The Drugs and Cosmetics Act, 1940 was enacted with a clearly deterrent purpose: to protect the Indian public from substandard and spurious drugs by imposing criminal liability on manufacturers and sellers without requiring proof of intent. Over the eight decades since enactment, the enforcement architecture has undergone a fundamental transformation — not through legislative amendment, but through the accretion of administrative guidelines, screening committee processes, and ultimately, formal compounding rules. By 2025, India’s drug enforcement regime has moved from strict criminal liability toward a graduated administrative framework where the most serious offences remain criminal but a broad class of quality failures can be settled through payment. This article traces that evolution, analyses its policy drivers and legal legitimacy at each stage, and evaluates whether the 2025 Compounding Rules under the Drugs and Cosmetics Act represent appropriate decriminalisation or a further erosion of public health deterrence.

I. INTRODUCTION: EIGHTY-FIVE YEARS OF ENFORCEMENT DESIGN

When Parliament enacted the Drugs Act in 1940, it was responding to a specific crisis: a proliferation of adulterated and spurious medicines in the Indian market. The legislative response was a strict liability criminal regime — manufacture of substandard drugs was a crime, and the manufacturer’s intent was irrelevant. Strict enforcement was not just an instrument of justice; it was a public health necessity.

Eighty-five years later, India’s drug enforcement architecture looks fundamentally different. The strict liability regime remains on paper, but in practice:

• DCC guidelines filter out the majority of prosecutions through administrative processes;
• CDSCO guidance documents acknowledge their own non-binding character; and
• The Jan Vishwas (Amendment of Provisions) Act, 2023 and the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 have formalised a pathway for settling drug offences without prosecution.

This article traces how we got here — and asks whether the trajectory serves the public health purpose that the 1940 Act was designed to achieve.

II. 1940–1980: THE ACT’S ORIGINAL STRICT ENFORCEMENT INTENT

The Drugs Act, 1940 established criminal penalties for manufacture and sale of adulterated, spurious, and substandard drugs from its inception. The original penalty structure — imprisonment up to three years and fines — was modest by today’s standards, but the structure was one of strict liability: no proof of intent was required.

The Drugs and Cosmetics Rules, 1945 established the regulatory infrastructure: drug standards, licensing requirements, the Government Analyst system, and the Drug Inspector’s sampling powers. These Rules were framed under the statutory process of Section 33 and carried full legal force.

In the first four decades, the regulatory architecture was largely statutory. DCC meetings produced advisory recommendations that were understood — correctly — as advisory. Drug Inspectors exercised independent judgment in prosecution decisions, constrained by the statutory framework but not by administrative filters.

Enforcement was imperfect — resource constraints, technical limitations, and political considerations all affected outcomes — but the legal framework was clear and the direction of legal development was toward stricter enforcement.

III. 1980–2008: THE RISE OF ADMINISTRATIVE FILTERS

From the 1980s onward, the DCC began developing more formal prosecution guidelines. This development reflected several pressures:

• Growth of the Indian pharmaceutical industry
• Increasing complexity of drug quality standards
• Resource limitations of State Drug Controllers
• Growing political influence of the pharmaceutical sector

The guidelines evolved from general advisory principles into detailed categorical frameworks — the A/B/C classification that characterises the current guidelines emerged from this period. The requirement of prior written permission before prosecution — the screening committee process — became institutionalised as standard practice across most states.

This administrative evolution was entirely extra-statutory. At no point was the D&C Act amended to incorporate these administrative filters. The Guidelines remained legally advisory, but operationally they functioned as binding rules — a situation that persisted, largely unchallenged, for decades.

IV. 2008: ENHANCED PENALTIES AND THE PARADOX OF STRICTER LAW, WEAKER ENFORCEMENT

The Drugs and Cosmetics (Amendment) Act, 2008 dramatically enhanced criminal penalties for drug quality violations: minimum ten years for manufacture of spurious drugs, extendable to life imprisonment, with the possibility of the death penalty where the drug caused death. These were among the harshest penalties in India’s regulatory statute book.

Yet the 2008 Amendment produced a paradox: by raising the stakes of conviction so dramatically, it made Drug Inspectors and screening committees even more reluctant to recommend prosecution. The prospect of recommending a prosecution that could result in a life sentence for what might be an inadvertent quality failure — rather than deliberate adulteration — created institutional risk aversion.

The result: the 2008 Amendment, intended to increase deterrence, may have actually reduced prosecution rates for the Category B and C cases that constitute the bulk of NSQ findings, because the enhanced penalties made the decision to prosecute feel disproportionate in those cases.

V. 2016–2018: THE FDC BANS AND THE LIMITS OF SECTION 26A

The Central Government’s exercise of Section 26A powers to ban 344 FDCs in 2016 — and the subsequent litigation culminating in the Supreme Court’s restoration of the ban — represented a different dimension of drug enforcement evolution: the use of regulatory prohibition (rather than criminal prosecution of manufacturers) as the primary quality control tool.

Section 26A prohibition is blunt: it withdraws a drug from the market entirely, but does not necessarily result in criminal prosecution of the manufacturers who had been producing the banned drugs. The FDC bans thus addressed market safety concerns while largely leaving individual manufacturers’ criminal liability unaddressed.

This pattern — regulatory withdrawal without criminal prosecution — is consistent with the broader trend toward administrative resolution of drug quality failures that the DCC guidelines had been institutionalising since the 1980s.

VI. 2023–2025: THE JAN VISHWAS ACT AND THE COMPOUNDING RULES — FORMALISING DECRIMINALISATION

The Jan Vishwas (Amendment of Provisions) Act, 2023 represented an explicit and deliberate legislative policy choice: to decriminalise minor regulatory violations across 183 laws, converting criminal penalties to civil penalties and establishing formal compounding mechanisms. This was not administrative drift — it was a Parliamentary decision.

For the Drugs and Cosmetics Act, the Jan Vishwas amendments strengthened Section 32B and enabled the Drugs and Cosmetics (Compounding of Offences) Rules, 2025. For the first time, a statutory, Gazette-notified, transparent framework exists for settling specified drug offences without prosecution.

The Compounding Rules are not unconstitutional and are not ultra vires — they were enacted by Parliament through the Jan Vishwas process and represent a legitimate exercise of legislative power to adjust the boundary between criminal and civil enforcement. The key question is whether the boundary has been drawn in the right place.

VII. EVALUATING THE TRAJECTORY: HAS THE PENDULUM SWUNG TOO FAR?

The 1940–2025 trajectory represents a consistent movement from strict criminal liability toward administrative resolution — with the 2025 Compounding Rules as the most recent (and most legitimate, because statutory) manifestation.

Whether this trajectory serves public health depends on whether the most dangerous quality failures — spurious and adulterated drugs, drugs that have caused death or serious harm — remain subject to vigorous criminal prosecution. On this dimension, the current framework is defensible: the Compounding Rules exclude Sections 27(a), (b), and (c) offences (spurious, adulterated, misbranded drugs) from compounding eligibility. These remain fully criminal.

The concern is whether the administrative resolution pathway for Category B and C NSQ failures — drugs that are substandard but not spurious — provides sufficient deterrence. A manufacturer who knows that a quality failure below the ‘spurious’ threshold can be settled through administrative compounding has a weaker incentive to invest in quality than one who faces criminal prosecution for any NSQ finding.

The evidence from the pre-compounding era — very low NSQ prosecution rates — suggests that administrative resolution was already insufficient as a deterrent. Whether formal statutory compounding improves or worsens this dynamic depends on:

• The level at which compounding amounts are set; and
• The rigour with which the Compounding Authority exercises its discretion to refuse compounding in appropriate cases.

VIII. WHAT A REFORMED D&C ACT SHOULD LOOK LIKE

Building on the 85-year evolution analysed in this article, a reformed D&C Act should:

1. Insert a provision equivalent to Section 119 of the IT Act, expressly empowering CDSCO to issue binding prosecution guidelines, with Parliamentary oversight.
2. Activate Section 33P to prescribe minimum prosecution standards binding on all State Drug Controllers.
3. Retain strict liability for all NSQ offences, including Category B cases — with the Compounding Rules providing an alternative resolution pathway only for genuinely minor violations.
4. Separate the regulatory and prosecutorial functions of CDSCO, either through an independent Drug Prosecution Division or mandatory Public Prosecutor referral.
5. Require annual public reporting on NSQ findings, prosecution decisions, compounding applications, and outcomes — creating accountability for enforcement discretion.

These reforms would preserve the core strict liability framework that Parliament intended in 1940, while acknowledging the legitimate need for proportionate responses to minor quality violations that the Jan Vishwas Act recognises.

IX. CONCLUSION

The evolution of India’s drug enforcement regime from 1940 to 2025 is a story of Parliamentary intent being progressively diluted — first through non-statutory administrative guidelines, then through institutional inertia, and finally through formal legislative decriminalisation for minor violations.

The trajectory is not without justification — some administrative resolution of minor quality failures is proportionate and efficient. But the cumulative effect has been to move India’s drug enforcement regime further from the deterrence-first model Parliament intended and closer to a compliance-and-settlement model that may not adequately protect public health.

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 are not the end of this story — they are its most recent chapter. The next chapter should be a comprehensive reform of the D&C Act that:

• Reasserts the primacy of strict liability for serious quality failures;
• Creates statutory binding force for prosecution standards; and
• Builds structural separation between regulatory and prosecutorial functions.

FAQs: 

1. What are the Drugs and Cosmetics Compounding Rules, 2025?

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 establish a statutory mechanism to settle certain drug-related offences by payment of a compounding amount instead of undergoing criminal prosecution under the Drugs and Cosmetics Act, 1940.

2. Which offences can be compounded under the Drugs and Cosmetics Act?

Generally, minor and technical violations—such as certain not-of-standard-quality (NSQ) drug offences—may be eligible for compounding. However, serious offences involving spurious, adulterated, or harmful drugs are excluded and remain criminal.

3. Are spurious and adulterated drug offences compoundable?

No. Offences involving spurious, adulterated, or misbranded drugs—especially under Section 27(a), (b), and (c)—are not eligible for compounding and continue to attract strict criminal penalties.

4. How did the Jan Vishwas Act, 2023 change drug law enforcement?

The Jan Vishwas (Amendment of Provisions) Act, 2023 introduced a broader policy of decriminalisation across multiple laws, including the Drugs and Cosmetics Act, by enabling compounding and converting certain offences into civil penalties.

5. What is meant by compounding of offences in drug law?

Compounding allows an accused person or company to settle a specified offence by paying a prescribed amount, thereby avoiding criminal prosecution and court proceedings.

6. Does compounding weaken drug quality regulation in India?

This is debated. While compounding improves efficiency and reduces litigation for minor violations, critics argue it may weaken deterrence if companies treat penalties as a cost of doing business.

7. What was the original enforcement approach under the Drugs and Cosmetics Act, 1940?

The original framework was based on strict liability, meaning manufacturers could be held criminally liable for substandard drugs regardless of intent, ensuring strong deterrence for public health protection.

8. Why are fewer drug prosecutions seen despite strict laws?

Administrative practices such as DCC guidelines, screening committees, and risk-averse enforcement decisions have reduced prosecution rates, especially for Category B and C NSQ cases.

9. What is the role of CDSCO in drug enforcement?

The Central Drugs Standard Control Organisation (CDSCO) acts as India’s central drug regulator, issuing guidelines, coordinating enforcement, and overseeing regulatory compliance—though its dual regulatory and prosecutorial role raises concerns about conflict of interest.

10. What reforms are needed in the Drugs and Cosmetics Act?

Key reforms include:

• Making prosecution guidelines legally binding
• Strengthening enforcement standards
• Retaining strict liability for serious offences
• Separating regulatory and prosecutorial functions
• Improving transparency through public reporting

11. What is the difference between decriminalisation and compounding?

Decriminalisation removes criminal penalties and replaces them with civil penalties, while compounding allows settlement of an offence without trial, even though the offence technically remains criminal.

12. Are the Compounding Rules, 2025 legally valid?

Yes. The rules are backed by statutory authority through amendments introduced by Parliament and are considered legally valid unless challenged and struck down by courts.

REFERENCES

1. The Drugs and Cosmetics Act, 1940 (Act 23 of 1940) — India Code
2. Drugs and Cosmetics (Amendment) Act, 2008 — CDSCO
3. Jan Vishwas (Amendment of Provisions) Act, 2023 — PIB, Government of India
4. Drugs and Cosmetics (Compounding of Offences) Rules, 2025 — SCC Online
5. DCC Guidelines for Taking Action on Samples of Drugs Declared Spurious or NSQ — CDSCO (2008)
6. Dinesh Thakur & Prashant Reddy T., Fixing India’s Broken Drug Regulatory Framework (2016)
7. Union of India v. Pfizer Ltd. & Ors. — Supreme Court of India
8. Compounding of Offences under the Drugs and Cosmetics Act, 1940 — Vaayath (2026)
9. ICLG India — Drug and Medical Device Litigation 2026
10. PMC — Regulatory Developments in Clinical Trials in India (2016)

The post Drugs and Cosmetics Act 1940 to 2025: Compounding Rules, Decriminalisation & Enforcement Shift in India appeared first on Bhatt & Joshi Associates.

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025, notified on April 24, 2025 under Sections 32B and 33(2)(r) of the Drugs and Cosmetics Act, 1940, represent a fundamental transformation in India’s drug enforcement landscape. For the first time, a statutory framework exists for settling specified drug offences by payment of a compounding amount — without criminal prosecution. This article analyses the 2025 Rules in detail, examines their interface with the existing prosecution procedure under Section 32, compares the framework with CBDT’s well-developed compounding regime, identifies the offences eligible for compounding, and addresses key questions of immunity, withdrawal, and the relationship between compounding and the non-statutory DCC prosecution guidelines that preceded the formal rules.

INTRODUCTION

For decades, India’s pharmaceutical manufacturers who found themselves facing prosecution for drug quality violations had two informal escape routes: first, the DCC’s non-statutory prosecution guidelines, which if followed by the Drug Inspector would result in the case being resolved through administrative action rather than criminal complaint; second, under the original Section 32B, limited compounding provisions that were narrowly applied.

The Jan Vishwas (Amendment of Provisions) Act, 2023 changed this landscape fundamentally. The Act amended over 180 laws to decriminalise minor regulatory offences — converting criminal sanctions to civil penalties and establishing formal compounding frameworks. Under this mandate, the Ministry of Health and Family Welfare notified the Drugs and Cosmetics (Compounding of Offences) Rules, 2025 on April 24, 2025.

These Rules are the first statutory, transparent, and rule-bound mechanism for settling drug offences without prosecution. They stand in sharp contrast to the ad hoc, non-statutory, and legally dubious DCC prosecution guidelines that previously served this function.

THE STATUTORY FOUNDATION: SECTIONS 32B AND 33(2)(R)

Section 32B of the Drugs and Cosmetics Act provides for compounding of offences. It authorises the Central Government to frame rules prescribing the authority competent to compound offences, the offences that may be compounded, and the amount that may be accepted.

Section 33(2)(r) confers the specific rulemaking power to prescribe procedures for compounding. Together, Sections 32B and 33(2)(r) provide the statutory transmission belt for the 2025 Rules — the Rules are not administrative guidelines or DCC recommendations. They are statutory rules with the full force of law, tabled before Parliament under Section 38.

This statutory character is the defining difference between the 2025 Rules and the DCC compounding guidance that preceded them. The 2025 Rules bind Drug Inspectors, manufacturers, and the Compounding Authority — their terms cannot be departed from except by amendment following the statutory procedure.

OFFENCES ELIGIBLE FOR COMPOUNDING

The 2025 Rules permit compounding of offences under specific sub-sections of the Act, including:
— Section 27(d): Manufacture, sale, stocking, or distribution of drugs in contravention of other provisions of Chapter IV (minor violations, not spurious or adulterated categories);
— Section 27A(ii): Violations relating to cosmetics;
— Section 28: Obstructing an Inspector in the exercise of their duties;
— Section 28A: Disclosure of information to a person from whom a sample was taken.

Critically, the most serious offences — manufacture of spurious, adulterated, or misbranded drugs under Sections 27(a), (b), and (c), which attract minimum ten-year sentences — are NOT eligible for compounding. Compounding is available only for the less serious end of the offence spectrum.

This structure reflects a deliberate policy choice: decriminalise truly minor regulatory violations (labelling errors, administrative non-compliance, minor quality deviations) while preserving criminal prosecution as the mandatory response for public health threats.

THE COMPOUNDING AUTHORITY AND PROCEDURE

The Compounding Authority for centrally licensed drugs is the Drugs Controller General of India (DCGI). For state-licensed drugs, the State Drug Controller or equivalent authority is the Compounding Authority.

The procedure requires: (i) an application by the accused (compounding is not automatic or ex officio); (ii) the accused’s acknowledgement of the offence; (iii) assessment of the compounding amount by the Authority; (iv) payment of the assessed amount; and (v) issue of a compounding certificate.

Compounding is not a right — it is at the discretion of the Compounding Authority. The Authority may refuse compounding where the public interest requires prosecution, where the offence is of a habitual or recidivist nature, or where the application does not meet the conditions of the Rules.

Once compounding is completed and the certificate issued, the accused is immune from prosecution for that specific offence. Importantly, immunity can be withdrawn if conditions were violated or false information was provided during the compounding process.

COMPARISON WITH CBDT COMPOUNDING FRAMEWORK

CBDT’s compounding guidelines, most recently revised in September 2022 and further updated in June 2024, represent a mature, well-developed compounding regime under Section 279(2) of the Income Tax Act, 1961.

Key comparisons:

Statutory basis: Both the CBDT compounding guidelines and the D&C Compounding Rules are underpinned by statutory authority — Section 279(2) IT Act for CBDT, and Sections 32B/33(2)(r) for the D&C Rules.

Threshold approach: CBDT guidelines specify graduated compounding amounts based on the amount of tax evaded. The D&C Rules specify amounts based on the nature of the offence and the scale of the violation.

Discretion: Both frameworks preserve discretion — compounding is not automatic. CBDT can refuse compounding for habitual offenders; the D&C Compounding Authority can similarly refuse.

Immunity scope: CBDT compounding grants immunity from prosecution under the IT Act for the compounded period. D&C Rules similarly grant immunity from prosecution for the compounded offence.

The key difference: CBDT’s regime has decades of operational experience and detailed guidance on compounding amounts. The D&C framework is newly established and the jurisprudence on its application is yet to develop.

INTERFACE WITH NON-STATUTORY DCC GUIDELINES

The existence of the 2025 Compounding Rules has an important implication for the status of the DCC’s non-statutory prosecution guidelines.

Prior to the 2025 Rules, one argument in favour of the DCC guidelines was that they served a quasi-compounding function — they provided an alternative to prosecution for minor violations, filling a gap in the statutory framework. This argument, while not sufficient to save the guidelines from the ultra vires critique, at least provided a policy justification.

Post-2025 Rules, this justification disappears. Parliament has now provided a statutory mechanism for settling minor drug offences without prosecution. The DCC’s non-statutory framework is not only legally invalid — it is now redundant. Drug Inspectors who decline to prosecute Category B or C cases on DCC guideline grounds, when a statutory compounding mechanism is available, are acting without any legitimate justification.

Further, the existence of statutory compounding actually strengthens the argument that minor violations should be addressed through the Compounding Rules (a transparent, accountable, Gazette-notified process) rather than through opaque administrative screening committees applying non-statutory DCC guidelines.

CONCLUSION

The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 represent the most significant reform of India’s drug enforcement architecture since the 2008 criminal penalty amendments. For the first time, a fully statutory, transparent, and accountable mechanism exists for settling minor drug offences without prosecution. The Rules should be welcomed by industry and regulators alike.

For counsel advising pharmaceutical clients, the 2025 Rules create a new strategic option: rather than relying on the legally tenuous DCC guidelines to avoid prosecution, manufacturers of eligible minor violations can formally apply for compounding — gaining statutory immunity upon successful completion. This is a far more secure legal position than dependence on a non-statutory administrative guideline that any court can declare ultra vires at any time.

REFERENCES

[1] Drugs and Cosmetics (Compounding of Offences) Rules, 2025 — SCC Online (April 24, 2025).  https://www.scconline.com/blog/post/2025/04/29/drugs-and-cosmetics-compounding-of-offences-rules-legal-news/

[2] The Drugs and Cosmetics Act, 1940, Sections 32B, 33(2)(r), 27, 27A, 28, 28A.  https://www.indiacode.nic.in/bitstream/123456789/15278/1/drug_cosmeticsa1940-23.pdf

[3] Jan Vishwas (Amendment of Provisions) Act, 2023 — PIB, Government of India.  https://www.pib.gov.in

[4] CBDT Revised Guidelines for Compounding of Offences under the Income-Tax Act, 1961 (September 2022) — PIB.  https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1860175

[5] Guidelines for Compounding of Offences under the Income-Tax Act, 1961 (2024 Revision) — Income Tax Department.  https://www.incometaxindia.gov.in/w/guidelines-for-compounding-of-offences-under-the-income-tax-act-1961-reg.-2

[6] CDSCO Guidance Document on Compounding of Offences (Drugs Rules 1945) — CDSCO.  https://cdsco.mohfw.gov.in/opencms/resources/UploadCDSCOWeb/2018/UploadPublic_NoticesFiles/Guidance%20Document%20%5BCompounding%5D.pdf

[7] Compounding of Offences under the Drugs and Cosmetics Act, 1940 — Cliniexperts (January 2026).  https://cliniexperts.com/regulatory-update/guidelines-on-compounding-of-offences-under-the-drugs-and-cosmetics-act-1940-as-per-d

[8] The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 — GKToday.  https://www.gktoday.in/drugs-and-cosmetics-compounding-rules-2025/

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