The government's inclusion of drugs under price control must strictly adhere to its own established criteria to avoid arbitrariness under Article 14.

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 Art.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.

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.

3 The DPCO, 1995 which came into force on 6th January, 1995, was promulgated by the Central Government in exercise of the powers conferred by S.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 It repealed the earlier DPCO of 1987, under which more number of drugs were subjected to price control.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.

4 According to S.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.

5 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 Art.14 of the Constitution. The plea of the respondents was accepted by the High Court.

6 In the Drug Policy document issued on 15th September, 1994, the Central Government noticed that during the last decad