Ranbaxy Laboratories Limited vs Union Of India & Anr.
2010 Latest Caselaw 5282 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

              W.P. (C) No. 3099 of 2008 & CM No. 5963/2008

                                         Reserved on: October 20, 2010
                                         Decision on: November 22, 2010



       RANBAXY LABORATORIES LIMITED                ..... Petitioner
                   Through : Mr. S. Ganesh, Senior Advocate with
                   Mr. Deepak Khurana and Mr. Shobhit Chandra,
                   Advocates

                        versus

       UNION OF INDIA & ANR.                      ..... Respondents
                     Through : Mr. A.S. Chandhiok, ASG with
                     Mr. Akshay Chandra, Advocate


                 CORAM: JUSTICE S.MURALIDHAR

         1. Whether reporters of the local news papers
            be allowed to see the judgment?                           No
         2. To be referred to the Reporter or not?                    Yes
         3. Whether the judgment should be reported in the Digest? Yes

                                 JUDGMENT

22.11.2010

1. The present case concerns the interpretation of Para 22 of the Drugs

(Prices Control) Order, 1995 („DPCO 1995‟) which sets out the powers of

the Central Government to review a Notification or Order made under the

DPCO, 1995. The question that arises is whether rejection of the

Petitioner‟s review petitions by the Central Government in the instant case

by the impugned order dated 26th February 2008 was proper.

2. By price fixation Notifications dated 13th and 27th June 2007, the

National Pharmaceuticals Pricing Authority („NPPA‟), Respondent No. 2

herein, which is functioning under the Union of India, Department of

Chemicals and Petrochemicals, Ministry of Chemicals and Fertilisers,

Respondent No. 1 herein, fixed the ceiling price of Roscillin 500 mg and

250 mg under paras 10 and 11 of the DPCO, 1995. Aggrieved by the said

Notifications the Petitioner, which is a manufacturer of the above tablets

filed review petitions on 27th June 2007 and 10th July 2007 under para 22

of the DPCO, 1995.

3. It is stated that the review petitions were not disposed of for more than

six months thereafter. An order dated 10th December 2007 was passed by

the Respondent No. 1 calling upon the Petitioner to comply with the price

fixation Notifications dated 13th and 27th June 2007. Aggrieved by the said

order dated 10th December 2007, the Petitioner filed Writ Petition (Civil)

No. 371/2008 in this Court. The following order was passed by this Court

while disposing of the said writ petition on 16th January 2008:

"2. In view of the facts which have been noticed herein above in my view this Writ Petition can appropriately be disposed of at this stage with a direction to the respondents to decide the review petition which is pending for over six months without delay.

The respondents are accordingly directed to dispose of the review petition which has been filed by the Petitioner under para 22 of DPCO 1995 within a period of four weeks from today in accordance with prescribed procedure and principles laid down by the Apex Court in 1987(2) SCC 720 Union of India v. Cynamide India Ltd. and Anr. The Respondents shall accord full opportunity to the Petitioner to make their representations including oral hearing and pass a reasoned order thereon. The order which is passed by the Respondents

shall be communicated to the Petitioner..."

4. A hearing was fixed for the review petitions on 4th February 2008. The

Petitioner also filed its written submissions. Thereafter on 26 th February

2008, the Petitioner‟s review petitions were dismissed by Respondent No.

1 by passing an order, the relevant portion of which reads as under:

"4. The review petitions as also the direction of the Hon‟ble High Court have been considered. It is observed from the records available with the Department of NPPA that the review applications filed under Para 22 of the DPCO do not appear to be maintainable since the compliance of the price notification of NPPA vide S.O. 954(E) dated June 13, 2007 and S.O. 1043(E) dated June 27, 2007 fixing the MRP of Roscillin 500 caps at Rs. 66.77 (8‟s pack size) and in respect of Roscillin 250 mg caps (8‟s pack size) fixing the MRP at Rs. 36.23 respectively have not been made within the stipulated period. However, the petitioner is free to file a price revision application on NPPA which shall consider and dispose it of as per the prescribed provisions."

5. The grievance of the Petitioner is that the review petitions were

rejected on a ground that was not available to the Respondents. The

review petitions ought to have been disposed of on merits irrespective of

whether the Petitioner had complied with the price fixation Notifications

dated 13th and 27th June 2007. It is submitted that in any event for non-

compliance of the said notifications a demand can be raised under para 13

of the DPCO, 1995. It is further pointed out that in fact the Petitioner had

implemented the price fixation Notifications dated 13 th and 27th June

2007. By an affidavit filed on 15th September 2009 the Petitioner has

sought to explain that it implemented the said price fixation Notifications

in the following manner:

"A) So far as Roscillin 250 mg capsules are concerned, the notification dated 27.6.2007 was displayed on the NPPA‟s website on 28.6.2007 and, accordingly, the period of 15 days allowed by para 14(2) of the DPCO, 1995 for implementing and giving effect to that notification expired on 13.7.2007. It is necessary to note that the last batch of Roscillin 250 mg capsules which was manufactured immediately before the issuance of the said notification dated 27.6.2007 was Batch No. 9090838, the manufacture of which completed on 05.06.2007, as can be seen from the table annexed hereto and marked as Annexure A. After 05.06.2007, there was no manufacture of Roscillin 250 mg capsules throughout the balance period of June, 2007, nor was there any manufacture of this product anytime during July, 2007. The Batch of Roscillin 250 mg capsules which were manufactured after the issuance of the said notification dated 27.6.2007 was Batch No. 9091109, the manufacture of which was completed on 8.9.2007. The Petitioner Company complied fully with the said Notification dated 27.6.2007 in respect of this batch, and the MRP of the same was Rs.36.23, as fixed by the impugned Notification. This is also clear from the Annexure A hereto.

B) So far as Roscillin 500 mg capsules are concerned, the impugned Notification dated 13.6.2007 was displayed on NPPA‟s website on 14.6.2007, accordingly, 15 days period allowed by para 14(2) of the DPCO, 1995 for implementing and giving effect to this Notifiation expired on 29.6.2007. Before the expiry of the said 15 days period on 29.6.2007, the Petitioner manufactured five batches of Roscillin 500 mg capsules, being Batch Nos. 9090894, 9090895, 9090897, 9090898 and 9090899 as can be seen from the statement, which is annexed hereto and marked as Annexure B. The last of these batches were manufactured on 28.6.2007 i.e. before

the expiry of the said 15 days period allowed by para 14(2) of the DPCO, 1995. Accordingly, the pre-notification MRP was applied in respect of these batches. The first batch of Roscillin 500 mg capsule which was manufactured by the Petitioner after the expiry of the said 15 days‟ period allowed by para 14(2) of the DPCO was Batch No. 9090987, the manufacture of which was completed on 16.7.2007. The Petitioner duly complied with the impugned Notification dated 27.6.2007, as required by para 14(2) of the DPCO, 1995 and the MRP applied in respect of this batch was Rs. 66.77, being the reduced MRP fixed by the said Notification dated 27.6.2007."

6. On its part, the Respondent No. 1 has not denied the above assertions.

It has, however, filed an additional affidavit on 6th January 2010 stating

that three other review petitions in respect of certain other price

notifications, two of which review petitions were filed by the Petitioner

and one filed by Novartis India Ltd., had been dismissed by the

Respondents on the same ground on which the review petitions of the

Petitioner were dismissed in the instant case.

7. This Court has heard the submission of Mr. S. Ganesh, learned Senior

counsel for the Petitioner and Mr. A.S. Chandhiok, learned Additional

Solicitor General appearing for the Respondents. The respective written

notes of arguments filed by both sides after the conclusion of the hearing

have also been considered.

8. The writ petition challenges not only the order passed by the

Respondent rejecting the review petitions but the price fixation

Notifications as well. This Court proposes to first take up for

consideration the point concerning the interpretation of Para 22 of the

DPCO, 1995. The said provision reads as under:

"22. Power to review - Any person aggrieved by any notification issued or order made under paragraphs 3, 5, 8, 9 or 10 may apply to the Government for a review of the notification or order within fifteen days of the date of publication of the notification in the Official-Gazette or the receipt of the order by him, as the case may be, and the Government may make such order on the application as it may deem proper.

Provided that pending a decision by the Government on the application submitted under the above paragraph, no manufacturer, importer or distributor, as the case may be, shall sell a bulk drug or formulation, as the case may be, at a price exceeding the price fixed by the Government of which a review has been applied for."

9. The proviso to Para 22 empowers the Central Government to insist that

pending a decision on the review application, "no manufacturer, importer

or distributor, as the case may be, shall sell a bulk drug or formulation, as

the case may be, at a price exceeding the price fixed by the Government

of which a review has been applied for". However, it is not possible to

read the proviso as a pre-condition to the review application being

entertained by the Central Government. In other words, there is nothing in

Para 22 to indicate that if, for some reason, the proviso to Para 22 is not

complied with, the review petition is liable to be dismissed. In other

words, it is not possible to read the proviso to Para 22 as empowering the

Central Government to reject the review petition, if it forms the opinion

that the Petitioner has not complied with the price fixation Notifications of

which the Petitioner is seeking review.

10. It appears that the manufacturer, importer or distributor, as the case

may be, has been given a right to seek the review of a price fixation

Notification under Para 22 and that right is hedged with the conditionality

that such manufacturer, importer or distributor, as the case may be, in the

meanwhile shall implement the price fixation Notification. However, in

the absence of any express provision to that effect, the right to seek

review cannot be taken away in the event such manufacturer, importer or

distributor does not implement the price fixation Notification of which the

review is sought. It is not as if the Central Government is remediless if a

manufacturer, importer or distributor fails to comply with the directions

contained in proviso to Para 22 to implement the price fixation

Notification. The powers in the DPCO, 1995 can be invoked to recover

from the manufacturer, importer or distributor what the Central

Government perceives to be the amount charged by him over and above

what is permissible under the price fixation Notification and require him

to deposit such differential amount into the Drug Prices Equalisation

Account („DPEA‟). The proviso to Para 22 only underscores the need for

a manufacturer to immediately implement the price fixation Notification

failing which the amount overcharged would be recoverable in terms of

the DPCO 1995. It does nothing more. Therefore the ground on which the

Central Government has, by its impugned order dated 26th February 2008,

rejected the Petitioner‟s review petitions is untenable in law.

11. A reading of the impugned order dated 26th February 2008 shows that

the Central Government has not explained the reasons for concluding that

the Petitioner failed to implement the price fixation Notifications dated

13th and 27th June 2007. It is not known whether any query was raised by

the Central Government in this regard. The Central Government has also

not countered the assertion by the Petitioner in the additional affidavit

dated 15th September 2009 regarding compliance with the price fixation

notifications. In any event, whether the Petitioner‟s interpretation of the

price fixation Notifications is correct and whether the 15 days‟ period as

allowed by para 14(2) of the DPCO, 1995 can be granted or not, is

something for the Central Government to consider and decide. For

instance, the Petitioner placed reliance upon the judgment of the Division

Bench of this Court in Glaxo Smithkline Pharmaceuticals India Ltd. v.

Union of India 164 (2009) DLT 30 (DB). However, the Central

Government points out that on 20th September 2010, the Supreme Court,

has by entertaining the SLP (Civil) No. 8475-76/2010 stayed the operation

of the above judgment of this Court. Reliance has also been placed by the

Respondents on the judgment of the Karnataka High Court in Smithkline

Beecham Pharmaceuticals (India) Ltd. v. Union of India (Writ Petition

(Civil) No. 38973/1998 dated 12th November, 2002) regarding the

mandatory nature of compliance with price fixation Notification. Be that

as it may, this Court is not called upon to actually examine if the

Petitioner has complied with the price fixation Notifications in the manner

required by the law. It is only required to examine if the review petitions

filed by the Petitioner could have been rejected on the ground on which

they have, by the Central Government by the impugned order dated 26th

February 2008. For the reasons already explained, this Court answers the

said question in the negative. Consequently the other question raised in

the writ petition concerning the validity of the price fixation Notifications

is not decided reserving to the Petitioner the right to raise it, if the need

arises, in other appropriate proceedings at a later stage.

12. Consequently, this Court sets aside the impugned order dated 26th

February 2008 passed by the Respondent No. 1 rejecting the Petitioner‟s

two review petitions. The said review petitions are restored to the file of

the Respondent No. 1 for a fresh consideration on merits in accordance

with law. The Petitioner will be given a hearing, the date of which will be

communicated to it by Respondent No.1 within the next four weeks and at

least ten days in advance. After hearing the Petitioner, a reasoned order on

the Petitioner‟s review petitions will be passed by Respondent No.1

within a period of four weeks and communicated to the Petitioner within

two weeks thereafter. It will be open to the Petitioner, if still aggrieved by

the decision of Respondent No. 1 on its two review petitions, to seek such

appropriate remedies that may be available to it in law.

The writ petition is disposed of in the above terms. The pending

application is also disposed of.

S. MURALIDHAR, J NOVEMBER 22, 2010 ak