Danapalan, Appellant in all the appeals/Accused No. 1 Prisoner vs State

V. Bakthavatsalu , J.—The accused who is having wholesale licence in Drug and the Proprietor of ""Seven Star Medicals"" is the appellant in

all three appeals. The respondent/Drug Inspector filed a complaint against the appellant for violation of Paragraph 21 of the Drugs Price Control

Order (hereinafter referred to as ""the order) read with Section 7(i)(a)(ii) of the Essential Commodities Act, 1955. In all these cases, the

appellant/accused was convicted under the above provision and was sentenced to undergo Rigor Imprisonment for one year and to pay a fine of

Rs. 1000/-.

The case of the complainant in all these three appeals is as follows:-

C.A.No.7 of 93 is filed against the judgment rendered in S.T.C.No. 18/92. The complainant has examined five witnesses. P.W.1 the Drugs

Inspector inspected the accused shop on 9.10.91. During inspection, he has found that the accused has sold medicine ARIS-TOGYL 5x12

LARIAGO for Rs.27.30/- to P.W.2 under a bill Ex.P-2. Similarly, the accused sold medicine BETNESOLN to P.W.3 under the bill Ex.P-3. As

per Paragraph 21 of the order, the appellant should have sold after deducting 16% to P.Ws.2 and 3 at Rs.22.94/- and 25.76/-. The above

medicines belong to formulation category.

The appellant sold VIALCRYS and four injection medicine to P. W.4 for Rs.20.50/ under a bill Ex.P-4. The above medicine ought to have

been sold for Rs. 17.22/-. On searching the relevant registers, P.W.1 prepared a report under Ex.P-5. He examined the above purchasers and

obtained receipts. P.W.1 also obtained price list from the manufacturer under Exs.P-9, P-10, P-12 and P. 15. Thereupon, he issued show cause

notice to the appellant under Ex.P-16 for which the appellant issued reply under Ex.P. 17. He sent a letter to the superior authority under letter

Ex.P. 18 for according sanction to prosecute the appellant. After, P.W.1 was transferred, P.W.5 who succeeded him filed the complaint on

20.7.92.

When the incriminating materials were explained to the accused, he denied the evidence. He has stated that when he was not available in the

shop, the employee in the shop was asked to sell the drug to a customer and that as he did not know the name of the customer, he has written the

name of the shop in the bill and that they sold the drug only at retail price.

C.A.No.8 of 93.:The above appeal relates to S.T.C.No. 17 of 92. The prosecution has examined P.Ws 1 to 3 and marked Exs.P-1 to P-10.

The case of the complainant is as follows:-

On 9.10.91, when P.W.1 inspected the shop of the appellant, he has found that the accused sold medicine NEMOCID to P.W.2 for Rs. 18.55/-

under a bill Ex.P-3. The price noted on the pack is Rs.20.60/-. If 16% is deducted, it comes to Rs. 15.59/-. P.W.1 examined the purchaser and

obtained price list under Ex.P-8. P. W.3 who succeeded P. W. 1 filed a complaint on 20.7.92.

When the incriminating materials appearing against the accused were explained to him, the accused has stated that the employee in his shop sold

the medicine to a messenger who came from the shop of P.W.2 on the representation that medicine was required to a customer and that as the

name of the customer was not known, he has written the name of the shop in the bill.

C.A.No.l0 of 93.

The above appeal is filed against the judgment rendered in S.O.C.No.19 of 92. The prosecution has examined P.Ws 1 to 4 and marked Exs.P-1

to P-12.

The case of the complainant is as follows:-

On 9.10.91, when P.W.1 inspected the shop of the appellant, he has found that the accused sold a medicine PROLUTOL to P.W.2 for

Rs.39.40/-. The appellant ought to have sold the same at Rs.33.10/-. He prepared a report under Ex.P-4. He also obtained the price list under

Ex.P.3. He also examined P.W.2 and obtained the receipts and bill under Ex.P- 10. P.W.3 on requisition made by the Drugs Inspector gave the

price list under Ex.P-3 and P. 11. P.W.4 who succeeded P.W. 1 filed a complaint on 20.7.92.

When the incriminating materials appearing against the appellant/accused were explained to him, the accused has stated mat when he was not

in the shop, his employee sold the medicine to a messenger who came from another medical shop on the representation that the medicine was

required to a customer and mat as the name of the customer was not known, to his employee, he has written the name of the shop in the bill.

In all the above three cases, the accused has produced bills to show mat he purchased the medicine at the price noted in the pack from the

manufacturing agency. The above bills are marked as Exs.D-1 to D-4 in the case relating to C.A.No.7 of 93. In S.T.C. 17/99 he has marked the

above bill as Ex.D-1. In the case relating to C.A.No. 10 of 93, he has marked the bill under Ex.D-1.

On a consideration of oral and documentary evidence, the trial court convicted the appellant for violation of paragraph 21 of the order and he

was convicted u/s 7(i)(a)(II) of the Essential Commodities Act and was sentenced to undergo Rigorous Imprisonment for one year and to pay a

fine of Rs.1000/-. The appellant/accused who is aggrieved by the above conviction and sentence filed these appeals raising the following

contentions.

Paragraph 21 of the Order will not apply to this case and that the trial Court failed to note that the appellant sold the drugs at retail"" price to the

customers and that the documents produced by the accused will show that he did not sell the products lesser than the price noticed in the bills

produced by him. It is, further, contended that the complainant/prosecution has not produced the notification issued by the Government fixing retail

price under Paragraph 21 of the Order.

On the other hand, learned Government Advocate contended that the accused himself has admitted that he sold the drugs to purchasers at the

price noted in the bill and that the said sale of drugs is not in accordance with paragraph 21 of the Order, and as such, there is no infirmity in the

findings rendered by the trial Court.

It is not in dispute that the accused is a wholesale dealer. It is also admitted by the complainant that the accused is owning licence for both

wholesale and retail sale. It is not in dispute that the accused is the proprietor of the medical shop namely.. ""Seven Star Medicals"". It is also not

disputed that on 9.10.91. P.W.1 inspected the medical shop and recovered the bills showing excess price in sale of drugs. It is the case of P.W. 1

that as the accused is the wholesale dealer, he should sell the drugs deducting 16% to the retailer. In all the above three cases, P.W. 1 has

produced bills to show that the appellant sold drugs to the retailer at higher price. Relying upon the bills produced by the accused in the case

relating to C. A.No.7 of 92, it is contended that the complainant expected the accused to sell the drugs at a price lesser than the price noted in the

above documents. The above contention was raised before the trial Court and it was also contended before the trial Court that the accused was

not expected to sell the drugs for the price lesser than the price noted in the bills. The trial Court negativing the above contention has held that if the

manufacturer sells the drugs to him contrary to paragraph 21 of the Order, suitable action should be taken by the accused against the said

manufacturer. But the admitted materials in this case will show that the accused has no mens rea to contravene. Para. 21 of the Order.

To invoke Para 21 of the Order, it must be shown that wholesale dealer sold the drug to the retail dealer. P.W.2 has stated that he purchased

medicine from the appellant only at retail price and that the same was sold to him without any taxes. P.W.3 has also admitted that if the medicines

are purchased for the business of their shop, it would be entered in the stock register and that only in order to give the medicine to his customer, he

has purchased the same at the retail price. P.W.4 another purchaser has also admitted that he purchased the medicines at retail price for his

customer. It is seen from the evidence that if the retail owners want to purchase drugs in bulk, they have to enter the same in the stock register and

that in the case of urgency, they have to purchase medicine at retail price, since the medicines are required to the customer. P. W. 1 has also

admitted in his evidence that the retail price for which the medicine can be sold is the price noted in the bill. He has also admitted that no taxes are

included in the above bill.

In the case relating to C.A.No.8 of 93 also, the purchaser, P.W.2, has admitted that he purchased the drug for retail business. He has further

stated that at sometimes, he would purchase the medicine for customers from other medical shop and that Ex.P-10 is the retail sale bill.

Similarly, in the case relating to C.A.No.10 of 93, the purchaser P.W.2 has stated that certain medicines were purchased for their shop

business and that the medicine in this case was purchased for their customer Amina Bi. He has also admitted that if a particular medicine is not

available in his shop, he would purchase the said medicine for the customers from other retail shop. Thus, the above evidence of the purchasers

given in all the cases will show that they purchased medicines from the accused shop at retail price for selling the same to their customers.

When the question whether the drugs were sold for wholesale or retail was argued before the trial Court, the trial Court has held that in all the

bills only the name of the medical shop is mentioned and that the bills are not issued to the customers. The trial Court failed to consider the

evidence of the purchasers who have uniformly stated that they purchased the medicines only at retail price. The explanation given by the accused

that since the name of the customers were not known, the name of the shop is mentioned has to be accepted, in view of the evidence of the

purchasers. It is seen that the drugs are not sold in bulk to purchasers and owners of the retail shop. It is also admitted that no tax is levied in the

above bills. In the above circumstances. I fail to understand as to why the explanation given by the accused should not be accepted.

To prosecute the wholesale dealer, the prosecution must show that the wholesaler sold the formulation to a retailer at a price equal to retail

price without excluding 16% in the case of price controlled drug. It is implicit from the above Para 21 of the Order, that it must be first established

that the medicine was sold to a retailer by whole seller. It is also admitted that the appellant/accused is having both wholesale and retail licence.

The mere fact that the name of the medical shop is mentioned in the bill, alone will not establish the contravention of Para 21 of the Order, in view

of the evidence of the purchasers and explanation of the accused.

It is contended on behalf of the appellant that the prosecution should establish that the medicine falls under the category of Formulation. In

support of the same, he also relies upon a decision reported in Suraj Bhan Jain vs. State of Orissa Prevention of Food Adulteration Cases, 1986

(1) Ori HC 350, wherein it is held thus:-

The learned Magistrate looking at the label has come to a finding that the formulation in question is made out of bulk drugs like plant products,

chemical products. But even if it is so as found by the learned Magistrate, unless the drug in question conforms to any of the formulations indicated

in any of the categories mentioned in the Third Schedule the provisions of Clause 21 will not be attracted. Since, there is no prima facie material

before the Magistrate to indicate that the formulation in question belongs to any of the categories specified in the Third Schedule the petitioner

cannot be charged for violation of Clause 21 of the Drugs (Price Control) Order, 1979.

It is clear from the above decision that there must be materials to indicate that formulation in question belongs to any of the categories specified in

the Third Schedule. In this context, it would be relevant to know the definition of formulation:-

Section 2(f) defines Formulation thus:-

(f)"" formulation means a medicine processed out of, or containing one or more bulk drugs or drugs with or without the use of any pharmaceutical

aids, for internal or external use for, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals, but shall not

include-

(i)any bona fide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicine

(ii)any medicine included in the Homoeopathic system of medicine

(iii)any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23of 1940) do not apply.

The First-Schedule relates to bulk drugs. In Second Schedule, the names of the bulk drugs are mentioned. The Third Schedule mentions

formulations in category (1) and Category (2). Category (1) reads thus:-

Category-I Formulations - All formulations based on the bulk drugs specified under the First Schedule either individually or in combination with

other bulk drugs.

Category - II reads thus:-

Category-II Formulations - All formulations based on bulk drugs specified in the Second Schedule either individually or in combination with other

bulk drugs except the followings:-

(i)Single ingredient formulations based on the bulk drugs specified in the Second Schedule and sold under generic name.

(ii)All single ingredient vitamin formulations containing individual vitamins specified in the Second Schedule, sold either in brand name or in generic

name, except the single ingredient vitamin formulations based on the bulk drugs Vitamin A and Vitamin C sold in brand name.

Except a bare allegation in the complaint that the above medicines fall under the category of formulation no materials are placed to show that those

medicines will fall under Schedule 1 to 3. It is seen that certain formulae has been laid down to bring a particular medicine as formulation. Unless

the prosecution is able to establish that the above medicines falls under the meaning ""formulation"", it cannot be said that the accused has violated

Para 21 of the Order.

It is also seen that the complainant has not produced the notification issued by the Government fixing the price of the drugs. Para 21 sub-clause

(2) of the Order states thus""-

Notwithstanding anything contained in subparagraph (1), the Government may by a general or special order fix, in public interest, the price to the

wholesaler or retailer in respect of any formulation the price of which has been fixed or revised under this order

In this case, the complainant has produced the price list Exs.P-9, P- 10, P-12, P-3 and P-8 alleged to have been given by the manufacturer. All

the above list are not signed by the manufacturer or competent authority. I fail to understand as to how the typed list issued by the manufacturers

would show that the price fixed is in accordance with the provisions of the Order. P.W.1 inspected the shop on 9.10,91. What is the price fixed

by the Government in respect of the above medicine is not known.

Learned counsel for the appellant on the above aspect relies upon a decision of Kerala High Court reported in M.Ramanujam vs. State of

Kerala (1988 (2) MWN (Cri) 103), wherein it is held thus:-

The retail price has been defined in clause 2 (r) of the Order and clause 10 of the said Orders gives the manner in which the retail price is to be

fixed and clause 13 of the Order states that the Government, may, from time to time by order, fix the retail price of a formulation specified in

category (iii) of the third schedule in accordance with the provisions of paragraphs 10 and 11.

On reading the provisions of the Drugs (Prices Control) Oder, 1979, it is clear that the Government has to fix the retail price of the drug specified

in category (iii) of the Third Schedule, applying clauses 10 and 11 of the Order. In the case of formulation like Baraline, also the Government might

have fixed some retail price applying these principles.

There is no evidence, absolutely to show as to what is the price fixed for this antiseptic cream. What has been produced and marked in this case is

a copy of the price list published by G.D. Pharmaceutical Ltd., manufacturers of Baroline.

It is true that in the copy it has been stated that the price list is issued in accordance with the said Order, but the price given in the packet or

wrapper need not be the retail price fixed by the Government in accordance with the said Oder. It may be that the price shown in the list would be

within the retail price fixed by the Government for this formulation.

Under clause 24(2)(b) of the Order the whole sale is prohibited from selling article in excess of the retail price minus 10% thereof, in case of non-

ethical drugs.

j So long as the retail price is not known or in a case where relevant notification fixing the retail price is not produced, the accused is entitled to get

the benefit of doubt especially when the alleged difference in price is only 11 paise.

I am in respectful agreement with the above judgment. In an unreported decision A. Muthukumar vs. State Rep. By Drug Inspector(C.A. No. 18

of 1993), which judgment was rendered by me, it is held by me in the above case that the price list refereed by the complainant cannot be a basis

for holding that the accused contravened the provisions of Drug (Price Control) Order and that as the prosecution failed to produce the retail price

list approved by the Government, no liability can be fastened on the accused for the contravention of the Order. It is, thus, clear from the above

decisions, that so long as the retail price is not known, or in case where relevant notification fixing the retail price is not produced, the accused is

entitled to benefit of doubt. It has to be held that mere mentioning the price on wrapper alone is not sufficient to convict the accused. What is the

retail price after deducting 16% should be fixed by the competent authority. It is. further, established from this case that the accused sold the drug

at retail price to other shop owners. In the above circumstances. I am unable to accept the case of the complainant that the accused has

contravened Para 21 of the Order. The complainant failed to prove that the above Drugs falls within the category ""formulation"". It is not shown as

to what is the price to be sold in retail after deducting 16% as per notification or the Competent authority or the Government. The price list

produced by the complainant without the signature of the competent authority or manufacturer alone cannot be taken into consideration for holding

that the accused contravened Para 21 of the Order The trial Court did not advert to the above vital aspect of the case. I hold that the reasons

assigned by the trial Court for convicting the accused are not sustainable. Therefore. I hold that the accused is entitled to acquittal.

In the result, all the three appeals i.e. C.A.Nos.7.8 and 10 of 93 are allowed. The conviction and sentence imposed on the accused are set

aside. The fine amount if any paid by the accused is ordered to be refunded to him.