IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2009 CORAM THE HONOURABLE MR.JUSTICE V.DHANAPALAN W.P.No.16864 of 2004 M/s.Southern Petrochemical Industries Corporation Limited SPIC Pharmaceutical Division SPIC House No.88, Mount Road, Guindy Chennai-32 rep.by its Manager (Finance) D.r.Augustine Paulraj ..Petitioner Vs. The National Pharmaceutical Pricing Authority, Department of Chemicals and Petrochemicals Ministry of Chemicals and Fertilizers Government of India YMCA Cultural Centre Building Jai Singh Road, New Delhi 110 001 rep.by its Director M.S.Balasubramanian ..Respondent Writ Petition filed U/s. 226 of the Constitution of India to issue a Writ of Certiorari calling for the records of the respondent herein relating to the proceedings dated 25.05.2004 (demanding the sum of Rs.84,98,615/- towards alleged over charge relating to the drug formulation Griseofulvin 250 Mg. Tablets and interest thereon) and to quash the same. For Petitioner : Mr.AR.L.Sundaresan Senior Counsel for Mrs.AL.Gandhimathi For Respondent : Mr.M.Ravindran, Addl.Solicitor General-I assisted by J.Ravindran Assistant S.G. ORDER This writ petition has been filed for the issuance of a Writ of Certiorari calling for the records of the respondent herein relating to the proceedings dated 25.05.2004 (demanding the sum of https://hcservices.ecourts.gov.in/hcservices/ Rs.84,98,615/- towards alleged overcharge relating to the drug formulation Griseofulvin 250 Mg. tablets and interest thereon) and to quash the same. 2. The case of the petitioner is that the petitioner is a registered company incorporated under the provisions of the Companies Act 1 of 1956 and one of its division is engaged in the manufacture and sale of pharmaceutical products; one of the products manufactured and sold by the petitioner is Griseofulvin 250 mg tablet, which is manufactured and sold by the petitioner under the name Tineavin. For the purpose of sale, several packing materials are used. The commodity also suffers excise duty. Hence, the petitioner, after taking into consideration the cost of the ingredients, packing materials, other incidental charges had arrived at the final price of Rs.19.60 per 10 tablets, including excise duty. 3. It is the further case of the petitioner that the Government of India, in exercise of powers conferred under the Essential Commodities Act, has framed Rules regulating and controlling the price of drugs and accordingly, The Drugs (Price Control) Order, 1995 (in short DPCO 1995) have been framed. In that, para No.3 provides for fixation of ceiling price for bulk drugs, para No.9 contemplates the powers to fix the price for formulation; para No.7 provides for fixing the retail price for formulation. The manufacturing cost includes the cost of ingredients, cost of packing materials and conversion cost. It also provides that the Maximum Allowable Post Manufacturing Expenses can be up to 100 percent of the cost of material and manufacturing. 4. It is also stated in the affidavit that as per para 7 of the DPCO 1995, the maximum retail price chargeable for Tineavin 10 tabs, excluding Excise, would be Rs.19.66. However, the petitioner has fixed the retail price of Tineavin at Rs.17.54 per ten tablets, excluding Excise Duty and at Rs.19.60 per ten tablets including Excise Duty, which is strictly in accordance with the formula prescribed under para 7 of the DPCO 1995. The Government, in exercise of powers conferred under para 3 of the DPCO 1987, vide Notification S.O.819 (E) dated 19.11.1994, fixed the ceiling price for the bulk drug of Griseofulvin at Rs.3,691/- per kg and according to para 7 of the DPCO 1995, the price of ten tablets would come to Rs.21.24, excluding Excise Duty. However, the Government, vide Order S.O.904 (E), dated 10.11.1995, which was issued in exercise of powers under para 9 of the DPCO 1995, fixed the ceiling price of Griseofulvin 250 mg at Rs.12.58 per 10 tablets, excluding Excise Duty, which was not in conformity with the fixation of the price of the bulk drugs as done under para 3 of the Control Order and the same is against the formula prescribed under para 7 of the said Order. 5. It is also stated that on 28.01.1997, the Assistant Director, Regional Office, Drugs Control Administration, State of Andhra https://hcservices.ecourts.gov.in/hcservices/ Pradesh, issued a notice to the petitioner calling upon him to show cause as to how he would be justified in fixing the retail price at 19.60 per 10 tablets, instead of Rs.12.58, as per S.O.904 (E), dated 10.11.1995. 6. It is the further case of the petitioner that he replied in response to the above show cause notice that the MRP charged for the Tineavin 250 mg tablets is well within the MRP chargeable as contemplated in DPCO 1995. He has also produced the working sheets, incorporating the necessary details. But the respondent has not replied for the same. Hence, the petitioner was under the impression that the explanation was accepted. 7. It is also stated that to the shock and surprise of the petitioner, the respondent issued a notice dated 25.05.2004 stating that the petitioner has violated the provisions of the DPCO 1995 and had charged price in excess of the notified price for the formulation of Griseofulvin 250 mg and directed the petitioner to deposit a sum of Rs.84,98,615/-, which includes Rs.47,81,772/- towards the overcharged amount and Rs.37,16,843/- towards interest, on or before 24.06.2004, failing which action will be taken as against the petitioner individually and severally under the provisions of DPCO 1995 read with the Essential Commodities Act, 1955. Hence the present writ petition. 8. The respondent in their counter affidavit would state that under no circumstance, there can be any exception to the rule of strict adherence to the ceiling price fixed by the Government and the petitioner has wilfully violated the provisions of the DPCO 1995. The petitioner company has violated the provisions of DPCO 1995, by fixing the price at Rs.19.60 for the Tineavin 250 mg 10's tablets, based on scheduled bulk drug Griseofulvin, on its own and was selling the same at a price higher than the notified price. If any manufacturer, who desires revision of the retail price, is required to make an application to the NPPA/Government of India under From III and IV. The petitioner is mandatorily required to implement the price. But however, the petitioner is deliberately overcharging, by selling the formulation at a MRP of Rs.19.60 per 10 tablets instead of Rs.12.58 per 10 tablets as fixed by the Respondent. 9. Submitting that price fixation is a legislative act and price fixation does not primarily affect the manufacturer, but vitally affects the consumer public, Mr.M.Ravindran, the learned Additional Solicitor General, inter alia made the following submissions. ●If there was any arbitrariness in price fixation, it is for the manufacturer to bring it to the Notice of the Government by invoking Para 22 of DPCO 1995 by filing Review. https://hcservices.ecourts.gov.in/hcservices/ ●When an efficacious alternative remedy is available, Court cannot constitute itself as a Court of Appeal, for which, reliance was placed upon (1987) 2 SCC 720 (Union of India v. Cynamide India Limited). 10. In exercise of the powers conferred under Sec. 3 of the Essential Commodities Act, The Drugs (Prices Control) Order, 1995, was promulgated by Government of India on 06.01.1995. Under DPCO 1995, 76 Bulk Drugs (subsequently reduced to 74) are included in the first schedule and these Bulk Drugs are called Scheduled Bulk Drugs. The Government of India/NPPA is empowered to fix and notify the maximum sale price of the Scheduled Bulk Drugs and the retail price of the related formulations under Para 3, 8 and 9 of DPCO 1995. 11. Para 3(1) of DPCO 1995, reads as follows: " 3. Power to fix the maximum sale prices of bulk drugs specified in the First Schedule. – (1) The Government may with a view to regulate the equitable distribution and increasing supplies of a bulk drug specified in the First Schedule and making it available at a fair price, from different manufacturers, after making such inquiry as it deems fit, fix from time to time, by notification in the Official Gazette, a maximum sale price at which such bulk drug shall be sold: .... " 11. Para 8 of DPCO 1995 reads as under: "8. Power to fix retail price of scheduled formulations.--(1) The Government may, from time to time, by order, fix the retail price of a scheduled formulation in accordance with the formula laid down in Para 7...." 12. The petitioner has been manufacturing a formulation called Tineavin 250 mg, which is stated to be a brand of Micronised Griseofulvin containing micronised form of Griseofulvin. Exercising the powers under para 9(1) of DPCO 1995, the Respondent fixed and notified the price of Rs.12.58 for scheduled formulation of Griseofulvin Tablets in S.O.No.904(E) dated 10.11.1995. 13. As per Para 14 of DPCO 1995, every manufacturer is under a legal obligation to strictly adhere to the ceiling prices fixed for the formulations and drugs. The mandate of Para 14 of DPCO 1995 is absolutely clear and unambiguous. As per Para 14, it is the duty of every manufacturer or importer to implement the price fixed by the Central Government within 15 days from the date of the concerned Notification. 14. The Petitioner company has not implemented the price fixed by the Respondent within 15 days. As per the information available https://hcservices.ecourts.gov.in/hcservices/ with the respondent, viz., The National Pharmaceutical Pricing Authority (NPPA), the Petitioner/Company have been selling the Griseofulvin 250 mg tablets at the rate of 19.60 including Excise Duty as against the ceiling price of Rs.12.58 (without excise duty), fixed by the Respondent. The Respondent called upon the Petitioner by communication dated 18.03.2003 to explain the reasons for non- compliance of the ceiling price. In the said communication, the Respondent also called upon the Petitioner to furnish consolidated price list in Form-V for all the products manufactured and/or marketed by Petitioner/Company and also called for the production and sales details in the prescribed format. 15. The Petitioner/Company had sent a reply dated 25.06.2003 stating that their product Tineavin consist of Micronised Griseofuvin, which is superior efficacy. The price was fixed as per para 7 DPCO 1995. The actual price notified by the Government for Griseofulvin Bulk Drug, including excise duty, was Rs.3,546/-, whereas the ceiling price specified for Griseofulvin Bulk drug in the Notification 819(E) dated 19.11.1994 was Rs.3,691/- per kg. Hence, the MRP chargeable as per para 7, subject to Notification No.819(E) dated 19.11.1994, is Rs.220/-. However, the petitioner company is charging only Rs.196/- for 10 x 10's tablet. They have also explained that the Notified Griseofulvin Bulk Drug Price is not unfortunately recognised, while fixing the formulation price. 16. As the Petitioner has not furnished the required particulars, by the impugned communication dated 25.05.2004, the Respondent called upon the Petitioner to provide relevant quantitative information, which is the subject matter of challenge in this Writ Petition. 17. The learned senior counsel for the petitioner would submit that the impugned proceedings has been passed in violation of the principles of natural justice, as no show cause notice was issued before calling upon the petitioner to pay the alleged over charge amount and the interest thereon. He would also submit that the ceiling price in respect of the formulations will have to be fixed only in accordance with the formula contained in para 7 of the DPCO 1995 and the fixation of Rs.12.58 per 10 tablets is erroneous and contrary to the formula prescribed under Para 7 of the Control Order and accordingly, he prayed for setting aside the impugned order. 18. The learned senior counsel for the petitioner would also submit that any contravention to the provisions of DPCO 1995 is punishable in accordance with the Essential Commodities Act 1955. U/s. 7 of the Essential Commodities Act, 1955, any contravention of any order (DPCO 1995) entails imprisonment and fine and or forfeiture of the property involved. As the contravention of the price notification issued under DPCO 1995 results in criminal prosecution, it was contended by the learned Senior Counsel that the Price https://hcservices.ecourts.gov.in/hcservices/ Notification must be construed strictly and in a narrow sense. Placing reliance upon W.H.King v. Republic of India, AIR 1952 SC 156 and Tolaram Vs. State of Bombay, AIR 1954 SC 496, the learned Senior Counsel submitted that the Price Notification must receive a strict and narrow interpretation and should not be stretched to include within its purview capsules containing an enteric coated tablet and must be confined to plain capsules. 19. Contending that there is no logic for fixing ceiling price at Rs.12.58 per 10 tablets, the learned Senior Counsel would submit had the Government intended to fix the ceiling price for the Petitioner's formulation, the Government would have asked for "the cost or efficiency" data of the Petitioner. It was further argued that under Para 9 of DPCO 1995, the ceiling price can be fixed only after taking into account the cost or efficiency, or both, of manufacturers of the formulations, whose price is sought to be fixed. 20. Countering the arguments, the learned Additional Solicitor General (ASG) Mr.M.Ravindran has submitted that the Petitioner's product is the scheduled formulation which comes under the purview of price control under the provisions of Paras 8 and 9 of DPCO 1995 and accordingly, the ceiling prices have been notified by the Respondent in S.O.No.904(E) dated 10.11.1995, after considering the relevant factors and norms as per the provisions of DPCO 1995. 21. The learned ASG mainly contended that as per Para 22 of DPCO 1995, price fixation is a legislative activity and Court cannot act as Court of Appeal over the question of price fixation and such question can be raised by the Petitioner only before the Government in Review Application under Para 22 of DPCO 1995. Placing reliance upon Cynamide India Limited Case ((1987) 2 SCC 720), it was submitted that the Court is neither concerned with the policy nor with the rates and any interference by the Court would only affect the common man to purchase the drugs at an affordable price. 22. In view of the availability of efficacious alternative remedy, I do not propose to go into the merits of the matter nor express any views as to whether Petitioner's formulation Griseofulvin 250 mg tablets would be covered under the Notification or not. 23. Para 22 of DPCO 1995 deals with power of Government to review a price order. Para 22 of DPCO 1995 reads as under: "22. Power to review.-- Any person aggrieved by any notification issued or order made under paras 3, 5, 8, 9 or 10 may apply to the Government for a review of the notification or order within fifteen days of the date of publication of the notification in the Official Gazette or the receipt of the order by him, as the case may be, and the Government may make such order on the application as it may deem proper; https://hcservices.ecourts.gov.in/hcservices/ Provided that pending a decision by the Government on the application submitted under the above paragraph, no manufacturer, importer or distributor, as the case may be, shall sell a bulk drug or formulation, as the case may be, at a price exceeding the price fixed by the Government of which a review has been applied for". 24. The Petitioner/Company has not filed any Review Application under Para 22 of DPCO 1995. 25. Observing that 'Price fixation is neither the function nor the forte of the Court' and if there is any grievance, the proper thing for the manufacturers is to bring it to the notice of the Government in their Applications for review, in Union of India v. Cynamide India Limited, (1987) 2 SCC 720, the Supreme Court has held as under: " 4. We start with the observation, 'Price fixation is neither the function nor the forte of the Court'. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquiry into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assembling of the raw materials and the mechanics of price fixation are the concern of the executive and we leave it to them. And, we will not re-evaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The court will, of course, examine if there is any hostile discrimination. That is a different 'cup of tea' altogether. .... 31....We think that if there is any grievance on that score, the proper thing for the manufacturers to do is bring it to the notice of the Government in their applications for review. The learned counsel argued that they were unable to bring these facts to the notice of the Government as they were not furnished the basis on which the prices were fixed. On the other hand, it has been pointed out in the counter- affidavits filed on behalf of the Government that all necessary and required information was furnished in the https://hcservices.ecourts.gov.in/hcservices/ course of the hearing of the review applications and there was no justification for the grievance that particulars were not furnished. We are satisfied that the procedure followed by the Government in furnishing the requisite particulars at the time of the hearing of the review applications is sufficient compliance with the demands of fair play in the case of the class of persons claiming to be affected by the fixation of maximum price under the Drugs (Prices Control) Order. As already stated by us, manufacturers of bulk drugs who claim to be affected by the Drugs (Prices Control) Order, belong to a class of persons who are well and fully informed of every intricate detail and particular which is required to be taken into account in determining the price. In most cases, they are the sole manufacturers of the bulk drug and even if they are not the sole manufacturers, they belong to the very select few who manufacture the bulk drug. It is impossible to conceive that they cannot sit across the table and discuss item by item with the reviewing authority unless they are furnished in advance full details and particulars. The affidavits filed on behalf of the Union of India show that the procedure which is adopted in hearing the review applications is to discuss across the table the various items that have been taken into account. We do not consider that there is anything unfair in the procedure adopted by the Government. If necessary it is always open to the manufacturers to seek a short adjournment of the hearing of the review application to enable them to muster more facts and figures on their side. Indeed we find that the hearing given to the manufacturers is often protected. As we said we do not propose to examine this question as we do not want to constitute ourselves into a court of appeal over the Government in the matter of price fixation. 26. In Para 37 of the Judgment, the Supreme Court observed that where prices of essential commodities are fixed in order to maintain or increase supply of the commodities or for securing the equitable distribution and availability at fair prices of the commodity, it is not right for the High Court to grant any interim order staying the implementation of the Notification fixing the prices. Price fixation being legislative function and in view of the availability of alternative remedy, it would not be appropriate for this Court to go into the merits of the contention raised by the Petitioner. 27. The learned ASG submitted that in the event of non- cooperation by the Companies, the quantum of overcharging is assessed on the basis of available sales data in ORG IMS. It was further submitted that as per the available information in the ORG in respect of Griseofulvin 250 mg tablets, it has been assessed that the Petitioner is liable to deposit Rs.84,98,615/- for the period from https://hcservices.ecourts.gov.in/hcservices/ March 1996 to April 2004 for charging higher price of Rs.19.20 against the ceiling price of Rs.12.58 notified vide S.O.No.904(E) dated 10.11.1995. According to the respondent, the petitioner is not entitled to sell the drugs in view of Paras 14 and 16 of DPCO 1995. 28. The issue relating to entertaining Writ Petition when alternative remedy is available was examined by the Supreme Court in several cases. In U.P.State Spinning Co. Ltd. v. R.S.Pandey, (2005) 8 SCC 264, the Supreme Court has held as under: "11. Except for a period when Article 226 was amended by the Constitution (Forty-Second Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remedy it is within the jurisdiction or discretion of the High Court to grant relief under Art. 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided, the High Court should ensure that he has made out a strong case or that there exist good grounds to invoke the extraordinary jurisdiction. 12. Constitution Benches of this Court in K.S.Rashid and Son v. Income Tax Investigation Commission, AIR 1954 SC 207, Sangram Singh v. Election Tribunal, Kotah, AIR 1955 SC 425, Union of India v. T.R.Varma, AIR 1957 SC 882, State of U.P. v. Mohd.Nooh, AIR 1958 SC 86 and K.S.Venkataraman and Co.(P) Ltd. v. State of Madras, AIR 1966 SC 1089, held that Article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. 13. Another Constitution Bench of this Court in State of M.P. v. Bhailal Bhai, AIR 1964 SC 1006, held that the remedy provided in a writ jurisdiction is not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defence legitimately open in such actions. The power to give relief under Article 226 of the https://hcservices.ecourts.gov.in/hcservices/ Constitution is discretionary power. Similar view has been reiterated in N.T.Veluswami Thevar v. G.Raja Nainar, AIR 1959 SC 422, Municipal Council, Khurai v. Kamal Kumar, AIR 1965 SC 1321, Siliguri Municipality vs. Amalendu Das, AIR 1984 SC 653, S.T.Muthusami v. K.Natarajan, AIR 1988 SC 616, Rajasthan SRTC v. Krishna Kant, AIR 1995 SC 1715, Kerala SEB v. Kurien E.Kalathil, AIR 2000 SC 2573, A.Venkatasubbiah Naidu v. S.Chellappan (2000) 7 SCC 695, L.L.Sudhakar Reddy v. State of A.P. (2001) 6 SCC 634, Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State of Maharashtra, (2001) 8 SCC 509, Pratap Singh v. State of Haryana, (2002) 7 SCC 484 and GKN Driveshafts (India) Ltd. v. ITO (2003) 1 SCC 72." 29. Pointing out the circumstances as to when the alternative remedy would not be a bar to entertain the Writ Petition, in the said decision the Supreme Court has held as follows: " 16.....There are two well-recognised exceptions to the doctrine of exhaustion of statutory remedies. First is when