Alken Laboratories Limited & Anr. vs State Of Tamil Nadu

This Criminal Original Petition has been filed seeking to quash the proceedings in C.C. No. 2787 of 2025, pending on the file of the learned X Metropolitan Magistrate, Egmore, Chennai, for the alleged contraventions of Sections 18(c) and 18A of the Drugs and Cosmetics Act, 1940, punishable under Sections 27(b)(ii), 28 and 27(d) (two counts) of the said Act.

The respondent filed a private complaint under Sections 210(1)(a) and 233 of the BNSS, alleging contraventions of Section 18(c) of the Drugs and Cosmetics Act, 1940 (hereinafter referred to as “the Act”), punishable under Section 27(b)(ii) of the Act; Section 18A of the Act, punishable under Section 28 thereof; and Section 18(c) of the Act read with Condition 3(ii) of the licence in Form 20B and Condition 4(ii) of the licence in Form 21B, punishable under Section 27(d) of the Act, on the allegation that during an inspection conducted at the residential premises of the first accused, physician samples of drugs were found without purchase orders and without a valid drug licence, thereby contravening Section 18(c) of the Act. The said drugs were allegedly stored along with a delivery challan pertaining to the second accused. It is further alleged that the first accused, in his statement, admitted that he was working as a Medical Representative of the second accused and had received the physician samples along with the delivery challan. However, he had allegedly failed to maintain proper records of the distribution of the said samples.

Consequently, a show-cause notice was issued to the first accused, who submitted his reply. As the respondent found the explanation unsatisfactory, show-cause notices were subsequently issued to the second and third accused as well. Since their replies were also found unsatisfactory, the respondent proceeded to file the present complaint against the accused. Upon taking cognizance of the complaint in C.C. No. 2787 of 2025, the learned Trial Court directed the issuance of summons to the accused. To quash the said proceedings the present petition has been filed.

The learned Senior Counsel appearing for the petitioners submits that the second accused is a company engaged in the research, development, manufacture and marketing of branded generic formulations, generic drugs, active pharmaceutical ingredients and nutraceuticals. The company carries on business in more than 40 countries and operates 19 manufacturing facilities. He further submits that the third accused is a professional with over 20 years of experience in the pharmaceutical industry. He would further submit that the second accused holds valid licences in Forms 20B and 21B and is duly authorised to distribute drugs in accordance with the provisions of the Drugs and Cosmetics Act, 1940, and the Rules framed thereunder. It is his contention that, even if the allegations contained in the impugned complaint are taken at their face value and accepted in their entirety, they do not prima facie constitute the offences alleged against the petitioners. He further submits that it is an admitted fact that the drugs in question were handed over to the first accused, who was working as a Medical Representative, for marketing and promotional purposes, and the delivery challan clearly reflects the nature of the transaction. According to the learned Senior Counsel, a conjoint reading of the impugned complaint and the order taking cognizance does not disclose any prima facie case against the petitioners warranting their prosecution. In the absence of the essential ingredients of the alleged offences, the order taking cognizance is legally unsustainable. Hence, he submits that the continuation of the criminal proceedings against the petitioners would amount to an abuse of the process of law and prays for quashing the same.

Heard the learned counsel appearing on either side and perused the materials placed on record.

On a perusal of the records, it is evident that the crux of the allegations in the complaint is that the first accused was found in possession of drugs without holding a valid drug licence. However, the mere possession of drugs by the first accused, in the circumstances of the present case, does not establish a contravention of Section 18(c) of the Act, particularly when the drugs in question were supplied as physician samples for medical campaigning and promotional purposes, and not by way of sale. Insofar as the second and third accused are concerned, they hold valid wholesale drug licences in Forms 20B and 21B, respectively. Section 18(c) of the Act prohibits the manufacture for sale or distribution, sale, stocking or exhibiting or offering for sale, or distribution of any drug, except under and in accordance with the conditions of a licence issued for such purpose under Chapter IV of the Act. Section 27(d) of the Act prescribes punishment for the manufacture, sale or distribution of any drug in contravention of the provisions of Chapter IV or the Rules made thereunder. The alleged contravention of Condition 3(ii) of Form 20B and Condition 4(ii) of Form 21B is founded on the allegation that the second and third accused supplied the drugs to the first accused, who allegedly did not possess the requisite licence to sell, stock or distribute the same. Condition 3(ii) of Form 20B prohibits the sale of any drug to a person who does not hold the requisite licence to sell, stock or exhibit for sale, or distribute the drug. Condition 4(ii) of Form 21B contains a corresponding restriction. Thus, the essential requirement for attracting the aforesaid licence conditions is a sale of drugs to a person who does not hold the requisite licence. The conditions do not prohibit every act of supply or transfer, irrespective of its nature and purpose.

In the present case, the prosecution itself proceeds on the basis that the first accused was working as a Medical Representative of the second accused and that the drugs were supplied to him as physician samples for medical campaigning and for disseminating medical information. The seizure mahazar further indicates that the drugs seized from the premises of the first accused were physician samples. These circumstances assume significance in determining whether the alleged transaction constituted a sale attracting the restrictions under the aforesaid licence conditions or whether the samples were supplied in the course of the medical representative's professional activities for promotional purposes. In the absence of prima facie material establishing a sale in contravention of the applicable licence conditions, the mere supply of physician samples to the Medical Representative of the company cannot be treated as sufficient to attract the penal provisions invoked against the petitioners.

Further, after receipt of the show-cause notice, the second and third accused categorically stated that the medicines had been supplied to the concerned Medical Representative for medical campaigning and dissemination of medical information, in accordance with the company's policy. In support of their explanation, the company had also furnished its policy and other relevant documents. The said explanation is consistent with the statement given by the first accused, who had also stated that he was working as a Medical Representative of the second accused and had received the physician samples along with the delivery challan. It is a matter of common practice in the pharmaceutical industry that physician samples are supplied to Medical Representatives for demonstration and detailing purposes and for distribution to registered medical practitioners, with a view to familiarising the medical community with the relevant medicines. In the present case, the materials available on record, including the seizure mahazar, indicate that the drugs seized were physician samples. Further, even according to the prosecution, the drugs were not sold to any person. The allegation is that the physician samples were supplied to the first accused in his capacity as a Medical Representative for medical campaigning and dissemination of medical information. The mere fact that the first accused was found in possession of physician samples, would not establish that the second and third accused had sold the drugs to a person who did not possess the requisite licence.

Rule 65(18) of the Drugs Rules, 1945, contemplates and regulates the supply of physician samples and requires such samples to be distinctly labelled with the words “Not for Sale”. In the present case, the drugs seized from the premises of the first accused admittedly bear the label “Not for Sale” and do not carry any price tag. These circumstances lend support to the petitioners’ contention that the drugs were supplied as physician samples for promotional and medical information purposes and not for commercial sale. Therefore, the mere possession of such physician samples, without specific material establishing that they were stocked or possessed with the requisite intent to sell in contravention of the applicable provisions of the Act, cannot by itself be treated as sufficient to establish an offence under Section 18(c) of the Act. Further, the complaint does not contain any specific averment that the second and third accused sold the drugs to a person who did not hold the requisite licence. In the absence of this foundational allegation, the essential ingredients of a contravention of Section 18(c) read with Condition 3(ii) of Form 20B and Condition 4(ii) of Form 21B are not prima facie made out against the second and third accused.

Further, upon receipt of the show-cause notices, the accused submitted their respective replies explaining the circumstances under which the physician samples had been supplied and the purpose for which they were intended. However, while according sanction for prosecution, the sanctioning authority merely observed that the explanations submitted by the accused were unsatisfactory, without discussing the contents of the replies or assigning any reasons as to how the conduct of the second and third accused constituted a contravention of the provisions of the Act and the conditions of the licences held by them. The sanctioning authority was required to consider the relevant materials, including the explanations furnished by the accused, and arrive at an independent conclusion as to whether the materials warranted prosecution. Further, the learned Trial Court has also mechanically taken cognizance of the complaint without recording any reasons reflecting the application of judicial mind to the allegations and the materials placed on record. The order taking cognizance merely states that:

The above impugned order does not indicate that the learned Magistrate applied his judicial mind to the allegations in the complaint or considered the explanations submitted by the accused, the nature of the physician samples seized, or the essential ingredients of the offences alleged under the Drugs and Cosmetics Act, 1940, alleged against the petitioners. This omission raises serious doubts as to the legality of the cognizance taken and renders the impugned order liable to be set aside. It is well settled that, before taking cognizance and issuing process against an accused, the Magistrate must apply his judicial mind to the allegations contained in the complaint and the materials placed on record and form an opinion that sufficient grounds exist for proceeding against the accused. In the absence of any discernible application of judicial mind, particularly in the light of the materials available on record, renders the impugned order legally unsustainable. Consequently, the order taking cognizance is liable to be set aside, and the continuation of the criminal proceedings against the petitioners cannot be sustained in law.

Further, the learned Trial Court, upon receipt of the complaint, ought to have afforded an opportunity to the accused to put forth their case before taking cognizance. However, no such opportunity was afforded to the accused, and the learned trial Court proceeded to take cognizance of the complaint without assigning any reasons. Consequently, the impugned order reflects a mechanical exercise of power, without due consideration of the relevant facts and materials placed on record.

In view of the overall facts and circumstances of the case, this Court is of the considered view that the complaint cannot be sustained in law and is liable to be quashed.

Accordingly, this Criminal Original Petition is allowed, and the proceedings in C.C. No. 2787 of 2025, pending on the file of the learned X Metropolitan Magistrate, Egmore, Chennai, insofar as the petitioners are concerned, are hereby quashed. Consequently, the connected miscellaneous petitions are closed.