Penalties for Contraventions under Sections 27(b)(ii) and 27(d) of India's Drugs and Cosmetics Act, 1940: A Legal Analysis
1. Introduction
The Drugs and Cosmetics Act, 1940 ("the Act") stands as a cornerstone of pharmaceutical regulation in India, enacted to govern the import, manufacture, distribution, and sale of drugs and cosmetics. Its primary objective is to ensure that drugs and cosmetics marketed in India are safe, effective, and conform to prescribed quality standards, thereby safeguarding public health. Chapter IV of the Act, encompassing Sections 16 to 33-N, lays down comprehensive provisions concerning the manufacture, sale, and distribution of drugs and cosmetics. To enforce these provisions, Section 27 of the Act stipulates penalties for various contraventions.
This article undertakes a scholarly analysis of two significant penal provisions within Section 27: specifically, Section 27(b)(ii) dealing with penalties for activities such as manufacture or sale of drugs without a valid license, and Section 27(d), which serves as a residuary penal clause for other contraventions of Chapter IV or the rules made thereunder. The discussion will delve into the statutory language, judicial interpretations, procedural requirements for prosecution, and sentencing considerations, drawing upon relevant case law and legal principles prevalent in India.
2. Statutory Framework: Section 27(b)(ii) and Section 27(d)
Section 27 of the Drugs and Cosmetics Act, 1940, has undergone several amendments, notably by the Drugs and Cosmetics (Amendment) Act, 2008, which enhanced penalties for various offenses. This analysis focuses on the current understanding and application of penalties related to unlicensed activities, primarily covered under Section 27(b)(ii), and the residuary penalties under Section 27(d).
2.1. Section 27(b)(ii): Penalty for Unlicensed Manufacture, Sale, etc.
Section 27(b)(ii) of the Act imposes penalties upon any person who, himself or by any other person on his behalf, manufactures for sale or for distribution, or sells, or stocks or exhibits or offers for sale or distributes any drug without a valid license as required under clause (c) of Section 18 of the Act.
The punishment prescribed under Section 27(b)(ii) is imprisonment for a term which shall not be less than three years but which may extend to five years, and with a fine which shall not be less than one lakh rupees or three times the value of the drugs confiscated, whichever is more. However, the proviso to Section 27(b) allows the Court, for any adequate and special reasons to be recorded in the judgment, to impose a sentence of imprisonment for a term of less than three years and a fine of less than one lakh rupees. This provision directly targets the rampant issue of unlicensed operations in the pharmaceutical sector, which poses a significant risk to public health. Cases such as State v. Manimaran (2018 SCC OnLine SC 3000) often involve convictions under this or erstwhile equivalent provisions for stocking and selling drugs without a valid license.
2.2. Section 27(d): Residuary Penalty for Other Contraventions
Section 27(d) of the Act serves as a residuary penal provision. It applies to any drug, other than those referred to in clauses (a), (b), or (c) of Section 27, which is manufactured for sale, sold, stocked, exhibited for sale, or distributed in contravention of any other provision of Chapter IV or any rule made thereunder for which no specific penalty is provided elsewhere in the Act.
The penalty under Section 27(d) is imprisonment for a term which shall not be less than one year but which may extend to two years, and with a fine which shall not be less than twenty thousand rupees. A proviso allows the Court, for any adequate and special reasons to be recorded in the judgment, to impose a sentence of imprisonment for a term of less than one year. This clause ensures that no contravention of Chapter IV or its rules goes unpunished, thereby maintaining the integrity of the regulatory framework. The Supreme Court in Samar Kumar Swain v. Subodha Kumar Nayak (Criminal Appeal No. 1970 of 2009, arising out of SLP (Crl.) No. 2382 of 2008, decided on 13.10.2009, though the reference provided is to an Orissa High Court citation which might be discussing the SC case or a similar point) has considered the scope of this provision.
3. Essential Elements and Judicial Interpretation
3.1. Actus Reus: "Manufactures for Sale, Sells, Stocks or Exhibits for Sale or Distributes"
A critical element for invoking penalties under Section 27, including clauses (b)(ii) and (d), is the act of manufacturing *for sale*, selling, stocking *for sale*, exhibiting *for sale*, or distributing the drug. The Supreme Court, in the oft-cited case of Mohd. Shabbir v. State of Maharashtra (AIR 1979 SC 564), clarified that mere possession or stocking of a drug is not sufficient to attract penal liability under Section 27. The prosecution must affirmatively prove that such stocking was for the purpose of sale or distribution (Mohan Nair, In Re, 1986 CriLJ 1920 (Mad), citing Mohd. Shabbir). This interpretation underscores the legislative intent to regulate commercial dealings in drugs rather than mere possession.
The question of what constitutes "stocking for sale" was also considered in Swantraj And Others v. State Of Maharashtra ((1974) 3 SCC 332), where the temporary storage of drugs intended for ultimate sale was examined in the context of Section 18(c) and punishable under the then Section 27(b).
3.2. Contravention of Section 18(c) leading to Section 27(b)(ii)
Section 27(b)(ii) is directly linked to Section 18(c) of the Act, which prohibits any person from manufacturing for sale or for distribution, selling, stocking or exhibiting or offering for sale, or distributing any drug or cosmetic, except under, and in accordance with the conditions of, a license issued for such purpose. Thus, any activity falling under Section 18(c) undertaken without a valid license triggers the penal provision of Section 27(b)(ii). Numerous cases, including State v. Manimaran (2018) and judgments like those in STATE OF GUJARAT v. M/S.KALPESH CORPORATION BRAHMANVADA, STATE HIGHWAY (Gujarat High Court, 2019, R/CRIMINAL APPEAL NO. 2048 of 2008), illustrate prosecutions for breach of Section 18(c) read with the relevant penal clause of Section 27.
3.3. Scope of "Any Other Provision of this Chapter or Any Rule Made Thereunder" for Section 27(d)
Section 27(d) acts as a catch-all provision. Its scope extends to any contravention of Chapter IV or the Drugs and Cosmetics Rules, 1945, that is not specifically penalized under other clauses of Section 27 or other sections. This could include, for example, violations of labeling requirements, conditions of license not amounting to unlicensed sale, or non-compliance with specific rules regarding storage or record-keeping, provided these are not covered by more specific penal clauses. The case of M/S. Ra Chem Pharma Limited v. The State of Andhra Pradesh (Andhra Pradesh High Court, 2018, Crl.P.No. 6092 of 2018) involved allegations, inter alia, under Section 18(b) (failure to disclose name of manufacturer) punishable under Section 27(d), showcasing its application.
3.4. Vicarious Liability under Section 34
When an offense under the Act, including those punishable under Sections 27(b)(ii) and 27(d), is committed by a company, Section 34 of the Act comes into play. This section provides for vicarious liability of every person who, at the time the offense was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company itself.
The Supreme Court in Rajasthan Pharmaceutical Laboratory, Bangalore And Two Others v. State Of Karnataka (1981 SCC (Cri) 244) clarified that the phrase "punished accordingly" in Section 34(1) means that individuals found vicariously liable can be subjected to the substantive punishments, including imprisonment, prescribed under Section 27. However, mere directorship is not sufficient; there must be specific averments and proof that the director was in charge of and responsible for the company's business at the material time (State Of Haryana v. Brij Lal Mittal And Others, (1998) 5 SCC 343).
4. Procedural Imperatives in Prosecutions
4.1. Institution of Proceedings: The Mandate of Section 32
Section 32(1) of the Act lays down a crucial procedural requirement: no prosecution under Chapter IV shall be instituted except by (a) an Inspector, or (b) any Gazetted Officer of the Central or State Government authorized in writing, or (c) the person aggrieved, or (d) a recognized consumer association. This provision is mandatory.
The Supreme Court in Union Of India (S) v. Ashok Kumar Sharma And Others (S) ((2020) SCC OnLine SC 683) definitively held that for offenses under Chapter IV of the Act, an FIR under Section 154 of the Code of Criminal Procedure, 1973 (CrPC) cannot be lodged, and police investigation cannot be conducted. Prosecution must be initiated by filing a complaint by one of the entities specified in Section 32(1). This principle was also noted in cases like JAYA SINGH And ANR v. STATE OF JHARKHAND (Jharkhand High Court, 2023, Cr.M.P. No. 741 of 2011).
4.2. Jurisdiction: Trial by Court of Session (Section 32(2))
Section 32(2) of the Act, as amended, stipulates that save as otherwise provided in the Act (e.g., Special Courts under Section 36AB for certain offenses), no Court inferior to that of a Court of Session shall try an offense punishable under Chapter IV. This means that offenses under Sections 27(b)(ii) and 27(d) are triable by a Court of Session. This was affirmed in Union of India v. Ashok Kumar Sharma (2020) and reiterated in cases like NAROTTAM CHAND v. STATE OF HP (Himachal Pradesh High Court, 2024, Cr. Revision No. 560 of 2023). The rationale is to ensure that these serious offenses affecting public health are tried by a higher court.
5. Sentencing Principles and Quantum
As detailed earlier, Section 27(b)(ii) prescribes a minimum imprisonment of three years (extendable to five) and a minimum fine of one lakh rupees, while Section 27(d) prescribes a minimum imprisonment of one year (extendable to two) and a minimum fine of twenty thousand rupees. Both provisions contain provisos allowing the court to impose lesser sentences for "adequate and special reasons to be recorded in the judgment."
The inclusion of minimum sentences reflects the legislative intent to treat these offenses with severity. However, the provisos grant judicial discretion to modulate sentences in deserving cases. The Supreme Court in State v. Manimaran (2018), while upholding the conviction under (the then applicable) Section 27(b)(ii), reduced the sentence imposed, demonstrating the appellate courts' power to review sentencing. Similarly, in Rajasthan Pharmaceutical Laboratory (1981), the Supreme Court remitted the case to the High Court for appropriate sentencing after finding errors in the High Court's approach. The "adequate and special reasons" must be specific, cogent, and germane to the facts of the case, such as the nature of the contravention, the quantity of drugs involved, the antecedents of the accused, and the potential harm to the public.
6. Conclusion
Sections 27(b)(ii) and 27(d) of the Drugs and Cosmetics Act, 1940, are vital penal provisions aimed at ensuring compliance with the regulatory framework for drugs in India. Section 27(b)(ii) specifically targets the grave offense of operating in the pharmaceutical domain without a valid license, while Section 27(d) serves as a residuary clause to penalize other contraventions of Chapter IV or the associated Rules.
Judicial interpretations have clarified essential elements of these offenses, particularly the requirement of "stocking for sale" and the parameters of vicarious liability. Procedurally, the mandate for prosecution by specified authorities and trial by a Court of Session underscores the seriousness with which these offenses are viewed. While the Act prescribes stringent minimum penalties, it also allows for judicial discretion in sentencing upon recording adequate and special reasons. The robust enforcement of these provisions, guided by sound legal principles, is indispensable for safeguarding public health and maintaining the integrity of the pharmaceutical market in India.