M/s.Southern Petrochemical IndustriesCorporation LimitedSPIC Pharmaceutical DivisionSPIC v. The National Pharmaceutical Pricing Authority

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2009 CORAMTHE HONOURABLE MR.JUSTICE V.DHANAPALANW.P.No.16864 of 2004M/s.Southern Petrochemical IndustriesCorporation LimitedSPIC Pharmaceutical DivisionSPIC HouseNo.88, Mount Road, GuindyChennai-32 rep.by its Manager (Finance)D.r.Augustine Paulraj ..PetitionerVs.The National Pharmaceutical Pricing Authority,Department of Chemicals and PetrochemicalsMinistry of Chemicals and FertilizersGovernment of IndiaYMCA Cultural Centre BuildingJai Singh Road, New Delhi 110 001rep.by its Director M.S.Balasubramanian ..RespondentWrit Petition filed U/s. 226 of the Constitution of India toissue a Writ of Certiorari calling for the records of the respondentherein relating to the proceedings dated 25.05.2004 (demanding thesum of Rs.84,98,615/- towards alleged over charge relating to thedrug formulation Griseofulvin 250 Mg. Tablets and interest thereon)and to quash the same.For Petitioner:Mr.AR.L.SundaresanSenior Counsel for Mrs.AL.GandhimathiFor Respondent:Mr.M.Ravindran,Addl.Solicitor General-I assistedby J.Ravindran Assistant S.G.ORDERThis writ petition has been filed for the issuance of a Writ ofCertiorari calling for the records of the respondent herein relatingto the proceedings dated 25.05.2004 (demanding the sum of https://hcservices.ecourts.gov.in/hcservices/ Rs.84,98,615/- towards alleged overcharge relating to the drugformulation Griseofulvin 250 Mg. tablets and interest thereon) and toquash the same.2. The case of the petitioner is that the petitioner is aregistered company incorporated under the provisions of the CompaniesAct 1 of 1956 and one of its division is engaged in the manufactureand sale of pharmaceutical products; one of the productsmanufactured and sold by the petitioner is Griseofulvin 250 mgtablet, which is manufactured and sold by the petitioner under thename Tineavin. For the purpose of sale, several packing materialsare used. The commodity also suffers excise duty. Hence, thepetitioner, after taking into consideration the cost of theingredients, packing materials, other incidental charges had arrivedat the final price of Rs.19.60 per 10 tablets, including excise duty.3. It is the further case of the petitioner that the Governmentof India, in exercise of powers conferred under the EssentialCommodities Act, has framed Rules regulating and controlling theprice of drugs and accordingly, The Drugs (Price Control) Order, 1995(in short DPCO 1995) have been framed. In that, para No.3 providesfor fixation of ceiling price for bulk drugs, para No.9 contemplatesthe powers to fix the price for formulation; para No.7 provides forfixing the retail price for formulation. The manufacturing costincludes the cost of ingredients, cost of packing materials andconversion cost. It also provides that the Maximum Allowable PostManufacturing Expenses can be up to 100 percent of the cost ofmaterial and manufacturing.4. It is also stated in the affidavit that as per para 7 of theDPCO 1995, the maximum retail price chargeable for Tineavin 10 tabs,excluding Excise, would be Rs.19.66. However, the petitioner hasfixed the retail price of Tineavin at Rs.17.54 per ten tablets,excluding Excise Duty and at Rs.19.60 per ten tablets includingExcise Duty, which is strictly in accordance with the formulaprescribed under para 7 of the DPCO 1995. The Government, inexercise of powers conferred under para 3 of the DPCO 1987, videNotification S.O.819 (E) dated 19.11.1994, fixed the ceiling pricefor the bulk drug of Griseofulvin at Rs.3,691/- per kg and accordingto para 7 of the DPCO 1995, the price of ten tablets would come toRs.21.24, excluding Excise Duty. However, the Government, videOrder S.O.904 (E), dated 10.11.1995, which was issued in exercise ofpowers under para 9 of the DPCO 1995, fixed the ceiling price ofGriseofulvin 250 mg at Rs.12.58 per 10 tablets, excluding ExciseDuty, which was not in conformity with the fixation of the price ofthe bulk drugs as done under para 3 of the Control Order and the sameis against the formula prescribed under para 7 of the said Order.5. It is also stated that on 28.01.1997, the Assistant Director,Regional Office, Drugs Control Administration, State of Andhra https://hcservices.ecourts.gov.in/hcservices/ Pradesh, issued a notice to the petitioner calling upon him to showcause as to how he would be justified in fixing the retail price at19.60 per 10 tablets, instead of Rs.12.58, as per S.O.904 (E), dated10.11.1995.6. It is the further case of the petitioner that he replied inresponse to the above show cause notice that the MRP charged for theTineavin 250 mg tablets is well within the MRP chargeable ascontemplated in DPCO 1995. He has also produced the working sheets,incorporating the necessary details. But the respondent has notreplied for the same. Hence, the petitioner was under the impressionthat the explanation was accepted.7. It is also stated that to the shock and surprise of thepetitioner, the respondent issued a notice dated 25.05.2004 statingthat the petitioner has violated the provisions of the DPCO 1995 andhad charged price in excess of the notified price for the formulationof Griseofulvin 250 mg and directed the petitioner to deposit a sumof Rs.84,98,615/-, which includes Rs.47,81,772/- towards theovercharged amount and Rs.37,16,843/- towards interest, on or before24.06.2004, failing which action will be taken as against thepetitioner individually and severally under the provisions of DPCO1995 read with the Essential Commodities Act, 1955. Hence the presentwrit petition.8. The respondent in their counter affidavit would state thatunder no circumstance, there can be any exception to the rule ofstrict adherence to the ceiling price fixed by the Government and thepetitioner has wilfully violated the provisions of the DPCO 1995.The petitioner company has violated the provisions of DPCO 1995, byfixing the price at Rs.19.60 for the Tineavin 250 mg 10's tablets,based on scheduled bulk drug Griseofulvin, on its own and was sellingthe same at a price higher than the notified price. If anymanufacturer, who desires revision of the retail price, is requiredto make an application to the NPPA/Government of India under From IIIand IV. The petitioner is mandatorily required to implement theprice. But however, the petitioner is deliberately overcharging, byselling the formulation at a MRP of Rs.19.60 per 10 tablets insteadof Rs.12.58 per 10 tablets as fixed by the Respondent.9. Submitting that price fixation is a legislative act and pricefixation does not primarily affect the manufacturer, but vitallyaffects the consumer public, Mr.M.Ravindran, the learned AdditionalSolicitor General, inter alia made the following submissions.●If there was any arbitrariness in price fixation, it is for themanufacturer to bring it to the Notice of the Government byinvoking Para 22 of DPCO 1995 by filing Review. https://hcservices.ecourts.gov.in/hcservices/ ●When an efficacious alternative remedy is available, Courtcannot constitute itself as a Court of Appeal, for which,reliance was placed upon (1987) 2 SCC 720 (Union of India v.Cynamide India Limited).10. In exercise of the powers conferred under Sec. 3 of theEssential Commodities Act, The Drugs (Prices Control) Order, 1995,was promulgated by Government of India on 06.01.1995. Under DPCO1995, 76 Bulk Drugs (subsequently reduced to 74) are included in thefirst schedule and these Bulk Drugs are called Scheduled Bulk Drugs.The Government of India/NPPA is empowered to fix and notify themaximum sale price of the Scheduled Bulk Drugs and the retail priceof the related formulations under Para 3, 8 and 9 of DPCO 1995.11. Para 3(1) of DPCO 1995, reads as follows: " 3. Power to fix the maximum sale prices of bulk drugsspecified in the First Schedule. – (1) The Government may witha view to regulate the equitable distribution and increasingsupplies of a bulk drug specified in the First Schedule andmaking it available at a fair price, from differentmanufacturers, after making such inquiry as it deems fit, fixfrom time to time, by notification in the Official Gazette, amaximum sale price at which such bulk drug shall be sold: ...."11. Para 8 of DPCO 1995 reads as under:"8. Power to fix retail price of scheduled formulations.--(1)The Government may, from time to time, by order, fix theretail price of a scheduled formulation in accordance with theformula laid down in Para 7...."12. The petitioner has been manufacturing a formulation calledTineavin 250 mg, which is stated to be a brand of MicronisedGriseofulvin containing micronised form of Griseofulvin.Exercising the powers under para 9(1) of DPCO 1995, the Respondentfixed and notified the price of Rs.12.58 for scheduled formulation ofGriseofulvin Tablets in S.O.No.904(E) dated 10.11.1995. 13. As per Para 14 of DPCO 1995, every manufacturer is under alegal obligation to strictly adhere to the ceiling prices fixed forthe formulations and drugs. The mandate of Para 14 of DPCO 1995 isabsolutely clear and unambiguous. As per Para 14, it is the duty ofevery manufacturer or importer to implement the price fixed by theCentral Government within 15 days from the date of the concernedNotification.14. The Petitioner company has not implemented the price fixedby the Respondent within 15 days. As per the information available https://hcservices.ecourts.gov.in/hcservices/ with the respondent, viz., The National Pharmaceutical PricingAuthority (NPPA), the Petitioner/Company have been selling theGriseofulvin 250 mg tablets at the rate of 19.60 including ExciseDuty as against the ceiling price of Rs.12.58 (without excise duty),fixed by the Respondent. The Respondent called upon the Petitionerby communication dated 18.03.2003 to explain the reasons for non-compliance of the ceiling price. In the said communication, theRespondent also called upon the Petitioner to furnish consolidatedprice list in Form-V for all the products manufactured and/ormarketed by Petitioner/Company and also called for the production andsales details in the prescribed format.15. The Petitioner/Company had sent a reply dated 25.06.2003stating that their product Tineavin consist of MicronisedGriseofuvin, which is superior efficacy. The price was fixed as perpara 7 DPCO 1995. The actual price notified by the Government forGriseofulvin Bulk Drug, including excise duty, was Rs.3,546/-,whereas the ceiling price specified for Griseofulvin Bulk drug in theNotification 819(E) dated 19.11.1994 was Rs.3,691/- per kg. Hence,the MRP chargeable as per para 7, subject to Notification No.819(E)dated 19.11.1994, is Rs.220/-. However, the petitioner company ischarging only Rs.196/- for 10 x 10's tablet. They have also explainedthat the Notified Griseofulvin Bulk Drug Price is not unfortunatelyrecognised, while fixing the formulation price. 16. As the Petitioner has not furnished the requiredparticulars, by the impugned communication dated 25.05.2004, theRespondent called upon the Petitioner to provide relevantquantitative information, which is the subject matter of challenge inthis Writ Petition.17. The learned senior counsel for the petitioner would submitthat the impugned proceedings has been passed in violation of theprinciples of natural justice, as no show cause notice was issuedbefore calling upon the petitioner to pay the alleged over chargeamount and the interest thereon. He would also submit that theceiling price in respect of the formulations will have to be fixedonly in accordance with the formula contained in para 7 of the DPCO1995 and the fixation of Rs.12.58 per 10 tablets is erroneous andcontrary to the formula prescribed under Para 7 of the Control Orderand accordingly, he prayed for setting aside the impugned order.18. The learned senior counsel for the petitioner would alsosubmit that any contravention to the provisions of DPCO 1995 ispunishable in accordance with the Essential Commodities Act 1955.U/s. 7 of the Essential Commodities Act, 1955, any contravention ofany order (DPCO 1995) entails imprisonment and fine and or forfeitureof the property involved. As the contravention of the pricenotification issued under DPCO 1995 results in criminal prosecution,it was contended by the learned Senior Counsel that the Price https://hcservices.ecourts.gov.in/hcservices/ Notification must be construed strictly and in a narrow sense.Placing reliance upon W.H.King v. Republic of India, AIR 1952 SC 156and Tolaram Vs. State of Bombay, AIR 1954 SC 496, the learned SeniorCounsel submitted that the Price Notification must receive a strictand narrow interpretation and should not be stretched to includewithin its purview capsules containing an enteric coated tablet andmust be confined to plain capsules.19. Contending that there is no logic for fixing ceiling priceat Rs.12.58 per 10 tablets, the learned Senior Counsel would submithad the Government intended to fix the ceiling price for thePetitioner's formulation, the Government would have asked for "thecost or efficiency" data of the Petitioner. It was further arguedthat under Para 9 of DPCO 1995, the ceiling price can be fixed onlyafter taking into account the cost or efficiency, or both, ofmanufacturers of the formulations, whose price is sought to be fixed.20. Countering the arguments, the learned Additional SolicitorGeneral (ASG) Mr.M.Ravindran has submitted that the Petitioner'sproduct is the scheduled formulation which comes under the purview ofprice control under the provisions of Paras 8 and 9 of DPCO 1995 andaccordingly, the ceiling prices have been notified by the Respondentin S.O.No.904(E) dated 10.11.1995, after considering the relevantfactors and norms as per the provisions of DPCO 1995.21. The learned ASG mainly contended that as per Para 22 of DPCO1995, price fixation is a legislative activity and Court cannot actas Court of Appeal over the question of price fixation and suchquestion can be raised by the Petitioner only before the Governmentin Review Application under Para 22 of DPCO 1995. Placing relianceupon Cynamide India Limited Case ((1987) 2 SCC 720), it wassubmitted that the Court is neither concerned with the policy norwith the rates and any interference by the Court would only affectthe common man to purchase the drugs at an affordable price.22. In view of the availability of efficacious alternativeremedy, I do not propose to go into the merits of the matter norexpress any views as to whether Petitioner's formulation Griseofulvin250 mg tablets would be covered under the Notification or not. 23. Para 22 of DPCO 1995 deals with power of Government toreview a price order. Para 22 of DPCO 1995 reads as under:"22. Power to review.-- Any person aggrieved by anynotification issued or order made under paras 3, 5, 8, 9 or 10may apply to the Government for a review of the notificationor order within fifteen days of the date of publication of thenotification in the Official Gazette or the receipt of theorder by him, as the case may be, and the Government may makesuch order on the application as it may deem proper; https://hcservices.ecourts.gov.in/hcservices/ Provided that pending a decision by the Government on theapplication submitted under the above paragraph, nomanufacturer, importer or distributor, as the case may be,shall sell a bulk drug or formulation, as the case may be, ata price exceeding the price fixed by the Government of which areview has been applied for". 24. The Petitioner/Company has not filed any Review Applicationunder Para 22 of DPCO 1995. 25. Observing that 'Price fixation is neither the function northe forte of the Court' and if there is any grievance, the properthing for the manufacturers is to bring it to the notice of theGovernment in their Applications for review, in Union of India v.Cynamide India Limited, (1987) 2 SCC 720, the Supreme Court has heldas under:"4. We start with the observation, 'Price fixation isneither the function nor the forte of the Court'. Weconcern ourselves neither with the policy nor with the rates.But we do not totally deny ourselves the jurisdiction toenquiry into the question, in appropriate proceedings,whether relevant considerations have gone in and irrelevantconsiderations kept out of the determination of the price.For example, if the legislature has decreed the pricingpolicy and prescribed the factors which should guide thedetermination of the price, we will, if necessary, enquireinto the question whether the policy and the factors arepresent to the mind of the authorities specifying the price.But our examination will stop there. We will go no further.We will not deluge ourselves with more facts and figures.The assembling of the raw materials and the mechanics ofprice fixation are the concern of the executive and we leaveit to them. And, we will not re-evaluate the considerationseven if the prices are demonstrably injurious to somemanufacturers or producers. The court will, of course,examine if there is any hostile discrimination. That is adifferent 'cup of tea' altogether. ....31....We think that if there is any grievance on thatscore, the proper thing for the manufacturers to do is bringit to the notice of the Government in their applications forreview. The learned counsel argued that they were unable tobring these facts to the notice of the Government as theywere not furnished the basis on which the prices were fixed.On the other hand, it has been pointed out in the counter-affidavits filed on behalf of the Government that allnecessary and required information was furnished in the https://hcservices.ecourts.gov.in/hcservices/ course of the hearing of the review applications and therewas no justification for the grievance that particulars werenot furnished. We are satisfied that the procedure followedby the Government in furnishing the requisite particulars atthe time of the hearing of the review applications issufficient compliance with the demands of fair play in thecase of the class of persons claiming to be affected by thefixation of maximum price under the Drugs (Prices Control)Order. As already stated by us, manufacturers of bulk drugswho claim to be affected by the Drugs (Prices Control) Order,belong to a class of persons who are well and fully informedof every intricate detail and particular which is required tobe taken into account in determining the price. In mostcases, they are the sole manufacturers of the bulk drug andeven if they are not the sole manufacturers, they belong tothe very select few who manufacture the bulk drug. It isimpossible to conceive that they cannot sit across the tableand discuss item by item with the reviewing authority unlessthey are furnished in advance full details and particulars.The affidavits filed on behalf of the Union of India showthat the procedure which is adopted in hearing the reviewapplications is to discuss across the table the various itemsthat have been taken into account. We do not consider thatthere is anything unfair in the procedure adopted by theGovernment. If necessary it is always open to themanufacturers to seek a short adjournment of the hearing ofthe review application to enable them to muster more factsand figures on their side. Indeed we find that the hearinggiven to the manufacturers is often protected. As we said wedo not propose to examine this question as we do not want toconstitute ourselves into a court of appeal over theGovernment in the matter of price fixation. 26. In Para 37 of the Judgment, the Supreme Court observed thatwhere prices of essential commodities are fixed in order to maintainor increase supply of the commodities or for securing the equitabledistribution and availability at fair prices of the commodity, it isnot right for the High Court to grant any interim order staying theimplementation of the Notification fixing the prices. Price fixationbeing legislative function and in view of the availability ofalternative remedy, it would not be appropriate for this Court to gointo the merits of the contention raised by the Petitioner. 27. The learned ASG submitted that in the event of non-cooperation by the Companies, the quantum of overcharging is assessedon the basis of available sales data in ORG IMS. It was furthersubmitted that as per the available information in the ORG in respectof Griseofulvin 250 mg tablets, it has been assessed that thePetitioner is liable to deposit Rs.84,98,615/- for the period from https://hcservices.ecourts.gov.in/hcservices/ March 1996 to April 2004 for charging higher price of Rs.19.20against the ceiling price of Rs.12.58 notified vide S.O.No.904(E)dated 10.11.1995. According to the respondent, the petitioner is notentitled to sell the drugs in view of Paras 14 and 16 of DPCO 1995. 28. The issue relating to entertaining Writ Petition whenalternative remedy is available was examined by the Supreme Court inseveral cases. In U.P.State Spinning Co. Ltd. v. R.S.Pandey, (2005)8 SCC 264, the Supreme Court has held as under:"11. Except for a period when Article 226 was amended bythe Constitution (Forty-Second Amendment) Act, 1976, the powerrelating to alternative remedy has been considered to be arule of self-imposed limitation. It is essentially a rule ofpolicy, convenience and discretion and never a rule of law.Despite the existence of an alternative remedy it is withinthe jurisdiction or discretion of the High Court to grantrelief under Art. 226 of the Constitution. At the same time,it cannot be lost sight of that though the matter relating toan alternative remedy has nothing to do with the jurisdictionof the case, normally the High Court should not interfere ifthere is an adequate efficacious alternative remedy. Ifsomebody approaches the High Court without availing thealternative remedy provided, the High Court should ensure thathe has made out a strong case or that there exist good groundsto invoke the extraordinary jurisdiction.12. Constitution Benches of this Court in K.S.Rashid andSon v. Income Tax Investigation Commission, AIR 1954 SC 207,Sangram Singh v. Election Tribunal, Kotah, AIR 1955 SC 425,Union of India v. T.R.Varma, AIR 1957 SC 882, State of U.P. v.Mohd.Nooh, AIR 1958 SC 86 and K.S.Venkataraman and Co.(P) Ltd.v. State of Madras, AIR 1966 SC 1089, held that Article 226 ofthe Constitution confers on all the High Courts a very widepower in the matter of issuing writs. However, the remedy ofwrit is an absolutely discretionary remedy and the High Courthas always the discretion to refuse to grant any writ if it issatisfied that the aggrieved party can have an adequate orsuitable relief elsewhere. The Court, in extraordinarycircumstances, may exercise the power if it comes to theconclusion that there has been a breach of principles ofnatural justice or procedure required for decision has notbeen adopted.13. Another Constitution Bench of this Court in State ofM.P. v. Bhailal Bhai, AIR 1964 SC 1006, held that the remedyprovided in a writ jurisdiction is not intended to supersedecompletely the modes of obtaining relief by an action in acivil court or to deny defence legitimately open in suchactions. The power to give relief under Article 226 of the https://hcservices.ecourts.gov.in/hcservices/ Constitution is discretionary power. Similar view has beenreiterated in N.T.Veluswami Thevar v. G.Raja Nainar, AIR 1959SC 422, Municipal Council, Khurai v. Kamal Kumar, AIR 1965 SC1321, Siliguri Municipality vs. Amalendu Das, AIR 1984 SC653, S.T.Muthusami v. K.Natarajan, AIR 1988 SC 616, RajasthanSRTC v. Krishna Kant, AIR 1995 SC 1715, Kerala SEB v. KurienE.Kalathil, AIR 2000 SC 2573, A.Venkatasubbiah Naidu v.S.Chellappan (2000) 7 SCC 695, L.L.Sudhakar Reddy v. State ofA.P. (2001) 6 SCC 634, Shri Sant Sadguru Janardan Swami(Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State ofMaharashtra, (2001) 8 SCC 509, Pratap Singh v. State ofHaryana, (2002) 7 SCC 484 and GKN Driveshafts (India) Ltd. v.ITO (2003) 1 SCC 72." 29. Pointing out the circumstances as to when the alternativeremedy would not be a bar to entertain the Writ Petition, in the saiddecision the Supreme Court has held as follows: "16.....There are two well-recognised exceptions to thedoctrine of exhaustion of statutory remedies. First is whenthe proceedings are taken before the forum under a provisionof law which is ultra vires, it is open to a party aggrievedthereby to move the High Court for quashing the proceedingson the ground that they are incompetent without a party beingobliged to wait until those proceedings run their fullcourse. Secondly, the doctrine has no application when theimpugned order has been mde in violation of the principles ofnatural justice. We may add that where the proceedingsthemselves are an abuse of process of law the High Court inan appropriate case can entertain a Writ Petition."30. In my considered view, in the instant case, no suchexceptional circumstances are made out. When factual questions areinvolved, it would not be desirable to deal with them in the WritPetition. The respondent called upon the petitioner in itscommunication dated 18.03.2003 to explain the reasons for non-compliance of the ceiling price and in the said communication therespondent also called upon the petitioner to furnish consolidatedprice list in Form V for all the products manufactured by thepetitioner company so also the production and sales details in theprescribed format. A reply was sent by the petitioner to the saidcommunication on 25.06.2003 stating about the product and fixing ofprice.31. It is the cardinal principle that only in case of violationof principles of natural justice, the statutory alternative remedycan be bypassed. Where effective, efficacious or alternative remedyis statutorily provided for, the same has to be exhausted by theparty in a manner known to law. https://hcservices.ecourts.gov.in/hcservices/

32. Therefore, in the instant case, in the absence of anyviolation of principles of natural justice, the petitioner cannotinvoke the jurisdiction under Article 226 of the Constitution withoutexhausting the remedy available under the provisions of the Act andthe Rules. In such a view of the matter, in this case, the remedyopen to the petitioner is to file a review before the Government asper the Drugs (Price Control) Order,1995, and therefore, the same hasto be exhausted.33. In the result, the Writ Petition is disposed of with thefollowing observations:●It is open to the Petitioner/Company to file Review before theGovernment under Para 22 of DPCO 1995. ●On such Review being filed, the Government shall consider andpass appropriate orders within a period of four weeks from thedate of receipt of copy of this order.●As per proviso to Para 22 of DPCO 1995, pending decision by theGovernment on the Review Application, the Writ Petitioner shallsell drug Tineavin at the price fixed by the Government. ●Till the disposal of the Review, the Respondent may not proceedto recover the overcharged amount from the Petitioner/Company. ●There is no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrarvj2To The Director National Pharmaceutical Pricing Authority, Department of Chemicals and Petrochemicals Ministry of Chemicals and Fertilizers Government of India YMCA Cultural Centre Building Jai Singh Road, New Delhi 110 001+ 1 c.c to M/s. A.L. Ganthimathi, Advocate. S.R.No.54863. W.P.No.16864 of 2004JRG (CO)GSK 03.11.2009.