Holding

The requirement of a licence under Section 18(c) cannot be enforced where the rules have not prescribed the form and conditions for a licence for manufacture for distribution, creating a statutory vacuum; thus the hospital was not required to obtain such a licence.

Summary

Dr. (Miss) Alette Grace Bell, the Medical Superintendent of Duncan Hospital in Bihar, was served a notice by the Drug Controller requiring a licence to manufacture and distribute an IV solution for patients, invoking Section 18(c) of the Drugs and Cosmetics Act, 1940. The High Court held that the hospital needed such a licence. On appeal, the Supreme Court examined the statutory scheme, noting that prior to the 1983 amendment, separate licences existed for manufacture for sale and for sale, and that the amendment created a composite activity of "manufacture for sale or for distribution" without prescribing a specific licence form or conditions for manufacture for distribution under Section 33(2). The Court found this omission created a statutory vacuum, and consequently the hospital could not be compelled to obtain a licence for the activity on the date of the alleged offence (2 May 1979). The Supreme Court set aside the High Court judgment and allowed the appeal, granting relief to the appellant.

Issues considered

Whether a hospital manufacturing a drug for internal distribution, not for sale, is required to obtain a licence under Section 18(c) of the Drugs and Cosmetics Act, 1940.
Whether the absence of prescribed licence forms and conditions under Section 33(2) creates a statutory vacuum that precludes enforcement of the licence requirement.

Legislation cited

Drugs and Cosmetics Act, 1940s. 18(c), s. 33(2)

Subjects

Drugs and Cosmetics Actlicence requirementmanufacture for distributionstatutory vacuumhospital pharmacySection 18(c)Section 33(2)regulatory compliance

Judgment

DR. (MISS) ALETTA GRACE BELL A
v.
DR. (MISS) S. TIRKEY AND ANR.

NOVEMBER 8, 1995

[MADAN MOHAN PUNCHHI AND SUJATA V. MANOHAR, JJ.] B

Dntgs and Cosmetics Act, 1940 :

Ss. IB(C) and 33(2)-Dmgs-'Manufacture for distribution'-Prohibi-
tion on-Requirement of application for licence-fonns to be prescribed--Ac- c
tually no forms prescribed nor any conditions laid dowlt-Hospital
manufactwing d1ug for distlibution to its patients~Held, in absence of any
fonns prescribed and conditions laid down, the requirement leaves a vacuum
and its benefit must go to hospital which could not be required to obtain a
licence on the date of alleged offence.
D
TI1e appellant was Medical Superintendent-cum- Administrative Of-
ficer of a Hospital in the State of Bihar. On 2.5.1979, the Drug Inspector
noticed that the hospital was engaged in the manufacture of a drug,
referred to as J.V. Solution, for administration to patients in the hospital.
The Drug Controller, Bihar served on the appellant a letter stating that E
for manufacture and distribntion of I.V. Solution the hospital was required
to obtain a licence under the provisions of the Drugs and Cosmetics Act,
1940, and for default it had to suffer prosecution. The appellant filed a
writ petition before the High Court contending that the product was
manufactured not for sale, but for distribution in the hospital and the Act
of manufacture for distribution required no licence. The High Court F
dismissed the writ petition holding that the hospital was required to obtain
• licence under S.18(c) of the Act. Aggrieved, the appellant filed the present
appeal by special leave.
'
Allowing the appeal and setting aside the judgment of the High G
Court, this Court

HELD: I.I. The scheme of chapter N of the Drugs and Cosmetics Act,
1940 and particularly the provisions of S.18(c) and S. 33(2) indicate that
Government is required to frame rules and prescribed from of licence for
"manufacture for sale or for distribution" of drugs as also the form of ap- H
843
844 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.

A plication for such licence, the conditions subject to which such licence may
be issued, and the authority empowered to issue the same. [845-C, 846-B)

1.2. Prior to amendment of S.18(c) of the Act with effect from
l.2.1983 only two forms of licence namely (i) for the manufacture for sale
and (ii) for sale, of drugs and cosmetics. were prescribed as the two
B activities were distinct, and separate licences were required for the respec-
tive activities. The significant change effected by the amendment is that
"manufacture for sale or for distribution" is now one composite activity
and would require a licence. Significantly, no form of licence for 'manufac-
ture for distribution' of drugs or cosmetics has been provided. Nor any
C condition has been laid subject to which such licence may be issued. The
requirement in that regard leaves a vacuum which for reasons best known
to the Executive has remained unfilled and its benefits must go to the
appellant. (845-H, 846-C-F]

1.3. The appellant has been able to successfully plead and prove that
D in the absence of the requisites laid down in Sections 18(c) and 33 of the
Act, she and hence the hospital could not be required to obtain a licence
for manufacture and distribution of the drug on the date when the offence
was allegedly committed. [846-F]

CIVIL APPELLATE JURISDICTION Civil Appeal No. 85 of
E 1981.

From the Judgment and Order dated 17.7.80 of the Patna High Court
in C.W.J.C. No. 3326 of 1979.

K.D. Prasad and (Mr. R.P. Singh) (NP) for the Appellant.
F
D. Goburdhan for the Respondents.
•
The following Order of the Court was delivered :

G This is an appeal against the judgment and order of a Division Bench
of the Patna High Court passed in Civil Writ Jurisdiction Case No. 3326
of 1979, on 17-7-1980.

The appellant - Dr. (Miss) Alette Grace Bell, as Medical Superin-
tendent-cum-Administrative Officer of the Duncan Hospital at Raxaul in
H the State of Bihar, was served with a letter from the Drug Controller Bihar
ALETIA GRACE BELL v. S. TIRKEY 845

..- to the effect that the hospital being in the manufacture and distribution of A
a drug referred to as LV. Solution, was required to take a licence under
the provisions of the Drugs and Cosmetics Act, 1940, for the default of
which it had to suffer prosecution. Challenging the same before the Patna
High Court, the appellant contended that since its product was a prepara-
tim, by compounding of glucose or sodium with distilled water and ad-
B
ministered to patients in the hospital, this solution was manufactured not
for sale but for distribution, and the act of manufacture for distribution
required no licence. The High Court on examining the various provisions
' of the Act, came to hold that the appellant's hospital"was required to obtain
licence under clause ( c) of Section 18 of the Drugs and Cosmetics Act,
1940. This view of the High Court has led to this appeal. C
\Vhen leave was granted, intcrin1 order of stay was vacated. We are
therefore not aware whether any prosecution of the appellant followed or
not. Be that as it may, we must state the legal position. The offence was
committed on 2.5.1979 when the Drugs Inspector on his usual visit, dis-
covered the appellant engaged in the manufacture of l.V. Solution for D
administration to patients in the hospital. The provision requiring licence,
being Section 18(c) of the Act then read as follows :

"From such date as may be fixed by the State Government by
notification in the official gazette in this behalf, no person shall E
himself or by any other person on his behalf manufacture for sale,
or sell, or stock or exhibit for sale, or distribute any drug or
cosmetic, except under, and in accordance with the conditions of,
a licence issued for such purpose under this Chapter."

With effect from J.2.1983, the provision reads : F
11
••••••• n1anufacture for sale or for distribution, or sell, or stock or
exhibit or offer for sale, or distribute any drug or cosn1etic,except
under, and in accordance with the conditions of, a licence issued
for such purpose under this Chapter."
G
As is evident, prior to the amcndn1cnt, n1anufacturc for sale of any
drug or cosmetic, as a con1posite activity required a separate licence.
Likewise, distribution of any drug or co~metic required a separate licence.
The significant change effected by the atnendmcnt is that ''manufacture for
-A" sale or for distribution'' is now one composite activily and \VOuld require·~ H
846 SUPREME COURT REPORTS f1995] SUPP. 4 S.C.R.

A licence. If distribution of any drug or cosmetic is a separate activity
unconnected wilh .n1anufactun.\ then as of before, it requires a separate
licence. In all situations licence n1ust be ohtaincJ to carry out activity on
the conditions given under Chapter IV of the said Act of which Section 33
is a part, en1powering the Central Ciovi.;rn1nent to n1ake rules. Section 33
is laid in the usual format. Clause (e) of Section 33(2) says that Rules to
B
be framed by the Government may prescribe the forms of licences for the
manufaclurcfor sale or for distribution (the relevant words added after the
amendment) and inter alia for the distribution of drugs etc. as also the form
of application for such licences, and the condition subject to which such
licences may be issued, and the authority empowered lo issue the same etc.
c etc. Significantly, no form of licence for manufacture for distribution of
drugs or cosmetics has been provided. No conditions has been laid subject
to which such licence may be issued. Only two forms stood prescribed prior
lo the amendment. Those were for obtaining licence (i) for the manufac-
ture for sale and (ii) for sale of drugs and cosmetics. Now after the
D amendment the form is for the manufacture for sale or for distribution of
drugs or cosmetics. In the absence of the requisite form of licence being
part of the rules as per requirements of Section 18(c), it is difficult lo
conceive as to how the appellant was obligated lo apply for obtaining the
requisite licence, and before which authority and in which form and subject f
lo which conditions. It thus appears clear to us that the requirement in that
E regard leaves a vacuum which for reasons best known lo the Executive has
remain unfilled. The obligation of the appellant and her sequel prosecution
being founded on the supposed requirement of Section 18(c) of the Act,
not only the provision, but the rules which carry out its purpose have to be
viewed strictly. When there is a vacuum, as spelled out before, its benefit
must go to the appellant. She thus has been able lo successfully plead and
F
prove that in the absence of the requisites laid down in Sections lS(c) and
33 of the Act, she and hence the hospital could not be required to obtain
a licence for manufacture and distribution of the drug on the date when
the offence was allegedly committed. !

G Thus, for the aforesaid reasons~ we differ from the view taken by the
High Court, an<l upset its judgtn~nt and order granted the \Vrit to the
appellant, as prayed. There shall be no orders as lo costs.

R.P. Appeal allowed.