In a significant legal battle concerning the pricing of medicinal drugs, the Supreme Court of India delivered a crucial judgment against a prominent manufacturer-distributor group. The case centered around the applicability of Paragraph 13 of the Drug Price Control Order and the obligations of the group regarding overcharging. The ruling establishes important precedents in safeguarding fair drug pricing policies for the benefit of the general public.
Facts
- There is no clear and absolute delineation among the definitions of manufacturer, importer, and distributor.
- The appellant claimed it could not be proceeded against under Paragraph 13 of the DPCO as it asserted it did not fall under the categories of manufacturer, importer, or distributor.
- The appellant failed before the Delhi High Court at both levels and then appealed to this Court.
- Appellant paid 1.25 crores ₹ towards the demand by respondent authorities
- Court directed status quo on recovery of remaining sum
- Writ petition dismissed on 13.07.2005
- Challenge in W.P.(C) No 10700 of 2005 to demand notices dated 08.02.2005 and 13.06.2005
- Appellant filed L.P.A. No 1629 of 2005 which was dismissed by Division Bench of High Court on 06.08.2014
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Issue
- The NPPA raised a demand against the appellant to recover the higher price charged for Roscilox.
- The demand notice directed the appellant to deposit the overcharged principal amount for the period April, 1996 to July, 2003.
- The NPPA was empowered to recover the interest due on the overcharged amount.
- A subsequent demand notice quantified the interest payable on the overcharged amount.
- The total amount demanded including interest was 4,65,08,333/-.
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Analysis
- Recovery of excess price charged attempted by NPPA under Paragraph 13 of DPCO.
- Paragraph 13 titled ‘Power to recover Overcharged Amount’ grants Government the authority to demand manufacturers, importers, or distributors to deposit overcharged amounts.
- Definitions from DPCO include ‘dealer’, ‘distributor’, and ‘wholesaler’, with some overlap between them.
- ‘Wholesaler’ as per Paragraph 2(y) encompasses both ‘dealer’ and stockists appointed by manufacturers or importers, falling within the ‘distributor’ definition.
- The definitions of ‘distributor’ and ‘dealer’ under the DPCO are not mutually exclusive.
- A ‘distributor’ may play a dual role by also becoming a ‘wholesaler’ or ‘retailer’.
- The appellant played both roles of distributor and dealer.
- The appellant cannot be excluded from the ambit of Paragraph 13 of the DPCO.
- The intent of the provision is to control prices of medicinal drug formulations for the common man.
- The appellant’s failure to produce an agreement regarding the purchase and sale of Roscilox was highlighted.
- The appellant’s inconsistent statements regarding the purchase of the drug formulation were noted.
- The main issue considered by the High Court was whether the appellant falls under Paragraph 13 of the DPCO.
- The appellant cannot raise new pleas at this stage which were not raised before.
- The High Court found overlapping and merger of identities between the manufacturer and the appellant’s group companies.
- Pleadings regarding computation of demand under Paragraph 19 of the DPCO were introduced during arguments before the Division Bench.
- The Division Bench did not accept the new story introduced by the appellant during arguments.
- Appellant’s inconsistent versions regarding its status as a distributor or dealer were not backed by proper documentation.
- Appellant’s claim of being only a ‘dealer’ and not a ‘distributor’ was rejected by the High Court.
- No error was found in the High Court’s decision regarding the appellant’s claim.
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Decision
- The appeal is devoid of merit
- The appeal is dismissed
- Parties shall bear their own costs
- Pending applications, if any, are dismissed
- Order of status quo dated 10.11.2014 stands vacated
Case Title: M/S SUN PHARMACEUTICAL INDUSTRIES LTD. Vs. UNION OF INDIA DEPARTMENT OF CHEMICALS AND PETROCHEMICALS (2024 INSC 521)
Case Number: C.A. No.-007209-007209 – 2019
