Dismissed

M/S. Inox Air Products Limited v. the State of A.P.

Andhra Pradesh HC11 Jan 2024CRLP/4148/2018

Case brief

AI extract

What is this about?

The High Court dismissed a criminal petition seeking quashing of proceedings under the Drugs and Cosmetics Act. The court held that selling Nitrous Oxide to a firm with a manufacturing licence (Form-25) but no purchase/distribution licence (Form-20B) violated Act provisions. It rejected reliance on a prior precedent regarding bona fide belief and declined to decide vicarious liability at this stag

What did the court decide?

The Criminal Petition was dismissed and interlocutory applications stood closed; proceedings against the petitioners were allowed to continue.

M/S. Inox Air Products Limited Vs the State of A.P. — Cheque Dishonour | Andhra Pradesh HC (2024)

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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

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FRIDAY ,THE TWELFTH DAY OF JANUARY TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO

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CRIMINAL PETITION NO: 4148 OF 2018

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Between:

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M/s. Inox Air Products Limited., Plot No. 38 IDA, Phase I, Pashamylaram, Patancheru, Sanga Reddy District, Telangana State, Rep by its Authorised Representation, Mr. E.K. S Sastry, OccGeneral Manager at Ms. Inox Air Products Pvt Ltd.

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Pavan Kumar Jain, M/s. Inox Air Products Ltd, Plot No. 38 IDA, Phase I, Pashyamlaram Patencheru, Sanga Reddy District, Telangana^State

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...Petitioners/Accused No. 5 & 6

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AND

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The State of Andhra Pradesh, rep by its PP, High Court at Hyderabad

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...Respondent/Complainant

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Petition under Section 482 of Cr.P.C praying that in^{thecircumstances} stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to call for the records in CC.No. 71 of 2018 on the file of the honble I Addl. JFCM, Kadapa and quash the same against the petitioners

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I.A. NO: 3 OF 2018

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Petition under Section 482 of Cr.P.C praying that in^{thecircumstances} stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to grant stay of all further proceedings including the appearance of the petitioners in CC.No. 71 of 2018 on the file of the honble court of I Addl. JFCM, Kadapa, pending disposal of the criminal petition, and pass

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I.A. NO: 2 OF 2018

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Petition under Section 482 of Cr.P.C praying that in^{thecircumstances} stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to restrain the respondent from taking any^{coerciveaction} or coervice steps against the Petitioners in connection with and or in furtherance of CC.No. 71 of 2018 on the file of the honble court of I Addl. JMFC, Kadapa pending the hearing and final deposit of the case

I.A. NO: 1 OF 2018

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Petition under Section 482 of Cr.P.C praying that in^{thecircumstances} stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to dispense with the filing of the certified copy of the complaint in CC.No. 71 of 2018 on the file of honble court of Addl. JMFC, Kadapa

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I.A. NO: 4 OF 2018

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Petition under Section 482 of Cr.P.C praying that in^{thecircumstances} stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to take the accompanying documents on record and allow the Criminal Petition as prayed

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This Petition coming on for hearing, upon perusing^{theMemorandumof} Grounds of Criminal Petition and upon hearing the arguments^ofSriNNaveen Kumar, Advocate for the Petitioner and the Public Prosecutor on behalf of the Respondent.

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The Court made the following order:

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THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO

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CRIMINAL PETITION No. 4148 OF 2018

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ORDER;

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The present Criminal Petition is filed to call for^therecord pertaining to C.C. No.71 of 2018 on the file of the^{FirstAdditional} Judicial Magistrate of First Class, Kadapa and to quash^thesame against the petitioners-accused Nos.5 and 6.

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The Drug Inspector, Kadapa filed a complaint under Section 32 of the Drugs and Cosmetics Act, 1940 (for^shortthe Act, 1940) and Rules of 1945 for the contravention^oftheSection 18 (c) punishable under Section 27(b)(ii) against Accused^No.l to 4 and contravention of the Section 18(a)(vi) r/w condition^ofthe license in Form 25 point No.03 r/w Rule 65(5)(l)(b) of the Act 1940.

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The Accused No.5 and 6 filed the present Criminal Petition.

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The Drug Inspector filed the above complaint against petitioners/Accused No.5 and 6 herein on the ground that they sold the drug Nitrous Oxide I.P. to the unlicenced A3 firm

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thereby they contravene Section 18(a)(vi) r/w condition of the license under Form 26 point No.03 r/w Rule 65(5)(l)(b)^oftheAct 1940 punishable under Section 27 (d) of Act, 1940.

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Heard Sri S. Niranjan Reddy, learned Senior Counsel appearing on behalf of Sri N. Naveen Kumar, learned^counselfor the petitioners and Sri S. Dushyanth Reddy, learned^Additional Public Prosecutor appearing for the respondent.

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Apart from the oral argument, a written submission on behalf of the petitioners was filed. Through the written submission, it is contended by the learned Senior Counsel^thata sole allegation is made in the complaint against the petitioners/accused that they have sold Nitrous Oxide I.P. to Accused No.3 firm, who does not possess license for purchase. Accused No.3 firm has licence to manufacture for sale or for distribution of Nitrous Oxide IP, which has been submitted by Accused No.3 to the Drug Inspector vide its reply dated 10.05.2017. There is no such allegation in the complaint^tothe effect that the drugs supplied by the Petitioner Company to Accused No.3 were not for further manufacturing, thus, not

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covered under Form-25. Accused No.3 admittedly holds^licence under Form No.25 for Manufacturing Nitrous Oxide IP. The Accused No.3 being a manufacturer, purchased Nitrous^OxideIP from the Petitioner Company and can further breakdown the same into Nitrogen or Oxygen for further supply in cylinders based on altering, ornamenting, finishing, packing, labeling. breaking up or otherwise or adopting any drug are referred to definition of manufacture under Section 3 of the Act and denied the allegation made against the Accused No.3 that they^didnot have any drug licence to distribute the drugs as per^theForm- 20B, which is required to purchase and sale of drugs,^on the ground that the said allegation is contrary to the^{factsonrecord} and it is evident from Form-25 licence in favour of Accused 3, that it is not only authorized to manufacture, but^thesamealso authorizes the sale by way of wholesale dealing and storage for sale by the licensee of the drugs manufactured under^thelicence.

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And he would refer Form-25 issued to 3''‘i accused in the Complaint, which, Form-25 Clause 2 alludes that “The^licence' authorizes the sale by way of wholesale dealing and storage for (

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sale by the licensee of the drugs manufactured under the licence, subject to the conditions applicable to licence for^sale.

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And also contends that no vicarious liability against the petitioner No.2 who is arrayed as Accused No.6 on the ground that there is no material to show that the petitioner^No.2was incharge and responsible to the company for the conduct^ofthe business of the company at the time of the alleged^offencewas committed and the entire complaint is silent whether during the time of alleged violations, Petitioner No.2 was involved in the day to day transactions of petitioner company or not.

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Learned Senior Counsel referred Section 3(f) of the Act, 1940 and he would contend that the definition includes breaking up or otherwise and the Nitrous Oxide can break into Nitrogen or Oxygen for supply in Cylinders based on demand.

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On the aforesaid grounds, learned Senior Counsel would pray to quash the proceedings and relied on the judgment^of High Court of Andhra Pradesh at Hyderabad titled as^J.Krishna

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Murthy and others v. State of Andhra Pradesh and another^^for the proposition that wholesaler to bona fide believing^thatlicence was subsisting and supplying drugs to retailer, cannot^besaidto have committed offences alleged against him as there^isnomens rea on the part of the wholesaler.

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Demurer the contentions, learned Additional Public Prosecutor Sri S. Dushyanth Reddy would contend that^Accused No.5 and 6 who are petitioners 1 and 2 herein respectively^sold the drug Nitrous Oxide IP to the unlicenced A3-Firm thereby the Petitioners/Accused No.5 6 contravened Section 18(a)(vi) r/w condition of the Licence under Form-26 Point No.03 r/w Rule 65(5)(l)(b) of the Act punishable under Section 27(d) of the Act, 1940 and the Accused No.3 did not have any drug licence to distribute the drugs as per the Form-20B under point^No.3“No sale of any drug” shall be made to a person not holding the requisite licence to sell and further contends that under Rule 65(5)(l)(b) of the Rules, the supply of the drug shall be made duly mentioning of licence number to whom it was sold and also contend that the Accused No.6 who is petitioner No.2 herein, who 2007 (1) ALD (Criminal) 948 AP

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is General Manager responsible for day to day activities^butnot submitted any supported documents that he is not the responsible person and as per the licence copies submitted by the firm. As such he argues that the petitioners who arrayed as Accused No.5 and 6 clearly contravened the Sections 18(a)(vi) r/w condition of the licence in Form 26 point No.03 r/w 65(5)(l)(b) of the Act, which is punishable under Section 27(d) of the Act, 1940.

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On the afore said contentions raised by learned Senior Counsel on behalf of the petitioner and learned Additional^Public Prosecutor, now the point for consideration is, whether the petitioners/ A5 and A6 have contravened the provisions of Section 18(a)(vi) r/w condition of the licence in Form 26 point No.03 r/w 65(5)(l)(b)oftheAct.

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It is the plank contention of the Drug Inspector that^the petitioners/A5 has sold the Nitrous Oxide IP to the Accused No.3 unlicenced Firm, who is not having licence for the purchase of Nitrous Oxide, therefore. Accused No.5 contravened the

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provisions of the Act, 1940 and therefore liable for punishment under Section 27(d) of the Act, 1940.

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It is expedient and appropriate to quote the relevant provisions, which are reproduced hereunder:

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Prohibition of manufacturer and sale of certain drugs and cosmetics; From such date as may be fixed by the State Government by notification in the Official Gazetteⁱⁿ this behalf, no person shall himself or by any other person on his behalf-

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fa) [manufacture for sale or for distribution, or sell,^orstock or exhibit or offer for sale,] or distribute—

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(vi) any drug or cosmetic in contravention of any of^the provisions of this Chapter or any rule made there under

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Under the aforesaid Section, no person shall manufacture or distribute or sell or stock or exhibit any drug^orcosmetic in contravention of the provisions of the Act.

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Sub-rule (5)(1) of Rule 65 postulates that conditions of licence sub-rule (5)(1) denotes that subject to the other provisions of these rules the supply of a drug by wholesale^shall

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be made against a cash or credit memo wherein the name and address of the licencee and his licence number under the Act, 1940, in which the following particulars shall be entered:

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(a) The date of sale

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(b) Name and address of the Licensee etc.,

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(d) The name of the manufacturer

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(e) The signature of the competent person under whose supervision the sale was effected

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Point No.3 of Form-20B postulates that [licence to sell, stock or exhibit or offer for sale, or distribute] by wholesale, drugs other than those specified in [schedules C, C(l) and Xj. As per the point No.3,

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(i) No drug shall be sold unless such drug is purchased under a cash or credit memo from a duly licensed dealer^or a duly licensed manufacturer.

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(ii) No sale of any drug shall be made to a person not holding the requisite licence to sell, stock or exhibit^for sale or distribute the drug.

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As seen from the Form-20B and Rule 65(5)(1)(B) of the Rules made under the Act, 1940 and Section 18(6) distribution^of

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any drug in contravention of the aforesaid rules, the Drug Inspector can made a complaint to punish the persons^who contravened the provisions under Section 32 of the^Act, which^is punishable under Section 27 of the Act.

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As seen from the record, the Accused No.3 has not furnished any licence for the purchase of Nitrous Oxide IP wherein, the petitioners/accused was granted licence under Form-25 vide L.Dis No.3238/Al/2015, dated July, 2015^forthe manufacturing of Nitrous Oxide IP. It is not the case of the petitioners/accused No.5 and 6 that the petitioners have produced the licence and therefore they have supplied^Nitrous Oxide to the Accused Nos.3 and 4. The licence was granted to the A3 for manufacturing Nitrous Oxide IP. Therefore, they cannot purchase the same Nitrous Oxide from the petitioner/accused No.5. Accused No.3 was granted licence to manufacture of Nitrous Oxide and the same purchased^fromthe Petitioner/Accused No.5 Firm. Therefore, the petitioner/accused No.5 has contravened the provision as well as Rules and the Form-20, wherein the licence was granted to the A3-firm.

Sub-rule (5) of Rule 65 envisages that the name and address of the licensee and Licence number under the Act, 1940 shall be entered to whom it was sold and his sale licence number. As per the Form-20B at point No.3, no sale of any drug shall be made to a person not holding the requisite^{licencetosell.} The 3rd accused in the complaint was not granted the^licencefor purchase of the Drug [Nitrous Oxide] and he was given^licencefor manufacturing of Nitrous Oxide. Therefore, the Petitioner/Accused No.5 cannot sell the drug [Nitrous Oxide] to the Accused No.3 in the complaint. The definition of manufacturer under definition of Section 3(f) of the Act, 1940 is no relevance to the present case. Therefore, the petitioner^No.1 accused No.5 cannot rely on the Section 3(f) of the Act, 1940. As the Accused No.3 was given licence under Form-25B for the manufacture of Nitrous Oxide and Oxygen, therefore^hecannot purchase the Nitrous Oxide from the petitioner Accused^No.5.

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In the instant case, the petitioners / accused have^soldthe Nitrous Oxide in contravention of the Rules and, therefore, in view of the provisions of Section 18(a)(vi) read with^Section27of

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the Act is liable to be prosecuted. The Rule 65 as^wellassub clauses of the said Rule impose the duty on the licensee^aloneto maintain records and registers in the prescribed forms^and for any contravention thereof or breach of Rule is liable for prosecution. Neither Section 18 nor Rule 65 carves out any exception in this regard. In absence thereof, a person who contravenes the provisions of the Act and Rules, is not possible to be excluded from the Criminal liability^under the provisions of the Act. 22. When the intent of the legislature is clear any interpretation in my view would contravenes the provisions^ofthe Act and Rules. The contention of the learned counsel for the petitioner if accepted in this regard, would frustrate^thescheme of Sections 18 and 27 and rule 65 and sub-rule made there under therefore, the same is rejected.

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The rules made under the Act need to be understood within the frame work in this scheme of the substantive provisions^of the Act and it cannot be construed in isolation in order to draw \ meaning different by the scheme of the provisions of^theAct. The

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provisions of Section 18 and Rule 65 in no uncertain times imposes liability on a person whoever he may be sells a drug in contravention of any of the provisions of the Act,^1940orRules contemplated under Section 27 (d) is liable to be punished accordingly, if the offence against him is proved by the prosecution for such contravention.

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Admittedly, petitioners/accused have sold the nitrous^oxide to Accused 3 86 4 without producing the license. Accused^No.3 firm was given permission for manufacturing of nitrous^oxide.

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On repetition, as discussed supra, the 3’'d accused has given licence to manufacture the Nitrous Oxide and Oxygen and the petitioner/A5 firm is also given licence to manufacture Nitrous Oxide. 26. In the instant case, the petitioners/accused have sold^the drug in contravention of the Act and Rules and, therefore,^inview of the provisions under Section 18(a)(vi) r/w Section²⁷ of the Act, 1940 is liable to be prosecuted.

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Learned Senior Counsel relied on the order in J. Krishna Murthy and others v. State of Andhra Pradesh and another referred supra (1), wherein, the said case, the authorities^has granted licence and it was expired as it was not renewed. On bona fide believing that licence was subsisting, supplying the drugs to the retailer. In the present case, there is no such licence to purchase the drug, where the licence was granted infavour of the 3^^ accused in the complaint, to manufacture^the Nitrous Oxide. And the petitioner/accused have sold the drug without obtaining any licence, particularly from accused No.3 Firm. Therefore, the said decision is not applicable to the present facts of the case.

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The contention of learned Senior Counsel for the petitioners/accused is accepted in this regard would^frustratethe scheme of the Act and Rules made there under. Therefore,^the same is rejected.

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The 2‘^d contention raised by the learned Senior Counsel^is that no vicarious liability can be fixed against the petitioner No.2 who is arrayed as Accused No.6 in the complaint on the ground

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that he was not involved in day to day transactions of the petitioner’s company. And the complaint should contain^allthe requisite averments to bring a case within the purview^ofSection 34 so as to make a person liable under the said Section.

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As seen from Section 34 of the Act, 1940, where an offence under the Act has been committed by a Company, every person who at time of the offence was committed was incharge^and was responsible of the Company for the conduct of the business shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. And the proviso alludes that the arrayed accused should prove that^theoffence was committed without his knowledge or that he exercises^ordue diligence to prevent the commission of such offence.

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As per the aforesaid Section, the person who at the^timeof offence was incharge of the Company or not is the question^ofthe fact which has to be decided during the course of trial by leading evidence. Hence, at this stage, this Court cannot come to conclusion that the Accused No.6 who is the Petitioner No.2 herein is not incharge of the company, whether he was

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responsible for sale of drug has to be decided during^the course of trial.

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Therefore, for the aforesaid discussion, the Criminal Petition is liable to be rejected and accordingly it^isdismissed. However, the Court below shall proceed in accordance with law without taking into consideration any of the observations made in the Criminal Petition, as the observations are made only for the purpose of disposal of the present Criminal Petition.

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Accordingly, the Criminal Petition is dismissed.

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As a sequel, interlocutory applications, if any pendingⁱⁿ

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this Criminal Petition shall stand closed.

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To.

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//TRUE COPY//

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Sd/- M PRABHAKAR RAO ASSISTANT REGISTR>\R y

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SECTION OFFICER

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2.3. OnPOne rrCC to Sri.Q N NaveenMagistrateKumar, Advocateof I Class. [OPUC]Kadapa. [OUT?^^ Prosecutor, High Court of Andhra Pradesh at Amaravathi, 4. Three CD Copies SM

vna

HIGH COURT

DATED:12/01/2024

ORDER

CRLP.No.4148 of 2018

DISMISSING THE CRLP

M/S. Inox Air Products Limited v. the State of A.P.

Case brief

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M/S. Inox Air Products Limited v. the State of A.P.

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