrawn if:
    • The applicant fails to pay the compounding amount within the specified time.
    • The applicant violates conditions attached to the immunity.
    • The applicant conceals material facts or provides false evidence during proceedings.
  9. What happens if immunity is withdrawn? If immunity is withdrawn, the provisions of the Drugs and Cosmetics Act, 1940, apply as if no immunity was granted. The applicant may face prosecution for the original offence and any related offences uncovered during the compounding process.
  10. How do these rules benefit the pharmaceutical and cosmetics industry? The rules provide a mechanism to resolve minor or technical violations without criminal prosecution, saving time and resources for companies. They encourage compliance by offering an alternative to lengthy legal proceedings, provided applicants cooperate fully and pay the compounding amount.

For further details, refer to the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated April 25, 2025.

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