Bulk Drug Manufacturers ... vs Uoi & Anr.
2000 Latest Caselaw 479 Del

ORDER

Dr.. M.K. Sharma, J.

1. This matter is placed before me in view of difference of opinion expressed by the Judges of the Division Bench on the application filed by the respondents registered & numbered as C.M. No.1583/1999 seeking for vacation of the interim order dated 7.1.1999. The point of reference is in the following terms:

"Whether or not the interim order dated 7.1.1999 needs to be vacated before the final disposal of the writ petition?"

In order to answer the aforesaid reference it would be necessary to refer to some of the background facts leading to filing of the aforesaid application on which there was divergence of opinion.

2. The petitioner No.1 is an association of the Bulk Drug Manufacturers of India having 300 members from all over India. In exercise of the powers conferred under the Essential Commodities Act the Central Government Promulgated a control order called the Drug (Prices Control) Order, 1995 (hereinafter referred to as DPCO) which was promulgated under the provisions of section 3 of the Essential Commodities Act, 1955. The aforesaid section of the Essential Commodities Act authorises the respondent No. 1 to control the prices at which an essential commodity may be brought or sold, for maintaining or increasing the supplies of the essential commodity or for securing its avail-ability at fair prices. As against the new Drug (Prices Control) Order, 1995 representations were filed on behalf of the members of petitioner No.1 calling upon the respondents to exclude 19 drugs based upon the said policy. A writ petition was also filed in the Bombay High Court which was registered as writ petition No.569/1996 titled Sukta Chemical and others Vs. Union of India and others. In the said writ petition the question that was raised was about the inclusion of certain bulk drugs in the Ist Schedule of the DPCO, 1995. On similar question three other writ petitions were filed and an interim order was passed by the Bombay High Court on 10.12.1996. By the aforesaid order interim orders were passed in the light of the directions made in the said writ petitions. Pursuant to the aforesaid order passed by the Bombay High Court and on the basis of representation filed by one of the petitioners herein clarifications were issued by the respondents by communication dated 10.6.1997 and the said clarifications have also been placed on record. On 7.9.1997 a notification was issued by the respondent No.1 excluding two drugs out of the nineteen drugs for which representations were made on behalf of the petitioners. By the aforesaid notification the respondent No.1 refused to exclude eight drugs which were sought to be excluded from the Drug Policy. The petitioner No.1, accordingly filed their representation with the respondent calling upon them to atleast exclude another eight specific drugs which according to them were ex facie liable to be excluded as per the Drug Policy and accordingly the present writ petition was filed in this court challenging the action of the respondents in including eight drugs manufactured by the petitioners and fixing the price of the said drugs under the DPCO, 1995. According to the petitioners the aforesaid action on the part of the respondent is illegal inasmuch as the said eight drugs did not attract the provisions of the Control Order and could not have been included in the notification. The petitioners have also challenged the constitutionality of the DPCO alleging that it is unconstitutional and ultravires of the provisions of the Essential Commodities Act.

3. Notice was issued on the writ petition directing the respondents to file their counter affidavit. Counter affidavit and rejoinder were filed in the said writ petition. As in the aforesaid writ petition constitutionality of the Drug (Prices Control) Order, 1995 was challenged on the ground that it is unconstitutional and ultravires of the Essential Commodities Act, the writ petition was directed to be listed before the Division Bench and the matter thereafter was placed before the Division Bench.

4. A fresh application, being C.M. 11957/1998 was filed in the aforesaid writ petition seeking for stay of the notification. The matter was listed before the Division Bench on 7.1.1999 on which notice was issued. A direction was also issued to the respondents to supply the requisite information sought for in the application. As the respondents did not file any reply to the earlier stay application it was observed by the Division Bench that a reply be filed. The Division Bench also ordered that in the meanwhile no punitive action would be taken against the members of the petitioner association based upon the inclusion of the eight drugs within the ambit of price control. The said order was passed on 7.1.1999. It may however, be noted that even on that day the counter affidavit was on record. Immediately thereafter on 11.2.1999 the respondent filed an application praying for vacation of the said interim order which was registered as C.M. No.1583/1999. The Division Bench by order dated 10.3.1999 passed an order that time likely to be taken to hear the two applications namely - the application praying for stay and the application seeking for vacation of the stay could be best utilised by hearing the arguments on the main petition and accordingly, by the consent of the parties the writ petition was placed for arguments alongwith the two miscellaneous applications. By the aforesaid order it was also observed by the Division Bench that in case for any reason it was not possible to conclude the hearing in the main matter the prayer of the respondent for vacation of the stay would be considered.

5. The matter was thereafter placed for regular hearing and it transpires from the record that the main writ petition was heard from time to time by Division Bench of this Court but the arguments could not be concluded. In the meantime there was a change in the Roster and it was held by the said Division Bench hearing the writ petition that in view of the change of roster it would not be possible to complete the hearing of the case and the matter was released from being treated as part- heard. Thereafter also the matter was heard by another Division Bench on few dates but as there was a change of roster the matter also stood released from being treated as partheard. On 10.2.2000 it appears from the order sheet that the application seeking vacation of interim order, namely - C.M. 1583/1999 was taken up for consideration and it was ordered by the Division Bench of this court that the petitioners would place on record requisite details with respect to eight drugs and its formulations alongwith information and data regarding differential amount payable by each of the members of the petitioner ssociation, in case ultimately the petitioners fail in the writ petition. It was directed that the amount would be calculated for the period from the date of fixation of the price as per the policy till 31st December, 1999. The Court observed that the complete data would be supplied and placed on record within a period of 8 weeks from the said date. As the said directions were not complied with, on 11.5.2000 the petitioners were again directed to comply with the order dated 10.2.2000 before the next date. The petitioners, on 19.5.2000 filed an application enclosing therewith an affidavit contending inter alia that there are about 52 bulk drug manufacturers and formulators of eight drugs, a list of whom was enclosed with the said affidavit. Alongwith the said affidavit the petitioners submitted details of the summary of amounts of its members and apologised for being unable to submit details as required by the court vide order dated 10.2.2000. It was further stated that the petitioners under the belief that as it is necessary for each of the drug manufacturers to submit information to the Union of India as per clause 20(2) of the DPCO, 1995. wrote a letter to the respondent requesting them to supply the necessary information as the same is already with them, and since no information was received from the respondents therefore, it was stated that all the details could not be furnished.

6. The Division Bench on 19.5.2000 took up the aforesaid application praying for vacating the stay order registered as C.M. No. 1583/1999. The matter was taken up for consideration and the Hon'ble Judges constituting the bench proceeded to pass orders. While Anil Dev Singh, J. on the facts and circumstances of the case thought it fit to vacate the interim order, B.A. Khan, J. held that the order did not call for lock stock barrel vacation when the writ petition could be disposed of on merits. In view of the aforesaid divergence of opinion the matter was placed before me by way of reference in terms of Delhi High Court Rules.

7. On the aforesaid reference I heard the learned counsel appearing for the parties on 7.7.2000 and order was reserved allowing the parties to file their written submissions on or before 11th July, 2000. Pursuant to the said order the petitioners filed their written submissions on 11.7.2000 whereas the counsel for the respondents informed that they rely upon the written synopsis filed earlier. On 11.7.2000 another application was filed by the petitioners seeking for further hearing in the matter and also to allow Mr. Chidambaram to address the court on behalf of the petitioners. The said application was taken up for consideration on 14.7.2000 and the application was allowed. Both Dr. Singhvi and Mr. Chidambaram appearing for the petitioner and Mr. Maninder Singh for the respondents were heard and order was reserved. Accordingly. I proceed to decide the matter now and give my opinion on the point of reference.

8. While directing for vacation of the interim order A.D. Singh, J. held that directions in the order dated 10.2.2000 have not been complied and that the application of the petitioners for grant of further time to comply with the aforesaid directions before the application of the respondent No. 2 for vacation of the interim stay is taken up for consideration was to be rejected as the petitioners cannot be allowed to delay the consideration of the application filed by respondent No. 2. He also held that as the directions in the order dated 10.2.2000 were not complied with the petitioners cannot be allowed to avail of the interim order as the effect of grant of the interim stay was that the petitioners are charging a higher price than the price fixed by the Drug (Prices Control) Order and as a result of the dismissal of the writ petition the consumers including the ones who can ill afford medicine would hardly have any chance to recover the higher prices charged from them in respect to bulk drugs and their formulations and that the consumers cannot be made to pay more when the inclusion of the eight drugs and their formulations has not so far been declared to be illegal.

9. On the other hand, B.A. Khan, J. held that when the writ petition itself could be taken up for consideration and disposal which was in fact taken up for consideration on earlier dates no exceptional circumstances or situation manifesting grave injustice had been brought out to warrant emergent vacation of the stay order. His Lordship was of the opinion that the interim arrangement having remained in force for a long time it did not call for vacation and is required to be kept in tact till the writ petition is heard and disposed of on merits.

10. Dr. Singhvi appearing for the petitioners submitted that none of the aforesaid 8 drugs actually comes within the ambit and purview of the Drug (Prices Control) Order and they could not have been included in the notification and therefore, the fixation of price by the respondents in respect of the aforesaid eight drugs under the DPCO is illegal and violative of the DPCO and the guidelines issued by the respondents themselves. In support of his submissions the learned counsel drew my attention to the guidelines issued by the respondents in respect of the pricing. Specific attention was drawn to paragraph 22.7.2. One of the guidelines specified therein, is that the criterion of including drugs under price control will be the minimum annual turn over of Rs. 400 lakhs. Two other criterion mentioned therein are in the following terms:

(ii) Drugs of popular use in which there is a monopoly situation will be kept under price control. For this purpose if for any bulk drug, having an annual turn over of Rs.100 lakhs or more there is a single formulator having 90 per cent or more market share in the Retail Trade as Per ORG a monopoly situation would be considered as existing.

(iii) Drugs in which there is sufficient market competition viz. at least 5 bulk drug procedures and at least 10 formulators and none having more than the 40 per cent market share in the Retail Trade as per ORG may be kept outside the price control. However, a strict watch would be kept on the movement of prices as it is expected that their prices would be kept in check by the forces of market competition. The Government may determine the ceiling levels beyond which increase in prices would not be permissible.

11. Referring to the aforesaid criterion Dr. Singhvi submitted that on a strict interpretation of the aforesaid guidelines it would be amply clear that the aforesaid eight drugs could not have been included within the DPCO as turn over for each of the aforesaid drugs is less than Rs. 400 lakhs based on ORG data. He also submitted that in terms of the order passed by the Bombay High Court turn over in respect of the export was to be excluded while computing the total turn over and when the same is thus excluded the total turn over of each of the aforesaid eight drugs will be much less than the stipulated Rs.400 lakhs. He also submitted that the aforesaid clause (iii) of para 22.7.2 is squarely attracted in the present case and therefore, the aforesaid eight drugs should have been kept outside the price control. In support of the said submission he placed reliance on the written submissions filed pursuant to orders dated 26.5.2000. Dr. Singhvi also argued on merit of the case in order to prove a strong arguable case to the aforesaid extent while according to Mr. Chidambaram consideration of merit at this stage is not necessary. He also submitted that the court could impose any condition in the light of the interim orders passed by the Bombay High Court which would protect the interest of the respondent. He also submitted that on merit the petitioners have a very strong arguable case and that balance of convenience is also in favour of the petitioners and that if an interim order passed by this court is not maintained the petitioners would suffer irreparable injury. He submitted that in case the drugs are directed to be sold at the controlled price the petitioners would suffer huge monetary loss which cannot be recouped whereas if the petitioners maintain accounts and an undertaking is furnished to comply with the provisions of clause 13 of DPCO, 1995 the interest of the respondents would also be protected. He fairly submitted that the petitioners would also undertake not to increase the prices of the aforesaid eight drugs from than the price which is prevailing at the present moment, during the pendency of the writ petition in this court. Mr. Chidambaram, Senior Counsel supplementing the arguments of Dr. Singhvi and appearing for the petitioners submitted that since as of date the entire informations as sought for by the court are furnished by the petitioners, there is no necessity of vacating the interim order on the ground of non-furnishing of relevant materials as was the view of A.D. Singh, J. He also submitted that the order dated 10.2.2000 is to be read in conjunction with that of the order dated 7.1.1999 whereby the court directed the respondents to furnish the particulars sought for by the petitioners. According to him there was non-compliance of the aforesaid direction on the part of the respondents and therefore, the entire blame could not have been placed on the petitioners. He also submitted that B.A. Khan, J. was the only Judge who was member of both the Benches passing the orders dated 7.1.1999 and 19.5.2000 and therefore, his views should get more weightage.

12. Mr. Salve, learned Solicitor General appearing for the respondents however, submitted that the interim order is required to be vacated immediately as the said order has adversely affected the interest of the consumer public. He submitted that each of the aforesaid drugs is vital life saving drug and in order to oversee that such vital drugs are available in the market easily and at a cheaper rate they were included within the ambit of the aforesaid DPCO after a proper verification that all criterion for their inclusion have been satisfied. He also submitted that the consumers cannot be made to pay more when the intention of the respondents was to make the same available at an affordable price which are life saving drugs in the nature of antibiotics and drug for treatment of Asthama. He submitted that the petitioners have failed to furnish full and complete information as was directed to be furnished by this court under order dated 10.2.2000 and on that count also the interim order is required to be vacated. He also relied upon the ratio of the decision in Union of India and another Vs. Cynamide India and another, .

13. In the light of the aforesaid submissions of the learned counsel appearing for the parties I proceed to answer the reference in the light of the discussions hereinafter made.

14. One of the aspects which also needs consideration is whether the directions issued by this court on 10.2.2000 were complied with or not. The contents of the said order find mention in the preceding paragraph 5. It is an admitted position that as on 19.5.2000 the petitioners could not furnish the entire information as was directed to be filed which is clear and apparent from the affidavit filed on behalf of the petitioners themselves. According to the own showing of the petitioners out of 52 bulk drug manufacturers and formulators of eight drugs particulars and information of only 16 members were filed. The said information filed by the said 16 members of the petitioner No.1 were also not in strict compliance of the orders passed by this court. A summary of amount was filed alongwith the said affidavit which was annexed as Annexure 5 to the said affidavit. A perusal of the same would show that the said summary of the amount involved in respect of 16 members was prepared on the basis of the materials received from the source of ORG for the years 1996 to 1999. The informations and statistics provided therein do not meet the requirement in terms of the directions of the court dated 10.2.2000, It also transpires from the record that the statistics provided through the ORG source are based only on the retail trace and do not include within its ambit the sale made by the members of the petitioner No.1 to institutions like the hospitals. Government Organisations etc. which also purchase such drugs in bulk. The members of petitioner No.1 are the manufacturers of the said bulk drugs and the accounts regarding sale of such bulk drugs should be available with the said members of petitioner No.1 themselves. It is therefore, not understood as to why the petitioners filed a summary of the sale basing the same on the ORG source. During the course of arguments Dr. Singhvi sought to submit that the aforesaid summary produced is not 80% information as sought to be submitted earlier but in fact 100% information inasmuch as there is no other sale of such eight drugs by any of the other manufacturers except for the aforesaid 16 members. Out of the 52 manufacturers on the own admission of the petitioners only 16 members have filed some information before this court and the other manufacturers who are also before the Court through petitioner No.1 in this court knew fully well at the time of filing of the aforesaid affidavit that they had no sale but in spite of being aware of the said fact the same was not brought to the notice of the court on 19.5.2000 but they sought for more time to furnish further details on behalf of the remaining 36 members of petitioner No.1 It is thus apparent that the members of petitioner No.1 have not made a sincere and bonafide effort to place all relevant facts as sought for by this court from the petitioners and instead sought to withhold the relevant material facts and have been taking different stands at different stages.

The submission that the order dated 7.1.1999 and 10.2.2000 are to be read conjointly also appears to be without merit for order dated 7.1.1999 was passed on the basis of the application filed by the petitioners seeking some informations from the respondents and incidently in the said application a prayer for stay was also added although in fact a specific application seeking for stay was pending even on 7.1.1999 when an order was also passed for filing reply in the said application. On the other hand order dated 10.2.2000 was passed directing the petitioners specifically to furnish the informations of the nature as contained in the said order. In the subsequent order dated 10.2.2000 there was no reference to earlier order nor any reiteration thereof. Besides the informations directed to be supplied by order dated 10.2.2000 were such informations and particulars as also records which are and should be available with the members of the petitioner No.1 and relate to their accounts including sale records. Such informations were not available on record on 19.5.2000 which is an admitted position.

15. On behalf of the petitioners it was submitted that the petitioners would suffer irreparable loss and injury in case the interim order passed by this court is not continued till the disposal of the writ petition. According to the learned counsel, in view of the impugned action on the part of the respondents in fixing prices of eight drugs the petitioners would be required to sell the same at a loss which the petitioners would not be able to recoup even if the writ petition is allowed. In this connection reference may be made to the Drugs (Prices Control) Order, 1995. Para 3 of the said order enables the Government with a view to regulating the equitable distribution of a drug and making it available at a fair price fix from time to time maximum sale price at which a drug is to be sold. Clause (2) of paragraph 3 provides that while so fixing the price of a bulk drug, the government may take into account the average cost of production of such bulk drug and allow a reasonable return on net worth. The aforesaid DPCO also provides for the formula for calculation of the retail price when it provides that the retail price of a formula would be calculated by the Government in accordance with the formula laid down therein. First Schedule of the said DPCO indicates that while fixing such retail price 8 to 10% profit margin is to be provided for. From the aforesaid provision it is apparent that even if in relation to a few bulk drugs the Govt. is proceeding to fix the price in terms of the DPCO even then the manufacturers would be earning profit at the rate envisaged therein. The aforesaid argument is therefore, without any merit.

16. During the course of arguments Dr. Singhvi Vehemently argued that 8 specific drugs do not by any standard fall under the parameters of the DPCO and therefore, they should have been excluded and could not have been included within the span of the DPCO. In order to substantiate his submission he specifically referred to the case of CIPROFLOXACIN, NORFLOXACIN as also SALBUTAMOL. In respect of the said submission it is relevant to point out that in the present writ petition an order was passed by this court on 27.3.1998 directing the respondents to decide the representation dated 24.11.1997 made by the petitioners with a further direction that the decision thereon should be supported by adequate reasons. In terms of the aforesaid directions the respondents disposed of the representation filed by the Bulk Drugs Manufacturers Association. The issue of exclusion of eight specified drugs was also considered. In respect of the drug - CIPROFLOXACIN it was held that the turn over of the said bulk drug during 1989-90 (domestic production and imports) was Rs.9.99 Crores. It was also tated therein that the association has worked out the turn over based on ORG report and that the said ORG does not cover the institutions sales like to hospitals, Government Organisations and exports etc. but covers data of drugs sold in the trade channel. Therefore, this method shall not give correct date on the turnover of the bulk drug, as according to the respondents the turnover of the bulk drug means total business in the country in relation to that bulk drug and it comprises of indigenous production and imports of that bulk drug.

In respect of SALBUTAMOL it was held that the calculation of the association that the total turnover of the said bulk drug is only Rs.1.71 Crore is incorrect as the bulk drug turn over is about Rs.11.50 crore. It was also stated that the calculation of the turnover at Rs.1.71 crore was also based on ORG report which does not give the clear picture and is not valid.

In respect of NORFLOXACIN it was held that although the market share of a single formulator was 39.50% which was technically lower than 40% prescribed for inclusion in the list of controlled drugs, the other criteria of atleast 5 bulk drug manufacturers was not satisfied. It was further held that although the association in the representation gave a list of manufacturers of this drug but for the same no supporting documents were provided regarding their production in the year 1989-90. It was further stated that there were only three bulk drug manufacturers in the country in the year 1989-90 as per the records available with the respondent.

On the basis of aforesaid conclusions it was held by the respondents that all the eight drugs were qualified for inclusion under the DPCO, 1995 as per the established criteria/guidelines.

17. The aforesaid conclusions and the reasons given by the respondents are disputed by the petitioners and in support relies upon the contents of the interim order passed by the Bombay High Court on 10.12.1996 in C.W.P. 569/1996. The order of the Bombay High Court is on an interim application and the final order in the writ petition is yet to be passed. It also transpires from the records that subsequent to the aforesaid order passed by the Bombay High Court a clarification was issued by the respondents which is to be read alongwith the guidelines issued by the respondents. It is well settled that the guidelines issued by the respondents do not have any statutory force. The provisions thereof are not required to be construed as that of a Statute. Besides clause III of para 22.7.2 also uses the expression 'may' which indicates that the provisions contained in the said clause are directory and latitude and discretion is provided to the respondent No.1 while exercising its powers. Furthermore the clarifications provided and issued by the respondents and the reasons given by the respondents on the representation filed by one of the petitioners for inclusion of the eight drugs under the control order are also required to be considered alongwith the guidelines. Prima facie, it cannot be said that the clarifications and the said reasons have no basis. The inclusion of the said drugs within the ambit of the DPCO and fixation of price thereof are issues to be decided at the time of disposal of the writ petition, for it involves some disputed questions and no final opinion is expressed at this stage.

18. The question, therefore, is whether at this stage the interim order passed by this court should be vacated till the final disposal of the writ petition or not. All the eight drugs are vital life saving drugs. They are antibiotics whereas Salbutamol drug is used by patients of Asthama. The said drugs are not only meant for patients with sufficient means but also used by the poorer sections of the society. The intention of the respondents in including the said drugs within the ambit of DPCO and fixing the price thereof is to regulate the availability of such drugs at a reasonable and affordable price to the needy persons and consumer public including the poor section of the society. The said steps were taken in the public interest as a welfare measure with an independent estimate by the experts in the field. If the interim order is allowed to be continued the said needy persons would be forced to purchase the said drugs at a much higher price than what is fixed by the respondents and in that event they would not be in a position to recover the differential amount even if the writ petition is dismissed at the final stage. On the other hand even if the writ petition is allowed the manufacturers would be still earning a profit over the cost of production although it may not be possible to earn the profit at the present rate which they are earning in view of the interim order passed by this Court. In my considered opinion the interest of the consumer public which also includes the poorer sections of the people should get the benefit available to them and their interest should get precedence over the interest of the manufacturers. Very relevant at this stage is the pronouncement of the Supreme Court in Cynamide India Ltd. (supra). Paragraph 37 having relevance is extracted below:

"We notice that in all these matters, the High Court granted stay of implementation of the notifications fixing the maximum prices of bulk drugs and the retail prices of formulations. We think that in matters of this nature, where prices of essential commodities are fixed in order to maintain or increase supply of the commodities or for securing the equitable distribution and availability at fair prices of the commodity, it is not right that the court should make any interim order staying the implementation of the notification fixing the prices. We consider that such orders are against the public interest and ought not to be made by a court unless the court is satisfied that no public interest is going to be served.

No doubt the order as made on November 25, 1981 has the manufacturers on terms, but the consumer public has been left high and dry. Their interests have in no way been taken care of. In matters of fixation of price, it is the interest of the consumer public that must come first and any interim order must take care of that interest."

19. As to the submission as to whether or not the views of B.A. Khan, J. should be given more weightage as His Lordship was the only common member of the two Benches passing the interim order dated 7.1.1999 and 10.2.2000 suffice it to say that the same Division Bench which passed the order dated 7.1.1999 in the present case granting an interim order refused to interfere with the order of the Single Judge passed on 22.4.1999 in another writ petition numbered as C.W.P. No.2134/1998 not permitting the petitioners therein to sell the drug at a higher price than the price fixed by notification dated 20th July, 1998 and the appeal was dismissed by the same Bench.

20. Counsel for the writ petitioners submitted that even in case the writ petition is dismissed the differential amount could be recovered from the members of petitioners in the light of clause 13 of the DPCO. I have considered the said submission of the learned counsel for the petitioners as well. It is true that the Government has been empowered to require the manufacturers, importers or distributors to deposit the amount accrued due to charging of prices higher than those fixed and notified by the Government under the Drugs (Prices Control) Order. The said amount could be directed to be deposited with the Government in terms of clause 13 of the DPCO but even then the benefit of the same would not percolate down to the consumer public who had already paid a higher price than what is fixed by the respondent in respect of aforesaid eight drugs. On an over all view of the entire facts and circumstances of the case I am of the considered opinion that the application for vacation of the stay order is required to be allowed. I fully agree with the views and opinion expressed by Anil Dev Singh, J. and respectfully disagree with the views taken by B.A. Khan, J.

21. In the light of the aforesaid conclusions I am of the opinion that the interim order needs to be vacated and I order accordingly.

Let this matter be now placed before the same Division Bench which passed the order dated 19.5.2000. out of which the present reference has arisen to enable the Division Bench to pass necessary order according to the opinion of the majority of the judges. To be listed on 21.7.2000. Dasti.