IMPORTANT POINT
While classifying the drugs for the purpose of price control, it is not open to the Government to flout or debilitate the set norms which it professed to follow in the interest of transparency and objectivity.

Headnote:(i) Drugs (Price Control) Order, 1995-Scheduled drugs-Prince fixation-Notices demanding overcharged amounts-Challenge regarding-Criteria laid down in para 22.7.2 of the Drug Policy, 1994 in relation to each drug-Annual turnover, determination of-Whether export sales should also be taken into account in computing annual turn-over-(No)-Meaning of expression turnover .
       Held : Let us proceed to analyze the three relevant criteria in the drug policy. According to the first criterion, for bringing the drugs under the price control, the minimum annual turnover of the drug should be 400 lacs. However, this requirement is qualified by and subject to the criteria laid down in (ii) & (iii). Where a monopoly situation prevails in respect of any bulk drug, the minimum annual turnover requirement gets reduced to 100 lacs. The monopoly situation is deemed to exist where there is a single formulator commanding 90 or more market share in the retail trade (as per ORG data). According to the 3rd criterion, even if minimum annual turnover exceeds 400 lacs, the drug will be kept outside price control in case there is sufficient market competition. The yardstick for assessing whether there is sufficient market competition, according to clause (iii) is that there are at least five producers of the particular bulk drug and at least ten formulators and none of them have more than 40 market share in the retail trade (as per ORG data). The said criteria have to be worked out with reference to the data available upto 31st March, 1990 which means, the relevant facts and figures relating to the financial years 1989-90 have to be taken into account. This is not in dispute. (Para 5.1)
       Where the Central Government as the delegate of legislative power announces a rational policy in keeping with the purposes of enabling legislation and even lays down specific criteria to promote the policy, the criteria so evolved become the guide-posts of its legislative action. While classifying the drugs for the purpose of price control, it is not open to the Government to flout or debilitate the set norms which it professed to follow in the interest of transparency and objectivity. Otherwise, there will be an element of arbitrariness and the delegated legislation will not withstand the test of Article 14. The expression turnover in Drug Policy, 1994 represents the sale value of bulk drug sold as such or in the form of formulations. Export sales should not be taken into account while computing turnover. The sum total of production and imports of bulk drug cannot be equated to turnover, though they are not altogether irrelevant in calculating the turnover. ORG data does not give exhaustive account of turn over of bulk drug. It may furnish the basis for estimating the turnover, but is not the sole guide. [Para 9 (1) to (5)]
       (ii) Drugs (Price Control) Order, 1995-Drug Policy, 1994-Criteria laid down-Criteria No. (iii) of Drug Policy-Single ingredient formulators alone ought to be taken into account as clarified by Govt. of India.
       Held : It is, therefore, contended by the Union of India that only single ingredient formulations have to be taken into account for the purpose of working out the criterion in clause (iii) and that the number of single ingredient formulators of the concerned bulk drug is not discernible from ORG data. Of course, it is the contention of the respondents that no such distinction can be drawn. It is contended that such distinction is irrational. In our view, the clarification given by the Government of India reflects a reasonable view point and it cannot be said that by adopting such approach, a distorted meaning is given to the expression formulator much against the spirit of the policy. At any rate, two views are possible and it is not for the Court to decide which view is preferable. (Para 5.9)
       (iii) Drugs (Price Control) Order, 1995-Scheduled drugs-Price fixation -Drug Policy 1994-Plea of discrimination between one drug and another-Not substantiated-Burden on writ petitioner to substantiate their plea of violation of Article 14-ORG data is neither comprehensive nor conclusive-In regard to some of the drugs, data does not in unequivocal terms, support case of writ petitioners-Crucial issues regarding applicability of criteria laid down in para 22.7.2 of the Drugs Policy require reconsideration by the High Court-Constitution of India-Article 14.
       Held : Burden lies on those who challenge the legislation on the ground of violation of Article 14 to make out their case by furnishing all the relevant material which is within their reach and knowledge. There should be frank disclosure of material facts, more so, when the plea is founded on certain factual aspects. The mere vagueness or lack of clarity in the stand taken by the Union of India does not by itself advance the case of the writ petitioners. The plea of writ petitioners ought to have been tested and subjected to scrutiny in the light of all relevant factors instead of merely considering whether the particulars furnished by the petitioner were effectively controverted or not. Such an approach of the High Court is wholly impermissible while deciding the validity of legislation-plenary or delegated, from the stand point of Article 14. The plea of discrimination between one drug and another is unfounded and should not have been accepted by the High Court. In the result, the judgment of the High Court is set aside and the writ petitions out of which these appeals arise shall stand restored to the file of the High Court and the High Court will have to consider afresh the relevant aspects concerning the criteria laid down in para 22.7.2 of the Drug Policy, 1994 in relation to each drug, having due regard to the observations made in the judgment. The High Court may endeavour to expedite hearing of the writ petitions. [Paras 9(7) to (9) & 10)]

JUDGMENT

P. Venkatarama Reddi, J.-1.1 These appeals by special leave preferred by the Union of India are directed against the common judgment of the Bombay High Court in a batch of writ petitions filed under Article 226 of the Constitution by the manufacturers/importers of certain bulk drugs and their formulations. The bulk drugs concerned are seven in number. They are: Salbutamol, Theophylline, Cyproflaxacin, Norfloxacin, Cloxacillin, Doxycycline and Glipizide. These bulk drugs and the formulations made out of them are sold within the country and part of the quantities produced are also exported outside the country. The challenge is to the inclusion of the said bulk drugs in the first schedule to the Drugs (Price Control) Order, 1995 (hereinafter referred to as the DPCO ). Though the fixation of price pursuant to the provisions of the said Order was also challenged in some of the writ petitions, that issue was not gone into by the High Court and at any rate, the mechanics of price fixation is not the contentious issue before us. However, it may be noted that the remedy by way of review is available under paragraph 22 of the DPCO to seek reconsideration of price fixation. The immediate provocation for filing the writ petitions in the High Court seems to be the notices issued by the National Pharmaceutical Pricing Authority, calling upon some of the Respondent-Companies to deposit the overcharged amounts in relation to the formulations of scheduled drugs.

1.2 The High Court held that the concerned drugs should not have been brought within the purview of the DPCO, 1995 and consequently, there could be no fixation of price in relation to those drugs. The notices demanding overcharged amounts were quashed. The writ petitions were thus allowed by the Division Bench of High Court.

2.1 The DPCO, 1995 which came into force on 6th January, 1995, was promulgated by the Central Government in exercise of the powers conferred by Section 3 of the Essential Commodities Act. It repealed the earlier DPCO of 1987, under which more number of drugs were subjected to price control. Drug as defined in Drugs & Cosmetics Act is one of the essential commodities.

2.2 According to Section 2(a) of DPCO, Bulk Drug means any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives, conforming to pharmacopoeia or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940 and which is used as such or as an ingredient in any formulation. Formulation is defined to mean a medicine processed out of, or containing one or more bulk drug or drugs with or without the use of any pharmaceutical aids, for internal or external use in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals.

2.3 Paragraph 3 of DPCO empowers the Central Government to fix, from time to time, a maximum sale price at which the bulk drug specified in the first schedule shall be sold, after making such inquiry, as it deems fit. The opening clause of sub-para (1) spells out the avowed purpose of price control on the scheduled bulk drugs. The declared objective is to regulate the equitable distribution and increasing supplies of the specified bulk drug and making them available at a fair price. There is a prohibition against the sale of bulk drug at a price exceeding the maximum sale price fixed under sub-paragraph (1) plus local taxes, if any. As already observed, we are not concerned here with the modalities of fixation of price. The very inclusion of these bulk drugs in the schedule is being assailed on the ground that it is opposed to the norms laid down by the Central Government itself in the Drug Policy of 1994 and, therefore, the delegated legislative power exercised by the Government is arbitrary and violative of Article 14 of the Constitution. The plea of the respondents was accepted by the High Court.

2.4 In the Drug Policy document issued on 15th September, 1994, the C

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2003 Supreme(SC) 707

IMPORTANT POINTWhile classifying the drugs for the purpose of price control, it is not open to the Government to flout or debilitate the set norms which it professed to follow in the interest of transparency and objectivity.

Cases Referred (1)

IMPORTANT POINT
While classifying the drugs for the purpose of price control, it is not open to the Government to flout or debilitate the set norms which it professed to follow in the interest of transparency and objectivity.