# UNION OF INDIA & ORS v. MIS. CIPLA LTD. & ANR

- **Citation:** [2016] 7 S.C.R. 523
- **Court:** Supreme Court of India
- **Decided:** 2016-10-21
- **Case number:** Civil Appeal No.329 of2005
- **Bench:** Madan B. Lokur, R.K. Agrawal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-ors-v-mis-cipla-ltd-anr-31629
- **Pages:** 81

## Headnote

Drugs (Prices Control) Order, 1995 - Paragraphs 7, 8, 9:
Notification dated 13. 0 7.1999 - Issuance by the Central
government under Paragraph 7 prescribing of norms for conversion
cost, packing charges and process loss of raw materials (other than
packing materials in conversion) and packing and process loss of
packing materials in packaging - Validity of - Held: Notification is
valid - They were issued after due application of mind and based
on available material duly examined by an expert body -
Notifications were not arbitrarily issued nor were they discriminatory
in any manner at all nor were they issued mechanically.
Notifications dated 12.07.2000, 12.07.2001, 12.07.2002 and
11.07.2003 - Issuance by Central Government under Paragraph 7
re-notifYing the norms prescribed on 13.07.1999 - Validity ofHeld: Are valid and were not issued mechanically or without any
application of mind and it was not necessary to re-determine the
norms every year as required by DPCO, 1995.
Issuance of notifications by the Central Government fixing
the retail price or ceiling price of formulations under Paragraphs
8 and 9 without determining the norm for cost of packing material
as required by Paragraph 7 - Validity of - Held: Are valid.
Fixation of retail price of a formulation under Paragraph 8
without first fixing the sale price of a bulk drug under Paragraph 3
utilized in the manufacture of a formulation - Validity of - Held: ls
valid in law.
Judicial review: Power of - Notification issued by Central
Government under Paragraph 8 or 9 - Held: Action of a repository
of power is also amenable to judicial review if it is contrary to or
violates the mandatory requirement of a subordinate legislation - If
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[2016] 7 S.C.R.
Central Government does not adhere to the formula given in
Paragraph 7 and fixes the retail price or ceiling price of
formulations, notification issued under Paragraph 8 or 9 is liable
to quashed being contrary to law - However, no instance pointed
out to use the power of judicial review and quash the notifications
- Drugs (Prices Control) Order, 1995 - Paragraphs 7, 8, 9.
Alternative remedy: Availability of - Manufacturer or
formulator aggrieved by fixing of retail or ceiling price of any
for111ulation - Alternative remedy available under the DPCO 1995
- Submission that norms not prescribed to 111ake effective case for
revision or review of price notification - Held: lf any manufacturer
or formulator had preferred a revision or review application, all
necessary material would have been 111ade available to the
complainant for an effective representation - None of the parties
were precluded, in fact, some of them did - In view of the availability
of an alternative and efficacious remedy under the DPCO 1995,
the writ petitions by the manufacturers and formulators ought not
to have been entertained by the concerned High Courts, but it is
left at that - Drugs (Prices Control) Order, 1995.
Forum shopping: Court to adopt a functional test vis-a-vis the
litigation and the litigant - It is to be seen whether there is any
functional similarity in the proceedings between one Court and
another or whether there is so111e sort of subterji1ge on the part of a
litigant - Functional test would determine whether a litigant is
indulging in forum shopping or not - On facts, on examination of
relief claimed by 'C' Company in the different High Courts, it is
found that they have no substantive connection whatsoever with
the relief claimed in the Allahabad High Court -
'C' company s
petitions do not fall under any category of forum shopping.
Practice and procedure: Practice of placing scanty material
before the High Courts, and placing volumes of documents before
this Court - Held: Such practice degrade the importance of
proceedings in the High Court and could subsequently embarrass
the High Court which might inadvertently base its decision on
insufficient material resulting in possibility of

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[2016] 7 S.C.R. 523
UNION OF INDIA & ORS.
v.
MIS. CIPLA LTD. & ANR.
(Civil Appeal No.329 of2005)
OCTOBER 21, 2016
[MADAN B. LOKUR AND R.K. AGRAWAL, JJ.]
Drugs (Prices Control) Order, 1995 - Paragraphs 7, 8, 9:
Notification dated 13. 0 7.1999 - Issuance by the Central
government under Paragraph 7 prescribing of norms for conversion
cost, packing charges and process loss of raw materials (other than
packing materials in conversion) and packing and process loss of
packing materials in packaging - Validity of - Held: Notification is
valid - They were issued after due application of mind and based
on available material duly examined by an expert body -
Notifications were not arbitrarily issued nor were they discriminatory
in any manner at all nor were they issued mechanically.
Notifications dated 12.07.2000, 12.07.2001, 12.07.2002 and
11.07.2003 - Issuance by Central Government under Paragraph 7
re-notifYing the norms prescribed on 13.07.1999 - Validity ofHeld: Are valid and were not issued mechanically or without any
application of mind and it was not necessary to re-determine the
norms every year as required by DPCO, 1995.
Issuance of notifications by the Central Government fixing
the retail price or ceiling price of formulations under Paragraphs
8 and 9 without determining the norm for cost of packing material
as required by Paragraph 7 - Validity of - Held: Are valid.
Fixation of retail price of a formulation under Paragraph 8
without first fixing the sale price of a bulk drug under Paragraph 3
utilized in the manufacture of a formulation - Validity of - Held: ls
valid in law.
Judicial review: Power of - Notification issued by Central
Government under Paragraph 8 or 9 - Held: Action of a repository
of power is also amenable to judicial review if it is contrary to or
violates the mandatory requirement of a subordinate legislation - If
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Central Government does not adhere to the formula given in
Paragraph 7 and fixes the retail price or ceiling price of
formulations, notification issued under Paragraph 8 or 9 is liable
to quashed being contrary to law - However, no instance pointed
out to use the power of judicial review and quash the notifications
- Drugs (Prices Control) Order, 1995 - Paragraphs 7, 8, 9.
Alternative remedy: Availability of - Manufacturer or
formulator aggrieved by fixing of retail or ceiling price of any
for111ulation - Alternative remedy available under the DPCO 1995
- Submission that norms not prescribed to 111ake effective case for
revision or review of price notification - Held: lf any manufacturer
or formulator had preferred a revision or review application, all
necessary material would have been 111ade available to the
complainant for an effective representation - None of the parties
were precluded, in fact, some of them did - In view of the availability
of an alternative and efficacious remedy under the DPCO 1995,
the writ petitions by the manufacturers and formulators ought not
to have been entertained by the concerned High Courts, but it is
left at that - Drugs (Prices Control) Order, 1995.
Forum shopping: Court to adopt a functional test vis-a-vis the
litigation and the litigant - It is to be seen whether there is any
functional similarity in the proceedings between one Court and
another or whether there is so111e sort of subterji1ge on the part of a
litigant - Functional test would determine whether a litigant is
indulging in forum shopping or not - On facts, on examination of
relief claimed by 'C' Company in the different High Courts, it is
found that they have no substantive connection whatsoever with
the relief claimed in the Allahabad High Court -
'C' company s
petitions do not fall under any category of forum shopping.
Practice and procedure: Practice of placing scanty material
before the High Courts, and placing volumes of documents before
this Court - Held: Such practice degrade the importance of
proceedings in the High Court and could subsequently embarrass
the High Court which might inadvertently base its decision on
insufficient material resulting in possibility of an incorrect decision
which is liable to be set aside - Such practice is to be discouraged
- For better adjudication of disputes, it is appropriate for all litigants
to place 011 record all the material before the court of first instance.
UNION OF INDIA & ORS. v. MIS. CIPLA LTD. & ANR.
Interim order: Matters pertaining to sale of formulations at
retail price or ceiling price fixed by Central Government through
notifications issued under the DPCO - Issuance of interim order -
Held: Matters having financial and economic implications, where
public interest. is involved, the Court ought to be circumspect in
granting any interim relief - Consequence of an interim order might
be quite serious to society and consumers and might cause damage
to public interest and have a long term impact - Drugs (Prices
Control) Order, 1995.
Drugs and medicines: Working of drug industry - Interference
by the courts - Held: Courts have to be extremely cautious in
interfering in any manner whatsoever with the working of the drug
industry - Not only is the drug industry in the country extremely
large with heavy financial stakes but there is lot at stake in it not
only for the industry but also for the consumers - Any interference
by the Courts would have wide ranging repercussions not only in
commercial terms but also for the people of the country.
Allowing the appeals filed by the Union of India and
dismissing the appeals by Dr. Reddy's Laboratories Ltd., the
Court
HELD: 1. The notification dated 13.07.1999 issued by the
Central government under Paragraph 7 of the Drugs (Prices
Control) Order, 1995 prescribing !he norms for conversion cost,
packing charges and process loss of raw materials (other than
packing materials in conversion) and packing and process loss
of packing materials in packaging is valid and that the notification
was not issued mechanically or without any application of mind.
The notifications dated 12.07.2000, 12.07.2001, 12.07.2002 and
11.07.2003 issued by the Central Government under Paragraph
7 of the Drugs (Prices Control) Order, 1995 re-notifying the norms
prescribed on 13.07.1999 are valid and were not issued
mechanically or without any application of mind and that it was
not necessary to determine the norms every year as required by
the Drugs (Prices Control) Order, 1995 and they are valid in law.
Various notifications issued by the Central Government fixing
the retail price or ceiling price of formulations under Paragraphs
8 and 9 (as the case may be) of the Drugs (Prices Control) Order,
1995 without determining the norm for cost of packing material
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as required by Paragraph 7 of the Drugs (Prices Control) Order,
1995 are valid in law. Fixing the retail price of a formulation under
Paragraph 8 of the Drugs (Prices Control) Order, 1995 without
first fixing the sale price of a bulk drug under Paragraph 3 of the
Drugs (Prices Control) Order, 1995 utilized in the manufacture .
of a formulation is valid in law. The impugned judgments and
orders are set aside. [Paras 173, 174) (602-C-H; 603-A-B)
2.1 The view in *Raya/aseenut Paper case would apply to
the Reports of the Masood Committee and the Jharwal Committee
set up by the Central Government for recommending the norms
for the purposes of Paragraph 7 of the DPCO 1995. The Reports
were antecedent materials, non-statutory and recommendatory
and could have been rejected by the Central Government. The
Masood Committee did not (and perhaps could not) recommend
any norms for conversion cost, packing charges and process loss,
except for cost of packing material (without process loss). The
Masood Committee was alive to the statutory requirement of
prescribing the norms on a yearly basis and therefore referred to
it. However, as far as the Report of the Jharwal Committee is
concerned, the Central Government accepted and implemented
it by issuing a notification on 13.07.1999 under Paragraph 7 of
the DPCO 1995 - but still did not prescribe the norms for cost of
packing material recommended by the Masood Committee.
[Paras 93, 94) [573-D-F]
Rayalaseema Paper Mills Ltd. v. Government of A.P.
2002 (3) Suppl. SCR 323 : (2003) 1 SCC ~41- referred
to.
2.2 While the counsel for 'C' company might have serious
differences of opinion with the recommendations of these
particular non-statutory Reports, generally a challenge to Reports
prepared by expert bodies is not easy but is subject to lesser
judicial scrutiny. A factor here or a factor there that should have
been taken into account but has been ignored should not
invalidate the Reports-mere errors in the Reports are not subject
to judicial review. That there can be a legitimate difference of
opinion (sometimes serious) bet"tVeen two expert bodies is not at
all unusual. [Paras 95, 96) [573-G-H; 574-A-B]
UNION OF INDIA & ORS. v. MIS. CIPLA LTD. & ANR.
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Prag Ice and Oil Mills and Anr. v. Union of India 1978
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(3) SCR 293:(1978) 3 SCC 459 - relied on.
Shri Sitaram Sugar Co. Ltd. v. Union of India 1990 (1)
SCR 909:(1990) 3 SCC 223 - referred to.
Railroad Commission of Texas v. Rowan & Nichols Oil
Company 311 US 570, 85 L Ed 358 - referred to.
2.3 The feel of the expert is important, if not conclusive.
The two expert Committees made their recommendations. These
recommendations were then examined and considered by the
Central Government and on the basis of the expert conclusions
arrived at, the norms were prescribed by a notification dated
13.07.1999 issued under Paragraph 7 of the DPCO 1995. Under
the circumstances, the question of judicial scrutiny of the Reports
of the Masood Committee and the Jharwal Committee and the
acceptance of their recommendations by the Central Government
is not only limited, but in this case it does not arise. It cannot be
said that the notification dated 13.07.1999 was based on no
material or was issued without any application of mind. The
counsel for 'C' company may disagree with the contents of the
materials, but cannot ignore their existence or that they were
considered by the Central Government. [Para 97) (574-G-H; 575A-B)
2.4 Fixing the price of any commodity is not only difficult
but also tricky. There is material to be considered, a bundle of
factors to be considered and appropriate weight is to be given to
the material and the factors. This is not easy to decide and there
will always be some criticism with regard to either the material
utilized or the factors considered or the weight attached to the
materials and factors. In matters pertaining to drug formulations,
it is not only an issue of demand and supply but also the ability of
a common person to afford the formulation. At the same time,
the manufacturer must also make some profit and be in a position
to invest in research and development. There simply cannot be
any mathematical precision in fixing the price of a commodity.
More than enough elbow room or a play in the joints is required
to be given in such matters-and even then the price fixing
authority may commit an error. Once this is appreciated, it will
be realized that the task before the Central Government in
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3.1 It is true that no manufacturer/formulator is under an
obligation to furnish whatever information is required by the
Central Government including information that might be
confidential. But that does not mean that absolutely no
information should be supplied by any company or incomplete
information should be supplied by a very few of them. It would
certainly be more appropriate for each company to have
responded to the questionnaires sent with a communication that
some particular information is not being furnished for reasons of
confidentiality. But no such courtesy was extended. While there
may not be a statutory obligation on each manufacturer/formulator
to furnish information for prescribing the norms, there is certainly
a moral and social obligation on them to furnish information so
that appropriate norms could be notified not only for their benefit
but also for the benefit of the consumers. The preamble to the
Essential Commodities Act, 1955 cannot be forgotten. By not
furnishing the information required, the drug industry pushed
· the Central Government into a corner leaving it with no option
but to prescribe the norms on the basis of available material and
later re-notify the norms. It is also true that fixing the price of
formulations based on the norms prescribed under Paragraph 7
of the DPCO 1995 is a legislative activity which the Central
Government was obliged to carry out on its own research and
assessment, assuming there was no cooperation from the
manufacturers/formulators. The efforts made by the Masood
Committee and the Jharwal Committee for prescribing the norms
for the purposes of Paragraph 7 of the DPCO 1995 were steps
leading up to this legislative activity. It is nobody's case that no
preliminary steps were taken or that no exercise was undertaken
for arriving at appropriate norms - the steps and exercise were
in fact undertaken through expert Committees but the material
used in the exercise and the resultant reports were criticized by
the counsel for 'C' company. Given the circumstances that the
two Committees were faced with and given the virtual noncooperative attitude of the drug industry, the Central Government
prescribed the norms and 'C' company and the drug industry
were obliged to accept them as notified without much ado. It
cannot be that the drug industry does not supply necessary
UNION OF INDIA & ORS. v. MIS. CIPLA LTD. & ANR.
information and data to the expert Committees appointed by the
Central Government and then blames the Central Government
for taking a decision without necessary information and data. The
failure of the drug industry to extend effective cooperation appears
to be an endemic problem. [Paras 102, 103, 104) [576-E-H; 577A-D]
3.2 The antecedent materials (the Reports) on the basis of
which the norms were recommended and then prescribed under
Paragraph 7 of the DPCO 1995 are subject to lesser judicial
scrutiny, limited perhaps only to the application of completely
erroneous principles. The burden for demonstrating the
application of completely erroneous principles is heavy as it is
and it is heavier still if the antecedent material is prepared by
experts. The onus of discharging the heavy burden must
necessarily fall on the challenger, and 'C' company has not been
able to sustain the challenge. There can be and are differences of
opinion but cannot and will not reconsider the opinion of experts,
particularly in matters of economic affairs or other economy
related issues unless there is extremely strong reason to do so.
!Para 106) [578-D-FI
Union of India v. Swiss Garnier Life Sciences (2013) 8
SCC 615; Secretary, Ministry of Chemicals and
Fertilizers v. 'C' Company Ltd. 2003 (2) Suppl. SCR
177 : (2003) 7 SCC 1; Shri Sitaram Sugar Co. Ltd. v.
Union of India 1990 (1) SCR 909 : (1990) 3 SCC 223
- referred to.
3.3 The various notifications issued under Paragraph 7 of
the DPCO 1995 in 1999 and thereafter prescribing the norms for
conversion cost, packing charges and process loss of raw
materials (other than packing materials in conversion) and
packing and process loss of packing materials in packaging were
issued after due application of mind and based on available
material duly examined by an expert body. The notifications were
not arbitrarily issued nor were they discriminatory in any manner
at all nor were they issued mechanically nor could it be said that
they were issued without any application of mind. [Para 108]
[579-G; 580-A-B]
4.1 On the one hand, there was virtual non-cooperation from
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the drug industry in providing information to the Central
Government despite repeated requests and reminders even by
expert Committees constituted for the purpose and on the other
there was a perceived statutory obligation on the Central
Government to notify the norms every year and that responsibility
could not be effectively discharged without the cooperation of
the drug industry. Therefore the Central Government, faced with
an extra-ordinary situation and a stalemate putting the consumers
of an essential commodity at the mercy of the drug industry, had
no option but to re~notify the existing norms in public interest on
the basis of the available material. [Para 110] [580-F-G]
4.2 The insistence of the drug industry to work out the
norms on the basis of the CARs was another stumbling block
staring at the face of the Central Government. The Cost Accounts
Branch of the Department of Expenditure in the Ministry of
Finance, had clearly expressed the view that the norms could
not be effectively determined only on the basis of the CARs.
Finally, the non-cooperation of the drug industry from October
1998 onwards was another road block. The overall attitude of
the drug industry appears to be one of profit making or preserving
commercial interests, while the concern should really be of
promoting consumer interest. Faced with these competing
interests, the Central Government sided with the consumer and
cannot be faulted for it. The Central Government did not act in a
routine or mechanical manner in re-notifying the norms every
year from 2000 onward. [Para 111) [581-B-D]
4.3 The re-notification of the prescribed norms in the period
2000 to 2003 was not mechanical or without any application of
mind. The materials were before the Central Government and
there was no change in the content of the materials. If there was,
the drug industry failed to effectively point it out as a result of
their non cooperative attitude. Also that re-notification of the
prescribed norms is per se not impermissible and in the instant
case it was justified in the circumstances. [Para 112] [581-E-F]
Shri Malaprabha Coop. Sugar Factory v. Union of
India 1993 (2) Suppl. SCR 415 : (1994) 1 SCC 648 -
referred to.
UNION OF INDIA & ORS. v. MIS. ClPLA LTD. & ANR.
5.1 The norms fixed by the Central Government are of
general application, they are not intended to benefit or harm any
particular manufacturer or formulator and indeed no manufacturer
or formulator is required to be heard (or was heard) in the
determination, they are notified in the Official Gazette for the
information of the general public and in arriving at the norms the
general attributes of legislative activity are attended to by the
Central Government for the benefit of the consumers. The
notification of the norms therefore, has the character of legislative
activity. [Para 114] [583-C-D]
5.2 No submission was made to the effect that the formula
given in Paragraph 7 of the DPCO 1995 was not applied proprio
vigore by the Central Government. The statutory criterion for
price fixing is the formula given in Paragraph 7 of the DPCO
1995. Whether this formula has been operated as it should be is
certainly subject to judicial review. Therefore, while operating
the formula, if the Central Government did not take conversion
cost into consideration or took into consideration some factor
not in the formula then, the Court could certainly strike down
the retail price or the ceiling price so fixed by the Central
Government on the ground that relevant factors were ignored or
irrelevant factors were taken into consideration. No such
allegation was made and no such contention was advanced by the
'C' company. [Para 115] [582-E-F]
Prag Ice and Oil Mills and Am: v. Union of India 1978
(3) SCR 293 : (1978) 3 SCC 459; Union of India v.
Cynamide India Ltd. & Anr: 1987 (2 ) SCR 841 : (1987)
2 SCC 720; Glaxosmithkline Pharmaceuticals Ltd. v.
Union of India 2013 (12) SCR 1120 : (2014) 2 SCC
753; Shri SitarG111 Sugar Co. Ltd. " Union of India 1990
(1) SCR 909 : (1990) 3 SCC 223; Saraswati Industrial
Syndicate Ltd. v. Union of India 1975 (1) SCR 956 :
(1974) 2 sec 630 - referred to.
6.1 There are several reasons that can be culled out from
the Report of the Masood Committee for the Central
Government not determining and prescribing the norms in 1995
and thereafter for the next three years. It is clear that the
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manufacturers/formulators were not put to any disadvantage in
the retail price fixed on the basis of the norms prescribed under
the DPCO 1987. Therefore, under these circumstances, the bona
{ides of the Central Government in not prescribing the norms
every year certainly cannot be doubted. [Paras 122,126) [586-B,
H; 587-A)
6.2 That apart, the provisions of Paragraph 8(5) and
Paragraph 27 of the DPCO 1995 come to the aid of the Central
Government and these provisions enabled the continuation of
the norms prescribed under Paragraph 6 of the DPCO 1987 and
saved the notifications issued under the provisions of Paragraphs
8 and 9 of the DPCO 1995. This 'arrangement' certainly could
not have carried on indefinitely, but the recalcitrance of the drug
industry pushed the Central Government into a corner leaving it
with little option but to continue the 'arrangement' till an
alternative was found through an in-depth study. This is perhaps
where the Central Government erred. It should have set up the
NPPA soon after announcing the new Drug Policy in 1994 and it
should have enacted a legislation constituting the National Drug
Authority in terms of the Drug Policy, 1994. Had these steps
been taken, the Central Government would not have to face
litigation in different parts of the country. What is tragic is that
even today, there does not seem to be any sign of the Central
Government taking any steps to constitute a statutory National
Drug Authority. [Para 127] (587-B-D]
6.3 Although several notifications issued between 1995 and
1999 were collaterally challenged by the manufacturers/·
formulators, the Court was not shown any notification in which
the retail price or the ceiling price was varied to their detriment.
Assuming there was such a notification, a manufacturer/formulator
was entitled to question the adverse revision by moving an
application under the provisions of Paragraph 8(4) and Paragraph
22 of the DPCO 1995. No such application was moved by any
manufacturer/formulator. [Para 128) [587-E-F)
6.4 It is not necessary to revise the retail price or ceiling
price of every formulation every year - and if there is no such
mandate, then it must follow that there is no mandate to prescribe
the norms every year under Paragraph 7 of the DPCO just for
the sake of it. What has to be seen by the Central Government,
UNION OF INDIA & ORS. v. MIS. CIPLA LTD. & ANR.
in the larger context, is whether the drug industry is losing out in
any manner and whether the consumers of formulations are being
put to any discomfort. A fine balance has to be struck and if the
Central Government has been successful in doing that, as it
appears, then carrying out an annual ceremonial procedure or
annual academic exercise of determining and prescribing the
norms under Paragraph 7 of the DPCO 1995 regardless of whether
there is any necessity to do so is not mandatory. [Para 129] [588D-F]
6.5 The Central Government cannot be compelled to
perform a legislative activity or legislative exercise that is of no
consequence and is perhaps ritualistic. While the formula given
in Paragraph 7 of the DPCO 1995 must be mandatorily adhered
to for fixing the retail price of a formulation, the requirement of
prescribing the norms every year is discretionary and would
depend upon the exigencies of the situation - it might be every
year or less frequently or more frequently. [Para 130] [588-G-H]
6.6 It was submitted that the principles known as Heydo11 's
mischief rule arc clearly applicable and there was a conscious
decision by the Central Government to switch over from
prescribing the norms from time to time as required under the
DPCO 1987 to fixing the norms on a yearly basis as required
under Paragraph 7 of the DPCO 1995, and since the norms were
not fixed on a yearly basis under the DPCO 1995, the retail prices
fixed by the Central Government on the formulations on the basis
of Paragraph 7 of the DPCO 1995 were illegal and liable to be
struck down. Nothing has been told regarding the mischief, if
any, sought to be remedied. Given the scheme of the DPCO 1995
there was no mandate of prescribing the norms under Paragraph
7 of the said DPCO every year. [Paras 131, 132] [589-B-D]
Heydon s case [1584] EWHC Exch J 36 - referred
to.
7.1 It does appear that the drug industry was content with
being allowed to take the cost of packing material on actuals rather
than insisting on the Central Government issuing a notification
prescribing the norms for cost of packing material. It is believed
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that in fact there was no necessity of fixing the cost of packing
material as a norm for the purposes of Paragmph 7 of the DPCO
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1995 and that there was no fatal error in the notifications issued
under Paragraph 7 of the DPCO 1995 from 1999 onward.
Prescribing the norms every year under Paragraph 7 of the DPCO
1995 was a discretionary exercisP,. [Para 135] [590-C-D]
7.2 If the formula given in Paragraph 7 of the DPCO 1995 is
not strictly adhered to by the Central Government while working
out the retail price of a formulation. But if the drug industry is
itself quite content with being given the benefit of actuals in
material cost rather than having a norm fixed in that regard, then
there is no obligation to completely upset the apple cart and quash
a few dozen notifications at the behest of only a couple of
respondents. If it is done, this Court would be acting to the
detriment of the entire drug industry (except one), but also
provide no advantage to the consumers who have already
purchased the formulations more than a decade ago and have no
hope of getting a refund on their purchase. Additionally, no public
or societal interest would be served in quashing a few dozen
notifications under these circumstances. [Para 136] [590-E-G]
8.1 It cannot be said that the retail price or the ceiling price
of a formulation could not have been fixed by the Central
Government without first fixing the maximum sale price under
Paragraph 3 of the DPCO 1995 of the bulk drug utilized in the
formulation. In the first place, there is no obligation on the Central
Government to fix the maximum sale price of every bulk drug,
whether it is in the First Schedule to the DPCO 1995 or not. In
fact, if a bulk drug is not in the First Schedule to the DPCO 1995
the Central Government is not empowered to fix its maximum
sale price. There could also be a situation where a formulation
consists of two or more drugs, one of which is not a scheduled
drug. In that event, if the submission is accepted then it would
mean that the retail price or the ceiling price of that formulation
cannot be fixed. This is surely not the intention of the DPCO
1995 nor is it a possible manner of reading the DPCO 1995. If
the DPCO 1995 were to be read in the suggested manner, then
every drug would have to be included in the First Schedule to
the DPCO 1995 as a pre-condition to fixing the retail price or
ceiling price of a formulation which contains that drug. This would
be doing utmost violence to the plain provisions of the DPCO
1995. [Para 138] [591-B-F]
UNION OF INDIA & ORS. v. MIS. CIPLA L TO. & ANR.
8.2 There is no inclination to take the submission that the
ceiling price of formulations fixed under Paragraph 9 of the DPCO
1995 denied the benefit of an exemption notification dated
2.03.1995 available to small scale industries, with any degree of
seriousness particularly since it seems to suggest that the Central
Government acted with a ma/a fide intent. There is no warrant
for such li.n assumption and no such allegation or averment has
been made in the pleadings. The issuance of a notification under
Paragraph 9 of the DPCO 1995 is a legislative exercise of power
and to say that it was resorted to for denying the benefit of an
exemption to small scale industries can hardly be given any
credence. There is nothing in the DPCO 1995 to suggest that a
small scale industry is kept out of the rigour of the DPCO 1995.
It is equally bound by any retail price or ceiling price fixation by
the Central Government. [Para 139] (591-G-H; 592-A-B]
8.3 The action of a repository of power is also amenable to
judicial review if it is contrary to or violates the mandatory
requirement of a subordinate legislation. Therefore, if the Central
Go"Vcrnment does not adhere to the formula given in Paragraph
7 of the DPCO 1995 and fixes the retail price or ceiling price of
formulations without following the formula laid down, the
notification issued by the Central Government under Paragraph
8 or Paragraph 9 of the DPCO 1995 (as the case may be) is liable
to quashed as being contrary to law. However, no instance has
been pointed out to compel the Court to use the power of judicial
review and quash the notifications under consideration. [Para 142]
(593-C-E)
V. K. Ashokan v. Assistant Excise Co111111issioner 2009
(4) SCR 331: (2009) 14 SCC 85; District Collector,
Chittoor v. Chittoor District Groundnut Traders
Association. 1989 (1 ) SCR 243:(1989) 2 SCC 58;
Marathwada University v. Seshrao Ba/want Rao
Chavan 1989 (2) SCR 454:(1989) 3 SCC 132; Barium
Chemicals Ltd. v. Company law Board 1966 Supp SCR
311: State of U.P. v. Renusagar Power Co.1988 (1)
Suppl. SCR 627 : (1988) 4 SCC 59; Shri Sitaram Sugar
Co. ltd. v. Union of India 1990 (1) SCR 909:(1990) 3
sec 223 - referred to.
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Associated Provincial Picture Houses Ltd. v. Wednesbury
Corporation (1948) 1 KB 223:(1947) 1 All ER 498;
Mayor & C Westminster Corporation v. London and
North Western Railway 1905 AC 426: 93 LT 143.
- referred to.
8
9.1 Form III in the Second Schedule to the DPCO 1995, is
a Form of application for approval or revision of the price of
scheduled formulations. This requires, in paragraph 13 thereof,
information relating to the break-up of the retail price of a
formulation. The submission was that an effective application
could not be made without the norms being prescribed. The norm
C
for conversion cost was prescribed first by the notification dated
17.02.1989 and then by the notification dated 13.07.1999 (and
subsequent notifications). It is difficult to accept the submission
that despite these notifications a manufacturer or formulator was
unaware of the norms for conversion cost. As far as the norm for
0
packing material cost is concerned, sub-paragraph (c) provides
an option to the applicant-either the information mentioned in
paragraph 15 may be provided or the norms may be provided.
Paragraph 15 requires the applicant to provide information
pertaining to the pack, batch size (tablets I gms etc.), name of the
packing material, rate per unit, quantity required per batch and
E
value of packing material/batch nos./kgs etc. (in rupees).
Therefore, even if the norm for cost of packing material is not
prescribed, the applicant can provide the requisite information
(based on actuals) for the purposes of making an effective
application for revision of the price of a scheduled formulation.
F
Incidentally, the Form also confirms that no manufacturer or
formulator is placed at any disadvantage if the norm for packing
material cost is not prescribed under Paragraph 7 of the DPCO
1995 but actuals are allowed. [Para 145) [594-B-F)
G
H
9.2 If any manufacturer or formulator had taken the trouble
of preferring a revision or review application, all necessary
material would have been made available to the complainant for
an effective representation. None of the parties was precluded
by circumstances from preferring a revision or review for
corrective measures in relation to the retail price or ceiling price
of any particular formulation - in fact, some of them did. [Para
146) (595-D-E)
UNION OF INDIA & ORS. v. MIS. CIPLA LTD. & ANR.
9.3 ln view of the availability of an alternative and efficacious
remedy available under the DPCO 1995 read with the decision
of this Court in Cynamide India Ltd. the writ petitions filed by the
manufacturers and formulators ought not to have been
entertained by the concerned High Courts, but it is left at that.
[Para 14i] [ 595-F]
Union of India v. Cynamide India Ltd. & Anr. 1987 (2 )
SCR 841 : (1987) 2 SCC 720 - referred to.
10.1 Forum shopping takes several hues and shades and
'C' compa11y's petitions does not fall under any category of forum
shopping. The decisions referred to clearly lay down the principle
that the Court is required to adopt a functional test vis-a-vis the
litigation and the litigant. What has to be seen is whether there
any functional similarity in the proceedings between one Court
and another or whether there is some sort of subterfuge on the
part of a litigant. It is this functional test that would determine
whether a litigant is indulging in forum shopping or not. Keeping
all these in mind with several other nuances and also keeping
the functional test in mind, the relief claimed by 'C' Company in
the different High Courts is examined and it is found that they
have no substantive connection whatsoever with the relief
claimed in the Allahabad High Court. [Paras 149, 157, 158) (596A-B; 598-C-D]
Rajiv Bhatia v. Govt. of NCT of Delhi and others 1999
(2) Suppl. SCR 280 : (1999) 8 SCC 525; Arathi Bandi
v. Bandi Jagadrakshaka Rao (2013) 15 SCC 790;
World Tanker Carrier Corporation v. SNP Shipping
Services Pvt. Ltd. and others 1998 (2 ) SCR 1032 :
(1998) 5 SCC 310; Ambica Industries ii Commissioner
of Central Excise 2007 (7) SCR 685 : (2007) 6 SCC
769; Jagmohan Bahl and another v. State (NCT of Delhi)
and another 2014 (12) SCR 543 : (2014) 16 SCC 501;
Udyami Evam Khadi Gramodyog Welfare Sanstha and
onother v. State of Uttar Pradesh and others 2007 (12)
SCR ~33:(2008) 1 SCC 560 - relied on.
10.2 Almost all the notifications under challenge in the
Karnataka High Court were also the subject matter of challenge
in the Allahabad High Court. However, 'C' Company had disclosed
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[2016] 7 S.C.R.
before the Allahabad High Court that it had filed writ petitions
before the Karnataka High Court. There was therefore, no
concealment of any facts by 'C' Company. The consequence of
allowing the three writ petitions filed by 'C' Company in the
Born bay High Court would have had an impact on the notifications
challenged in the Allahabad High Court, but that impact would
have been collateral and consequential. Under these
circumstances, 'C' Company ought to have disclosed the filing of
writ petitions in the Bombay High Court, but at this stage it is
not appropriate to non-suit 'C' Company only on this ground.
[Para 166] [599-B-G]
10.3 The proceedings in the Allahabad High Court were
initiated as a result of a show cause notice issued to 'C' Company.
No similar show cause notice and no similar factual circumstances
existed in any of the other High Courts in which 'C' Company
had initiated proceedings. It cannot, therefore, be said that 'C'
Company had indulged in forum shopping in any manne:-
whatsoever. [Para 167] [599-G-H; 600-A]
11.1 By and large, very little or scanty material was placed
by the Union of India before the concerned High Courts,
particularly the Allahabad High Court. On the other hand, several
volumes of docum~nts have been filed in this Court, though after
permission. Such a practice deserves discouragement and this
Court does so. There are several reasons for this. It tends to
degrade the importance of proceedings in the High Court and
could subsequently embarrass the High Court which might
inadvertently base its decision on insufficient material resulting
in the possibility of an incorrect decision which is liable to be set
aside. It might also cause serious prejudice to a litigant because
it is for the first time in this Court that the entire material is
made available to a litigant placing him/her at a disadvantage in
dealing with issues of importance. It certainly places an
unnecessai-y and totally avoidable burden on this Court which is
required to deal with the material as a court of first instance.
Under such circumstances this Court does not have the benefit
of the opinion of the High Court while dealing with an appeal. All
in all therefore, for the better adjudication of disputes and for the
convenience of all concerned, it would be more appropriate for
UNION OF INDIA & ORS. v. M/S. CIPLA LTD. & ANR.
the Union of India, as indeed for all litig:mts to place on record all
the material before the court of first instance, whether it is a ·
district court or a High Court. [Para 168] (600-B-E]
11.2 Certain interim orders were brought to the notice
restraining coercive action against a manufacturer/formulator
when a price notification was under challenge. It is true that such
an interim order could have a huge impact on society. Under these
circumstances, in matters where public interest is involved, the
Court ought to be circumspect in granting any interim relief. The
consequence of an interim order might be quite serious to society
and consumers and might cause damage to public interest and
have a long term impact. It is made clear that it is not the intention
to suggest to any Court how and in what circumstances interim
orders should or should not be passed but it is certainly the
intention to make it known to the Courts that the time has come
when it is necessary to be somewhat more circumspect while
granting an interim order in matters having financial or economic
implications. [Paras 169, 171] [600-G; 601-E-G]
11.3 The Drug Policy, 1994 mentions that as far as the drug
industry is concerned, there are about 250 large units and about
8000 small scale units in operation. These units produce about
350 bulk drugs, and more than 2000 formulations. The Drug
Policy, 1994 also mentions that the production of bulk drugs in
1993-94 is in the region of Rs. 1320 crores and for the same
period the product!on of formulations is in the region of Rs. 6900
crores. In other words, not only is the drug industry in the country
extremely large with heavy financial stakes but there (s lot at
stake in it not only for the industry but also for the consumers.
For this reason, the Courts have to be extremely cautious in
interfering in any manner whatsoever with the working of the
drug industry. Any interference by the Comis would have wide
ranging repercussions not only in commercial terms but also for
the people of the country. [Para 172] (601-G-H; 602-A-B]
Case Law Reference
2003 (2) Suppl. SCR 177
2002 (3) Suppl. SCR 323
referred to
referred to
Para9
Para 90
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SUPREME COURT REPORTS
[2016] 7 S.C.R.
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1987 (2) SCR 841
referred to
Para 92
1978 (3) SCR 293
referred to
Para 95
1990 (1) SCR 909
referred to
Para 96
(2013) 8 sec 615
referred to
Para 104
B
2003 (2) Suppl. SCR 177
referred to
Para 105
1993 (2) Suppl. SCR 415
referred to
Para 109
2013 (12) SCR 1120
referred to
Para 113
1975 (1) SCR 956
referred to
Para 115
c
2009 (4) SCR 331
referred to
Para 140
1989 (1) SCR 243
referred to
Para 140
1989 (2) SCR 454
referred to
Para 140
1966 Supp SCR 311
referred to
Para 141
D
1988 (1) Suppl. SCR 627
referred to
Para 141
1999 (2) Suppl. SCR 280
referred to
Para 150
(2013) 15 sec 790
referred to
Para 151
E
1998 (2) SCR 1032
referred to
Para 152
2007 (7) SCR 685
referred to
Para 153
2014 (12) SCR 543
referred to
Para 154
2007 (12) SCR 933
referred to
Para 155
F
(2016) 5 sec 808
referred to
Para 156
CIVIL APPELLATE JURISDICTION: Civil Appeal No.