The Supreme Court has clarified that deliberate non-maintenance of manufacturing records under the Drugs and Cosmetics Act, 1940, constitutes a contravention of Chapter IV provisions and attracts prosecution under Section 27(d), not merely the lesser penalty under Section 18-B. This ruling redefines the legal consequences of record-keeping failures in pharmaceutical manufacturing and resolves long-standing ambiguity on jurisdiction and limitation.
Background & Facts
The Dispute
The appellants, M/s SBS Biotech and its key personnel, were prosecuted for allegedly failing to maintain accurate manufacturing, testing, and distribution records for Pseudoephedrine Hydrochloride as mandated by Schedule-M and Schedule-U of the Drugs and Cosmetics Rules, 1945. During inspections on 22.07.2014 and 05.08.2014, the Drug Inspector found discrepancies including missing entries, tampered records, and unexplained stock movements. The firm was directed to produce records under Section 22(1)(cca) and Section 18-B, but failed to comply. Seizure of documents and drug stock followed, leading to criminal proceedings.
Procedural History
- 22.07.2014: Initial inspection revealed non-compliance with Schedule-M/U record-keeping norms.
- 05.08.2014: Re-inspection confirmed tampering and non-submission of records; seizure of 24.990 kg of drug and production documents under Form-16.
- 15.09.2016: Prosecution sanction granted by State Drug Controller for contravention of Section 18(a)(vi) read with Rule 74, Section 18-B, and Section 22(1)(cca).
- 27.02.2017: Criminal complaint filed alleging offences punishable under Section 27(d) and Section 28-A.
- 06.04.2017: Judicial Magistrate First Class (JMFC) took cognizance, referencing Section 18(a)(vi) and Section 18-B, but omitted Section 27(d) in the handwritten order.
- 05.10.2017: JMFC committed the case to the Special Judge, citing exclusive jurisdiction under Section 27(d) read with Section 28-A.
- 29.07.2024: High Court dismissed the Section 482 Cr.P.C. petition for quashing, upholding cognizance and committal.
Relief Sought
The appellants sought quashing of the complaint and cognizance order, arguing that: (1) record-keeping failures fall only under Section 18-B (punishable by one year), making the complaint time-barred; (2) the case should have been tried summarily by a JMFC under Section 36-A, not before a Special Judge; and (3) the omission of Section 27(d) in the cognizance order was fatal.
The Legal Issue
The central question was whether non-maintenance of records under Schedule-M and Schedule-U constitutes a contravention of Section 18(a)(vi) punishable under Section 27(d), or whether it is confined to the lesser offence under Section 18-B punishable under Section 28-A. A secondary issue was whether the case was correctly committed to a Special Judge under Section 36-AB, or should have been tried summarily by a JMFC under Section 36-A.
Arguments Presented
For the Appellant
The appellants contended that Section 18-B exclusively governs non-maintenance of records and non-furnishing of information, and is punishable under Section 28-A with a maximum sentence of one year. They argued that Section 27(d) applies only to the manufacture, sale, or distribution of substandard, adulterated, or spurious drugs - not record-keeping lapses. Relying on Miteshbhai J. Patel v. Drug Inspector and Cheminova (India) Ltd. v. State of Punjab, they asserted that the complaint filed after 2.5 years was barred by the one-year limitation under Section 468 Cr.P.C. They further argued that Section 36-A mandates summary trial by a JMFC for offences punishable up to three years, and that Section 32(2) does not override this exception.
For the Respondent
The State contended that Section 18(a)(vi) prohibits any contravention of Chapter IV or its rules, including record-keeping obligations under Schedule-M and Schedule-U. Non-compliance with these rules therefore constitutes a contravention of Section 18(a)(vi), attracting punishment under Section 27(d), which prescribes imprisonment of one to two years. The State argued that the omission of Section 27(d) in the cognizance order was a clerical error, as the complaint and committal order clearly referenced it. The limitation period of three years applied, and Section 36-A did not apply because Section 32(2) bars inferior courts from trying offences under Chapter IV unless expressly excepted.
The Court's Analysis
The Court undertook a detailed statutory interpretation of Section 18, Section 18-B, Section 27(d), and Section 28-A. It held that Section 18(a)(vi) broadly prohibits any contravention of Chapter IV or its rules, and Schedule-M and Schedule-U are integral parts of these rules. The failure to maintain records is not a standalone administrative lapse but a structural violation undermining the regulatory framework for drug safety.
"The allegations levelled in the complaint disclose a pattern of deliberate non-maintenance and tampering of records, which directly impacts the integrity of drug manufacturing and poses a risk to public health. Such conduct falls squarely within the ambit of Section 18(a)(vi) read with Rule 74."
The Court distinguished Section 18-B as a supplementary provision for procedural non-compliance, such as failure to respond to notices, while Section 27(d) addresses substantive violations of manufacturing standards. The Court emphasized that Section 27(d) was specifically designed to cover violations of rules under Chapter IV, including record-keeping, and not merely the sale or adulteration of drugs.
Regarding jurisdiction, the Court held that Section 32(2) establishes a general rule that only Courts not inferior to a Court of Session may try offences under Chapter IV. Section 36-A provides an exception for summary trial, but only for offences not triable by Special Courts under Section 36-AB. Since Section 27(d) is listed under Section 36-AB as an offence triable by Special Courts, Section 36-A is inapplicable. The committal to the Special Judge was therefore legally sound.
The Court also rejected the limitation argument, noting that Section 27(d) prescribes imprisonment of one to two years, attracting a three-year limitation period under Section 468 Cr.P.C. The complaint was filed within 2.5 years and thus not time-barred. The omission of Section 27(d) in the cognizance order was deemed a clerical error, corrected by the complaint and committal order.
The Verdict
The appellants’ appeal was dismissed. The Supreme Court held that non-maintenance of records under Schedule-M and Schedule-U constitutes a contravention of Section 18(a)(vi), punishable under Section 27(d) with imprisonment of one to two years. The case was correctly committed to a Special Judge under Section 36-AB, and the complaint was not barred by limitation.
What This Means For Similar Cases
Prosecution Under Section 27(d) Applies to Record Tampering
- Practitioners must now treat deliberate falsification or omission of manufacturing records as a Section 27(d) offence, not merely a Section 18-B violation.
- Prosecutors may invoke Section 27(d) even where no adulteration or spuriousness is alleged, if record-keeping breaches compromise drug safety.
- Defence counsel must challenge the factual nexus between record discrepancies and public health risk, not merely the statutory classification.
Special Courts Have Exclusive Jurisdiction for Record-Based Offences
- Cases involving Section 27(d) must be tried by Special Courts under Section 36-AB, even if the underlying violation is procedural.
- Applications under Section 482 Cr.P.C. to quash proceedings on grounds of summary trial jurisdiction will fail if Section 27(d) is invoked.
- Defence advocates must file jurisdictional objections at the earliest stage, as delay waives the right to challenge Special Court competence.
Limitation Period Is Three Years for Record Violations
- The three-year limitation under Section 468 Cr.P.C. applies to all Section 27(d) offences, regardless of whether the violation is record-based or product-based.
- Prosecutors must ensure complaints are filed within three years of the last act of non-compliance, not from the date of inspection.
- Delayed complaints based on record-keeping lapses will be dismissed only if filed beyond three years, not one.
