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REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  5117    OF 2013 (ARISING OUT OF SLP(C) NO.11107  OF 2012)

UNION OF INDIA AND ANOTHER    … APPELLANTS

VERUS

M/S. SWISS GARNIER LIFE SCIENCES & ORS.          … RESPONDENTS

WITH

CIVIL APPEAL NO.    5118       OF 2013 (ARISING OUT OF SLP(C) NO.11108  OF 2012)

UNION OF INDIA AND ANOTHER          … APPELLANTS

VERUS

M/S. MARS THERAPEUTICS AND  CHEMICALS LIMITED                       … RESPONDENT

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

Leave granted. These appeals are preferred by the Union of India  

and  others  against  the  common  judgment  dated  15th March,  2011  

passed by the Division Bench of the Delhi High Court in LPA No. 634 of  

2010 with LPA No.790 of 2010. By the impugned judgment the Division

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Bench affirmed the order dated 19th May, 2010 passed by the learned  

Single  Judge  of  the  Delhi  High  Court  in  W.P.(C)No.10277  with  W.P.

(C)No.12958  of  2009  and  dismissed  the  appeals  preferred  by  the  

appellants.  

2. The respondents filed the aforesaid two writ petitions challenging  

the  price  fixation  Notifications  dated  30th April,  2009  and  17th  

November,  2009  whereby  the  Government  had  fixed  the  prices  of  

“Doxofylline formulations” in exercise of power conferred under paras 9  

and 11 of the Drugs (Prices Control) Order, 1995 (hereinafter referred  

to  as  ‘DPCO,  1995’  for  short).  Learned  Single  Judge  set  aside  the  

Notifications aforesaid and held that ‘Doxofylline’  is not a bulk drug  

within the meaning ascribed to it under para 2(a) of the DPCO, 1995.

3. The factual matrix of the case is as follows:

On 14th May, 2008 an article appeared in the Newspaper ‘THE  

HINDU’,  regarding the sale of ‘Doxofylline formulations’  as a part of  

tactics  to  replace  less  profitable  price  controlled  products  i.e.  

‘Theophylline’ with huge profitable alternatives of the same class. The  

article captioned – ‘Drug companies chasing profits, cheating patients;  

Costlier asthma drugs duck curb, hit market’ wherein the Editor of the  

Medical Journal, Monthly Index of Medical Specialties, Dr. C.M. Gulati,  

while giving various reasons for the real reason for ‘Doxofylline’ entry

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into the country, stated that ‘Doxofylline’ was being offered as a more  

profitable alternative to Theophylline. Further, by successive orders in  

2006, all loopholes to sell Theophylline products at high profit margins  

have  been  closed  by  the  National  Pharmaceutical  Pricing  Authority  

(NPPA),  the  body  that  monitors  medicine  prices  in  India.  Therefore,  

nearly  all  companies  selling  Theophylline  formulations  have  been  

scouting  for  similar  molecules  outside  the  price  control  system  

irrespective of  whether  they are  similar,  better  or  even worse than  

their current brands. It was alleged that the core issue is profits, not  

patients.

4. In  the  light  of  aforesaid  newspaper  report  and  complex  of  

consideration  implied  in  the  DPCO,  1995,  on  22nd July,  2008,  the  

appellants wrote to all the Doxofylline formulation manufactures asking  

them to provide reasons as to why ‘Doxofylline’ should not be classified  

as derivative of Theophylline. Since the requisite information was not  

furnished by the manufacturers /formulators, including the respondents  

herein,  and  Industry  Associations  even  after  a  lapse  of  substantial  

time, and the matter being significant, they were once again reminded  

by the appellants vide letter dated 16th September, 2008 to furnish the  

reply latest by 30th September, 2008.

5. The matter was then considered by Technical Committee of the  

NPPA(2nd appellant).  The  Technical  Committee  decided  to  seek  the

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experts opinion of the Indian Institute of Science, Bangalore (IISc for  

short) on whether ‘Doxofylline’ is a derivative of ‘scheduled bulk drug’  

Theophylline. The IISc, Bangalore, vide their letter dated 23rd January,  

2009, informed the appellants that ‘Doxofylline’, is in fact, a derivative  

of scheduled bulk drug - Theophylline.  

6. On the advice of the IISc, Bangalore, it was decided by the 2nd  

appellant to fix the price of ‘Doxofylline formulations’. A letter dated  

17th February,  2009  was  addressed  by  2nd appellant  to  all  known  

manufacturers  of  the Doxyfylline formulations seeking details  of the  

purchase price of the bulk drug ‘Doxofylline’ necessitated for fixation of  

price of the ‘Doxofylline formulation’.  

As per provisions and paras 4 and 5 of the DPCO, 1995, all the  

manufacturers  of  the  bulk  drugs  are  required  to  furnish  details  of  

manufacture,  sales  and  cost  of  different  bulk  drugs  including  non-

scheduled bulk drugs to the NPPA. However, none of the manufacturers  

of  the  bulk  drug  ‘Doxofylline’  complied  with  the  mandatory  

requirement of DPCO provisions. In absence of the required information  

from  the  manufacturers  of  bulk  drug  ‘Doxofylline’,   2nd appellant  

considered  the  price  of  the  ‘Doxofylline’,  based  on  best  available  

information in terms of para 11 of the DPCO, 1995. Accordingly, the  

prices of the ‘Doxofylline formulations’ were fixed by 2nd appellant vide

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Notification  Nos.S.O.1124(E)  and  S.O.1084(E),  both  dated  30th April,  

2009, as per the provisions of paras 9 and 11 of the DPCO, 1995.

7. The  2nd Appellant,   vide  their  letter  dated  14th May,  2009  

requested the IISc, Bangalore for specific views of  IISc on the issue  as  

to whether ‘Doxofylline’ is a salt or ester or stereo-isomer or derivative  

of the bulk drug Theophylline.  

8. In  the  meantime,  the  respondents,  who  are  manufacturers  of  

‘scheduled formulations’ of ‘Doxofylline’, filed applications for review,  

both dated 19th May, 2009 under para 22 of DPCO, 1995 against the  

notifications aforesaid. Therefore, the appellants, vide their letter dated  

25th May,  2009  addressed  to  the  Director,  National  Institute  of  

Pharmaceutical  Education and Research (NIPER), SAS Nagar, Punjab,  

requested  them  to  give  expert  advice  as  to  whether  the  drug  

‘Doxofylline’  was a new chemical  entity/new drug or a derivative of  

Theophylline. The respondents were also given opportunity of hearing  

on 9th June, 2009 to discuss the said review applications.

9. During  the  pendency  of  the  review  applications  aforesaid,  by  

letter dated 28th May, 2009, the IISc clearly opined that ‘Doxofylline’ is  

a ‘derivative’ of Theophylline.   

The Director, NIPER, Professor P. Rama Rao, vide his letter dated  

1st June, 2009 also opined that:

“1. Drug Doxofylline is a new chemical entity/new drug.

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2. Drug Doxofylline is a derivative of Theophylline.”

Going through the review applications filed by the respondents-

companies and after giving them hearing, 1st appellant passed an order  

on 2nd July,  2009 directing 2nd appellant to consider the cost of raw  

material Doxofylline used in the formulations whose prices have been  

fixed  by  Notifications  dated  30th April,  2009  in  respect  of  the  

Doxofylline  formulations  either  by  obtaining  the  cost  of  Doxofylline  

from  the  respondents  or  by  fixing  the  cost  of  Doxofylline  by  the  

authority.

10. Aggrieved  by  the  review order  dated  2nd July,  2009 passed in  

review applications, the respondents approached the Delhi High Court  

by filing writ petitions. During the pendency of the writ petitions, 2nd  

appellant requested the Pharma Industry Associations, i.e., Indian Drug  

Manufacturers’  Association  (IDMA),  Organisation  of  Pharmaceutical  

Producers  of  India  (OPPI)  and the Indian Pharmaceutical  Association  

and  8  known  bulk  drug  manufacturers  to  send  the  cost  details  of  

Doxofylline bulk drug, within a stipulated period. A reminder was also  

issued on 31st August, 2009.  Twelve known manufacturers including  

M/s Lupin Ltd. were requested on 11th August, 2009 to furnish the data  

I  Form-III  for the fixation of price of Doxofylline. Appellant No.2 also  

requested  the  manufacturers  on  9th October,  2009  to  furnish  the

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detailed information in Form-III  of  the DPCO, 1995 in respect of the  

revision in the price fixation of the Doxofylline based formulation.

11. In  line  with  the  review  order  of  the  Department  of  

Pharmaceuticals and in view of the fact that the prices of Doxofylline  

formulation were very high in the market, 2nd appellant  decided that  

the  prices  of  bulk  drug  Doxofylline  may  be  fixed  on  the  basis  of  

available information under para 3 and para 11 of DPCO, 1995 to bring  

down the  prevailing  market  price  of  Doxofylline  based  products  for  

consumers/patients and also  to provide a reasonable incentive to the  

manufacturers by giving a better price than that of Theophylline. Vide  

Notification dated 17th November, 2009 upward price revision had been  

carried  out,  based  on  maximum  sale  price  of  Rs.1487/kg  for  the  

Doxofylline bulk drug (as against the earlier adopted price of Rs.512/kg  

based  on  notified  price  of  bulk  drug  Theophylline)  in  respect  of  

Doxofylline formulations including those which were fixed/notified on  

30th April, 2009.

12. Subsequent notification was also challenged by the respondents  

before the High Court and the learned Single Judge by judgment dated  

19th May,  2010 allowed the writ  petitions  with  cost  of  Rs.5,000/-  in  

favour  of  the respondents  which has been affirmed by the Division  

Bench of the High Court.

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13. Ms. Indira Jaising, learned Additional Solicitor General, appearing  

for the appellants submitted as follows:

(a) Doxofylline is  a  bulk  drug  within  the  meaning  of  para  2(a)  of  DPCO,  1995,  therefore,   maximum sale price of such bulk drug can be notified   under para 3 and sale price of formulations based on  such bulk drug can be notified under para 9 of DPCO,   1995.

(b) Doxofylline  is  a  derivative  of  Theophylline,  it   comes  within  the  meaning  of  bulk  drug.  The  salts,   esters,  stereo-isomers  and  derivatives  of  any  bulk   drug also  come within  the  meaning of  para  2(a)  of   DPCO, 1995.

(c) If  the  pharmaceutical,  chemical,  biological  or   plant  product  conforms  the  requirement  of  Second  Schedule of the Drugs and Cosmetics Act, 1940, it also   applies  to  every  salts,  esters,  stereo-isomers  and  derivatives of pharmaceutical, chemical, biological or   plant  product.  But  salts,  esters,  stereo-isomers  and   derivatives of bulk drug need not require to be listed  separately  in  First  Schedule  of  DPCO,  1995,  if  the   pharmaceutical, chemical, biological or plant product   is listed in the First Schedule.  

14. On  behalf  of  the  respondents  the  following  broad  contentions  

were advanced:

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(1) Doxofylline  is  a  new  drug,  and  has  been  considered as a new drug by the authority under Rule   122B of the D & C Rules. Doxofylline was previously a   patented drug (for which patent has now expired), and   therefore  clearly  meets  the  test  of  novelty  etc.  It   cannot,  therefore,  be  considered  a  derivative  of   Theophylline; (2) Even  if  Doxofylline  is  considered  to  be  a  derivative,  it is not a bulk drug as it is not mentioned   in  any  official  Pharmacopoeia.  Under  para  2(a)  of   DPCO,  even  salts,  esters,  stereo-isomers  and  derivatives must conform to the standards laid down   in Second Schedule of the Drugs and Cosmetics Act,   (i.e., being listed in pharmacopoeia); (3) Even if Doxofylline is considered as a bulk drug it   is not a ‘scheduled bulk drug’ within the meaning of   para 2(u) as it is not specified in the First Schedule of   DPCO. As such it is not amenable to price control; and  (4) Doxofylline  can  only  be  tamenable  to  price   control  if  it  meets  the price  criteria  set  out  in para   22.7-2. “Span of Control” in the New Drug Policy of   1994.  

15. The contentions which found favour with the High Court are:  

(i) Doxofylline  does  not  conform  the  pharmacopoeial  or  other  

standards  specified  in  the  Second  Schedule  to  the  Drugs  and  

Cosmetics Act, 1940. Therefore, Doxofylline could not be regarded as a

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‘bulk drug’ on the dates on which the impugned judgment/notifications  

were issued.

(ii) The definition of ‘scheduled formulation’ [para 2(v) of the DPCO,  

1995] indicates that the expression - ‘scheduled formation’ refers to a  

formulation containing any bulk drug specified in the First  Schedule  

either  individually  or  in  combination  with  other  drugs  etc.  As  

Doxofylline is not specified in the First Schedule of DPCO, 1995, the  

Doxofylline formulation cannot be regarded as scheduled formulation  

and consequently would not be covered under para 9 of the DPCO,  

1995 for fixing the ceiling price for such formulation.  

(iii) Theophylline is not contained in the Doxofylline formulation either  

independently  or  in  combination  with  other  drugs.  Therefore,  

Doxofylline formulation contains Doxofylline and not Theophylline and  

for that Doxofylline formulations are not covered under the expression  

scheduled formulation appearing in para 2(v) of DPCO, 1995.

16. The  High Court  did  not  feel  it  necessary  to  go  into  the  issue  

whether the impugned Notifications were issued after satisfaction of  

the criteria specified in para 22.7-2 of the New Drug Policy.

17. The questions involved in these cases are:

(a)Whether ‘Doxofylline’ is a bulk drug within the meaning of   para 2(a) of DPCO, 1995;

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(b)Whether ‘Doxofylline’ is a ‘schedule bulk drug’ within the   meaning of para 2(u) of DPCO, 1995 ; and

(c)Whether ‘Doxofylline’ is a “scheduled formulation” within  the meaning of para 2(v) of  DPCO, 1995; and

(d)Whether the appellant has power to fix the ceiling price   

or revise the price of Doxofylline under paras 9 and 10 of   

DPCO, 1995 ?  

18. For determination of the above stated issues it is necessary at  

this stage to notice the broad features of the DPCO, 1995, as discussed  

below:  

In exercise of powers conferred under Section 3 of the Essential  

Commodities Act, 1955, the Central Government made order, namely,  

the  Drugs  (Prices  Control)  Order,  1995.  It  repealed  the  earlier  the  

Drugs  (Prices  Control)  Order,  1987.  It  was  so  issued  to  control  the  

prices of the essential drugs including life saving drugs. Para 2 is the  

definition clause. Bulk drug is defined in para 2(a) as under:

“2(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;”

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Whereas para 2(f) defines “drug”, In this case, we are concerned  

with  para  2(f)(iii)  which  indicates  “drug”  includes  “bulk  drugs  and  

formulations”. The same is quoted hereunder:  

“2(f)(iii). “bulk drugs and formulations”

Then comes to what is defined as “formulation” in para 2(h) and  

reads as follows:

“2(h).’formulation’ means a medicine processed out of, or   containing one or more bulk drug or drugs with or without   the use of any pharmaceutical aids, for internal or external   use  for  or  in  the  diagnosis,  treatment,  mitigation  or   prevention of disease in human beings or animals, but shall   not include-  

(i)  any medicine included in any bona  fide   Ayurvedic  (including  Sidha)  or  Unani  (Tibb)   systems of medicines;

(ii)  any  medicine  included  in  the  Homoeopathic system of medicine; and

(iii) any substance to which the provisions of   the  Drugs  and  Cosmetics  Act,  1940  (23  of   1940) do not apply;”

Para 2(u) defines ‘scheduled bulk drug” in the following manner:

“2(u) ‘scheduled bulk drug’ means a bulk  drug specified in the First Schedule;”

Whereas “scheduled formation” is defined in para 2(v) as follows:

“2(v)  ‘scheduled  formulation’  means  a  formulation  containing  any  bulk  drug  specified  in  the  First  Schedule  either   individually or in combination with other   drugs,  including  one  or  more  than  one  drug  or  drugs  not  specified  in  the  First   Schedule  except  single  ingredient  formulation based on bulk drugs specified  

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in the First Schedule and sold under the  generic name;”

19. From the aforesaid definitions,  we find that for the purpose of  

coming within  the meaning of  bulk  drug,  pharmaceutical,  chemical,  

biological  or  plant  product  including its  salts,  esters,  stereo-isomers  

and derivatives should conform to pharmacopoeial or other standards  

specified  in  the  Second  Schedule  to  the  Drugs  and  Cosmetics  Act,  

1940, while for the purpose of coming within the purview of “scheduled  

bulk drug” within the meaning of para 2(u) or “scheduled formulation”  

within the meaning of  para 2(v),  it  is  not necessary to refer  to the  

Second Schedule of the Drugs and Cosmetics Act, 1940, the bulk drug  

is specified in the First Schedule of DPCO, 1995.

20. We will now move into para 3 which relates to power to fix the  

maximum sale  prices  of  bulk  drugs  specified  in  the  First  Schedule,  

which reads as follows:

“3. Power to fix the maximum sale prices of  bulk  drugs  specified  in  the  First  Schedule.- (1)The Government may, with a view to regulate the  equitable  distribution  and  increasing  supplies  of  a   bulk drug specified in the First Schedule and making   it  available  at  a  fair  price,  from  different   manufacturers,  after  making  such  inquiry  as  it   deems fit, fix from time to time, by notification in the   Official Gazette, a maximum sale price at which such   bulk drug shall be sold:  

          Provided that for the purpose of enquiry, in   addition to the information required to be furnished

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by  the  manufacturers  under  this  Order,  the   manufacturers  shall  provide  any  such  additional   information as may be required by the Government,   and shall allow for inspection of their manufacturing  premises for verification through on the spot study of   manufacturing processes and faculties and records   thereof, by the Government.

     (2)While fixing the maximum sale price of a bulk   drug under sub-paragraph (3), the Government shall   take into consideration a post-tax return of fourteen  per  cent  on  net  worth  or  a  return  of  twenty-two  percent on capital employed or in respect, of a new   plant  an  internal  rate  of  return  of  twelve  per  cent   based on long term marginal costing depending upon  the option for any of the specified rates of return that   may be exercised by the manufacturer of a bulk drug:  

      Provided that where the production is from basic   stage, the Government shall take into consideration a   post-tax return of eighteen percent on net worth or a   return of twenty-six percent on capital employed :  

   Provided further that the option with regard to the   rate of return once exercised by a manufacturer shall   be final and no change of rates shall be made without   the prior approval of the Government.

   (3)No person shall  sell  a  bulk  drug at  a  price   exceeding the maximum sale price fixed under sub- paragraph (1) plus local taxes, if any:  

   Provided that until the price of a bulk drug is fixed,   by the Government under sub-paragraph (1), the price   of such bulk drug shall be the price which prevailed  immediately before the commencement of this Order   and the manufacturer of such bulk drug shall not sell   the bulk drug at a price exceeding the price prevailing   immediately before the commencement of this Order.

  (4)Where, after the commencement of this Order,   any manufacturer commences Production of any bulk   drug specified  in  the  First  Schedule,  he shall  within   fifteen days of  the commencement of  production of   such bulk drug, furnish the details to the Government   in Form I, and any such additional information as may  be required by the Government and the Government   may after receipt of the information and after making   such inquiry as it may deem fit, may fix the maximum  sale price of bulk drug by notification in the Official  

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Gazette.

 (5)Any manufacturer,  who 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),  as  the  case  may be,  shall  make  an   application  to  the  Government  in  Form  1,  and  the  Government  shall  after  making  such  inquiry,  as  it   deems fit within a period of four months from the date   of  receipt of  the complete information, fix a revised  price for such bulk drug or reject the application for   revision for reasons to be recorded in writing.”

In  the  present  case,  it  is  not  necessary  for  us  to  go  into  the  

details of para 4 and para 5 except to state that the manufacturers  

producing “scheduled bulk drugs” are required to furnish details under  

para  4  as  per  the said  order  to  the Central  Government.  Similarly,  

manufacturers  of  “non-scheduled  bulk  drugs”  are  also  required  to  

furnish details as per para 5 to the Central Government.

We will now deal with the special provisions relating to “fixation  

of price” as provided under para 9 and 11, which read as follows:

9. Power to fix ceiling price of Scheduled  formulations.-  (1)Notwithstanding  anything  contained in this Order, the Government may, from  time to time, by notification in the Official Gazette,   fix  the  ceiling  price  of  a  Scheduled  formulation  in  accordance with the formula laid down in paragraph  7, keeping in view the cost or efficiency, or both, of   major  manufacturers of  such formulation and such  price shall  operate as the ceiling sale  price for  all   such packs including those sold under generic name  and for every manufacturer of such formulations.  

(2)The  Government  may,  either  on  its  own  motion or on application made to it in this behalf by   a manufacturer in Form III  or Form IV, as the case   may be, after calling for such information as it may  consider  necessary,  by  notification  in  the  Official  

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Gazette, fix a revised ceiling price for a Scheduled   formulation.  

(3)With a view to enabling the manufacturers  of similar formulations to sell those formulations in   pack size different to the pack size for which ceiling   price has been notified under the sub-paragraphs (1)   and (2), manufacturers shall work out the price for   their  respective  formulation  packs  in  accordance   with  such  norms,  as  may  be notified  by  the  Government, from  time  to  time,  and  he  shall   intimate  the  price  of  formulation  pack,  so  worked   out, to the Government and such formulation packs   shall  be  released for  sale  only  after  the  expiry  of   sixty days after such intimation.  

Provided  that  the  Government  may,  if  it   considers  necessary,  by  order  revise  the  price  so   intimated  by  the  manufacturer  and  upon  such  revision,  the  manufacturer  shall  not  sell  such  formulation at a price exceeding the price so revised.   

Explanation -  For  the  purpose  of  this   paragraph  the  "Scheduled  formulation"  includes   single  ingredient  formulation  based  on  bulk  drugs   specified  in  the First  Schedule  and sold under the   generic name.”

11.   Fixation  of  price  under  certain  circumstances.  -   Where  any  manufacturer  or  importer of bulk drug or formulation fails to submit   the application for price fixation or revision, as the  case may be, or to furnish information as required  under this Order, within the time specified therein,   the  Government  may,  on  the  basis  of  such  information as may be available with it, by order fix a  price in respect of such bulk drug or formulation as   the case may be.”

21. First  Schedule  of  the  DPCO,  1995  indicates  the  ‘bulk  drugs’  

recognised  by  the  Government.  There  are  75  Bulk  Drugs  shown  

therein. At Serial No.34 “Theophylline” has been shown as one of the  

bulk drugs for the purpose of para 2 and 3. ‘Doxofylline’ as such has

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not been shown as one of the bulk drugs in the First Schedule of the  

DPCO, 1995.

22. The  Second  Schedule  of  the  Drugs  and  Cosmetics  Act,  1940  

provides “Standards to be complied with by imported drugs and  

by drugs manufactured for sale, stocked or exhibited for sale   

or distributed”. The class of drugs and the standards to be complied  

with has been shown therein. For the purpose of the present case, we  

would refer Item Nos.1 and 5 of the class of drug and standards to be  

complied with, which read as under:

“THE SECOND SCHEDULE (See sections  8 and 16)

STANDARDS TO BE COMPLIED WITH BY IMPORTED DRUGS AND BY  DRUGS MANUFACTURED FOR SALE, STOCKED OR     EXHIBITED FOR  

SALE OR DISTRIBUTED

    Class  of  drug  

Standard to be complied with 1.   Patent or proprietary  medicines       [other than Homoeopathic          medicines]

5.   Other drugs-

 (a) Drugs included in the        Indian  Pharmacopoeia

The  formula  of  list  of  ingredients  displayed in the prescribed manner  on the label or container and such  other  standards  as  may  be  prescribed.

Standards  of  identity,   purity  and  strength specified in  the edition of  the  Indian  Pharmacopoeia  for  the  time being in force and such other  standards as may be prescribed.      In case the standards of identity,  purity and strength for drugs are not  specified in the edition of the Indian  Pharmacopoeia for the time being in  force but are specified in the edition

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(b)  Drugs  not  included   in  the  Indian  Pharmacopoeia but which  are  included   in   the  official  Pharmacopoeia  of  any other country.

of  the  Indian  Pharmacopoeia  immediately  preceding  the  standards  of  identity,  purity  and  strength shall be those occurring in  such immediately preceding edition  of  the  Indian  Pharmacopoeia  and  such  other  standards  as  may  be  prescribed.  

Standards  of  identity,  purity  and  strength  specified  for  drugs  in  the  edition of such official Pharmacopoeia  of  any  other  country  for  the  time  being  in  force  and  such  other  standards  as  may  be  prescribed.  In  case the standards of identity, purity  and  strength  for  drugs  are  not  specified in the edition of such official  Pharmacopoeia  for the time being in  force, but are specified in the edition  immediately preceding the standards  of  identity, purity and strength shall  be  those  occurring  in  such  immediately preceding edition of such  official Pharmacopoeia and such other  standards as may be prescribed.

23. According to the respondents ‘Doxofylline’ is a new drug; it is not  

a  ‘bulk  drug’  as  ‘Doxofylline’  is  not  mentioned  in  the  official  

pharmacopeia.  Even  salts,  ester,  stereo-isomers  and  derivatives  of  

Doxofylline do not conform to the standards laid down in the Second  

Schedule to the Drugs and Cosmetics Act, 1940. ‘Doxofylline’ cannot  

be considered as a derivative of ‘Theophylline’.  

24. In answer to this, the stand of the appellants is that ‘Doxofylline’  

is derivative of Theophylline, therefore, by virtue of being a derivative,  

ipso facto, is itself a bulk drug.

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25. In  view of  such stand taken by the parties,  it  is  necessary  to  

decide  on  the  question  whether  the  ‘Doxofylline’  is  a  derivative  of  

‘Theophylline’.

In reply to a letter written by the Department of Chemical and  

Petro-Chemicals, Ministry of Chemical and Fertilizer, New Delhi dated  

5th December, 2008 in connection with Doxofylline as a derivative of  

Theophylline, Indian Institute of Science, Bangalore vide letter dated  

23rd January, 2009 informed that Doxofylline, was in fact, a derivative  

of scheduled drug Theophylline.  The said letter is quoted herein:

“Dear Mr. Jagdish Kumar

Thank you for  your  letter  of  December  5,  2008 in   connection  of  Doxophylline  as  a  derivative  of   Theophylline  a  scheduled  bulk  drug  under  DPCO  1995.

I  have  gone  through  the  structures  of  both  the  compounds  and  the  methods  of  preparation  of   Doxophylline  from  Theophylline.   My  recommendation is as follows.

While Doxophylline is a new compound it is prepared  by N-alkylation of Theophylline by treatment with 2- boromethy -13- dioxalane. Instead of replacement of   hydrogen with methyl or ethyl or propyl group it is   being  replaced  by  1.3  dixalan  2-yl  methyl  group.   Therefore  it  should  be  considered  as  an  N-alkyl   derivative of Theophylline.

My  recommendation  is  that  Doxophylline  is  a  derivative  of  scheduled  drug  Theophylline.  If  you  need  any  others  clarification  feel  free  to  in  tough   with me.

With kind regards (SD) S. Chandrasekartan.”

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26. The National Institute of Pharmaceutical Education and Research  

(NIPER) by its letter dated 1st June, 2009 informed as follows:

“After  going  through  your  letter  and  the  information as provided by Prof. A.K. Chakraborti,  I   am of the opinion that:

1.Drug Doxofylline is a new chemical entity/new  drug. 2.Drug  Doxofylline  is  a  derivative  of   Theophylline.”

27. The  aforesaid  opinions  of  the  experts  of  Indian  Institute  of  

Science  (IISc),  Bangalore,  and  Director,  National  Institute  of  

Pharmaceutical  Education  and  Research  (NIPER)  have  not  been  

disputed by the respondents.  

28. In the present case, what we find is that the present stand taken  

by  the  respondents  is  contrary  to  their  stand  taken  before  the  

authorities while they applied for grant of registration of Doxofylline  

400  mg.  tablets.  The  record  as  enclosed  by  the  respondent-Mars  

Therapeutics Ltd. reveals the following facts:

(i) Application for grant of registration of Doxofylline 400 mg.   tabs.  formulation  was  filed  on  3rd October,  2003.  Therein  the  respondents enclosed a number of documents including reports   in its support. Item No.3 is “a copy of the letter from M/s. Suven   Pharmaceuticals  Ltd.,  Hyderabad  relating  to  supply  of  ‘Bulk  Drug  Doxofylline’.  This  shows  that  the  respondents  had  knowledge that Doxofylline is a bulk drug.

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(ii)   In  Form-44  the  composition  of  the  formulation  of   Doxofylline  400  mg.  as  shown  at  Serial  No.8  the  active   ingredients  and inactive ingredients  as Annexure I  and II  and   which is specification and standard test procedures over ‘active   and inactive ingredients’. The analytical control schedule shows  that Doxofylline is the ingredient of Theophyllin and the relevant   portion of the same is extracted below:

“7-Theophyllin  acetaldehyde <0.2%      Theophylline  2.91-    0.5%     Theophyllinemethyl – 1.3-dioxolane”

(iii) Under  the  heading  denomination  while  common  denomination has been shown “Doxofylline” ,  which has been   mentioned as follows:

“Denomination

Common denomination Doxofylline

Systematic  demonation  :  2-7’  –  Theophyllinemethyl-1,3-

dioxolane”

(iv) In  Annexure  II  attached  with  Form  44  Chemical   Pharmaceutical information has been supplied therein. Chemical   information has been shown as follows:

“Name of the material/Code:Doxofylline Category:Finished  Formulation

Chemical Information General Name         Doxofylline Chemical Name (s)         2-7’ –Theophyllinemethyl-1.3- dioxolane”

(v)  On the Toxicological  and  Pharmacological  (Pre-Clinical)   documentation of  ‘Doxofylline’ has been shown in the expert  

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report enclosed with Form 44, relevant portion of which reads as   follows:

“1. INTRODUCTION

Doxofylline  or  2(7’-theophyllinmethyl)-1.3”dioxolane  is  a   theophylline derivative with the following structural formula:

Doxofylline was synthesized with the aim of reducing the typical   theophylline  side  effects,  without  affecting  antibronchospastic   and  bronchodilator  effects  that  are  the  main  pharmacological   activities of methylxanthines useful for the therapy of asthma.”

From  the  expert  opinion  of  IISc  and  NIPER  which  has  been  

submitted by the appellants, details enclosed by the respondent- Mars  

Therapeutics  Ltd.  with  their  Form 44,  and  the  stand  taken  in  their

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application  for  registration,  we  find  and  hold  that  Doxofylline  is  a  

derivative of Theophylline.

29. The difference between ‘bulk drug’ [para 2(a) ], ‘scheduled bulk  

drug’ [para 2(u)] and ‘scheduled formulation’ [para 2(v)] has already  

been noticed in the preceding paragraphs. As per definition the bulk  

drug  should  conform  to  the  pharmacopoeial  or  other  standards  

specified in Second Schedule to the Drugs and Cosmetics Act, 1940.  

On the other hand, to find out whether a drug is a ‘scheduled bulk  

drug’  within  the  meaning of  para   2(u)  or   ‘scheduled formulation’  

within the meaning of para 2(v), one has to find out whether the bulk  

drug is specified in the First Schedule of DPCO, 1995, individually or in  

combination with other drugs.  

30. Theophylline is a ‘bulk drug’ shown at Serial No.34 of the First  

Schedule of DPCO, 1995. It is also not in dispute that Theophylline is  

shown in the Indian  pharmacopeia and conforms to the standard as  

per  Second  Schedule  to  the  Drugs  and  Cosmetics  Act,  1940.  

Therefore,  Theophylline  comes  within  the  meaning  of  bulk  drug  as  

defined in para 2(a) and also comes within meaning of ‘scheduled bulk  

drug’ [para 2(u)] and ‘scheduled formulation’ [para 2(v)].

31. From the experts opinion of  IISc,  Bangalore and NIPER,  Punjab  and opinion enclosed with the Form 44 submitted by the respondent- Mars Therapeutics Ltd., we have noticed and held that Doxofylline is a  derivative of Theophylline. In the preceding paragraph we have noticed

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that  Theophyline  is  a  bulk  drug,  therefore,  and  by  virtue  of  being  derivative of Theophylline, Doxofylline, ipso facto, is itself a bulk drug.  Where  a  certain  “pharmaceutical,  chemical,  biological  or  plant  product”, i.e. the “base drug” satisfies the test laid down under para  2(a),  its  “salts,  esters,  stereo-isomers  and  derivatives”  are  also  automatically included and to be treated as bulk drug in terms of para  2(a). Therefore, if the “base drug” conforms the requirement of Second  Schedule  to  the  Drugs  and  Cosmetics  Act,  1940,  it  automatically  applies to every salts, esters, stereo-isomers and derivatives of such  “base drug”. 32. As per Para 2(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  , and which is used as such or as an ingredient in any formulation. The  words  “includes  also”  in  the  context  of  definition  of  lease  was  considered by this Court in  State of Uttarakhand and others vs.   Harpal Singh Rawat, (2011) 4 SCC 575. If the ratio of the said case  is  followed,  we  find  and  hold  that  the  definition  of  “bulk  drug”  contained in para 2(a) consists of two parts. The first part is applicable  to “base drug” i.e. any pharmaceutical, chemicals, biological or plant  product. The second part, which is inclusive, applies to salts, esters,  stereo-isomers and derivatives  of such “base drugs”. The use of the word “includes” implies that the  

definition of bulk drug contained in para 2(a) is very wide and it not  

only applies to the base drug but also  ipso facto  applies to its salts,  

esters, stereo-isomers and derivatives.

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33. In view of the definition of ‘bulk drug’ [para 2(a)] and our finding  

as  recorded  above,  we  hold  that  if  any  pharmaceutical,  chemical,  

biological  or  plant  product  conforms  to  pharmacopeial  or  other  

standards accepted under  the Drugs  and Cosmetics  Act,  1940,  and  

thus comes within the meaning of bulk drug, as defined in para 2(a), all  

salts, esters, stereo-isomers and derivatives of such bulk drug are, ipso  

facto,  deemed  to  be  conforming  to  the  pharmacopoeial  or  other  

standards  accepted  under  the  Drugs  and  Cosmetics  Act  and  are  

deemed to be bulk drug within the meaning of  para 2(a)  of  DPCO,  

1995.  

34. We  have  already  held  that  Doxofylline  is  a  derivative  of  

Theophylline and admittedly, Theophylline is a bulk drug shown in First  

Schedule  (Item  No.34)  of  DPCO,  1995  and  is  conforming  to  

pharmacopoeial  and  other  standards  specified  in  the  Drugs  and  

Cosmetics Act.  We hold that Doxofylline is deemed to be a bulk drug  

within the meaning of  para 2(a)  conforming to  pharmacopoeial  and  

other standards specified in the Second Schedule to the Drugs and  

Cosmetics  Act.  Further,  in  view of  the definition of  bulk  drug [para  

2(a)],  Theophylline  if  used  as  such  (i.e.  Theophylline)  or  as  an  

ingredient (i.e. Doxofylline) in any formulation, it will deem to be a bulk  

drug within the meaning under para 2(a).

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35. ‘Scheduled bulk drug’ means a bulk drug specified in the First  

Schedule of DPCO, 1995 [Para 2(u)]. Theophylline has been shown as  

one of the scheduled drug at Serial No.34 of the First Schedule. In view  

of our finding that Doxofylline is a derivative of Theophylline, we hold  

that Doxofylline comes within the meaning of bulk drug as defined in  

para  2(a)  and also  within  the meaning of  ‘scheduled bulk  drug’  as  

defined in para 2(u).

36. ‘Scheduled  formulation’  is  defined  in  para  2(v),  means  a  

formulation containing any bulk drug specified in the First Schedule,  

either individually or in combination with other drugs, including one or  

more than one drug or drugs not specified in the First Schedule. In view  

of  the  finding  recorded  above,  Doxofylline  being  the  derivative  of  

Theophylline, a bulk drug, and Doxofylline  in any formulation having  

held to be a bulk drug within the meaning of para 2(a), we hold that  

Doxofylline also comes within the definition of scheduled formulation  

under para 2(v).

37. Under sub-para (1) of para 9, notwithstanding anything contained  

in DPCO, 1995, the Government is empowered to fix the ceiling price of  

a  scheduled  formulation.  In  view  of  our  finding  that  Doxofylline  

formulation is a scheduled formulation as defined under para 2(v), we

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hold that the Government was very well within its jurisdiction to fix the  

ceiling price of Doxofylline formulation.  

It is not the case of the respondents that ceiling price has not  

been fixed as per formula laid down in para 7 keeping in view the cost  

or efficiency or both of the major manufacturers of such formulation as  

laid down in sub-para (1) of para 9. For the reason aforesaid, there was  

no  occasion  for  the  High  Court  to  interfere  with  the  impugned  

Notification  Nos.S.O.1124(E)  and  S.O.1084(E),  both  dated  30th April,  

2009 or Notification dated 17th November, 2009.

38. In the present case we have noticed that though the appellants  

called  for  details  from manufacturers  of  Doxofylline  formulations  by  

letters  dated  22nd July,  2008,  16th September,  2008,  they  failed  to  

furnish  information  as  required  under  DPCO,  1995,  within  the  time  

specified  therein.  In  view  of  such  refusal  to  furnish  the  detailed  

information, it was well within the jurisdiction of the Government to fix  

price under para 11 on the basis of information as available with it, by  

order fixing a price in respect of Doxofylline or its formulation.  

39.  In  this  case,  we  have  noticed  the  news  appeared  in  the  

newspaper insinuating that drug companies were cheating patients, by  

following  a  strategy  by  way  of  which,  they  would  stop  selling  less  

profitable,  price  controlled  products  and replacing them with  highly

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profitable alternatives of the same class. The article captioned – ‘Drug  

companies  chasing profits,  cheating  patients;  Costlier  asthma drugs  

duck curb, hit market’. Dr. C.M. Gulati have given various reasons for  

Doxofylline entry into the country, stated that “ ‘Doxofylline’ has been  

offered as a more profitable alternative to Theophylline.  Further,  by  

successive orders in 2006, all loopholes to sell Theophylline products at  

high profit margins have been closed by the National Pharmaceutical  

Pricing  Authority  (NPPA),  the  body that  monitors  medicine  prices  in  

India. Therefore, nearly all companies selling Theophylline formulations  

have  been  scouting  for  similar  molecules  outside  the  price  control  

system irrespective of whether they are similar, better or even worse  

than their current brands” adds Dr. Gulati. On  the  basis  of  such  

report, the Government suo moto took the matter under para 11 of the  

DPCO, 1995, called for reports and opinion of experts and then fixed  

the price.  

40. In this view of the matter and having regard to the facts that we  

have held that Doxofylline is derivative of Theophylline, a bulk drug,  

and  Doxofylline  in  any  formulation  comes  within  the  definition  of  

scheduled formulation, we hold that it is well within the jurisdiction of  

the Government to fix the ceiling price of Doxofylline formulation under  

para  9  or  para  11  of  DPCO,  1995.  Therefore,  interference  with

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Notification (s) both dated 30th April, 2009 and 17th November, 2009 is  

uncalled for.

41. Consequently, the appeals are allowed; the judgments and orders  

dated 19th May, 2010 and 15th March, 2011 passed respectively by the  

Single Judge and the Division Bench of the Delhi High Court are set  

aside.   The writ  petitions preferred by the respondents  in  the High  

Court are dismissed.  The parties shall bear their own cost.  

………..………………………………………..J.       (G.S. SINGHVI)

………………………………………………….J.                     (SUDHANSU JYOTI MUKHOPADHAYA)

NEW DELHI, JULY 4, 2013.