Delhi High Court - Orders
Cipla Limited vs Union Of India & Anr on 6 October, 2022
Author: Yashwant Varma
Bench: Yashwant Varma
$~40
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3358/2020 & CM APPL. 11870/2020(Interim Direction)
CIPLA LIMITED ..... Petitioner
Through: Ms. Archana Sahadeva, Adv.
versus
UNION OF INDIA & ANR. ..... Respondents
Through: Mr. Kirtiman Singh, CGSC with Ms.
Vidhi Jain, Adv. for UOI
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
ORDER
% 06.10.2022
1. Admittedly, the solitary question which arises in the present writ petition is whether the manufacturer of a non-scheduled formulation was entitled to round off the price of drugs in terms of the relevant provisions made in the Drugs (Price Control) Order, 2013 ["the 2013 DPCO"] and whether such action would constitute a violation of Para 20 of the order. Before this Court it is accepted that the NPPA has held against the petitioner solely on account of it having rounded off the prices of its non-scheduled formulations.
2. The Court notes that an identical question had fallen for consideration before it in Bharat Serums and Vaccines Limited versus Union of India and Anr. [W.P.(C) 7946/2018 decided on 22 September 2022] where upon a consideration of the legal position, it had held thus:-
"93. That only leaves the Court to deal with the issue of rounding off.Signature Not Verified Digitally Signed By:NEHA Signing Date:07.10.2022 18:27:41
It cannot possibly be disputed that the 2011 Rules clearly do not apply in light of the express exclusion of drugs from their ambit. The Court also bears in mind the submission of Mr. Singh who had contended that Para 5.2 of the NPPA Minutes of Meeting dated 12 April 2016 used the expression „ceiling price" and "WPI" and must therefore be understood to be confined to scheduled formulations only. The Court also bears in mind that the extension of the rounding off the principle was one which was considered and ruled upon in Obsurge and which decision presently forms subject matter of challenge in a pending LPA No. 310/2020.
94. Notwithstanding the above and without being influenced by the observations in Obsurge, the Court notes that Para 5.2 speaks of overcharging on account of fixation of a price for formulations. Undisputedly, the expression „formulation‟ would include both scheduled and non-scheduled formulations. The Court also bears in mind that NPPA had decided not to pursue overcharging cases which arose merely on account of the adoption of the rounding off principle and was otherwise not actuated by mala fide. Bharat Serums has in terms of the data placed on the record clearly established that it has been held to have overcharged merely because it had rounded off the price of its drugs. This is evident from the disclosures made by the said petitioner where the price of Rs. 90.75 was rounded off to Rs. 91 and Rs. 109.808 was rounded off to Rs.
110. It becomes pertinent to observe that it is not the case of the respondent that the aforesaid action of Bharat Serums was actuated by mala fides. The issue ultimately boils down to whether the respondents would be justified in taking the position that the principle of rounding off can only apply to scheduled formulations.
95. The Court bears in mind the admitted fact that a manufacturer of non-scheduled formulations is not obliged by statute to seek the approval of the price of its drugs. In fact, that class of formulations is exempt from the rigors of price control altogether as has been noticed in the preceding parts of this decision. The Government has merely retained a power to monitor the price of non-scheduled formulations. Apart from the power of oversight which stands retained by the Government in respect of this class of drugs, the manufacturers thereof are freed from the rigors of price control and are entitled to raise and revise the prices of such formulations provided such increases are within the permissible band of 10%. The Court also cannot lose sight of the practical difficulties that may accompany the price of a drug being fixed at Rs. 99.825, Rs. 109.808, Rs. 2698.30, Rs. 2968.13 or Rs. 3591.43. The fixation of such prices would lead to serious impracticalities when evaluated from a consumer‟s point of view.
96. On a more fundamental plane, this Court of the firm opinion that Signature Not Verified Digitally Signed By:NEHA Signing Date:07.10.2022 18:27:41 depriving manufacturers of non-scheduled formulations of the facility of rounding off which is otherwise and generally accepted by the NPPA itself as a well-recognized mathematical practice would be manifestly arbitrary. The respondents have failed to point out any justifiable or rationale basis on account of which the principle of rounding off would not apply to non-scheduled formulations. The Court finds no justification in the stand taken by the respondents who contend that while it would be open for a manufacturer of a scheduled formulation to round off the price of its products, that benefit should be denied to manufacturers of non- scheduled formulations. Once the NPPA had arrived at the conclusion that rounding off was a well-accepted mathematical principle, the Court finds no justification to discriminate between scheduled and non-scheduled formulations and restrict the application of that practice only to the former. The Court deems it pertinent to observe that if the argument as advanced on behalf of the respondents on this score were to be countenanced, it would not only amount to a hostile discrimination between scheduled and non-scheduled formulations, it would additionally and more fundamentally be patently arbitrary. The Court comes to this firm conclusion since the respondents have abjectly failed to indicate any valid or justifiable ground on the basis of which the principle of rounding off which as per the respondents themselves is a well recognised mathematical practice would not apply to non-scheduled formulations. The Court also bears in mind the fact that the applicability of the aforesaid mathematical practice has been accorded due recognition and acceptance by the NPPA itself. That decision taken by the apex regulatory body cannot and should not be construed as being restricted to scheduled formulations alone. It would be manifestly arbitrary and unjust to uphold an allegation of overcharging against manufacturers of non-scheduled formulations where the infraction of Para 20 is based solely on the adoption of the principle of rounding off."
3. Insofar as the decision in Obsurge Biotech Ltd. v. Union of India [2020 SCC OnLine Del 1744] is concerned, the Court had in Bharat Serums itself noted that although the said decision forms subject matter of a Letter Patents Appeal in which the operation of that decision had been placed in abeyance, the Court had for reasons independently recorded upheld the right of a manufacturer to invoke and adopt the well accepted principle of rounding off.
4. Accordingly and in light of the reasons assigned in the decision Signature Not Verified Digitally Signed By:NEHA Signing Date:07.10.2022 18:27:41 rendered in Bharat Serums, the instant writ petition shall stand allowed. The impugned demand notices of 05 September 2018 bearing Nos. F.No. 29(13-4)/2017/Div.IV(OC-II)/NPPA, F.No.29(13-6)/2017/Div.IV(OC-II)/ NPPA, F.No.29(13-8)/2017/Div.IV(OC-II)/NPPA and F.No.29(13-
5)/2017/Div.IV(OC-II)/NPPA and impugned order dated 20 February 2020 bearing No.F.No.29(13-4)/2017/Div.IV(OC-II)/NPPA shall consequently stand quashed and set aside.
YASHWANT VARMA, J.
OCTOBER 6, 2022/neha Signature Not Verified Digitally Signed By:NEHA Signing Date:07.10.2022 18:27:41