Karnataka High Court
M/S Singh Mehandi Industries vs State Of Karnataka on 22 September, 2020
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF SEPTEMBER, 2020 R
BEFORE
THE HON'BLE MR.JUSTICE B.A. PATIL
CRIMINAL PETITION NO.5257 OF 2019
BETWEEN:
1. M/s Singh Mehandi Industries,
An Indian Partnership Firm,
#1800-430/490/1, G.G. F.F.S.F.,
Hoysalanagar, Srigandhakaval,
Sunkadakatte,
Bengaluru-560 091.
Represented by its
Managing Partner,
Sri. Manohar Singh
S/o Sri Shardul Singh.
2. Sri. Manohar Singh,
Aged about 44 years,
S/o Sri.Shardul Singh,
#1800-430/490/1, G.G.F.F. S.F.,
Hoysalanagar,
Srigandhakaval,
Sunkadakatte,
Bengaluru-560 091.
...Petitioners
(By Sri Sivaraman V., Advocate - Through VC)
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AND:
State of Karnataka,
Represented by
Assistant Drugs Controller-2,
Bengaluru Circle 3,
Drugs Control Department,
Palace Road
Bengaluru - 560 001.
...Respondent
(By Sri H.R. Showri, HCGP)
This Criminal Petition is filed under Section 482
of Cr.P.C. praying to quash the entire proceedings in
C.C.No.129/2019 pending on the file of Hon'ble
Special Court for Economic Offence Bengaluru.
This Criminal Petition coming on for Admission,
this day, the Court made the following:
ORDER
This petition has been filed by accused Nos.1 and 2 under Section 482 of Cr.P.C., praying this Court to quash the proceedings in C.C.No.129/2019 pending on the file of Special Court of Economic Offences for the offences punishable under Sections 18(c), 27(A)(ii), 18(a)(ii) and under Section 27(A)(ii) of the -3- Drugs and Cosmetics Act, 1940 (hereinafter referred to as 'the Act' for short).
2. I have heard Sri. Sivaraman V., learned counsel for petitioners-accused Nos.1 and 2 and Sri.H.R.Showri, learned HCGP for the respondent-State.
3. The genesis of the case of the complainant is that petitioners-accused No.1 was a partnership firm, accused No.2 was Managing Partner and was responsible for all the business affairs of accused No.1-firm. Petitioner No.1 is carrying on the business of manufacturing and selling of Mehandi Cones by using various trademarks belonging to petitioner No.2 including the trademarks Singh's Satrang and Bansuri.
For the purpose of its manufacturing activities, petitioner No.1 used to buy raw materials for making Mehandi cones such as Mehandi Powder, Clove oil, -4- Eucalyptus oil etc and packaging materials. It is further alleged that the mehandi paste is made by mixing the raw materials in desired quantity.
Subsequently, the complainant, Assistant Drugs Controller-2, Bengaluru visited the premises of petitioner No.1 on 09.04.2018. On enquiry, they summoned accused No.2 and accused No.2 informed that they did not have license to manufacture cosmetics like Henna powder. Subsequently, they inspected and found that accused persons have engaged in manufacturing Henna paste in the name of Singh's Satrang mehandi cone and Bansuri Mehandi Cone using Henna powder and other additives and after detailed enquiry, they came to know that the analysis of the test report show that the Singh's Satrang mehandi cone and Bansuri Mehandi Cone have been conformed to certain tests. But the report on the sample of Henna powder declared that the -5- sample was not of standard quality for having less than the prescribed limit of acid insoluble ash. In that light, a private complaint has been filed. On the basis of the private complaint, a case has been registered and proceedings have been initiated.
5. It is the submission of the learned counsel for the petitioners-accused that the petitioners-
accused are not required to obtain Cosmetics licence for manufacturing mehandi cone under the provisions of the Act with the Drugs and Cosmetics Rules, 1945 (hereinafter referred to as 'the Rules' for short). It is his further submission that there is no provision for mehandi cone in Schedule M II of the Rules. It is his further submission that the petitioners are not the manufacturers of mehandi powder or Henna powder.
Under such circumstances, obtaining the licence does not arise at all as it is not covered in Schedule M-II of the Rules.
-6-6. It is his further submission that the Henna powder, which has been seized are not manufactured by the petitioners. They have been used only for the purpose of preparing mehandi products i.e., mehandi cones and even the contents of the complaint clearly goes to show that the sample of Singh's Satrang mehandi cone and Bansuri mehandi cone has been conformed to certain test, where it was declared that the sample was not of standard quality for having less than the prescribed limit of acid insoluble ash. As such, there is no irregularity or illegality. It is his further submission that the Henna powder is a raw material used to manufacture mehandi cones and it is meted out to higher standard of purity test. It is his further submission that the continuation of the proceedings is nothing but abuse of process of law. In order to substantiate such contentions, he has relied upon the decision of the Hon'ble Bombay High Court -7- in the case of 'Chutararam & Anr. Vs. State of Maharashtra', in Criminal Application No.3956/2015.
On these grounds, he prayed to allow the petition and to quash the proceedings.
7. Per contra, learned HCGP vehemently argued and submitted that when the raid has been conducted in the premises of the petitioners-accused it was found that the applicants were the manufactures of the Henna powder and were selling the mehandi cones and mehandi cones contains Henna powder. It was not containing standard quality and for manufacturing Henna powder, no licence have been obtained. In that light, they have committed offence in this regard. It is his further submission that as per the provision of Rule 150A of the Rules and appended Schedule-S of the Rules, requirement of obtaining licence for Cosmetics is mandatory. It is his further submission that the mehandi cone, which is -8- going to be used or Henna powder, is used for the purpose of cosmetics. In that light, obtaining of licence is very much necessary. It is his further submission that admittedly the petitioners-accused are not holding any licence. In that light, there is a prima facie material as against the petitioners-accused for having violated the provisions of the Act and are liable to be convicted for the said offence.
8. I have carefully and cautiously gone through the submission made by learned counsel appearing for the parties and perused the records including the contents of the complaint.
9. On perusal of the contents of the complaint, it indicates that there are two allegations.
Firstly, there is no valid licence and secondly, mehandi cone and mehandi powder i.e, Henna powder require the licence for the purpose of manufacturing. It is the -9- specific contention of the learned counsel for the petitioner that for the purpose of manufacturing mehandi cone, no licence is required in view of the provisions of the Act and Rules. For the purpose of brevity, I quote Rules 138, 139 and 142 of the Rules, which reads as under:
"138. Application for licence to manufacture cosmetics for sale or for distribution.
(1) Application for grant or renewal of licence to manufacture cosmetics for sale or for distribution shall be made upto ten items for each category of cosmetics categorised in Schedule MII to the Licensing Authority appointed by the State Government for the purpose of this part (hereinafter in this Part referred to as Licensing Authority) in Form 31 and shall be accompanied by a licence fee of rupees two thousand and five hundred and an inspection fee of
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rupees one thousand for every inspection thereof or for the purpose of renewal of licence. [***] (2) If a person applies for the renewal of licence after expiry but within six months of such expiry, the fee payable for the renewal of such licence shall be rupees two thousand and five hundred plus an additional fee at the rate of rupees four hundred per month or part thereof in addition to an inspection fee of rupees one thousand. [***] (3) Application by a licensee to manufacture additional items of cosmetics shall be accompanied by a fee of rupees one hundred for each item subject to a maximum of rupees three thousand for each application. [***] (4) A fee of rupees two hundred and fifty shall be paid for duplicate copy of
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a licence issued under sub-rule (1), if the original is defaced, damaged or lost.
138A. Application for loan licence to manufacture cosmetics.--
(1) Application for grant or renewal
of a loan licence for the
manufacture for sale of
cosmetics shall be made up to
ten items of each category of
cosmetics categorised in
Schedule MII in Form 31A to the Licensing Authority and shall be accompanied by a licence fee of rupees two thousand and five hundred and an inspection fee of rupees one thousand for every inspection thereof.
Explanation.--For the purpose of this rule a 'loan licence' means a licence which a licensing authority may issue to an applicant who does not have his own arrangements for manufacture
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but who intends to avail himself of the manufacturing facilities owned by a licensee in Form 32.
(2) If a person applies for the renewal of a loan licence after its expiry but within six months of such expiry, the fee payable for the renewal of such a licence shall be rupees two thousand and five hundred plus an additional fee at the rate of rupees four hundred for each month or part thereof.
(3) The licensing authority shall,
before the grant of a loan
licence, satisfy himself that the manufacturing unit has adequate equipment, staff, capacity for manufacture and facilities to undertake the manufacture on behalf of the applicant for a loan licence.
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(4) The loan licence shall be granted by the licensing authority to only such applicants who propose to avail of the facilities of manufacture of cosmetics in the premises of a manufacturer located in the same State where the applicant is located. In case the manufacture of cosmetics involves any special process of manufacture or use of equipments which are not available in the State where the applicant is located, the licensing authority, after consulting the licensing authority where the manufacturing unit is located, may grant the loan licence.
(5) Subject to the provisions of sub-
rule (2), application for manufacture of additional items on a loan licence shall be
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accompanied by a fee of rupees one hundred for each item subject to a maximum of rupees three thousand per application.
(6) A fee of rupees two hundred and fifty shall be paid for a duplicate copy of a licence issued under sub-rule (1) if the original is defaced, damaged or lost.
139. Condition for the grant or renewal of a licence in Form 32.-- Before a licence in Form 32 is granted or renewed, the following conditions shall be complied with by the applicant:--
(1) The manufacture shall be conducted under the direction and personal supervision of a competent technical staff consisting of at least one person who is a whole time employee and who possesses any one of the following qualifications:--
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(a) holds a Diploma in Pharmacy approved by the Pharmacy Council of India under the Pharmacy Act, 1948 (8 of 1948), or
(b) is registered under the Pharmacy Act, 1948 (8 of 1948), or
(c) has passed the Intermediate Examination with Chemistry as one of the subjects or an examination recognised by the licensing authority as equivalent to it. [***] (2) The factory premises shall comply with the requirements and conditions specified in Schedule M II.] [***] (5) The applicant shall either--
(i) provide and maintain adequate staff, premises and laboratory equipment for testing the cosmetic manufacture, and the
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raw materials used in the
manufacture, or
(ii) make arrangements with some institution approved by the licensing authority under Part XV(A) of these rules for such tests to be regularly carried out in this behalf by the institution.
139A. Form of licence to manufacture cosmetics for sale or for distribution.--A licence to manufacture cosmetics for sale or for distribution against application in Form 31, shall be granted in Form 32.
139AA Inspection before grant or renewal of licence. --Before a licence under this Part is granted or renewed in Form 32, Form 32A or Form 33, the licensing authority shall cause the establishment, in which the manufacture is proposed to be conducted or being conducted, to be inspected by one or more
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Inspectors appointed under the Act. The Inspector or Inspectors shall examine all portions of the premises, plant and appliances and also inspect the process of manufacture intended to be employed or being employed along with the means to be employed or being employed for standardising and testing the substances to be manufactured and inquire into the professional qualifications of the technical staff to be employed. He shall also examine and verify the statements made in the application in regard to their correctness, and the capability of the applicant to comply with the requirements of competent technical staff, manufacturing plants, testing equipments and the requirements of plant and equipment as laid down in Schedule M-II read with the requirements of maintenance of records as laid down in Schedule U-I. 139AB. Report by Inspector.--The Inspector of Inspectors shall forward a
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detailed descriptive report giving his or their findings on each aspect of inspection along with his or their recommendations after completion of his or their inspection to the licensing authority.
139AC. Grant or refusal of licence.--
(1) If the Licencing Authority after such further enquiry, if any, as he may consider necessary is satisfied that the requirements of the rules under the Act have been complied with and that the conditions of the licence and the rules under the Act shall be observed, he shall grant or renew a licence in Form 32, Form 32A or Form
33. (2) If the licensing authority is not so satisfied, he shall reject the application and shall inform the applicant of the reasons for such rejection and of the conditions which
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must be satisfied before a licence can be granted or renewed and shall supply the applicant with a copy of inspection report.
139AD. Further application after rejection.--If within a period of six months from the rejection of an application for a licence, the applicant informs the licensing authority that the conditions laid down have been fulfilled and deposits an inspection fee of rupees two hundred and fifty, the Licencing Authority may, if, after causing further inspection to be made, he is satisfied that the conditions for the grant of licence have been complied with, issue a licence in Form 32, Form 32A or Form 33.
139AE. Appeal to the State Government.--Any person who is
aggrieved by the order passed by the licensing authority refusing to grant or renew a licence under this part may within ninety days from the date of receipt of such
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order, appeal to the State Government and the State Government may, after such enquiry into the matter as is considered necessary and after giving the said person an opportunity for representing the case, pass such order as it thinks fit.
139B. Form of loan licence to manufacture cosmetics for sale or for distribution.--A loan licence to manufacture cosmetics for sale or for distribution against application in form 31A shall be granted in Form 30A.
142. Conditions of licence.--A licence in Form 32 shall be subject to the conditions stated therein and to the following other conditions, namely:--
(a) The license shall provide and maintain staff, premises and equipment as specified in rule 139.
(b) The licensee shall comply with the provisions of the Act and the rules
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made thereunder and with such further requirements, if any, as may be specified in any rules to be made hereafter under Chapter IV of the Act. (b1) The licensee shall keep records of the details of each batch of cosmetic manufactured by him and of raw materials used therein as per particulars specified in Schedule U(1) and such records shall be retained for a period of three years.
(c) The licensee shall test each batch or lot of the raw materials used by him for the manufacture of the cosmetics and also each batch of the final product and shall maintain records or registers showing the particulars in respect of such tests. The records or registers shall be retained for a period of three years from the date of manufacture.
(d) The licensee shall allow any Inspector appointed under the Act to
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enter with or without prior notice any premises where the manufacture of a substance in respect of which the licence is issued is carried on, to inspect the premises and to take samples of the manufactured products under a receipt.
(e) The licensee shall allow an Inspector to inspect all register and records maintained under these rules and shall supply to the Inspector such information as he may require for the purpose of ascertaining whether the provisions of the Act and the rules made thereunder have been complied.
(f) The licensee shall maintain an Inspection Book in Form 35 to enable an Inspector to record his impression and the defect noticed: Provided that clauses (b1) and (c) shall not apply to the manufacture of soap and the procedure for testing of raw materials
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and the records to be maintained by a manufacturer of soap shall be such as are approved by the "licensing authority".
142A. Additional information to be furnished by an applicant for licence or a licensee to the licensing authority.--The applicant for the grant of a licence or any person granted a licence under this Part shall, on demand, furnish to the licensing authority, before the grant of the licence or during the period the licence is in force, as the case may be, documentary evidence in respect of the ownership or occupation on rental or other basis of the premises, specified in the application for licence or in the licence granted, constitution of the firm, or any other relevant matter, which may be required for the purpose of verifying the correctness of the statements made by the applicant or the licensee while applying for
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or after obtaining the licence as the case may be.
142B. Conditions of licence in Form 32A.--
(a) A licence in Form 32A shall be
deemed to be cancelled or
suspended, if the licence owned by the licensee, in Form 32, whose manufacturing facilities, is cancelled or suspended, as the case may be, under these rules.
(b) The licensee shall comply with the provisions of the Act and these rules and with such further requirements, if any, as may be specified from time to time in Chapter IV of the Act, provided that where such further requirements are specified in the rules, these would come into force four months after publication in the Official Gazette. (b1) The licensee shall keep records of the details of
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each batch of cosmetic manufactured by him and of raw materials used therein as per particulars specified in Schedule U(1) and such records shall be retained for a period of three years.
(c) The licensee shall test each batch or lot of the raw materials used by him for the manufacture of the cosmetics and also each batch of the final product and shall maintain records or registers showing the particulars in respect of such tests. The records or registers shall be retained for a period of three years from the date of manufacture.
(d) The licensee shall allow an Inspector appointed under the Act to enter with or without prior notice any premises where the manufacture of a substance in respect of which the licence is issued is carried on, to inspect the premises and to take
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samples of the manufactured
products under a receipt.
(e) The licensee shall allow an Inspector
to inspect all registers and records maintained under these rules and shall supply to the Inspector such information as he may require for the purpose of ascertaining whether the provisions of the Act and the rules made thereunder have been complied.
(f) The licensee shall maintain an Inspection Book in Form 35 to enable an Inspector to record his impressions and the defects noticed."
10. As per Rule 138 of the Rules, the application for grant or renewal of licence to manufacture cosmetics for sale or for distribution shall be made upto ten items for each category of cosmetics categorized in Schedule M II to the licensing
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Authority appointed by the State Government and as per provision of Rule 139 of the Rules, the conditions as laid down in the Rules are required to be fully followed before the licence is granted as the Rules laid down are mainly in respect of qualification of technical staff or certain requirements that are required to be followed by the Lab for testing cosmetics that are manufactured and the raw materials used in manufacturing etc.
11. On careful perusal of Schedule M II, I find that mehandi cone has not been categorized in Schedule M II. Then under such circumstances, for manufacturing the said mehandi products, no licence is required as contemplated under Rules 138 or 139 of the Rules. As could be seen from Rule 142 of the Rules, a licence in Form 32 shall be subject to the conditions stated therein and to the other conditions mentioned in the Rules.
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12. On conjoint reading of Sections 138, 139 and 142 along with Schedule M II, it is clear that no licence is required to manufacture mehandi cone or mehandi powder for sale or for distribution. As per Rule 150A, Standard for cosmetics is prescribed in Schedule S and Schedule S item No.28 is Henna Powder. It is stated in Schedule S that Cosmetics as listed in the Schedule in finished form shall conform to the Bureau of Indian Standards (BIS) specifications laid down from time to time by the Bureau of Indian Standards. Insofar as Item No.28 - Henna powder is concerned, specification for Indian standard is mentioned as IS:11142. Even on plain reading of the contents of the complaint, the complaint does not specifically say that the petitioners-accused are the manufacturers of Henna powder. If the Henna powder is manufactured by the petitioners-accused, then
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under such circumstances, Schedule S will be attracted.
13. But, in the instant case on hand, the Henna powder has been taken from outside as a raw material and the same has been used for the purpose of manufacturing the mehandi cone by using the said material in a prescribed quantity of other mixtures. As could be seen from the contents of the complaint, the accused-petitioners were found engaged in manufacturing of Henna paste in the brand names Singh's Satrang mehandi cone and Bansuri mehandi cone using Henna powder and other additives and even that the samples of Singh's Satrang mehandi cone and Bansuri mehandi cone has conformed to certain test.
14. When that being the case, I am of the considered opinion that for the purpose of
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manufacturing mehandi cone, no licence is required and there is no material to come to a conclusion that Henna powder is also manufactured at the manufacturing unit of the petitioners-accused. Then under such circumstances, the said provision of Rule 150A is also not applicable to the present facts of the case on hand.
15. Keeping in view the above said provisions of law and as discussed in the foregoing aspects, I am of the considered opinion that the proceedings initiated as against the petitioners-accused is nothing but abuse of process of law and no useful purpose will be served if proceedings are ordered to be continued.
The petitioners have made out the case so as to allow the petition.
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16. Hence, the petition is allowed. Proceedings in C.C.No.129/2019 pending on the file of Special Court of Economic Offences are hereby quashed.
In view of disposal of the main petition, I.A.No.1/2019 does not survive for consideration.
Accordingly, I.A.No.1/2019 stands disposed of.
Sd/-
JUDGE Mds/-