Supreme Court of India
UNION OF INDIAversusGLAXO INDIA LTD. & ANR.
- Citation
- 2011 INSC 244
- Decided
- 30 March 2011
- Disposal
- Appeal(s) allowed
- Bench
- R V RAVEENDRAN
Holding
Supersession of a price‑fixation notification does not wipe out liability under the earlier notification, and the DPEA demand must be calculated on the basis of the bulk‑drug prices fixed under the 20‑Nov‑1986 notification, not the 2‑Jan‑1989 notification.
Summary
Glaxo India Ltd. manufactured three bulk drugs and their formulations. The Central Government fixed maximum prices for these drugs by notifications dated 12‑May‑1981, 20‑Nov‑1986 and 2‑Jan‑1989, the latter superseding the earlier ones. The Government later demanded that Glaxo deposit Rs 71.21 crore into the Drug Prices Equalisation Account (DPEA) for the period 12‑May‑1981 to 25‑Aug‑1987, calculating the demand on the basis of formulation prices rather than bulk‑drug prices. The High Court quashed the demand, holding the 2‑Jan‑1989 notification to be retrospective and the demand to be violative of Para 7(2)(a) of the Drug (Price Control) Order, 1979. The Supreme Court held that the 2‑Jan‑1989 notification was prospective, that supersession does not erase liability under the earlier 20‑Nov‑1986 notification, and that the DPEA demand must be based on the bulk‑drug prices fixed under the 20‑Nov‑1986 order. Consequently, the Court allowed the appeal, set aside the High Court’s order and confirmed the Central Government’s demand.
Issues considered
- Whether the demand for deposit into the DPEA could be based on the drug prices fixed by the 2‑Jan‑1989 notification or must rely on the 20‑Nov‑1986 notification.
- Whether the Central Government was justified in directing Glaxo India Ltd. to deposit Rs 71.21 crore into the DPEA.
- What is the legal effect of a ‘supersession’ of a notification – prospective or retrospective – and does it extinguish liability incurred under the earlier notification?
Legislation cited
- Drug (Price Control) Order, 1979s. para 12, s. para 13, s. para 17, s. para 27, s. para 3, s. para 7, s. para 7(2)(a), s. para 7(2)(b)
- Drug (Price Control) Order, 1987
- Essential Commodities Act, 1955
- General Clauses Acts. Section 6
Subjects
Drug price controlSupersessionRetrospective effectDrug Prices Equalisation AccountAdministrative lawSubordinate legislationStatutory interpretationBulk drug pricing
Judgment
[2011) 4 S.C.R. 50
A UNION OF INDIA
v.
GLAXO INDIA LTD. & ANR.
(Civil Appeal No. 6497 of 2002)
MARCH 30, 2011
B
[R.V. RAVEENDRAN AND H.L. DATTU, JJ.]
DRUG (PRICE CONTROL) ORDER, 1979 :
c Paragraphs 3, 12, 13 and 27 - Price Fixation of bulk
drugs - Central Government fixing the price of scheduled bulk
drugs by Notification dated 2.1.1989 superseding the earlier
Notification dated 12.5.1981 - Demand raised towards the
difference between the formulation prices fixed in the price
fixation orders and the actual prices charged by company for
0
the period 12.5.1981 to 25.8.1987 to be deposited in DRUG
PRICES EQUILASITAION ACCOUNT - Held : When fresh
notification was issued on 2. 1. 1989, the earlier notifications
were superseded and, therefore, it cannot be said that they
become non est for all purposes - The earlier notific.ation,
E fictionally must be held to have subsisted and were operative
from such points of time of commencement upto the date it
was superseded -The Central Government is well within its
rights to raise demands for making deposit into DPEA on the
basis of prices shown in Notification dated 20. 11. 1986 - The
F demand raised by the Central Government is confirmed.
Para 27 - Review - Concept of - Explained - Held :
Once a review petition filed by the manufacturer of a bulk drug
is considered and a fresh notification is issued, the same
G would be prospective and it does not relate back to the
notification fixing the price of bulk drugs issued earlier -
Administrative Law - Subordinate Legislation.
H 50
....
- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 51
DRUG PRICES EQUALISATION ACCOUNT: A
Drug manufacturing company required to deposit in
DPEA the excess of the common selling price over retention
price -Held :The provision is a beneficial one -This provision
applies equally both to indigenously manufactured drugs as
8
well as the drugs imported so as to maintain uniformity in the
price of bulk drug.
WORDS AND PHRASES :
Expression 'supersession' - Connotation of in the c
context of drugs price fixation.
The respondent-company was engaged in
manufacture and sale of three bulk drugs, namely, BA,
BV and BP and formulations based thereon. The Central
Government, in exercise of power under Para 3(1) of the D
Drug (Price Control) Order, 1979 (DPCO, 1979) fixed the
maximum price of the three bulk drugs by its order dated
12.5.1981. The respondent-company challenged the order
before the High Court in CWP No. 1551 of 1981. The High
Court stayed implementation of the order dated 12.5.1981 E
in view of the undertaking of the respondent company
to maintain the prices of the bulk drugs and its
formulations prior to the notification dated 12.5.1981, and
directed the parties for settlement in view of the petition
for review of the order dated 12.5.1981 filed by the F
respondent company. The Central Government re-fixed
the price of the bulk drugs by order dated 20.11.1986 with
retrospective effect from 12.5.1981. The High Court
disposed of the writ petition by its judgment dated
31.8.1987. It did not quash the price fixation order dated G
20.11.1986, but directed the respondent company to file
review petition before the Central Government. The
Central Government constituted 'Murthy Committee'
which gave its report dated 12.10.1988.
H
52 SUPREME COURT REPORTS (2011] 4 S.C.R.
A The Central Government, issued price fixation order
dated 2.1.1989 under DPCO 1989 fixing the price for the
three bulk drugs higher than that fixed under order dated
20.11.1986, and, by letters dated 18.6.1990 and 16.11.1990
raised a demand of Rs. 71.2 crores, as difference between
B the formulation prices fixed and the actual price charged
by the company for the period 12.5.1981 to 25.8.1987, to
be deposited in Drug Prices Equalisation Account
(DPEA). The company filed another writ petition (CWP No.
2170/90). The High Court allowed the writ petition holding,
c inter alia, that the demands raised were contrary to the
directions of the High Court in earlier writ petition (CWP
No. 1551/81); that the price fixation order was
retrospective in its operation and related back to the
order dated 12.5.1981; and that the demands raised were
in violation of Para 7(2) (a) of DPCO 1979 inasmuch as it
0
was not based on "common selling prices" and
"retention prices of bulk drugs" but was based on
"common selling price and the price of formulators". The
High Court also observed that even If the DPCO 1979 was
violated the company would be still entitled to retain the
E excess amount over and above the maximum statutory
price and the only option available to the Central
Government was to Initiate criminal proceedings. The
High Court directed the Central Government to raise the
demands on the basis of the revised prices of the bulk
F drugs as notified on 2.1.1989 and determine the excess
amount not on the basis of prices of the formulations, but
on the basis of the prices of bulk drugs used by the
company in its formulations. Aggrieved, the Union of
India filed the appeal.
G
The questions for considerations before the Court
were (i) whether the Central Govt. was justified in issuing
a demand based on Drug Prices fixed on 02.01.1989,
instead of drug prices fixed on 20.11.1986; (ii) whether the
H
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 53
Central Government was justified in directing the A
respondent-Company to deposit an amount of Rs.71.21
crores in the Drug Prices Equalization Account (in short,
"DPEA"); and (iii) what was the effect of 'supersession'
of a notification and when such supersession is made,
would it have the prospective or r~trospective effect. B
Allowing the apj)eal, the Court
HELD : 1. The three bulk drugs manufactured by the
respondent-Company were covered under DPCO 1979,
which empowered the Central Government to fix the C
maximum prices thereof. Para 17 of DPCO, 1979
authorized the Central Government to maintain a Drug
Prices Equalization Account comprised of the Grants as
may be made by the manufacturers, importers and
distributors of the drugs. The purpose and object of this D
account was to control and maintain the prices of drugs
by getting the amounts determined under Para 7(2) and
the excess of the common selling price over retention
price deposited into this accour.t from those
manufacturers who were selling or utilizing the bulk drug E
in their formulations. This provision appears to be a
beneficial provision. The reason being, if the "common
selling price" happens to be less than the "retention
price", the manufacturer could be paid out of DPEA. This
provision applies equally both to indigenously F
manufactured drugs as well as the drugs imported, so as
to maintain uniformity in the price of bulk drugs. [para 24]
[76-G-H; 77-A-D]
2.1. There are three notifications. The first one is
dated 12.05.1981, wherein the Central Government fixed G
the maximum sale prices of the three bulk drugs. The
second notification is dated 21.11.1986, whereby the
Central Government has fixed the revised prices of the
aforesaid three bulk drugs. These notifications were
subject matters of the writ petitions filed before the Delhi H
54 SUPREME COURT REPORTS [2011J 4 S.C.R.
A High Court. Pursuant to the directions issued in the
aforesaid writ petition, the Central Government issued the
notification dated 02.01.1989. [para 25] [77-E-F]
2.2. The Notification dated 2.1.1989 was issued by the
B Central Government in supersession of the earlier
Notification dated 12.5.1981. By this notification, the
Government has fixed the maximum price at which
indigenously manufactured bulk drugs shall be sold by
the respondent-Company and others. The impugned
notification uses the expression "supersession" of the
C earlier notification. When the fresh notification was issued
on 02.01.1989, the earlier notifications were superseded,
therefore, it could not be said that they became non est
for all purposes and were unable to support the
proceedings for the enforcement of liability incurred for
D the period prior to 1989, otherwise it would produce the
anomalous results. The point to be noted is that the
notification dated 26.11.1986 became effective from
12.5.1981. This notification, fictionally must be held to
have subsisted and was operative from such points of
E time of its commencement upto the date it was
superseded. [para 27-28) [78-G-H; 79-A, E-G]
State of Orissa Vs. Titaghur Paper Mills Company Ltd.
AIR 1980 SC 1293 - relied on.
F Webster's Third New International Dictio and P.
Ramanathan Aiyar's Advanced Law Lexicon - referred to.
2.3. In Titaghur's case, this Court came to the
conclusion that the previous liability to tax for a period
G prior to the supersession was not wiped out. The results
that flow from changes in the law by way of amendment,
'repeal', 'substitution' or 'supersession' on the earlier
rights and obligations cannot be decided on any set
formulae. It is essentially a matter for construction and
H depends on the intendment of the law as could be
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 55
gathered from the provisions in accordance with A
. accepted cannons of construction. The notification in the
instant case is close to the consequences arising out of
repeal without the benefit of a saving clause in respect
of the obligations previously incurred, but for saving
principle in the Titaghur's case. In Nand Kishore's case, it B .
has been stated that the effect of an Act or an order which
is superseded is not to obliterate it altogether. A!l Act or
order is said to be superseded where a later enactment
or order effects the same purpose as an earlier one by
repetition of its terms or otherwise. [para 29) [80-C-E-G- c
H; 81-A-B]
Nand Kishore Vs. Emperor, AIR 1945 Oudh 214; Syeda
Mustafa Mohamed Gouse Vs. State of Mysore (1963) 1
Crl.L.J. 372 (Mys) and R. S. Anand Behari Lal Vs.
Government of U.P. AIR 1955 NUC 2769 All) - referred to. D
2.4. The appellants are well within their rights to raise
demands for making deposit into DPEA on the basis of
the prices notified by their notification dated 20.11.1986.
[para 29] [81-E] E
3.1. Para 27 of the DPCO 1979 lays down that any
person aggrieved by any notification or order under
paragraphs 3,4,5,6,7,9,12,13,14,15 or 16, may apply to the
Government for a review of the notification or order within
fifteen days of the date of the notification in the Official F
Gazette. After receipt of the application/review petition, the
Government may make such order on the application as
it may consider necessary. In Cyanamide's* case it has
been observed that the review in para 27 of DPCO 1979
is in the form of a post decisional hearing which is G
sometimes afforded after the making of some of the
administrative orders, but not truly so. From the scheme
of the Control Order and the context and content of Para
27, the review insofar as it concerns the orders under
Paras 3, 12 and 13 appears to be in the nature of a H
56 SUPREME COURT REPORTS (2011) 4 S.C.R.
A legislative review of legislation, or more precisely a
review of subordinate legislation by a subordinate
legislative body at the instance of an aggrieved person.
In the instant case, the Central Government was directed
by the High Court in the first judgment to consider
B certain grievances of the respondent-Company regarding
working out of certain weighted averages, such as rate
of income tax being taken low, the packaging and
distribution expenses taken lower than the actual cost,
etc., by the Central Government while the prices of the
C bulk drugs were being fixed. The Court had permitted the
respondent-company to file review petition, if they so
desire and further had directed the Central Government
to pass an order as they deem fit, that is, either affirming
or reviewing the prices fixed by order dated 20.11.1986
and to make consequent changes in the prices for drug
0
formulations, if fixed in the meanwhile. Thus, the High
Court had reserved liberty to the Central Government
either to affirm or review the prices of the bulk drugs fixed
by order dated 20.11.1986 and to make consequent
changes in the prices for drug formulations. The Central
E Government, taking clue from the directions issued by the
High Court, which order has become final, has passed
the impugned Notification dated 02.01.1989, by refixing
the prices of dn•g formulations by applying the provisions
contained in DPCO 1989. In this view of the matter, no
F fault can be found with the exercise done by Central
Government while notifying the impugned notification.
The notification so issued is in accordance with the
observations made by this Court in Cyanamide* case
which supports the stand of the Revenue, that once a
G review petition filed by the manufacturer of a bulk drug
is considered and a fresh notification is issued, the same
would be prospective and it does not relate back tp the
notification fixing the prices of bulk drugs issued earHer.
[para 30-32] [81-E-H; 82-A-F-H; 83-A-G; 84-B-C]
H
....
- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 57
*Union of India v. Cyanamide India Ltd. 1987 ( 2 ) SCR A
=
841 (1987) 2 sec 720 - relied on.
3.2. It is no doubt true that the Murthy Committee was
constituted pursuant to the direction issued by the High
Court to look into the data that may be furnished by the 8
respondent-Company and give its report for the purpose
of fixing the prices of the bulk drugs manufactured by the
respondent-Company. It is also not in dispute that the
prices fixed by the Murthy Committee were much higher
than those notified by the Central Government, while
issuing the notification dated 20.11.1986. That itself will C
not make any difference for the reason, the Central
Government, after taking into consideration the report
and the recommendations made by the Murthy
Committee, has issued a notification which is only
prospective and not retrospective. Hence, there was no D
implied rejection of the recommendations of the Murthy
Committee. [para 33] (i&4-D-F]
3.3. Therefore, fi&.-tly, it cannot be said that the
Central Government while co11side~ing the review petition E
filed by the respondent-company had disregarded the
direction issued by the Delhi High Court in its first
judgment. Secondly, it cannot t?e said, as has been
contended by the respondent-company, that the price
fixation order of 02.01.1989 was the result of decision F
taken by the Central Government on the review petition 1
filed by the respondent-company and, therefore, the \
demands raised as per the price fixation order dated
. 20.11.1986 had to be revised according to the price
fixation order dated 02.01.1989, cannot be accepted. G
Further, since the notification dated 02.01.1989 fixing
prices of bulk drugs is prospective, the earlier notification
would operate during the intervening period. [para 34]
[84-G-H; 85-A]
3.4. To sum up, the findings of this Court in regard H
58 SUPREME COURT REPORTS [2011} 4 S.C.R.
A to the first and third issues are: (i) The demand to be
raised on the respondent-company for the period
12.05.1981 to 25.08.1987 is to be based on the prices fixed
under the notification dated 20.11.1986 and not on the
drug prices fixed on 02.01.1989; and (ii) The
B supersession of a notification does not obliterate the
liability incurred under the earlier notification. [para 34]
[85-8-D]
4.1. Para 7 of the DPCO, 1979 is in two parts. Sub-
para (1) of Para-7 authorises the Central Government to
C fix retention price and pooled price for the sale of Bulk
drugs specified in First Schedule or Second Schedule
indigenously manufactured and those of imported bulk
drugs. Sub-Para (2) of Para 7 speaks of a situation where
a manufacturer of formulations sells the formulations of
D any bulk drug, either manufactured by him or procured
by him from other sources, being lower than the price
allowed to him in the price of his formulations, the
Government may require such manufacturer of
formulations to deposit into DPEA the excess amount as
E determined by the Central Government. Sub Para 7(2)(b)
mandates the manufacturer of the formulations to sell
such formulations as fixed by the Central Government.
Para 7 of DPCO 1979 provides two different situations,
one based on the difference in the common selling prices
F of bulk drugs and the second the difference based on
common selling prices of the formulations. Para 17 of
DPCO 1979, authorizes the Central Government to
maintain DPEA comprised of the grants made by the
Government, deposits to be made by the manufacturers,
G importers and distributors of the drugs. It is a cardinal
principle of interpretation that a statute must be read as
a whole. [para 37 and 40) [86-G-H; 87-A-C; 88-F]
Phillips India Ltd. v. Labour Court, 1985 ( 3) SCR 491 =
H (1985) 3 sec 103 - relied on
....
-
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 59
Co/guhoun v. Brooks, (1889) 14 AC 493 - referred to. A
4.2. A plain reading of Para 7(2)(a) of the DPCO 1979
shows what can be directed by the Central Government
to be deposited into DPEA by the manufacturer of bulk
c;lrugs and any formulations using those drugs or 8
procured from outside, as in the instant case. Firstly, Para
7(2)(a) applies to a manufacturer of formulations. The
manufacturer must utilize in the formulation(s) any bulk
drug. The bulk drug could be either from his own
production or procured from any other sources. If the C
price of such bulk drugs is notified as lower than the price
allowed to him in the price of his formulations, the Central
• Government may require the manufacturer of formulation
the excess amount determined to be deposited into
DPEA. Under Para 7(2)(b), the Central Government may
direct the manufacturer of formulations to sell the D
formulations at such prices as may be fixed by the
Government. [para 46] [92-F-H; 93-A]
4.3. The Central Government, while issuing the
letters/demand dated 18.06.1990 and 16.11.1990, has E
specifically bifurcated the differential amount that
requires to be paid by the respondent-company on the
bulk drugs and their formulations. In the letter, it is made
clear that in view of the notificatiC>n dated 20.11.1986, the
respondent-company has to deposit into DPEA the F
difference between the retention price and pooled price
for the sale of bulk drugs. Similarly, since the respondent-
company manufactures drug formulations by captive
consumption of the bulk drugs, the Central Government
initially could not fix the retention price of the G
formulations in view of the interim orders passed by the
High Court while admitting the writ petition filed by the
respondent-company. After disposal of the writ petitions
filed and in view of the specific liberty that was granted
by the High Court in the petitions filed by the respondent- H
.....
60 SUPREME COURT REPORTS [2011] 4 S.C.R.
-
A company, the Central Government directed the company
to pay not only the difference amount payable for the
price of bulk drugs but also those drugs which are utilized
in their formulations over and above the prices fixed by
the Central Government. [para 47] [93-B-E]
B
4.4. It cannot be said that under para 7(2)(a) of DPCO
1979, the Central Government could issue demand on the
basis of bulk drugs only and not on the basis of difference
between the prices of bulk drugs and the prices of the
C formulations in which the company had used those bulk
drugs. [para 47] [93-E-F]
4.5. The respondent company (and similar
companies) not only manufacture bulk drugs but also
use them for their drug formulations for its supply in retail
D vending and thereby, the ordinary consumer is burdened
with a higher price than what they could have got at a
lesser price. That is taken care of in para 17 of DPCO
1979. [para 48] [93-G-H; 94-A]
4.6. The demands raised by the Central Government
E
is confirmed. [para 49] [94-B-C]
Case Law Reference:
1987 ( 2 ) SCR 841 relied on Para 11
F AIR 1980 SC 1293 relied on. Para 28
AIR 1945 Oudh 214 referred to Para 29
(1963) 1 Crl.L.J. 372 referred to Para 29
G (AIR 1955 NUC 2769 All) referred to Para 29
(1889) 14 AC 493 referred to Para 40
1985 ( 3 ) SCR 491 relied on Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
H 6497 of 2002.
......
- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 61
From the Judgment & Order dated 19.10.2001 of the High A
Court of Delhi at New Delhi in Civil Writ Petition No. 2170 of
1990.
Parag Tripathi, ASG, Sadhana Sandhu, Kiran Bhardwaj,
Amey Nargolkar, Vaibhav Joshi, S.N. Terdal, Kunal Bahri, B.V. 8
Balaram Das for the Appellant.
T.R. Andhyarujina, S. Ganesh, U.A. Rana, Mrinal
Majumdar, Priyanka Dayal, Gagrat & Co. of the Respondent.
The Judgment of the Court was delivered by c
H.L. DATTU, J. 1. The issues that arise for our
consideration and decision in this appeal are :-
(i) Whether the Central Govt. was justified in issuing a .
demand based on Drug Prices fixed on D
02.01.1989, instead of drug prices fixed on
20.11.1986.
(ii) Whether the Central Government was justified in
directing Glaxo India Ltd. (hereinafter referred to as, E
"Respondent-Company") to deposit an amount of
Rs. 71.21 crores in the Drug Prices Equalization
Account (in short, "DPEA").
(iii) What is the effect of 'supersession' of a notification
and when such supersession is made, would it have F
the prospective or retrospective effect.
Factual Backoround
2. The Respondent-Company is engaged in manufaciure G
and sale of three bulk drugs, namely, Betamethasone Alcohol
(B.A.), Betamethasone 17 valerate (B.V.) and Betamethasone
di Sodium Phosphate (8.P.), and various formulations based
on these bulk drugs. They were sold at the price that was
declared by the Respondent-Company under the Drugs (Price H
.....
62 SUPREME COURT REPORTS [2011] 4 S.C.R.
-
A Control) Order, 1970 [in short, "DPCO 1970"]. The Central
Government promulgated the Drug (Price Control) Order, 1979,
[in short, "DPCO 1979"], replacing DPCO 1970 which included
the above mentioned bulk drugs in Schedule II to the order. The
Central Government is vested with the power under Para 3(i)
B of DPCO 1979 to fix the maximum sale price of indigenously
manufactured bulk drugs in First or Second Schedule by
issuing a notification in the official gazette. Sub-Para 3(2)
provides that while fixing the price of a bulk drug, the
Government may take into account the average cost of
c production of such bulk drug manufactured by an efficient
manufacturer and allow a reasonable return on net worth. Sub-
Para 3(3) prohibits any person from selling a bulk drug at a price
exceeding the price fixed under sub-para(1) and other local
taxes, if any, payable.
D 3. In exercise of the powers so conferred, the Central
Government had fixed the maximum price of the above
mentioned bulk drugs vide its order dated 12.05.1981.
4. The Respondent-Company had called in question the
E legality and validity of the price fixation order dated 12.05.1981
before the High Court of Delhi in C.W.P No. 1551 of 1981,
mainly on the ground that the price fixation order did not take
into account the cost of production of bulk drugs as was
required to be done. On 27.08.1981, the High Court passed
F an interim order staying the implementation of the bulk drug
prices fixed as per order dated 12.05.1981 as well as the
prices of the formulations from the said bulk drug, in view of
the undertaking of the respondent company to maintain the
prices of both bulk drugs and its formulations prior to the
G notification dated 12.05.1981. During the pendency of the
proceedings, the High Court, by order dated 13.05.1982,
directed the parties to explore the possibilities of a settlement,
when it was brought to the notice of the High Court that the
Respondent-Company has filed a review petition for review of
the price fixation order dated 12.05.1981 passed by the Central
H
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 63
[H.L. DATIU, J.]
Government in exercise of its power under Para 3(1) of DPCO A
1979.
5. Pursuant to the said direction, the Respondent-Company
made available the actual cost of production of bulk drugs to
the Central Government and also requested for an oral hearing. B
After considering the material available on the record and also
the oral submissions made, the Central Government re-fixed the
price of the three bulk drugs mentioned above by an Order
dated 20.11.1986 with retrospective effect from 12.05.1981.
Aggrieved by the same, the Respondent-Company amended
the relief claimed in the pending proceedings before the High C
Court.
6. The Division Bench of the High Court, by its judgment
and order dated 31.08.1987, disposed of the writ petition. While
doing so, the Court did not quash the impugned price fixation D
order dated 20.11.1986 (made after the first review) passed
by the Central Government, but directed the Respondent-
Company to file another review petition before the Central
Government for reconsideration of the price fixed by impugned
price fixation order and the Central Government to condone the E
delay and consider the review petition on merits.
7. In the light of the said directions issued by the Delhi High
Court in CWP No.1551 of 1981, the Central Government
constituted the "Murthy Committee" consisting of experts in the F
field. The Committee conducted the review in accordance with
directions issued by the High Court and submitted its report
dated 12.10.1988 to the Central Government. The Government,
vide its order dated 02.01.1989, issued price fixation order
under DPCO 1989 fixing the price for three Bulk Drugs higher
than the earlier price fixed vide order dated 20.11.1986. For G
convenience, we give below the price declared by the
respondent company under DPCO 1970 and the price fixed by
the Government on 12.05.1981, on 20.11.1986 after first review
and on 02.01.1989 after the second review.
H
64 SUPREME COURT REPORTS [2011] 4 S.C.R.
A Price Fixed by the Central Govt.
s. Name Declared Vi de Vide Vide
~o. price with Notifi- Notifi- Notifi-
DPCO cation cation cation
1970 dt. dt. dt.
B
12.05.81 20.11.86 02.01.1989
(first (second
review) review)
(Rs.) (Rs.) (Rs.) (Rs.)
1. Betamethasone 134.28 113.34 127.70 144.19
c Alcohol
2. Betamethasone 220.00 105.85 122.00 136.58
17-Valerate
3. Betamethasone 225.00 126.23 135.00 144.58
D-Sodium
D Phosphate
Pursuant to the order so passed, the Union of India had
issued tentative demand of Rs. 66.35 Crores, which was finally
revised to Rs. 71.21 Crores (towards the difference between
E the formulation prices fixed in the price fixation orders and the
actual prices charged by the respondent company for the period
12.05.1981 to 25.08.1987) to be deposited by the respondent-
company in the DPEA, by their letters dated 18.06.1990 and
16.11.1990.
F
8. Aggrieved by the demand so made by the Central
Government vide its letters dated 18.06.1990 and 16.11.1990,
the Respondent-Company filed C.W.P. No. 2170 of 1990
before the High Court of Delhi, inter alia, questioning the legality
and validity of the demands raised by the Central Government
G and for its deposit into DPEA. The main issues raised therein
were that the demand was contrary to the directions issued by
the High Court in CWP No.1551 of 1981. Secondly, the
demands were in violation of para 7(2)(a) of the DPCO 1979
and further, the demands were not based on the difference in
H
--
UNION OF INDIA v. GLAXO INDIA LTD. & ~NR. · 65
[H.L. DATTU, J.]
prices of "common selling prices" and "retention prices" of bulk A
drugs, but were based on the difference between the "common
selling prict}s" and the "price of formulations". The writ petition
was contested by the Union of India, and it was contended that
the prices were fixed after taking into consideration all the
relevant data and the same was done in accordance with the B
judgment and order of the Division Bench of the High Court in
C.W.P. No. 1551 of 1981.
9. The High Court, by its order dated 19.10.2001, allowed
the writ petition and quashed the demands made by the Central
Government as illegal, arbitrary and contrary to the directions C
issued by the Division Bench of the High Court in C.W.P. No.
1551 of 1981. It was held that the price fixation order dated
02.01.1989 was retrospective in its operation and related back
to the order dated 12.05.1981. It was also held that the
demand raised by the Central Government was in violation of D
Para 7(2)(a) of the DPCO 1979, inasmuch as it is not based
on the "common selling prices" and "retention prices of bulk
drugs", but is based on the difference between the "common
selling prices" and the "price of formulations". The Court further
observed that even though the DPCO 1979 contained statutory E
provisions for fixation of formulation prices, even if it is violated,
the respondent company would still be entitled to retain the
excess amount over the statutory maximum price and the onlv
· option available to the Central Govt. was to initiate criminal
proceedings. The High Court directed the appellants to raise F
demands on the basis of the revised prices of the bulk drugs
as notified on 02.01.1989 and for the purpose of Para 7(2) (a)
of DPCO 1979, determine the excess amount not on the basis
of the prices of the formulations but on the basis of the prices
of bulk drugs use.d by the respondent company in its G·
formulations. The correctness of the said judgmentand order
is called in question by the Union of India in this appeal.
10. Since we will be referring to two Division Bench
judgments and orders of the High Court of Delhi in the course H .
. .: '-,.
. '
--
66 SUPREME COURT REPORTS [2011] 4 S.C.R.
A of our judgment, we will refer to the judgment in C.W.P. 1551
of 1981 as the 'first judgment' and the judgment in C.W.P. No.
2170 of 1990 as the 'impugned judgment', to avoid any
confusion.
B Submissions of the Appellant - Union of India
11. -The case of the learned Additional Solicitor General
Shri. Parag P. Tripathi is that the Division Bench of the High
Court erred in coming to the conclusion that the price fixed by
the Central Government on the bulk drugs manufactured by the
C Respondent-Company is contrary to the statutory provision and
the direction issued by the High Court in the first judgment. It is
further argued that the Murthy Committee constituted to
examine the review petition filed by the Respondent-Company
considered the data between 1980-81 and 1984-85, which
D itself prima facie rules out that the price fixation order was to
be applied retrospectively and should relate back to the order
passed on 12.05.1981. It is further submitted that that the
decision of the executive in the mechanics of price fixation is
beyond the scope of judicial review as held by this Court in the
E case of Union of India v. Cyanamide India Ltd., (1987) 2 SCC
720. Our attention was also drawn to the affidavit of the Union
of India filed before the Delhi High Court, and the file notings
of Shri. R.N. Tandon. By placing reliance on these material, he
would submit, that the recommendations of the Murthy
F Committee were to come into ~ffect prospectively, and not
retrospectively. Alternatively, it is submitted that the price
fixation aider dated 2.1.1989 in the Review Petition filed by the
Respondent-Company was under the DPCO 1987 and had
nothing to do with the price fixation order dated 20.11.1986 and
G therefore, it should be presumed that the Review Petition filed
by the Respondent-Company was impliedly rejected. It is also
submitted that the intention of the Central Government to fix the
price of bulk drug and its formulations prospectively could be
clearly inferred from the price fixation order itself. It is urged that
the Review Petition was impliedly rejected and the prices that
H
.....
- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 67
[H.L. DATIU, J.] \
were fixed on 2.1.1989 were to be given \
effect prospectively A
and did not relate back to price fixation order dated 20.11.1986,
which has been retrospectively applied with effect from
12.05.1981.
12. With regard to the finding of the Division Bench in the
8
impugned judgment that the demands raised is in contravention
of Para 7(2)(a) of the DPCO 1979, it is submitted that the
Respondent-Company has already benefited from the stay
order passed by the High Court, and the demand was based
on the difference on the price of bulk drug prevalent prior to the C
stay order and the prices fixed on 2.1.1989. It is further
submitted that the stand of the Respondent-Company that since
there is no provision in the DPCO 1979 .for the deposit of the
excess amount in the DPEA, the Respondent-Company should
be allowed to retain the same, is against the basic principles
of 'unjust enrichment' as held by this Court. In support of this D
contention, our attention was drawn to observations made by
this Court in Mafatlal, (1997) 5 SCC 536; Concap Capacitators
(2007) 8 SCC 658, Swanstone Multiplex Cinema, (2009) 10
SCALE 148]. It is argued that the Drugs (Prices Control) Order
is a socio-economic measure, and the same has to be E
interpreted by this Court in the light of the object sought to be
achieved, viz. to ensure that there is a proper availability of
drugs at reasonable prices, which are fair to the consumer as
well as to the industry. It is also contended that the phrase
"excess amount to be determined by the Government" in Para F
7(2)(a) of the DPCO 1979, gives a wide discretion to the
Government to determine any amount to be recovered, and that
the demand made as amount due is therefore justified. It is
further submitted that it is incorrect to proceed on the basis that
the DPCO 1979 permitted such retention of excess money that G
was in excess over the formulation price fixed under the price
fixation order and such an interpretation will be contrary to the
object of the provisions of the Essential Commodities Act and
of the DPCO 1979. It is further argued that since Para 7(2)(a)
dealt with DPEA only, and it is totally incorrect to interpret the H
68 SUPREME COURT REPORTS [2011] 4 S.C.R.
-
A same in a manner that would permit drug companies to violate
price fixation order and get away with the same, by stating that
the Respondent-Company was liable only to criminal
proceedings, if any.
13. In the alternative, it is submitted that Para 14 of the
8
DPCO 1987, provides for recovery of dues accrued under
DPCO 1979 and deposit of the same into DPEA. In view of
the said provision, the Central Government has the power to
direct the drug companies to deposit such amounts in the
DPEA. A further reference is also made to Para 15 of the
C DPCO 1987, which gives the power to the Central Government
to recover dues accrued due to charging of prices higher than
those fixed or notified by the Government as per the provisions
of the DPCO 1987.
D Submissions of the Respondent-Company
14. Shri. T.R. Andhyarujina and Shri. S. Ganesh, learned
senior counsel, submitted that there is a basic difference
between 'review' and 'revision' under the DPCO 1979, and that
E a 'review' operates retrospectively from the date of fixation of
the drug price under review, whereas, the order passed in a
'revision' is prospective in its operation. It is brought to our
notice that in Cyanamide's case, it was held that a review was
in the nature of a post decisional hearing that is granted to the
manufacturers of bulk drugs. It is argued that the review was
F filed by the Respondent-Company for review of the bulk drug
price fixation order dated 12.05.1981 even before filing of the
first writ petition and the same was considered by the Central
Government by its order dated 20.11.1986, in which the price
fixed were considerably higher than those in 1981. It is also
G submitted that this review was based on the Respondent-
Company's cost of production for 5 years from 1981 to 1985.
It is further submitted that the review conducted by the
Government took the actual cost of production between 1981
and 1985, instead of the projected cost of production, as the
H
--
UNION CF INDIA v. GLAXO INDIA LTD. & ANR. 69
[H.L. DATTU, J.]
normal practice was, in the review that was conducted in 1986. A
It is further argued that the Division Bench, in the first judgment,
had directed the Respondent-Company to file a review of the
price fixation order 1986, and, therefore, the same would
necessarily relate back to the price fixation order dated
12.5.1981. It is further argued by the learned counsel that the B
price fixation order of 02.01.1989 had superseded the price
fixation order dated 12.5.1981 and, therefore, the same is
retrospective and not prospective as contended by the
Revenue. It is contended that the Murthy Committee carried out
the review strictly in conformity with the first decision of the High c
Court and on the same basis as conducted in 1986, i.e. the
actual costs between 1981 and 1984-85 were considered by
the Murthy Committee. It is also brought to our notice that
though the Respondent-Company requested the Committee to
consider the costs up to 1986-87, the same was not granted D
by the Committee, thereby bringing to our notice that the
Committee followed the directions issued by the Division Bench
of the High Court: It is further submitted that the price fixation
order passed by the Committee in pursuance nf the directions
of the High Court in the first judgment, were significantly revised E
upwards, though based on the same data that was considered
in the year 1986.
15. The learned counsel submits that the contention of the
Central Government that the Review Petition filed by the
Respondent-Company was impliedly rejected by the F
Government is incorrect, since no such order was ever
communicated to the Respondent-Company. It is submitted that
the order passed in review petition necessarily operates
retrospectively, and it is fallacious even to suggest that an order
passed in review petition operates prospectively. It is further G ·
submitted that the Central Government, while issuing the letter
dated 16.11.1990 by way of demand notice directing a
particular amount to be paid to DPEA, considered only the first
review dated 20.11.1986, and ignored the review of
02.01.1989 as though it never happened. Hence, it is argued H
70 SUPREME COURT REPORTS [2011] 4 S.C.R.
A that the demand of Rs. 71.21 crores made by the Central Govt.
is illegal, arbitrary and in violation of the price control order.
16. According to the learned counsel for the Respondent-
Company, the situation contemplated for deposit into the
DPEA is the profit earned by the manufacturer between the
8
formulation price that has been fixed on the basis of certain bulk
drugs and the bulk drug price, if in case, the manufacturer of
formulations procures and uses the bulk drug at a price which
is lower than the prices fixed. It is urged that the same is clear
from the combined reading of Para 7(2)(a) and Para 17 of the
C DPCO 1979. It is contended that this difference in bulk drug
prices can be recovered by the Central Government from the
manufacturer by directing them to deposit the excess amount
in the DPEA. It is further submitted that the phrase "excess
amount" when read in the context can only mean the difference
D in the prices of bulk drugs and the same is clear from scheme
of DPCO 1979.
17. It is further contended that the Central Government
entered into agreements with other drug companies for recovery
E of the differential amounts, and no such agreement was entered
into with the Respondent-Company. It is submitted that the
doctrine of contemporaneous exposition demanded that the
settled understanding of Para 7(2)(a) should be continued.
F 18. The learned counsel disputes that there was any unjust
enrichment by the Respondent-Company, as contended by the
learned counsel for the Revenue and to the contrary, the returns
filed by the Respondent-Company would amply demonstrate
that there was less margin of profit than what it is entitled to
under the Fifth Schedule of the DPCO 1979. It is also stated
G that the Respondent-Company never charged prices higher than
those that were fixed by the Central Government. It is also
contended that the impugned demand made by the Central
Government is without the authority of law and in total disregard
to the directions contained in the first judgment. It is submitted
H that Para 7 of the DPCO 1987 did not give any authority to
....
-
UNION OF INDIA v. GLAXO IND!A LTD. & ANR. 71
[H.L. DATTU, J.]
recover the difference in 'notional' prices of formulation as the A
Central Government sought to do vide letter dated 16.11.1990.
It is further argued that the only liability that the Respondent-
Company had, was the liability that accrued in respect of
actions. taken prior to 25.08.1987, which was nothing but the
difference in bulk drug prices. It is stated that only this amount s
could be recovered by virtue of Para 14 of the DPCO 1987,
unlike what was claimed by the Central Government. It is also
argued that the High Court, in the impugned judgment, had
correctly decided the issue by quashing the demand for
payment of Rs. 71.21 crores made by the Central Government. c
It is submitted that the demands made vide letter dated
16.11.1990 is liable to be set aside as the demand was made
on the prices based on notional formulation prices worked out
by the Bureau of Indian Standards, which were not revealed to
the Respondent-Company, and that these notional formulation D
prices were in total disregard of the review of the bulk drug
prices notified on 02.01.1989, which were in pursuance of the
directions of the first judgment, but on the basis of the previously
fixed bulk drug prices of 20.11.1986. In conclusion, it is argued
that the Central Government should recalculate the amount
based on the difference in bulk drug prices as reviewed and E
notified on 02.01.1989, in compliance of the directions of the
High Court.
The First Judgment of the Delhi High Court
F
19. The submission of the learned Additional Solicitor
General is in view of Para 17, 18 and 19 of the judgment in
C.W.P. No. 1551 of 1981, it is clear that the Order dated 26-
11·1986 was not quashed and the Central Government was
only asked to consider the review petition filed by the G
Respondent-Company. At this stage, it is useful to extract Para
17 and 18 of the Judgment to understand the direction issued
by the High Court:-
"17. We have come to the conclusion that the interests of
H
72 SUPREME COURT REPORTS [2011] 4 S.C.R.
A justice require that the respondents should give the
petitioner once more an opportunity of being heard on the
price fixation order of 1986. We, however, wish to make
it clear that we are not setting aside the order dt. 20-11-
1986 for this purpose; nor do we, in view of the categorical
B observations of the Supreme Court, consider it necessary,
proper or appropriate to stay further implementation of the
said order or to stay any proceedings for fixation of prices
of various drug formulations of the petitioner which that
respondents might wish to initiate. We would only direct
c the petitioner to file a formal application for review and the
Government to deal with the same (condoning the delay
in filing the same due to the pendency of this writ petition}
after giving the petitioner a hearing on the lines indicated
above and, in the light of such hearing, to affirm or revise
the prices fixed by the order dt. 20..11-1986 and to make
D
consequent changes, thereafter, in the prices for drug
formulations, if fixed in the meanwhile.
18. We would also, as was done by the Supreme Court,
indicate a time bound schedule for the course of action
E suggested above:
(a} Within ten days from the date of receipt of this order,
the applicants may request the department to furnish such
specific information as it may need as to the basis on which
F the figures of net worth of
assets, interest on borrowings and rate of return have been
taken by them in respect of each of the drugs and the
department should make the same available to the
petitioner within ten days thereafter;
G
(b) Within ten days thereafter the petitioner may file a
formal application for review of the order dt. 20-11-1986
with an application to condone delay. This application
should not content itself with criticising the department's
H figures but should specifically set out petitioner's own
--
UNION OF INDIA v. GLAX.O INDIA LTD. & ANR. 73
[H.L. DATTU, J.]
detailed working out of the price to be fixed on the basis A
of the annual and cost audit reports of the Company for
the period 1981 to 1985;
(c} The respondent should fix a hearing within a period of
15 days from the date of receipt of the application and the 8
petitioner may be heard thereon;'
(d} Within two weeks thereafter, the respondents may
dispose of the application as they deem fit. In case they
allow it in whole or in part they should pass an order
notifying the revised prices under para 3 of the 1979 C
DPCO.
19. The writ petition is disposed of accordingly with no
order as to costs. It is made clear that the interim stay
orders are vacated and the department will be free to D
implement the order dt. 20-11-1986 as well as to proceed
to fix the prices for the petitioner's drug formulation, subject
to the outcome of the procequre indicated in the previous
para."
The Impugned Judgment E
20. The issue decided by the Division Bench in the
impugned judgment is whether the deli1ands made by the
Central Government for deposit of Rs. 71.21 crores was on the
basis of the prices notified vide Order dated 2.1.1989 or Order F
dated 20.11.1986. The High Court, apart from others, has
concluded that from a combined reading of paragraphs 15 to
19 of the directions of the Division Bench in the first judgment,
it is clear that the High Court has neither upheld the Order dated
26.11.1986 nor given any finality to the same; !hat the Central G
Government, for the purpose of considering the Review Petition
filed, pursuant to the directions issued in the first judi;.1ment, the
matter was referred to the Murthy Committee ancj that the
Murthy Committee has conducted the price re-fixation of bulk
drugs in acc;ordance with the directions that was iss1Jed by the H
74 SUPHEME COURT REPORTS [2011] 4 S.C.R.
A High Court. The Murthy Committee has taken into
consideration the weighted_average figures from 1980-81 to
1984-85 and refused the request of the Respondent-Company
to consider the cost of production for the later years, which
clearly shows that the Committee focused only on the Order
B dated 26.11.1986 and not thereafter; that it was apparent that
the prices fixed by the order dated 20.11.1986 were based on
the costing of the year 1981 only, whereas the one dat,;id
2.1.1989 was based on the weighted average cost figures from
the year 1981 to 1985; that the notings on the file and the
c statements of the Hon'ble Minster on the floor of Parliament
indicate that the prices that were re-fixed by the Murthy
Committee were accepted.
21. The High Court has also rejected the contention of the
Central Government that there was an implied rejection uf the
D review as there was no notification to that effect. It is also noted
that there was no communication from the Central Government
to the Respondent-Company expressing that the review had
been rejected at any stage. The Court has also observed that
there was a letter dated 20.3.1989 by the Central Government
E to the Respond1ent-Company informing them that the revi~;ed
prices of bulk dmgs was with effect from 12.5.1981, and tllis
was enough to show that the Respondent-Company was notifited
that the order dated 2.1.1989 held the field in place of the order
dated 26.11.1986. It was also noted by the High Court that evem
F though the word 'retrospective' was not mentioned in the
notification dated 02.01.1989, if it were not construed
retrospectively, the order impugned would be in vil)lation of th•a
directions of the Division Bench in the first judgmtmt.
22. The High Court, after considering the language of para
G 3 to 17 of the DPCO 1979, has taken the view that the Central
Government was not justified in considering the prices of the
formulations under Para 7(2)(a) of the DPCO 1979 for
determining the excess amount. The reasons and conclusion
H so reached by the Delhi High Court is the subject matter of this
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 75
[H.L. DATIU, J.]
appeal. A
Our Conclusion
23. To our mind, after hearing the learned counsel, the
undisputed facts appears to be that the Respondent-Company,
as required under para 5 and 14 of DPCO 1970, had informed 8
the Central Government the selling prices/notional prices of
their bulk drugs manufactured and sold and also the retail prices
of the formulation of these drugs. The maximum selling prices
of these drugs so informed/proposed by the respondent-
company was approved by the Central Government. C
The Central Government, in exercise of the powers
conferred under para 3(1) of the Price Control Order 1979 by
its order dated 12.05.1981 had fixed the maximum selling
prices of these bulk drugs manufactured and sold by o
Respondent Company. After receipt of the said order, the
Respondent-Company had filed a Review Petition dated
23.06.1981. May be prior to or after the receipt of this
representation, the Central Government, by its letter dated
29.06.1981, had informed the Respondent-Company of its
liability to pay into DPEA the difference between the prices that E I
!he company was enjoying under Prices Control Order 1970
and the prices as notified by the Central Government with effect
from 12.05.1981. The Respondent-Company filed CWP 1551
of 1981 before the High Court of Delhi, inter alia, seeking a
F
writ of certiorari of the notification issued by the Central
Government on the ground that the notification issued by the
Central Government fixing the maximum selling prices of the
three bulk drugs manufactured and sold by them as illegal,
arbitrary and unconstitutional. The High Court, while issuing
notice of the petition to the Respondents therein, granted the G
interim order dated 01.07.1981, inter alia, staying the
implementation of any formulation prices for the three bulk
drugs. On a later date, the High Court, after recalling its earlier
order dated 01.07.1981, granted stay of the implementation of
the bulk drug prices notified by the Central Government by its H
76 SUPREME COURT REPORTS (2011) 4 S.C.R.
-
A order dated 12.05.1981. Since the Central Government passed
yet another order dated 20.11.1986, the Respondent-Company
by way of amendment of the relief sought in the writ petition,
questioned the said order also. The High Court. by its order
dated 31.08.1987, disposed of the petition with certain
B observations and directions, which we have already noticed in
extenso. Pursuant to the directions so issued, the Respondent-
Company filed review petition dated 09.03.1988 to review the
order dated 20.11.1986. The Central Government, by its order
dated 02.01.1989, in exercise of its power conferred by Sub-
C para (1) of para 3 of the Control Order 1987 and in
supersession of the order dated 12.05.1981 in so far as the
three bulk drugs, has fixed the maximum price at which the
indigenously manufactured drugs should be sold. After issuing
the aforesaid notification, the Government by its letter dated
0 18.06.1990, after referring to the Judgment of Delhi High Court
dated 31.08.1987, has stated that the Respondent-Company
has not been authorized to retain the amounts over charged by
the company. It is also stated that the prices of the bulk drugs
fixed on 20.11.1986 based on the direction issued by the High
E Court is also not disturbed and the Court is also authorized to
fix the prices of the formulations. Accordingly, the Central
Government, vide their letters dated 18.06.1990 and
16.11.1990, made a tentative demand of Rs.66.35 crores,
which was subsequently revised based on the data made
available by the Respondent Company to Rs. 71.21 crores
F payable by the Respondent-Company to be deposited into
DPEA. These were those orders/letters which were impugned
by the Respondent-Company by filing CWP 2170 of 1990
before the High Court.
G 24. The Central Government, exercising its powers under
the Essential Commodities Act, 1955, had promulgated DPCO
1970. Para 3 of this order empowered the Central Government
to fix the maximum selling price of an essential bulk drug
specified in Schedule-I appended to the order. However, the
H three bulk drugs manufactured by the Respondent-Company
-- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 77
[H.L. DATIU, J.]
were covered under DPCO 1979, and empowered the Central A
Government to fix the maximum prices thereof. Para 17
authorized the Central Government to maintain a Drug Prices
Equalization Account comprised of the Grants as may be made
by the manufacturers, importers and distributors of the drugs.
The purpose and object of this account was to control and B
maintain the prices of drugs by getting the amounts determined
under Para 7(2} and the excess of the common selling price
over retention price deposited into this account from those
manufacturers who were selling or utilizing the bulk drug in their
formulations. This provision appears to be a beneficial c
provision. The reason being, if the "common selling price"
happens to be less than the "retention price", the manufacturer
could be paid out of DPEA. This provision applies equally both
to indigenously manufactured drugs as well as the drugs
imported, so as to maintain uniformity in the price of bulk drugs. D
25. As of now, we have three notifications. The first one is
dated 12.05.1981, wherein the Central Government fixed the
maximum sale prices of the aforesaid three bulk drugs. The
second notification is dated 21.11.1986, whereby the Central
Government has fixed the revised prices of the aforesaid three E
bulk drugs. These notifications were subject matters of the writ
petitions filed before the Delhi High Court. Pursuant to the
directions issued in the aforesaid writ petition, the Central
Government has now issued the notification dated 02.01.1989.
It is this notification which the Central Government contends is F
prospective in its operation but the Respondent-Company
claims that it relates back to the notification dated 12.05.1981.
26. To appreciate the controversy raised in this appeal, it
would be useful to extract the Gazette Notification dated G
02.01.1989 issued by the Central Government under Drugs
(Prices Control} Order 1987 :-
S.0.6(E} - In exercise of the powers conferred by
sub paragraph (1) of paragraph 3 of the Drugs (Prices
Control) Order, 1987, and in supersession of the order of H
--
78 SUPREME COURT REPORTS [2011] 4 S.C.R.
A the Government of India in the erstwhile Ministry of
Petroleum, Chemicals and Fertilizers (Department of
Chemicals and Fertilizers) No. S.O. 373 (E) dated the 12th
May, 1981, in so far as it relates to the drugs
'Betamethesone Alcbhol', 'Betamethasone' '17-Valerate'
B and 'Betamethasone Di-sodium Phosphate' against serial
numbers 1 to 3, the Cen!ral Government hereby fixes the
prices specified in .column (3) of the Table below as the
maximum price at which the indigenously manufactured
bulk drug specified in the corresponding entry column (2)
c thereof shall be sold :-
TABLE
S.No Name of the Bulk Drug Maximum price
(Rs. Per gramme)
D
1. Betamethasone Alcohol 144.19
2. Betamethasone Valerate 136.50
E
3. Batemethasone Di-Sodium 144.58"
Phosphate
27. The aforesaid notification is issued by the Central
Government in supersession of the earlier Notification issued
F by the Government of India No. S.O. 373(E) dated the 12th
May, 1981. By this notification, the Government has fixed the
maximum price at which indigenously manufactured bulk drugs
shall be sold by the Respondent-Company and others.
According to the Revenue, the notification is prospective and
G the notification issued earlier would hold the field till the
impugned notification is issued. However, it is the stand of the
Respondent-Company that the notification dated 02.01.1989
is retrospective in its operation and relates back to first
notification issued by the Central Government dated
H 12.05.1981.
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 79
[H.L. DATTU, J.]
28. The impugned notification uses the expression A
"supersession" of the earlier notification. Therefore, the first
question that requires to be considered and answered by us
is, what is the meaning of the expression "supersession" and
what is its effect. Webster's Third New International Dictionary
defines the word "supersession" to mean 'the State of being B
superseded', 'removal' and 'replacement'. P. Ramanathan
Aiyar's Advanced Law Lexicon defines 'superseded' as 'set
aside' and 'replaced by'. The view of this Court in some of the
decisions is that the expression "supersession" has to be
understood to amount 'to repeal' and when notification is c
repealed, the provisions of Section 6 of the General Clauses
Act would not apply to notifications. The question whether
statutory obligations subsist in respect of a period prior to
repeal of a provision of a Statute or any subordinate legislation
promulgated thereunder has to be ascertained on legal D
considerations apposite to the particular context. The matter is
essentially one of construction. Such problems do not admit of
being answered on the basis of any single principle or legal
consideration. When the fresh notification was issued on
02.01.1989, the earlier notifications were superseded, could it E
be said that they became non est for all purposes and were
unable to support the proceedings for the enforcement of
liability incurred for the period prior to 1989. To hold so, would
produce the anomalous results. The answer, in our opinion,
must depend on proper construction to be placed on the
notification themselves. The point to be noted is that the F
notification dated 26.11.1986 became effective from 12th day
of May, 1981. This notification, fictionally must be held to have
. subsisted and were operative from such points of time of their
commencement upto the date it was superseded. The position
here is somewhat analogous to the one considered in the case G
of State of Orissa Vs. Titaghur Paper Mills Company Ltd. AIR
1980 SC 1293. In the said decision, the effect of supersession
of notifications under Orissa Sales Tax Act came up for
consideration. Referring to the effect of supersession of the
notification, this Court observed :- H
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80 SUPREME COURT REPORTS [2011) 4 S.C.R.
A "The word "supersession" in the notifications dated
December 29, 1977 is used in the same sense as the
words "repeal and replacement' and therefore, does not
have the effect of wiping out the tax liability under the
previous notifications. All that was done by using the words
B in supersession of all previous notifications in the
notifications dated December 29, 1977, was to repeal and
replace previous notifications and not to wipe out any
liability incurred under the previous notifications."
29. In Titaghur's case, the specific question whether on
C "supersession" of a notification, the liability to tax for a period
prior to the supersession was wiped out or not, directly arose
and was considered. This Court came to the conclusion that
the previous liability to tax for a period prior to the supersession
was not wiped out. In our view, the results that flow from changes
D in the law by way of amendment, 'repeal', 'substitution' or
'supersession' on the earlier rights and obligations cannot be
decided on any set formulae. It is essentially a matter for
construction and depends on the intendment of the law as could
be gathered from the provisions in accordance with accepted
E cannons of construction. The question whether the liability for
payment of difference amount incurred by the respondent-
company could be enforced after the order dated 02.01.1989
passed under DPCO 1987, when the notification was
superseded clearly falls within the principles laid down in
F Titaghur Mills case. It is no doubt true that in some cases, there
are statements which admit the construction that once a
notification is 'superseded', it amounts to repeal and that
Section 6 of the General Clauses Act has no application to such
cases. If that principle is applied, then after 12th day of May,
G 1981, the notification becomes unavailable to Central Govt. to
give effect to the notification issued under DPCO 1979, even
in respect of the period when the notification must be deemed
to have been in force. The notification in this case is close to
the consequences arising out of repeal without the benefit of a
H saving clause in respect of the obligations previously incurred,
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 81
[H.L. DATIU, J.]
but for saving principle in the Titaghur's case. We may also A
usefully refer to the observations made by Kaul, J. in Nand
Kishore Vs. Emperor, AIR 1945 Oudh 214. It is stated "that
the effect of an Act or an order which is superseded is not to
obliterate it altogether. An Act or order is said to be superseded
where a later enactment or order effects the same purpose as B
an earlier one by repetition of its terms or otherwise. In Syeda
Mustafa Mohamed Gouse Vs. State of Mysore (1963) 1
Crf.L.J. 372 (Mys), the Sugar (Movement Control) Order 1959,
of 6th November, 1959 was passed in supersession of the
Sugar (Movement Control) Order, 1959, dated 27th July, 1959. c
It was held that in law 'supersession' has not the same effect
as repeal and proceedings of a superseded order can be
commenced. In R. S. Anand Behari Lal Vs. Government of
U.P. (AIR 1955 NUC 2769 All), it was held that in case of
supersession of a notification, the objections and liabilities 0
accrued and incurred under the earlier notification remain
unaffected, since the supersession will be effected from the
date of second notification and not retrospectively, so as to
abrogate the earlier notification from the date of its
commencement. In view of the above discussion, we are of the
view that the appellants are well within their rights to raise E
demands for making deposit into DPEA on the basis of the
prices notified by their notification dated 20.11.1986.
30. We now deal with the concept of 'review' that finds a
place in para 27 of the DPCO 1979. What is contemplated in F
this provision is that any person aggrieved by any notification
or order under paragraphs 3.4,5,6,7,9,12,13,14,15 or 16, may
apply to the Government for a review of the notification or order
within fifteen days of the date of the notification in the Official
Gazette. After receipt of the application/review petition, the G
Government may make such order on the application as it may
consider necessary. What is the scope ofthe review that is
contemplated under Drugs (Prices Control Order) is explained
by this Court in Cyanamide's case (supra). It is observed that
the review in para 27 of DPCO 1979 is in the form of a post H
--
82 SUPREME COURT REPORTS [2011] 4 S.C.R.
A decisional hearing which is sometimes afforded after the
making of some of the administrative orders, but not truly so.
"It is a curious amalgam of a hearing which occasionally
precedes a subordinate legislative activity such as the fixing
of municipal rates etc. that we mentioned earlier and a post-
s decision hearing after the making of an administrative or quasi-
judicia I order. It is a hearing which follows a subordinate
legislative activity intended to provide an opportunity to affected
persons such as the manufacturers, the industry and the
consumer to bring to the notice of the subordinate legislative
c body the difficulties or problems experienced or likely to be
experienced by them consequent on the price fixation,
whereupon the government may make appropriate orders. Any
decision taken by the Government cannot be confined to the
individual manufacturer seeking review but must necessarily
affect all manufacturers of the bulk drug as well as the
0
consumer. Since the maximum price of a bulk drug is required
by Para 3 to be notified, any fresh decision taken in the
proceeding for review by way of modification of the maximum
price has to be made by a fresh notification fixing the new
maximum price of the bulk drug. In other words, the review, if it
E is fruitful, must result in fresh subordinate legislative activity.
The true nature of the review provided by Para 27 insofar as it
relates to the fixation of maximum price of bulk drugs under
Para 3 and leader price and prices of formulations under Paras
12 and 13 is hard to define. It is difficult to give it a label and
F to fit it into a pigeonhole, legislative, administrative or quasi-
judicial. Nor is it desirable to seek analogies and look to distant
cousins for guidance. From the scheme of the Control Order
and the context and content of Para 27, the review insofar as
it concerns the orders under Paras 3, 12 and 13 appears to
G be in the nature of a legislative review of legislation, or more
precisely a review of subordinate legislation by a subordinate
legislative body at the instance of an aggrieved person."
31. In the present case, the Central Government was
H directed by the High Court in the first judgment to consider
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 83
[H.L. DATIU, J.]
certain grievances of the Respondent-Company regarding A
working out of certain weighted averages, such as rate of
income tax being taken low, the packaging and distribution
expenses taken lower than the actual cost, etc., by the Central
Government while the prices of the bulk drugs were being fixed.
The Court specifically observed that in the interest of justice, B
the Respondent-Company should be given one more
opportunity of being heard on the price fixation order of 1986.
The Court further made it clear that they are not setting aside
the order dated 20.11.1986 or staying further implementation
of the said order or stay any proceedings for fixation of prices c
of various drug formulation of the Respondent-Company of
which the appellants - Central Government may wish to initiate.
The Court had permitted the Respondent-Company to file
review petition, if they so desire and further had directed the
Central Government to pass an order as they deem fit, that is,
0
either affirming or reviewing the prices fixed by order dated
20.11.1986 and to make consequent changes in the prices
for drug formulations, if fixed in the meanwhile.
32. In our view, a reading of the observations made by the
Court, would indicate that it had reserved liberty to the Central E
Government either to affirm or review the prices of the bulk
drugs fixed by order dated 20.11.1986 and to make
consequent changes in the prices for drug formulations. The
Central Govt., taking clue from the directions issued by the
Court, which order has become final, has passed the impugned F
Notification dated 02.01.1989, by refixing the prices of drug
formulations by applying the provisions contained in DPCO
1989. In view of the above, it is difficult for us to find fault with
the exercise done by Central Government while notifying the
impugned notification. In our considered view, the notification G
so issued is in accordance with the observations made by this
Court in Cyanamide case (supra) wherein it is stated:-
"............... since the maximum price of a bulk drug is
required by paragraph 3 to be notified any fresh decision H
--
84 SUPREME COURT REPORTS [2011) 4 S.C.R.
A taken in the proceeding for review by way of modification
of the maximum price has to be made by a fresh
notification fixing the new maximum price of the bulk drug.
In other words, the review if it is fruitful it must result in fresh
subordinate legislative activity."
B
These observations of this Court in Cyanamide case, in
our view, supports the stand of the Revenue, that once a review
petition filed by the manufacturer of a bulk drug is considered
and a fresh notification is issued, the same would be
prospective and it does not relate back to the notification fixing
C the prices of bulk drugs issued earlier.
33. It is no doubt true that the Murthy Committee was
constituted pursuant to the direction issued by the High Court
to look into the data that may be furnished by the Respondent-
D Company and give its report for the purpose of fixing the prices
of the bulk drugs manufactured by the Respondent-Company.
It is also not in dispute that the prices fixed by the Murthy
Committee was much higher than those notified by the Central
Government, while issuing the notification dated 20.11.1986.
E In our view, that itself will not make any difference for the
reason, the Central Government, after taking into consideration
the report and the recommendations made by the Murthy
Committee, has issued a notification which we have already
said is only prospective and not retrospective as contended by
F learned counsel for the Respondent-Company. Hence, we are
of the view that there was no implied rejection of the
recommendations of the Murthy Committee.
34. Therefore, firstly, it cannot be said that the Central
Government while considering the review petition filed by the
G Respondent-Company had disregarded the direction issued by
the Delhi High Court in its first judgment. Secondly, the
contention of the respondent-company that the price fixation
order of 02.01.1989 was the result of decision taken by the
Central Govt. on the review petition filed by the respondent-
H company and therefore, the demands raised as per the price
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 85
[H.L. DATIU, J.]
fixation order dated 20.11.1986 had to be revised according A
to the price fixation order dated 02.01.1989, cannot be
accepted. We also add, since the notification dated
02.01.1989 fixing prices of bulk drugs is prospective, the earlier
notification would operate during the intervening period.
To sum up, our findings in regard to the first and third 8
issues are as under :~
(i) The demand to be raised on the respondent-
company for the period 12.05.1981 to 25.08.1987
is to be based on the prices fixed under the C
notification dated 20.11.1986 and not on the drug
prices fixed on 02.01.1989.
(ii) The supersession of a notification does not
obliterate the liability incurred under the· earlier
0
notification.
35. Now to answer the second issue, viz. whether the
demand raised under para 7(2)(a) of DPCO 1979, should be
computed on the basis of difference in bulk drug prices or on
the basis of difference in formulation prices, it is necessary to E
extract para 7 of DPCO 1979 and the other relevant paras in
DPCO 1979. Para 7 reads:
"7. Power to fix retention price and pooled price for the
sale of bulk drugs specified in First Schedule or Second F
Schedule indigenously manufactured as well as imported
- (1) Where a bulk drug specified in the First Schedule or
the Second Schedule is manufactured indigenously and is
also imported, the Government may, having regard to the
sale prices prevailing from time to time in respect of G
indigenously manufactured bulk drugs and those of
imported bulk drugs, by order, fix, with such adjustments
as the Government may consider necessary -
(a) retention prices for individual manufacturers, importers,
or distributors of such bulk drugs; H
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86 SUPREME COURT REPORTS [2011] 4 S.C.R.
A (b) a pooled price for the sale of such bulk drugs
(2) Where a manufacturer of formulations utilises in the
formulations any bulk drug, either from his own production
or procured by him from any other source, the price of such
bulk drug being lower than the price allowed to him in the
B price of his formulations the Government may require such
manufacturer -
(a) to deposit into the Drug Prices Equalisation Account
referred to in paragraph 17 the excess amount to be
c determined by the Government; or
(b) to sell the formulations at such prices as may be fixed
by the Government".
36. Para 8 speaks of prices of bulk drugs produced
D through indigenous research and development, Para 9
authorises the Central Government to direct manufacturer of
bulk drugs to sell bulk drugs to manufacturers of formulations,
Para 10 provides for the calculation of retail prices of the
formulations, Para 12 authorises the Central Government to fix
E retail prices of formulations specified in Category Ill of Third
Schedule, Para 14 provides for general provisions regarding
prices of formulations, Para 15 speaks of power of the Central
Government to revise prices of formulations, Para 17 speaks
of Drug Prices Equalisation Account (DPEA). The other paras
F may not be relevant to be noticed for the purposes of this case.
37. Para 7 of the DPCO, 1979 is in two parts. Sub-para
(1) of Para-7 authorises the Central Government to fix retention
price and pooled price for the sale of Bulk drugs specified in
G First Schedule or Second Schedule indigenously manufactured
and those of imported bulk drugs. Sub-Para (2) of Para 7
speaks of a situation where a manufacturer of formulations sells
the formulations of any bulk drug, either manufactured by him
or procured by him from other sources, being lower than the
H
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 87
[H.L. DATIU, J.]
price allowed to him in the price of his formulations, the A
Government may require such manufacturer of formulations to
deposit into DPEA the excess amount as determined by the
Central Government. Sub Para 7(2)(b) mandates the
manufacturer of the formulations to sell such formulations as
fixed by the Central Government. Para 7 of DPCO 1979 B
provides two different situations, one based on the difference
in the common selling prices of bulk drugs and the second the
difference based on common selling prices of the formulations. ,
Para 17 of DPCO 1979, as we have already stated, authorizes
the Central Government to maintain DPEA comprised of the c
grants made by the Government, deposits to be made by the
manufacturers, importers and distributors of the drugs.
38. The Respondent-Company in the month of June, 1990
and November, 1990 received a demand on the allegations
that the Respondent-Company had over charged for the bulk D
drugs as well as formulations being manufactured by it. These
demands are based on the prices fixed by order dated
20.11.1986. The Respondent-Company had questioned this
demand before the High Court primarily on the ground that the
sale prices of the formulations cannot not be taken into E
consideration and only the cost of bulk drugs consumed in
those formulations could be taken into consideration for making
calculations. The prayer in the writ petition was to direct the
Central Government to reassess and calculate the demand on
the basis of the revised bulk drug prices fixed on 02.01.1989, F
instead of taking into consideration the prices of the
formulations and to consider the excess amount on the basis
of prices of bulk drugs used in the formulations. The stand of
the Central Government in the affidavit filed before the High
Court was that the prices of the bulk drugs had been fixed vide G
their order dated 12.05.1981 and 20.11.1986, but the prices
of the formulation could not be fixed because of the stay
granted by the Court and as such the Respondent-Company
was bound to charge only prices as were liable to be fixed
under the DPCO 1979. They had also stated that the H
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88 SUPREME COURT REPORTS [2011] 4 S.C.R.
A Respondent-Company was entitled to charge such prices for
its bulk drug as was fixed by the price fixation order dated
20.11.1986 or liable to be fixed for formulations under DPCO
of 1979 and was bound to deposit the over charged amounts
to DPEA.
B
39. The learned senior counsel Shri. Andhyarujina submits
that Para 7(2)(a) read with Para 17 of DPCO 1979 makes it
clear that the Scheme of the DPCO 1979 was to encourage
domestic production of bulk drugs through a system of retention
C and pooled pricing. It is also submitted that para 17(2) and (3)
sets out the manner in which the DPEA was to be utilized and
how a manufacturer of bulk drugs could make a claim in respect
of bulk drugs manufactured.by it from DPEA. Therefore, para
7(2)(a)was never intended to cover prices of formulation but only
the differences in the price of bulk drugs used in formulations
D which the manufacturer can be asked to deposit into the DPEA
under para 7(2)(a). However, it is argued by learned counsel
for the Central Government that the expression "excess amount
to be determined by the Government" in para 7(2)(a) of DPCO
1979 gives a wide discretion to the Government in the matter
E of determining the amount recoverable under the para and,
therefore, the Government was justified in raising the demand
taking into consideration the difference between the common
selling prices and the price of the formulations.
F 40. It is a cardinal principle of interpretation that a statute
must be read as a whole. Lord Herschell in the case of
Colguhoun v. Brooks, (1889) 14 AC 493, aptly pointed out:
"It is beyond dispute, too, that we are entitled, and indeed
bound, when construing the terms of any provision found
G in a statute, to consider any other parts of the Act which
throw light on the intention of the legislature, and which may
serve to show that the particular provision ought not to be
construed as it would be alone and apart from the rest of
the Act."
H
-- UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 89
[H.L. DATTU, J.]
41. This Court in the case of Phillips India Ltd. v. Labour A
Court, {1985) 3 SCC 103 has observed :
"15. No canon of statutory construction is more firmly
established that the statue must be read as a whole. This i
is a general rule of construction applicable to all statutes 8I
alike which is spoken of as construction ex visceribus
actus ... ... The only recognized exception to the well-laid
principle is that it cannot be called in aid to alter the
meaning of what is of itself clear and explicit. Lord Coke
laid down that: "it is the most natural and genuine C
exposition of a statute, to construe one part of a statute
by another part of the same statute, for that best
expresseth meaning of the makers" {Quoted with approval
in Punjab Beverages Pvt. Ltd. v. Suresh Chand, [(1978)
2 sec 144])"
D
42. To our mind, the grievance of the respondent-company
which was projected before the High Court and also before us
is that the"lmpugned demands were in violation of Para 7{2){a)
of DPCO 1979, mainly for the reason that they were not
computed on the basis of difference i!:J the prices of bulk drugs E
but on the difference between the prices of bulk drugs and the
prices of formulations in which the company had used those
bulk drugs. The appellants/Central Government while justifying
the impugned demand ha~ contended before the High Court
and even before us, that the prices of bulk drugs were fixed vide F
orders dated 12.05.1981, which were revised by order dated
20.11.1986, but the formulations could not be fixed because
of the interim order granted by the High Court and, ergo, the
respondent-company is liable to deposit into DPEA the over
charged amount in respect of their formulations also. G
43. To resolve the controversy on this issue, it is necessary .
to notice the impugned demands raised by the appellants/
Central Government dated 16th November, 1990. The relevant
portion is extracted by omitting what is not necessary for the
H
--
90 SUPREME COURT REPORTS [2011] 4 S.C.R.
A purpose of considering the issue before us. They are as
under:-
"Subject: Recovery into the Drug prices Equalisation
Account in respect of Betamethasone and its formulations.
B Dear Sirs,
I am directed to refer to your letter dated the 17th
September, 1990 on the above subject and to say that the
liability of your company upto 25th August, 1987 has since
c been determined based on the available data. The details
are as under:-
(i) Bulk drugs sold to others
(a) Attached statement at Annexure-1 gives the
D details of your liability of Rs.23.62 lakhs in respect
of the bulk drug.
(ii) Formulations and bulk drug captively used.
(b) The liability in respect of 16th packs of
E formulations has been determined at Rs. 7121.03
lakhs as per details annexed.
(c) Liability in respect of 8 packs of formulations
have been worked out at Rs.33.53 lakhs subject
F to your company making available the details of
the packs produced and sold during 12th May,
1981 and 30th June, 1981. The liability in respect
of these 8 packs would be finalized after these
details are received.
G 2. While determining the liability the prices charged by your
company based on the stay granted by the Hon'ble Delhi
High Court and the prices to which your company would
have been entitled had the stay not been granted have
been taken into consideration. The prices to which your
H
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 91
[H.L. DATIU, J.]
company was entitled to are shown in column 5 of the A
statement and these prices have been worked out by the
Expert Body, namely, Bureau (sic.) of Industrial Costs and
prices based on the price of the bulk drug as upheld by
the High Court and other parameters like conversion cost, ·
packing charges, packing materials excipients (sic.) etc. B
As prevalent in May, 1981, the norms of conversion cost
and packing charges for formulations have also been
upheld by the Hon'ble Supreme Court.
3. Liability in respect of two packs of formulations
indicated at S.No.17 and 18 (sic.) would be C
communicated to you after the details of the price
prevailing on 12th May, 1981 and the basis thereof are
communicated to the Government.
4. The liability in respect of 6 packs of formulations would D
be finalized after the details of packs produced/sold during
12th May, 1981 to 30th June, 1981 are made available.
It is brought to your notice once again that as already
advised in this Ministry's letter of even number dated the
20th September, 1990 and as directed by the Hon'ble E
High Court vide its orders dated the 9th August, 1990 your
company is still to make available the details in respect
of bulk drug Betamathasone and its formulations after
25th August, 1987. Please expedite these details also so
that your liability can be finalized for this period as well. F
Yours faithfully,
Sd./-
(J.L. Sharma)
UNDER SECRETARY TO
THE GOVERNMENT OF INDIA" G
44. Now let us see how the High Court has decided this
issue. The Court after noticing elaborately the intent, object and
the possible construction that could be placed on paras 3 to 9
and para 17 has observed that:
H
---
92 SUPREME COURT REPORTS [2011] 4 S.C.R.
A "Neither paras 3 to 9 nor para 17 of DPCO 1979 suggest
that the amount to be deposited in DPEA had anything to
do with the prices of the formulations which were being
fixed in terms of paras 10 and 11 of the said order. Para .
7(2) of the order, which speaks of utilization of bulk drugs
B in the formulations, makes it abundantly clear that the
amount to be deposited into DPEA in this regard related
only to the common selling price of bulk drug which was
lower than the price allowed to him in the price of his
formulations. As a natural consequence, therefore, the
c demand for the amount to be deposited in DPEA account
could be based and calculated only on the basis of the
prices of the bulk drugs consumed in the formulations and
not on the basis of notional prices of formulations. The
prices of the formulations, therefore, were not at all relevant
for the purpose. Thus the impugned demands, which
D
were based on the formulations prices suffer from the vice
of considering the formulations prices and not the
quantity and the price of the bulk drugs consumed
therein." (Emphasis supplied)
E 45. In our view, the fallacy in the impugned judgment
appears to be in not properly analyzing the clear meaning of
the expressions used in para 7(2)(b) of DPCO 1979.
46. A plain reading of Para 7(2)(a) of the DPCO 1979
F shows what can be directed by the Central Government to be
deposited into DPEA by the manufacturer of bulk drugs and
any formulations using those drugs or procured from outside,
as in the present case. Firstly, Para 7(2)(a) applies to a
manufacturer of formulations. The manufacturer must utilize in
G the formulation(s) any bulk drug. The bulk drug could be either
from his own production or procured from any other sources. If
the price of such bulk drugs is notified as lower than the price
allowed to him in the price of his formulations, the Central
Government may require the manufacturer of formulation the
excess amount determined to be deposited into DPEA. Under
H
--
UNION OF INDIA v. GLAXO INDIA LTD. & ANR. 93
[H.L. DATIU, J.]
Para 7(2)(b), the Central Government may direct the A
manufacturer of formulations to sell the formulations at such
prices as may be fixed by the Government.
47. The Central Government, while issuing the letters/
demand dated 18.06.1990 and 16.11.1990, has specifically 8
bifurcated the differential amount that requires to be paid by
the respondent-company on the bulk drugs and their
formulations. In the letter, it is made clear that in view of the
notification dated 20.11.1986, the respondent-company has to
deposit into DPEA the difference between the retention price C
and pooled price for the sale of bulk drugs. Similarly, since the
respondent-company manufactures drug formulations by
captive consumption of the bulk drugs, the Central Government
initially could not fix the retention price of the formulations in view
of the interim orders passed by the High Court while admittfng
the writ petition filed by the respondent-company. After disposal D
of the writ petitions filed and in view of the specific liberty that
was granted by the High Court in the petitions filed by the
respondent-company, the Central Government directed the
company to pay not only the difference amount payable for the
price Of bulk drugs but also those drugs which are utilized in E
their formulations over and above the prices fixed by the Central
Government. In our view, since the para 7(2)(a) of DPCO 1979
does not admit a construction which the respondent-company
suggests, it is difficult to hold that under para 7(2)(a) of DPCO
1979, the Central Government could issue demand on the F
basis of bulk drugs only and not on the basis of difference
between the prices of bulk drugs and the prices of the
formulations in which the company had used those bulk drugs.
48. Before we conclude, it is important to mention that the G
respondent company (and similar companies) not only
manufacture bulk drugs but also use them for their drug
formulations for its supply in retail vending and thereby, the
ordinary consumer is burdened with a higher price than what
they could have got at a lesser price. Since that is taken care H
--
94 SUPREME COURT REPORTS [2011] 4 S.C.R.
A of in para 17 of DPCO 1979, it may not be necessary to lean
towards the submissions made by learned counsel for the
respondent-company.
49. In conclusion, we would only say that none of the
submissions made by learned counsel for the respondent-
8
company were worth accepting. Accordingly, we allow this
appeal and set aside the order passed by the High Court and
thereby, we confirm the demands raised by the Central
Government. In the facts and circumstances of the case, we
C deem it proper that the parties will bear their own costs.
R.P. Appeal allowed.
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