2003 (8) TMI 541 - SC - Indian Laws

Summary

Issues Involved:
1. Inclusion of bulk drugs in the First Schedule to the Drugs (Price Control) Order, 1995.
2. Interpretation of "turnover" for the purpose of price control.
3. Consideration of export sales in turnover calculation.
4. Criteria for market competition and monopoly situation.
5. Alleged discrimination between drugs.

Summary:

1. Inclusion of Bulk Drugs in DPCO, 1995:
The Union of India appealed against the Bombay High Court's judgment which quashed the inclusion of seven bulk drugs in the First Schedule to the DPCO, 1995. The High Court held that these drugs should not have been included under the DPCO, 1995, and thus, price fixation for these drugs was invalid. The Supreme Court emphasized that the Government must adhere to its own policy guidelines when exercising delegated legislative power, and any deviation without justification could be arbitrary and violative of Art. 14 of the Constitution.

2. Interpretation of "Turnover":
The Supreme Court clarified that "turnover" in the Drug Policy, 1994 represents the sale value of bulk drugs sold as such or in the form of formulations. The Court rejected the Government's interpretation that turnover includes the value of total production and imports, emphasizing that only what is sold and marketed can be considered as turnover.

3. Consideration of Export Sales:
The Court agreed with the High Court that export sales should not be included in the turnover calculation. The term "turnover" should be understood in the context of domestic usage and consumption, as indicated in the Drug Policy, 1994.

4. Criteria for Market Competition and Monopoly Situation:
The Supreme Court upheld the Government's view that only single ingredient formulators should be considered for assessing market competition under Cl. (iii) of para 22.7.2 of the Drug Policy. The Court noted that the High Court failed to critically examine the factual basis of the writ petitioners' claims regarding the number of formulators and their market share.

5. Alleged Discrimination Between Drugs:
The Supreme Court found the High Court's acceptance of the plea of discrimination between drugs to be unfounded. The Court emphasized that the exclusion of some drugs from the DPCO, even if unjustified, cannot be a ground to claim exclusion of other drugs on the principle of parity.

Conclusion:
The Supreme Court set aside the High Court's judgment and remanded the writ petitions for reconsideration. The High Court was directed to re-examine the applicability of the criteria laid down in para 22.7.2 of the Drug Policy, 1994, in light of the Supreme Court's observations. The appeals were allowed, and the recovery of 50% of the 'overcharged' amounts was permitted pending fresh determination by the High Court.