UNION OF INDIA & ANR. versus CYNAMIDE INDIA LID. & ANR.

Citation: [1987] 2 S.C.R. 841 · Decided: 10-04-1987 · Supreme Court of India · Bench: O. CHINNAPPA REDDY · Disposal: Appeal(s) allowed

Cited by 9 judgment(s) · cites 9 · see the full citation network in Lexace

Judgment (excerpt)

y 
I 
UNION OF INDIA & ANR. 
A 
v. 
CYNAMIDE INDIA LID. & ANR. 
APRIL 10, 1987, 
[O. CHINNAPPA REDDY AND K.N. SINGH, JJ.) 
B 
Drugs (Prices Control) Order, 1979: Paragraphs 3, 12, 13 & 27: 
Bulk Drugs-,Price fixation of-,--Whether legislative activity-Principles 
of natural justice whether applicable to-Cost of production-Whether 
can be determined by a subordinate legislating Body-Price ftxation-
Review-Nature of-Formulations--Fixation of retail prices-Whether C 
to await the result of review application. 
Constitution of India,. Artic!es 32 & 226-Essential Commo-
dities-Price fixation of-Whether matter for investigation and interfer-
ence by Court. 
Practice. and Procedure: Essential Commodities-Price ftxatidn 
of-Interim order staying implementation of notificc.tion fixing prices-
Courts not to pass orders which would be against public interest. 
D 
Constitution of India,. Article 39(b)-Material resources of the 
community-Distribution of to sub-serve common good-Obligations 
E 
of State. 
Paragraph 3 of the Drugs (Prices Control) Order, 1979 made by 
the Central Government in exercise of powers unW:r s. 3(2)(c) of the 
Essential Commodities. Act, 1955 empowers the Government; after 
making such enquiry as it deems fit, to fix the maximum price at which 
F 
' the indigenously manufactured bulk dmg shall be sold. Clause (2) of 
Paragraph 3 provides that while so fixing the price of a bulk dmg, th• 
Government may take into account the average cost of production of 
such bulk drug manufactured by a efficient manufacturer and anow a 
reasonable return ou net worth. Paragraph 12 empowers the Govern-
ment to fix leader prices of formulations of categories I and II, while 
G 
paragraph 13 empowers the Government to fix retail prices of formnla-
tions of category III. Paragraph 27 enables any person aggrieved by any 
notification or order under the various paragraphs aforesaid to appeal 
to the Government for a review: 
The Central Government issued notifications under paragraph 3 · H 
' · 
841 
, /' 
842 
SUPREME COURT REPORTS 
[1987] 2 S.C.R. 
A of the 1979 Order fixing the maximum prices at which various indi-
genously manufactured hulk drugs could he s0Id. The manufacturers 'y 
first filed review applications under paragraph 27 of the Order and 
thereafter writ petitions under Art. 226 of the Constitution challenging 
the notifications. The High Court quashed those notifications on the 
ground of failure to observe the principles of natural justice. Since 
B prkes of formulations are primarily dependent on prices of bulk drugs, 
the notifications fixing the retail prices of formulations issued during 
L 
the pendency of review petitions were also quahsed. 
r' 
· 1n the appeal by the Union of India, it was contended that the 
fixation of maximum price under paragraph 3 of the Order was a 
C legislative activity and, therefore, not subject to any principle of 
natural justice, that paragraph 27 of the Order gave a remedy to the 
manufacturers to seek a review of the order f°IXing the maximum price )--
under paragraph 3, that such review did not partake the character of a 
judicial or quasi-judicial proceedings, and that at the time of the bear-
ing of the review application the matter underwent thorough and de-
D tailed discussion between the parties and the Government as well as the 
Bureau of Industrial Costs and Prices, and that the prices had not been 
fixed in an arbitrary manner. 
For the respondents, it was contended that unlike other price j. 
control legislations, the Drugs (Prices Control) Order was designed to 
E induce better production by providing for a fair return to the man-
ufacturers; that the provision for an enquiry proceeding the determina-
tion of the price of a bulk drug, the prescription in paragraph 3, clause 
2 that the average cost of production of the bulk drug manufactured by 
an efficient manufacturer should be taken into account and that a-.f 
reasonable return on net worth should be allowed, and the provision for ' 
F a review of the order determining the price, established that price-
~ 
fixation under the Order was a quasi-judicial activity obliging the 
observance of the rules of natural justice; that the review, for which 
provision is made by paragraph 27, was certainly of quasi-judicial 
character and, therefore, it was necessary that the manufacturers 
should be informed of the basis for the fixation of the price, that the 
G price had hen f°IXed in an arbitrary manner and the Gov

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