LexSECRETARY, MINISTRY OF CHEMICALS AND FERTILIZERS GOVERNMENT OF INDIA versus M/S. CIPLA LTD. AND ORS.
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SECRETARY, MINISTRY OF CHEMICALS AND FERTILIZERS A GOVERNMENT OF INDIA v. M/S. CIPLA LTD. AND ORS. AUGUST l, 2003 B [S. RAJENDRA BABU, P. VENKATARAMA REDDI AND ARUN KUMAR, JJ.) ' Constitution of India, 1950--Article 14-Drugs (Price Control) Ordrtr, 1995-First Schedule-Drug Policy, 1994-Para 22. 7.2-Bulk drugs and their C formulations-:-lnclusion of bulk drugs in First Schedule to Control Order of 1995-Pricefixation by Government and directing manufacturers to deposit overcharged amount-Writ petitions challenging the direction-High Court holding that drugs should not have been brought within the Control Order' as inclusion of drugs is opposed to the norms laid down by Central Government .D in Drug Policy and, therefore, delegated legislative power exercised by Government arbitrary and violative of Article 14-Justification of-Held: Approach of High Court not correct in applying the criteria laid down in Drug Policy in relation to each of the drugs-Further, by classifying the drug for price control Government should not flout the norms which it proposed to . follow in the public interest of transparency and objectivity-Delegated E legislation-Administrative law. Words and Phrases: 'Turnover'-Meaning of in the context of Drug Policy, 1994. Central Government issued Drug Policy of 1994 and set out price control criteria for drugs. The first criteria of including the drugs un<Jer the price control was the minimum annual turnover of Rs. 4QO lacs subject F to second and third criteria. The second criteria was that where monopoly situation prevails for any bulk drug, the minimum annual turnover sho~ld G be Rs. 100 lacs and such situation exists where there is a single formulator commanding 90% or more market share in the retail trade (as per ORG) and the third criterion was that even if minimum annual turnover exceeds Rs.400 lacs, drug will be kept outside price control in case there is sufficient market competition, yardstick being that there are at least five producers 177 H 178 SUPREME COURT REPORTS [2003] SUPP. 2 S.C.R. A of the particular bulk drug and at least ten formulators and none of them have more than 40% market share in the retail trade. Central Government promulgated Drugs (Price Control) Order, 1955 under which more number of drugs were subject fo price control. Seven bulk drugs, namely, Salbutamol, Theophylline, Cyproflaxacin, B Norfloxacin, Cloxacillin, Doxycycline and Glipizide were included in the first schedule to the Drugs (Price Control) Order, 1995 and the prices were fixed. National Pharmaceutical Pricing Authority then issued notices to the respondent-manufacturers of such drugs to deposit overcharged amounts in relation to the formulations of scheduled. drugs. Respondents C . filed writ petition challenging the inclusion of the drugs and price fixation. They contended that the norms set out in the Drug Policy have not been adhered to while framing the I Sche~ule to DPCO, 1995, that the annual turnover did not exceed the prescribed limit under the policy; and that there was discrimination between one drug and other. Union of India filed a counter affidavit. High Court accepted the claim of the writ petitioners D as there was bald denial and the particulars given were not controverted in the counter. It held that the Central Government acted contrary to its own guidelines contained in Drug Policy, 1994 by taking export sales figures and value of entire production of bulk drugs into account, and, therefore the concerned drugs should not have been brought within the E purview ofDPCO, 1995; and there could be no price fixation and quashed the notices allowing the petitions. Hence the present appeals. Appellants contended that the concerned bulk drugs were included in the schedule only after being satisfied that they came within the ambit of price control; that the value of total production plus imports of the bulk F drug in the country determines the annual turnover; that export sales could also be taken into account in arriving at the annual turnover; that only the single ingredient formulations have to be taken into account for purpose of working out the third criteria of the Drug Policy; that the number of single ingredient formulators of the concerned bulk drug is not discernible from ORG data; and that High Court cannot sit in judgment G over the exercise done by experts. Respondents-manufacturers of drugs contended that the se
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