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Narcotic Drugs and Psychotropic Substances Act: 1985: s. 37-Application for bail-Companies providing network facilities for arranging supply of banned psychotropic substance on line-Owner arrested u/ss. 24 and 29-Plea of applicant that his companies were protected from prosecution by s. 79 of Information Technology Act-Held: Applicant and his associates were not innocent intermediaries or network service providers as defined under s. 79 of I.T. Act but the said business was only a facade and comouflage for more sinister activity-In this situation, s. 79 will not grant immunity to an accused who has violated provisions of the Act as this provision gives immunity from prosecution for an offence only under I.T. Act itself-In the face of overwhelming inculpatory evidence it is not possible to give finding envisaged under s.37 of the Act for grant of bail that there were reasonable grounds for believing that applicant was not guilty of offence alleged, or that he would not resume his activities should bail be granted-Information Technology Act, 2000-s. 79. K.T.S. Tulsi and Uday Umesh Lalit, Arun Kumar Srivasma, Manoj Prasad, Amit Pawan and G. Bhargava for the Appellant. Vikas Singh, ASG., B.B. Singh, Binu Tamta and Sushma Suri for the Respondents.

CASE NO.:
Various prescription and street drugs may caus...

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Appeal (crl.)  1659 of 2007

PETITIONER:
Sanjay Kumar Kedia

RESPONDENT:
Narcotics Control Bureau & Anr

DATE OF JUDGMENT: 03/12/2007

BENCH:
S.B.SINHA & HARJIT SINGH BEDI

JUDGMENT:
JUDGMENT

O R D E R 
CRIMINAL APPEAL NO. 1659 OF 2007
 (@SLP (Crl.) No. 3892 of 2007) 


HARJIT SINGH BEDI, J. 



1. 	Special Leave granted.

2.	The appellant Sanjay Kumar Kedia, a highly qualified 
individual, set up two companies M/s. Xponse Technologies 
Limited (XTL) and M/s. Xponse IT Services Pvt. Ltd. (XIT) on 
22.4.2002 and 8.9.2004 respectively which were duly 
incorporated  under the Indian Companies Act, 1956.  On 
1.2.2007 officers of the Narcotics Control Bureau (NCB) 
conducted a search at the residence and office premises of 
the appellant but found nothing incriminating.  He was also 
called upon  to appear before the NCB on a number of 
occasions pursuant to a notice issued to him under Section 67 
of the Narcotic Drugs and Psychotropic Substances Act, 1985 
(hereinafter referred to as the "Act") and was ultimately 
arrested and the bank accounts and premises of the two 
companies were also seized or sealed.  On 13.3.2007 the 
appellant filed an application for bail in the High Court 
which was dismissed on the ground that a prima facie case 
under Sections 24 and 29 of the Act had been made out and 
that the investigation was yet not complete.  The appellant 
thereafter moved a second bail application before the High 
Court on 16.4.2007 which too was dismissed with the 
observations that the enquiry was at a critical stage and 
that the department should be afforded sufficient time to 
conduct its enquiry and to bring it to its  logical 
conclusion as the alleged offences had widespread 
ramifications for society.  It appears that a bail 
application was thereafter filed by the appellant before the 
Special Judge which too was rejected on 28.5.2007 with the 
observations that the investigation was still in progress.  
Aggrieved thereby, the appellant preferred yet another 
application for bail before the High Court on 4.6.2007 which 
too was dismissed on 7.6.2007.  The present appeal has been 
filed against this order.
3.	Notice was issued on the Special Leave Petition on 
30.7.2007 by a Division Bench noticing a contention raised by 
Mr. Tulsi that service providers such as the two companies 
which were intermediaries were protected from prosecution by 
Section 79 of the Information Technology Act, 2000.  An 
affidavit in reply has also been filed on behalf of the 
respondent  NCB and a rejoinder affidavit in reply thereto 
by the appellant.
4.	We have heard learned counsel for the parties at length.
5.	Mr. Tulsi has first and foremost argued that the 
allegations against the appellant were that he had used the 
network facilities provided by his companies for arranging 
the supply of banned psychotropic substances on line but 
there was no evidence to suggest that the appellant had been 
involved in dealing with psychotropic substances or  engaged 
in or controlled any trade whereby such a substance obtained 
outside India had been supplied to persons outside India and 
as such no case under section 24 of the Act had been made out 
against the appellant.  Elaborating this argument, he has 
submitted that the two drugs which the appellant had 
allegedly arranged for supply were phentermine and butalbital  
and as these drugs were not included in Schedule-I of the 
Narcotic Drugs or Psychotropic Substances Rules 1987 in terms 
of the notification dated 21.2.2003 and were also recognized 
by the Control Substances Act, a  law applicable in the 
United States, as having low  potential for misuse and it was 
possible to obtain these drugs either on written or oral 
prescription of a doctor, the supply of these drugs did not 
fall within the mischief of Section 24.  He has further 
argued that in the circumstance, the companies were mere 
network service providers they were protected under Section 
79 of the Technology Act from any prosecution.
6.	Mr. Vikas Singh, the learned Additional Solicitor 
General for the respondents has  however pointed out that the 
aforesaid drugs figured in the Schedule appended to the Act 
pertaining to the list of psychotropic substances (at Srl. 
Nos. 70 and 93) and as such it was clear that the two drugs 
were psychotropic substances and therefore subject to the 
Act.  It has also been pointed out that the appellant had 
been charged for offences under Sections 24 and 29 of the Act 
which visualized that a person could be guilty without 
personally handling a psychotropic substance and the evidence 
so far  collected showed that the appellant was in fact a 
facilitator between buyers and certain pharmacies either 
owned or controlled by him or associated with the two 
companies and that Section 79 of the Technology Act could not 
by any stretch of imagination guarantee immunity from 
prosecution under the provisions of the Act. 
7.	It is clear from the Schedule to the Act that the two 
drugs phentermine and butalbital are psychotropic substances 
and therefore fall within the prohibition contained in 
Section 8 thereof.  The appellant has been charged for 
offences punishable under Sections 24 and 29 of the Act.  
These Sections are re-produced below:
24. " Punishment for external dealings in 
narcotic drugs and psychotropic substances 
in contravention of section 12.-  Whoever 
engages in or controls any trade whereby a 
narcotic drug or a psychotropic substance 
is obtained outside India and supplied to 
any person outside India without the 
previous authorization of the Central 
Government or otherwise than in accordance 
with the conditions (if any) of such 
authorization granted under section 12, 
shall be punishable with rigorous 
imprisonment for a term which shall not be 
less than ten years but which may extend 
to twenty years and shall also be liable 
to fine which shall not be less than one 
lakh rupees but may extend to two lakh 
rupes:

     Provided that the court may, for 
reasons to be recorded in the judgment, 
impose a fine exceeding two lakh rupees".





29. Punishment for abetment and 
criminal conspiracy. -  (1) Whoever 
abets, or is a party to a criminal 
conspiracy to commit an offence 
punishable under this Chapter, shall, 
whether such offence be or be not 
committed in consequence of such 
abetment or in pursuance of such 
criminal conspiracy, and 
notwithstanding anything contained in 
section 116 of the Indian Penal Code 
(45 of 1860), be punishable with the 
punishment provided for the offence.

(2)  A person abets, or is a party to a 
criminal conspiracy to commit, an 
offence, within the meaning of this 
section, who, in India abets or is a 
party to the criminal conspiracy to the 
commission of any act in a place 
without and beyond India which 
	
(a)	would constitute an offence if 
committed within India; or


(b)	under the laws of such place, 
is an offence relating to 
narcotic drugs or psychotropic 
substances having all the legal 
conditions required to 
constitute it such an offence 
the same as or analogous to the 
legal conditions required to 
constitute it an offence 
punishable under this Chapter, 
if committed within India.

8.    A perusal of Section 24 would show that it deals with 
the engagement or control of a trade in Narcotic Drugs and 
Psychotropic Substances controlled and supplied outside India 
and Section 29 provides for the penalty arising out of an 
abetment or criminal conspiracy to commit an offence under 
Chapter IV which includes Section 24.  We have accordingly 
examined the facts of the case in the light of the argument 
of Mr. Tulsi that the companies only provided third party 
data and information without any knowledge as to the 
commission of an offence under the Act. We have gone through 
the affidavit of Shri A.P. Siddiqui Deputy Director, NCB and 
reproduce the conclusions drawn on the investigation, in his 
words.  						
"(i) The accused and its associates are 
not intermediary as defined under 
section 79 of the said Act as their 
acts and deeds was not simply 
restricted to provision of third party 
data or information without having 
knowledge as to commission of offence 
under the NDPS Act.  The company 
(Xponse Technologies Ltd. And Xpose IT 
Services Pvt. Ltd. Headed by Sanjay 
Kedia) has designed, developed, hosted 
the pharmaceutical websites and was 
using these websites, huge quantity of 
psychotropic substances (Phentermine 
and Butalbital) have been distributed 
in USA with the  help of his 
associates.  Following are the online 
pharmacy websites which are owned by 
Xponse or Sanjay Kedia.


(1)	Brother Pharmacy.com and LessRx.com:  
Brothers pharmacy.com, online pharmacy 
was identified as a marketing website 
(front end) for pharmaceutical drugs. 
LessRx.com has been identified as a "back 
end" site which was being utilized to 
process orders for pharmaceutical drugs 
through Brotherspharmacy.com.  
LessRx.com's registrant and 
administrative contact was listed True 
Value Pharmacy located at 29B, Rabindra 
Sarani, Kolkata, India-700073.  Telephone 
No.033-2335-7621 which is the address of 
Sanjay Kedia.  LessRx.com's IP address is 
203.86.100.95.  The following websites 
were also utilizing this IP address:

ALADIESPHARMACY.com,
EXPRESSPHENTERMINE.com,
FAMILYYONLINEPHARMACY.com
ONLINEEXPRESSPHARMACY.com,
SHIPPEDLIPITOR.com
Domain name Servers for LessRx.com (IP 
address: 203.86.100.95) were 
NS.PALCOMONLINE.com and 
NS2PALCOMLINE.com.

      The LessRx.com's website hosting 
company was identified as Pacom Web Pvt 
Ltd, C-56/14,1st Floor, Institutional 
Area, Sector 62, Noida-201301.  Sanjay 
Kedia entrusted the hosting work to 
Palcom at VSNL, Delhi.  These servers 
have been seized.  Voluntary statement of 
Shri Ashish Chaudhary, Prop. Of Palcom 
Web Pvt Ltd.indicates that He maintained 
the websites on behal of Xponse.

      According to the bank records, 
funds have been wired from Brothers 
pharmacy, Inc's Washington Mutual Bank 
Account #0971709674 to Xponse IT services 
Pvt Ltd, ABN AMRO bank account 
No.1029985, Kolkata.


(2) Deliveredmedicine.com   : A review of 
the Xponse's website-XPONSEIT.com was 
conducted and observed and advertisement 
for XPONSERX.  That XPONSERX was 
described as a software platform 
developed for the purpose of powering 
online pharmacies.  Xponserx was designed 
to process internet pharmacy orders by 
allowing customers to order drugs.  Drug 
Enforcement Administration (DEA), USA 
conducted a "whois" reverse lookup on 
domain name XPONSERX.COM was at 
domaintools.Com and it revealed that 
XPONSERX.COM was registered to Xponse IT 
Services Pvt Ltd, Sanjay kedia, 
29B,Rabindra Sarani, 12E,3rd floor, 
Kolkata, WB 70073. Telephone no.+91-
9830252828 was also provided for Xponse.  
Two websites were featured on the 
XPONSEIT.COM websites as featured 
clients. And these were 
DELIVEREDMEDICINE.COM             AND 
TRUEVALUEPRESCRIPTIONS.COM.  Review 
indicated that these two websites were 
internet pharmacies.

Consequently a "whois" reverse look-up on 
domain name DELIVEREDMEDICINE.COM at 
domainstools.com conducted by DEA revealed 
that it was registered to Xponse Inc.,2760 
Park Ave.,Santa Clara, CA, USA which is the 
address of Sanjay Kedia.

(3) Truevalueprescriptions.com:  Review of 
this website indicated that this website was 
a internet pharmacy.  In addition 
TRUEVALUEPRESCRIPTIONS listed Phentermine as 
a drug available for sale.  It appeared that 
orders for drugs could be made without a 
prescription from the TRUEVALUE website, it 
was noted that orders for drugs could be 
placed without seeing a doctor.  According 
to the website, a customer can complete an 
online questionnaire when placing the order 
for a drug in lieu of a physical exam in a 
physician's office.  Toll free telephone 
number 800-590-5942 was provided on the 
TRUEVALUE website for customer Service.

DEA, conducted a "whois" reverse look-up 
on domain name TRUEVALUEPRESCRIPTIONS.COM 
at domaintools.com and revealed that IP 
address was 203.86.100.76 and the server 
that hosts the website was located at 
Palcom, Delhi which also belongs to Xponse.

From the above facts it is clear that the 
Xponse Technologies Ltd and Xponse IT 
Services Pvt Ltd were not acting merely as 
a network service provider but were 
actually running internet pharmacy and 
dealing with prescription drugs like 
Phentermine and Butalbital."

9.   We thus find that the  appellant and his associates were 
not innocent intermediaries or network service providers as 
defined under section 79 of the Technology Act but the said 
business was only a fagade and camouflage for more sinister 
activity. In this situation, Section 79 will not grant 
immunity to an accused who has violated the provisions of the 
Act as this provision gives immunity from prosecution for an 
offence only under Technology Act itself.
10.   We are therefore of the opinion that in the face of 
overwhelming inculpatory evidence it is not possible to give 
the finding envisaged under Section 37 of the Act for the 
grant of bail that there were reasonable grounds for 
believing that the appellant was  not guilty of the offence 
alleged,  or that he would not resume his activities should 
bail be granted.
11.    For the reasons recorded above, we find no merit in 
this appeal, which is accordingly dismissed.  We however 
qualify that the observations made above are in the context 
of the arguments raised by the learned counsel on the bail 
matter which obligated us to deal with them, and will not 
influence the proceedings or decision in the trial in any 
manner.

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