Case: Wallace Pharmaceuticals Limited &amp; Another Vs. Union of India, Through The Secretary, Ministry of Chemicals &amp; Fertilizers, Department of Chemicals &amp; Fertilizers &amp; Others

In this petition, Rule was granted by the Division Bench of this Court on 20th September, 1999. Thereafter, this Court was informed that the issue raised in this petition was pending before the Apex Court and, as such, the petitions, on this point, which were pending in various High Courts were adjourned sine die. Finally, Transfer Petition (Civil) No(s).of 2003 were disposed of by the Apex Court by order dated 3rd May, 2010 and a direction was given by the Apex Court to dispose of the petitions without any undue delay. The following order was passed by the Apex Court:ORDER.The Transfer Petitions filed at the instance of the Union of India are of the years 2003 and 2006 respectively. The earlier one was last listed before the Court on October 18, 2005, when no effective order was passed. During the long pendency of these Transfer Petitions, it is reported that some of the cases pending before the different High Courts have been disposed of and some others in other High Courts would have been heard and disposed of but for the pendency of these Transfer Petitions.In those circumstances, we find that no useful purpose will be served by keeping these Transfer Petitions pending before this Court any longer. These Transfer Petitions are, accordingly, dismissed.It is made clear that since these Transfer Petitions are no longer pending before this Court, there is no impediment in the way of the respective High Courts in proceeding with the cases pending there and dispose them of without any undue delay.The Special Leave Petitions, to which these Transfer Petitions were connected, may be listed in due course.In view of the disposal of the Transfer Petitions in the Supreme Court, this petition was taken up for hearing.Brief facts which are relevant for the purpose of deciding the present petition, are as under:(i) Petitioner No.1 is a Company incorporated under the Companies Act, 1913 and carries on, inter alia, business of manufacturing and marketing pharmaceutical products and formulations. The second petitioner is the servant of petitioner No.1 and is a citizen of India. Respondent No.2 is a Committee constituted by respondent No.1 Union of India to review matters arising out of prices charged by various drug companies in India for sale of bulk drugs and formulations and determine the liabilities of drug companies on the over charged amounts between 1981 and 1987 and to make the recommendations to the Government of India in respect of recoveries from the pharmaceutical industry into Drugs Price Equalisation Account (DPEA). The said Committee has been directed to determine the liabilities in accordance with the recommendations of the Price Review committee (Murthy Committee) and according to the Line of Action as determined by the Department in 1990.(ii) The petitioners started manufacturing various formulations made from and using the imported bulk drug Rifampicin under the trade name Rifadin effective from April, 1982. The petitioners were marketing these formulations of Rifampicin at the leader prices notified by respondent No.1 under the provisions of DPCO, 1979.(iii) Respondent No.1 fixed the maximum sale price in respect of one of the formulations of Rifadin capsule (450 mg/Cap/4s at Rs.10.35). The said price fixation order was issued under para 13(1)(a) of the DPCO, 1979.(iv) Applications were made by the petitioner dated 30th June, 1984 and 27th July, 1984 requesting respondent No.1 to fix/revise the prices of the formulations manufactured by the petitioner from and using the said bulk drug Rifampicin.(v) Reply was given by respondent No.1 dated 3/13th August, 1984 and the petitioners were informed that the Government had already notified leader prices in respect of the said formulations and that the petitioners should, accordingly, follow the leader prices.(vi) The petitioner was importing the bulk drug Rifampicin which was not indigenously manufactured/available in India and, therefore, the petitioner by an application dated 23rd August, 1984, submitted in prescribed Form 2 for information of landed cost in respect of the said bulk drug. This application, according to the petitioners, was neither considered nor disposed of by respondent No.1.(vii) Thereafter, respondent No.1 fixed leader prices in respect of various formulations manufactured out of the said bulk drug by notification dated 12th September, 1984, as a result of which the leader prices were further reduced.(viii) The petitioners found that the cost of production of the formulations made from the bulk drug Rifampicin, including the cost of procurement was much higher and, therefore, it was rendered unviable and accordingly, the petitioner made an application in Form 3 for price fixation/revision of the said formulations. However, respondent No.1 by a letter dated 25th September, 1984, directed the petitioner to follow the leader prices fixed by its order dated 12th September, 1984 and the request made by the petitioner was not taken into consideration.(ix) It is the case of the petitioners that since the said drug and formulations weredrugs, the petitioner company, under protest, complied with the directions given in the letter dated 25th September, 1984 and followed the leader prices fixed by respondent No.1.(x) Respondent No.1 once again revised the leader prices in respect of one of the formulations of Rifadin Capsule 450 mg 4s by price fixation order dated 2nd March, 1984.(xi) The petitioners again protested this notified prices and made an application for revision of the retail price by filing their application in Form No.3. However, the said application also was not considered by respondent No.1 and, as a result, the petitioner Company discontinued to manufacture and sale of the formulations sometime in August, 1985, since the prices were totally uneconomical, beyond the control of the petitioners, having regard to the cost of procurement of the bulk drug and since there was no response from respondent No.1.(xii) Thereafter, sometime on 21st October, 1986, a notification was issued fixing the price of indigenous bulk drug.(xiii) In the meantime, sometime on 17th September, 1986, after the petitioner company discontinued manufacture and sale of formulations, respondent No.1 called upon the petitioner to forward the details for the period from 1st April, 1979 onwards relating to import/procurement of utilisation of the bulk drug Rifampicin and also give details in respect of the set off duly supported by necessary bills and invoices to enable the Department to determine the recovery into the Drug Prices Equalization Account. Accordingly, the petitioner complied with the said request and provided the details of import/procurement of the said drug.(xiv) On 25th August, 1987, the DPCO, 1987 was enacted.(xv) Respondent No.1, by demand notice dated 6th October, 1987 called upon the petitioners to pay an amount of Rs.2,82,071/which was determined under as unintended profit made by the petitioner Company during the period 1st April, 1979 to 31st March, 1984 on account of the difference in the prices of the bulk drug Rifampicin allowed in the formulations and the actual import price in terms of para 7(2) of the DPCO, 1979.(xvi) A representation was made by the petitioner that the said order had been passed, without giving any reasons and without taking into consideration the data submitted by the petitioners.(xvii) Thereafter, the matter was again referred to respondent No.2 for review.(xviii) The petitioner Company, thereafter received a demand notice for recovery on behalf of respondent No.4 dated 15th March, 1999.(xix) Being aggrieved by the said demand notice, the petitioners have filed this petition.

Court's reasoning:
11. In our view, the ratio of the said judgment of the Karnataka High Court clearly applies to the facts of the present case. It is an admitted position that the said judgment and order of the Karnataka High Court has, so far, not been challenged by the respondents, in the Apex Court and, as such, as of today, the finding given by the Karnataka High Court has become final. The ratio of the said Judgment clearly applies to the facts of the present case, and, as such, the contention of the learned Counsel appearing on behalf of the petitioners will have to be accepted.In our view, the ratio of the said judgment would not apply to the facts of the present case, since the question which fell for consideration before the Division Bench of Bombay High Court was, whether, after repeal of the provisions of para 7(2) and 17 of the DPCO, 1979 with effect from 26th August, 1987, the show cause notices could have been issued for the recovery of the amount which had actually accrued during the continuance of the DPCO, 1979  In paragraphs 1 and 2, the issue involved before the Division Bench has been succinctly mentioned.Perusal of the said observations reveal that the challenge in the said petition was on a totally different ground and, as such, the observations which are made in the context of paragraph 7(2) would strictly not apply to the facts of the present case and the learned Counsel appearing on behalf of the respondents was unable to point out any observations which were either directly contrary to the ratio of the judgment of the Karnataka High Court or in favour of the arguments advanced by the respondents in the present case.