How is Compounding of Offences Done Under Drugs & Cosmetics Act, 1940 after introduction of Jan Vishwas Act

Many offences under the Drugs and Cosmetics Act, 1940 (“D&C Act”) which earlier used to invite criminal prosecution against the senior management of pharmaceutical, medical device and cosmetics companies have now been made compoundable – meaning that allegations of violation of D&C Act can be resolved by paying a compounding amount instead of continuing criminal proceedings.

However, compounding is not available for every violation, nor is it available as a matter of right. The offence must first be legally compoundable, and the designated Compounding Authority must be satisfied that the applicant is entitled to relief.

In this article, we will examine the procedure of compounding of offences against pharmaceutical companies, medical device companies and cosmetic companies.

I. Assess If The Offence Is Compoundable

The first step of compounding is to determine if the offense in question is compoundable as per the law. Not every offence under the D&C Act can be compounded. Only offences specifically notified under Section 32B (as expanded after the Jan Vishwas reforms) are eligible.

While Section 32B compounding of specified offences has existed since 2008, the Jan Vishwas (Amendment of Provisions) Act, 2023 expanded the category of compoundable offences under the Drugs and Cosmetics Act. The Drugs and Cosmetics (Compounding of Offences) Rules, 2025 finally prescribed a uniform procedure for seeking compounding.

Serious offences involving spurious or adulterated drugs, public health risks or repeat violations remain outside the compounding framework and continue to attract criminal prosecution.

II. Identify the Correct Compounding Authority

Jurisdiction depends upon the authority that drew the sample or initiated enforcement action. Rule 3 empowers the Central and State Governments to appoint the Compounding Authority through notification in the Official Gazette. The Central Government has notified the Additional Director General of Health Services (CDSCO) as the Central Compounding Authority, while some States, including Delhi and Tamil Nadu, have notified their respective State Compounding Authorities.

If the sample was drawn or proceedings were initiated by a CDSCO Drugs Inspector, the application must be filed before the Central Compounding Authority.

If the sample was drawn by a State or UT Drugs Inspector, the application must be filed before the respective State or UT Compounding Authority.

This distinction is important because filing before the wrong authority can delay the process or result in the application being returned.

III. File the Application

Rule 4(2) specifically states that an application can be made by the company or person engaged in

• manufacturing

• import

• sale

• distribution

• any other activity covered under D&C Act and Rules.

The application has to be filed in the prescribed Form together with relevant information and supporting documents as prescribed under the Rules.

This generally includes:

• details of the applicant

• particulars of the alleged offence

• statutory provision involved

• stage of proceedings

• relevant documents

• declaration that the offence is eligible for compounding

An application may be made either before or after the institution of prosecution.

The 2025 Rules prescribe the form and accompanying documentation, bringing much needed uniformity.

IV. Examination by the Compounding Authority

Once the application is received, the Compounding Authority calls for a report from the Reporting Authority and considers the particulars furnished in the application together with any other information relevant to examining the application.

The Reporting Authority is the Licensing Authority, Central Licensing Authority, Central Licence Approving Authority or the State Licensing Authority, as the case may be, having jurisdiction over the place where the alleged offence was committed. Upon receiving a request from the Compounding Authority, within one month it submits a factual report on the alleged contravention to assist the Compounding Authority in deciding the compounding application.  The Compounding Authority may also consider the applicant's disclosures and other relevant facts before deciding whether the application should be allowed.

Compounding is entirely discretionary. Rule 5(6) expressly provides that an applicant cannot claim compounding as a matter of right. The Authority retains discretion to accept or reject the application. Before rejecting an application, the Compounding Authority must provide the applicant an opportunity of personal hearing and record reasons for rejection.

Every order must be communicated to the applicant.

V. Grant of Immunity and Closure of Proceedings

If the application is accepted, the compounding amount has to be paid and proof of payment must be furnished within 30 days. The Compounding Authority may then grant immunity from prosecution for the compounded offence, provided the applicant has made a full and truthful disclosure and has cooperated during the proceedings.

The Rules do not prescribe a fixed amount. The compounding amount is determined by the Compounding Authority on the facts of each case.

Immunity once the compounding is granted is conditional. It may be withdrawn if the applicant conceals material facts, furnishes false evidence, violates the conditions attached to the order or fails to pay the compounding amount within the prescribed period. If immunity is withdrawn, prosecution may continue as though compounding had never taken place.

Conclusion

The 2025 Rules convert compounding from a largely dormant statutory provision into a practical compliance mechanism.

Businesses receiving inspection reports, show cause notices or prosecution complaints should assess at the earliest stage whether the alleged offence is compoundable, whether the correct Compounding Authority has jurisdiction, and whether an early application under Rule 4 would reduce litigation risk.

Companies must remember that compounding of the offence does not cure the underlying regulatory non-compliance or prevent regulators from taking separate administrative action where warranted.