Case Note & Summary
The present appeal arises from a criminal complaint filed by the Drugs Inspector, Kadapa, against several accused, including the appellants (Accused Nos. 5 and 6), for alleged contravention of the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945. The first appellant, INOX Air Products Limited (now INOX Air Products Private Limited), is a company engaged in the manufacture and sale of industrial and medical gases, and the second appellant, Pavan Kumar Jain, is its Managing Director. The complaint alleged that the appellants sold Nitrous Oxide I.P. to Accused No. 3 firm, which did not possess a license for sale, thereby violating Section 18(a)(vi) read with Rule 65(5)(1)(b) of the Rules, punishable under Section 27(d) of the Act. The appellants filed a petition under Section 482 of the Code of Criminal Procedure, 1973 before the High Court of Andhra Pradesh seeking quashing of the complaint, which was dismissed. Aggrieved, they appealed to the Supreme Court. The Supreme Court examined the definition of 'manufacture' under Section 3(f) of the Act, which includes any process for making, altering, packing, labelling, breaking up, or otherwise treating a drug with a view to sale or distribution. The court noted that Accused No. 3 had a manufacturing license in Form 25 and its process of filling small cylinders from big cylinders fell within the definition of 'manufacture'. The court further held that Rule 2(g) defines 'sale by way of wholesale dealing' as sale to a person for the purpose of selling again, and that sale by one manufacturer to another for further manufacturing does not constitute wholesale dealing requiring a Form 20B license. The only allegation against the appellants was that they sold Nitrous Oxide I.P. to an unlicensed firm, but since Accused No. 3 was a licensed manufacturer, the sale was not in contravention of the law. The court also noted that the order taking cognizance did not record reasons, but did not need to decide that issue as the complaint was quashed on merits. Additionally, the court found that there were no specific averments against the second appellant, the Managing Director, and therefore the proceedings against him were also liable to be quashed. The Supreme Court allowed the appeal, set aside the High Court's order, and quashed the criminal proceedings against the appellants.
Headnote
A) Criminal Law - Quashing of Criminal Proceedings - Section 482 CrPC - Abuse of Process - The High Court dismissed the petition under Section 482 CrPC seeking quashing of complaint alleging sale of Nitrous Oxide I.P. to an unlicensed firm. The Supreme Court held that the sale by a licensed manufacturer to another manufacturer for further manufacturing does not contravene 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, as the definition of 'manufacture' under Section 3(f) includes repacking and refilling. The proceedings were quashed as an abuse of process. (Paras 13-22) B) Drugs and Cosmetics Act, 1940 - Definition of Manufacture - Section 3(f) - Scope - The term 'manufacture' under Section 3(f) is inclusive and wide, covering any process for making, altering, packing, labelling, breaking up, or otherwise treating a drug with a view to sale or distribution. The process of filling small cylinders from big cylinders by accused No.3 falls within this definition. (Paras 14-15) C) Drugs and Cosmetics Rules, 1945 - Sale by Wholesale - Rule 2(g) and Rule 65(5) - Applicability - Rule 2(g) defines 'sale by way of wholesale dealing' as sale to a person for the purpose of selling again. Sale by one manufacturer to another for further manufacturing is not a wholesale dealing and does not require a license under Form 20B. (Paras 18-20) D) Criminal Procedure Code, 1973 - Cognizance Order - Requirement of Reasons - The order of the Magistrate taking cognizance and issuing summons must record reasons. However, since the complaint itself was quashed on merits, the court did not need to decide this issue. (Para 8) E) Criminal Law - Vicarious Liability of Directors - Section 34 of the Drugs and Cosmetics Act, 1940 - Specific Averments - In the absence of specific averments regarding the role of the Managing Director (appellant No.2), the proceedings against him are liable to be quashed, following Pepsi Foods Ltd. v. Special Judicial Magistrate. (Paras 9, 22)
Issue of Consideration
Whether the sale of Nitrous Oxide I.P. by a licensed manufacturer (appellant) to another manufacturer (accused No.3) for further manufacturing amounts to a contravention of 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, and whether the criminal proceedings against the appellants are liable to be quashed.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned judgment of the High Court dated 12th January 2024, and quashed the criminal proceedings in C.C. No. 71 of 2018 pending before the First Additional Judicial Magistrate of First Class, Kadapa, against the appellants.
Law Points
- Definition of manufacture under Section 3(f) of the Drugs and Cosmetics Act
- 1940 includes repacking and refilling
- Sale by one manufacturer to another for further manufacturing is not a wholesale dealing requiring Form 20B license
- Order taking cognizance must record reasons
- Director of company not liable without specific averments
