Karnataka High Court
Healthcare Global Enterprises Limited vs Union Of India on 27 March, 2023
Bench: Chief Justice, M.G.S. Kamal
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WA No. 83 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF MARCH, 2023
PRESENT
THE HON'BLE MR PRASANNA B. VARALE, CHIEF JUSTICE
AND
THE HON'BLE MR JUSTICE M.G.S. KAMAL
WRIT APPEAL NO. 83 OF 2023 (GM-RES)
IN
WRIT PETITION No.11057 OF 2019 (GM-RES)
BETWEEN:
HEALTHCARE GLOBAL ENTERPRISES LIMITED,
A COMPANY INCORPORATED UNDER THE
COMPANIES ACT, 1956 AND HAVING ITS
REGISTERED ADDRESS AT HCG TOWER, NO.8,
P KALINGA RAO ROAD, SAMPANGI RAMANAGARA,
BENGALURU-27 AND REPRESENTED HEREIN BY ITS
AUTHORIZED SIGNATORY,
B S AJAIKUMAR.
Digitally
...APPELLANT
signed by
(BY SRI DEEPAK BHASKAR, ADVOCATE)
ROOPA R U
Location: AND:
High Court
of 1. UNION OF INDIA,
Karnataka THROUGH ITS SECRETARY,
DEPARTMENT OF PHARMACEUTICALS,
MINISTRY OF CHEMICALS AND FERTILIZERS,
SHASTRI BHAWAN,
NEW DELHI- 110 001.
2. THE NATIONAL PHARMACEUTICAL PRICING
AUTORITY,
THROUGH ITS CHAIRMAN,
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WA No. 83 of 2023
HAVING ADDRESS AT 3RD/5TH FLOOR,
YMCA CULTURAL CENTRE BUILDING,
1, JAISINGH ROAD,
NEW DELHI -110 001.
...RESPONDENTS
(BY SRI KUMAR M N, CGSC FOR R1 AND R2)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO; SET ASIDE THE
IMPUGNED ORDER DATED 30/11/2022, AS PASSED BY THE
LEARNED SINGLE JUDGE IN WP 11057/2019 AND
CONSEQUENTLY SET ASIDE THE ORDER BEARING S.O.
NO.1041(E) DATED 27TH FEBRUARY AS PASSED BY THE
RESPONDENT NO.2 - THE NATIONAL PHARMACEUTICAL
PRICING AUTHORITY AND 2.PASS SUCH OTHER ORDERS.
THIS APPEAL COMING ON FOR PRELIMINARY HEARING,
THIS DAY M.G.S. KAMAL J., DELIVERED THE FOLLOWING:
JUDGMENT
This writ appeal is filed by the appellant aggrieved by dismissal of its writ petition in W.P.No.11057/2019 by order dated 30.11.2022.
2. The above writ petition was filed by the appellant herein calling in question the order dated 27.02.2019 issued by respondent No.2- National Pharmaceutical Pricing Authority (NPPA) imposing a cap on trade margin of 30% and further directing manufacturers to fix their -3- WA No. 83 of 2023 retail price based on the price at first point of sale of product of non-scheduled formulations containing in all 42 drugs listed in the said order.
3. It is the case of the appellant that it is the largest provider of cancer care, having 20 comprehensive cancer care centers across the country successfully providing innovative and cost-effective methods of treatment and management of cancer. That respondent No.2-NPPA imposed a cap of 30% upon manufacturers for select "anti cancer drugs" identified by the Ministry of Health and Family Welfare "being essential" for the treatment of cancer invoking power conferred under the Drugs (Prices Control) Order, 2013 ('DPCO' for short). That appellant being a "retailer", as defined under DPCO is directly impacted by imposition of trade margin under the impugned order dated 27.02.2019. Being aggrieved by the same, filed the above writ petition raising various grounds.
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4. That the said writ petition was resisted by the respondents contending inter alia that under the DPCO, respondent No.2 is empowered to put a cap on the price of either of the manufacturer or of the retailer. That it is the manufacturer whose price is capped under the impugned order and not that of the retailer. The appellant not being a manufacturer, cannot claim to be an aggrieved person. That in the public interest essential drugs can be placed under control order as the market forces were charging 900% over and above the manufacturing costs and the cap imposed by the impugned order was on all anti cancer drugs and it was in the larger public interest which required for every citizen suffering from such diseases.
5. Considering the rival contentions of the parties, learned Single judge framed the following point for consideration:
"Whether the policy of Government of India in the imposition of cap on trade margin of 30% on the manufacturer is arbitrary and unreasonable?"-5- WA No. 83 of 2023
and referring to National Pharmaceutical Price Policy 2012 and also DPCO 2013 and also in view of the settled principles of law with regard to the scope of judicial review in the matters of policy decisions by the State, rejected the writ petition by the impugned order. Aggrieved by the same, appellant is before this Court.
6. Sri.Deepak Bhaskar, learned counsel for the appellant reiterating the grounds urged in the memorandum of appeal submitted that:
(a) The appellant has not challenged any policy instead it was its contention that the impugned order is contrary to the National Pharmaceutical Pricing Policy(NPPP) which contemplates that prices of non-scheduled formulations or non-essential drugs shall only be subject to market forces and are not to be brought under any controlled regime.
He submits that the appellant has challenged the impugned order being violative of the extant policy and not the policy itself.
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(b) That the only issue that requires to be considered is with regard to jurisdiction of respondent No.2 in issuing the impugned order fixing the `trade margin' inasmuch as Paragraph 19 of DPCO does not speak of `trade margin', it only refers to `ceiling price' and `retail price'.
(c) That the essential drugs are placed in the schedule to DPCO classified as "Scheduled Formulations". "Non scheduled formulations" not being in the schedule are deemed to be "non-essential" in nature and are thus subjected to market forces and cannot be brought under the controlled regime. The only power available to the Government is of monitoring the prices of non scheduled formulations and taking steps to regulate their prices in the manner set out in Paragraph 20 of DPCO.
(d) He relied upon the Judgment of the Apex Court in the case of Secretary, Ministry of Chemicals and Fertilizers, Government of India Vs Cipla Limited and others reported in (2003) 7 SCC 1 to buttress his -7- WA No. 83 of 2023 contention that for the purpose of price control it was not open to the Government flout its own policy.
(e) Thus, he submits that without adverting to above aspect of the matter, learned Single Judge incorrectly formulated the issue with regard to the policy of the Government of India which is not relevant to the grounds urged by the appellant. Hence, seeks for allowing of the appeal.
7. Sri.M.N.Kumar, learned Central Government Standing counsel for respondents reiterating the contents of statement of objections filed to the writ petition, submits that the appellant cannot claim to have any grievance as it is not a manufacturer. That the order fixing the cap on price is directed against the manufacturers. He submits that the Government has power under DPCO to fix the price even in respect of non scheduled formulations in the public interest on any drugs for a particular period. Hence, he seeks for dismissal of the appeal.
8. Heard. Perused the records.
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9. Perusal of the order dated 27.02.2019 issued by the Ministry of Chemicals and Fertilizers (Department of Pharmaceuticals) which is impugned in this appeal reveal that respondent No.2-NPPA was established by the Government of India vide its resolution dated 29.08.1997 to fix/revise, monitor prices of drugs / formulations and oversee the implementation of DPCO. That the Government of India by its order dated 30.05.2013 in exercise of its power conferred under Sections 3 and 5 of the Essential Commodities Act, 1955 delegated certain powers of DPCO 2013 to respondent No.2-NPPA to exercise the functions of Central Government. The aim of DPCO 2013 is to ensure that the essential drugs are available to all at affordable prices.
10. Taking note of the judgment of this Court dated 12.11.2002 passed in W.P.No.21618/2002 in the case of K.S.Gopinath and others vs. Union of India directing the Government to ensure that the life saving drugs do not fall -9- WA No. 83 of 2023 out of price control which was reiterated by the Apex Court in its order dated 31.2.2007 in C.A.No.9218/2003 and also taking note of another judgment dated 19.03.2013 passed by the High Court of Punjab and Haryana in Crl.Mis. No.1417/2008 in the case of Ranbaxy Laboratories Ltd. Vs. The State of Haryana and others wherein the High Court of Punjab and Haryana expressing its concern about the prices of life saving drugs, had expressed its hope to the effect that the authorities would wake up and take some remedial steps to save the consumers from such fleecing, the respondent No.2-NPPA felt it appropriate and imperative to rationalize the prices in the non-scheduled drugs segments. In furtherance thereof, after several rounds of deliberations and considering the available informations, the expert committee of Ministry of Health and Welfare for the purpose of ensuring affordability of the drugs to the patients in the case of anti cancer medicines recommended 43 anti cancer medicines for price control on pilot basis and thereby invoking the provisions of paragraph 19 of DPCO 2013, fixed the cap on the trade
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WA No. 83 of 2023margin at 30% and directed the manufacturers to fix their retail prices based on price at first point of sale of product as formulated in Table A non-scheduled formulations containing any of the 42 drugs listed in Table B.
11. Though, learned counsel for the appellant emphatically submitted that the aforesaid order fixing the cap impacts the appellant being the hospital which is treated as "stockiest" for the purpose of said order, as rightly taken note of by the learned Single Judge, the order fixing the cap of trade margin at 30% is directed against the manufacturers and appellant herein not being a manufacturer cannot claim to have been impacted or effected by the impugned order.
12. As regards the challenge to the jurisdiction and authority of respondent No.2-NPPA in fixing the trade margin, learned counsel for the appellant insists that the terms "ceiling price" or "retail price" found in paragraph 19 of DPCO has to be read with paragraphs 2(d) and 2(z)
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WA No. 83 of 2023which refers and applies to "scheduled formulations"
alone. He further insists that there is no term "trade margin" used in these paragraphs. Therefore, he justifies his contention that the respondent No.2-NPPA is not having power or jurisdiction to expand scope of the policy contained in NPPP in respect of trade margin pertaining to non scheduled formulations.
13. In this regard it is necessary to refer paragraphs 19 and 20 of DPCO 2013 which reads as under;
"19. Fixation of ceiling price of a drug under certain circumstances: Notwithstanding anything contained in this order the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or retail price, as the case may be, irrespective of annual wholesale price index for that year.
20. Monitoring the prices of non scheduled formulations: (1) the Government shall monitor the maximum retail prices (MRP) of the drugs including the non-scheduled formulations and ensure that no manufacturer increases the maximum retail price of a drug more than ten percent of maximum retail price during preceding twelve months and where the increase is beyond ten percent of the maximum retail price, it shall reduce the same to the level of ten percent of maximum retail price for next twelve months."
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WA No. 83 of 2023(2).............
14. We deem it appropriate to emphasize that aforesaid paragraph 19 deals with power of the Government in fixing ceiling price or retail price `of any drug' in the extraordinary circumstances and the said paragraph do not classify scheduled formulation or non scheduled formulation. Paragraph 20 deals with power of the Government to monitor prices of non scheduled formulation. It is necessary to note at this juncture respondent No.2-NPPA which has been constituted by the Government of India has been delegated with power as provided in paragraphs 4 to 21, and 23 to 30 and 32 of DPCO 2013 to exercise the functions of the Central Government. The appellant has not disputed or questioned this delegation of power by the Government to respondent No.2-NPPA. Thus the power of the Central Government in fixing the ceiling price and retail price provided under paragraph 19 of the DPCO is now available to be exercised by respondent No.2-NPPA. Thus, in
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WA No. 83 of 2023furtherance of such exercise of powers respondent No.2- NPPA has fixed the 30% cap on the trade margin.
15. The learned Single Judge at paragraph 8 of the impugned Judgment has taken into consideration the aforesaid paragraphs of DPCO and has read them along with paragraphs 2(d), 2(z), 5 and 10 of the DPCO and has rightly come to the conclusion that the respondent No.2- NPPA is empowered under extra-ordinary circumstances if it considers necessary to do so in public interest fix the ceiling price or retail price of any drug for a particular period.
16. Learned counsel for the appellant referred to Judgment of the Apex Court in the case of Secretary, Ministry of Chemicals and Fertilizers, Government of India Vs Cipla Limited and others reported in (2003) 7 SCC 1 and drawing attention of this Court to paragraph 9 wherein the Apex Court while summarizing the conclusion has held that
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WA No. 83 of 2023
"Where the Central Government as the delegate of legislative power announces a rational policy in keeping with purposes of enabling legislation and even lays down specific criteria to promote the policy, the criteria so evolved become the guidepost of its legislative action. While classifying the drugs for the purpose price control it is not open to the Government to float or deliberate the said norms which it professed to follow in the interest of transparency and objectivity. Otherwise there will be an element of arbitrariness and the delegated legislation will not withstand the test of Article 14."
17. Learned Single Judge at paragraph 17 of the impugned Judgment has dealt with the said contention of the appellant in detail and has rightly distinguished the said Judgment as it involved issue of inclusion of certain bulk drugs in the first schedule to DPCO. In the instant case as already noted above the Government in exercise of powers conferred under Section 3 and 5 of the Essential Commodities Act, 1955 has delegated powers in respect of certain paragraphs of DPCO 2013 to respondent No.2- NPPA which includes paragraphs 19 and 20. In furtherance thereof respondent No.2-NPPA has classified
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WA No. 83 of 2023drugs, the subject matter of this appeal as essential drugs and exercise of power in fixing the cap at 30% is invoking paragraph 19 of DPCO 2013. As such, the reliance placed on by the learned counsel for the appellant on the aforesaid Judgment of the Apex Court is of no avail. Thus, that the contentions of the appellant and the question of jurisdiction of NPPA in fixing the trade margin cannot be countenanced.
18. Adverting to the other contentions of the learned counsel for appellant that the appellants have challenged order being violative of extant policy and not the policy itself and that in this regard, framing of issue by learned Single Judge on the policy of the Government being erroneous, it is to be seen as noted herein above that the impugned order fixing the trade margin at 30% is preceded by objects and reasons of providing mechanism for examining options for rationalization of prices in the non scheduled drug segment in a graded manner. It has also taken into consideration the policy of Competition
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WA No. 83 of 2023Commission of India and various other factors referred to in paragraphs 2 to 13 of the impugned order. Thus, decision of the respondent No.2-NPPA to put a cap on trade margin of 30% and directing manufacturer to fix the retail price based on the price at first point of sale of product is indeed a matter of policy and we do not find any error in learned Single Judge in framing the issue and answering the same as noted above in the impugned order.
No grounds are made out in the appeal warranting interference. Appeal is dismissed.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE RU