Case Note & Summary
The dispute concerned the obligation of a hospital to obtain a licence under the Drugs and Cosmetics Act, 1940 for manufacturing an intravenous (I.V.) solution used for administration to patients. The appellant was the Medical Superintendent-cum-Administrative Officer of Duncan Hospital at Raxaul, Bihar. The Drug Controller Bihar issued a letter stating that the hospital was engaged in the manufacture and distribution of an I.V. solution and therefore required a licence under the Act, failing which prosecution would follow. The appellant challenged this before the Patna High Court, contending that the solution was prepared by compounding glucose or sodium with distilled water and was administered to patients in the hospital, thus manufactured not for sale but for distribution, and manufacture for distribution required no licence. The High Court examined the provisions and held that the hospital required a licence under clause (c) of Section 18 of the Act. The Supreme Court granted leave and vacated the interim stay. The offence was alleged to have been committed on 2 May 1979 when a Drugs Inspector visited and discovered the appellant manufacturing I.V. solution for administration to patients. The Supreme Court analysed the language of Section 18(c) before and after an amendment effective from 1 February 1983. Before the amendment, manufacture for sale required a licence, and distribution separately required a licence; manufacture for distribution per se did not have a separate licensing requirement. The amendment made 'manufacture for sale or for distribution' a composite activity requiring a licence, but distribution alone still required a separate licence. The Court noted that Section 33 of the Act empowered the Central Government to make rules prescribing forms and conditions for licences. Under Section 33(2)(e), rules may prescribe forms of licences for manufacture for sale or for distribution, and for distribution of drugs, but no form of licence for manufacture for distribution had ever been prescribed. Only two forms existed prior to the amendment: for manufacture for sale and for sale. After the amendment, the form was for manufacture for sale or for distribution, but no conditions had been laid down. In the absence of a prescribed form and conditions, the appellant could not know before which authority and in which form and subject to which conditions to apply for a licence. The Supreme Court held that the requirement left a vacuum, and penal provisions and their enabling rules must be construed strictly. The benefit of that vacuum went to the appellant. The Court thus differed from the High Court, set aside its judgment and order, and granted the writ as prayed, with no order as to costs.
Headnote
A) Drugs and Cosmetics Act - Licence Requirement - Section 18(c) of Drugs and Cosmetics Act, 1940 - Interpretation of 'manufacture for sale' and 'manufacture for distribution' pre and post amendment - The Supreme Court held that prior to the 1983 amendment, manufacture for distribution did not require a licence separate from manufacture for sale; after the amendment making 'manufacture for sale or for distribution' a composite licensable activity, the absence of prescribed forms and conditions under the Rules rendered the requirement unenforceable (Paras 1-3). B) Statutory Interpretation - Regulatory Vacuum - Section 33 of Drugs and Cosmetics Act, 1940 - Rules must prescribe licence forms and conditions; where no form for manufacture for distribution existed, no valid application or licence could be made or issued - Held that penal provisions are construed strictly and the benefit of the vacuum went to the appellant, so the High Court's view requiring licence was incorrect (Paras 2-3).
Issue of Consideration
Whether a hospital manufacturing I.V. solution for distribution to its patients without sale was required to obtain a licence under Section 18(c) of the Drugs and Cosmetics Act, 1940, in the absence of prescribed forms and conditions for such licence.
Final Decision
Appeal allowed; High Court judgment and order set aside; writ granted to appellant; no order as to costs. The appellant/hospital was not required to obtain a licence for manufacture and distribution of the drug on the date of alleged offence due to absence of prescribed forms and conditions under the Act and Rules.
Law Points
- licence requirement under Section 18(c) Drugs and Cosmetics Act
- 1940
- manufacture for distribution distinct from manufacture for sale prior to amendment
- amendment made manufacture for sale or for distribution composite activity
- rules under Section 33 must prescribe forms and conditions
- absence of prescribed form and conditions creates vacuum
- penal provisions construed strictly
- benefit of vacuum to accused
