2024 (7) TMI 859 - SC - Indian Laws

Recovery of the remaining sum payable by the appellant - manufacturer or importer or distributor - whether the National Pharmaceutical Pricing Authority (NPPA), Government of India, was justified in raising a demand against the appellant to recover the higher price charged in relation to Roscilox, a brand of a Cloxacillin-based drug formulation, than that fixed by the Government under the provisions of the Drugs (Price Control) Order, 1995? HELD THAT - There is some overlapping inasmuch as a wholesaler , as defined in Paragraph 2(y), would include not only a dealer , as defined in Paragraph 2(d), but also a stockist appointed by a manufacturer or an importer, who would fall within the ambit of a distributor under Paragraph 2(e). There is, thus, no clear and absolute delineation amongst the definitions. However, the so-called distinction in the defined categories was the basis for the claim of the appellant that it could not be proceeded against under Paragraph 13 of the DPCO. It asserted that it was not a manufacturer or an importer or a distributor and, therefore, it stood beyond the grasp of Paragraph 13. Though an attempt was made by the learned counsel for the appellant to enlarge the scope of this appeal by questioning the very validity of the demand made under the DPCO, the same is not permitted - there is no evidence of the appellant having raised such an issue properly before the Delhi High Court. The main issue that was raised before and considered by the High Court was whether the appellant would come within the reach of Paragraph 13 of the DPCO in the light of its claim that it was not a manufacturer or importer or distributor. In this regard, we find that the replies filed by the appellant in response to the notices issued by the NPPA categorically manifested that the appellant admitted purchase of the drug from the manufacturer itself. Thus, in terms of its own admissions in its replies, the appellant had direct contact with the ostensible manufacturer - Though the definition of wholesaler under Paragraph 2(y) of the DPCO blurs the distinction between a dealer and a distributor , by including a dealer as well as a stockist appointed by a manufacturer, the fact remains that a distributor under Paragraph 2(c) of the DPCO has links with the manufacturer directly while a dealer does not, as he obtains his supply of drugs from the said distributor . Given its own inconsistent versions and in the absence of a firm factual foundation being built up by the appellant with proper documentation as to its status, it was not open to it to baldly claim that it was not a distributor but only a dealer - thus, no error committed by the High Court in rejecting the claim of the appellant. Appeal dismissed.

Summary

Issues:
1. Challenge to demand raised by National Pharmaceutical Pricing Authority (NPPA) under Drugs (Price Control) Order, 1995 (DPCO).
2. Interpretation of Paragraph 13 of the DPCO regarding recovery of overcharged amount.
3. Claim of appellant not being a manufacturer, importer, or distributor under the DPCO.
4. Examination of appellant's role as a dealer or distributor in the drug supply chain.
5. Corporate veil piercing to determine liability.
6. Adequacy of appellant's disclosure and documentation regarding drug purchase agreements.
7. Appellant's inconsistent versions affecting its claim under the DPCO.
8. High Court's decision on appellant's claim and dismissal of the appeal.

Detailed Analysis:

1. The appellant challenged the demand notices issued by the NPPA under the DPCO. The appellant contended that the demand to recover the higher price charged for a drug formulation was unjustified.

2. The key issue revolved around the interpretation of Paragraph 13 of the DPCO, empowering the government to recover overcharged amounts. The appellant argued that it did not fall within the purview of manufacturers, importers, or distributors targeted by this provision.

3. The appellant claimed it was not a manufacturer, importer, or distributor as defined in the DPCO. This distinction was crucial in determining the applicability of Paragraph 13 and the subsequent recovery demands.

4. The High Court scrutinized the appellant's role in the drug supply chain, considering whether the appellant functioned as a dealer or distributor. The appellant's interactions with manufacturers and supply chain dynamics were pivotal in this analysis.

5. The High Court also delved into the concept of piercing the corporate veil to establish liability. The court examined the overlapping identities and relationships within the appellant's corporate structure.

6. The adequacy of the appellant's disclosure and documentation regarding drug purchase agreements came under scrutiny. Inconsistent versions and lack of concrete evidence affected the appellant's claims and defenses.

7. The High Court's decision to dismiss the appellant's claim was based on the findings related to the appellant's role, interactions with manufacturers, and compliance with DPCO provisions.

8. Ultimately, the appeal was dismissed as lacking merit, affirming the High Court's decision. The court emphasized the importance of factual evidence, consistent narratives, and compliance with regulatory provisions in such cases.