The validity of notifications issued by the Central Government under the DPCO 1995 for drug price control is upheld, confirming that they were not issued mechanically and that yearly norm revisions are discretionary.

1. (a) The issues that arise in this batch of appeals are as follows:
(i) Whether the notification dated 13th July, 1999 issued by the Central Government under Paragraph 7 of the Drugs (Prices Control) Order, 1995 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 was issued mechanically and without any application of mind or is it valid in law?
(ii) Whether the notifications dated 12th July, 2000, 12th July, 2001, 12th July, 2002 and 11th July, 2003 issued by the Central Government under Paragraph 7 of the re - notifying the norms prescribed on 13th July, 1999 were issued mechanically, without any application of mind and without re - determining the norms every year as required by the and are valid in law?
(iii) Whether 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 without determining the norm for cost of packing material as required by Paragraph 7 of the are valid in law?
(iv) Whether fixing the retail price of a formulation under Paragraph 8 of the without first fixing the sale price of a bulk drug under Paragraph 3 of the utilized in the manufacture of a formulation is valid in law?

2. We are primarily concerned with the Drugs (Prices Control) Order, 1995 (the DPCO 1995) and for historical reasons with the Drugs (Prices Control) Order, 1970 (the 1970), the Drugs (Prices Control) Order, 1979 (the 1979) and the Drugs (Prices Control) Order, 1987 (the 1987). All these Orders were issued by the Central Government in exercise of powers conferred by S.3 of the Essential Commodities Act, 1955 .

3. The appeals before us
The principal appeal before us and in which the leading submissions were made is Civil Appeal No. 329 of 2005 filed against Cipla. This appeal is directed against the judgment and order dated 3rd March, 2004 passed in Writ Petition (C) No. 41214 of 2003 by the Division Bench of the Allahabad High Court.

4. The challenge in the writ petition was to notifications issued by the Central Government on 12th July, 2000, 12th July, 2001, 12th July, 2002 and 11th July, 2003 re - notifying the norms prescribed by notification dated 13th July, 1999 issued under Paragraph 7 of the DPCO 1995 on the basis of which the retail price of formulations is fixed under Paragraph 8 of the 1995. It was held by the High Court that these notifications were issued mechanically and without any application of mind.

5. The consequence of the decision of the Allahabad High Court is that about 40 notifications fixing the retail price and ceiling price of formulations have been invalidated.

6. The High Court also quashed the show cause notice dated 16th August, 2003 issued by the Inspector of Drugs in Varanasi alleging that Cipla had charged higher retail prices than those notified by various notifications. In view of this allegation, the Inspector of Drugs required Cipla to clarify whether it had any order from the National Pharmaceutical Pricing Authority exempting it from compliance with the price notifications and to give the quantities of the formulations sold during the period 1995 till date.

7. Civil Appeal No. 4005 of 2004 is directed against the judgment and order dated 27th April, 2002 passed by the Division Bench of the High Court of Punjab & Haryana at Chandigarh in C.W. P. No. 15677 of 1999 filed by M/s Martin & Harris Laboratories Ltd.

8. Three issues have been raised in this appeal. The first is whether the inclusion of the bulk drug Diosmin in the First Schedule to the DPCO 1995 is valid or not. The second is whether the ceiling price fixed by the Central Government in the notification dated 20th July, 1998 of the Diosmin formulation was in accordance with the provisions of Paragraph 7 of the 1995. The third is whether the ceiling price of the Diosmin formulation could have