Drug Inspectors Cannot Impose Bans On Drugs: SC

The Bench of Justice Vikram Nath and Justice Prasanna B Varale clarified that drug inspectors can check if the drug is being sold properly, if records are kept, and if the rules are being followed, but they cannot stop the sale of a licensed drug just because it is being misused by some people.

Deliberating a case involving the aromatic tincture of cardamom, a licensed herbal medicine, the apex court has set aside the Allahabad High Court's orders that upheld the restrictions imposed by local authorities and quashed the actions taken against the appellants, Bhagwati Medical Hall and others.

Bhagwati Medical Hall, a licensed drug retailer in Agra, had been selling aromatic tincture of cardamom, a medicinal preparation used for minor digestive ailments. Despite its lawful status, authorities alleged misuse due to its high alcohol content, claiming it was being consumed as a substitute for liquor. This led to abrupt inspections, shop closures, and a directive prohibiting its sale.

Aggrieved, the appellants approached the High Court, which upheld the restrictions. The appellants then moved the Supreme Court, arguing that there was no legal basis for the restrictions imposed on the sale of aromatic tincture of cardamom. They highlighted that the tincture is a licensed medicinal preparation commonly used to treat minor ailments such as indigestion and nausea. Since no notification had been issued under Section 26A of the D&C Act, which empowers only the Central Government to restrict or prohibit the sale of a drug, the appellants contended that the actions of the authorities were unlawful.

The appellants also asserted that the restrictions violated their fundamental right to conduct a lawful business under Article 19(1)(g) of the Constitution. As they held valid licenses and complied with all regulatory requirements, they argued that the authorities’ actions amounted to arbitrary interference. They further alleged that the repeated inspections, shop closures, and harassment were motivated by extraneous reasons, including retaliation for complaints made against certain officials.

Citing RTI responses from government departments, the appellants emphasized that the tincture remained a lawful product. They also highlighted the significant financial losses and reputational damage they had suffered due to the restrictions, which they argued were wholly unjustified and arbitrary.

On the other hand, the respondents, including the Central Drugs Standard Control Organization (CDSCO) and state authorities, justified their actions on grounds of public health and safety. They argued that the aromatic tincture of cardamom, with an alcohol content of 84%–87%, was being misused as a cheap substitute for liquor, especially by vulnerable groups such as daily-wage earners and rickshaw pullers. According to the respondents, this misuse posed severe health risks and could even result in fatalities.

The respondents also raised concerns about revenue losses to the state, claiming that the misuse of the tincture was replacing taxed country liquor. They pointed out that inspections revealed improper sale practices, including the sale of large quantities of the tincture without maintaining proper records or requiring the presence of a registered pharmacist. Furthermore, they alleged that no other medicines were being sold by the appellants, reinforcing the claim that the tincture was being marketed primarily as an intoxicant rather than a medicinal preparation.

The authorities argued that their actions were necessary to protect public health and fell within their regulatory powers under Section 22 of the D&C Act. They also defended the High Court’s observation treating the tincture as a “prohibited article” due to its potential misuse.

After considering the arguments from both sides, the Supreme Court ruled in favor of the appellants. The Court emphasized that only the Central Government has the authority to regulate, restrict, or prohibit the sale of a drug under Section 26A of the D&C Act.

Referring to Section 26A of the Act, the Court observed;

"This is the sole statutory mechanism through which a drug, previously permissible, can be effectively taken off the market or subjected to special conditions. The provision ensures that any decision to restrict a drug stem from a central, uniform, and scientifically informed process, guided by expert advice, safety evaluations, and considered policy determinations. This centralized approach is deliberate, aimed at preventing arbitrary or inconsistent local measures that would fragment the national drug regulatory regime."

It held that in the absence of a notification issued under Section 26A by the Central Government, the authorities could not classify the aromatic tincture of cardamom as a “prohibited article”, and the tincture remains a licensed medical preparation that can be manufactured and sold in accordance with law. It observed;

"The Respondent authorities cannot, on their own accord, treat this lawful product as a 'prohibited article.' Any such classification by subordinate authorities would undermine the statutory scheme, which deliberately centralizes the ultimate decision-making power over prohibition with the Central Government. To hold otherwise would effectively allow local officials to unilaterally bypass the checks and balances embedded in the Act, and to create, in practice, an ad hoc ban outside the statutory process."

It further noted that if misuse of the tincture was a genuine concern, the authorities could intensify regulatory oversight and ensure compliance with licensing conditions, but they could not impose ad hoc bans outside the statutory process.

The Court further rejected the reliance on Section 22 (Powers of Inspectors) of the 1940 Act, which allows inspection, sampling, and seizure of non-compliant drugs. It said this is a general regulatory authority provided under the Act but it cannot surpass the special centralized power of the Central Government to prohibit drugs. It observed;

“The Respondent authorities have attempted to justify their actions by relying on Section 22(1)(d) of the D&C Act, 1940. This provision empowers Inspectors, within the local limits of their jurisdiction, to exercise such powers as may be necessary for carrying out the purposes of the Chapter or any rules made thereunder. The scope of this provision is essentially procedural, intended to facilitate inspection, sampling, seizure of non-compliant drugs, and enforcement of existing statutory and regulatory requirements. It does not, however, confer authority to impose new prohibitions or to classify a duly licensed drug as contraband. Section 22(1)(d) is not a substitute for Section 26A of the D&C Act, 1940. While an Inspector may inspect premises, verify licenses, ensure proper record-keeping, and take action against specific offenses under the Act, the Inspector cannot supplant the Central Government’s prerogative by effectively banning a drug simply because of alleged misuse in certain quarters.”

“Similarly, even if the Respondent authorities are concerned about the high alcohol content of the tincture or its potential misuse by certain consumers, the D&C Act, 1940 and the rules framed thereunder provide mechanisms for addressing such issues without resorting to extra-statutory prohibitions. For instance, the authorities may ensure that licensees maintain proper records as mandated by the relevant rules; they may verify that a qualified pharmacist is present at the time of sale; they may inspect the premises regularly and take penal action if any license conditions are breached. If, upon gathering evidence and seeking expert advice, the authorities believe that the drug poses health risks serious enough to warrant prohibition, their proper recourse is to move the Central Government to consider exercising its powers under Section 26A of the D&C Act, 1940. Until such a notification is issued, the drug cannot be unilaterally banned at the local level.”

It further noted;

“By endorsing the characterization of the aromatic tincture of cardamom as a ‘prohibited article’ without any notification from the Central Government, the impugned orders of the High Court have effectively circumvented the legislative design. The High Court’s reasoning overlooks the clear distinction drawn by the D&C Act, 1940 between general regulatory authority and the special, centralized power to prohibit drugs. This approach also disregards the rights of a duly licensed trader who is entitled to carry on business in a product that remains lawful unless and until lawfully prohibited. Fundamental principles of administrative law, as well as the very structure of the D&C Act, 1940, demand that any restriction on a licensed medicinal preparation must rest on a firm statutory footing.”

“It follows that the impugned orders dated 12.07.2022 and 22.09.2022 must be set aside. The Appellants, holding a valid license and acting within the boundaries of existing regulations, are entitled to resume their business of selling the aromatic tincture of cardamom and any other duly permitted medicines. The Respondent authorities, if genuinely concerned about misuse, may intensify lawful regulatory oversight, ensuring strict compliance with licensing conditions and quality standards. However, they cannot assume the power to declare the product banned or treat it as such in the absence of a notification under Section 26A of the D&C Act, 1940. The statutory scheme envisions uniformity, predictability, and legal certainty—values that would be undermined if local authorities could unilaterally impose prohibitions contrary to the nationally determined regime.”

Subsequently, the Supreme Court set aside the restrictions imposed by the authorities and allowed the appellants to resume their business under their valid license. It held;

“The Respondent authorities shall not, in the absence of any valid prohibition or restriction notified by the Central Government under the D&C Act, 1940 or the rules made thereunder, impose any limitations, conditions, or curbs on the Appellants’ lawful business activities relating to the sale, distribution, and wholesaling of the aromatic tincture of cardamom or any other duly licensed medicine. The Appellants shall be entitled to carry on their trade in accordance with their valid license and all applicable statutory provisions, free from unwarranted interference.”

To view the original order, click on the link below: