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19. The primary submission made before us by learned counsel appearing on behalf of Dr. Reddy’s Laboratories was that the ceiling price of the Norfloxacin formulations could not be fixed prior to fixing the maximum sale price of the bulk drug Norfloxacin under Paragraph 3 of the DPCO 1995. It was also contended that the requirements of Paragraph 7 of the DPCO 1995 were not adhered to while notifying the ceiling price of Norfloxacin formulations.

Brief background

20. The core issue in this batch of appeals relates to the interpretation and application of Paragraph 7 of the DPCO 1995 and Paragraphs 8 and 9 of the DPCO 1995 – the extent of flexibility available to the Central Government in fixing the retail price and ceiling price of formulations and the rigidity expected by the statutory Order. The specific issue in these appeals relates to the validity of various notifications prescribing the norms for calculating the retail price of formulations under Paragraph 7 of the DPCO 1995 for the purposes of Paragraphs 8 and 9 of the DPCO 1995.

83. The primary issues before us relate to (i) the legitimacy and soundness of the materials on the basis of which the norms were prescribed for application of the formula given in Paragraph 7 of the DPCO 1995 and on the basis of which the retail price and ceiling price of formulations were fixed under Paragraphs 8 and 9 of the DPCO 1995; (ii) the effect of the failure of the Central Government to prescribe the norms under Paragraph 7 of the DPCO 1995 on a yearly basis, and (iii) the effect of the failure of the Central Government to prescribe the norms for cost of packing material under Paragraph 7 of the DPCO 1995. The issue before us does not relate to the actual norms or actually fixing the retail price or ceiling price of formulations under Paragraphs 8 and 9 of the DPCO 1995 in the sense that there is no dispute that for the purposes of fixing the retail price or ceiling price of formulations under Paragraphs 8 and 9 of the DPCO 1995 the norms were prescribed and the formula given in Paragraph 7 thereof was adhered to. Even otherwise, the actual norms and price fixing on the basis of the norms is out of bounds for us.

131. It was also contended by learned counsel for one of the respondents before us that there was a qualitative difference between the DPCO 1987 and the DPCO 1995 in as much as under the DPCO 1987 the norms were required to be prescribed from time to time under Paragraph 6 thereof. However, as far as the DPCO 1995 is concerned the norms were required to be prescribed on a yearly basis under Paragraph 7 thereof. The submission was that the principles known as Heydon’s mischief rule[16] are clearly applicable and there was a conscious decision by the Central Government to switch over from prescribing the norms from time to time to fixing the norms on a yearly basis. Since the norms were not fixed on a yearly basis under the DPCO 1995, the retail prices fixed by the Central Government on the formulations on the basis of Paragraph 7 of the DPCO 1995 were illegal and liable to be struck down.

137. We may mention en passant that the ceiling price fixed by the BICP on 7th July, 1994 and thereafter revised by the NPPA in February 1998 in respect of packing materials has not been questioned (let alone challenged) by anybody.

(iv) Other submissions

138. It was contended by learned counsel appearing on behalf of Dr. Reddy’s Laboratories Ltd. that the retail price or the ceiling price of a formulation could not have been fixed by the Central Government without first fixing the maximum sale price under Paragraph 3 of the DPCO 1995 of the bulk drug utilized in the formulation. We are unable to accept this submission. In the first place, there is no obligation on the Central Government to fix the maximum sale price of every bulk drug, whether it is in the First Schedule to the DPCO 1995 or not. In fact, if a bulk drug is not in the First Schedule to the DPCO 1995 the Central Government is not empowered to fix its maximum sale price. There could also be a situation where a formulation consists of two or more drugs, one of which is not a scheduled drug. In that event, if the contention of learned counsel is accepted then it would mean that the retail price or the ceiling price of that formulation cannot be fixed. This is surely not the intention of the DPCO 1995 nor is it a possible manner of reading the DPCO 1995. If the DPCO 1995 were to be read in the suggested manner, then every drug would have to be included in the First Schedule to the DPCO 1995 as a pre- condition to fixing the retail price or ceiling price of a formulation which contains that drug. This would be doing utmost violence to the plain provisions of the DPCO 1995 and for this simple reason we are unable to accept the submission of learned counsel. The learned counsel has unfortunately overlooked that a formulation can contain one or more bulk drugs including a bulk drug not included in the First Schedule to the DPCO 1995.