Gujarat High Court
Pharmaceutical vs Union on 5 March, 2010
Author: K.A.Puj
Bench: K.A.Puj
Gujarat High Court Case Information System
Print
SCA/5823/1998 25/ 27 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 5823 of 1998
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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PHARMACEUTICAL
AND CHEMICAL INDUSTRIES
Versus
UNION
OF INDIA & 1
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Appearance
:
MR BH CHHATRAPATI for
Petitioner
MR HRIDAY BUCH for Respondent No.1
MR NIKUNJ RAVAL
AGP for Respondent No.2
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CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
Date
: 05/03/2010
ORAL
JUDGMENT
[1] The petitioner has filed this petition under Article 226 of the Constitution of India praying for quashing and setting aside the impugned notices dated 04.04.1998, 11.06.1998 and 02.07.1998 at Annexure - F , O and P respectively.
[2] On 28.07.1998, this Court [Coram: H. L. Gokhale,J.] issued the notice and while issuing the notice, a detailed order was passed and interim protection was granted on condition that the petitioner shall file an undertaking through responsible officer that the petitioner shall not part with the assets of the company nor they will create any third party rights and encumbrances. The Court also directed the petitioner to deposit 1% of the amount quantified at Rs.11 Lakhs in this Court on or before 06.08.1998. The Court has made clear that on this term, the impugned notices would not be enforced until the matter was further heard. It was also made clear that if the petitioner would not file an undertaking or would not deposit the amount, the interim relief would stand vacated.
[3] After service of the notice and after filing affidavit-in-reply on 15.10.1998, the respondent No.1 moved Civil Application No.8273 of 1999 on 30.07.1999 for vacating ad-interim relief granted on 28.07.1998. It was pointed out therein that various High Courts including Bombay, Delhi and Andhra Pradesh High Courts in respect of similarly situated Pharmaceutical Companies on the same issue, relying upon the decision of the Hon'ble Supreme Court, have continued the interim relief only on a condition to at least deposit 50% of the principal liability amount. The Andhra Pradesh High Court, in the matter of Parke Davis, has directed the Company to deposit the 100% of the amount. It was further contended in the said Civil Application that since the order dated 28.07.1998 came to be passed ex-parte, the above referred orders passed by various High Courts could not be brought to the notice of this Court. This Court, therefore, while granting ad-interim relief, has only directed to deposit 1% of the amount. The only contention raised on behalf of the petitioner was that the demands raised pertain to other parties who have filed Special Civil Application No.9065 of 1998 which was then adjourned to 15.10.1999. The Court, therefore, without deciding the issue raised in the Civil Application, disposed off the same by its order dated 23.09.1999, extending the interim relief only upto 15.10.1999.
[4] This Court passed order dated 15.10.1999 referring the matter to the Division Bench after observing that the petitioner raised important and substantial questions of interpretation of provisions of Drugs (Prices Control) Order, 1979 (for short DPCO, 1979) and subsequent orders and the effect of repeal. Thereafter, the petition was admitted and interim relief was granted on 04.11.1999. On 02.02.2000, the interim relief was ordered to be continued till further order.
[5] This Court has passed further order on 25.04.2000 recording the submissions made on behalf of the petitioner and directing the respondents to produce the entire record pertaining to the petitioner. The Court wanted to verify from the original record as to the aspect whether the recovery which was being effected through the Mamlatdar against the petitioner was in respect of the liabilities of other companies and that whether the petitioner company had not manufactured any of the four formulations covered by the recovery notices issued in context of paragraph No.7(2) of the DPCO, 1979. The Court directed the responsible officer of the Central Government not below the rank of Deputy Secretary to produce original record and original files and liabilities of the petitioner under paragraph No.7(2) of the DPCO, 1979.
[6] This Court has passed further order on 08.05.2000 wherein it is observed that in this petition, the petitioner has mainly challenged the orders which have been issued by the revenue authorities on the basis of the determination for the purpose of effecting revenue recovery of their dues under Section 7-A of the Essential Commodities Act. Though the orders of the revenue authorities were being challenged, there is a reference to the order of determination which, according to the petitioner, pertain to other entities. Those entities, would, therefore, be proper parties to be impleaded in this petition. It appears that despite the order dated 08.05.2000, no action was taken by the petitioner impleading other entities in this petition.
[7] The matter was, thereafter, again re-transferred to the learned Single Judge and that is how, this petition is taken up for final hearing.
[8] Heard Mr.B. H. Chhatrapati, learned advocate appearing for the petitioner and Mr.Hriday Buch, learned Standing Counsel appearing for the respondent No.1.
[9] The petitioner in this petition confines its challenge to the notices of recovery issued by the Mamlatdar on 04.04.1998, 11.06.1998 and 02.07.1998 produced at Annexure - F , O and P respectively. The petitioner has made it clear that the petitioner was not raising any issue in respect of the justifiability or otherwise, of the so called demands under Drugs (Price Control) Order, 1979. The petitioner had reserved its right to file substantive petition either before this Court or before Bombay High Court or before any other Court, raising issues on merits of the claim under DPCO, 1979.
[10] The case of the petitioner before the Court in the present petition is that the petitioner is a Company engaged in the manufacturing of pharmaceuticals preparation. The Government of India, Ministry of Chemicals and Petrochemicals, Department of Chemical and Fertilizers had addressed a communication dated 13.12.1988 seeking details of procurement and utilization for certain bulk drugs, inter alia, for Gentamycin Sulphate and Amoxycillin. The petitioner received another communication dated 07.04.1989 from the Government of India, Ministry of Chemicals and Petrochemicals, Department of Chemical and Fertilizers informing the petitioner Company that the petitioner
- Company has failed to furnish the required information and hence, the authority has decided to proceed against the petitioner for violation of the statutory provisions and take legal action under the provisions of the Essential Commodities Act and/or other relevant laws / rules in this regard. The petitioner vide letter dated 10.07.1999 informed the authority that the petitioner was not manufacturing either Gentamycin or Amoxycillin preparation and a Drugs Inspector of the Food and Drugs Controller's Office had visited the petitioner and satisfied himself about this. The petitioner had, thereafter, received a communication dated 20.03.1998 from Mamlatdar by which a demand was sought to be raised for sum of Rs.3,74,53,885.27 in respect of the procurement of bulk drug Ampicillin Tritydrate on the basis of the alleged recovery / demand claimed vide letter dated 08.05.1995 addressed by the Government of India, Ministry of Chemicals and Fertilizers to M/s.Pharmaceutical Company of India. This communication of the Mamlatdar dated 20.03.1998 placed reliance upon the communication dated 08.05.1995. The petitioner vide its letter dated 28.03.1998 pointed out that apparently the recovery / demand notice dated 08.05.1995 upon which the Mamlatdar had relied upon, was not addressed to the petitioner but it was addressed to some other entity.
[11] The respondent No.2, thereafter, issued another notice dated 04.04.1998 relying upon four recovery / demand notices, particulars whereof are as under:
Particulars of Notice reference No. and date Entity to which notice addressed Product / bulk drug to which the demand / recovery notice pertain Amount sought to be demanded 6(20-D.I)/86.D-II/ DPEA/130 31.7.1996 Pharmaceutical Co. of India.
Ethambutol 20812899.39 6(28-W)86-D.II/ DPEA/948 31.7.96 Pharmaceutical Co. of India.
Ampicillin Trihydrate 37453885.27 6(12)86-D.II/ DPEA CELL / 939 23.7.1996 Pharmaceutical & Chemicals Ind. Ltd.
Gentamycin Sulphate 29820574.00 6(27-G)/86-D.II / DPEA / 941 Pharmaceutical Co. of India.
Amoxycillin Trihydrate 15479723.78 [12] The first communication dated 31.07.1996 is in the nature of seeking recovery / demanding a deposit in respect of bulk drug Ethambutol. The said communication was, however, not addressed to the petitioner, but addressed to M/s.Pharmaceutical Company of India. The earlier communication dated 28.04.1995, seeking a recovery / demanding a deposit in respect of bulk drugs Ethambutol, was not addressed to the petitioner, but it was addressed to M/s.P.C.I. Pharma.
[13] The second communication dated 31.07.1996 raising a recovery / demand in respect of bulk drug Ampicillin Trihydrate was addressed to M/s.Pharmaceutical Company of India and not addressed to the petitioner. Similarly, the earlier communication dated 08.05.1995 seeking / raising demand in respect of bulk drugs Ampicilin Trihydrate was addressed to M/s.Pharmaceutical Company of India and not to the petitioner.
[14] The third communications dated 23.07.1996 and 28.07.1995 / 08.05.1995 sent by the Mamlatdar are in respect of raising a demand for the bulk drug Gentamycin Sulfate which were addressed to the petitioner, but the petitioner was never engaged in procuring / manufacturing and / or marketing the said drug Gentamycin Sulfate. Similarly, the fourth communications dated 24.07.1996 and 27.03.1995 sent by the Mamlatdar are in respect of a demand for the bulk drug Amoxycillin Trihydrate were not addressed to the petitioner, but to one M/s.Pharmaceutical Company of India. The petitioner was not, at all, manufacturing, marketing or procuring of Amoxycillin Trihydrate preparation and hence, the petitioner was not concerned with the said demand.
[15] In light of the above factual background, Mr.B. H. Chhatrapati, learned advocate appearing for the petitioner has submitted that the action of the respondent is in utter violation of the order of the Bombay High Court and is, in fact, tantamount to committing contempt thereof. The respondent No.1 was prohibited from continuing with any action against the IDMA members, and petitioner was one of such members. Since the respondent No.2 is acting at the behest of the respondent No.1, could not have been permitted to flout the order of the Bombay High Court. He has further submitted that the impugned demand / recovery notices on which the reliance was placed, are not actually addressed to the petitioner, but to other concerns, which are separate legal entities from the petitioner. He has further submitted that no opportunity of hearing or to show cause against the purporting action has been provided to the petitioner. He has further submitted that at the relevant time, the petitioner's unit employed more than 300 workmen and all of them would have been rendered unemployed by such action, if implemented. He has further submitted that the impugned action of the Mamlatdar is even otherwise outside the scope of the DPCO, 1979 which nowhere stipulates that any contravention of the provisions of the said Order would be punishable in accordance with the provisions of the Essential Commodities Act. The penalties are prescribed under Essential Commodities Act, according to which a person contravening any order under Section 3 is punishable. Section 7A of the Essential Commodities Act provides for power of the Central Government to recover certain amounts as arrears of land revenue. Firstly, in order to empower the Government under the said provisions, the pre-requisite is that the person has to be liable to pay any amount in pursuance of any order made under Section 3 or to deposit any amount to the credit of any account of fund constituted by or in pursuance of any order made under that Section. In the case of the petitioner, there is no such liability cast upon the petitioner, muchless found or held as such under the provisions of Section 7A of the Essential Commodities Act. It would, therefore, not have any application. It is alternatively contended that it is not provided under Section 7A to authorize the Mamlatdar to take action under any of the provisions of the Bombay Land Revenue Code. He has, therefore, submitted that the impugned action of the Mamlatdar is absolutely illegal and in violation of the principles of natural justice and hence, deserves to be quashed and set aside.
[16] An affidavit-in-reply is filed on behalf of the respondent No.1. On the basis of this affidavit, Mr.Hriday Buch, learned Standing Counsel appearing for the respondent No.1 has submitted that so far as four recovery notices referred to and relied on by the Mamlatdar are concerned, it is worthwhile to note that M/s.PCI Pharmaceutical Private Limited which is sister / subsidiary Company of the petitioner was asked to furnish details of procurement and utilization etc. of the bulk drug Ethambutol as well as for production of records for determination of DPEA liabilities vide department's letter dated 14.09.1986. Although, the Company did not provide the requisite details vide its letter dated 23.10.1986 contested that DPEA recovery is not applicable since the item is a bulk drug and is not being manufactured by the Company. Since the details called for were not supplied, the Department determined the DPEA liability of the Company based on information available with them and vide their letter dated 28.04.1995 asked the Company to deposit an amount of Rs.80,93,559 in to DPEA. The department, thereafter, referred to the case to the three Member, Drug Prices Liability Review Committee headed by retired High Court Judge and three Member Committee vide its letters dated 05.01.1996, 25.03.1996 and 03.06.1996 asked the petitioner Company to submit any submissions / representations against DPEA liability determined by the department. Since the Company neither made any submissions nor gave any personal appearance before the three Member Committee, the Committee gave its report to the department presuming that the Company has no ground to challenge its liability as fixed by the department. Accordingly, the Company was finally asked to deposit an amount of Rs.2,08,12,899.39 (Rs.80,93,559 towards the principal amount and Rs.1,27,19,340.30 towards the interest upto 24.06.1996) into DPEA vide letter dated 31.07.1996. When the company did not respond to this letter also, the department initiated action for the recovery of the said amount of Rs.2,08,12,899.39 as arrears of land revenue through the Collector.
[17] Mr.Hriday Buch has further submitted that regarding the recoveries relating to bulk drug Ampicillin Trihydrate, the petitioner Company was asked to furnish the details needed for determination of their DEPA liability in respect of the said bulk drug vide letter dated 24.10.1986 followed by reminder letters dated 29.12.1986, 25.08.1989, 30.11.1992 and 07.04.1994. The petitioner did not submit the requisite details to the department. The department determined the DPEA liability of the Company based on the information available with them and vide letter dated 08.05.1995 asked the Company to deposit an amount of Rs.1,48,02,920 into DPEA. The department referred this case to the above referred three Member Drug Prices Liability Review Committee headed by a retired High Court Judge and the Committee vide its letters dated 11.12.1995, 25.03.1996 and 03.06.1996 asked the petitioner Company to submit any submissions / representations against DPEA liability determined by the department. Since the Company neither made any submissions nor gave personal appearance before the Committee, the Committee gave its report to the department that the Company has no ground to challenge the liability as fixed by the department. Accordingly, the Company finally was asked by the department, to deposit an amount of Rs.3,74,53,885.27 (Rs.1,48,02,920 towards the principal amount and Rs.2,26,50,965.27 towards the interest upto 20.06.1996) vide letter dated 31.07.1996. When the Company did not respond to the department, the department initiated the action for the recovery of abovesaid amount of Rs. 3,74,53,885.27 as arrears of land revenue through the Collector.
[18] Mr.Hriday Buch has further submitted that regarding item No.3 of the notice dated 04.04.1998 i.e. bulk drugs Gentamisin Sulphate, M/s.Pharmaceutical Company of India (PCI) a sister / subsidiary Company of the petitioner was asked to furnish details needed for working out their DPEA liability vide department's letter dated 31.05.1984. The petitioner Company did not furnish the requisite details, despite reminders dated 02.03.1986, 15.10.1986, 19.12.1986, 16.03.1988 and 12.05.1988. On finding that the Company was not cooperating with the department for compliance with the provisions of DPCO, 1979, the petitioner company was issued show-cause notices dated 13.12.1988, 14.01.1989 and 03.03.1989 against the violation of the provisions of the DPCO, 1979. Instead of providing the information, the petitioner Company started side tracking the issue by stating that recoveries against DIPL and HAL have been waived on account of they being loosing Companies and certain off-sets have been allowed while finalizing the amounts against certain Companies. They also alleged that recoveries have been dropped against other formulators on account of their having raised certain disputes and nothing has been done for the past 2-3 years. As against this, the department's stand was that the Government has decided only to drop the legal proceedings against the IDPL and HAL and there was no intention to deprive DPEA and its legitimate dues from these Companies. The off-sets admissible under the provisions of DPCO, 1979 against the amount payable by the company did not arise and lastly that the amounts recoverable under paras-7 and 17 of the DPCO, 1979 from the formulators have not been dropped. The Company was again reminded vide department's letters dated 05.07.1989, 23.08.1989, 18.11.1992 and 18.04.1994 to furnish full details of procurement of various bulk drugs both imported and indigenous during the period from 01.04.1979 to 25.08.1987 for determination of their DPEA liability. Since the petitioner Company failed to submit the requisite details to the department, the department determined the DPEA liability of the company based on the information available with them and vide their letter dated 08.05.1995 asked the Company to deposit an amount of Rs.1,57,82, 115 into DPEA in respect of the bulk drugs Gentamycin Sulphate. Thereafter, the department referred this case to the above three Members Drugs Prices Liability Review Committee headed by a retired High Court Judge and Committee vide their letters dated 29.12.1995, 25.03.1996 and 05.06.1996 asked the petitioner company to submit any submissions / representations against the DPEA liability determined by the department. Since the Company neither made any written submission nor gave any personal appearance before the three Member Committee, the Committee gave its report to the department presuming that the Company has no ground to challenge the liability as fixed by the department. Accordingly, the Company was finally asked to deposit an amount of Rs.3,98,20,574 (Rs.1,57,82,115 towards the principal amount and Rs.2,40,38,459 towards the interest upto 21.06.1996) vide letter dated 23.07.1996. When the Company did not respond to this letter also, the department initiated the action for the recovery of the abovesaid amount as arrears of land revenue through the Collector.
[19] Regarding item No.4 of the notice dated 04.04.1998 i.e. bulk drugs Amoxycillin Trihydrate, Mr.Hriday Buch has submitted that the petitioner Company was asked to furnish the details needed for working out their DPEA liability vide department's letter dated 22.10.1986 followed by reminder letters dated 29.12.1986, 25.08.1989, 01.12.1992 and 10.06.1994. Since the petitioner Company failed to submit the requisite details to the department, the department determined the DPEA liability of the Company based on the information available with them and vide their letter dated 27.03.1995 asked the Company to deposit an amount of Rs.61,11,191 into DPEA. Thereafter, the department referred this case also to the abovesaid three Member Drugs Prices Liability Review Committee and the Committee vide their letters dated 05.01.1996, 25.03.1996 and 18.06.1996 asked the petitioner to submit any submissions / representations against the DPEA liability determined by the department. The petitioner neither gave any submission nor gave any personal appearance before the three Member Committee, the Committee gave its report to the department presuming that the company has no ground to challenge the liability as fixed by the department. Accordingly, the Company was finally asked to deposit an amount of Rs.1,54,79,723.78 (Rs.61,11,1919 towards the principal amount and Rs.93,68,532.78 towards the interest upto 28.06.1996) vide letter dated 24.07.1996. When the Company did not respond to this letter also, the department initiated the action for the recovery of the abovesaid amount of Rs.1,54,79,723.78 as arrears of the land revenue through the Collector.
[20] Mr.Hriday Buch has further submitted that vide para-14 of DPCO, 1979, Government has protected its right to recover the amounts which had accrued (on account of the actions under the DPCO, 1979) on or before the commencement of DPCO, 1979 and deposit into DPEA by manufacturers. He has further submitted that from the sequence of events, it is clear that each and every case of bulk drugs covered under Recovery Notice dated 04.04.1998 either the petitioner or its sister / subsidiary Company, whoever was manufacturing or using that particular bulk drug into their formulation to furnish the requisite details about production, procurement, etc. for determination of their liability. The petitioner Company on the one hand aborted all attempts of the respondents to obtain necessary details about production / procurement of bulk drug and now, having failed in all possible attempts to obtain these details, the respondent initiated recovery proceedings through the Collector, the petitioner Company has been taking stand that inquiry was initiated for the first time in April / May, 1995 to ascertain whether any amount was payable into DPEA by the petitioner Company or not. He has submitted that as late as on 20.07.1988, the petitioner Company was asked to furnish the documents like incorporation certificate in original in respect of each of three sister / subsidiary Companies -
[i] M/s. The Pharmaceutical and Chemical Industries (Prop. P.C.I : Chemicals and Pharmaceuticals Ltd.);
[ii] M/s.Pharmaceutical Company of India (Prop. P.C.I. And Laboratory Pvt. Ltd.); and [iii] M/s.P.C.I. Pharmaceutical Private Limited ;
[21] This information has also not been furnished by the petitioner Company only to avoid identification of the actual users of the bulk drugs and to cause delay in discharging of their DPEA liabilities.
[22] Mr.Hriday Buch has further submitted that the writ petitions filed by IDMA and another before Bombay High Court and the stay granted by the Bombay High Court is not applicable to any of the four recovery notices to the petitioner Company. The Government is fully and legally competent to require the petitioner Company and its sister / subsidiary Companies to deposit the amounts due to them into DPEA. From the sequence of events indicated earlier, it is clear that the petitioner Company or his sister or subsidiary Companies were given ample opportunities for making representations not only before the Department but also before the three Member Drugs Prices Liability Review Committee headed by a retired High Court Judge, which is quasi-judicial body. The reports of three Member Committee have been honoured by almost all High Courts in the country.
[23] Mr.Hriday Buch has further submitted that from the plain reading of the Essential Commodities Act, 1955, it clearly appears that once revenue recovery proceedings are initiated under Section 7A of the Act, no Court / Tribunal or other authority has power to grant any injunction etc. prohibiting the Government from recovering any amount. He has, therefore, submitted that there is no substance in this petition and the petitioner is not entitled to any relief from this Court. He has, therefore, submitted that the petition deserves to be dismissed with costs.
[24] Having heard the learned advocates appearing for the parties and having considered their rival submissions, the court is of the view that the brief legislative history of drug price control is required to be taken into consideration before deciding the controvercy between the parties. It is revealed from the record that there was no statutory control over the prices prior to 1962. In 1962 (in the wake of the Chinese Aggression) the Drugs (Display of Prices) Order 1962 and the Drugs (Control of Prices) Order, 1963 were promulgated under the then Defence of India Act. By and large these Orders froze the prices of drugs from 1st April, 1962. However, the prices of raw materials and inputs were not frozen. This was unfair to the Industry. As a result, a system of Selective price increase was introduced in 1966.
[25] Thereafter, the Tariff Commission was appointed in August, 1966 to go into the cost structure of 17 bulk drugs, 34 single drug formulations and 15 multiple drug formulations. The Tariff Commission made a detailed study and in August, 1966 submitted its report recommending fair selling prices of the said bulk drugs and formulations. It recommended a provision of 15% pretax return on capital employed as being adequate for bulk drugs. For the selected formulations, the Tariff Commission gave a formula, that was factory costs (i.e. price of cost of raw material plus packing materials plus conversion costs and packing costs). Selling expenses at 15% on total factory costs was added. The selling prices so arrived at included an addition of 15% by way of mark up on the total cost of sales i.e. total factory costs plus freight plus selling expenses.
[26] The Central Government in exercise of its powers under Section 3 of the Essential Commodities Act, 1955 issued the Drugs (Prices Control) Order, 1970 on 16th May 1970 and this was amended from time to time. Under DPCO, 1979 and the amendments thereof, selling prices of essential bulk drugs were fixed by the Government. So far as other drugs were concerned, their prices were frozen at the level prevailing before the issue of the DPCO, 1979. Without the prior approval of Government, no increases were permitted in selling prices of such bulk drugs.
[27] The Government of India had set up on 08.02.1974, a Committee under the Chairmanship of Mr.Jaisukhlal Hathi with members of Parliament various officials and non-officials as members, to enquire into various factors of the drug industry in India. Various matters were referred to the said Committee and after deliberations the said Committee submitted its report in April, 1975 popularly known as Hathi Committee report.
[28] On 29th march, 1978, late Shri H. N. Bahuguna, the then Minister of Petroleum, Chemicals and Fertilizers announced the new Drug Policy of the Central Government containing the Government's decision on the recommendations of the Hathi committee and based on that, the Drugs (Prices Control) Order, 1979 was issued on 31st march, 1979 and it superseded the then existing DPCO, 1970.
[29] Under the provisions of the DPCO, 1979, the Government has been empowered under Sub-Para 2 of Para-7 of the Order to recover the difference between the prices of bulk drugs allowed by it in formulations prices and the actual procurement price of the said bulk drug by its formulations.
[30] Sub-paragraph 2 of Paragraph 7 of the DPCO, 1979 is reproduced hereinbelow.
7(2) : where a manufacturer of formulations utilises in his formulations and bulk drug, either from his own production or procured by him from any other source the price of such bulk drug being lower than the price allowed to him in the price of his formulations, the Government may require such manufacturer.
(a) to deposit into the Drug Prices Equalization Account referred to in para 17 the excess amount to be determined by the Government; or
(b) to sell the formulation at such prices as may be fixed by the Government [31] In accordance with the provisions of DPCO, 1979, Government fixed the prices of bulk drugs and formulations of the control categories during 1980-81 in respect of various companies, out of which 12 companies filed a writ petition in 1981 in the Delhi High Court challenging the Government's reasonableness of the prices fixed by the Government in the impugned cases. In December, 1984, the High Court of Delhi decided the cases in favour of the petitioners and quashed the price fixation orders issued by the Government of India. However, on a Special Leave Petition filed by the Union of India, the Hon'ble Supreme Court of India (Union of India Vs. Cynamide, AIR 1987 S.C. 1802) upheld the validity of the provisions of the Drugs (Prices Control) Order, 1979 issued by the Government of India under the Essential Commodities Act, 1955. By this order, the Hon'ble Supreme Court of India set aside the judgment of 1984 of the High Court of Delhi which had struck down the DPCO, 1979 being ultra-vires the Constitution. During the period of litigation, the pharmaceutical companies had not scrupulously followed the provisions of the DPCO, 1979 which had resulted in accrual and undischarged liabilities towards DPEA. After the judgment of the Hon'ble Supreme Court of India, the Government was competent to make recoveries from the drug companies in accordance with the provisions of the DPCO, 1979. Such recoveries are divided into two categories as under:-
(I) OVER : CHARGING :-
Where a Drug Company had sold its medicines at prices higher than those noticed by the Government on account of operation of the Court's stay orders or otherwise, in violation of the provisions of the DPCO 1979 issued under the Essential commodities Act as amended from time to time.
(II) UNAUTHORISED RETENTION OF AMOUNT :-
This is the second category of companies from whom also recoveries are to be made. These arise out of provisions of para 7(2) of DPCO, 1979 which inter-alia requires any manufacturer of formulations to deposit into the Drug Prices Equalisation Account, the excess amount determined by the Government in respect of those quantity of drugs which had been procured either indigenously or through import at prices less than those allowed by the Government in fixing the prices of the formulations. A number of companies having collected the money from the consumer (in the form of sale of medicines at a particular authorised price) have pre-varicated from depositing the excess amounts into the DPEA and thus have enriched themselves with these unintended benefits. The number of such companies could be very large and it has become difficult to assess the liabilities as the companies are not responding to the notices issued by the Government eliciting details relevant for determining the unauthorised retention of amounts.
[32] The Hon'ble Supreme Court of India by its aforesaid judgment also considered the issue regarding profiteering and observed as follows:-
Profiteering, by itself, is evil, Profiteering in the scarce resources of the community, much needed life sustaining foodstuff and life saving drugs is diabolic. It is a menace which has to be fettered and curbed.
In other words, the Hon'ble Supreme Court of India has held that the manufacturers of bulk drugs and formulations should not be allowed to enjoy and retain the unintended benefits earned by them.
[33] Even with regard to the petitioner's contention that the Bombay High Court has granted stay in the case of Indian Drugs Manufacturers Association (IDMA) against DPEA recoveries contained in the notice dated 04.04.1998 issued by Mamlatdar, Ankleshwar, it is found that the provisions of paras - 7(2) and 17 of the DPCO, 1979 after its repeal with effect from 26th August, 1987. The petitioners in that petition were aggrieved by a letter dated 11.06.1996 from the Department seeking certain information about formulations, their manufacturing and marketing etc., during the currency of the DPCO, 1979. The stay order in that petition was also in the nature of restraining the respondents from taking any action pursuant to and / or in implementation of the said notice dated 11.06.1996. it is, therefore, rightly contended by Mr.Burch that the DPEA liabilities already accrued and assessed are not affected by the stay order granted by the Bombay High Court.
[34] The other main contention raised on behalf of petitioner is that the demands raised pertain to other parties. These other parties are not strangers nor outsiders. They are sister concerns and/or group Companies. Before issuance of the impugned notices by the Mamlatdar, the Drug Price Control authorities have issued various notices and reminders to all the entities including the petitioner calling for requisite details, way back from 1986 onwards. Even before determining the DPEA liability against the different group Companies and/or units notices were issued and after determination, they were separately asked to deposit the amount so determined, into DPEA. Even after referring the cases to the three Members, Drug Prices Liability Review Committee, headed by the retired High Court Judge, several notices were issued by the Committee separately to the group Companies and/or Units to submit their submissions / representations against DPEA liability determined by the department. None of these Companies and/or entities had availed of these opportunities nor any one appeared on their behalf challenging this liability. Ultimately, on submission of its reports by the Committee, when all these entities were finally asked to deposit the amount with interest and when, on non-payment thereof, demand was sought to be enforced through Collector by way of recovery of land revenue, the petitioner has rushed to this Court. Despite Court's directions to implead other entities as party-respondents, the petitioner had not done so. The Court, therefore, does not find any substance in this contention and it is, therefore, rejected.
[35] The other contentions raised by the petitioner with regard to petitioner not involved in procuring and/or manufacturing and/or marketing the drug Gentamycin Sulphate and violation of principles of natural justice, do not have any merit or substance in view of the fact that despite several notices and reminders issued from 1986 onwards, no requisite details were furnished by the petitioner and/or its group Companies.
[36] While granting ad-interim relief on 28.07.1998, this Court accepted the submission of the learned advocate appearing for the petitioner that the petitioner may be protected on petitioner filing an undertaking through Responsible Officer that they will not part with the assets of the Company nor they will create any third party rights and encumbrances. Pursuant to this, an undertaking was filed by Mr.K. M. Shah, the director of the petitioner on 29.07.1998 assuring this Court that the Company will not part with its assets nor create any third party rights and encumbrances. At the time of final hearing of this petition, Mr.Chhatrapati, learned advocate for the petitioner has candidly submitted that he has no idea about the assets of the company at present. He has further submitted that there is no contact with any one from the petitioner. From this, it appears that the petitioner's own existence is doubtful and assets of the company might be frittered away. Be that as it may, mere pendency of this petition for number of years would not nullify the effect of an undertaking given to this Court. It is, therefore, held that when this petition is being dismissed, the respondents are hereby permitted to approach this Court by way of contempt petition, if any breach of an undertaking given to this court, is committed, after ascertaining about the details of assets available with the company at the time of filing an undertaking before this Court and the present status of such assets.
[37] This Court, vide its ad-interim order dated 28.07.1998, further directed the petitioner to deposit an amount of Rs.11 Lakhs on or before 06.08.1998. Since this petition is being dismissed, the amount of Rs.11 Lakhs with interest accrued thereon if any, if so deposited and lying with this Court, must be paid forthwith to the Mamlatdar, Ankleshwar, who in turn, shall pass on the said amount to the concerned department of the respondent No.1.
[38] Subject to the above direction, this petition is dismissed. Rule discharged. Interim relief stands vacated. No order as to costs.
[ K. A. PUJ,J.] (vijay) Top