P. Venkatarama Reddi, J. - (1.) 1.1. These appeals by special leave preferred by the Union of India are directed against the common judgment of the Bombay High Court in a batch of writ petitions filed under Art. 226 of the Constitution by the manufacturers/importers of certain bulk drugs and their formulations. The bulk drugs concerned are seven in number. They are : Salbutamol, Theophylline, Cyproflaxacin, Norfloxacin, Cloxacillin, Doxycycline and Glipizide. These bulk drugs and the formulations made out of them are sold within the country and part of the quantities produced are also exported outside the country. The challenge is to the inclusion of the said bulk drugs in the first schedule to the Drugs (Price Control) Order, 1995 (hereinafter referred to as the DPCO). Though the fixation of price pursuant to the provisions of the said order was also challenged in some of the writ petitions, that issue was not gone into by the High Court and at any rate, the mechanics of price fixation is not the contentious issue before us. However, it may be noted that the remedy by way of review is available under paragraph 22 of the DPCO to seek reconsideration of price fixation. The immediate provocation for filing the writ petitions in the High Court seems to be the notices issued by the National Pharmaceutical Pricing Authority, calling upon some of the respondent-companies to deposit the overcharged amounts in relation to the formulations of scheduled drugs. 1.2. The High Court held that the concerned drugs should not have been brought within the purview of the DPCO, 1995 and consequently, there could be no fixation of price in relation to those drugs. The notices demanding overcharged amounts were quashed. The writ petitions were thus allowed by the Division Bench of High Court.
(2.) The DPCO, 1995 which came into force on 6th January, 1995, was promulgated by the Central Government in exercise of the powers conferred by S. 3 of the Essential Commodities Act, it repealed the earlier DPCO of 1987, under which more number of drugs were subjected to price control. Drug as defined in Drugs and Cosmetics Act is one of the essential commodities. According to S. 2(a) of DPCO, Bulk Drug means any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives, conforming to pharmacopoeia or other standards specified in the second schedule to the Drugs and Cosmetics Act, 1940 and which is used as such or as an ingredient in any formulation. Formulation is defined to mean a medicine processed out of, or containing one or more bulk drug or drugs with or without the use of any pharmaceutical aids, for internal or external use in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals. Paragraph 3 of DPCO empowers the Central Government to fix, from time to time, a maximum sale price at which the bulk drug specified in the first schedule shall be sold, after making such inquiry, as it deems fit. The opening clause of sub-para (1) spells out the avowed purpose of price control of the scheduled bulk drugs. The declared objective is to regulate the equitable distribution and increasing supplies of the specified bulk drug and making them available at a fair price. There is a prohibition against the sale of bulk drug at a price exceeding the maximum sale price fixed under sub-paragraph (1) plus local taxes, if any. As already observed, we are not concerned here with the modalities of fixation of price. The very inclusion of these bulk drugs in the schedule is being assailed on the ground that it is opposed to the norms laid down by the Central Government itself in the Drug Policy of 1994 and, therefore, the delegated legislative power exercised by the Government is arbitrary and violative of Art. 14 of the Constitution. The plea of the respondents was accepted by the High Court. In the Drug Policy document issued on 15th September, 1994, the Central Government noticed that during the last decade, the drug industry had grown significantly in terms of production of bulk drugs and formulations and the export performance of the industry had been commendable, it was said that the pharmaceutical sector had been able to carve a special niche for itself in the international market as a dependable exporter of bulk drugs. The drug policy with regard to pricing has been stated thus in paragraph 9 of the policy paper : "9. Pricing- The aberrations which have come to notice, in the listing of drugs and their categorization for the purpose of price control, need to be eliminated by the use of transparent criteria applied across the board on all the drugs with the minimum use of subjectivity. The high turnover of a drug is an index of its extent of usage and is considered to meet the requirements of objectivity justifiable on economic considerations. However, the monopoly situation in cases of drugs with comparatively lower turnover has also to be kept in view. Also, as an experimental measure, drugs having adequate competition may not be kept under price control and if this proves successful it would pave the way for further liberalization. In the event, however, of prices of these drugs not remaining within reasonable limits, the Government would reclamp price control." In paragraph 11, it is stated- "In the light of the apprehensions expressed in the Parliament on the likely spurt in the prices of medicines, it has been felt that it would not be desirable to allow automaticity in the pricing mechanism. The Government would set up an independent body of experts, to be called the National Pharmaceutical Pricing Authority, to do the work of price fixation. This expert body would also be entrusted with the task of updating the list of drugs under price control each year on the basis of the established criteria/guidelines. . . . . . . ." The Governments resolve to closely monitor the trends of prices of medicines and to take appropriate measures to reclamp price control in case the prices of such medicines rise unreasonably, has been stressed in paragraph 12. Then, we come to the most important paragraph in the Drug Policy i.e., 22.7.2 which bears the heading Span of Control. It sets out the criteria for bringing the drugs under price control. We quote paragraph 22.7.2 :- 22. 7.2. Span of Control.- (i) The criterion of including drugs under price control would be the minimum annual turnover of Rs. 400 lakhs. (ii) Drugs of popular use in which there is a monopoly situation be kept under price control. For this purpose for any bulk drug, having an annual turnover of Rs. 100 lakhs or more there is a single formulator having 90% or more market share in the retail trade (as per ORG) a monopoly situation would be considered as existing. (iii) Drugs in which there is sufficient market competition viz., at least 5 bulk drug producers and at least 10 formulators and none having more than the 40% market share in the Retail Trade (as per ORG) may be kept outside the price control. However, a strict watch would be kept on the movement of prices as it is expected that their prices would be kept in check by the forces of market competition. The Government may determine the ceiling levels beyond which increase in prices would not be permissible. (iv) Government will keep a close watch on the prices of medicines which are taken out of price control. In case, the prices of these medicines rise unreasonably, the Government would take appropriate measures, including reclamping of price control. (v) For applying the above criteria, to start with, the basis would be the data up to 31st March, 1990 collected for the exercise of the review of the Drug Policy. The updating of the data will be done by the National Pharmaceutical Pricing Authority as detailed in para 22.7.4(i).
(3.) The central theme of the arguments is that the norms set out in sub-paras (i), (ii) and (iii) have not been adhered to by the Government while framing the first schedule to DPCO in purported implementation of the drug policy. There was either deviation from the criteria set out or there was no scientific or rational assessment of the factors relevant to the norms. Most of the arguments centered round the interpretation of the three clauses in para 22.7.2 - an exercise which is usually associated with the construction of statutes. The sum and substance of the arguments on behalf of the respondents is that the seven bulk drugs get excluded from the span of control under one or more norms spelt out in para 22.7.2, whereas the stand of the appellants is that the concerned bulk drugs were included in the schedule only after being satisfied that they came within the ambit of price control criteria. It is also the contention of the appellant that the Governments decision to bring these important bulk drugs within price control is in accordance with the objectives underlying in S. 3 of the Essential Commodities Act, particularly, the interests of consumers. Every attempt was made to examine the facts and figures by an Expert Group of the Standing Committee, keeping in view the prescribed norms in Drug Policy. It is pointed out that the High Court cannot go into the intricacies of price fixation under Art. 226 of the Constitution or sit in judgment over the exercise done by experts.;