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Quashes 's Blanket Notification,
A of the has struck down the ’s () of , which sought to impose a on any formulation containing a scheduled drug unless a specific price was fixed. The Court declared the notification the ), and quashed the consequent demand notices for overcharging against M/s. Pharmed Limited, the manufacturer of the osteoarthritis drug ‘Cartigen Forte’.
Case Background: The Price Control Maze
The petitioner, M/s. Pharmed Limited, manufactured and marketed ‘Cartigen Forte’ tablets, a formulation for osteoarthritis. The , exercising powers delegated by the under , had issued two key notifications. The first, dated , fixed ceiling prices for ‘multivitamin and mineral tablets and capsules’. The second, dated , was a sweeping order stating that any formulation containing any scheduled drug as an ingredient would be subject to the mentioned in the relevant earlier notification, unless the manufacturer subsequently obtained a specific price fixation.
Based on these notifications, the issued to Pharmed Limited, alleging that its sale price for Cartigen Forte exceeded the applicable to multivitamin formulations. This led to demands for recovery of overcharged amounts exceeding ₹12 crores, including interest. After a protracted process involving multiple hearings, remands by the High Court, and fresh demand notices, the company approached the court again, challenging the very validity of the notifications.
The Core Legal Question: Can a Be Implied?
The central dispute revolved around whether the could, via the 2009 notification, deem a to apply to any formulation merely because it contained a scheduled bulk drug, without undertaking the specific exercise of fixing the for that particular formulation under the mechanism. Pharmed argued that the 2007 notification was inapplicable to its osteoarthritis product, which contained only trace amounts of vitamins, and that the 2009 notification was an impermissible blanket order that bypassed the statutory formula for price calculation.
Court’s Analysis: Formula is Fundamental
The High Court examined the language of , particularly . provides a detailed formula for calculating the retail price of a scheduled formulation: R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED, where each component (material cost, conversion cost, packaging cost, etc.) must be considered. empowers the government to fix a only in accordance with this formula.
The Court found that the 2009 notification completely dispensed with this formula. “The impugned notification dated has the effect of completely doing away with the formula specified in of ,” the Bench observed. It noted that the had never applied the formula to Cartigen Forte or any similar formulation through a , as required by . The blanket order was therefore arbitrary and beyond the powers delegated to the .
Key Observations from the Judgment
“The moment the very formula for calculation of as per read with is taken away, it becomes clear that the impugned notification dated is rendered itself.”
“The said respondents were required to pass an order by notification in the official gazette after calculating the on the basis of the aforesaid formula specified in of . No such exercise was ever undertaken by the said respondents in respect of the subject formulation.”
“The impugned notification dated is clearly , expansive and it operates in the teeth of the paragraphs of itself. In other words, it is beyond the power vested in respondent No.2- to issue such kind of notification.”
Decision and Implications
The allowed the . It quashed the notification to the extent it was sought to be applied to Cartigen Forte , and quashed the notification in its entirety . All demand notices issued by the and the Collector under the were set aside.
The ruling clarifies that regulatory authorities cannot bypass statutory pricing mechanisms through sweeping declarations. The judgment reinforces that any must be calculated and notified for the specific formulation, using the formula mandated by . This decision will likely impact similar cases where relied on the blanket 2009 order, and may prompt a review of price control procedures.
