# GLAXOSMITHKLINE PHARMACEUTICALS LIMITED (FORMERLY KNOWN AS SMITHKLINE BEECHAM PHARMACEUTICALS (INDIA) LIMITED) v. UNION OF INDIA & ORS

- **Citation:** [2013] 12 S.C.R. 1120
- **Court:** Supreme Court of India
- **Decided:** 2013-12-09
- **Case number:** Civil Appeal No. 1939 of 2004
- **Bench:** R.M. Lodha, Kurian Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/glaxosmithkline-pharmaceuticals-limited-formerly-known-as-smithkline-beecham-28711
- **Pages:** 39

## Headnote

C
DRUGS (PRICES CONTROL) ORDER, 1995:
Para 14 (1) and 16 -
Fixation of price of bulk drug or
formulation - Compliance of - Held: Once the Government
exercises power and fixes maximum sale price of bulk drugs
D specified in the First Schedule, there is ban to sell a bulk drug
at a price exceeding the maximum sale price so fixed plus
local taxes, if any -
True import of paragraph 14(1) is that
once the price notification is gazettec1, it takes effect
immediately though its enforcement is postponed by fifteen
E days to enable the manufacturers and others to make suitable
arrangements with regard to unsold stocks -
During the
period of fifteen days, it is not open to the manufacturer to
manufacture and clear bulk drug or formulation at prenotification prices - Period of 15 days is simply a grace
period or cooling period allowed to manufacturers to adjust .
F their business in a manner where appropriate arrangements
are maoc with regard to unsold stocks in distribution chain -
Drugs (Price Control) Orders, 1987 - Para 16(3).
Fixation of price of bulk drug or formulation - Nature and
G object of- Held: Price fixation by Central Government under
DPCO is in the nature of legislative measure and dominant
object and purpose of such price fixation is equitable
distribution and availability of commodities at fair price.
H
1120
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1121
INDIA
Circulars:
A
Circular issued by Department - Held: If departmental
circular provides an interpretation which runs contrary to the
provisions of law, such interpretation cannot bind the court -
The 1979 circular falls in such category - Circular dated
B
28.4.1979 issued by the Ministry of Petroleum, Chemicals
and Fertilizers, Department of Chemicals and Fertilizers,
Government of India -
Interpretation of statutes -
Contemporanea expositio.
The instant appeals arose out of the judgments of the C
High Courts of Karnataka and Delhi wherein they took
diametrical opposite views on the question whether the
prices fixed under the Drugs (Prices Control) Order
('DPCO') in respect of drugs/formulations would be
operative in respect of all sales subsequent to 15 days
D
from the date of the notification by the Government in the
official gazette/receipt of the price fixation order by the
manufacturer.
Writ petitions were filed before the Karnataka High
E
Court challenging the notices issued by the Inspector of
Drugs pursuant to the explanatory notice dated
10.03.1998 issued by the National Pharmaceutical Pricing
Authority (NPCA) clarifying that "the notification reduces
the existing prices and the manufacturers must make
effective the prices so fixed/revised, within 15 days (from
F
the date of the notification in the official gazette or receipt
of the order of the NPCA) as required under para 14(1)
of the DPC0,1995 and also issue necessary revised price
lists as required under para 14(3) of that Order." The
Karnataka High Court held that every manufacturer and G
distributor would be duty bound to issue a revised price
list within 15 days from the date of the notification issued
by the Government under para 9 of the DPC Order.
The Delhi High Court in the writ petition aris.ing out H
1122
SUPREME COURT REPORTS
(2013] 12 S.C.R.
A of the price fixation order dated 17.3;1988 issued under
para 9(1) of the DPCO, 1987, said to have been received
by the manufacturer on 21.3.1988, did !)Ot agree with the
view adopted by the Karnataka High Court, and relying
upon the circular dated 28.4.1979 allowed the writ petition
B and quashed the seizure memo whereby the goods had
been seized.
Disposing of the appeals, the Court
HELD: 1.1. Under the respective Para 3 of DPCO
C 1995, the Central Government is empowered to fix price
of the bulk drugs for regulating the equitable distribution
of indigenously manufactured bulk drugs and the
maximum price at which the bulk drug shall be sold.
Such fixation of maximum sale price of bulk drugs
D specified in the First Schedule has to be done by
not

## Text

_Characters 0–39,787 of 72,242. This is a partial read: ask again with offset=39787 for what follows._

[2013] 12 S.C.R. 1120
A
GLAXOSMITHKLINE PHARMACEUTICALS LIMITED
(FORMERLY KNOWN AS SMITHKLINE BEECHAM
PHARMACEUTICALS (INDIA) LIMITED)
v.
UNION OF INDIA & ORS.
8
(Civil Appeal No. 1939 of 2004)
DECEMBER 09, 2013
'
[R.M. LODHA AND KURIAN JOSEPH, JJ.]
C
DRUGS (PRICES CONTROL) ORDER, 1995:
Para 14 (1) and 16 -
Fixation of price of bulk drug or
formulation - Compliance of - Held: Once the Government
exercises power and fixes maximum sale price of bulk drugs
D specified in the First Schedule, there is ban to sell a bulk drug
at a price exceeding the maximum sale price so fixed plus
local taxes, if any -
True import of paragraph 14(1) is that
once the price notification is gazettec1, it takes effect
immediately though its enforcement is postponed by fifteen
E days to enable the manufacturers and others to make suitable
arrangements with regard to unsold stocks -
During the
period of fifteen days, it is not open to the manufacturer to
manufacture and clear bulk drug or formulation at prenotification prices - Period of 15 days is simply a grace
period or cooling period allowed to manufacturers to adjust .
F their business in a manner where appropriate arrangements
are maoc with regard to unsold stocks in distribution chain -
Drugs (Price Control) Orders, 1987 - Para 16(3).
Fixation of price of bulk drug or formulation - Nature and
G object of- Held: Price fixation by Central Government under
DPCO is in the nature of legislative measure and dominant
object and purpose of such price fixation is equitable
distribution and availability of commodities at fair price.
H
1120
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1121
INDIA
Circulars:
A
Circular issued by Department - Held: If departmental
circular provides an interpretation which runs contrary to the
provisions of law, such interpretation cannot bind the court -
The 1979 circular falls in such category - Circular dated
B
28.4.1979 issued by the Ministry of Petroleum, Chemicals
and Fertilizers, Department of Chemicals and Fertilizers,
Government of India -
Interpretation of statutes -
Contemporanea expositio.
The instant appeals arose out of the judgments of the C
High Courts of Karnataka and Delhi wherein they took
diametrical opposite views on the question whether the
prices fixed under the Drugs (Prices Control) Order
('DPCO') in respect of drugs/formulations would be
operative in respect of all sales subsequent to 15 days
D
from the date of the notification by the Government in the
official gazette/receipt of the price fixation order by the
manufacturer.
Writ petitions were filed before the Karnataka High
E
Court challenging the notices issued by the Inspector of
Drugs pursuant to the explanatory notice dated
10.03.1998 issued by the National Pharmaceutical Pricing
Authority (NPCA) clarifying that "the notification reduces
the existing prices and the manufacturers must make
effective the prices so fixed/revised, within 15 days (from
F
the date of the notification in the official gazette or receipt
of the order of the NPCA) as required under para 14(1)
of the DPC0,1995 and also issue necessary revised price
lists as required under para 14(3) of that Order." The
Karnataka High Court held that every manufacturer and G
distributor would be duty bound to issue a revised price
list within 15 days from the date of the notification issued
by the Government under para 9 of the DPC Order.
The Delhi High Court in the writ petition aris.ing out H
1122
SUPREME COURT REPORTS
(2013] 12 S.C.R.
A of the price fixation order dated 17.3;1988 issued under
para 9(1) of the DPCO, 1987, said to have been received
by the manufacturer on 21.3.1988, did !)Ot agree with the
view adopted by the Karnataka High Court, and relying
upon the circular dated 28.4.1979 allowed the writ petition
B and quashed the seizure memo whereby the goods had
been seized.
Disposing of the appeals, the Court
HELD: 1.1. Under the respective Para 3 of DPCO
C 1995, the Central Government is empowered to fix price
of the bulk drugs for regulating the equitable distribution
of indigenously manufactured bulk drugs and the
maximum price at which the bulk drug shall be sold.
Such fixation of maximum sale price of bulk drugs
D specified in the First Schedule has to be done by
notification in the official gazette. Once the Government
exercises the power and fixes maximum sale price of bulk
drugs specified in the First Schedule, there is ban to sell
a bulk drug at a price exceeding the maximum sale price
E so fixed plus local taxes, if any. It is the obligation of the
manufacturer, if he commences production of the bulk
drug after the commencement of the order, to furnish the
details to the Government in Form I and any such
additional information as may be required by the
F Government within 15 days of the commencement of the
production of such bulk drug. If any manufacturer desires
revision of the maximum sale price of a bulk drug fixed
under sub-paragraph (1) or (4) or as permissible under
sub-paragraph (3), it is permitted to make an application
G to the Government in Form I. [para 44] [1147-B-E]
1.2. Insofar as a retail price of scheduled formulations
is concerned, under paragraph 7, the Central
Government is empowered to fix the same in accordance
with the formula laid down therein. The method of
H calculation of retail price of formulation is ciearly provided
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1123
INDIA
in paragraph 7. With a view to enable the manufacturers
A
of similar formulations to sell those formulations in pack
size different to the pack size for which ceiling price has
been notified under sub-paragraphs (1) and (2) of
paragraph 9, manufacturers have to work out the price
for their respective formulation packs in accordance with
B
such norms as may be notified by the Government from
time to time. The manufacturer is required to intimate the
price of formulation pack, so worked out, to the
Government and such formulation pack can be released
for sale only after the expiry of 60 days after such c
intimation. However, Government may, within its power,
revise the price so intimated by the manufacturer and
upon such revision the manufacturer is not permitted to
sell such formulation at a price exceeding the price so
revised. [para 45] [1147-F-H; 1148-A-B]
1.3. Under paragraph 13, the Government has been
conferred with the overriding power requiring the
manufacturers, importers or distributors to deposit the
amount accrued due to charging of prices higher than
D
·those fixed or notified by the Government under the
E
DPCO, 1987 and so also under DPCO, 1995. [para 46]
[1148-C]
1.4. The price fixation by the Central Government
under DPCO is in the nature of legislative measure and
F
the dominant object and purpose of such price fixation
is the equitable distribution and availability of
commodities at fair price. The whole idea behind such
price fixation is to control hoarding, cornering or artificial
short supply and give benefit to the consumer. The G
regulation of drug price is ultimately for the benefit of the
consumer. [para 47] [1148-D-E]
1.5. Paragraph 14 of DPC0,1995 makes provision for
carrying out the effect of the price fixed or revised by the
Government. Sub-paragraph (1) of paragraph 14 provides
H
1124
SUPREME COURT REPORTS
[2013] 12 S.C.R.
A that every manufacturer or importer shall carry into effect
the price of a bulk drug or formulation, as fixed by the
Government, within fifteen days from the date of
notification in the official gazette or receipt of the order
of the Government by such manufacturer or importer.
B During this period of 15 days, it is not open to the
manufacturer to manufacture and clear the bulk drug or
formulation at pre-notification prices. It is important to
bear in mind that under paragraph 14(2), the
manufacturer is required to print the retail price of the
C formulation on the label of the container of the
formulation. This is expressed by the words "retail price
not to exceed" preceding it "local taxes extra"
succeeding it. Sub-para (2) of para 14 does not indicate
that upto to the expiry of the fifteenth day from the date
0 of notification of the price fixation order in the official
gazette or receipt of the price fixation order by the
manufacturer, he is at liberty to manufacture the
formulation and print on them the pre-notification prices.
[para 48] [1148-F-G; 1149-A-C]
E
1.6. The true import of paragraph 14(1) is that once
the price notification is gazetted, it takes effect
immediately though its enforcement is postponed by
fifteen days to enable the manufacturers and others to
make suitable arrangements with regard to unsold stocks.
F The period of 15 days is simply a grace period or cooling
period allowed to manufacturers to adjust their business
in a manner where appropriate arrangements are made
with regard to the unsold stocks in the distribution chain.
If the stocks cleared by the manufacturer before the
G fifteenth day are sold to the consumer at the higher
unrevised price then, that may result in same formulation
being offered for sale to a consumer at two different
prices. This must be avoided. Further, the manufacturer
may increase manufacture of the bulk drugs during
H fifteen-day period of notified price and clear that stock at
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1125
INDIA
the unrevised/higher price. This will also lead to
A
frustrating the regulatory regime which is sought to be
put in place by DPCO.[para 49-50] [1149-D-F, H; 1150-A]
1.7. The DPCO defines 'dealer', 'distrib,utor',
'manufacturer', 'retailer' and 'wholesaler'. The provisions
B
contained in paragraphs 3,8, 9 and other relevant
provisions clearly show that DPCO effectively covers the
chain from manufacture of the bulk drug by the
manufacturer to sale of formulation to consumer though
there may be several persons in the distribution chain.
The provisions of DPCO requires not just the end point C ·
sale to be at the notified price, but also every sale within
the distribution chain must be at the notified price, if such
sale is made after the date on which sale price is
operative. There cannot be two prices at the end point of
the distribution chain depending on the batch number.
D
[para 51] [1150-C-D, E, G-H]
1.8. Paragraph 16 of DPC0,1995 bans sale of bulk
drug or formulation to a consumer at a price exceeding
the price specified in the current price list or price
E
indicated on the label of the container or pack thereof
whichever is less, plus all taxes, if any payable. The
expressions 'current price list' and 'whichever is less' in
paragraph 16 are significant. The current price list is
simply the price reflecting the currently operating notified
price under the DPCO. Once a price is notified for a
formulation, it takes effect immediately and sale of the
formulation to the consumer has only to be at the notified
price. This is the plain and ordinary meaning of paragraph
F
16. The expression, 'whichever is less' further makes it G
an absolute obligation on all concerned not to sell any
formulation to any consumer at a price exceeding the
price specified in the current price list or price indicated
on the label of the container or pack thereof whichever
is less. [para 52] (1151-A·D]
H
1126
SUPREME COURT REPORTS
[2013] 12 S.C.R.
A
1.9. This Court is of the considered view that if an
interpretation of paragraph 14(1 ),(2)(3), paragraph 16(3)
and paragraph 19 of DPC0,1995 results in frustrating its
object and leads to denial of the benefit of current notified
price to the consumer, then such interpretation must be
B avoided. [para 55] [1152-C-D]
•
1.10. It is true that the principle of contemporanea
expositio guides that contemporaneous administrative
construction, unless clearly wrong, should be given
considerable weight and should not be lightly
C overturned, but in light of the construction of the relevant
provisions Indicated in the instant judgment, the view in
the circular cannot be followed and upheld. [para 56]
[1152-E-F]
D
Union of India and Another v. Cynamide India Limited
and Another; 1987 (2) SCR 841 = (1987) 2 sec 720;
Collector of Central Excise, Patna v. Usl1a Martin Industries
1997 (3) Suppl. SCR 601 = (1997) 7 sec 47; and
Commissioner of Customs, Calcutta and others v. Indian Oil
E Corporation Limited and Anr. 2004 (2) SCR 511 = (2004) 3
sec 488 - referred to.
1.12. It is well settled that if the departmental circular
provides an interpretation which runs contrary to the
provisions of law, such interpretation cannot bind the
F court. The 1979 circular falls in such category. Moreover,
the 1979 circular is with reference to the DPCO, 1979
whereas the Court is concerned with DPCO, 1987 and
DPCO, 1995. It cannot be said that in view of the saving
clause in DPCO, 1987, the circular is saved and is further
G saved by the saving clause in DPC0,1995. [para 60]
[1154-C-D]
Union of India v. Ranbaxy Laboratories Limited and
Others 2008 (8) SCR 315 = (200~) 7 SCC 502 - held
H inapplicable
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1127
INDIA
1.14. The Delhi High Court in the impugned order has
A
erred in relying upon 1979 circular. Moreover, it has gone
more by practical difficulties which a manufacturer may
suffer and completely overlooked the scheme of the
DPCO which is intended to give benefit to the consumer
of the reduced current price of the formulation. The view
8
of the Delhi High Court is fundamentally flawed and
clearly wrong. The Karnataka High Court has taken the
correct view and the same is upheld. [para 65-66] [1157·
A, C; 1158-A]
Desh Bandhu Gupta and Company and Others v. Delhi C
Stock Exchange Association Ltd. 1979 (3) SCR 373 = (1979)
4 SCC 565; State of Madhya Pradesh and another v. Mis.
G.S. Dall and Flour Mills 1990 (1) Suppl. SCR 590 = 1992
Supp.(1) SCC 150; Bengal Iron Corporation and another v.
Commercial Tax Officer and Others; 1993 (3) SCR 433 = D
1994 Supp.(1) SCC 310; Commissioner of Central Excise,
Bolpur v. Ratan Melting & Wire Industries
2008
(14) SCR 653 = (2008) 13 SCC 1; and Union of India v.
Arviva Industries (/) Ltd. 2007(209) E.L.T. 5 (S.C.) - cited.
Case Law Reference:
E
2008 (8) SCR 315
held inapplicable para 26
1979 (3) SCR 373
cited
para 27
1997 (3) Suppl. SCR 601 referred to
para 29
F
1987 (2) SCR 841
referred to
para 34
1990 (1) Suppl. SCR 590cited
para 36
1993 (3) SCR 433
cited
para 37
G
2008 (14) SCR 653
cited
para 38
2004 (2) SCR 511
referred to
para 58
2007(209) E.L.T. 5 (S.C.) cited
para 59
H
1128
SUPREME COURT REPORTS
[2013] 12 S.C.R.
A
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
B
1939 of 2004.
From the Judgment & Order dated 12.11.2002 of the High
Court of Karnataka at Bangalore in Civil Writ Petition No. 38973
of 1998.
WITH
C.A. No. 1940, 1941and1942 of 2004, 10901-10902 of 2013.
Indira Jaising, Rakesh Kumar Khanna, ASG, S. Gao'esh
C U.A. Rana, Mrinal Majumar (for Gagrat & Co.), Bina Gupta,
Aman Ahluwalia, Prateek Jalan, Supriya Jain, Priyanka Sinha,
Sonakshi Malhan (for Shreekant N. Terdal), Puneet Taneja,
Pravin Bahadur, Mallika Joshi, Amit Agrawal, Rajan Narain for
the appearing parties.
D
The Judgment of the Court was delivered by
R.M. LODHA, J. 1. Leave granted in SLP(C) Nos.2724127242 of 2010.
E
2. This is a group of six appeals, by special leave, four
arising from the judgment of the Karnataka High Court and two
from the Delhi High Court.
3. The two High Courts, Karnataka and Delhi, have taken
F diametrical opposite view on the question whether the prices
fixed under the Drugs (Prices Control) Order (for short, 'DPCO')
in respect of drugs/formulations would be operative in respect
of all sales subsequent to 15 days from the date of the
notification by the Government in the official gazette/receipt of
f3 the price fixation order by the manufacturer.
H
4. The Drugs (Prices Control) Order, 1995 (for short,
'DPC0,1995') was under consideration before the Karnataka
High Court whereas the Drugs (Prices Control) Order, 1987 (for
short, 'DPCO, 1987') fell for consideration before the Delhi High
GIAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1129
INDIA [RM. LODHA, J.]
Court. Although, the sequence of the relevant paragraphs in the
A
two DPCOs differ but the relevant provisions are almost
identical. The view of the Karnataka High Court has not been
accepted expressly by the Delhi High Court. Since the common
arguments have been advanced in this group of matters and
the question of law is identical, all these six appeals were heard
B
together and are disposed of by the common order.
5. The facts in civil appeals from Karnataka High Court are
these: The appellant, in the year 1998, was manufacturer of
Furoxene Tablets and was also the sole distributor for C
Dependal-M Tablets and Dependal Suspension manufactured
by Kanpha Labs, Bangalore. Dependal-M and Dependal
Suspension and Furoxene are formulations of Furozolidine and
Metronidazole. On 09.03.1998, a notification was issued by the
National Pharmaceutical Pricing Authority (NPCA) under the
DPCO, 1995, whereby the ceiling price in regard to several
D
formulations consisting of Furozolidine and/or Metronidazole
was fixed exclusive of excise duty and local taxes. The
notification was gazetted on 09.03.1998 itself.
6. On 10.03.1998, NPCA issued an explanatory notice
E
clarifying that the notification reduces the existing prices and
the manufacturers must make effective the prices so fixed/
revised, within 15 days (from the date of the notification in the
official gazette or receipt of the order of the NPCA) as required
under para 14(1) of the DPC0,1995 and also issue necessary
F
revised price lists as required under para 14(3) of that Order.
7. On 14.07.1998, the Inspector of Drugs, Varanasi issued
a letter addressed to the appellant-Company that it has not given
the effect to the notification dated 09.03.1998.
8. On 22.07.1998, the appellant-Company responded to
the letter received from the Inspector of Drugs and brought to
his notice that the notification dated 09.03.1998 has been given
effect to from the first batch manufactured on the expiry of 15
G
H
1130
SUPREME COURT REPORTS
[2013] 12 S.C.R.
A days from the date of the notification which is permissible under
para 14 of the DPC0,1995.
9. On 30.07.1998, Inspector of Drugs sent another Jetter
to the appellant-Company stating therein that under paragraph
8 16 of DPCO, 1995, all sales of the subject formulations would
have to be made at the new ceiling price fixed on 09.03.1998
irrespective of the date of manufacture of the subject
formulations. The plea of the appellant-Company was,
accordingly, rejected by the Inspector of Drugs and he
C proposed to initiate the prosecution against the appellantCompany under the Essential Commodities Act, 1955 ('EC
Act'). This was reiterated by the Inspector of Drugs in his further
communication dated 16.11.1998.
10. The appellant-Company then challenged the notices/
D letters dated 14.07.1998, 30.07.1998 and 16.11.1998 by filing
a writ petition before the High Court. The writ petition was
contested by the Central Government and its functionaries.
11. The Karnataka High Court by its judgment dated
E 12.11.2002 dismissed the writ petition. The principal reasoning
is reflected in paragraph 9 of the judgment which reads as
follows:
"9. Having regard to the provisions of para 14 of DPC
Order, petitioner who is a manufacturer of Furoxene
F
tablets, ought to carry into effect the revised price fixed as
per Notification dated 09.03.1998 within 15 days from the
date of the said Notification or receipt of the Order of the
Government. There is no dispute that the Notification dated
09.03.1998 was published in the Gazette of India on the
G
same date. While sub-para (2) of para 14 requires the
retail price of the formulation as notified by the Government
being displayed on the label of the container of the
formulation and the minimum pack offered for retail sale,
sub-para (3) thereof requires the manufacturer to issue a
H
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1131
INDIA [RM. LODHA, J.]
price list and supplementary price list to the dealers and
A
other persons specified therein indicating reference to
price fixation/revision from time to time. Para 16 of DPC
Order prohibits all persons including manufacturers/
distributors/retailers from selling any formulation at the
price exceeding the price specified in the current price list
B
indicated on the label of the pack whichever is less. Thus,
a combined reading of these provisions make it clear that
every manufacturer and distributor is duty bound to issue
a revised price list within 15 days from the date of the
notification issued by the Government under para 9 of the
C
DPC Order. It is also clear that manufacturers, distributors
and retailers will be liable to sell formulations from the date
of such revised price list (which is required to publish within
15 days from the date of notification) at the revised prices
and not the prices mentioned on the label of the container
or pack. In view of it, the contention of the Petitioner that
D
revised prices will not apply to the existing stocks but only
to new batches of drugs and formulations to be
manufactured after 15 days of the notification cannot be
accepted. The provisions of the DPC Order are clear that
prices should be revised within 15 days even in regard to
E
the formulations which were manufactured prior to the date
of notification or those manufactured within 15 days from
the date of notification."
12. It is from the above judgment that four appeals arise
F
at the instance of the manufacturer/distributor.
13. The two appeals from the judgment of the Delhi High
Court are at the instance of the Central Government. The facts
in these two appeals in brief are these: For the period
01.04.1979 to 25.08.1987, Drugs (Prices Control) Order,1979
G
(for short, 'DPCO, 1979') was in operation. The bulk drug
Ranitidine and its formulation were not subject to price control
under DPC0,1979, and, consequently, there was no price
fixation at all in respect of Zinetac tablets.
H
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SUPREME COURT REPORTS
[2013] 12 S.C.R.
A
14. On 26.08.1987, DPCO, 1987 came into force whereby
the bulk drug Ranitidine was included and, accordingly, Zinetac
tablets (its formulations) were subjected to price control.
15. On 17.03.1988, the price fixation order was issued
under para 9(1) of the DPC0,1987 fixing the retail price of
B Zinetac tablets. The price fixation order is said to have been
received by the manufacturer (Biotech Pharma) on 21.03.1988.
16. The respondent is distributor of the Zinetac tablets in
the strength of 150 mg and 300 mg per tablet manufactured
C by Biotech Pharma. Zinetac is a formulation of the bulk drug
Ranitidine. On 04.04.1988, the Biote<:h Pharma sent the
supplementary price list effective from 04.04.1988 in form V. It
is the case of the respondent that the price fixed by the price
fixation order dated 17.03.1988 is applicable with effect from
D 04.04.1988 (on expiry of 15 days from 21.03.1988, i.e., the
date of receipt of the price fixation order dated 17.03.1988).
17. On 23.05.1988, seizures were made of 300 mg
Zinetac tablets from Batch No.3104. The respondent's case is
that Batch No.3104 is prior to Batch No.3115 mentioned as the
E effective batch number in the manufacturer's letter dated
04.04.1988.
18. The respondent-Company challenged the seizure of
goods by filing a writ petition before the Delhi High Court. The
F writ petition was contested by the Central Government before
the Delhi High Court and the judgment of the Karnataka High
Court was also cited. However, Delhi High Court did not agree
with the view adopted by the Karnataka High Court. The Delhi
High Court heavily relied upon a circular dated 28.04.1979
G issued by the Ministry of Petroleum, Chemicals and Fertilizers,
Department of Chemicals and Fertilizers, Government of India.
The said circular though was issued in the context of paragraph
19(2) of DPC0,1979 but the Delhi High Court was of the view
that the said circular was identical to paragraph 16(3) of
H DPCO, 1987, and, therefore, the position explained in respect
, GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1133
INDIA [RM. LODI-IA, J.)
of the DPC0,1979 would continue to hold the field in respect
A
of the very same provisions in DPC0,1987. The Delhi High
Court, accordingly, by its judgment dated 22.10.2009 allowed
the writ petition and quashed the seizure memo whereby the
goods were seized. The Union of India is aggrieved by the
judgment and the two appeals arise therefrom.
B
19. We have heard Mr. S. Ganesh, learned senior counsel
for the manufacturer/distributor and Ms. Indira Jaising, learned
Additional Solicitor General for the Union of India.
20. It is appropriate at this stage to reproduce the few C
relevant paragraphs of DPC0,1987 and DPC0,1995 side by
side.
DPCO, 1987
16(3) Every manufacturer or
importer shall give effect to
the price of a bulk drug or
formulation, as the case may
be,
as
fixed
by
the
government from time to time
within 15 days from the
receipt by such manufacturer
or
importer
of
the
communication in this behalf
from the government and
issue a supplementary price
list in this regard to the
dealers,
state
drugs
controllers
and
the
government and indicate
necessary reference to such
price fixation.
17. Every manufacturer
importer or distributor of a
formulation intended for sale
DPCO, 1995
14(1) Every manufacturer or
importer shall carry into
effect the price of a bulk
drug or formulation, as the
case may be, as fixed by the
Government from time to
time, within fifteen days from
the date of notification in the
Official Gazette or receipt of
the order of the Government
in this behalf by such
manufacturer or importer.
14(2) Every manufacturer,
importer or distributor of a
formulation intended for sale
D
E
F
G
H
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SUPREME COURT REPORTS
[2013] 12 S.C.R.
A
shall display in indelible print shall display in indelible print
mark, on the label of mark,onthelabelofcontainer
container of the formulation of the formulation and the
and the minimum pack minimum
pack
thereof
thereof offered for retail sale, offered for retail sale, the
B
the maximum retail price of retail price of that formulation
that formulation with the notified in the Official Gazette
words "retail price not to or
ordered
by
the
exceed" preceding it, and Government in this behalf,
"local
taxes
extra" with the words "retail price not
c succeeding it.
to exceed" preceding it, "local
taxes extra· succeeding it,
Provided that in the case of a and "under Government
container consisting of Prices Control" on a red strip,
smaller saleable packs, the in the case of scheduled
retail price of such smaller formulations:
D pack shall also be displayed
on the label of each smaller
pack and such price shall not
be more than the pro-rata
price of the main pack
E
rounded off to the nearest
paisa.
F
21. Prices to the traders:-
(1) A manufacturer, distributor
G or wholesaler shall sell a
formulation to a retailer,
unless otherwise permitted
under the provisions of this
Order or any other made
H
Provided that in the
case
of
a
container
consisting of smaller saleable
packs, the retail price of such
smaller pack shall also be
displayed on the label of
each smaller pack and such
price shall not be more than
the pro-rata retail price of the
main pack rounded off to the
nearest paisa.
14(3) Every manufacturer or
importer shall issue a price
list and supplementary price
list, if required, in form V to the
dealers,
State
Drugs
Controllers
and
the
Government
indicating
reference to such price
Gl.AXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1135
INDIA [R.M. LODHA, J.]
thereunder, at a price equal
to the retail price (excluding
, excise duty, if any) minus
16% thereof in the case of
price controlled drug.
(2) Notwithstanding anything
contained in sub-paragraph
(1), the Government may by a
general or special Order fix,
in public interest, the price to
the wholesaler or retailer in
respect of any formulation the
price of which has been fixed
or revised under this Order.
fixation or revision as
covered by the order or
Gazette notification issued
by the Government from
time to time.
15(1) Every manufacturer,
importer or distributor of a
non-scheduled formulation
intended for sale shall
display in indelible print
mark, on the label of
container of the formulation
and the minimum pack
thereof offered for retail sale,
the retail price of that
formulation with the words
"retail price not to exceed"
preceding it and the words
"local
taxes
extra·
succeeding it, and the words
"Not under Price Control" on
a green strip:
Provided that in the
case
of
a
container
consisting
of
smaller
saleable packs, the retail
price of such smaller pack
shall also be displayed on
the label of each smaller
pack and such price shall not
be more than the pro-rata
retail price of the main pack
rounded off to the nearest
paisa.
A
B
.c
D
E
F
G
(2) Every manufacturer or
H
A
B
c
D
E
F
G
H
1136
SUPREME COURT REPORTS
[2013] 12 S.C.R.
importer shall issue a price
list and supplementary price
list, if required of the nonscheduled formulation in
Form V to the dealers, State
Drugs Controllers and the
Government
indicating
changes from time to time.
(3) Every retailer and dealer
shall display the price list and
the supplementary price list,
if any, as furnished by the
manufacturer or importer, on
a conspicuous part of the
premises where he carries
on business in a manner so
as to be easily accessible to
any person wishing to consult
the same.
19(1) A manufacturer,
distributor or wholesaler shall
sell a formulation to a retailer,
unless otherwise permitted
under the provisions of this
Order or any order made
thereunder, at a price equal
to the retail price, as
specified by an order or
notified by the Government
(excluding excise duty, if
any), minus sixteen per cent
thereof in the case of
scheduled drugs.
(2) Notwithstanding
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1137
INDIA [R.M. LODHA, J.]
anything contained in subparagraph
(1),
the}
Government may by a
general or special order fix,
in public interest, the price of
formulation sold to the
wholesaler or retailer in
respect of any formulation
the price of which has been
fixed or revised under this
Order.
21. The comparative statement of the above provisions
indicates that para 14(1) of DPC0,1995 is identical to para
16(3) of DPC0,1987. Para 14(2) of DPC0,1995 is identical
A
B
c
to para 17 of DPC0,1987. Para 14(3) of DPC0,1995 is
identical to para 16(3) of DPCO, 1987 and para 15(1) of D
DPC0,1995 is identical to para 17 of DPC0,1987.
22. In light of the similarity of the above provisions, for the
sake of convenience, we shall refer henceforth to the provisions
contained in DPC0,1995.
E
23. Mr. S. Ganesh, learned senior counsel for the
manufacturer/distributor argues that on a plain reading of para
14(1) of the DPC0,1995, a manufacturer is given fifteen days
from the date of notification of a price fixation by the
F
Government in the official gazette or receipt of the price fixation
order by the manufacturer for carrying into effect the price of
the bulk drug or formulation. Under para 14(2) of the
DPCO, 1995, the manufacturer is required to print indelibly the
retail price of the formulation on the label of the container of
the formulation with the words "retail price not to exceed"
G
preceding it and "local taxes extra" succeeding it. Therefore,
upto the expiry of the fifteenth day from the date of the
notification, the price fixation order in the official gazette or
receipt of the price fixation order by the manufacturer, the
H
1138
SUPREME COURT REPORTS
[2013] 12 S.C.R.
A manufacturer is at liberty to manufacture the formulations and
print on them the pre-notification prices and clear the same from
his factory after paying excise duty on the basis of such
provided price.
8
24. Mr. S. Ganesh, learned senior counsel relies upon the
Circular dated 28.04.1979 issued by the Central Government
wherein it was clarified that all reductions in the prices of
formulations effected from time to time by the Central
Government would be applicable to the stocks cleared on and
after the date of effectuation of reduction. The clarificatory
C Circular further says that price list shall state clearly the batch
numbers from which the reduction is effective. It is, thus, the
submission of Mr. S. Ganesh that the formulations which are
manufactured and cleared prior to the date of effectuation of
reduction (the 15th day after the date of notification in the official
D gazette or the date of receipt of price fixation/reduction order)
are not subject to the price reduction and, accordingly, the said
pre-effective batch products can be sold at the previously
existing and operating prices which would be printed on them.
E
25. It is argued by Mr. S. Ganesh that the said circular has
not been withdrawn and it has been continuously observed by
the trade as well as by the Central Government for several
decades. It is his submission that if the interpretation as above
is not accepted, the consequence will be that the period of 15
F days expressly allowed by para 14(1) of the DPCO, 1995 and
the specific provision in Form V regarding the effective batch
number to which the price reduction/fixation would apply, will
all be rendered completely meaningless and otiose. With
reference to practical problems, it is submitted that the
G manufacturer pays excise duty on the basis of the printed price
at the time of the manufacture and clearance from his factory
and also on the payment of sales tax on the sale price charged
by the manufacturer to the distributor/wholesalers, which again
will be on the basis of the printed price. The payment of excise
duty and sales tax having become final, the differential amount
H
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1139
INDIA [R.M. LODHA, J.]
cannot possibly be refunded and re-assessed. Moreover, if a A
distributor/wholesaler/retailer has already paid a higher price
on the basis of the previously prevailing price, he cannot
possibly be required to sell the formulation at the newly reduced
price. According to Mr. S. Ganesh, learned senior counsel such
an interpretation will be contrary to and in fact destructive of the
8
provisions of para 19 of the DPC0,1995.
26. Mr. S. Ganesh, heavily relied upon the judgment of this
Court in Ranbaxy Laboratories Limited' which interpreted an
exemption notification. Drawing analogy from that judgment, it
is argued that just as the exemption notification which was
C
issued under para 25 of the DPCO, 1995 was addressed to the
manufacturer, similarly, price fixation/revision notification is also
addressed to the manufacturer who is required to effectuate the
same by printing the revised price on all products manufactured
and cleared by him from the 15th day after the date of D
notification/receipt of the order, and also issuing the revised
price list declaring the effective batch number from which
revised price will operate.
27. Mr. S. Ganesh, learned senior counsel submits that the
E
manufacturer/distributor having acted as per circular dated
28.04.1979, cannot be lawfully prosecuted/penalized since the
circular constitutes the contemporanea expositio of the Central
Government which framed the DPCO. In this regard, learned
senior counsel places reliance upon the decision of this Court
F
in Desh Bandhu Gupta2• His submission is that under the
DPCOs, every price list is in respect of "effective batch
number". The clarification made with regard to DPCO, 1979 is
equally applicable for interpretation of 1995, DPCO, since para
14(1) and 14(3) of DPCO, 1995 is identical to DPC0,1979.
28. Mr. S. Ganesh, learned senior counsel argues that there
1.
Union of India v. Ranbaxy Laboratories Limited and Others; [(2008 7 SCC
502.
G
2.
De sh Sandhu Gupta and Company and Others v. Delhi Stock Exchange
Association Lid; [(1979) 4 sec 565.
H
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SUPREME COURT REPORTS
(2013] 12 S.C.R.
A is no allegation of any act or omission by the manufacturer/
distributor during the period of 15 days allowed by para 14 of
DPCO, 1995. He further submits that the interpretation of
DPC0,1979, DPC0,1987 and DPC0,1995 is no more a
relevant issue as with effect from. June, 2013, DPCO, 2013 has
8 come into operation and its scheme and provisions are entirely
different from the earlier DPCOs.
29. Relying upon the decision of this Court in Usha
Martin3, it is submitted by the learned senior counsel that the
issuance of 1979 circular shows that two views are possible
C and, therefore, the view beneficial to the subject must be
adopted, particularly, to a case of criminal prosecution/penalty.
30. It is argued by Mr. S. Ganesh that there is no provision
in DPCO or in the EC Act which nullifies or sets aside past
o lawfully completed transaction for sale of goods by the
manufacturer to the distributor or by the distributor to the retailer.
There is also no provision which requires the manufacturer to
reprint products already in the market with the new price. The
printing of the price is covered by Section 3(f) of the Drugs and
E Cosmetics Act, 1940 and, therefore, the reprinting of the price
can be done only by the manufacturer in his licence
manufacturing premises. The manufacturer has no privily
whatsoever with the retailer and may not even know his identity.
It is absolutely impossible for the manufacturer to get
F possession of the goods from large number of retailers, bring
them back to his factory, reprint the lower price and then send
them back to the retailer with a lower price printed on it, so that
the retailer who paid the higher price to the distributor is then
compelled to sell the goods at a loss at the lower price. The
retailer who has already paid for the goods would never part
G with them; especially only for having them reprinted with a much
lower price. He submits that such an interpretation of the DPCO
will be utterly unworkable and impossible to comply with and
3.
Collector of Central Excise, Patna v. Usha Martin Industries; [(1997) 7 SCC
H
47]
GLAXOSMITHKLINE PHARMACEUTICALS LTD. v. UNION OF 1141
INDIA [R.M. LODHA, J.]
any interpretation other than what has been stated in the circular
A
must be summarily rejected.
31. Ms. Indira Jaising, learned Additional Solicitor General,
on the other hand, argues that the scheme of the two DPCOs,
1987 and 1995 is very clear and that scheme is that once the
8
price is notified for a formulation, the sale to the consumer can
only be at the notified price. Learned Additional Solicitor
General submits that para 16 of the DPC0,1995 imposes an
absolute obligation on all persons not to sell any formulation to
any consumer at a price exceeding the price specified in the
"current price lisf' or price indicated on the label of the container C
or back thereof, "whichever is less".
32. With reference to the definition of the expression 'price
list' in para 2(u) of DPC0, 1995 learned Additional Solicitor
General submits that the price specified in the current list is
D
nothing but the currently notified price of the bulk drug or
formulation under the DPCO. For purpose of interpreting the
expression "price specified in the current price list", it is
essential that the manufacturer has not defaulted in its
obligation to issue price list or supplementary price list. The
E
'current price list' is, therefore, simply the price list reflecting
the currently operating notified price under the DPCO. Moreover,
price specified in the current price list is nothing but the MRP
reflected in column 11 of Form V. Thus, regardless of the entry
in column 11, "effective batch number" the price specified in
F
column 11 is the price specified in the current price list. for the
purposes of para 16. Batch number is not relevant for the
purpose of identifying this price.