UNION OF INDIA Vs. CYNAMIDE INDIA LIMITED

JUDGEMENT

(1.) It was just the other day that our brothers Ranganath Misra and M. M. Dutt, JJ. had to give directions in a case (Vincent Panikurbangara v. Union of India), AIR 1987 SC 990) where a public spirited litigant had complained about the unscrupulous exploitation of the India Drug and Pharmaceutical Market by multinational Corporations by putting in circulation low-quality and even deleterious drugs. In this group of cases we are faced with a different problem of alleged exploitation by big manufacturers of bulk drugs. The problem is that of high prices, bearing, it is said, little relation to the cost of production to the manufacturers. By way of illustration, we may straightway, mention a glaring instance of such high-pricing which was brought to our notice at the very commencement of the hearing. 'Barlagan Ketone', a bulk drug, was not treated as an essential bulk drug under the Drugs (Prices Control) Order, 1970 and was not included in the schedule to that order. A manufacturer was, under the provisions of that Order, free to continue to sell the drug at the price reported by him to the Central Government at the time of the commencement of the order, but was under an obligation not to increase the price without the prior approval of the Central Government. The price which the manufacturer of Barlagan Ketone, reported to the Central Government in 1971 was Rs. 24,735.68/- per Kg. After the 1979 Drugs (Prices Control) Order came into force, the distinction between essential and nonessential bulk drugs was abolished and a maximum price had to be fixed for Barlagan Ketone also like other bulk durgs. The manufacturer applied for fixation of price at Rs. 3,500 per Kg. The Government, however, fixed the price at Rs. 1,810 per Kg. For the moment, ignoring the price fixed by the Government, we see that the price of Rs. 24,735 per Kg. at which the manufacturer was previously selling the drug and at which he continues to market the drug to this day because of the quashing of the order fixing the price by the High Court, is so unconscionably high even compared with the price claimed by himself that it appears to justify the charge that some manufacturers do indulge in 'profiteering'.

(2.) Profiteering, by itself, is evil. Profiteering in, the scarce resources of the community, much needed fife-sustaining food-stuffs and life-saving drugs is diabolic. It is a menace which had to be fettered and curbed. One of the principal objectives of the Essential Commodities Act, 1955 is precisely that. It must be remembered that Art. 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'. The Essential Commodities Act is a legislation towards that end. Section 3(1) of the Essential Commodities Act enables the Central Government, if it is of opinion 'that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair price', to 'provide for regulating or prohibiting by order, the production, supply and distribution thereof and trade and commerce therein'. In particular, S. 3(2)(c) enables the Central Government, to make an order providing for controlling the price at which any essential commodity may be bought or sold. It is in pursuance of the powers granted to the Central Government by the Essential Commodities Act that first the Drugs (Prices Control) Order, 1970 and later the Drugs (Prices Control) Order, 1979 were made. Armed with authority under the Drugs (Prices Control) Order, 1979 the Central Government issued notifications fixing the maximum prices at which various indigenously manufactured bulk drugs may be sold by the manufacturers. These notifications were questioned on several grounds by the manufacturers and they have been quashed by the Delhi High Court on the ground of failure to observe the principles of natural justice. Since prices of 'formulations' are primarily dependent on prices of 'bulk drugs, the notifications fixing the retail prices of formulations were also quashed. The manufacturers had also filed review petitions before the Government under Para 27 of the 1979 Order. The review petitions could not survive after the notifications sought to be reviewed had themselves been quashed. Nevertheless the High Court gave detailed directions regarding the manner of disposal of the review petitions by the High Court. The Union of India has preferred these appeals by special leave of this court, against the judgment of the High Court. The case for the Union of India was presented to us ably by Shri G. Ramaswami, the learned Additional Solicitor General and the manufacturers were represented equally ably by Shri Anil Diwan.

(3.) Before we turn to the terms of the Drugs (Prices Control) Order, 1979, we would like to make certain general observations and explain the legal position in regard to them.