IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN MONDAY, THE 14TH DECEMBER 2009 / 23RD AGRAHAYANA 1931 WP(C).No. 6838 of 2009(Y) ------------------------- PETITIONER: --------------- KINGS PHARMACEUTICAL DISTRUBUTORS, 41/1578 A, ARANGATH ROAD, ERNAKULAM, KOCHI-682018, REPRESENTED BY ITS MANAGING PARTNER, S.SANKARANARAYANAN. BY ADV. SRI.K.JAYAKUMAR SRI.P.B.KRISHNAN SMT.GEETHA P.MENON RESPONDENTS: --------------- 1. THE STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT OF KERALA, DEPARTMENT OF HEALTH AND FAMILY WELFARE, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE DRUGS CONTROLLER OF KERALA, OFFICE OF DRUGS CONTROLLER, NEAR EYE HOSPITAL, GENERAL HOSPITAL JUNCTION, THIRUVANANTHAPURAM-695 001. 3. THE ASSISTANT DRUGS CONTROLLER, ERNAKULAM, CIVIL STATION, KAKKANAD P.O., KOCHI-682 030. 4. M/S. ABBOT INDIA LIMITED, 4, CORPORATE PARK, SION TROMBAY ROAD, MUMBAI-400 071. GOVERNMENT PLEADER SRI.V.MANU FOR R1 TO R3 ADV. SRI.P.VIJAYA BHANU FOR R4 SMT.M.M.DEEPA FOR R4 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14/12/2009, ALONG WITH WPC NO. 6876 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 6838 of 2009(Y) I N D E X PETITIONER'S EXHIBITS EXT.P1: DT.13.07.05 – TRUE COPY OF LICENCE NO.7-357/20B/2005 ISSUED TO THE PETITIONER. EXT.P2:DT.13.07.05, TRUE COPY OF THE LICENCE NO.7-358/21B/2005 ISSUED TO THE PETITIONER. EXT.P3:SERIES DT.26.11.08, 01.12.08 ETC. TRUE COPIES OF ORDERS PLACED BY THE PETITIONER TO RESPONDENT NO.4. EXT.P4, P(a) & P(b), DT.26.11.08, TRUE COPIES OF DEMAND DRAFTS. EXT.P5:DT.1.12.08, TRUE COPY OF LETTER SENT BY THE PETITIONER TO RESPONDENT NO.4. EXT.P6:DT.1.12.08, TRUE COPY OF THE COMPLAINT MADE BY THE PETITIONER TO RESPONDENT NO.3. EXT.P7:DT.2.2.07, TRUE COPY OF THE ORDER OF THIS COURT IN W.P(C) No.33190/2006. EXT.P8:DT.23.05.07, TRUE COPY OF THE JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN W.A.NO.971/2007. RESPONDENTS' EXHIBITS EXT.R4(a):TRUE COPY OF THE COMMON JUDGMENT IN WPC NO.2961 OF 2006, 29157/07, 29048, 36287, 37739 & 36287 OF 2008 OF THIS COURT DT.08.04.09. rtr/ true copy P.A to Judge THOTTATHIL B.RADHAKRISHNAN, J. ------------------------------------------- W.P(C).Nos.6838 & 6876 OF 2009 ------------------------------------------- Dated this the 14th day of December, 2009 JUDGMENT 1.These writ petitions are filed by dealers as defined in the Drugs (Prices Control) Order, 1995, hereinafter referred to as the 'Control Order', for short. They have the necessary licences in terms of the provisions of the Drugs and Cosmetics Act, 1940, hereinafter, the 'D & C Act', for short. 2.The plea of the petitioners is that the 4th respondent manufacturer is not releasing drugs to them and has thus committed refusal to sell drugs to them without good and sufficient reasons. They, accordingly, seek directions to the statutory authorities also to ensure that supply is appropriately maintained. 3.The 4th respondent company takes the stand that it has a C & F agent, through whom, its supplies are brought to the State of WPC.6838/09 & 6876/09 2 Kerala and then handed over to different stockists with whom the 4th respondent has contractual relationship. It is, accordingly, contended that such stockists being available, drugs can be purchased, even by dealers, only from such stockists. 4.The backdrop of these writ petitions appears to be the forming of lobbies of stockists who even try to regulate the market by refusing to issue drugs to certain dealers, who may not be of the choice of that particular group. In an earlier round, the petitioner in W.P(C).6876/09 had obtained an interim order on 2.2.2007 in W.P(C).33190/06. That was not interfered with by the Division Bench while deciding the writ appeal against that interim order. - See the judgment dated 23.5.2007 in W.A.No.971/07. Ultimately, when W.P(C).33190/06 and connected matters came up for final decision, it was pointed out that the petitioners were at liberty to obtain drugs from the manufacturers through the concerned stockists/ distributors appointed by the manufacturers on payment of the WPC.6838/09 & 6876/09 3 requisite price. Those writ petitions were accordingly decided holding that no further order is required to be passed except for recording the submissions made before court from either side. 5.The moot issue arising for decision is as to what are the duties and responsibilities of a manufacturer in relation to supply in terms of the Control Order and the D & C Act and Rules. Section 3 (f) of the D & C Act defines manufacture. Section 18 of that Act provides prohibition of manufacture and sale of certain drugs and cosmetics. Section 33 (2)(e) provides the power of the Central Government to make rules prescribing licences etc. for the purpose of the D & C Act. 6. Adverting to the D & C Rules, Part VI thereof deals with sale of drugs other than homeopathic medicines and Part IV deals with import and registration. Part VII deals with manufacture for sale or for distribution of drugs other than homeopathic medicines. Rule 21(d) among the Rules regulating import and WPC.6838/09 & 6876/09 4 registration, defines a 'manufacturer' to include a manufacturer of drugs having its drug manufacturing facilities duly approved by the National Regulatory Authority of a country other than India and who also has a free sale approval of the drugs approved by the said authority in the concerned country. Rule 59 of the D & C Rules provides for the appointment of the licensing authorities, to be made by the State Government. Rule 62B lays down the conditions to be satisfied before a licence in Form 20A or Form 21A is granted and Rule 64 provides the conditions to be satisfied before a licence in Form 20, 20B, 20F, 20G, 21 or 21B is granted. 7.Clause (2)(l) of the Control Order defines manufacture and clause (m) states that 'manufacturer' means any person who manufactures a drug. Clause 2 (e) provides that 'distributor' means distributor of drugs or his agent or a stockist appointed by a manufacturer or an importer for stocking his drugs for sale to a dealer. 'Dealer' means, in terms of clause 2 (d) of the Control Order, a person carrying on the business of purchase WPC.6838/09 & 6876/09 5 or sale of drugs, whether as a wholesaler or retailer and whether or not in conjunction with any other business, and includes his agent. With this, adverting to clause 18, it could be seen that the said provision enjoins that subject to the provisions of the D & C Act and the Rules framed thereunder, no manufacturer or distributor shall withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons. The question raised is as to whether this obligation is satisfied by the manufacturer, pointing out different stockists that it has in terms of its commercial contacts. 8.A close reading of clauses (l) and (m) would show that manufacturer does not include a stockist. Manufacturer is one who carries out the process of manufacture in terms of clauses 2(l), i.e., in relation to any drug, carries out any process which ultimately provide any drug with a view to its sale and distribution. The process of distribution by the manufacturer, through any of its stockists, is not part of the regulations made through the Control Order issued under the Essential WPC.6838/09 & 6876/09 6 Commodities Act. ' Distributor' in terms of clause 2(e) of the Control Order is the distributor who is eligible in terms of clause 18 (a) for statutory protection from being deprived of supply of drugs. 'Distributor' as defined in clause 2(e) of the Control Order means a distributor of drugs or his agent or a stockist appointed by the manufacturer. Therefore, even if manufacturer has a stockist, he may be a distributor in the company. But the appointment of stockists does not take away the statutory liability of the manufacturer to effect supply to satisfy the mandate of clause 18(a), which obliges that a manufacturer shall not withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons. 9. The petitioners are dealers as defined in clause 2(d) of the Control Order. They carry on the business of purchase and sale of drugs on wholesale basis. They, therefore, are dealers for the purpose of the Control Order. If that were so, the petitioners are entitled to supply of drugs by the manufacturers. Even if the manufacturer shows the WPC.6838/09 & 6876/09 7 availability of stockists as good and sufficient reasons to refuse sale directly to the petitioners/dealers, the agency relationship between the stockists and the manufacturer cannot, in any way, result in deprivation of the petitioners, who are dealers, from the entitlement to supply, which is protected by clause 18 of the Control Order. Therefore, the petitioners are clearly entitled to supply of drugs. Otherwise, it would be in contradiction with clause 18 of the Control Order except in cases where there is good and sufficient reasons. 10.The relationship of the stockists and the manufacturer does not entitle the manufacturer to refuse supply to the petitioners. It would, at the most, enable it to require that the petitioners have to buy from the stockists with reference to any term of the commercial deal between the manufacturer and its stockists, if any. It also needs to be noted that the requirement to supply the drugs form part of the statutory duties in terms of the Control Order which is issued under the Essential commodities Act. WPC.6838/09 & 6876/09 8 11. The Drug Controller of the Government of Kerala is present before Court today and he has explained the stand of the department in as much as the Drugs Controller cannot be made to negotiate between the manufacturer or its stockists and the dealers who want the supply. The possession of licence in terms of the D & C Act and Rules, which entails a person to be treated as a dealer for the purpose of the Control Order, does not ipso facto result in his being a stockist of the manufacturer. The appointment of stockists is within the exclusive commercial domain of the manufacturer and the Drugs Controller is not liable or entitled to interfere with that matter in any manner. At the same time, any failure of the manufacturer to supply to a dealer in terms of clause 18 of the Control Order is a matter, on which, the Drugs Controller would be entitled to exercise authority and in view of that clause, he is duty bound to take such action. However, the manufacturer has necessarily to be heard as to any sufficient WPC.6838/09 & 6876/09 9 or good reason for it for refusing supply to any particular dealer. With the aforesaid, these writ petitions are ordered directing that the official respondents will act in terms of what is stated above and would look into complaints of violations of clause 18 of the Control Order but shall not, in any manner, interfere with the contractual obligations of the manufacturer and stockists or in any manner deal with the request of any dealer for being the stockist of any manufacturer. It is clarified that the supply by the manufacturer to the dealers will be in terms of their entitlement as per the statutory provisions. These writ petitions are ordered accordingly. Sd/- THOTTATHIL B.RADHAKRISHNAN, Judge. kkb.15/12.