M/s sun pharmaceutical industries Ltd. Vs. Union of India

Facts

The case revolves around the issue of the prices at which the drugs and formulations are sold. The appellant which was the Sun Pharmaceutical Industries Limited, a company registered under the provisions of the Companies Act, 1956 (Companies Act, 1956), had failed before the Delhi High court before approaching the Hon’ble Supreme Court. The respondent authorities which were the Union of India and others, were paid a total of Rs. 1.25 crores by the appellant towards the demands which were made by the authorities. The Delhi High Court had ordered the status quo to be maintained corresponding to the recovery of the sum payable by the appellant.

The appellant had filed writ petition (No. 10700) of certiorari which was dismissed by a learned judge. The appellant later on filed letter of patent appeal (No. 1629) which was also dismissed by a Division Bench of High Court by a judgment dated on 6^th of August, 2014.

Issues Raised

The issues which were raised are as follows –

The action taken by “National pharmaceutical pricing authority” in raising the demand against the appellant (M/s. Sun Pharmaceuticals Industries Ltd.) to recoup the higher price which was levied in relation to “Roscilox” which is a “Cloxacillin- based drug formulation” brand, than the price which was fixed by the government of India under the stipulations of “Drugs (Price Control) Order, 1995” (DPCO)
Whether the appellant would come under the ambit of paragraph 13 of the DPCO, 1995, under the light of its claim that it was not a manufacturer or an importer or a distributor.
Whether there was any error committed by the High Court in its decision of rejecting the claim of the appellant.

Contention of the Respondent

The arguments raised by the respondent are as follows –

A demand notice was addressed to the appellant (Sun Pharmaceutical Industries Ltd.) by the “National Pharmaceutical Pricing Authority” on 8^th of February 2005, which directed the appellant to deposit the “overcharged principal amount” of Rs. 2,15,62,077/-, for the duration of April, 1996 to July, 2003. According to the demand notice, “National Pharmaceutical Pricing Authority” also demanded the interest which was due on the principal amount. In accordance with the law, the “National Pharmaceutical Pricing Authority” issued another demand notice which was dated on 13^th of June, 2005, which stated that the interest which is to be paid on the overcharged principal amount is Rs. 2,49,46,256/-, and that the appellant had to deposit a total of Rs.4,65,08,333/-, which was the overcharged principal amount along with the interest.

The “National Pharmaceutical Pricing Authority” demanded the overcharged amount in exercise of power under the 13^th Paragraph of the Drugs (Price Control) Order, 1995. The title of paragraph 13 is “Power to recover overcharged amount” and it says “Notwithstanding anything contained in this order, the Government shall by notice, require the manufacturers, importers or distributors, as the case maybe to deposit the amount accrued due to the charging of prices higher than those fixed or notified by the government under the provisions of Drugs (Price Control) Order, 1987 and under the provisions of this order” (DPCO 1995)

The respondents argued that the appellant had not made completely revealed information regarding its arrangement with Oscar Laboratories Private Limited for supplying the drug formulation to the retailers. This issue was raised before the Division Bench of the Delhi High Court.

Contention of the Appellant

The arguments raised by the appellant are as follows –

According to the appellant, the definitions under the paragraph 2(e), paragraph 2(y) and paragraph 2(d) of the DPCO, 1995, were not clear, this was the basis on which the appellant claimed that the further proceedings cannot happen under paragraph 13 of the DPCO, 1995. As per the argument of the appellant, it was not a manufacturer or importer or distributor, hence, it was not under the ambit of paragraph 13 of the DPCO,1995. However, the court said that the appellant was not permitted to raise such a plea at that stage.
The learned counsel of the appellant made an attempt to widen the scope of the appeal made, by raising questions on the validity of the demands which are mentioned in the Drugs (Pricing Control) Order, 1995.

Rationale

The Delhi High Court had given particularly recorded that the plea which was made by the appellant regarding it not coming under the scope of paragraph 13 of the DPCO, 1995, as it was not a manufacturer or an importer or a distributor, and that definitions under the paragraph 2 of the DPCO,1995, were unclear, had been made for the first time. The Delhi High Court also gave particular importance to the fact that the writ petition and also the memorandum of appeal filed by the appellant were lacking of any pleadings to that effect.

The Division Bench of Delhi High Court stated that the appellant could not be permitted to raise such a plea before them at that stage.

The Supreme Court found that the Grounds H and Y which were referred to by the learned counsel of the appellant were general in nature and that they do not focus on the context of paragraph 19 of the DPCO, 1995. This issue was compared to a case of the Allahabad High Court “TC Health Care Private Ltd. and others Vs. Union of India and others” (TC Health Care Private Limited and others vs. Union of India and others ) in which a similar claim was made and it was supported by factual evidence, unlike this case. The claim of the appellant under paragraph 19 was made for the first time before the Division Bench of the Delhi High Court.
The Supreme Court acknowledged that the Delhi High Court found that there was overlapping of identities of Oscar Laboratories Private Limited, from which Sun Pharmaceutical Industries Limited; the appellant, had claimed purchased drug formulations from, and with the appellant’s own companies.
The Supreme Court found the replies which were filed by the appellant in response to the demand notices from the National Pharmaceutical Pricing Authority. In the replies, it was suggested that the appellant admitted to purchase of the drug from the manufacturer, which means that the appellant had direct contact with the apparent manufacturer. The appellant played the role of being a ‘retailer’ or ‘wholesaler’ and also the role of ‘dealer’.
The aim of the DPCO is to control the prices at which the drug formulations are sold to the general public, which could be done by “holding out the threat of recovery of the higher prices charged for such drug formulations by those involved in their manufacturing and marketing” as stated by the Apex Court. Because the intent and aim were laudable, it can not undergo restricted interpretation. The main objective of the DPCO is the ensure that there is no deception to a consumer and that the drug formulations are sold at price not exceeding to the price written on the pack or on the container, whichever is lesser one.
The agreement, if there was any, between the appellant and the manufacturer regarding the purchase of “Roscilox” and the sale of the same was never produced. This issue was raised before the Division Bench of the Delhi High Court by the respondent authorities, according to them, the appellant, despite sufficient opportunities had not disclosed all the information regarding its relation to Oscar Laboratories Private Limited.
The Supreme Court acknowledges that the Divion Bench of the Delhi High Court had not accepted the story put forward by the appellant which stated that the appellant had came up with a new version of the drug formulation which it had bought from Delta Aromatics Private Limited. The Division Bench did not accept this story because it was a new story altogether and had no significance to the case.

Inference

The Apex Court gave its judgment on this matter between Sun pharmaceutical industries limited and Union of India. It ruled that the decision taken by the Delhi High Court in rejecting the claims made by appellant had no error in it. The appellant claimed that it was out of the reach of paragraph 13 of the Drug (Pricing Control) Order of 1995, according to the appellant it was not a manufacturer or an importer or a distributor. The High Court also said that no such claims were permitted at that stage. The supreme court stated that the appeal which was presented before them by the appellant was devoid of merit and was accordingly dismissed. The supreme court also stated that the order of status quo which dates back to 10^th November 2014, shall stand vacated. (Judgment by the Supreme Court of India)

References