Page 1

REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1939 OF 2004

GlaxoSmithKline Pharmaceuticals Limited (Formerly known as SmithKline Beecham  Pharmaceuticals (India) Limited)  …  Appellant

         Versus  

Union of India & Ors.                   …  Respondents

WITH

CIVIL APPEAL NO.1940 OF 2004 WITH

CIVIL APPEAL NO.1941 OF 2004 WITH

CIVIL APPEAL NO.1942 OF 2004 AND

CIVIL APPEAL NOS._10901-10902_OF 2013 (ARISING OUT OF SLP (CIVIL) NOS.27241-27242 OF 2010)

JUDGMENT

R.M. LODHA,J.

Leave granted in SLP(C) Nos.27241-27242 of 2010.

2. This is a group of six appeals, by special leave, four arising  

from the judgment of the Karnataka High Court and two from the Delhi High  

Court.

3. The  two  High  Courts,  Karnataka  and  Delhi,  have  taken  

diametrical opposite view on the question whether the prices fixed under  

the  Drugs  (Prices  Control)  Order  (for  short,  ‘DPCO’)  in  respect  of  

1

Page 2

drugs/formulations would be operative in respect of all sales subsequent to  

15 days from the date of the notification by the Government in the official  

gazette/receipt of the price fixation order by the manufacturer.  

4. The  Drugs  (Prices  Control)  Order,1995  (for  short,  

‘DPCO,1995’) was under consideration before the Karnataka High Court  

whereas the Drugs (Prices Control)  Order,1987 (for short, ‘DPCO,1987’)  

fell for consideration before the Delhi High Court. Although, the sequence  

of  the  relevant  paragraphs  in  the  two  DPCOs  differ  but  the  relevant  

provisions are almost identical. The view of the Karnataka High Court has  

not been accepted expressly by the Delhi High Court. Since the common  

arguments have been advanced in this group of matters and the question of  

law is identical, all these six appeals were heard together and are disposed  

of by the common order.

5. The facts in civil appeals from Karnataka High Court are these:

The  appellant,  in  the  year  1998,  was  manufacturer  of  Furoxene  

Tablets  and  was  also  the  sole  distributor  for  Dependal-M  Tablets  and  

Dependal  Suspension  manufactured  by  Kanpha  Labs,  Bangalore.  

Dependal-M and Dependal Suspension and Furoxene are formulations of  

Furozolidine and Metronidazole. On 09.03.1998, a notification was issued  

by  the  National  Pharmaceutical  Pricing  Authority  (NPCA)  under  the  

DPCO,1995, whereby the ceiling price in regard to several  formulations  

consisting  of  Furozolidine  and/or  Metronidazole  was  fixed  exclusive  of  

2

Page 3

excise duty and local taxes. The notification was gazetted on 09.03.1998  

itself.   

6. On 10.03.1998, NPCA issued an explanatory notice clarifying  

that the notification reduces the existing prices and the manufacturers must  

make effective the prices so fixed/revised, within 15 days (from the date of  

the notification in the official gazette or receipt of the order of the NPCA) as  

required under para 14(1) of  the DPCO,1995 and also issue necessary  

revised price lists as required under para 14(3) of that Order.

7. On  14.07.1998,  the  Inspector  of  Drugs,  Varanasi  issued  a  

letter addressed to the appellant-Company that it has not given the effect to  

the notification dated 09.03.1998.

8. On 22.07.1998, the appellant-Company responded to the letter  

received from the Inspector of  Drugs and brought to his notice that the  

notification dated 09.03.1998 has been given effect to from the first batch  

manufactured on the expiry  of  15 days from the date of  the notification  

which is permissible under para 14 of the DPCO,1995.

9. On 30.07.1998, Inspector of Drugs sent another letter to the  

appellant-Company stating therein that under paragraph 16 of DPCO,1995,  

all  sales of the subject formulations would have to be made at the new  

ceiling price fixed on 09.03.1998 irrespective of the date of manufacture of  

the  subject  formulations.  The  plea  of  the  appellant-Company  was,  

accordingly, rejected by the Inspector of Drugs and he proposed to initiate  

the  prosecution  against  the  appellant-Company  under  the  Essential  

3

Page 4

Commodities Act,1955 (‘EC Act’). This was reiterated by the Inspector of  

Drugs in his further communication dated 16.11.1998.

10. The  appellant-Company  then  challenged  the  notices/letters  

dated  14.07.1998,  30.07.1998  and  16.11.1998  by  filing  a  writ  petition  

before  the  High  Court.  The  writ  petition  was  contested  by  the  Central  

Government and its functionaries.      

11. The Karnataka High Court by its judgment dated 12.11.2002  

dismissed  the  writ  petition.  The  principal  reasoning  is  reflected  in  

paragraph 9 of the judgment which reads as follows:

“9.   Having  regard  to  the  provisions  of  para  14 of  DPC Order,  petitioner who is a manufacturer of Furoxene tablets, ought to carry  into  effect  the  revised  price  fixed  as  per  Notification  dated  09.03.1998 within 15 days from the date of the said Notification or  receipt of the Order of the Government. There is no dispute that  the Notification dated 09.03.1998 was published in the Gazette of  India on the same date. While sub-para (2) of para 14 requires the  retail price of the formulation as notified by the Government being  displayed on the label of the container of the formulation and the  minimum pack offered for retail sale, sub-para (3) thereof requires  the manufacturer to issue a price list and supplementary price list  to  the  dealers  and  other  persons  specified  therein  indicating  reference to price fixation/revision  from time to time. Para 16 of  DPC  Order  prohibits  all  persons  including  manufacturers/distributors/retailers from selling any formulation at  the  price  exceeding  the  price  specified  in  the  current  price  list  indicated  on  the  label  of  the  pack  whichever  is  less.  Thus,  a  combined  reading  of  these  provisions  make  it  clear  that  every  manufacturer and distributor is duty bound to issue a revised price  list within 15 days from the date of the notification issued by the  Government under para 9 of the DPC Order. It is also clear that   manufacturers,  distributors  and  retailers  will  be  liable  to  sell  formulations  from  the  date  of  such  revised  price  list  (which  is  required to publish within 15 days from the date of notification) at  the revised prices and not the prices mentioned on the label of the  container or pack. In view of it, the contention of the Petitioner that   revised prices will not apply to the existing stocks but only to new  batches  of  drugs  and  formulations  to  be  manufactured  after  15  days of the notification cannot be accepted. The provisions of the  

4

Page 5

DPC Order are clear that prices should be revised within 15 days  even in regard to the formulations which were manufactured prior  to  the date of  notification  or  those manufactured within  15 days  from the date of notification.”  

12. It  is  from the above judgment that four appeals arise at the  

instance of the manufacturer/distributor.

13. The two appeals from the judgment of the Delhi High Court are  

at the instance of the Central Government. The facts in these two appeals  

in brief are these: For the period 01.04.1979 to 25.08.1987, Drugs (Prices  

Control) Order,1979 (for short, ‘DPCO,1979’) was in operation. The bulk  

drug Ranitidine and its formulation were not subject to price control under  

DPCO,1979, and, consequently, there was no price fixation at all in respect  

of Zinetac tablets.

14. On 26.08.1987, DPCO,1987 came into force whereby the bulk  

drug  Ranitidine  was  included  and,  accordingly,  Zinetac  tablets  (its  

formulations) were subjected to price control.

15. On 17.03.1988, the price fixation order was issued under para  

9(1) of the DPCO,1987 fixing the retail price of Zinetac tablets.  The price  

fixation order is said to have been received by the manufacturer (Biotech  

Pharma) on 21.03.1988.

16. The  respondent  is  distributor  of  the  Zinetac  tablets  in  the  

strength  of  150  mg  and  300  mg  per  tablet  manufactured  by  Biotech  

Pharma.  Zinetac  is  a  formulation  of  the  bulk  drug  Ranitidine.  On  

04.04.1988, the Biotech Pharma sent the supplementary price list effective  

5

Page 6

from 04.04.1988 in form V. It is the case of the respondent that the price  

fixed by the price fixation order dated 17.03.1988 is applicable with effect  

from 04.04.1988 (on expiry of 15 days from 21.03.1988, i.e., the date of  

receipt of the price fixation order dated 17.03.1988).

17. On 23.05.1988, seizures were made of 300 mg Zinetac tablets  

from Batch No.3104. The respondent’s case is that Batch No.3104 is prior  

to  Batch  No.3115  mentioned  as  the  effective  batch  number  in  the  

manufacturer’s letter dated 04.04.1988.

18. The respondent-Company challenged the seizure of goods by  

filing  a  writ  petition  before  the Delhi  High Court.  The writ  petition  was  

contested by the Central Government before the Delhi High Court and the  

judgment of the Karnataka High Court was also cited. However, Delhi High  

Court did not agree with the view adopted by the Karnataka High Court.  

The  Delhi  High  Court  heavily  relied  upon  a  circular  dated  28.04.1979  

issued by the Ministry of Petroleum, Chemicals and Fertilizers, Department  

of Chemicals and Fertilizers, Government of India. The said circular though  

was issued in the context of paragraph 19(2) of DPCO,1979 but the Delhi  

High Court was of the view that the said circular was identical to paragraph  

16(3) of DPCO,1987, and, therefore, the position explained in respect of  

the DPCO,1979 would continue to hold the field in respect of the very same  

provisions  in  DPCO,1987.  The  Delhi  High  Court,  accordingly,  by  its  

judgment  dated  22.10.2009  allowed  the  writ  petition  and  quashed  the  

6

Page 7

seizure  memo whereby  the  goods  were  seized.  The  Union  of  India  is  

aggrieved by the judgment and the two appeals arise therefrom.

19. We have heard Mr. S. Ganesh, learned senior counsel for the  

manufacturer/distributor and Ms. Indira Jaising, learned Additional Solicitor  

General for the Union of India.

20.  It is appropriate at this stage to reproduce the few relevant  

paragraphs of DPCO,1987 and DPCO,1995 side by side.

DPCO, 1987 DPCO, 1995 16(3)  Every manufacturer  or  importer  shall  give  effect  to  the  price  of  a  bulk  drug  or  formulation,  as the case may  be,  as  fixed  by  the  government from time to time  within  15  days  from  the  receipt  by such manufacturer  or  importer  of  the  communication  in  this  behalf  from  the  government  and  issue  a  supplementary  price  list  in  this  regard  to  the  dealers,  state  drugs  controllers  and  the  government  and  indicate  necessary  reference  to  such  price fixation.

14(1)  Every  manufacturer  or  importer  shall  carry  into  effect  the  price  of  a  bulk  drug  or  formulation, as the case may be,  as  fixed  by  the  Government  from time to time, within fifteen  days  from  the  date  of  notification  in  the  Official  Gazette  or  receipt  of  the order  of the Government in this behalf  by  such  manufacturer  or  importer.

17.   Every  manufacturer  importer  or  distributor  of  a  formulation  intended  for  sale  shall  display in indelible  print  mark, on the label of container  of  the  formulation  and  the  minimum pack thereof offered  for  retail  sale,  the  maximum  retail  price of that formulation  with the words “retail price not  to  exceed”  preceding  it,  and  “local taxes extra” succeeding  it.

14(2)   Every  manufacturer,  importer  or  distributor  of  a  formulation  intended  for  sale  shall  display  in  indelible  print  mark, on the label  of  container  of  the  formulation  and  the  minimum  pack  thereof  offered  for retail  sale, the retail  price of  that  formulation  notified  in  the  Official  Gazette  or  ordered  by  the  Government  in  this  behalf,  with the words “retail price not to  exceed”  preceding  it,  “local  

7

Page 8

Provided that in the case of a  container consisting of smaller  saleable  packs,  the  retail  price  of  such  smaller  pack  shall also be displayed on the  label  of  each  smaller  pack  and  such  price  shall  not  be  more than the pro-rata price of  the main pack rounded off  to  the nearest paisa.

taxes extra”  succeeding  it,  and  “under  Government  Prices  Control”  on  a  red  strip,  in  the  case of scheduled formulations:

    Provided that in the case of a  container  consisting  of  smaller  saleable  packs,  the  retail  price  of such smaller pack shall  also  be  displayed  on  the  label  of  each  smaller  pack  and  such  price shall not be more than the  pro-rata retail  price of the main  pack rounded off to the nearest  paisa.

21.  Prices to the traders:-

(1)   A  manufacturer,  distributor or wholesaler shall  sell a formulation to a retailer,  unless  otherwise  permitted  under  the  provisions  of  this  Order  or  any  other  made  thereunder, at a price equal to  the  retail  price  (excluding  excise duty, if any) minus 16%  thereof  in  the  case  of  price  controlled drug. (2)  Notwithstanding anything  contained  in  sub-paragraph  (1), the Government may by a  general or special Order fix, in  public interest, the price to the  wholesaler  or  retailer  in  respect of any formulation the  price of which has been fixed  or revised under this Order.

14(3)   Every  manufacturer  or  importer  shall  issue a price list  and supplementary  price  list,  if  required,  in  form  V  to  the  dealers, State Drugs Controllers  and  the  Government  indicating  reference to  such price fixation  or  revision  as  covered  by  the  order  or  Gazette  notification  issued by the Government from  time to time.

15(1)  Every  manufacturer,  importer or distributor of a non- scheduled  formulation  intended  for sale shall display in indelible  print  mark,  on  the  label  of  container of the formulation and  the  minimum  pack  thereof  offered for retail  sale, the retail  price of that formulation with the  words  “retail  price  not  to  exceed”  preceding  it  and  the  words  “local  taxes  extra”  

8

Page 9

succeeding  it,  and  the  words  “Not  under  Price  Control”  on  a  green strip:

    Provided that in the case of a  container  consisting  of  smaller  saleable  packs,  the  retail  price  of such smaller pack shall  also  be  displayed  on  the  label  of  each  smaller  pack  and  such  price shall not be more than the  pro-rata  retail  price of the main  pack rounded off to the nearest  paisa. (2)  Every  manufacturer  or  importer  shall  issue a price list  and supplementary  price  list,  if  required  of  the  non-scheduled  formulation  in  Form  V  to  the  dealers, State Drugs Controllers  and  the  Government  indicating  changes from time to time. (3)   Every  retailer  and  dealer  shall  display  the  price  list  and  the  supplementary  price  list,  if  any,  as  furnished  by  the  manufacturer  or  importer,  on  a  conspicuous  part  of  the  premises  where  he  carries  on  business in  a manner so as to  be  easily  accessible  to  any  person  wishing  to  consult  the  same. 19(1) A manufacturer, distributor  or  wholesaler  shall  sell  a  formulation to a retailer,  unless  otherwise  permitted  under  the  provisions of  this  Order  or  any  order  made  thereunder,  at  a  price equal to the retail price, as  specified by an order or notified  by  the  Government  (excluding  excise  duty,  if  any),  minus  sixteen  per  cent  thereof  in  the  case of scheduled drugs.  (2)  Notwithstanding  anything  contained in sub-paragraph (1),  the  Government  may  by  a  general  or  special  order  fix,  in  

9

Page 10

public  interest,  the  price  of  formulation  sold  to  the  wholesaler or retailer in respect  of  any  formulation  the  price  of  which has been fixed or revised  under this Order.

21. The comparative statement of the above provisions indicates  

that para 14(1) of DPCO,1995 is identical  to para 16(3) of DPCO,1987.  

Para 14(2) of DPCO,1995 is identical to para 17 of DPCO,1987. Para 14(3)  

of DPCO,1995 is identical to para 16(3) of DPCO,1987 and para 15(1) of  

DPCO,1995 is identical to para 17 of DPCO,1987.   

22. In light of the similarity of the above provisions, for the sake of  

convenience,  we  shall  refer  henceforth  to  the  provisions  contained  in  

DPCO,1995.

23. Mr.  S.  Ganesh,  learned  senior  counsel  for  the  

manufacturer/distributor argues that on a plain reading of para 14(1) of the  

DPCO,1995,  a  manufacturer  is  given  fifteen  days  from  the  date  of  

notification of a price fixation by the Government in the official gazette or  

receipt of the price fixation order by the manufacturer for carrying into effect  

the  price  of  the  bulk  drug  or  formulation.  Under  para  14(2)  of  the  

DPCO,1995, the manufacturer is required to print indelibly the retail price  

of the formulation on the label of the container of the formulation with the  

words  “retail  price  not  to  exceed”  preceding  it  and  “local  taxes  extra”  

succeeding it. Therefore, upto the expiry of the fifteenth day from the date  

of the notification, the price fixation order in the official gazette or receipt of  

10

Page 11

the price fixation order by the manufacturer, the manufacturer is at liberty to  

manufacture the formulations and print on them the pre-notification prices  

and clear the same from his factory after paying excise duty on the basis of  

such provided price.

24. Mr. S. Ganesh, learned senior counsel relies upon the Circular  

dated  28.04.1979  issued  by  the  Central  Government  wherein  it  was  

clarified that all reductions in the prices of formulations effected from time  

to  time  by  the  Central  Government  would  be  applicable  to  the  stocks  

cleared on and after the date of effectuation of reduction. The clarificatory  

Circular further says that price list  shall  state clearly the batch numbers  

from which the reduction is effective. It is, thus, the submission of Mr. S.  

Ganesh that the formulations which are manufactured and cleared prior to  

the  date  of  effectuation  of  reduction  (the  15th day  after  the  date  of  

notification  in  the  official  gazette  or  the  date  of  receipt  of  price  

fixation/reduction  order)  are  not  subject  to  the  price  reduction  and,  

accordingly,  the  said  pre-effective  batch  products  can  be  sold  at  the  

previously existing and operating prices which would be printed on them.

25. It is argued by Mr. S. Ganesh that the said circular has not  

been withdrawn and it has been continuously observed by the trade as well  

as by the Central Government for several decades. It is his submission that  

if the interpretation as above is not accepted, the consequence will be that  

the period of 15 days expressly allowed by para 14(1) of the DPCO,1995  

and the specific provision in Form V regarding the effective batch number  

11

Page 12

to  which  the  price  reduction/fixation  would  apply,  will  all  be  rendered  

completely meaningless and otiose. With reference to practical problems, it  

is  submitted that the manufacturer pays excise duty on the basis of the  

printed price at the time of the manufacture and clearance from his factory  

and also on the payment of sales tax on the sale price charged by the  

manufacturer  to  the  distributor/wholesalers,  which  again  will  be  on  the  

basis of the printed price. The payment of excise duty and sales tax having  

become final, the differential amount cannot possibly be refunded and re-

assessed. Moreover, if a distributor/wholesaler/retailer has already paid a  

higher  price  on  the  basis  of  the  previously  prevailing  price,  he cannot  

possibly  be required to sell  the formulation at  the newly reduced price.  

According to Mr. S. Ganesh, learned senior counsel such an interpretation  

will  be contrary to and in fact destructive of the provisions of para 19 of the  

DPCO,1995.   

26. Mr. S. Ganesh, heavily relied upon the judgment of this Court  

in  Ranbaxy  Laboratories  Limited1 which  interpreted  an  exemption  

notification.  Drawing analogy from that judgment, it is argued that just as  

the  exemption  notification  which  was  issued  under  para  25  of  the  

DPCO,1995  was  addressed  to  the  manufacturer,  similarly,  price  

fixation/revision notification is also addressed to the manufacturer who is  

required to effectuate the same by printing the revised price on all products  

manufactured  and  cleared  by  him  from  the  15th day  after  the  date  of  

1  Union of India v. Ranbaxy Laboratories Limited and Others; [(2008) 7 SCC 502] 12

Page 13

notification/receipt  of  the  order,  and  also  issuing  the  revised  price  list  

declaring the effective batch number from which revised price will operate.  

27. Mr.  S.  Ganesh,  learned  senior  counsel  submits  that  the  

manufacturer/distributor  having acted as per  circular  dated 28.04.1979,  

cannot be lawfully prosecuted/penalized since the circular constitutes the  

contemporanea  expositio of  the  Central  Government  which  framed  the  

DPCO. In this  regard,  learned senior  counsel  places  reliance upon the  

decision of  this  Court  in  Desh Bandhu Gupta2.   His  submission is  that  

under the DPCOs, every price list is in respect of “effective batch number”.  

The clarification made with regard to DPCO,1979 is equally applicable for  

interpretation of 1995, DPCO, since para 14(1) and 14(3) of DPCO, 1995 is  

identical to DPCO,1979.

28. Mr. S. Ganesh, learned senior counsel argues that there is no  

allegation of any act or omission by the manufacturer/distributor during the  

period of  15 days allowed by para 14 of DPCO,1995. He further submits  

that the interpretation of DPCO,1979, DPCO,1987 and DPCO,1995 is no  

more a relevant issue as with effect from June, 2013, DPCO, 2013 has  

come into operation and its scheme and provisions are entirely different  

from the earlier DPCOs.

29. Relying upon the decision of this Court in  Usha Martin3,  it is  

submitted by the learned senior counsel that the issuance of 1979 circular  

shows that two views are possible and, therefore, the view beneficial to the  2  Desh Bandhu Gupta and Company and Others v. Delhi Stock Exchange Association Ltd.;  

   [(1979) 4 SCC 565] 3  Collector of Central Excise, Patna v. Usha Martin Industries; [(1997) 7 SCC 47]

13

Page 14

subject  must  be  adopted,  particularly,  to  a  case  of  criminal  

prosecution/penalty.

30. It  is  argued by Mr.  S. Ganesh that  there is  no provision in  

DPCO or in the EC Act which nullifies or sets aside past lawfully completed  

transaction for sale of goods by the manufacturer to the distributor or by the  

distributor  to  the retailer.  There is  also  no provision which requires  the  

manufacturer to reprint products already in the market with the new price.  

The  printing  of  the  price  is  covered  by  Section  3(f)  of  the  Drugs  and  

Cosmetics Act, 1940 and, therefore, the reprinting of the price can be done  

only  by  the  manufacturer  in  his  licence  manufacturing  premises.  The  

manufacturer has no privity whatsoever with the retailer and may not even  

know his identity.  It  is  absolutely impossible  for the manufacturer to get  

possession of the goods from large number of retailers, bring them back to  

his factory, reprint the lower price and then send them back to the retailer  

with a lower price printed on it, so that the retailer who paid the higher price  

to the distributor is then compelled to sell the goods at a loss at the lower  

price. The retailer who has already paid for the goods would never part with  

them; especially only for having them reprinted with a much lower price. He  

submits that such an interpretation of the DPCO will be utterly unworkable  

and impossible to comply with and any interpretation other than what has  

been stated in the circular must be summarily rejected.

31. Ms. Indira Jaising, learned Additional Solicitor General, on the  

other hand, argues that the scheme of the two DPCOs, 1987 and 1995 is  

14

Page 15

very  clear  and  that  scheme  is  that  once  the  price  is  notified  for  a  

formulation,  the sale  to the consumer can only  be at  the notified  price.  

Learned  Additional  Solicitor  General  submits  that  para  16  of  the  

DPCO,1995 imposes an absolute obligation on all persons not to sell any  

formulation to any consumer at a price exceeding the price specified in the  

“current price list” or price indicated on the label of the container or back  

thereof, “whichever is less”.

32. With reference to the definition of the expression ‘price list’ in  

para 2(u) of DPCO,1995 learned Additional Solicitor General submits that  

the price specified in the current list  is  nothing but the currently notified  

price  of  the bulk  drug or  formulation  under  the DPCO.  For  purpose of  

interpreting the expression “price specified in the current price list”,  it  is  

essential that the manufacturer has not defaulted in its obligation to issue  

price list  or supplementary price list.  The ‘current price list’  is,  therefore,  

simply the price list reflecting the currently operating notified price under  

the DPCO. Moreover, price specified in the current price list is nothing but  

the MRP reflected in column 11 of Form V. Thus, regardless of the entry in  

column 11, “effective batch number” the price specified in column 11 is the  

price specified in the current price list, for the purposes of para 16. Batch  

number is  not relevant for the purpose of  identifying this price.  It  is  the  

submission of the learned Additional Solicitor General that batch number is  

altogether different concept which may be traced to Rule 96 of the Drugs  

and Cosmetics Rules, and the reference to effective batch number in Form  

15

Page 16

V is  only  for internal  record related purposes. There is  no reference to  

batch numbers in either, DPCO, 1987 or DPCO, 1995. Such reference can  

only  be  found in  Form V  and  Form V  does  not  give  any  definition  of  

effective batch number.

33. Learned  Additional  Solicitor  General  submits  that  the  plain  

meaning suggests that revised price must be carried into effect within 15  

days. The words “carried into effect” read with “within 15 days” mean that  

the prices of the drugs are fixed “with effect from” fifteen days from the date  

of notification. The expression “within 15 days” indicates the outer limit.

34. The contention of the learned Additional  Solicitor General is  

that there cannot be two different prices in the distribution chain. Each of  

the DPCOs, i.e.,  DPCO,1979, DPCO, 1987 and DPCO,1995 contains a  

provision where the benefit of the price reduction will mandatorily have to  

be passed on to the consumer from the moment the reduction became  

operative.  While  there may be several  persons in the distribution chain,  

there is an embargo in the DPCO preventing any person from selling to the  

end-point consumer at anything above the notified price (once such price  

became operative). That being the position, there cannot be one price that  

is operational at the end-point of the distribution chain and another price  

upstream in the distribution chain. The emphasis by the learned Additional  

Solicitor General is that DPCOs ensure that consumer is given the benefit  

of the notified price, upon its notification. The consumer gets the benefit of  

the notified price, irrespective of batch numbers since the formulation be  

16

Page 17

interpreted with the object of the DPCO as the guiding principle.  Reliance  

is placed on Cynamide India Limited4.

35. It  is  also argued by the learned Additional  Solicitor  General  

that no prejudice is caused to the manufacturer/distributor as the revised  

price is also based on a cost plus methodology. The reduction in the price  

is  only to reflect  reduced cost and it  simply  prevents the manufacturers  

from making windfall gains by charging high prices even though costs have  

reduced.  As regards distributors or  others in the distribution chain,  it  is  

submitted that it is possible that certain stock has been purchased at the  

higher and revised price and is lying with the distributor or wholesaler or  

retailer but once the revised price comes into effect, this stock becomes  

unsellable  at  the higher price,  and the losses or  reductions need to be  

absorbed  somewhere  in  the  distribution  chain.  How  the  

manufacturers/distributors  and dealers,  inter-se,  make  arrangements  for  

these  losses  to  be  absorbed,  depends  on  the  specific  contractual  and  

credit arrangements. It is possible to work out an arrangement where the  

stock is recalled or necessary adjustments are made to reflect the lower  

price. The fact that the Chemists and Druggists Federation advocates such  

a mechanism shows that it  is entirely within the realm of possibility.  It is  

emphasised that  paramount consideration of  the Central  Government is  

that the revised price must be carried into effect insofar as the consumer is  

4 Union of India and Another v. Cynamide India Limited and Another; [(1987) 2 SCC 720] 17

Page 18

concerned. It is for the manufacturers and distributors to make appropriate  

arrangements how the unsold stock is dealt with.

36. As regards the circular of 28.04.1979, the submission of the  

learned Additional  Solicitor  General  is  that DPCO,1979 stands repealed  

and the so-called circular is not saved by the saving clause as it is not a  

thing done or action taken under the DPCO. Rather it is clarification of the  

DPCO itself and it cannot survive once the DPCO is repealed.  The circular  

of  28.04.1979  was  in  the  context  of  interpretation  of  DPCO,1970  and  

DPCO,1979 whereas the present matters are concerned with DPCO,1987  

and DPCO,1995. Relying upon a decision of this Court in  M/s. G.S. Dall   

and Flour Mills5, it is argued that an executive instruction issued in a certain  

context cannot govern a later notification. Moreover, it is submitted that if a  

circular provides an interpretation that runs contrary to the provisions of  

DPCO, the Court may examine the provisions and interpret them in their  

proper perspective. The circular is not binding on the court. The circular is  

not issued under any statutory authority and cannot be used to interpret the  

provisions of the statute.

37. It is  submitted that the circular is, in any event, inconsistent  

with the provisions of DPCO,1987 and DPCO,1995. It only represents the  

department’s view at the time which may have been erroneous.  There is  

no estoppel  against  statute.  In this regard, the decision of  this Court  in  

Bengal Iron Corporation and Another6 is relied upon.

5 State of Madhya Pradesh and another v. M/s. G.S. Dall and Flour Mills;[1992 Supp.(1) SCC 150] 6  Bengal Iron Corporation and another v. Commercial Tax Officer and Others; [1994 Supp.(1) SCC 310]

18

Page 19

38. It  is  also argued by the learned Additional  Solicitor  General  

that a circular which is contrary to the statutory provisions has no existence  

in  law.  Ratan Melting & Wire Industries7 is  pressed into  service  in  this  

regard. In any case, it is submitted that the manufacturer/distributor have  

not relied on the circular in good faith. In 1988, there is correspondence in  

the Glaxo between appellant and respondent where appellant was clearly  

put to notice that it was required to comply with notified price. Despite this  

correspondence, the appellant elected not to comply with the notified price.  

Thus, the appellant can hardly rely on the circular once the respondent has  

put forward a certain interpretation in 1998. The appellant was fully aware  

of the interpretation taken by the respondent and willfully elected to act in  

contravention of the DPCO. That being the case, the appellant cannot now  

act  oblivious  of  correspondence  in  1988  and  place  reliance  on  1979  

circular.

39. It is the submission of the learned Additional Solicitor General  

that the relabeling  is permitted under law. Earlier, issue of printing prices  

was governed by the Standards of Weights and Measures Act, 1976. Now  

it is governed by Legal Metrology Act, 2009. Legal Metrology (Packaged  

Commodities) Rules, 2011 (for short, ‘2011 Rules’) contains an exemption  

for pharmaceuticals  being cognizant of the fact that Government can fix  

prices at any time and such prices would need to be given effect to within  

the statutorily  prescribed  period.  Therefore,  relabeling  may be  required  

7  Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries; [(2008) 13 SCC 1] 19

Page 20

where there is a revision in price, and prevailing law specifically permits  

that by exempting price from the rigors of 2011 Rules.  

40. The Central Government is empowered by Section 3 of EC Act  

to make an order providing for controlling the price at which the essential  

commodity may be bought or sold.

41. A Committee on Drugs and Pharmaceuticals Industry (known  

as  the Hathi  Committee)  was  appointed  by  the Central  Government  to  

examine  the  various  facets  of  the  drug  industry  in  India  including  the  

measures taken so far to reduce prices of drugs for the consumer, and to  

recommend such further measures as may be necessary to rationalize the  

prices of basic drugs and formulations.  The Hathi Committee in its Report  

observed  that  there  was  no  justification  for  the  drug  industry  charging  

prices and having a production pattern which is based not upon the needs  

of the community but on aggressive marketing tactics and create demand.

42. Following the Hathi Committee Report, the Government first  

framed the statement on drug policy and then issued DPCO,1979.  The  

DPCO,1970  was  accordingly  repealed.  DPCO,1979  is  repealed  by  

DPCO,1987 and DPCO,1987 is repealed by DPCO,1995.

43. In order  to  have the proper  perspective  of  the matter,  it  is  

necessary  that  certain  provisions  of  the  DPCO,1995  are  surveyed.  

Paragraph  2  is  an  interpretation  clause,  it  defines  certain  expressions  

occurring in DPCO as under:

“2.   ………

20

Page 21

(a) “bulk drug” means any pharmaceutical, chemical, biological  or  plant  product  including  its  salts,  esters,  stereo-isomers  and  derivatives,  conforming  to  pharmacopoeial  or  other  standards  specified in the Second Schedule to the Drugs and Cosmetics Act,  1940(23 of 1940), and which is used as such or as an ingredient in  any formulation;

. . . . . . . . . .  . . . (d)   “dealer” means a person carrying on the business of purchase  or sale of drugs, whether as a wholesaler or retailer and whether or  not in conjunction with any other business and includes his agent; (e)   “distributor”  means a  distributor  of  drugs  or  his  agent  or  a  stockist appointed by a manufacturer or an importer for stocking his  drugs for sale to a dealer;

. . . . . . . . . . . . . (m)   “manufacturer” means any person who manufactures a drug;  

. . . . . . . . . . . . .  (r)   “price list” means a price list referred to in paras 14 and 15 and   includes a supplementary price list; (s)   “retail price” means the retail price of a drug arrived at or fixed  in  accordance  with  the  provisions  of  this  Order  and  includes  a  ceiling price; (t)   “retailer” means a dealer carrying on the retail business of sale  of drugs to customers; (u)   “scheduled bulk drug” means a bulk drug specified in the First   Schedule;

. . . . . . . . . . . (y)   “wholesaler”  means  a  dealer  or  his  agent  or  a  stockist  appointed  by  a  manufacturer  or  an  importer  for  the  sale  of  his  drugs to  a retailer,  hospital,  dispensary,  medical,  educational  or  research  institution  purchasing  bulk  quantities  of  drugs. . . . . . . . .. .”

44. Under paragraph 3, the Central Government is empowered to  

fix  price  of  the  bulk  drugs  for  regulating  the  equitable  distribution  of  

indigenously manufactured bulk drugs and the maximum price at which the  

bulk drug shall be sold.  Such fixation of maximum sale price of bulk drugs  

specified in the First Schedule has to be done by notification in the official  

gazette.  Once the Government exercises the power and fixes maximum  

sale price of bulk drugs specified in the First Schedule, there is ban to sell  

a bulk drug at a price exceeding the maximum sale price so fixed plus local  

21

Page 22

taxes,  if  any.  It  is  the obligation of  the manufacturer,  if  he commences  

production of the bulk drug after the commencement of the order, to furnish  

the details to the Government in Form I and any such additional information  

as  may  be  required  by  the  Government  within  15  days  of  the  

commencement of the production of such bulk drug.  If any manufacturer  

desires revision of the maximum sale price of a bulk drug fixed under sub-

paragraph  (1)  or  (4)  or  as  permissible  under  sub-paragraph  (3),  it  is  

permitted to make an application to the Government in Form I.

45. Insofar  as  a  retail  price  of  scheduled  formulations  is  

concerned, under paragraph 7, the Central Government is empowered to  

fix the same in accordance with the formula laid down therein. The method  

of calculation of retail price of formulation is clearly provided in paragraph  

7. With a view to enable the manufacturers of similar formulations to sell   

those formulations in pack size different to the pack size for which ceiling  

price has been notified under sub-paragraphs (1) and (2) of paragraph 9,  

manufacturers have to work out the price for their respective formulation  

packs  in  accordance  with  such  norms  as  may  be  notified  by  the  

Government from time to time. The manufacturer is required to intimate the  

price  of  formulation pack,  so worked out,  to  the Government  and such  

formulation pack can be released for sale only after the expiry of 60 days  

after such intimation. However, Government may, within its power, revise  

the price  so intimated  by the manufacturer  and upon such revision the  

22

Page 23

manufacturer is not permitted to sell such formulation at a price exceeding  

the price so revised.

46. Under paragraph 13, the Government has been conferred with  

the overriding power requiring the manufacturers, importers or distributors  

to deposit the amount accrued due to charging of prices higher than those  

fixed or  notified  by the Government under the DPCO,1987 and so also  

under DPCO,1995.

47. One  finds,  therefore,  that  the  price  fixation  by  the  Central  

Government under DPCO is in the nature of legislative measure and the  

dominant  object  and  purpose  of  such  price  fixation  is  the  equitable  

distribution and availability  of  commodities  at  fair  price.  The whole idea  

behind such price fixation is to control hoarding, cornering or artificial short  

supply and give benefit to the consumer. The regulation of drug price being  

ultimately for the benefit of the consumer, we must now consider the effect  

of paragraph 14(1),(2) and (3), paragraph 16 (3), paragraph 19 and Form  

V.

48. Paragraph 14 of DPCO,1995  makes provision for carrying out  

the effect of the price fixed or revised by the Government. Sub-paragraph  

(1)  of  paragraph 14  provides  that  every  manufacturer  or  importer  shall  

carry into effect the price of a bulk drug or formulation, as fixed by the  

Government, within fifteen days from the date of notification in the official  

gazette or receipt of the order of the Government by such manufacturer or  

importer. Does it mean that during this period of 15 days, it is open to the  

23

Page 24

manufacturer to manufacture and clear the bulk drug or formulation at pre-

notification prices?  We do not think so. In our view, sub-paragraph (1) of  

paragraph  14  does  not  deserve  to  be  given  a  construction  which  is  

derogatory to the object and scheme of DPCO,1995.  It is important to bear  

in mind that under paragraph 14(2), the manufacturer is required to print  

the  retail  price  of  the  formulation  on  the  label  of  the  container  of  the  

formulation.  This is expressed by the words “retail  price not to exceed”  

preceding it “local taxes extra” succeeding it. In our view, sub-para (2) of  

para  14  does  not,  in  any  manner,  support  the  contention  of  the  

manufacturer/distributor that upto to the expiry of the fifteenth day from the  

date of notification of the price fixation order in the official gazette or receipt  

of the price fixation order by the manufacturer, the manufacturer is at liberty  

to manufacture the formulation and print on them the pre-notification prices.  

49. The  true  import  of  paragraph  14(1)  is  that  once  the  price  

notification is gazetted, it takes effect immediately though its enforcement  

is  postponed by fifteen days to enable  the manufacturers and others to  

make suitable arrangements with regard to unsold stocks. We agree with  

learned Additional  Solicitor General  that the period of 15 days is simply  

a  grace  period  or  cooling  period  allowed  to  manufacturers  to  adjust  

their  business  in  a  manner  where  appropriate  arrangements  are  

made  with  regard  to  the  unsold  stocks  in  the  distribution  chain.  The  

argument of  the manufacturer or distributor,  if  accepted, that the stocks  

cleared by the manufacturer before the fifteenth day can be sold to the  

24

Page 25

consumer at the higher unrevised price then, in our view, that may result in  

same formulation being offered for  sale  to  a  consumer at  two different  

prices.  This  must  be  avoided  and,  therefore,  we  do  not  think  that  the  

interpretation put forth by Mr. S. Ganesh is reasonable.  It does not deserve  

acceptance.

50. Then, the interpretation to sub-paragraph (1) of paragraph 14  

urged on behalf of the manufacturer/distributor may also result in misuse by  

the manufacturer inasmuch as the manufacturer may increase manufacture  

of the bulk drugs during fifteen-day period of notified price and clear that  

stock at the unrevised/higher price. We are afraid, this interpretation will   

also lead to frustrating the regulatory regime which is sought to be put in  

place by DPCO.

51. The senior counsel for the manufacturer contends that under  

paragraph 15 of DPCO,1995, it  is incumbent to print the maximum retail  

price  on  the  product  and  that  too  indelibly.  There  is  no  provision  for  

reprinting of the labels or of return of drugs once they leave the factory  

premises. Thus, the batches which have been manufactured and stamped  

with old prices can continue to be sold at those prices. We do not find any  

merit  in  the  argument.  The  DPCO  defines  ‘dealer’,  ‘distributor’,  

‘manufacturer’,  ‘retailer’  and  ‘wholesaler’.  The  provisions  contained  in  

paragraphs 3,8, 9 and other relevant provisions clearly show that DPCO  

effectively  covers  the  chain  from  manufacture  of  the  bulk  drug  by  the  

manufacturer  to  sale  of  formulation  to  consumer  though there  may  be  

25

Page 26

several persons in the distribution chain.  The ultimate object of the DPCO  

is that there is no deception to a consumer and he is sold the formulation at  

a price not exceeding the price specified in the current price list or price  

indicated on the label of the container or pack thereof, whichever is less.  

Logically it follows that there cannot be two prices at the end point of the  

distribution  chain  depending  on  the  batch  number.  A  consumer  

approaching a chemist/retailer can hardly be offered two prices for the very  

same product based only on the difference in batch numbers. Consumer  

must get the benefit of the notified price. That is the ultimate objective of  

DPCO. The batch number cannot override the benefit to which a consumer  

is  entitled on price reduction of  a formulation.  A fair  reading of  DPCO  

leaves  no  manner  of  doubt  that  a  formulation  cannot  be  sold  to  the  

consumer at the higher price (for earlier batch numbers). In this view of the  

matter, we find merit in the submission of the learned Additional Solicitor  

General that the provisions of DPCO requires not just the end point sale to  

be at  the notified price,  but also every sale within the distribution chain  

must be at the notified price, if such sale is made after the date on which  

sale price is operative.

52. Paragraph  16  of  DPCO,1995  bans  sale  of  bulk  drug  or  

formulation to a consumer at a price exceeding the price specified in the  

current price list  or price indicated on the label  of the container or pack  

thereof whichever is less, plus all  taxes, if  any payable. The expressions  

‘current price list’  and ‘whichever is less’ in paragraph 16 are significant  

26

Page 27

expressions. We find ourselves in agreement with the submission of the  

learned Additional Solicitor General that the current price list is simply the  

price reflecting the currently operating notified price under the DPCO. Once  

a price is notified for a formulation, it takes effect immediately and sale of  

the formulation to the consumer has only to be at the notified price. This is  

the  plain  and  ordinary  meaning  of  paragraph  16.  The  expression,  

‘whichever is less’ further makes it an absolute obligation on all concerned  

not to sell  any formulation to any consumer at  a price  exceeding price  

specified  in  the current  price  list  or  price  indicated  on the label  of  the  

container or pack thereof whichever is less.

53. The requirement of issuance of a price list in Form V by the  

manufacturer to the dealers, State Drugs Controllers and the Government  

which mentions mandatorily effective batch number and the date thereof is  

of no real help in construction of paragraph 14.  Moreover, if the argument  

of Mr. S. Ganesh with reference to Form V that every price list is in respect  

of  “effective  batch  number”  only,  is  accepted,  it  may  have  effect  of  

overriding the entire scheme of DPCO.  In our view, this cannot be done.  

54. In  Cynamide India Limited4, though the Court was concerned  

with challenge to the notifications issued by the Central Government fixing  

the  maximum  prices  at  which  various  indigenously  manufactured  bulk  

drugs could  be  sold  under the DPCO,1979 but  the prefatory  statement  

made  by  this  Court  in  paragraph  2  is  worth  noticing.  In  paragraph  2  

(Pg. 733) of the Report, the Court observed:

27

Page 28

“2.  Profiteering,  by  itself,  is  evil.  Profiteering  in  the  scarce  resources  of  the  community,  much  needed  life-sustaining  foodstuffs  and  life-saving  drugs  is  diabolic.  It  is  a  menace  which  has  to  be  fettered  and curbed.  One of  the  principal  objectives of the Essential Commodities Act, 1955 is precisely  that. It must be remembered that Article 39(b) enjoins a duty  on the State towards securing ‘that the ownership and control  of the material resources of the community are so distributed  as best to subserve the common good’”.

55. We  are  of  the  considered  view  that  if  an  interpretation  of  

paragraph 14(1),(2)(3), paragraph 16(3) and paragraph 19 of DPCO,1995  

results in frustrating its object and leads to denial of the benefit of current  

notified price to the consumer, then such interpretation must be avoided.  

We, therefore, find it difficult to accept the construction put to the above  

provisions by Mr. S. Ganesh.

56. We  may now deal  with the circular  dated 28.04.1979 upon  

which heavy reliance has been placed by Mr. S. Ganesh, learned senior  

counsel  for  the  manufacturer/distributor.   It  is  true  that  the  principle  of  

contemporanea  expositio guides  that  contemporaneous  administrative  

construction, unless clearly  wrong, should be given considerable  weight  

and should not be lightly overturned but in light of the construction of the  

relevant provisions indicated by us above, the view in the circular cannot  

be followed and upheld.  

57. In  Usha  Martin  Industries3,  while  dealing  with  exemption  

notification issued under the Central Excises and Salt Act, 1944, this Court  

in paragraphs19 and 20 observed as follows:  

28

Page 29

“19. No doubt the court has to interpret statutory provisions  and notifications thereunder  as they are with emphasis to  the intention of the legislature. But when the Board made all   others  to  understand a notification  in  a  particular  manner  and when the latter have acted accordingly, is it open to the  Revenue to turn against such persons on a premise contrary  to such instructions? 20. Section 37-B of the Act enjoins on the Board a duty to  issue such instructions and directions to the excise officers  as  the  Board  considers  necessary  or  expedient  “for  the  purpose of uniformity in the classification of excisable goods  or with respect to levy of duty excised on such goods”. It is  true  that  Section  37-B  was  inserted  in  the  Act  only  in  December 1985 but that fact cannot whittle down the binding  effect  of  the  circulars  or  instructions  issued by the Board  earlier. Such instructions were not issued earlier for fancy or  as rituals.  Even the pre-amendment circulars  were issued  for  the  same purpose  of  achieving  uniformity  in  imposing  excise  duty  on  excisable  goods.  So  the  circular,  whether  issued before December 1985 or thereafter should have the  same binding effect on the Department.”

58. In  Indian Oil Corporation8,  this Court culled out the following  

principles in relation to the circulars issued by the Government under the  

fiscal laws (Income Tax Act and Central Excise Act) as follows:  

“1.Although  a  circular  is  not  binding  on  a  court  or  an  assessee,  it    is  not  open  to  the  Revenue  to  raise  a  contention that is contrary to a binding circular by the Board.  When a circular remains in operation, the Revenue is bound  by it and cannot be allowed to plead that is not valid nor that  it is contrary to the terms of the statute.  2. Despite the decision of this Court, the Department cannot  be  permitted  to  take  a  stand  contrary  to  the  instructions  issued by the Board. 3. A show-cause notice and demand contrary to the existing  circulars of the Board are ab initio bad.  4. It is not open to the Revenue to advance  an argument or  file an appeal contrary to the circulars.”  

59. The above legal position culled out in  Indian Oil Corporation8  

has been followed in Arviva Industries9.  

8 Commissioner of Customs, Calcutta and others v. Indian Oil Corporation Limited and Anr;     [(2004) 3  SCC 488]

9 Union of India v. Arviva Industries (I) Ltd.; [2007(209) E.L.T. 5 (S.C.)] 29

Page 30

60. In our view, it  is well  settled that if the departmental circular  

provides an interpretation which runs contrary to the provisions of law, such  

interpretation cannot bind the Court.  1979 circular falls in such category.  

Moreover, the 1979 circular is with reference to the DPCO,1979 whereas  

we  are  concerned  with  DPCO,  1987  and  DPCO,1995.  We  are  not  

impressed by the argument of Mr. S. Ganesh that in view of the saving  

clause in DPCO,1987, the circular is saved which is further saved by the  

saving clause in DPCO,1995.   

61. Mr.  S.  Ganesh,  learned  senior  counsel  for  the  

manufacturer/distributor  also  relied  upon  a  decision  of  this  Court  in  

Ranbaxy Laboratories1, wherein this Court had an occasion to interpret an  

exemption notification issued under paragraph 25 of the DPCO,1995. By  

the notification dated 29.08.1995, the exemption was granted to Ranbaxy  

in respect of Pentazocine and its formulations upto 31.10.1999.  This Court  

held  that the said  exemption was available  in respect of  such products  

manufactured  upto  31.10.1999,  even  though  the  same  might  be  sold  

afterwards.  It is argued that just as the exemption notification issued under  

Section  25  of  the  DPCO,1995  was  addressed  to  the  manufacturer,  

similarly,  a  price  fixation/revision  notification  is  also  addressed  to  the  

manufacturer who is required to effectuate the same by printing the revised  

price on all  products manufactured and cleared by him from the 15th day  

after the date of  the notification/receipt  of  the order,  and also issuing a  

revised  price  list  declaring  the  effective  batch  number  from  which  the  

30

Page 31

revised price will operate.  It is submitted that the reasoning of the Court in  

Ranbaxy  Laboratories1  is  directly  applicable  to  the  present  situation  

because the conceptual issue arising in both the cases is same.    

62. In  Ranbaxy  Laboratories1,  the  exemption  notification  dated  

29.08.1995 is reproduced in paragraph 20 of the Report which reads as  

follows:   

“S.O. No. 7153 (E), in exercise of the powers conferred by  sub-para (1) of Para 25 of the Drugs (Prices Control) Order,  1995, the Central Government having regard to the factors  specified in clause (e) of sub-para (2) of Para 25 of the said  Order and also having been satisfied for the need to do so  in  the  public  interest  hereby  exempts  the  bulk  drug  and  formulations based thereupon specified in Column 2 of the  Table  below  which  is  manufactured  by  the  Company  specified in the corresponding entry in Column 3 from the  operation of price control stipulated in sub-para (1) of Para  3, sub-para (1) of Para 8 and sub-para (1) of Para 9 of the  said  Order,  up  to  the  period  as  indicated  in  Column  4  thereof.

TABLE Sl. No. Name of the product Name of the company Period up to which the                                                                                   Exemption is granted                                                                        1    2    3         4   1. Pentazocine and its formulations    M/s Ranbaxy Laboratories Ltd.         31-10-1999”

63.          In paragraph 27 of the Report in Ranbaxy Laboratories1, this Court  

held as under:   

“27. The  court  while  construing  an  exemption  notification  cannot  lose  sight  of  the  ground  realities  including  the  process of marketing and sale. The exemption order dated  29-8-1995  is  clear  and  unambiguous.  By  reason  thereof  what  has  been  exempted  is  the  drug  which  was  manufactured by the Company and the area of exemption is  from the operation of the price control.  They have a direct  nexus.  They  are  correlated  with  each  other.  While  

31

Page 32

construing  an exemption  notification  not  only  a  pragmatic  view is required to be taken but also the practical aspect of  it.  A  manufacturer  would  not  know as  to  when  the  drug  would be sold. It has no control over it. Its control over the  drug would end when it is dispatched to the distributor. The  distributor may dispatch it  to the wholeseller.  A few others  may deal with the same before it reaches the hands of the  retailer. The manufacturer cannot supervise or oversee as to  how others would be dealing  with its  product.  All  statutes  have to be considered in light of the object and purport of  the  Act.  Thus,  the  decisions  relied  upon  by  the  learned  Additional  Solicitor  General  in  Union of India v.  Cynamide  India  Ltd.;  Prag  Ice  &  Oil  Mills v.  Union  of  India,  Shree  Meenakshi Mills Ltd. v.  Union of  India and  Panipat Coop.   Sugar Mills v. Union of India will have no application.”

64. The issue before us is  quite  different  and,  in  our view,  the  

judgment  of  this  Court  in  Ranbaxy Laboratories1 does  not  apply  to  the  

present  controversy  for  more  than  one  reason.  First,  in  Ranbaxy  

Laboratories1,  the  Court  was  concerned  with  the  exemption  notification  

issued  under  paragraph 25  of  the  DPCO,1995  whereas  in  the  present  

matters, the issue centres around paragraphs 14,16 and 19 of that DPCO.  

Second, the notification under consideration in Ranbaxy Laboratories1 was  

an exemption notification and not a notification for fixation of price.  Third,  

the exemption notification is  relatable  to  the manufacturer  to  the drugs  

whereas price fixation notification is related to sale of drug/formulation at a  

given price.  

65.   The Delhi High Court in the impugned order has relied upon  

1979  circular  and further  held  that  1979 circular  was  in  the context  of  

paragraph 19(1)  of  DPCO,1979,  which is  almost  identical  to  paragraph  

16(3) of DPCO,1987 and, therefore, the circular explaining the position in  

32

Page 33

respect of the DPCO,1979 would continue to hold the field in respect of the  

very same provisions in DPCO,1987.  We are unable to accept the view of  

the Delhi  High Court  for  the reasons which we have already discussed  

above.  Moreover,  the  Delhi  High  Court  has  gone  more  by  practical  

difficulties which a manufacturer may suffer and completely overlooked the  

scheme of the DPCO which is intended to give benefit to the consumer of  

the reduced current price of the formulation. It is pertinent to notice that  

Delhi High Court distinguished the view of the Karnataka High Court and  

observed as follows:  

“We agree with the submissions made by Mr. Ganesh  that the   Karnataka High Court decision did not consider  Form 5 nor its reference to “Effective Batch No.”.  Nor  did the said decision refer to the Circular of 1979 which  we have already indicated to be applicable to the DPCO  1987 also.  We,  therefore, do not agree with the view  adopted  by  the  Karnataka  High  Court.   In  fact,  the  Supreme  Court  decision  cited  by  Mr.  Ganesh clearly  recognizes the practical aspects of pricing in the context  of time lags.  Once the reality of time lags in the process  of  manufacture,  clearance,  distribution  and  sale  is  recognised, the importance of ‘Effective Batch Nos.’ as  mentioned in Form 5 comes to the fore.  The Effective  Batch No. represents the cut-off for the new pricing.  The  seizure memo which is impugned herein relates to Batch  No. BT 3104 (for 300mg tablets) which is prior to the  “Effective Batch No. BT 3115”.  The said seizure was,  thus, in respect of tablets which had been manufactured  prior  to  the “effective”  Batch No.  BT 3115 which,  we  have explained above, is to be taken as the cut-off point  insofar as the new prices are concerned.”

66. The  above  view  of  the  Delhi  High  Court  is  fundamentally  

flawed  and  clearly  wrong  in  light  of  our  foregoing  discussion.   The  

Karnataka High Court has taken the correct view and the same is upheld.

33

Page 34

67. We,  accordingly,  dismiss  the  appeals  preferred  by  the  

manufacturer/distributor and allow the appeals of the Union of India.  The  

parties shall bear their own costs.  

..……………………J.  (R.M. Lodha)

…. …………………..J. (Kurian Joseph)

New Delhi, December 09, 2013

34