GLIANDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner, Glaxo Laboratories (I) Ltd, (renamed as Glindia Ltd.) is the manufacturer, inter alia, of three "bulk drugs" we need not pause to set out the definition of this expression as it is not relevant for purposes of the present case known as Betamethasone Alcohol (B.A.), Betamethasone 17 Valerate (B.V.) and Betamethasone Di-Sodium Phosphate (B.P.). They came to this Court in June 1981 challenging the legality and validity of an order dt.00 12-5-1981 by which the Union Government fixed the maximum prices at which the above drugs could be sold. Subsequently, however, the writ petition had to be amended since the respondents, on a the maximum prices (at figures slightly higher than before) by an order dt.00 20-11-1986. The petitioners are also not satisfied with the revised prices so fixed and have amended the petition to pray that this Court should strike down and quash the order dt.0020-11-1986 and direct the respondents to refix the maximum prices in the light of certain factors.

(2.) The recent decision of the Supreme Court dt.00 10-4-1987 in Union of India v. Cynamide India Ltd.: (reported in AIR 1987 SC 1802) has considerably narrowed down the scope of the debatable issues between the parties but it is nevertheless necessary, in order to appreciate the contentions raised on behalf of the petitioners, to set out in some detail the factual background as well as the legal context in which the questions arise.

(3.) The first attempt of the law to impose some control on the prices of drugs in India was initiated by the Drug (Prices Control) Order, 1970 (1970 DPCO) made in exercise of powers conferred by S. 3 of the Essential Commodities Act (10 of 1955). Paragraph 4 of this order empowered the Central Government to fix the maximum sale price of "an essential bulk drug" by which expression were meant those bulk drugs the names of which were specified in Schedule I to the order. It is common ground that the three drugs we are concerned with were not among those specified in the said schedule,. In respect of other bulk except ones which were imported (which is not the case here) the order only required the manufacturer to report to the Central Government, soon after the commencement of the order, the names of the bulk drugs marketed by him or used exclusively by him for formulations, i.e., medicines processed by him out of one or more of the bulk drugs. Where he was selling the bulk drugs, he had to report the maximum selling price and where he was using them in his formulations, he had to report the notional price which he was debiting, in his, manufacturing accounts, towards the costs of such drugs. This was the purport of para 5 of the order in so far as it is relevant for our present purposes. Once this was done the manufacturer could not increase the said selling price or notional price, as the case may be, without the approval of the Government nor could any person sell the bulk drug at a price higher than this. There were other provisions regarding the fixation of prices for formulations but there was an alternative scheme of pricing permitted under para 14 of the order under which, in a case where the overall gross profit of the manufacturer did not exceed 15%, all he had to do was to submit for the approval of the Central Government a price list regarding the formulations manufactured by him. The Central Government could approve or modify the price list and no formulation could be sold at a price higher than the one approved by the Government. The petitioner had its price lists of formulations approved by the Central Government under para 14, and, so far as bulk drugs are concerned, it had reported the following prices as per para 4 on 1-6-1970 : <FRM>JUDGEMENT_109_AIR(DEL)_1988Html1.htm</FRM>