Case: Glaxosmithkline Pharmaceuticals Limited &amp; Another Vs. Union of India &amp; Others

2. The 1st petitioner is a company registered under the Companies Act, 1956 and engaged in manufacture and distribution of drugs and pharmaceuticals, including life saving and essential drugs. The 2nd petitioner is a shareholder of the 1st petitioner company and he is a national and citizen of India. The petitioners seek to challenge the show cause notice dated 16th June, 1997 and orders dated 7th October, 1990, 9th April, 1999 and 23rd April 1999 whereby the petitioner company has been directed to deposit overcharged SUM of Rs.1,90,71,795 in relation to Betnelan tablets for the period Ist January, 1995 to 17th July, 1995 with penal interest under Drugs (Price Control) Order, 1995, hereinafter referred to as DPCO, 1995, read with Essential Commodities Act, 1955. We may hasten to add that the amount of Rs.1,90,71,795 on fresh calculation is fixed at Rs.1,20,42,312. The brief facts and circumstances giving rise to this petition are stated hereinafter.3. The Drugs (Price Control) Order, 1987, hereinafter referred to as DPCO, 1987, was promulgated by the Central Government on 26th August, 1987 in exercise of the powers under section 3 of the Essential Commodities Act, 1955. As Betamethasone was classified as scheduled bulk drug under Schedule II of DPCO, 1987, the Central Government was empowered to notify the price of the said scheduled bulk drug and related formulation. The manufacturer of a scheduled bulk drug and formulation has to adopt the price so notified by the Central Government within the prescribed period. The petitioner company was granted exemption from the price control under para 28 of DPCO, 1987 in respect of the said drug Betamethasone by the Central Government on 28th February, 1992 and the period of exemption was upto 31st December, 1994. In the meanwhile the Central Government notified the ceiling price of Rs.2.98 per strip for formulations relating to bulk drug Betamethasone on 11th February, 1992. The petitioner company was not required to adopt the ceiling price as notified on 11th February, 1992 up to 31st December, 1994, as it was exempted from price control by the Central Government. However, even after the expiry of the exemption period w.e.f. 1st January, 1995, the petitioner company continued to adopt its own price of Rs.3.74 per stip for Betamethasone formulations which was higher than prevailing ceiling price for the said formulation. Therefore a show cause notice was issued to the petitioner company by the Department of Chemicals and Petrochemicals on 10th June, 1997 in which the amount overcharged was initially calculated as Rs.1,90,71,795 during the period from 1st January, 1995 to 17th July, 1995 and the company was directed to deposit the overcharged amount under para 15 of DPCO, 1987 along with interest at the rate of 15% p.a. In reply to the said notice it was contended by the petitioner company that under Guideline 1 of 1989 dated 14th February, 1989 there was no specific provision requiring the manufacturer of the scheduled bulk drug/formulation, to adopt the then prevailing ceiling price of the scheduled bulk drug/formulation after the period of exemption under Para 28 of the DPCO, 1987. It was further contended by the petitioner that in the absence of specific provision in Guideline 1 of 1989 the company was at liberty to charge any price till the revision of the price by the Government of India. Secondly, the petitioner company contended that the quantity of the said formulation manufactured by it during the period from Ist January, 1995 to 17th July, 1995 should only be considered for the purpose of calculation of overcharged amount. Subsequent to the formation of NPPA, the case was transferred to NPPA and letters were issued by the department to the petitioner company to deposit the overcharged amount. At the request of the petitioner company a personal hearing was granted to them. By the impugned orders the petitioner company was called upon to deposit a sum of Rs.1,90,71,795/in relation to the Betamethasonetablets for the period from Ist January, 1995 to 17th July, 1995 with interest at the rate of 15% p.a. The said sum on recalculation was reduced to Rs.

Court's reasoning:
15. In our opinion, the submission is devoid of any substance. Under the substantive part of DPCO, 1987 the ceiling price in respect of scheduled formulation was included in paras 8 and 9(6) and all the manufacturers of the formulations had to adopt ceiling price within 15 days of the date of notification Paras 8 and 9(6) are reproduced herein below:"8. Power of Government to fix ceiling prices of formulations specified in Category I of the Third Schedule(1) The Government may, from time to time, by notification in the Official Gazette, fix the ceiling price of a formulation specified in Category I of the Third Schedule in accordance with provisions of paragraphs 6 and 7 and such price shall operate as the ceiling sale price for every manufacturer of such formulations.(2) The Government may, of its own motion or an application, made to it in this behalf by a manufacturer in form 2 or form 3 as the case may be, after, calling for such information as it may consider necessary, by notification in the Official Gazette for a revised ceiling price for a formulation.9(6). Without prejudice to the provisions of the precedingThe Government may, if it considers necessary or expedient so to do, by notification in the Official Gazette, fix or revise a ceiling price for any formulation specified in the Third Schedule and any manufacturer of such formulation may sell such formulation at a price not exceeding the price so notified and intimate the Government accordingly.(b) With a view to enabling the manufacturers of similar formulations in pack sizes other than those for which ceiling prices referred to in the abovehave been notified, to market such formulation packs at worked out prices, the Government may, by notification in the Official Gazette fix norms from time to time and such manufacturer shall work out the price of their respective formulation packs in accordance with such norms and marks such formulation packs after thirty days of intimation to the Government in this behalf.Provided that the Government; may, if it considers necessary by order, revise the price so intimated by the manufacturer and upon such revision, such manufacturer shall not sell such formulation at a price exceeding the price so revised".