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3. A Counter affidavit has been filed on behalf of the respondents by the Director of National Pharmaceutical Pricing Authority, Ministry of Chemicals and Petrochemicals and fertilizers, New Delhi.

In the said counter affidavit, the deponent would state that the Control on the prices of drugs and pharmaceuticals was introduced for the first time in 1962 in the wake of the Chinese aggression basically in order to keep the prices at reasonable level so that the interests of the consumers could be protected. The Drugs (Display of Prices) Order, 1962 and the Drugs (Control of Prices) Order, 1963 were promulgated under the Defence of India Act, freezing the prices of medicines. However, comprehensive orders were issued subsequently under the Essential Commodities Act, 1955. In the counter affidavit it is further stated that Section 2(a) of the Essential Commodities Act confer powers upon the Central Government to control production, supply, distribution etc., of Essential Commodity, inter-alia providing for controlling the prices at which Essential Commodity may be bought or sold. It is only in exercise of powers under Section 3 of the said Act, the Central Government made the Drugs (Price control) Order, 1995 repealing the earlier order of 1987. The said order empower the Central Government to fix the maximum sale price of Scheduled bulk drugs as well as retail price of its formulations and the Government is empowered to recover the amount overcharged by the manufacturer/importer/distributor of Scheduled Bulk Drugs and Formulations under Drugs (Price Control) Order, 1987. When the Drugs (Price Control) order, 1987 was repealed, the power of the Government to recover the overcharged amount was provided in para 13 of DPCO, 1995. It is stated that the Drugs Price Control Order, 1987 was notified by the Government of India in exercise of powers conferred by Section 3 of the Essential commodities Act, 1955 and as per the provisions of DPCO, 1987, 134 drugs were classified as Scheduled drugs under Schedule II of DPCO, 1987. The Government was empowered under the provisions of DPCO, 1987 to fix the prices of Scheduled Bulk Drugs and related formulations. As per the provisions, all the manufacturers of the said Bulk Drugs and related formulations were required to adopt the price fixed by the Government within 15 days from the date of notification and in case, the manufacturers charge more than the price fixed, the Government of India is empowered to recover the overcharged amount from the manufacturer under para 15 of DPCO, 1987. The Government is empowered to exempt any drug manufacturing unit from the provisions of DPCO 1987 if the production of the Bulk Drug is from the basic stage, by a process developed through indigenous research and development. It is explained that the Government of India in exercise of powers under para 28 of DPCO 1987 issued guideline No. 1/1989 dated 14.2.1989 in respect of Bulk Drugs produced by a unit from the basic stage by a process of manufacture developed through its Research and Development for specified period not exceeding five years from the date of commencement of Commercial production subject to some terms and conditions. In addition to that, the Government of India also issued guideline No. 2/1989 dated 12.9.1989 in which it was inter-alia stated that exemption shall be available for a period of five years only from the date of approval by the Government and the exemption from price control shall not be applied retrospectively.

According to the respondents, petitioner Company applied for exemption from price control under para 28 of DPCO, 1987 and their request for price exemption was considered by the High Level Committee headed by Mr. Vijay Kelkar, who recommended for exemption of 13 bulk drugs including the said drug from price control subject to the conditions that (a) the policy of OGL import of the said drugs would continue, (b) the said formulations would continue to be under price control, and (c) the said bulk drugs were to be manufactured from the basic stage on indigenous technology. In the meantime, guideline 1/89 dated 14.2.1989 and 2/89 dated 12.9.1989 under para 28 of DPCO 1987 were announced by the Government of India. As per the guidelines, the application of any manufacturers for exemption of price control was to be certified by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. Since along with the application petitioner did not furnish a certificate from DSIR, it was asked to do so. The petitioner company sent the said certificate in February, 1990. In April, 1990, the Committee further made enquiries with DSIR and with the Petitioner Company as to whether the process improvement claimed by the Company was cost-effective and genuine and in addition, the details of the process, areas of improvements, costing details, date of commercial production were sought from the Company. After detailed examination by the Committee, the Department of Chemical and Petrochemicals in its order dated 12.11.1990 granted exemption from the price control for Ephedrine Hydrochloride upto 31.3.1992 and the company was informed accordingly. According to the respondents, it came to its knowledge from the Drug Controller, Madras that the Petitioner Company overcharged the price of Ephedrine Hydrochloride and hence the Department of Chemical and Petrochemicals issued a show cause notice dated 4.12.1990 directing the Company to deposit Rs.1,16,29,917/-, which was over charged by the Company under DPCO, 1987. In the enquiry conducted, the Company took a stand that the exemption of five years ended on 31.3.1992, which means the exemption period applicable from 1.4.1987 to 31.3.1992 and hence there was no over charging in this case. The sum and substance of the stand taken in the counter affidavit is that as per the guidelines 1/89 and 2/89, the period during which exemption can be granted is five years from the date of commercial production and that further the exemption shall be operative only from the date of order and would not operate retrospectively.