Code of Criminal Procedure, 1973 – Section 482 Quashing of Criminal Proceedings – High Court dismissed the petition under Section 482 of the Code of Criminal Procedure, 1973 – Supreme Court held that proceedings were unsustainable in law – No prima facie case made out against the appellants – Summoning order was a non-speaking order – Application of judicial mind was absent – High Court’s failure to correctly interpret the licensing provisions under the Drugs and Cosmetics Act, 1940 – (Paras 1, 31, 32, 38, 41)

Drugs and Cosmetics Act, 1940 – Section 18(a)(vi), Section 27(d), Section 3(f) Manufacturing License – Wholesale License Not Required – Term ‘manufacture’ as defined in Section 3(f) of the Drugs and Cosmetics Act, 1940 was wide – Included breaking, repacking, and relabeling for sale – Accused No. 3 possessed a manufacturing license under Form 25 – No requirement to hold a wholesale license under Form 20B – Sale from Accused No. 5 to Accused No. 3 was lawful – (Paras 15-17, 21-26, 39)

Drugs and Cosmetics Rules, 1945 – Rule 65(5)(1)(b), Form 20B, Form 25 License Conditions – Interpretation – Form 25 license permitted wholesale dealings – Prosecution failed to establish any violation of Form 20B conditions – Sale by a licensed manufacturer to another licensed manufacturer did not contravene licensing conditions – High Court’s interpretation of Form 25 as being ‘subject to’ Form 20B was erroneous – (Paras 20-22, 24-26, 28-30)

Summoning Order – Lack of Reasons – Quashed

Requirement of Judicial Application of Mind – Magistrate issued process against the accused without recording reasons – Summoning order must reflect satisfaction of prima facie case – Supreme Court held that issuance of process was not an empty formality – Reliance placed on Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 and Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609 – (Paras 32-38)

Acts and Sections Discussed:

• Code of Criminal Procedure, 1973 – Section 482 – Inherent powers of the High Court
• Drugs and Cosmetics Act, 1940 – Section 18(a)(vi), Section 27(d), Section 3(f) – Manufacture, sale, and licensing requirements
• Drugs and Cosmetics Rules, 1945 – Rule 65(5)(1)(b), Form 20B, Form 25

Criminal Law – Quashing of Prosecution – Principles Reaffirmed:

a. Prosecution must establish prima facie contravention of statutory provisions – No violation of the Drugs and Cosmetics Act, 1940 was made out – (Para 31)
b. Order issuing process must record reasons – Mere reproduction of complaint allegations is insufficient – (Para 32, 38)
c. High Court failed to appreciate the licensing framework correctly – Misinterpretation of Form 25 and Form 20B – (Paras 39-41)

Subjects:

Quashing of proceedings, Summoning order, Application of judicial mind, Prima facie case, Manufacturing license, Wholesale license, Judicial reasoning, Repacking, Rule 65, Form 25, Form 20B

Nature of the Litigation:

Criminal Appeal arising from the dismissal of a petition under Section 482 of the Code of Criminal Procedure, 1973 by the High Court of Andhra Pradesh. The petition sought to quash proceedings under the Drugs and Cosmetics Act, 1940.

Who Filed the Case and What Remedy was Sought?

• Appellants: Inox Air Products Limited and its Managing Director
• Respondent: State of Andhra Pradesh
• Relief Sought: Quashing of proceedings before the Trial Court in C.C. No. 71 of 2018

Reason for Filing the Case:

The appellants challenged their prosecution on the ground that:
a. They possessed a valid manufacturing license under Form 25.
b. The alleged sale of Nitrous Oxide I.P. was to a firm (Accused No. 3) that also held a manufacturing license under Form 25.
c. There was no requirement for Accused No. 3 to hold a wholesale license under Form 20B.
d. The summoning order by the Magistrate lacked reasons and was a non-speaking order.

What Was Already Decided?

• The High Court dismissed the criminal petition under Section 482 of the CrPC, holding that the sale was in contravention of the licensing provisions under the Drugs and Cosmetics Act, 1940.
• The Trial Court had taken cognizance and issued summons to the accused persons.

Issues Before the Supreme Court:

1. Whether the sale of Nitrous Oxide I.P. by a licensed manufacturer (Accused No. 5) to another licensed manufacturer (Accused No. 3) violated the Drugs and Cosmetics Act, 1940.
2. Whether the High Court erred in holding that a license under Form 25 was subject to Form 20B, making the sale unlawful.
3. Whether the summoning order issued by the Magistrate was legally sustainable.

Submissions and Arguments:

Appellants’ Arguments:

• Manufacture Defined Broadly: The definition of ‘manufacture’ under Section 3(f) of the Drugs and Cosmetics Act, 1940 includes repacking and relabeling. Since Accused No. 3 was engaged in such processes, the sale was not unlawful.
• License Requirements Met: Both the appellants and Accused No. 3 possessed a valid manufacturing license under Form 25. There was no requirement for Accused No. 3 to also possess a wholesale license under Form 20B.
• Summoning Order Invalid: The Magistrate’s order lacked reasoning, violating principles laid down in Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 and Lalankumar Singh v. State of Maharashtra, 2022 SCC OnLine SC 1383.

Respondent’s Arguments:

• Violation of Section 18(a)(vi): The sale of Nitrous Oxide I.P. to Accused No. 3 was unlawful because Accused No. 3 did not have a Form 20B license for wholesale distribution.
• Licensing Under Form 25 Subject to Form 20B: The conditions under Form 25 required compliance with Form 20B, making the sale in contravention of licensing requirements.

Decision:

• The Supreme Court quashed the criminal proceedings against the appellants, holding that:
  a. Accused No. 3, possessing a Form 25 manufacturing license, was legally permitted to break, repack, and distribute Nitrous Oxide I.P. without needing a Form 20B license.
  b. The High Court erred in interpreting the licensing requirements under the Drugs and Cosmetics Act, 1940.
  c. The summoning order by the Trial Court lacked reasons and was legally unsustainable.

Ratio Decidendi:

1. Manufacturing License Under Form 25 Permits Sale for Further Processing: A firm holding a manufacturing license under Form 25 does not require a wholesale license under Form 20B for lawful sale to another manufacturer.
2. Magistrate’s Order Must Contain Reasons: Summoning an accused in a criminal case requires due application of judicial mind, as per Pepsi Foods Ltd. v. Special Judicial Magistrate (1998) 5 SCC 749 and Sunil Bharti Mittal v. CBI (2015) 4 SCC 609.
3. Quashing of Frivolous Prosecution: Proceedings initiated without proper application of law and judicial reasoning are liable to be quashed under Section 482 CrPC.

Final Order:

1. Appeal Allowed.
2. High Court’s judgment dated 12th January 2024 set aside.
3. Summoning order of the Trial Court dated 20th January 2018 quashed.