Full Judgment Text
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PETITIONER:
BALAKRISHNA PILLAI, CHIEF INSPECTOR OF DRUGSINTELLIGENCE S
Vs.
RESPONDENT:
MATHA MEDICLAS AND OTHERS
DATE OF JUDGMENT15/01/1991
BENCH:
VERMA, JAGDISH SARAN (J)
BENCH:
VERMA, JAGDISH SARAN (J)
RAY, B.C. (J)
CITATION:
1991 SCR (1) 65 1991 SCC (2) 203
JT 1991 (1) 123 1991 SCALE (1)35
ACT:
Drugs (Price Control) Order, 1979--Paras 10-14, 18 and
21-- Collection of excess price when drug’s maximum retail
price fixed--Maintainability of prosecution--’Bulk drug’--
Formulation--Interpretation of.
HEADNOTE:
Respondent No. 1 is a firm dealing in medicines and
respondents 2 and 3 are its managing parnter and pharmacist.
In contravention of the provisions of Drugs (Price Control)
Order 1979, para 21 read with para 18 they charged from a
Nursing Assitant of the Medical College Hospital, Kottayam,
Rs. 90 in excess of the maximum retail price fixed for the
sale of 15 tablets of Largactil of 100 mg each and 60p in
excess for 100 tablets of Hipnotex of 5mg each. According
to the prosecution this act of their ’s being in
contravention of the provisions of the Order, was punishable
under Section 7 of the Essential Commodities Act, 1955 and
accordingly prosecution was initiated against the
respondents. The trial court found the respondents guilty
and convicted them and sentenced respondent No. 1 firm to a
fine of Rs. 2.000 and respondents 2 and 3 to three months
simple imprisonment. On appeal, the High Court of Kerala
acquitted them taking the view that none of the aforesaid
two medicines, namely Largactil and Hipnotex were
’formulations’ as defined in Section 2(f) of the Drugs
(Price Control) Order 1979 and as such the sale of these
drugs at higher rates than the prescribed was not punishable
under paras 21 read with para 18 of the order.
The appellants have thus filed this appeal after
obtaining special leave. The question for decision in the
present case relates to the correctness of the construction
made by the High Court of the provisions of the ’Order’.
Partly allowing the appeal, this Court,
HELD: A bulk drug is one which may be capable of use by
itself or as an ingredient in any formulation. [69G]
Formulation is a medicine which may comprise even of
one bulk
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drug by itself or more than one bulk drug. The definition
of ’Formulation’ is very wide and includes even one bulk
drug where that one bulk drug by itself is treated as a
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medicine. [70B]
The provisions of para 21 which in terms are meant to
control sale prices of formulations specified in the Third
Schedule as also the other provisions of the Order which in
terms may be of limited application are specifically made
applicable to all formulations as defined in the Order
except only paragraphs 10 to 14 which have been expressly
excluded. It is by virtue of para 18 that the prohibition
contained in para 21 has been made applicable to
formulations not specified in the Third Schedule. [70G-H]
The High Court misconstrued the provisions of the Drugs
(Price Control) Order 1979. The Court rejected that
construction and held that the allegations in the present
case, if proved, would amount to a contravention of para 21
read with para 18 of the ’Order’ which is punishable under
Section 7 of the Essential Commodities Act, 1955. The Court
however did not interfere with the acquittal of the
respondents. [72B-C]
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 37
of 1991.
From the Judgment and Order dated 7.3. 1989 of the
Kerala High Court in Crl. Appeal No. 321 of 1986.
P.S Poti and T.T. Kunhikannan for the Appellants.
T.S Krishnamoorthy lyer and N. Sudhakaran for the
Respondents.
The Judgment of the Court was delivered by
VERMA, J. The respondents were found guilty by the
trial Court for contravention of para 21 read with para 18
of the Drugs (Prices Control) Order, 1979 (hereinafter
referred to as ’the Order") issued under Section 3 of the
Essential Commodities Act, 1955 (hereinafter referred to as
’the Act’) and accordingly convicted under Section 7 of the
Act. Respondent No. 1 firm was sentenced to a fine of
Rs.2,000 while respondents 2 and 3 who were the managing
partner and pharmacist of the firm were sentenced to three
months simple imprisonment. The High Court of Kerala at
Ernakulam (hereinafter referred to as ’the High Court’)
allowed their appeal against the con-
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viction and sentence and acquitted all of them. Hence, this
special leave petition against their acquittal.
Leave granted.
The allegation on which the prosecution of the
respondents was based is that they collected Rs. 90 in
excess of the maximum retail price fixed for the sale of 15
tablets of Largactil of 100 mg each and 60p. in excess for
100 tablets of Hipnotex of 5 mg each from one Sepastian
Joseph, a Nursing Assistant in the Medical College Hospital,
Kottayam, on 4.2.1985. It is alleged that recovery of the
amount in excess of the maximum retail price fixed for the
sale of these medicines under the drugs (Prices Control)
Order, 1979 was a contravention of the provisions contained
therein which is punishable under Section 7 of the Essential
Commodities Act, 1955. The trial Court rejected the several
defences raised by the respondents and found them guilty of
contravention of para 18 read with para 21 of the Order
which is an offence punishable under Section 7 of the
Essential Commodities Act, 1955. The respondents were
accordingly convicted and sentenced as aforesaid.
As earlier stated, the respondents’ appeal to the High
Court has succeeded and they have all been acquitted. The
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High Court has taken th view that on these allegations,
contravention of para 18 of the Order is not made out. The
High Court has summarised its conclusion as under:
"The upshot of the above discussion is that
Largactil and Hipnotex--Chlorpromazine and
nitrazepam--are only bulk drugs and not
formulation. The appellants, none of whom is a
manufacturer or distributor, cannot be convicted
for contravention of paragraph 18 of the Order.
(The position is seemingly different in the Order
of 1987 because paragraph 18 of the Order of 1987
contains inhibition against sale of bulk drugs
also).
In the result, I allow this appeal and set
aside the conviction and sentence. The appellants
are acquitted and are directed to be set at
liberty.
The real question for decision in the present case is
the correctness of the construction made by the High Court
of the provisions of the ’Order’. Shri P.S. Poti, learned
counsel for the appellants contended that the grievance in
this appeal is really to the construction
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made by the High Court of the provisions of the ’Order’
which is affecting a large number of similar matters are not
to the outcome of individual matter before us. Learned
Counsel contended that the appellants are not much
interested in assailing the acquittal in the present
individual matter, but the correct construction of the
provisions of the Order is necessary for future guidance. In
our opinion, it is necessary to examine the provisions of
the ’Order.’ and to indicate their correct meaning in view
of the general importance thereof.
The Order was made by the Central Government in
exercise of the powers conferred by Section 3 of the
Essential Commodities Act, 1955. Para 2 of the order
contains the definitions, some of which may be referred.
Clause (a) of para 2 defines ’bulk drug’ to mean any
substance.....’which is used as such, or as an ingredient in
any formulations’.’Dealer’ is defined in clause(b) to mean a
person carrying on the business of purchase or sale of
drugs, whether as a wholesaler or retailer and includes an
agent of a dealer. ’Drug’ is defined in clause (d) to
include ’bulk drugs and formulations’. Clause (f) defines
’formulation’ to mean a medicine processed out of, or
containing ’one or more bulk drugs or drug’. Clause (q)
defines ’price list’ to mean a price list referred to in
this Order. Clause (r) defines ’retail price’ to mean the
retail price of a drug arrived at or fixed in accordance
with the provisions of this Order. The other clauses of
Para 2 contain other definitions including the definitions
of ’retailer’ and ’wholesaler. It is not necessary to refer
to them in detail. Para 3 contains the power to fix the
maximum sale price of indigenosly manufactured bulk drugs
specified in First or Second Schedule of the Order. Para 19
requires every manufacturer or importer of a formulation to
furnish to the dealers, State Drug Controllers and the
Government, a price list showing the price at which the
formulation is sold to a retailer and every dealer is
required to display the price list at a conspicuous part of
his business premises. Part 20 required every manufacturer,
importer or distributor of a formulation to display on label
of the container the maximum retail price of that
formulation. Paras 18, 21 and 22, the construction of which
is in dispute, read as under:
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"18. Certain provisions of this Order to apply to
formulations not included in Category I, Category
II or Category III of Third Schedule.-- The
provision of this Order, other than those contained
in paragraphs 10 to 14 (both inclusive), shall
apply, to any formulation not specified in Category
I, Category II or Category III of the Third
Schedule."
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:21. Control of sale prices of formulations
specified in Third Schedule.--No retailer shall
sell any formulations specified in any of the
categories in the Third Schedule to any person at a
price exceeding the price specified in the current
price list or the price indicated on the label of
the container or pack thereof whichever is less
plus the local taxes, if any, payable.
Explanation.-- For the purposes of this
paragraph, "local taxes" include sales tax and
octroi actually paid by the retailer under any law
in force in a particular area."
"22. Sale of split quantities of formulations.--No
dealer shall sell loose quantity of any formulation
drawn from a bottle pack of such formulation at a
price which exceeds the pro-rate price of the
formulation plus 5 per cent thereof.
provided that nothing in this behalf shall
apply to any formulation compounded at the premises
of the dealer."
The view taken by the High Court is that the two
formulations, namely, Largactil and Hipnotex, the sale of
which at an excess price is alleged to be the contravention
of the Order, not being formulations specified in any of the
categories in the Third Schedule to the Order, the
prohibition contained in para 21 of the Order has no
application. On this basis, the view taken is that the sale
of these two formulations in excess of the retail price
fixed for their sale is not a contravention of any provision
of the Order to attract the punishment provided under
Section 7 of the Essential Commodities Act, 1955. It has
also been held by the High Court that none of these two
medicines is a formulation as defined in clause (f) of para
2 of the Order but merely a bulk drug, which fact also
excludes the application of para 21 of the Order. It
appears that this position was not seriously contested even
by the learned public prosecutor in the Courts below. In
our opinion, such a view results from a mis-reading of the
material provisions of the Order.
The definition of ’bulk drug’ given in clause (a) of
para 2 shows that it means any substance ’which is used as
such’ or ’as an ingredient in any formulations’. Thus a
bulk drug is one which may be capable of use by itself or as
an ingredient in any formulation. Drug is defined in clause
(d) of para 2 to include ’bulk drugs’ and ’formulations’.
Clause-
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(f) then defines ‘formulation’ to mean any medicine
processed out of or containing one or more bulk drugs or
drug. Thus formulation is a medicine which may comprise
even of one bulk drug by itself or more than one bulk drug.
The definition of ’formulation’ is thus very wide and
includes even one bulk drug where that one bulk drug by
itself is treated as a medicine. It is difficult to uphold
the view that the two medicines, namely, Largactil and
Hipnotex, do not fall within the definition of ’formulation’
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contained in clause (f) of para 2 of the Order. One of the
two difficulties pointed out by the High Court in applying
para 21 of the Order to the present case is clearly out of
the way.
The only surviving question now is whether para 21 of
the Order is rendered inapplicable merely because none of
these formulations is specified in any of the categories in
the Third Schedule to the Order. In other words: is the
High Court correct in taking the view that notwithstanding
the fixation of the maximum retail price of these
formulations in accordance with the provisions of the Drugs
(Prices Control) Order, 1979, there is no provision made
therein to prohibit their sale at an amount in excess of the
maximum retail price fixed under the Order to attract the
punishment provided in Section 7 of the Essential
Commodities Act, 1955? In our opinion, it is not so. There
is no controversy that by an amendment made in 1987 to which
we shall refer later, the matter has been placed beyond the
scope of any argument. However, even prior to that
amendment, the matter is clear by the express provision
contained in para 18 as it existed even then.
Para 18 clearly says that the provisions of this Order
’other than those contained in paragraphs 10 to 14 (both
inclusive)’ shall apply to any formulations not specified in
Category I, Category II or Category III of the Third
Schedule. It is plain that the provisions of the Order
except paragraphs 10 to 14 which have been expressly
excluded, are specifically made applicable to formulations
which are not specified in the Third Schedule. It is,
therefore, clear that the provisions of para 21 which in
terms are meant to control sale prices of formulations
specified in the Third Schedule as also the other provisions
of the Order which in terms may be of limited application
are specifically made applicable to all formulations as
defined in the Order except only paragraphs 10 14 which have
been expressly excluded. It is by virtue of para 18 that
the prohibition contained in para 21 has been made
applicable to formations not specified in the Third
Schedule. This is also the logical view to take. The
contrary view would lead to the conclusion that inspite of
the price fixation made for the formula-
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tions not specified in the Third Schedule, there is no
prohibition made against its sale for an amount in excess
thereof with the result that the price fixation would be an
exercise in futility. The Drugs (Prices Control) Order,
1987, which has replaced the Drugs (Prices Control) Order,
1979, contains paras 18 and 21 differently worded to show
clearly that such an argument is now not even available
under the 1987 Order.
We are clearly of the opinion that the High Court
misconstrued the provisions of the Drugs (Prices Control)
Order, 1979, to take the view that none of the aforesaid
two medicines, namely, Largactil and Hipnotex are
’formulations’ as defined in Section 2(f) of the Drugs
(Prices Control) Order, 1979; and that the sale of these two
medicines for an amount in excess of the maximum retail
price fixed is not punishable under para 21 read with para
18 of the Order.
The only question now is of the order we should make
in this matter. Shri T.S. Krishnamurthy lyer, learned
counsel for the respondents very fairly stated that the
construction we have made of the several provisions of the
1979 Order including paras 18 and 21 thereof cannot be
seriously disputed. However, he contended that the
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respondents had raised several defences none of which has
been considered by the High Court since it acquitted the
respondents only on the construction it made of these
provisions. He, therefore, argued that setting aside the
High Court’s order should not automatically lead to
restoration of conviction and sentence made by the trial
court since other defences raised by the respondents remain
for consideration. He suggested that in view of the lapse
of several years from the date of the alleged offence and
the peculiar facts of this case, we may merely set aside the
High Court’s order but not restore the conviction and
sentence of the respondents. He pointed out that the
customer to whom the medicines are alleged to have been sold
at an excess price is himself a member of the nursing staff
of a hospital and it is unreasonable to take the view that
he would pay Rs. 99 for 15 tablets of Largactil against its
retail price of Rs. 9 only, particularly when he had been
purchasing these drugs for a long time. We find merit in
the contention of learned counsel for the respondents and we
are inclined to adopt the course suggested by him in the
light of peculiar facts of this case. In our opinion, it
would be inappropriate after the lapse of several years to
send back the case to the High Court for the deciding the
remaining defences raised by the respondents which would
further prolong conclusion of the trial. It is also clear
that without rejecting the other defences, it is not
possible to uphold the conviction and sentence
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awarded by the trial court. In such a situation, the course
suggested by Shri T.S. Krishnamurthy lyer, particularly in
view of the stand taken by Shri P.S. Poti on behalf of the
appellants, that the appellants are more keen to know the
correct meaning of the provisions of the Order, appears to
be the proper course to adopt in the present case.
Consequently, we reject the High Court’s construction
of the provisions of the ’Order’ and hold that allegations
in the present case, if proved, would amount to a
contravention of para 21 read with para 18 of the Drugs
(Prices Control) Order, 1979, which is punishable under
Section 7 of the Essential Commodities Act, 1955. However,
for the reasons already given, we do not interfere with the
acquittal of the respondents. The appeal is disposed of
accordingly.
Y.L. Lal Appeal allowed partly.
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