Summary
The Supreme Court quashed a Drugs and Cosmetics Act prosecution against a medical-gas company and its Managing Director for selling Nitrous Oxide I.P. in bulk to a firm that held a Form 25 manufacturing licence but no Form 20B wholesale licence. Given the wide definition of 'manufacture' in Section 3(f), a Form 25 licensee may break up, repack and sell the drug by wholesale, so no offence under Section 18(a)(vi) read with Section 27(d) was made out; the Magistrate's summoning order was also bad for want of any reasons.
Issues
- Whether sale of a drug by a licensed manufacturer to another firm holding a Form 25 manufacturing licence, but not a Form 20B wholesale licence, contravenes Section 18(a)(vi) of the Drugs and Cosmetics Act, 1940 read with Rule 65(5)(1)(b) of the Drugs and Cosmetics Rules, 1945, punishable under Section 27(d).
- Whether the condition that a Form 25 licence is 'subject to' the conditions applicable to a licence for sale made out an offence without any shown violation of a Form 20B condition.
- Whether a summoning order recording only the complainant's submissions, without reasons, is sustainable.
Provisions considered
- Section 3(f), Drugs and Cosmetics Act, 1940The definition of 'manufacture' is inclusive and wide, covering any process or part of a process of making, altering, packing, labelling, breaking up or otherwise treating a drug with a view to its sale or distribution. The Court held that filling bulk gas into smaller cylinders and resealing them for sale falls within it, and that the High Court erred in treating the definition as irrelevant. (¶¶ 14, 15, 23, 24, 25, 26, 40)
- Section 18(a)(vi), Drugs and Cosmetics Act, 1940The prohibition on selling a drug in contravention of the Chapter or rules would be attracted only if the purchaser held no licence permitting further sale; since the purchaser held a Form 25 licence authorising wholesale sale of drugs manufactured under it, the sale to it was not in contravention. (¶¶ 16, 18, 26, 31)
- Section 27(d), Drugs and Cosmetics Act, 1940The penalty for selling a drug in contravention of the Chapter or rules was not attracted, as even on the complaint's allegations taken at face value no contravention was shown. (¶¶ 17, 18, 31)
- Rule 65(5)(1)(b) and Forms 20B and 25 (Rules 61 and 70), Drugs and Cosmetics Rules, 1945Rule 65(5)(1)(b) requires a wholesale supply memo to record the purchaser's name and sale licence number. Clause 2 of Form 25 authorises wholesale sale and storage of the drugs manufactured under the licence, subject to the conditions for a sale licence. Reading 'subject to' as subordinate to or governed by, the Court held the prosecution still had to show a breach of some Form 20B condition, which the State could not point out. (¶¶ 18, 19, 20, 21, 22, 27, 28, 29, 30)
- Section 204, Code of Criminal Procedure, 1973Relying on Pepsi Foods, Sunil Bharti Mittal and Lalankumar Singh, the Court held that the order issuing process must show application of mind and the formation of an opinion that there is sufficient ground to proceed; an order merely recording the complainant's submissions and directing summons is liable to be set aside. (¶¶ 32, 33, 34, 35, 36, 37, 38)
- Section 482, Code of Criminal Procedure, 1973The High Court's dismissal of the appellants' petition to quash the complaint case was set aside and the proceedings were quashed. (¶¶ 2, 39, 40, 41)
Held
- A holder of a Form 25 manufacturing licence may, by virtue of the wide definition of 'manufacture' in Section 3(f), alter, break up, repack and relabel a drug received from another manufacturer and sell or distribute it by wholesale. Sale of Nitrous Oxide I.P. in bulk by one Form 25 licensee to another, which filled it into smaller cylinders for sale, did not contravene Section 18(a)(vi); it would have been otherwise only if the purchaser held no licence permitting further sale. (¶¶ 23, 24, 25, 26)
- Even if a Form 25 licence is 'subject to' the conditions of a Form 20B sale licence, the prosecution must show that the seller violated some Form 20B condition; as none was pointed out, the complaint's allegations taken at face value disclosed no offence under Section 18(a)(vi) read with Section 27(d). (¶¶ 27, 28, 29, 30, 31)
- Summoning an accused is a serious matter; the order issuing process must reflect application of mind to the facts and law and state the Magistrate's opinion that there is sufficient ground to proceed, though detailed reasons are not required. An order that merely records the complainant's submissions and directs summons, without any reasons, is liable to be set aside. (¶¶ 33, 34, 35, 37, 38)
- The High Court misdirected itself in holding the definition of 'manufacture' irrelevant and in reasoning that a firm licensed to manufacture was not authorised to purchase the drug from another manufacturer. (¶¶ 39, 40)
Result
Appeal allowed; High Court's order dated 12.01.2024 in Criminal Petition No. 4148 of 2018 set aside; summoning order dated 20.01.2018 and the proceedings in C.C. No. 71 of 2018 before the Judicial Magistrate, Kadapa quashed.