Bombay High Court
M/S PHARMED LIMITED AND ANRversusUNION OF INDIA AND 3 ANR
- Decided
- Disposal
- DISPOSED OFF
Holding
The NPPA lacked the statutory power to fix ceiling prices for the petitioners’ formulation without a proper order under paragraph 9 of DPCO 1995, rendering the 27‑09‑2007 and 30‑01‑2009 notifications ultra vires and the subsequent demand notices unsustainable.
Summary
The petitioners, a pharmaceutical manufacturer and its director, challenged notices and demand letters issued by the Union of India, the National Pharmaceutical Pricing Authority (NPPA) and the Collector for alleged over‑charging on their formulation ‘Cartigen Forte’ alleging that the ceiling price was not lawfully fixed. The dispute centered on whether the NPPA could, under the Drugs (Price Control) Order, 1995 (DPCO 1995), issue blanket notifications fixing ceiling prices for a formulation that was not a multivitamin/mineral tablet and whether the required formula under paragraph 7 of DPCO 1995 was ever applied. The Court examined the statutory scheme, the definition of “scheduled formulation”, the procedural requirements for fixing a ceiling price, and found that the NPPA had acted ultra vires by issuing the 27‑09‑2007 and 30‑01‑2009 notifications without a proper price‑fixation order. Consequently, the Court held that the notifications were invalid and that the subsequent demand notices, including those under the Maharashtra Land Revenue Code, were unsustainable. The writ petition was allowed, quashing the 27‑09‑2007 notification to the extent it applied to the petitioners and setting aside the 30‑01‑2009 notification in its entirety, and directing that no further action be taken on the demand notices.
Issues considered
- The NPPA’s authority to fix ceiling prices for a formulation not covered by a specific DPCO 1995 order
- Whether the 27‑09‑2007 and 30‑01‑2009 notifications are ultra vires DPCO 1995
- The requirement to apply the formula in paragraph 7 of DPCO 1995 before fixing a ceiling price
- The validity of demand notices issued under the Maharashtra Land Revenue Code based on the impugned notifications
- The applicability of natural‑justice principles in the issuance of the demand notices
Legislation cited
Subjects
- price control
- ceiling price
- Drugs (Price Control) Order 1995
- National Pharmaceutical Pricing Authority
- ultra vires
- natural justice
- essential commodities
- Maharashtra Land Revenue Code
- quashing of notification
- statutory interpretation
Judgment
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 595 OF 2017
WITH
CHAMBER SUMMONS NO. 135 OF 2017
IN
WRIT PETITION NO. 595 OF 2017
M/s. Pharmed Limited & Anr. … Petitioners
Versus
Union of India & Ors. … Respondents
******
Mr. Navroz Seervai, Senior Counsel a/w Mr. Akash Rebello, Mr. Abhay
Jadeja and Ms. Urvi Gulechha i/by Jadejas & Partners for Petitioners.
Mr. R. V. Govilkar, Senior Counsel a/w Dr. G. R. Sharma, Mr. D. P. Singh
and Ms. Apurva Gupta for Respondent Nos.1 to 3.
Ms. Anupamaa Pawar, AGP for Respondent No. 4-State.
******
CORAM : MANISH PITALE AND
SHREERAM V. SHIRSAT, JJ.
RESERVED ON : 3rd SEPTEMBER 2026
PRONOUNCED ON : 22nd SEPTEMBER 2026
Judgment (Per Manish Pitale, J.) :
. The petitioners are aggrieved by notifications and notices of
demand issued by the respondents for recovery of amounts on the
ground that the petitioners sold certain medicinal formulation
beyond the ceiling price allegedly fixed by the respondent Nos.1
and 2 under the Drugs (Price Control) Order, 1995 (hereinafter
referred to as ‘DPCO 1995’). The petitioner No.1 is a company
engaged in manufacturing and marketing of pharmaceutical
formulations and petitioner No.2 is a shareholder and director of
petitioner No.1 company.
2. The respondent No.1-Union of India (Central Government)
issued DPCO 1995 as per notification dated 06.01.1995 by
exercising power conferred by Section 3 of the Essential
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Commodities Act, 1995. DPCO 1995 provided for power in the
respondent No.1-Central Government to fix maximum sale price
for bulk drugs, power to fix retail price of scheduled formulations
and also power to fix ceiling price of scheduled formulations. In
the present case, we are concerned with the power exercised by
the Central Government under paragraph 9 of DPCO 1995 for
fixing ceiling price for scheduled formulations. DPCO 1995
provided a whole scheme and mechanism for exercising such
power and also defined key terms such as bulk drug, formulation,
scheduled bulk drug and scheduled formulation. The Central
Government issued notifications/orders from time to time for
fixing ceiling price for various scheduled formulations. It is the
case of the petitioners that in the present case, the impugned
notifications were issued by respondent No.2 i.e. National
Pharmaceuticals Pricing Authority (NPPA), while the power to
issue such notifications should have been exercised by the
respondent No.1-Central Government under DPCO 1995.
3. The present case concerns a medicinal/pharmaceutical
formulation manufactured by the petitioner No.1 called ‘Cartigen
Forte Tablets’, a drug for treatment of osteoarthritis. The
petitioners have placed on record the ingredients of the said
formulation manufactured by them prior to January 2010 and also
the ingredients of the formulation manufactured from January
2010 onwards. The petitioners contend that the respondent No.1-
Central Government never fixed the ceiling price for the aforesaid
formulation manufactured either prior to January 2010 or from
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January 2010 onwards and therefore, the impugned demands are
wholly unjustified. The petitioners emphasized that the impugned
notifications/orders dated 27.09.2007 and 30.01.2009 deserve to
be quashed and set aside, insofar as their application to the
formulation of the petitioners is concerned, for the reason that the
notification dated 27.09.2007 pertains to multivitamin and
mineral tablets/capsules, which have nothing to do with the subject
formulation of the petitioners. It is further contended that the
subsequent notification dated 30.01.2009 is extremely broad-
based and it is in the teeth of the paragraphs of DPCO 1995 itself,
thereby indicating that it deserves to be quashed and set aside on
the said ground. The petitioners contend that the impugned
notifications and the consequent demands made by the
respondents deserve to be quashed and set aside on this short
ground itself. The petitioners have also raised various other
grounds to indicate why the writ petition deserves to be allowed.
4. On 04.09.1997, the Central Government through Ministry
of Chemicals and Fertilizers issued a notification under paragraph
20 of DPCO 1995, directing the respondent No.2-NPPA to
exercise the functions of the Central Government in respect of
paragraphs 3 to 5, 7 to 11 and 13 to 21 of DPCO 1995. On
27.09.2007, the respondent No.2-NPPA issued the impugned
notification, fixing the ceiling price for multivitamin and mineral
tablets, as also multivitamin and mineral capsules. Thereafter, on
30.01.2009, the respondent No.2-NPPA issued another
notification stating that any formulation/ composition not covered
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in the table of standing orders, that has any scheduled drug as one
of its ingredients, shall be subject to price ceiling mentioned at the
respective serial number of the respective notification, unless the
manufacturer subsequently gets a specific price fixed by the NPPA
for that formulation/composition. The language used in the said
notification demonstrates that it is extremely widely worded and
purports to take within its fold, formulations for which no ceiling
price has been fixed.
5. After issuing notices to the contract manufacturer of
petitioner No.1 to give details of production of the subject
formulation, on 13.10.2010, respondent No.2-NPPA issued show
cause notice to the petitioner No.1, alleging that its sale price was
higher than the ceiling price and on that basis, called upon the
petitioner No.1 explain as to why an amount of Rs.10,97,86,227/-
should not be recovered towards estimated overcharged amount.
On 31.01.2011, the petitioner No.1 sent reply to the said show
cause notice, inter alia, stating that the subject formulation had
undergone change since January 2010 and that in any case, the
subject formulation was not a multivitamin, for which ceiling price
had been fixed. It was further stated that NPPA could not issue
such a blanket order as the power to do so vests only with the
Central Government. The petitioner No.1 also demanded personal
hearing in the matter. It is to be noted that on 15.03.2013, DPCO
2013 came into effect and DPCO 1995 was repealed.
6. On 09.09.2014, after more than 3 years and 6 months of the
reply to the show cause notice being submitted by the petitioner
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No.1, inter alia, demanding personal hearing, respondent No.2-
NPPA issued a letter fixing the date for final hearing as
22.09.2014. The NPPA also recalculated the overcharged amount
as Rs.6,33,62,316/- and further added interest of
Rs.4,90,71,525/-, taking the total amount to Rs.11,24,33,841/-.
7. On 22.09.2014, hearing was conducted in the chamber of
Member Secretary of the respondent No.2-NPPA and the minutes
thereof were circulated along with letter dated 20.10.2014. At the
time of hearing, the said Member Secretary of NPPA claimed that
it had not received the aforesaid reply to the show cause notice
submitted by the petitioner No.1 on 31.01.2011 and hence, an
acknowledged copy was handed over. Thereafter, on 27.11.2014,
the petitioner No.1 filed its written submissions, stating as to why
no amount towards overcharging could be levied upon the
petitioner No.1. But, on 26.11.2014, the Deputy Director of
respondent No.2-NPPA issued a demand notice, calling upon the
petitioner No.1 to deposit the alleged overcharged amount of
Rs.11,42,82,631/-. The petitioner No.1 received it in December
2014 and on 23.01.2015, the petitioner No.1 sent a letter in
response, pointing out various Infirmities. It was also highlighted
that the said notice did not make any reference to the personal
hearing and that no speaking order was passed in pursuance of the
said personal hearing conducted on 20.10.2014. It was further
stated that while the hearing was conducted by the Member
Secretary of the NPPA, the order was passed by the Deputy
Director, thereby vitiating the order/demand notice. It was also
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submitted that such demand notice was prior to placing of the
written submission of the petitioner No.1 on record, in pursuance
of the personal hearing. On this basis, the petitioner No.1 called
upon respondent No.2-NPPA to withdraw the demand notice
dated 26.11.2014. Certain communications were exchanged
between the parties and eventually, on 09.07.2015, the petitioner
No.1 received the impugned notice of demand to defaulter issued
by the Tehsildar from the office of the respondent-Collector under
Section 267 of the Maharashtra Land Revenue Code, 1966
(MLRC) for depositing an amount of Rs.12,05,92,401/- within a
period of 20 days, failing which attachment proceedings would be
initiated.
8. On 20.07.2015, the petitioner No.1 filed Writ Petition No.
2804 of 2015, challenging the said demand notices issued by the
respondents. On 03.02.2016, a Division Bench of this Court
disposed of the writ petition on a statement made on behalf of
respondent-NPPA that the petitioners would be heard again and a
speaking order would be passed in the matter. It is to be noted that
in the said writ petition, ad-interim order was granted. Hence,
while disposing of the writ petition by order dated 03.02.2016,
this Court directed that the ad-interim order would continue to
operate till a fresh order was passed in the matter and for a period
of four weeks, the said order would not be acted, if it was adverse
to the petitioners. It was further clarified that since the matter was
sent back to the NPPA, none of the demand notices that were
impugned in the writ petition, could be enforced.
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9. In pursuance of the said order passed by this Court, on
01.03.2016, hearing was conducted, wherein the petitioners
reiterated their contentions raised in Writ Petition No. 2804 of
2015 and they sought disclosure with respect to material costs to
be taken into consideration, as per paragraph 7 of DPCO 1995 for
arriving at ceiling price. On 07.03.2016, the respondent No.2-
NPPA again issued demand notice, which is impugned in this writ
petition, to the petitioner No.1 to deposit amount of
Rs.12,73,36,583/- towards overcharged amount and interest
thereon, calculated upto 15.03.2016. On 29.03.2016, the
petitioner No.1 sent a letter in response, again stating that the
demand notice was not preceded by a speaking order, no
disclosures were given as demanded by the petitioners, the specific
submissions of the petitioner No.1 were not considered and that
the demand notice dated 07.03.2016 violated the directions
contained in the order dated 03.02.2016 passed by this Court in
Writ Petition No. 2804 of 2015. Despite the said response sent by
the petitioner No.1, on 12.05.2016, respondent No.2-NPPA
issued the second impugned demand notice/letter calling upon the
petitioner No.1 to make payment of alleged overcharged amount
of Rs.12,93,41,609/-. On 21.11.2016, the respondent No.4 i.e.
the office of the Collector through the Tehsildar, issued another
notice under Section 267 of the MLRC, for recovery of amount of
Rs.13,41,06,802/- in the form of a notice of demand to defaulter.
10. It is in this backdrop that the present petition was filed in
December 2016, which was subsequently amended upon
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permission granted by this Court. On 05.12.2016, a Division
Bench of this Court granted ad-interim relief in favour of the
petitioners by directing that no further steps would be taken by
the Tehsildar, Mumbai City, on the basis of the impugned demand
notice, subject to the condition that the petitioner No.1 would not
create any third party rights in respect of the immovable
properties held by it and it shall not part with possession thereof.
The ad-interim order was continued by subsequent orders.
Respondent No.4 filed reply affidavit in January 2017 to which
the petitioners filed their rejoinder affidavit. In February 2017,
respondent Nos.2 and 3 filed their reply affidavit, in response to
which the petitioners filed a further rejoinder affidavit.
Subsequently, respondent No.2 filed an additional affidavit in
reply to the amended writ petition. On 25.02.2020, this Court
directed that the ad-interim order granted on 05.12.2016 as
interim relief, would continue until further orders. The writ
petition was taken up for hearing.
11. Mr. Seervai, learned Senior Counsel appearing for the
petitioners submitted that the impugned notifications dated
27.09.2007 and 30.01.2009 deserve to be quashed and set aside.
As regards notification dated 27.09.2007 issued by the respondent
No.2-NPPA, it was submitted that the same pertained to
multivitamin and mineral tablets/capsules and by no stretch of
imagination, could the said notification apply to the subject
formulation of the petitioners i.e. Cartigen Forte, used for the
treatment of osteoarthritis. It was submitted that prior to January
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2010, the subject formulation contained certain vitamins, which
formed part of bulk drugs, identified in First Schedule to DPCO
1995, but the active pharmaceutical ingredients of the subject
formulation were never made subject matter of fixing ceiling price
by the respondents. Even the two vitamins in the pre January 2010
version of the subject formulation, which were included in the
bulk drugs in the First Schedule to DPCO 1995, were in minuscule
quantity, even less than the quantities specific in the impugned
notification dated 27.09.2007, thereby indicating that the said
notification could never apply to the subject formulation. In any
case, if the said notification was sought to be applied as it is to the
subject formulation, it deserves to be quashed and set aside.
12. As regards the impugned notification dated 30.01.2009, it
was submitted that the same was ultra vires with DPCO 1995. It
was submitted that in the first place, the Central Government
could not have delegated power to respondent No.2-NPPA to
issue such a blanket and broad-based notification. It was
specifically submitted that the said impugned notification dated
30.01.2009 was sought to be used by respondent Nos.2 and 3 to
cover the subject formulation, despite the fact that ceiling price
was not fixed for the subject formulation under paragraph 9 of
DPCO 1995, based upon the formula for calculation specified in
paragraph 7 thereof. The respondent No.2-NPPA cannot be
permitted to escape its responsibility of fixing ceiling price for a
particular formulation, in this case the subject formulation,
applying the mechanism of paragraphs 7 and 9 of DPCO 1995, by
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taking recourse to the aforesaid broad-based and blanket
notification dated 30.01.2009. It was submitted that the aforesaid
notification deserves to be quashed and set aside, on this ground
alone.
13. Thereupon, the learned Senior Counsel appearing for the
petitioners invited attention of this Court to various paragraphs of
DPCO 1995, to contend that if the stand taken by the respondents
was to be accepted, paragraph 7 of DPCO 1995, pertaining to
calculation of retail price of a formulation, would be rendered
unworkable. Attention of this Court was specifically invited to the
various factors included in the formula, as per paragraph 7 of
DPCO 1995, including retail price, material costs, conversion cost,
cost of packaging material, packing charges and maximum
allowable post manufacturing expenses, as also excise duty, to
contend that none of these factors were applied in the facts of the
present case, to arrive at any fixed price for the subject
formulation. According to the petitioners, this is a fundamental
and fatal flaw, which renders the impugned notifications, as also
the consequential notices of demand, wholly illegal and
unsustainable.
14. It was further submitted that the consideration of the case of
the petitioners at the hands of the respondents was wholly
arbitrary and basic principles of natural justice were violated. Even
after the earlier Writ Petition No. 2804 of 2015 filed by the
petitioners was partly allowed and the matter was remanded to the
respondent No.2-NPPA, the specific issues raised on behalf of the
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petitioners in the personal hearing and in the written submissions,
were not considered at all. No speaking order was passed and
instead, impugned demand notice dated 29.03.2016 was issued,
contrary to the specific observations made by this Court in the
order dated 03.02.2016 passed in Writ Petition No. 2804 of 2015.
It was further submitted that the impugned demand notice dated
07.03.2016 verbatim reproduced the contents of the affidavit in
reply filed in Writ Petition No. 2804 of 2015, thereby
demonstrating total non-application of mind on behalf of
respondent No.2-NPPA while calling upon the petitioner No.1 to
deposit huge amount towards alleged overcharging for the subject
formulation.
15. It was further submitted that the impugned demand notice
issued by respondent No.4 under the provisions of the MLRC is
unsustainable because the same has been issued on the basis of the
demand notice dated 20.03.2015, which was already set aside by
this Court while disposing of Writ Petition No. 2804 of 2015. As
per the petitioners, before this Court in the present writ petition,
the respondents have sought to justify issuance of the demand
notices on the basis of communications and documents which
cannot substitute a valid certificate for recovery and therefore, on
this ground also, the writ petition deserves to be allowed. It was
also submitted that the respondents cannot claim interest for the
entire period of alleged delayed payment of the amount towards
overcharging from the time it allegedly became due, because major
part of the delay was on the part of the respondents in taking
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forward the proceedings and thereafter, the earlier Writ Petition
No. 2804 of 2015 stood allowed, thereby indicating that the
respondents cannot be allowed to take advantage of the time
consumed in the process. This would amount to the petitioners
being punished for the fault of the respondents in failing to sustain
the earlier notices of demand. By placing reliance on judgment of
this Court in the case of Franco Indian Remedies Private Limited
& Anr. vs. Union of India & Anr., 2016 SCC OnLine Bom 16344,
it was contended that, at best, the respondents could claim interest
from the date of the order or notice impugned in the present writ
petition till the actual date of payment.
16. It was further submitted that the eligibility of the petitioner
No.1 and its contract manufacturer for exemption, on the ground
of being small scale industrial unit, was not considered by the
respondents. A proper application for the said exemption would
show that paragraph 8 of DPCO 1995 regarding fixing of retail
price itself would not apply. It was further submitted that the
respondents did not consider the entitlement of petitioner No.1 to
deduction of trade margin while computing the interest on the
alleged overcharged amounts. On the basis of the aforesaid
submissions, it was asserted that the writ petition deserves to be
allowed.
17. Mr. Govilkar, learned Senior Counsel appearing for
respondent Nos.1 to 3 submitted that the contentions raised on
behalf of the petitioners are unsustainable on a proper reading of
DPCO 1995. By inviting attention of this Court to the definition
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of the terms Formulation, Scheduled Formulation and paragraphs
8 to 11 read with First Schedule of DPCO 1995, it was submitted
that so long as any of the bulk drugs stated in the First Schedule
formed ingredients of the subject formulation, the respondents
were entitled to impose ceiling price fixed for such ingredients. It
was submitted that the moment any of the bulk drugs mentioned
in the First Schedule to DPCO 1995 was found in the formulation,
it became a scheduled formulation, for which the respondents
were entitled to fix ceiling price and on the basis of the same,
recover overcharged amounts. It was submitted that the petitioners
had failed to demonstrate lack of power in the respondent No.2-
NPPA to issue the impugned notifications. It was submitted that
the impugned notifications read in the correct perspective clearly
demonstrate that the petitioner No.1 had violated the ceiling price
fixed by the respondent No.2-NPPA and that recovery of
overcharged amounts was clearly warranted in the facts and
circumstances of the present case.
18. The learned Senior Counsel appearing for the said
respondents also placed reliance on paragraph 11 of DPCO 1995
to contend that since the petitioner No.1 failed to submit an
application for price fixation of the subject formulation, the
respondent No.2-NPPA was entitled to fix the same. Accordingly,
the respondent No.2-NPPA had exercised power under paragraph
9 of DPCO 1995 to fix ceiling price and since the petitioner No.1
sold the subject formulation above the ceiling price, recovery of
overcharged amounts was clearly warranted. On this basis, it was
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submitted that the writ petition deserves to be dismissed and the
interim order ought to be vacated.
19. It was further submitted that the contentions raised with
regard to the principles of natural justice are also unsustainable,
for the reason that after the matter was remanded by this Court
and ample opportunity of hearing was given to the petitioners, the
contentions of the petitioners were considered and thereupon, the
revised demand notice was issued. By referring to the contents of
the reply affidavit filed on behalf of the said respondents, it was
submitted that all the contentions raised on behalf of the
petitioners were answered and therefore, the writ petition ought
to be dismissed.
20. Ms. Pawar, learned AGP appearing on behalf of respondent
No.4 submitted that since the impugned demand notices were
issued by the said respondent under the provisions of the MLRC,
on the basis of the demand notices issued by respondent No.2-
NPPA for overcharged amount, no fault could be found with the
impugned demand notice issued by the said respondent. It was
submitted that the demand notice issued by respondent No.4 was
consequential in nature and therefore, the same does not deserve
any interference.
21. Having heard the learned counsel for the rival parties, in
order to consider the rival submissions, it is necessary to first refer
to the relevant portions of DPCO 2015, which read as follows :
“2. Definitions.–In this order, unless the context otherwise
requires,–
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(h) “formulation” means a medicine processed out of, or
containing without the use of any one or more bulk drug or
drugs with or pharmaceutical aids, for internal or external use
for or in the diagnosis, treatment, mitigation or prevention of
disease in human beings or and, but shall not include –
(i) any medicine included in any bona fide Ayurvedic
(including Sidha) or Unani (Tibb) systems of medicines;
(ii) any medicine included in the Homeopathic system of
medicine; and
(iii) any substance to which the provisions of the Drugs
and Cosmetics Act, 1940 (23 of 1940) do not apply;
(u) “Scheduled bulk drug” means a bulk drug specified in the
First Schedule;
(v) “Scheduled formulation” means a formulation containing
any bulk drug specified in the First Schedule either
individually or in combination with other drugs, including
one or more than one drug or drugs not specified in the First
Schedule except single ingredient formulation based on bulk
drugs specified in the First Schedule and sold under the
generic name;
4. Information to be furnished by the manufacturer in relation
to the Scheduled bulk drugs.–Every manufacturer, producing
a Scheduled bulk drug shall furnish to the Government,–
(a) a list of all Scheduled bulk drugs produced by him within
days of the commencement of this Order and indicate the
details of the cost of each of such bulk drug in Form I;
(b) the details of the cost of each Scheduled bulk drug
produced by him, including such bulk drug which has been
produced after the commencement of this Order, in Form I by
the 30th September, every year.
7. Calculation of retail price of formulation.–The retail price
of a formulation shall be calculated by the Government in
accordance with the following formula namely,–
R.P.= (M.C.+ C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED.
where–
"R.P." means retail price;
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"M.C." means material cost and includes the cost of drugs and
other pharmaceutical aids used including overages, if any, plus
process loss thereon specified as a norm from time to time by
notification in the Official Gazette in this behalf;
"C.C." means conversion cost worked out in accordance with
established procedures of costing and shall be fixed as a norm
every year by notification in the Official Gazette in this
behalf;
"P.M." means cost of the packing material used in the packing
of concerned formulation, including process loss, and shall be
fixed as a norm every year by, notification in the Official
Gazette in this behalf;
"P.C." means packing charges worked out in accordance with
established procedures of costing and shall be fixed as a norm
every year by notification in the Official Gazette in this
behalf;
"MAPE" (Maximum Allowable Post-manufacturing Expenses)
means all costs incurred by a manufacturer from the stage of
ex-factory cost to retailing and includes trade margin and
margin for the manufacturer and it shall not exceed one
hundred per cent for indigenously manufactured Scheduled
formulations;
"E.D." means excise duty:
Provided that in the case of an imported formulation,
the landed cost shall form the basis for fixing its price
alongwith such margin to cover selling and distribution
expenses including interest and importer's profit which shall
not exceed fifty percent of the landed cost.
Explanation.–For the purpose of this proviso, "landed
cost" means the cost of import of formulation inclusive of
customs duty and clearing charges.
8. Power to fix retail price of Scheduled Formulations.–(1)
The Government may, from time to time, by order, fix the
retail price of a Scheduled formulation in accordance with the
formula laid down in paragraph 7.
(2) Where the Government fixes or revises the price of any
bulk drug under the provisions of this Order and a
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manufacturer utilises such bulk drug in his Scheduled
formulations he shall, within thirty days of such fixation or
revision, make an application to the Government, in Form-III
for price revision of all such formulations and the
Government may, if it considers necessary, fix or revise the
price of such formulation.
(3) The retail price of a formulation once fixed by the
Government under (1) and (2) shall not be increased by any
manufacturer the prior approval of the Government.
(4) Any manufacturer, who desires revision of the retail price
of a formulation fixed under sub-paragraph (1), shall make an
application to the Government in Form III or Form IV, as the
case maybe, and the Government shall after making such
enquiry, as it deems fit within a period of two months from
the date of receipt of the complete information, fix a revised
price for such formulation or reject the application for
revision for reasons to be recorded in writing.
(5) Not with standing anything contained in the foregoing
sub-paragraphs, the retail price of a Scheduled formulation, of
a manufacturer shall until the retail price thereof is fixed
under the provisions of this Order, be the price which
prevailed immediately before the commencement of this
Order, and the manufacturer of such formulation shall not sell
the formulation at a price exceeding the price prevailing
immediately before the commencement of this Order.
(6) No manufacturer or importer shall market a new pack, if
not covered under sub-paragraph 3 of para 9, or a new
formulation or a new dosage form of his existing Scheduled
formulation without obtaining the prior approval of its price
from the Government.
(7) No person shall sell or dispose of any imported Scheduled
formulation without obtaining the prior approval of its price
from the Government.
9. Power to fix ceiling price of Scheduled formulations.–(1)
Notwithstanding anything contained in this Order, the
Government may, from time to time, by notification in the
Official Gazette, fix the ceiling price of a Scheduled
formulation in accordance with the formula laid down in
paragraph 7, keeping in view the cost or efficiency, or both, of
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major manufacturers of such formulations and such price shall
operate as the ceiling sale price for all such packs including
those sold under generic name and for every manufacturer of
such formulations.
(2) The Government may, either on its own motion or on
application made to it in this behalf by a manufacturer in
Form III or Form IV, as the case may be, after calling for such
information as it may consider necessary, by notification in
the Official Gazette, fix a revised ceiling price for a Scheduled
formulation.
(3) With a view to enabling the manufacturers of similar
formulations to sell those formulations in pack size different
to the pack size for which ceiling price has been notified
under the sub-paragraphs (1) and (2), manufacturers shall
work out the price for their respective formulation packs in
accordance with such norms, as may be notified by the
Government from time to time, and he shall intimate the
price of formulation pack, so worked out, to the Government
and such formulation packs shall be released for sale only
after the expiry of sixty days after such intimation.
Provided that the Government may, if it considers
necessary, by order revise the price so intimated by the
manufacturer and upon such revision, the manufacturer shall
not sell such formulation at a price exceeding the price so
revised.
Explanation.–For the purpose of this paragraph the
"Scheduled formulation" includes single ingredient
formulation based on bulk drugs specified in the First
Schedule and sold under the generic name.
11. Fixation of price under certain circumstances.–Where any
manufacturer, importer of a bulk drug or formulation falls to
submit the application for price fixation or revision, as the
case, may be, or to furnish information as required under this
Order, within the time specified therein, the Government
may, on the basis of such information as may be available with
it, by order fix a price in respect of such bulk drug or
formulation as the case may be.”
22. In the present case, the subject formulation of the petitioners
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is ‘Cartigen Forte’ used for treatment of osteoarthritis. It is the
case of the petitioners that the said formulation is not a
multivitamin or mineral tablet. The original composition of the
subject formulation was as follows :
Each Film Coated Tablet Contains
Glucosamine Sulfate Potassium Chloride USP 750 mg
Chondroitin Sulfate Sodium USP 100 mg
Methyl Sulfonyl Methane 250 mg
Vitamin D3 IP 200 IU
Vitamin E Acetate IP 12.5 mg
Vitamin C IP 37.5 mg
Sodium Selenite BP equivalent to elemental Selenium 70 mcg
Zinc Sulphate Monohydrate USP equivalent to elemental zinc 4 mg
Manganese Sulphate USP equivalent to elemental Manganese 3 mg
Chromium Picolinate USP equivalent to elemental Chromium 50 mcg
Copper Sulphate Pentahydrate BP equivalent to elemental Copper 0.5 mg
Sodium Borate BP equivalent to elemental Boron 0.5 mg
Colloidal Silicon Dioxide IP equivalent to elemental Silicon 2 mg
Colour: Red Iron Oxide, Black Iron Oxide and Titanium Dioxide IP
Appropriate overages of vitamin added
23. It is undisputed that from January 2010, the composition of
the subject formulation was as follows :
Each Film Coated Tablet Contains
Glucosamine Sulfate Potassium Chloride USP 750 mg
Chondroitin Sulfate Sodium USP 100 mg
Methyl Sulfonyl Methane USP 250 mg
Vitamin D3 IP 200 IU
Calcium Ascorbate USP 50 mg
Sodium Selenite Pentahydrate BP equivalent to elemental Selenium 70 mcg
20
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Zinc Sulphate Monohydrate USP equivalent to elemental zinc 4 mg
Manganese Sulphate USP equivalent to elemental Manganese 3 mg
Chromium Picolinate USP equivalent to elemental Chromium 50 mcg
Copper Sulphate Pentahydrate BP equivalent to elemental Copper 0.5 mg
Sodium Borate BP equivalent to elemental Boron 0.5 mg
Colloidal Silicon Dioxide IP equivalent to elemental Silicon 2 mg
Colour: Red Iron Oxide, Black Iron Oxide and Titanium Dioxide IP
Appropriate overages of vitamin added
24. A perusal of the above quoted composition of the subject
formulation shows that prior to January 2010, the ingredients of
the subject formulation included vitamin C and vitamin E that are
bulk drugs specifically included in the First Schedule of DPCO
1995. The composition of the subject formulation w.e.f. January
2010 does not include said vitamin C and vitamin E. It is the
specific case of the petitioners that the active pharmaceutical
ingredients of the subject formulation used for the treatment of
osteoarthritis are Glucosamine Sulfate Potassium Chloride,
Chondroitin Sulfate Sodium and Methyl Sulfonyl Methane.
Having perused the aforesaid composition of the subject
formulation, which is not disputed by the respondents, we are in
agreement with the petitioners that the subject formulation is
neither a multivitamin nor a mineral tablet/capsule. But, the
respondents claim that inclusion of vitamin C and vitamin E in the
subject formulation, even if in very small quantities, shows the
existence of multivitamins, which are included in the list of bulk
drugs in the First Schedule to DPCO 1995. Much emphasis is
placed on the definition of Scheduled Formulation in paragraph
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2(v) of DPCO 1995 to claim that the moment any of the bulk
drugs in the First Schedule either individually or in combination of
other drugs are found, ceiling price can be imposed. It is on the
basis of the aforesaid stand that the impugned notification dated
27.09.2007 is sought to be justified. At this stage, it would be
appropriate to reproduce the relevant portions of the impugned
notification dated 27.09.2007, which read as follows :
“ORDER
S.O. 1665(E)- In exercise of the powers, conferred by sub-
paragraphs (1) and (2) of paragraph 9 and paragraph 11 of
the Drugs (Prices Control) Order, 1995, read with No. S.O.
637 (E) dated the 4th September, 1997 issued by the
Government of India in the Ministry of Chemicals and
Fertilizers and in supersession of the Order of the
Government of India in the Ministry of Chemicals and
Fertilizers, (National Pharmaceutical Pricing Authority) No.
S.O. 1064(E), dated 11th July, 2006, the National
Pharmaceutical Pricing Authority, hereby fixes the prices as
specified in column (5) of the table below as ceiling prices
exclusive of excise duty and local tax, if any, and in column
(6) of the table below as Equivalent MRP inclusive of excise
duty and education cess, sales tax/VAT of each of the
Scheduled formulations specified in the corresponding entry
in column (2) of the said Table with the strength and pack size
specified respectively in the corresponding entries in columns
(3) and (4) thereof:
Table
Equival
ent
Ceiling MRP*(i
Sl. Name of the Pack
Strength Price nclusive
No Formulation Size
(Rs.) of all
taxes)
(Rs.)
(1) (2) (3) (4) (5) (6)
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Each coated tab contains
1 Multivitamins Vitamin A Acetate-5000iu 10’s 7.32 8.44
and Mineral Vitamin D3 -400 iu Strip/
Tablets Vitamin E -15iu / mg, Blister
Thiamine Mononitrate-10mg
Riboflavine-10mg, Pyridoxine
HCl-2mg
Cyanocobalamine-7.5mcg,
Niacinamide-50mg
Calcium Panthothenate-10mg,
Ascorbic Acid-75mg
Heavy Magnesium Oxide-30mg,
Maganese Sulphate
Monohydrate-2.8mg
Copper Sulphate-2.0mg,
Zinc Sulphate Monohydrate-
63mg
Selenium Di-oxide-70mcg
Each hard/soft gelatin capsules
contains
2 Multivitamins Vitamin A Acetate-5000iu 10’s 8.80 10.15
and Mineral Vitamin B1 Strip/
Capsules Mononitrate-10mg Blister
Vitamin B2 (Riboflavine) -10mg,
Vitamin B6 (Pyriboxine HCl) -
2mg,
Vitamin B12 (Cyanocobalamine)
-7.5mcg,
Vitamin C-75mg, Vitamin D3 -
400iu
Vitamin E Acetate-15 i.u / mg
Calcium Pantothenate-10mg,
Folic Acid-1mg, Niacinamide-
50mg,
Biotin D-150mcg, Zinc Sulphate
monohydrate – 63mg
Potassium Iodide eq. to Iodine-
150mcg,
Magnesium Oxide heavy -30mg,
Copper Sulphate – 2mg,
Chromium picolinate eq. to
Chromium-25mcg
Selenium Dioxide Monohydrate
eq. to Selenium-70mcg
23
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Sodium Molybdate Dihyderate
eq. to Molybdenum-25mcg
Colloidal Silicon Dioxide eq. to
Silicon-1mg
Sodium Borate eq. to Boron-
150mcg
Magnase Sulphate – 2.8mg
*Subject to actual payment of Government levies/taxes, as applicable.
Note :
I. For all the other Vitamin formulations having composition within
the prescribed range in Schedule-V under Drugs and Cosmetics Act,
1940. The Following adjustment shall be made by a manufacturer to
work out the ceiling price (column no.5) for a product under the said
order for formulation(s) in column No.2, when there is a change in the
composition and the following factors (which are inclusive of
admissible MAPE) shall be added/subtracted as the case may be to the
notified ceiling price given in column No.5 of the table on the
following basis.
II. to V. x x x
VI. For different packing material used or any special feature
claimed, companies are required to approach NPPA for
approval/fixation of specific prices.
VII. The manufacturer and marketing company for the above said
formulation shall be required to take the requisite prior approval from
the competent Authority for any change in the composition of the
above said formulation with written prior intimation to the National
Pharmaceutical Pricing Authority.”
25. According to the respondents, inclusion of vitamin C and
vitamin E in the impugned notification dated 27.09.2007 is
sufficient for the respondent No.2-NPPA insisting that the
petitioners should have sold their formulation as per the ceiling
price indicated in the said notification. In this context, much
emphasis is placed on paragraphs 4 and 11 of DPCO 1995 read
24
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with Notes VI and VII appended to the impugned notification
dated 27.09.2007, quoted hereinabove.
26. We have carefully considered the said contention raised on
behalf of the respondents. We find that the respondents would
certainly have power to fix the price of a formulation on the basis
of information available with it when the manufacturer or
importer of a bulk drug or formulation fails to submit an
application for price fixation and also fails to furnish information
as required under DPCO 1995. Such power is indeed found in
paragraph 11 of DPCO 1995 read with the obligation on the
manufacturer to furnish such information to the respondents
under paragraph 4 thereof. The respondents are also justified in
contending that the scheduled formulation indeed means a
formulation containing a bulk drug specified in the first schedule
to DPCO 1995, either individually or in combination with other
drugs. But, even if the aforesaid contentions raised on behalf of
the respondents are found to be in line with DPCO 1995, what is
most crucial is that the respondent No.1 and/or respondent No.2
are required to pass an order for fixing the ceiling price of the
scheduled formulation. In order to pass an order for fixing the
ceiling price of the scheduled formulation under paragraph 9 of
DPCO 1995, the said respondents are required to do so in
accordance with the formula laid down in paragraph 7 of DPCO
1995.
27. The subject formulation in the present case is Cartigen Forte
used for treatment of osteoarthritis and since its ingredients
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included vitamin C and vitamin E prior to January 2010, it could
be covered under the definition of Scheduled Formulation, as per
paragraph 2(v) of DPCO 1995. But, respondent No.1 and/or
respondent No.2 i.e. the Central Government and the NPPA were
required to pass an order by notification in the official gazette
under paragraph 9 of DPCO 1995 to fix the ceiling price of the
subject formulation. In order to do so, the formula for calculation
under paragraph 7 of DPCO 1995 was required to be applied.
This is evident from clause (1) of paragraph 9 of DPCO 1995
itself, as it specifically lays down that the ceiling price would be
fixed from time to time in accordance with the formula laid down
in paragraph 7 thereof. A perusal of the above quoted paragraph 7
of DPCO 1995 shows that the price would have to be calculated
on the basis of the following formula :
R.P.= (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED.
28. Thus, the calculation of the ceiling price would be
determined and arrived at by applying the said formula, which
would necessarily entail incorporating all the relevant factors i.e.
material cost, conversion cost, cost of packaging material,
packaging charges, maximum allowable post manufacturing
expenses (MAPE) and excise duty and that too in terms of the
mechanism specifically provided in paragraph 7 of DPCO 1995.
Therefore, the said respondents were required to pass an order by
notification in the official gazette after calculating the ceiling price
on the basis of the aforesaid formula specified in paragraph 7 of
DPCO 1995. No such exercise was ever undertaken by the said
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respondents in respect of the subject formulation. In such a
situation, the respondents were not entitled to apply impugned
notification dated 27.09.2007 to claim that the ceiling price
specified therein stood applied to the subject formulation of the
petitioners. A perusal of the above quoted portion of the said
notification shows that the formulations for which ceiling price
had been fixed were ‘multivitamin and mineral tablets’ and
‘multivitamin and mineral capsules’. No doubt, vitamin C and
vitamin E were ingredients recorded in the said formulations when
ceiling price was fixed under the said notification dated
27.09.2007, but the ceiling price was arrived at after applying the
formula specified in paragraph 7 of DPCO 1995. In other words,
the said respondents took into consideration the aforementioned
factors and then arrived at the ceiling price.
29. A perusal of Note I, VI and VII appended to the said
notification dated 27.09.2007 shows the manner in which the
ceiling price is to be applied, if there is a change in composition.
In the said notes, there is a reference to MAPE and other such
factors. Even otherwise, a perusal of the said notification dated
27.09.2007 shows that vitamin C in the formulation ‘multivitamin
and mineral capsules’ is shown to the extent 75 mg and vitamin E
in the ‘multivitamin and mineral tablets’ at 15 iu/mg. The said
weightage of vitamin C and vitamin E, which are indeed bulk
drugs included in the First Schedule to DPCO 1995, is shown in
combination with other vitamins and minerals. In the subject
formulation, prior to January 2010, vitamin C was only 37.5 mg
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and vitamin E was only 12.5 mg. The weight of both these
scheduled bulk drugs was much less than what was specified in the
impugned notification dated 27.09.2007, while shown in
combination with other vitamins and minerals for the formulation
‘multivitamin and mineral tablets’ and ‘multivitamin and mineral
capsules’. It is also an admitted position that from January 2010
vitamin C and vitamin E were not even ingredients in the subject
formulation, thereby showing that the respondents cannot rely
upon the impugned notification dated 27.09.2007 to justify their
stand.
30. It is also found that the impugned notification dated
27.09.2007 specifically showing ceiling price fixed for the
formulations ‘multivitamin and mineral tablets’ and ‘multivitamin
and mineral capsules’ cannot be applied to the subject
formulation, in which the active pharmaceutical ingredients are
Glucosamine Sulfate Potassium Chloride, Chondroitin Sulfate
Sodium and Methyl Sulfonyl Methane. It is also found that the
ceiling price as per the aforesaid impugned notification dated
27.09.2007 is fixed for the entire formulation, the composition of
which includes various vitamins and minerals, after applying the
specific formula under paragraph 7 of DPCO 1995. On pointed
queries put to the respondents, as to how only vitamin C from the
formulation of multivitamin and mineral capsules and vitamin E
from the formulation of multivitamin and mineral tablets could be
segregated for ascertaining the ceiling price to then apply it to the
subject formulation, there was no satisfactory response. The
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reason for the same is that if the contentions raised on behalf of
the respondents on the basis of the impugned notification dated
27.09.2007 are accepted and sought to be applied to the subject
formulation, the specific formula contained in paragraph 7 of
DPCO 1995 is rendered wholly unworkable. Even if the stand of
the respondents is taken into consideration, it is an admitted
position that fixing of ceiling price under paragraph 9 of DPCO
1995 for the subject formulation has not been undertaken because
the specific formula under paragraph 7 thereof has not been
applied for calculation and determination of the ceiling price. The
aforementioned factors applied in the said formula have not been
considered and determined by the respondents to undertake the
exercise of calculation of ceiling price of the subject formulation
and therefore, the contentions raised on behalf of the respondents
in that regard are rendered wholly unsustainable.
31. There can be no doubt about the fact that reading
paragraphs 4 and 11 of DPCO 1995 reserves power in the
respondents to fix price of the subject formulation on the basis of
the information available to them, in the absence of information
being furnished by the manufacturer for fixing of price. But, the
procedure prescribed under paragraph 9 read with paragraph 7 of
DPCO 1995 has to be followed and a specific order by way of
notification in the official gazette has to be issued in respect of the
subject formulation to claim that ceiling price is applicable in a
given case. No such exercise was undertaken in the context of the
subject formulation of the petitioners and therefore, the very basis
29
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of claiming that the petitioners had overcharged, is taken away.
Therefore, the impugned notification dated 27.09.2007 to the
extent that it is sought to be applied to the subject formulation,
deserves to be set aside.
32. In the face of such a situation, the respondents seek to rely
upon impugned notification dated 30.01.2009. The said
notification reads as follows :
“ORDER
S.O.372(E). - In exercise of the powers, conferred by
paragraphs 9 and 11 of the Drugs (Prices Control) Order,
1995 read with S.O. 637(E) dated the 4th September 1997
issued by the Government of India, Ministry of Chemicals and
Fertilizers, the National Pharmaceutical Pricing Authority
hereby notifies that any formulation/composition not covered
in the table of standing orders issued by the NPPA that has
any scheduled drug as one of its ingredients, shall be subject
to the price ceiling mentioned at the respective serial number
of the respective notification, as the case may be, unless the
manufacturer has subsequently got a specific price fixed by
the NPPA for that formulation/composition.
The manufacturer or marketing company not
complying with the ceiling prices and the condition specified
in the respective notification shall be liable to deposit the
overcharged amount along with interest under the provision
of Drug Price Control Order, 1995 read with the Essential
Commodities Act, 1995.”
33. A perusal of the above quoted notification shows that it is
extremely widely worded and it violates DPCO 1995 itself.
Although, it has been issued purportedly by exercising power
under paragraphs 9 and 11 of DPCO 1995, the crucial part of
calculation of ceiling price as per formula under paragraph 7 of
DPCO 1995 has been lost sight of. In fact, the impugned
30
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notification dated 30.01.2009 has the effect of completely doing
away with the formula specified in paragraph 7 of DPCO 1995.
The moment the very formula for calculation of ceiling price as
per paragraph 7 read with paragraph 9 is taken away, it becomes
clear that the impugned notification dated 30.01.2009 is rendered
ultra vires DPCO 1995 itself. We find that when ceiling price is
not fixed by the respondents as per the mechanism under
paragraphs 7, 9 and 11 of DPCO 1995 and it is deemed that the
ceiling price is fixed when the same is ascertained as regards any of
the ingredients in the formulation, the very basis of calculation
and obligation upon the respondents to fix the price of scheduled
formulation in terms of DPCO 1995 is taken away.
34. The impugned notification dated 30.01.2009 is clearly over
broad, expansive and it operates in the teeth of the paragraphs of
DPCO 1995 itself. In other words, it is beyond the power vested
in respondent No.2-NPPA to issue such kind of notification. As a
matter of fact, it indicates abdication of the responsibilities and
obligations cast upon the Central Government and the NPPA to
specifically fix ceiling price under paragraph 9 of DPCO 1995
read with the rigorous formula specified in paragraph 7 thereof.
We find substance in the contentions raised on behalf of the
petitioners in this regard to hold that the impugned notification
dated 30.1.2009 is indeed ultra vires DPCO 1995.
35. We also find that the exercise of power by respondent No.2-
NPPA purportedly under paragraphs 9 and 11 of DPCO 1995 for
issuing impugned notification dated 30.01.2009, is wholly
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arbitrary and hence, unsustainable. In fact, the manner in which
impugned notification dated 27.09.2007 is sought to be applied to
the subject formulation and the arbitrary nature of impugned
notification dated 30.01.2009, show that the very basis of alleging
that the petitioners overcharged in respect of the subject
formulation is taken away, rendering the demand notices issued by
the respondent No.2-NPPA as well as respondent No.4-Collector,
as unsustainable and liable to be quashed and set aside.
36. The moment the impugned notifications dated 27.09.2007
and 30.01.2009 are found unsustainable and liable to be quashed
and set aside, the impugned demand notices issued by
respondents, including those issued by exercising power under
MLRC, also deserve to be quashed and set aside. There is no
independent basis for respondent No.4 to have exercised power
under MLRC to issue demand notice for recovery of specific
amounts and therefore, if the very basis of raising such demands
by the respondent No.2-NPPA is found to be unsustainable, the
action sought to be undertaken by respondent No.4 under MLRC
is also rendered unsustainable.
37. Apart from this, there is substance in the contention raised
on behalf of the petitioners that huge amount towards interest
could not have been calculated on the basis of the date of basic
demand notices issued by respondent No.2-NPPA, for the reason
that considerable period of time was consumed due to delay on
the part of respondent No.2-NPPA itself in granting hearing to the
petitioners and the earlier demand notices being set aside on the
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ground of violation of principles of natural justice on the part of
the respondent No.2-NPPA. The time consumed in the
interregnum, due to the fault of the said respondent, cannot inure
to its benefit and to the detriment of the petitioners, insofar as the
calculation of the interest is concerned. Thus, in terms of the law
laid down by this Court in the case of Franco Indian Remedies
Private Limited & Anr. vs. Union of India & Anr. (supra), at
worst, the interest amount could have been calculated from the
notice of demand issued after the proceedings were remanded by
this Court while allowing earlier Writ Petition No. 2804 of 2015.
38. We also find substance in the contention raised on behalf of
the petitioners that the impugned demand notice issued by the
respondent No.4-Collector, on the basis of earlier demand notice
issued by the respondent No.2-NPPA, that had been already set
aside, is wholly unsustainable and deserves to be quashed on the
said additional ground also.
39. But, we are of the opinion that since the impugned
notifications dated 27.09.2007 and 30.01.2009 themselves are
found liable to be set aside, the very basis for claiming that the
petitioners had overcharged regarding the subject formulation is
taken away and the writ petition deserves to be allowed on that
ground alone. Therefore, there is no necessity to go into the
question of violation of principles of natural justice, even after
remand of the proceedings, as the subsequent demand notice
simply reproduced the grounds taken in the reply affidavit filed in
the earlier Writ Petition No. 2804 of 2015, and other such
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grounds. The question concerning exemption available to
petitioner No.1 and its contract manufacturer, as small scale
industrial unit, is also not required to be gone into, in the light of
the findings rendered hereinabove, in favour of the petitioners in
the context of the impugned notifications dated 27.09.2007 and
30.01.2009.
40. In view of the above, the writ petition is allowed in terms of
prayer clauses (a), (b), (c), (d) and (e).
41. It is made clear that impugned notification dated
27.09.2007 is quashed to the extent of its applicability to the
subject formulation of the petitioners, while impugned notification
dated 30.01.2009 is quashed and set aside in its entirety.
42. As a consequence of the writ petition being allowed in terms
of prayer clauses (a) to (e), the respondents shall not act upon the
impugned demand notices against the petitioners.
43. Pending applications and Chamber Summons, if any, also
stand disposed of.
(SHREERAM V. SHIRSAT, J.) (MANISH PITALE, J.)
Digitally signed by
BIPIN BIPIN DHARMENDER
DHARMENDER PRITHIANI
PRITHIANI Date: 2026.09.22
15:13:28 +0530
Bipin Prithiani
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