# UNION OF INDIA & ANR v. CYNAMIDE INDIA LID. & ANR

- **Citation:** [1987] 2 S.C.R. 841
- **Court:** Supreme Court of India
- **Decided:** 1987-04-10
- **Case number:** Civil Appeal No. 1603 of 1985
- **Bench:** O. Chinnappa Reddy, K.N. Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-anr-v-cynamide-india-lid-anr-9513
- **Pages:** 42

## Headnote

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

## Text

_Characters 0–39,894 of 109,196. This is a partial read: ask again with offset=39894 for what follows._

y
I
UNION OF INDIA & ANR.
A
v.
CYNAMIDE INDIA LID. & ANR.
APRIL 10, 1987,
[O. CHINNAPPA REDDY AND K.N. SINGH, JJ.)
B
Drugs (Prices Control) Order, 1979: Paragraphs 3, 12, 13 & 27:
Bulk Drugs-,Price fixation of-,--Whether legislative activity-Principles
of natural justice whether applicable to-Cost of production-Whether
can be determined by a subordinate legislating Body-Price ftxationReview-Nature of-Formulations--Fixation of retail prices-Whether C
to await the result of review application.
Constitution of India,. Artic!es 32 & 226-Essential Commodities-Price fixation of-Whether matter for investigation and interference by Court.
Practice. and Procedure: Essential Commodities-Price ftxatidn
of-Interim order staying implementation of notificc.tion fixing pricesCourts not to pass orders which would be against public interest.
D
Constitution of India,. Article 39(b)-Material resources of the
community-Distribution of to sub-serve common good-Obligations
E
of State.
Paragraph 3 of the Drugs (Prices Control) Order, 1979 made by
the Central Government in exercise of powers unW:r s. 3(2)(c) of the
Essential Commodities. Act, 1955 empowers the Government; after
making such enquiry as it deems fit, to fix the maximum price at which
F
' the indigenously manufactured bulk dmg shall be sold. Clause (2) of
Paragraph 3 provides that while so fixing the price of a bulk dmg, th•
Government may take into account the average cost of production of
such bulk drug manufactured by a efficient manufacturer and anow a
reasonable return ou net worth. Paragraph 12 empowers the Government to fix leader prices of formulations of categories I and II, while
G
paragraph 13 empowers the Government to fix retail prices of formnlations of category III. Paragraph 27 enables any person aggrieved by any
notification or order under the various paragraphs aforesaid to appeal
to the Government for a review:
The Central Government issued notifications under paragraph 3 · H
' ·
841
, /'
842
SUPREME COURT REPORTS
[1987] 2 S.C.R.
A of the 1979 Order fixing the maximum prices at which various indigenously manufactured hulk drugs could he s0Id. The manufacturers 'y
first filed review applications under paragraph 27 of the Order and
thereafter writ petitions under Art. 226 of the Constitution challenging
the notifications. The High Court quashed those notifications on the
ground of failure to observe the principles of natural justice. Since
B prkes of formulations are primarily dependent on prices of bulk drugs,
the notifications fixing the retail prices of formulations issued during
L
the pendency of review petitions were also quahsed.
r'
· 1n the appeal by the Union of India, it was contended that the
fixation of maximum price under paragraph 3 of the Order was a
C legislative activity and, therefore, not subject to any principle of
natural justice, that paragraph 27 of the Order gave a remedy to the
manufacturers to seek a review of the order f°IXing the maximum price )--
under paragraph 3, that such review did not partake the character of a
judicial or quasi-judicial proceedings, and that at the time of the bearing of the review application the matter underwent thorough and deD tailed discussion between the parties and the Government as well as the
Bureau of Industrial Costs and Prices, and that the prices had not been
fixed in an arbitrary manner.
For the respondents, it was contended that unlike other price j.
control legislations, the Drugs (Prices Control) Order was designed to
E induce better production by providing for a fair return to the manufacturers; that the provision for an enquiry proceeding the determination of the price of a bulk drug, the prescription in paragraph 3, clause
2 that the average cost of production of the bulk drug manufactured by
an efficient manufacturer should be taken into account and that a-.f
reasonable return on net worth should be allowed, and the provision for '
F a review of the order determining the price, established that price-
~
fixation under the Order was a quasi-judicial activity obliging the
observance of the rules of natural justice; that the review, for which
provision is made by paragraph 27, was certainly of quasi-judicial
character and, therefore, it was necessary that the manufacturers
should be informed of the basis for the fixation of the price, that the
G price had hen f°IXed in an arbitrary manner and the Government was
not Willing to disclose the basis On which the prices Were f°IXed On the r
pretext that it may involve disclosure of matters of confidential nature;
that since the price of formulations were dependent . on the prices of
bulk drugs, these should not have been prescribed until the review
application was disposed of, that the undertaking given by the parties
H before the High Court while obtaining ex-parte interim order to main-
•
(4- -
-r
UNION v. CYNAMIDE LTD.
843
lain the status-quo on the prices of bulk drugs and formulations prevailA
ing before the issue of notifications, and in case of dismissal of their
petitions to deposit the difrerence in the prices of the formulations in the
Court, lapsed with the disposal of the writ petition and it could no
longer be enforced; and tbat the delay in filing special leave petitions
against other manufacturers should not be condoned as the Goveru-
"''nt was well versed litigant as compared to private litigants.
B
Allowing the appeal, the Court,
· HELD: I.Price f'ixation is neither tbe function nor the forte of tbe
Court. The Court is concerned neither with the policy nor with the
rates. But it has jurisdiction to enquire into the question, in approC
priate proceedings, whether relevant considerations have gone in and
irrelevant considerations kept out of the determination of the price. For
example, if the legislature has decreed tbe pricing policy.and prescribed
the factors which should guide the determination of the price, the Court
will, if necessary, enquire into the question whether the policy and
factors were present to the mind of the authorities specifying the price. D
Its examination would stop there. The mechanics of price fixation are
not concern of the executive. The Court will not revaluate the considerations even if the prices were demonstrably injurious to some
manufacturers or producers. It will, of course, examine ifthere was any
hostile discrimination. [852E-H]
E
Secretary of Agriculture v. Central Reig Refining Company, 338
604; Prag Ice & Oils Mills v. Union of India, [1978i 3 SCC 459 and
~We/com Hotel v. State of Andhra Pradesh, (1983] 4 SCC 575, referred
/ to.
2. Profiteering, by itself, is evil. Profiteering In the scarce reF
sources of the community, much needed life-sustaining food stuffs and
life saving drugs is diabolic. It is a menace which has to be fettered and
curbed. The ESsential Commodities Act, 1955 is a legislation towards
that end, in keeping with the duty of the State enshrined in Art. 39(b) of
the Constitution towards securing that the ownership and control of the
material resources of the community are so distributed as best to subG
serve the common good. [851E-F]
The right of the citizen to obtain essential articles at fair prices
and duty of the State to provide them are thus transformed into the
power of the State to fix prices and obligation of the producer to charge
no more than the price fixed. [854F]
H
A
B
c
D
E
F
844
SUPREME COURT REPORTS
[1987] 2 S.C.R.
Shree Meenakshi Mills Ltd. v. Union of India, [1974] 1 SCC 468;
Hari Shankar Bag/a v. State of Madhya Pradesh, [1955] 1 SCR 380;
Union of India v. Bhanamal Gulzarimal, [1%0] 2 SCR 627; Sri Krishna
Rice Mills v. Joint Director (Food), (unreported), State of Rajasthan v.
Nathmal and Mithamal, [1954) SCR 982; Narendra Kumar v. Union of
India, [1960) 2 SCR 375, Panipat Co-operative Sugar Mills v. Union of
India, [1973) l SCC 129; Anakapalle Co-operative Agticttltural and Industrial Society Ltd. v. Union of India, [1973) 3 SCC 435 and Premier
Automobiles Ltd. v. Union of India, [1972) 2 SCR 526, referred to.
3.1 A price fixation measure does not concern itself with the
interests of an individual manufacturer or producer. It is generally in
relation to a particular commodity or class of commodities or transactions. It is a direction of a general character not directed against a 'r
particular situation. It is intended to operate in future. It is conceived in
the interest of the general consumer public. [854E-F)
3.2 Price fixation is more in the nature of a legislative activity
than administrative. A legislative act is the creation and promulgation
of a general rule of conduct without reference to particular cases; an
administrative act is the making and issue of a specific direction or the
application of a general rule to a particular case in accordance with the 'f.
requirements of policy. Legislation is the process of formulating a
general rule of conduct without reference to particular cases and usually operating in future; administration is the process of performing
particular acts, of issuing particular orders or of making decisions
which apply general rules to particular cases. [853F-H; 854A]
Secretary' of Agriculture v. Central Reig Refining Company, 338 --f.
US 604, and Saraswati Industrial Syndicate Ltd. v. Union of India,
\. ·
[1974) 2 sec 630, referred to.
3.3.1 Price fixation may occasionally assume an administrative or
quasi-judicial character when it relates to acquisition or requisition of
goods or property from individuals and it becomes necessary to fix the
price separately in relation to such individuals. Such situations may
G
arise when the owner of property or goods is compelled to sell his r
property or goods to the Government or its nominee and the price to he
paid is directed by the legislature to be determined according to the
statutory guidelines laid down by it. In such situations the determination of price may acguire a quasi-judicial character. [854G-H; 855A]
H
3.3.2 Section 3(2)(1) of the Essential Commodities Act enables the
-
UNION v. CYNAMIDE LID.
845
Central Government to make an order requiring any person engaged in
A
the production of any essential commodity to sell the whole or a specific
part of the quantity produced by him to the Government or its nominee.
Section 3(3)(C) provides for the determination of the price to be paid to
such a person. If the provisions ofs. 3(2)(c), nnder which the price of an
essential commodity may be controlled, are contrasted withs. 3(3)(C)
under which payment is to be made for a commodity required to be sold B
by an individual to the Government, the distinction between a legislative act and a non-legislative act will at once become clear. The order
made under s. 3(3)(c), which is not in respect of a single transaction,
nor dkected to a particular individual, is clearly a legislative act, while
an order made under s. 3(3)(C), which is in respect of a particular
transaction of compulsory sale from a specific individual, is a nonC
legislative act. [8608-H; 861A-B)
3.3 The order made under s. 3(2)(c) controlling the price of an
essential commodity may itself prescribe the manner in which price is to
be f"rxed but that will not make the fixation of price a non-legislative
activity, when the activity is not directed towaros a single individual or D
transaction but is of a general nature, covering all mdividuals and all
transactions. The legislative character of the activity is not shed and an
administrative or quasi-judicial character acquired merely because
guidelines prescribed by the statutory order have to he taken into
account. [8618-C]
3.4 Legislative action, plenary or subordinate, is not subject to
rules of natural justice. In the case of Parliamentary legislation, the
-) proposition is self evident .• In the case of subordinate legislation, it may
happen that Parliament may itself provide for a notice and fqr a hearE
"°'
ing, in which case the snbstantial non-observance of the statutorily
prescribed mode of observing natural justice may have the effect of F
invalidating the subordinate legislation. But where the legislature has
not chosen to provide for any notice or hearing, no one can insist upon it
and it will not be permissible to read natural justice into such legislative
activity. [852H; 853A-C]
I
New India Sugar Works v. State of Uttar Pradesh, (1981) 2 SCC
G
293; Laxmi Khandsari v. State of Uttar Prad,esh, (1981) 2 SCC 600;
Ramesh Chandra Kachardas Porwal v. State of Maharashtra, (1981] 2
SCC 722; Bates v. Lord Hailsha, of St. Marylebone, [1972] 1 WLR
1973; Edinburgh and Dalkeith Rv. v. Wauchope Per Lord Brougham,
(1842] 8 Cl & F 700, 720; British Railways Board v. Pickin, (1974) 1 All
ER 609, Sarkar Sasta Anaj Vikreta Sangh v. State of Madhya Pradesh,
H
'
846
SUPREME COURT REPORTS
[1987] 2 S.C.R.
[i981] 4 SCC 471 and Tharoo Mal v. Puranchand, [1978] 1 SCC 102,
A referred to.
3.5 Nothing in the scheme of the Drugs (Prices Control) Order,
1979 leads to the inference that price fixation nnder that Order is not a
legislative activity hot a qnasi-jndicial activity which would attract the
B observance of the principles of natural jnstice. Nor i5 there anything in
the scheme or the provisions of that Order which otherwise contemplates the observance of any principle of natnral jnstice or kindred rule,
the non-observance of which would give rise to a' cause of action to a
suitor. [871G-H; 872A-B]
I
~·
4.1 Occasionally the legislature directs the subordinate legislate ing body to make 'such enqniry as it thinks fit' before making the
;..-
snbordinate legislation. In such a situation, while such enquiry by the
subordinate legislating body as it deems fit is a condition precedent to
the subordinate legislation, the nature and the extent of the enquiry is in
the discretion of the subordinate legislating body and the subordinate
D legislation is not open to question on the ground that the enquiry was
not as full as it might have been. The provision for such an enquiry is ·
generally an enabling provision, intended to facilitate the subordinate
legislating body to obtain relevant information from all and whatever
-I
source considered necessary. It is the sort of enquiry which the legislature itself may cause to be made before legislating, an enquiry which
E
will not confer any right on anyone other than the enquiring body. It is
different from an enquiry In which an opportunity is required to be
given to persons likely to he affected. The former is an enquiry leading
to a legislative activity while the latter is an enquiry which ends in an -f
administrative or quasi-jndicial decision. [853D-F]
F
4.2 In the present case, paragraph 3 of the Drugs (Prices Control)
Order, 1979 is an enabling provision. "Such an enquiry as it thinks fit"
contemplated by it is an enquiry of the former character to be made for
the purposes of fixing the maximum price at which a boil!. drug may be
sold, with a view to regulating its equitable distribution and making it
available at a fair price for the benefit of the ultimate consumer in
G consonance with Art. 39(b) of the Constitution. It is primarily from the
)>---
consumer public's point of view that the Government is expected to
make its enquiry. The need of the consumer public is to be ascertained
and making the drug available to them at a fair price is its ultimate aim.
The enquiry is to be made from that angle and directed towards that
end. Information may be gathered from whatever source considered
H desirable by the Government. [872B-E]
UNION v. CYNAMIDE LTD.
847
4.3 In fixing the price of a bulk drug, the Goverumeut is expreA
ssly required by the Order to take into account the average cost of
production of such bulk drug manufactured by 'an efficient manufacturer' and allow a reasonable return on 'net worth'. For this
purpose too, the Government may gather information from any source
including the manufacturers. Here again the enquiry by the Government need not be restricted to 'an tofficient manufacturer' or some
B
manufacturers; nor need it be extended to all manufacturers. What is
necessary is that the average cost of production by 'an efficient
manufacturer' must be ascertained and a reasonable return a''qwed on
'net worth'. Being a subordinate or delegated legislative activity, the
enquiry must necessarily comply with the statutory conditions, if any,
no more and no less, and no implicatious of natural justice can be read
into it unless it is a statutory condition. [866B-D]
C
5 .1 The review provided by paragraph 27 of the Order, of the
order made under paragraph 3 fixing maximum price of indigenously
manufactured drugs, and under paragraphs 12 and 13 f"ixing leader and
retail prices of formulations, is akin to a post-decisional hearing which
D
is sometimes afforded after the making of some administrative orders,
but not truly so. It is a curious amalgam of a hearing which occasionally
precedes a subordinate legislative activity such as the f"IXing of municipal rates etc. and a post decisional hearing after the making of an
administrative or quasi-judicial order. It is a hearing which follows a
subordinate 'legislative activity intended to provide an opportunity to
E
affected persons such as the manufacturers, the industry and the consumer public to bring to the notice of the subordinate legislating body the
difficulties or problems experienced or likely to be experienced by them
consequent on the price fixation, '\>hereupon the Government may make
appropriate orders. More precisely it is a review of subordinate legislation
by a legislating body at the instance of an aggrieved person. [873B; 874C-D]
F
5.2 The reviewing authority bas the fullest freedom and discretion under paragraph 27 of the Order to prescribe its own procedure
and consider the matter brought before it so long as it does not travel
beyond the parameters prescribed by paragraph 3 in the case of a
review against an order made under that paragraph and the respective
G
other paragraphs in the case of other orders. But whatever procedure is
adopted, it most be a procedure tuned to the situation. [873H; 874A-B]
Vraj/a/ Manila/ & Co. v. Union of India & Anr., [1964] 7 SCR 97;
Shivaji Nathubhaiv. Union of India & Ors., [1960] 2 SCR 775; Maneka
Gandhi v. Union of India, [1978] 2 SCR 621; Swadeshi Couon Mills v.
H
848
SUPREME COURT REPORTS
(1987] 2 S.C.R.
A
Union of India, (1981] 2 SCR 533 and Liberty Oil Mills v. Union of
·y
India, [1984] 3 SCR 676, distingnished.
6.1 So long as the method prescribed and adopted by the snbordinate legislating body in arriving at the cost of prodnction of bulk drugs
was not arbitrary and opposed to tbe principal statutory provisions, it
B could not legitimately be questioned. [878F]
6.2 It is open.to the subordinate legislating body to prescribe and
adopt its own mode of ascertaining the cost of production and the items
to be included and excluded in so doing. Such a body is under no
obligation to follow the method adopted by the Income-tax authorities
C
in allowing expenses for the purpose of ascertaining income and assessing it. There may be many items of business expenditure which may be
allowed by Income-tax authorities as legitimate expenses but which can
never enter the cost of production. It is open to such an authority to
adopt a rough and read but otherwise not unreasonable formula rather
than a needlessly intricate so-called scientific formula. [8780-H] .
D
It could not therefore, be said in the instant case, that the subordinate legislating authority acted unreasonably in prescribing the
norms in the manner it has done.
7.1 From the legislative nature of the activity of the Government,
£
it is clear that it is under no obligation to make any disclosure of any
information received and considered by it in making the order but in
order to render effective the right to seek a review given to an a.ggrieved
person, the Government, if so requested by the aggrieved manufac- +
lurer, is under an obligation to disclose any relevant information which
may reasonably be disclosed pertaining to 'the average cost of produc-
':i.,.
F
lion of the bulk drug manufactured by an efficient manufacturer' and
'the reasonable return on net worth'. [874C-E]
7.2 In the instant case, the procedure followed by the Government in furnishing the requisite particulars at the time of the hearing of
the review applications and discussing across the table the various items
G
that had Ileen taken into account was sufficient <0mpliance "ith the
)-·
demands of fair play in the case of the class of persons claiming to by
affected by the fixation of maximum price under the Drugs (Prices
Control) Order.' It cannot, therefore, be said that there was anything
unfair in the procedure adopted by the Government. [8760-EJ.
H
8. This Court cannot constitute itself into a court of appeal over
UNION v. CYNAMIDE LTD.
849
the Government in the matter of price fixation. The questions that A
obsolete quantitative usages had been takrn into consideration, proxi·
mate cost data had been ignored, and the data relating to the year
ending November 1976 had been adopted as the basis; that there were
errors in totalling, errors in the calculation of prices of utilities, errors
in the calculation of 'net worth' and many other similar errors, were
B
questions to be raised before the Government in the review application
underparagraph27. [877A·C]
9 .1 It is the necessary duty of the Government to proceed to fix
the retail price of a formulation as soon as the price of the parent bulk
drug is fixed. Though the price fixation of formulations is dependent on
the price of the bulk drug, it is not to await the result of a review C
application which in the end may turn out to be entirely without subst·
ance. In view of the public interest, therefore, it is necessary that the
price of formulation should be fixed close on the heels of the fixation of
bulk drug price. [879D-E; GJ
9.2 The ups and downs of commerce are inevitable it is not possi·
hie to devise a fool proof system to take care of every possible defect and
objection. It is certainly not a matter at which the conrt contd take a
hand. All that conrt may do is to direct the Government to dispose of
the review application expeditiously according to a time bound
programme. [879F·G]
10. Though the price of a bulk drug is dependent on innumerable
variables, it does not follow that. the notification fixing the maximum
price must necessarily be struck down as obsolete by the mere passage
D
E
of time. The applications for review must be dealt with expeditiously
and whenever they are not so dealt with, the aggrieved person may seek F
a mandamus from the court to direct the Government to deal with the
review application within a tmre frame-work. [880B·C]
11. Where prices of essential commodities are fixed in order to
maintain or increase their supply or for securing their equitable dis·
tribution and availability at fair prices, the court should not make any G
interim order staying the implementation of the notification fixing the
prices. Such orders are against the public interest and onght not to be
made by a court nnless it is satisfied that no public interest is going to
suffer. 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. [880D-F]
H
850
SUPREME COURT REPORTS
[1987] 2 S.C.R.
A
In the instant case, the order made by the High Court has the
y
manufacturers on terms, bqt the consumer public has been left high and
dry. [881D]
12. Apart from the fact that an appeal is ordinarily considered to
be a continuation of the original proceeding, in the present case, further
B orders of the Supreme Court were also in contemplation and such
c
further orders could only be made if appeals were preferred to the
!--·
Supreme Court. There was no doubt in anyone's mind that the matter
would be taken up in appeal to the Supreme Court whichever way the
. ~ •
writ petitions were decided. The undertakings given by the parties in. the
present cases, were thus intended to and do continue to subsist. [881E-F]
[The Government is directed to dispose of the review applications
after giving notice of hearing to the manufacturer. The hearing to be ·
given within two months and the review applications disposed of within
two weeks after the conclusion of the hearing.]
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1603
of 1985 etc.
From the Judgment and Order dated 17 .12.1984 of the Delhi
-..f
High Court in C.W.P. No. 820of 1981.
E
G. Ramaswamy, Additional Solicitor General G. Subramanium,
F
C.V. SubbaRao and A. Subba Rao for the Appellants.
A.B. Diwan, S.I. Thakar, D.D. Udeshi, H.S. Merchant, Ravin-
-f
der Narain, Mrs. A.K. Verma and D.N. Mishra for the Respondents.
'
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J. It was just the other day that our
brothers Ranganath Misra and M.M. Dutt, JJ. had to give directions in
a case (Vincent Panikurbangara v. Union of India) where a public
spirited litigant had complained about the rinscrupulous exploitation
G of the Indian Drug and Pharmaceutical Market by multinational
Corporations by putting in circulation low-quality and even deleterious drugs. In this group of cases we are faced with a different problem
of alleged exploitation by big manufacturers of bulk drugs. ,The problem is that of high prices, bearing, it is said, little relation to the cost of
production to the manufacturers. By way of illustration, we may
H straightaway mention a glaring instance of such high-pricing which was
UNION v. CYNAMIDE LTD. [CHINNAPPA REDDY, J.)
851
brought to our notice at the very commencement of the hearing.
'Barlagan Ketone', a bulk drug, was not treated as an essential bulk
drug under the Drugs (Prices Control) Order, 1970 and was not included in the schedule to that order. A manufacturer was, under the
provisions of that Order, free to continue to sell the drug at the price
reported by him to the Central Government at the time of the commencement of the order, but was under an obligation not to increase the
price without the prior approval of the Central Government. The price
which the manufacturer of Barlagan Kotone, reported to the Central
Government in 1971 was Rs.24,735.68 per Kg. After the 1979 Drugs
(Prices Control) Order came into force, the distinction between essential and non-essential bulk drugs was abolished and a maximum price
had to be fixed for Barlagan Ketone also like other bulk drugs. The
manufac~rer applied for fixation of price at Rs.8,500 per Kg. The
Government, however, fixed the price at Rs. l,810 per Kg. For the
moment, ignoring the price fixed by the Government, we see that the
price of Rs.24,735 per Kg. at which the manufacturer was previously
selling the drug and at which he continues to market the drug to this
day because of the quashing of the order fixing the price by the High
Court, is so unconsciously high even compared with the price claimed
by himself that it appears to justify the charge that some manufacturers do indulge in 'profiteering'.
Profiteering, by itself, is evil. Profiteering in the scarce resources
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of the community, much needed life-sustaining food-stuffs and lifeE
saving drugs is diabolic. It is a menance which had to be fettered and
curbed. One of the principal objectives of the Essential Commodities
Act, 1955 is precisely that. It must be remembered that Art. 39(b)
enjoins a duty on the State towards securing 'that the ownership and
control of the material resources of the community are so distributed
as best to subserve the common good'. The Essential Commodities
F
Act is a legislation towards that end. Section 3(1) of the Essential
Commodities Act enables the Central Government, if it is of opinion
'that it is necessary or expedient so to do for maintaining or increasing
supplies of any essential commodity or for securing their equitable
distribution and availability at fair price', to 'provide for regulating or
prohibiting by order, the production, supply and distribution thereof G
and trade and commerce therein'. In particular, s. 3(2)(c) enables the
Central Government, to make an order providing for controlling the
price at which any essential commodity may be bought or sold. It is in
pursuance of the powers granted to the Central Government by the
Essential Commodities Act that first the Drugs (Prices Control) Order, 1970 and later the Drugs (Prices Control) Order, 1979 were made.
H
852
SUPREME COURT REPORTS
[1987] 2 S.C.R.
Armed with authority under the Drugs (Prices Control) Order, 1979
A the Central Government issued notifications fixing the maximum
prices at which various indigenously manufactured bulk drugs may be
sold by the manufacturers. These notifications were questioned on
several grounds by the manufacturers and they have been quashed by
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the Delhi High Court on the ground of failure to observe the principles
of natural justice. Since prices of 'formulations' are primarily dependent on prices of 'buli drugs', the notifications fixing the retail prices of
formulations were also quahsed. The manufacturers had also filed
review petitions before the Government under paragraph 27 of the
1979 Order. The review petitions could not survive after the notifications sought to be reviewed had themselves been quashed. Nevertheless the High Court gave detailed directions regarding the manner of
disposal of the review petitions by the High Court. The Union of India
has preferred these appeals by Special leave of this Court against the
judgment of the High Court. The case for the Union of India was
presented to us ably by Shri G. Ramaswami, the learned Additional
Solicitor General and the manufacturers were represented equally
D ably by Shri Anil Diwan.
Before we turn to the terms of the Drugs (Prices Control) Order,
1979 we would like to make certain general observations and explain
the legal position in regard to them.
E
We start with the observation, 'Price-fixation is neither the function nor the forte of the Court'. We concern ourselves neither with the
policy nor with the rates. But we do not totally deny ourselves the
jurisdiction to enquire into the question, in appropriate proceedings,
·whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the
F Legislature has. decreed the pricing policy and prescribed the factors
which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are
present to the mind of the authorities specifying the pric''· But our
examination will stop there. We will go no further. We will not deluge
ourselves with more facts and figures. The assembling of the raw mateG rials and the mechanics of price fixation are the concern of the executive and we leave it to them. And, we will not revaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. 'J:he Court will, of course, examine if there is
any hostile discrimination. That is a different 'cup of tea' altogether.
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The second observation we wish to make is, legislative action,
't··
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LINION v. CYNAMIDE LTD. [CHlNNAPPA REDDY. J.J
853
plenary or subordinate, is not subject to rules of natural justice. In the
case of Parliamentary legislation, the proposition is self-evident. In the
case of subordinate legislation, it may happen that Parliament may
itself provide for a notice and for a hearing-there are several instances
of the legislature requiring the subordinate legislating authority to give
public notice and a public hearing before say, for example, levying a
municipal rate-,in which case the substantial non-observance of the
statutorily prescribed mode of observing natural justice may have the
effect of invalidating the subordinate legislation. The right here given
to rate payers or others is in the nature of a concession which is not to
detract from the character of the activity as legislative and not quasijudicial. But, where the legislature has not chosen to provide for any
notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity.
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Occasionally, the legislature directs the subordinate legislating
body to make 'such enquiry as it thinks fit' before making the subordinate legislation. In such a situation, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the D
subordinate legislation, the nature and the extent of the enquiry is in
the discretion of the subordinate legislating body and the subordinate
legislation is not open to question on the ground that the enquiry was
not as full as it might have been. The provision for 'such enquiry as it
thinks fit' is generally an enabling pwvision, intended to facilitate the
subordinate legislating body to obtain relevant information from all
E
and whatever source and not intended to vest any right in any one
other than the subordinate-legislating body. It is the sort of enquiry
which the legislature itself may cause to be made before legislating, an
enquiry which will not confer any right on anyone.
The third observation we wish to make is, price fixation is more F
in the nature of a legislative activity than any other. It is true that, with
the proliferation of delegated legislation, there is a tendency for the
line between legislation and administration to vanish into an illusion.
Administrative, quasi-judicial decisions tend to merge in legislative
activity and, conversely, legislative activity tends to fade into and present an appearance of an administrative or quasi-jl!dicial activity. Any G
attempt to draw a distinct line between legislative and administrative
functions, it has been said, is 'difficult in theory and impossible in
practice'. Though difficult, it is necessary that the line must sometimes
be drawn as different legal rights and consequences may ensue. The
distinction between the two has usually been expressed as 'one between the general and the particular'. 'A legislative act is the creation H
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854
SUPREME COURT REPORTS
[1987] 2 S.C.R.
and promulgation of a general rule of conduct without reference to
particular cases; an administrative act is the making and issue of a
specific direction or the application of a general rule to a particular
case in accordance with the requirements of policy'. 'Legislation is the
process of formulating a general rule of conduct without reference to
particular cases and usually operating in future; administration is the
B process of performing particular acts, of issuing particular orders or of
making decisions which apply general rules to particular cases.' It has
also been said "Rule making is normally directed toward the formulation of requirements having a general application to all members of a
broadly identifiable class" while, "an adjudication, on the other hand,
applies to specific individuals or situations". But, this is only a bread
C distinction, not necessarily always true. Administration and administrative adjudication may also be of general application and there may
be legislation of particular application only. That is not ruled out.
Again, adjudication determines past and present facts and declares
rights and liabilities while legislation indicates the future course of
action. Adjudication is determinative of the past and the present whil~
D legislation is indicative of the future. The object of the rule, the reach
of its application, the rights and obligations arising out of it, its
intended effect on past, present and future events, its form, the
manner of its promulgation qre some factors which may help in drawing the line between legislative and non-legislative acts. A price fixation measure does not concern itself with the interests of an individual
E manufacturer or producer. It is generally in relation to a particular
commodity or class of commodities or transactions. It is a direction of
a general character, not directed against a particular situation. It is
intended to operate in the future. It is conceived in the interests of the
general consumer public. The right of the citizen to obtain essential
articles at fair prices and the duty of the State to so provide them are
F
transformed into the power of the State to fix prices and the obligation
of the producer to charge n(\ more than the price fixed. Viewed from
whatever angle, the angle of general application the prospectivity of its
effect, the public interest served, and the rights and obligations flowing therefrom, there can be no question that price fixation is ordinarily
a legislative activity. Price-fixation may occassionally assume an
G administrative or quasi-judicial character when it relates to acquisition
or requisition of goods or property from individuals and it becomes
necessary to fix the price separately in relation to such individuals.
Such situations may arise when the owner of property or goods is
compelled to sell his property or goods to the Government or its
nominee and the price to be paid is directed by the legislature to be
H determined according to the statutory guidelines laid down by it. In
UNION v. CYNAMIDE LTD. [CHINNAPPA REDDY, J.]
855
such situations the determination of price may acquire a quasi-judicial
character. Otherwise, price fixation is generally a legislative activity.
We also wish to clear a misapprehension which appears to prevail in
certain circles that price-fixation affects the manufacturer or producer
primarily and therefore fairness requires that he be given an apportunity and that fair opportunity to the manufacturer or producer must be
read into the procedure for price-fixation. We do not agree with the
basic premise that price fixation primarily affects manufacturers and
producers. Those who are most vitally affected are the consumet public.
It is for their protection that price-fixation is resorted to and any
.._ · increase in price affects them as seriously as any decrease does a
manufacturer, if not more.
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The three observations made by us are well-settled and well-
--1.,
founded on authority. The cases to which we shall now refer, will
perhaps elucidate what we have tried, unfelicitously, to express.
In Shree Meenakshi Mills Ltd. v. Union of India, [1974] I SCC
468 a notification fixing the ex-factory price of certain counts of cotton D
yam was questioned on the ground that the price had been arbitrarily
fixed. After referring to Hari Shanker Bag/a v. State of Madhya
Pradesh, [1955] 1 SCR 380; Union of India v. Bhanamal Gulzarimal,
\-
[1960] 2 SCR 627; Sri Krishna Rice Mills v. Joint Director {Food),
(unreported); State of Rajasthan v. Nathmal and Mithamal, [1954]
SCR 982; Narendra Kumar v. Union of India, [1960; 2 SCR 375; E
Panipat Co-operative Sugar Mills v. Union of India, [1973] I ~CC 129;
Anakapalle Co-operative Agricultural & Industrial Society Ltd. v.
. Union of India, [1973] 3 SCC 435 and Premier Automobiles Ltd. v ..
..._ Union of India, [ 1972] 2 SCR 526 a constitution bench of the court
observed that the dominant object and the purpose of the legislation
,1.
was the equitable distribution and availability of commodities at fair F
price and if profit and the producer's return were to be kept in the
forefront, it would result in losing sight of the object and the purpose
of the legislation. If the prices of yarn or cloth were fixed in such a way
to enable the manufacturer or producer recover his cost of production
and secure a reasonable margin of profit, no aspect of infringement of
I
any fundamental right could be said to arise. It was to be remembered G
\
that the mere fact that some of those were engaged in the industry,
trade or commerce alleged' that they were incurring loss would not
render the law stipulating the price unreasonable'.