Valid Licensing: The applicants claimed to be licensed medicine dealers who had purchased the stock through valid invoices from legitimate distributors.
Medicinal Exemption: It was argued that since the concentration of Codeine in the cough syrup was within the medicinal limits prescribed under the Drugs and Cosmetics Act, it should not be treated as a "manufactured drug" under the NDPS Act.
Procedural Lapses: The defense contended that the Drug Inspector did not have the proper authority to collect and seal samples in the manner it was done, suggesting a violation of statutory protocols.
Clean Antecedents: The counsel highlighted that the applicants had no prior criminal record and were being falsely implicated.

On the other hand, the State’s counsel, led by Additional Advocate General Anoop Trivedi, strongly opposed the bail. The prosecution argued that the sheer volume of the recovery—nearly 12,000 bottles—clearly indicated that the syrup was not meant for retail pharmacy sales but for illegal "diversion" to addicts. They maintained that when a drug is diverted for non-medicinal use, the "therapeutic" exemption no longer applies.

The core legal question before the High Court was whether a licensed medicine becomes a narcotic substance if possessed in bulk without a clear therapeutic explanation.

Justice Srivastava referred to the Central Government Notification dated November 14, 1985, which lists 'Codeine' (Methyl-Morphine) as a manufactured drug. While an exception exists for preparations containing less than 100mg of Codeine per dosage unit and a concentration of not more than 2.5%, the Court clarified that this exception is conditional.

"The exemption provisions are required to be strictly and literally complied with," the Court noted. "Any violation of any condition would disentitle the claimant to the exemption."

The Court observed that the phrase "established in therapeutic practice" is the most crucial condition for the exemption. In this case, the possession of 11,885 bottles during a suspicious loading operation was seen as a "flagrant violation" of this condition. The Court reasoned that no legitimate therapeutic practice requires two individuals to handle such a massive quantity in a non-clinical, non-warehouse setting without transparent logistical documentation.