S.V. Bal Reddy and Another vs State of A.P.

N.Y. Hanumanthappa, J

There was divergence of opinion as to interpretation of Clause 21 of the Drugs (Prices Control) Order, 1987 (for short ''the order'') as amended upto date. Regarding interpretation of Clause 21 of the Order, two appeals were filed before this Court - one Criminal Appeal No.793 of 1995 and the other one Criminal Appeal No.794 of 1995. The accused in both the appeals are the same. The appellants-accused filed these appeals aggrieved by the order dated 17-11-1995 passed by the learned Sessions Judge, Warangal, convicting the accused for violation of Clause 21 of the Order read with Section 3(2)(c) of the Essential Commodities Act (for short ''the Act'') punishable under Clause 26 of the Order read with Section 7 of the Act, whereby they were sentenced to suffer simple imprisonment for three months and to pay a fine of Rs.5,000/-each and in default to pay the fine, to suffer simple imprisonment for 100 days each.

The case of the prosecution before the lower Court was that accused No. 1 is the Proprietor of Ajantha Pharmaceuticats, Hanmakonda and accused No.2 is the agent of accused No.1 and they were dealing in drugs and pharmaceutical products. A news-item has appeared in a Telugu daily - Eeenadu, Warangal Special, that M.G.M. Hospital, Warangal, is purchasing medicines at higher prices. The said news-item made the Drug Inspector to visit the M.G.M. Hospital, and he enquired as to the supply of drugs. One Dayal Singh, Pharmacy Supervisor, informed the Drug Inspector that the drugs and pharmaceuticals products were supplied by Ajantha Pharmaceuticals, Hanmakonda, and took custody of the sale bills relating to the supplies made by the said Pharmaceuticals to the hospital and found that Ajantha Pharmaceuticals sold Fortified Crocin Pencilling 20 lakhs at Rs.11.48 ps. per vial instead of Rs.10.38ps. per vial i.e. in excess of Rs.1.10 ps. pervial. He reached the above conclusion that Ajantha Pharmaceuticals is selling products in excess of Rs.1.10 ps. per vial on the basis of a price list that was supplied by the manufacturer - M/s. Indian Drugs and Pharmaceuticals Company. A charge was framed by the trial Court and the accused pleaded not guilty. Then, evidence was led in Dayal Singh, Pharmacy Supervisor of M.G.M. Hospital and the Drug Inspector were examined as PWs.l and 2 respectively and Exs.Pl to P34 were marked. Though opportunity was given to the accused to lead evidence, they had not made use of it. After considering the entire evidence, the trial Court was satisfied that the accused sold the products at higher rates than the one fixed and accordingly resulted in conviction. Aggrieved by the same, the two appeals were filed.

By mistake the two appeals were dealt by two different Benches of this Court. Criminal Appeal No.794 of 1995 was dealt by His Lordship N Sanjeeva Reddy, J., a little earlier to Criminal Appeal No.793 of 1995 dealt by His Lordship A. Hanumanthu, J. Criminal Appeal No.794 of 1995 was disposed of on 16-9-1997 and His Lordship N. Sanjeeva Reddy, J. took into consideration the definitions of ''wholesaler'' and ''retailer'' as defined in Clauses 2 (x) and 2 (s) respectively. His Lordship also took into consideration the effect of Clause 21 of the Order and ultimately found that the transaction that took place between Ajantha Pharmaceuticals and the M.G.M. Hospital cannot be brought within the mischief of Clause 21 of the Order. In other words, he observed that the wholesaler is entitled to sell the products not only to the retailer but also to hospitals, dispensaries, medical, educational or research institutions purchasing bulk quantities of drugs. His Lordship also observed that these institutions, other than retailers, purchasing bulk quantities of drugs were not included in Clause 21 of the Order and therefore the sale of bulk drugs by the Ajantha Pharmaceuticals to M.G.M. Hospital at the minimum retail price is not contrary to Clause 21 of the Order. Accordingly, the appeal was allowed and the conviction and sentences were set aside.

Subsequent to the above, His Lordship A. Hanumanthu, J disposed of Criminal Appeal No.793 of 1995 which was listed before His Lordship. When the matter was taken up for hearing, the judgment rendered by His Lordship N. Sanjeeva Reddy, J. referred to above was brought to His Lordship''s notice and sought to follow the same and thus to acquit the accused from the charge levelled against them. Our learned brother A. Hanumanthu, J. took into consideration the definitions of ''wholesaler'' and ''retailer'' and the effect of Clause.21 of the order as considered by our another learned brother JV. Sanjeeva Reddy, J., but was unable to be convinced with the view taken by His Lordship N. Sanjeeva Reddy, J. and as such made reference, raising the following proposition.

"Whether the restriction in price contained in Clause 21 for selling a formulation by a wholesaler to a retailer, is equally applicable while selling to hospitals, dispensaries, medical, educational or research institutions purchasing in bulk quantities."

To reach this conclusion, His Lordship referred to some of the penal provisions as contained in some of the observations made in Poppatlal Shah Vs. The State of Madras, , Aswini Kumar Ghosh and Another Vs. Arabinda Bose and Another, , O.P. Singla and Another Vs. Union of India (UOI) and Others, and Thakur Rudreswari Prasad Sinha Vs. Srimati Rani Probhabhati and Others, , which deal about the interpretation of statute and what meaning shall be given and if a word is absent how it has to be interpreted, inferred and what shall be held as implied. Hence, this reference.

At the cost or repetition we are once again referring to the definitions of ''wholesaler'' and ''retailer'' and the effect of Clauses 21 and 26 of the order.

Clause 2(s) which deals with ''retailer'' reads as follows.

"retailer means a dealer carrying on retail business of sale of drugs to customers."

Clause 2 (x) dealing with ''wholesaler'' reads as follows.

"Wholesaler means a dealer or his agent or a stockist appointed by a manufacturer or an importer for the sale of his drugs to a retailer, hospital, dispensary, medical, educational or research institution purchasing bulk quantities of drugs."

Clause 21 dealing with prices to traders reads as follows.

"(1) A manufacturer, distributor or wholesaler shall sell a formulation to a retailer, unless otherwise permitted under the provisions of this Order or any order made thereunder at a price equal to the retail price (excluding excise duty, if any) minus 16% thereof in the case of price controlled drug.

(2) Notwithstanding anything contained in Sub-paragraph (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."

As far as the interpretation of the penal Clause in Clause 26 is concerned, we will be dealing with the same a little later. The expressions of ''wholesaler'' and ''retailer'' have been clearly defined as to their nature of transaction. It is also mentioned in Clause-21 as to when a drug item is to be sold to a retailer, what price is to be fixed and at what price it has to be sold. It is mentioned that whenever an article is sold to a retailer, in respect of the item which is a price controlled one, the same shall be sold at the control price (excluding excise duty, if any) minus 16% thereof. This minus 16% probably is the profit margin that is fixed for the retailer which indicates the selling of items from a dealer to others, namely, from dealer to wholesaler or from wholesaler to others.

Control of sale prices of bulk drugs and formulations are defined under Clause -18 which reads as follows.

"No person shall sell any bulk drug or formulation to any consumer at a price exceeding the price specified in the Current price list or price indicated on the lable or the container or pack thereof whichever is less plus the local taxes, if any, payable."

The Drugs (Prices Control) Order 1987 is one made under the provisions of Section 3 of the Essential Commodities Act, 1955 (10 of 1955) The nature of a transaction to be dealt by different agencies, namely, retailers, wholesalers, dispensaries, medical and educational or research institutions who purchase bulk quantities of drugs are different. It is a mere common sense that any supply of drugs and pharmaceuticals made to a hospital is not in the nature or role of one of a retailer. Likewise, the price of the item sold to a retailer, hospital or dispensary etc., will always be different. Thus, the word ''retailer'' cannot be I equated to the word ''hospital'' for the reason that the role of a retailer is to sell the item/ product whereas the duty of an hospital purchasing the drags and pharmaceuticals is to distribute the said medicines. Further, the interpretation given by our learned brother A. Hanumanthu, J., as to the interpretation of statutes, how a statute has to be incorporated etc., and placing reliance on some of the authorities of the Supreme Court mentioned above, on tacts, is either not warranted or not applicable.

Clause 26 is the penal clause which deals with penalties in the event of any contravention of the Order. Clause 26 reads as follows:

"Any contravention of any of the provisions of this order shall be punished in accordance with the provisions of the Essential Commodities Act, 1955 (10 of 1955)"

It has to be borne in mind that in the matter of penal provision the words appearing in the particular penal provisions have to be construed in the context in which they are used and not by substituting something else or by inferring what is not warranted in the said Section. This position has been clearly clarified by the Supreme Court in the year 1954 in Tolaram Relumal and Another Vs. The State of Bombay, while interpreting the scope of House and Rents -Section 18(1) of the Bombay Rents, Hotel and Lodging Houses Rates (Control) Act, including interpretation of statute and held as follows:

"The question that needs our determination in such a situation is whether Section 18(1) makes punishable receipt of money at a moment of time when the lease had not come into existence, and when there was a possibility that the contemplated lease might never come into existence. It may be here observed that the provisions of Section 18(1) are penal in nature and it is a well settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the Court to stretch the meaning of an expression used by the Legislature in order to carry out the Legislature in order to carry out the intention of the Legislature. As pointed out by Lord Macmillain in ''L & N.E.RIy. Co. V. Berriman'' 1946 AC 278 (B),

"Where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however beneficient its intention, beyond the fair and ordinary meaning of its language."

The restriction in the above Clause 21 for selling formulation by a wholesaler to retailer and by wholesaler to hospitals, dispensaries, medical, educational or research institutions who purchase in bulk quantities is altogether different. Hence, the penal provision attracted to the question is not warranted. In our view, the decision rendered by our learned brother N. Sanjeeva Reddy. J., is correct one. Thus the reference ordered as above.

Having given our answer to the reference above, all that we have to say is that Criminal Appeal No.793 of 1995 is liable to be allowed on par with Criminal Appeal No.794 of 1995.

Accordingly, Criminal Appeal No.793 of 1995 is allowed and the order of the learned Sessions Judge convicting and sentencing the appellants as aforesaid is set aside.

The bail bonds of the appellants shall stand cancelled. On the submission made by the learned Counsel for the appellants, the fine amount, if paid, is ordered to be credited to the Member Secretary, Andhra Pradesh State Legal Services Authority, High Court buildings, Hyderabad.