TMI Blog2015 (7) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the formulations of which strength and dosage have not been specified. Para 2(1)(zb) defines scheduled formulations as formulation included in the First Schedule whether referred to by generic versions or brand name. Thus, it is clear that all formulations that are included in the First Schedule, irrespective of specification of strength and dosages, are scheduled formulations‟. In other words, scheduled formulations include non-scheduled formulations. On a combined reading of Para 4, Para 2(1)(d) and Para 2(1)(zb), it appears that the specification of dosage and strength in the First Schedule has a specific bearing with regard to fixation of ceiling price under DPCO-2013. The words in the definition of ceiling price‟ under Para 2(1)(d) i.e. in accordance with the provisions of this order‟ make the intention of the Legislature abundantly clear and that the same shall be given due weight while implementing the provisions of DPCO-2013 - It is pertinent to note that DPCO-2013 contains a different method of regulation so far as non-scheduled formulations‟ are concerned. Para 20 of DPCO-2013 provides for monitoring the maximum retail prices‟ o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 10-7-2015 - HON'BLE THE CHIEF JUSTICE AND HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW For the Appellant : Mr. Kapil Sibal Mr. Arvind Nigam, Sr. Advs. with Mr. Jawahar Lal, Mr. Amar Gupta and Mr. Raghav G., Advs. For the Respondent : Mr. Sanjay Jain, ASG with Mr.Akshay Makhija, Mr. Kirtiman Singh, Mr.Vidur Mohan, Mr.Gyanesh Bhardwaj, Mr.Mansimran Singh, Ms. Noor Anand, Mr.Waize Ali Noor, Ms. Mahima Bahl and Mr.Rohitendra Deb, Advs. for UOI. ORDER MS. G. ROHINI, CHIEF JUSTICE 1. Whether fixation of ceiling price under the provisions of the Drugs (Prices Control) Order, 2013 for male contraceptives (condoms) is in conformity with the powers vested under the Essential Commodities Act, 1955 read with the Drugs and Cosmetics Act, 1940 is the question that requires consideration in these two writ petitions. 2. The petitioners in both the writ petitions are the companies engaged in manufacturing/marketing of various health products including male contraceptives (Condoms). It is pleaded that the petitioner in W.P. No.7705/2013 manufactures and markets condoms under the brand name Durex‟ and Kohinoor‟, whereas the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also contended that against the order dated 10.07.2014, an alternative remedy of Review is available under Paragraph 31 of DPCO, 2013. 7. Both the objections raised by the respondents, according to us, are untenable since the order dated 10.07.2014 came to be passed during the pendency of the writ petition, particularly in terms of the liberty granted by this Court to the petitioner to file the Review under Paragraph 31 of the DPCO, 2013. That apart, the main contention in the writ petition is that the very inclusion of the condoms‟ within the purview of DPCO, 2013 is beyond the powers conferred under the Essential Commodities Act, 1955 apart from being contrary to the National Pharmaceutical Pricing Policy, 2012. Apparently, by virtue of the proposed amendment, the nature of the writ petition has not been altered in any manner whatsoever. Moreover, the proposed amendment is only on account of subsequent developments that took place during the pendency of the writ petition. Hence, we are of the view that the proposed amendment is essential for the purpose of determining the real questions in controversy between the parties and accordingly we allow the amendment as propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urtenant to a building or not, for the growing thereon of food-crops generally or of specified food-crops and for otherwise maintaining or increasing the cultivation of food-crops generally, or of specified food-crops; (c) for controlling the price at which essential commodity may be bought or sold; (d) xxx xxx xxx (e) xxx xxx xxx......................... 12. The word essential commodity‟ was initially defined under Section 2(a) of the EC Act, 1955. However, by Amendment Act 54 of 2006, Clause (a) to Section 2 was omitted and Section 2A was inserted providing that the essential commodity means a commodity specified in the Schedule. By virtue of the said amendment, a Schedule was also added to the EC Act, 1955 enumerating the essential commodities. Drugs‟ is one of the commodities included in the Schedule to the EC Act, 1955 and it is explained that for the purposes of the said Schedule, drugs‟ has the meaning assigned to it in clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940. Drugs and Cosmetics Act, 1940 13. The Drugs and Cosmetics Act, 1940 has been enacted to regulate the import, manufacture, distribution and sale of drugs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses; (ix) I.V. Cannulac; (x) Bone Cements; (xi) Heart Valves; (xii) Scalp Vein Set; (xiii) Orthopaedic Implants; (xiv) Internal Prosthetic Replacements. 16. Section 12 of the Drugs and Cosmetics Act, 1940 empowers the Central Government to make Rules for the purpose of giving effect to the provisions of Chapter III of the said Act (providing for import of drugs) and such Rules inter alia may specify the drugs or classes of drugs for the import of which a license is required and prescribe the form and conditions of such licenses, the authority empowered to issue the same, the fees payable therefor and etc. Similarly, Section 33 of the Drugs and Cosmetics Act, 1940 empowers the Central Government to make Rules for the purposes of giving effect to the provisions of Chapter IV (which provides for manufactures, sale and distribution of drugs and cosmetics) and such Rules may inter alia prescribe the forms of licenses for the manufacture for sale or for distribution, for the sale and for the distribution of drugs or any specified drug or class of drugs, the form of application for such licenses, the conditions subject to which such licenses may be issued and the matters incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Essential Drugs List was explained in the Preface to the National Essential Drugs List, 1996 as under: The National List is not intended as an imposition on the rights of State Governments, Government institutions, or private health care providers. It is meant to be used as a guideline to the concept of rational therapeutics and as an indicator of availability in the country. While the drugs selected are considered adequate to treat diseases common to most parts of the country, it is appreciated that specific regional requirements for drugs to treat diseases of local importance may not be available in the National List, and in such instances it will be appropriate for the State Health Administration (adopting the National List) to include drugs as may be considered adequate to treat these diseases. The National Essential Drugs List implies that the drugs included in it are adequate to meet the common contemporary health needs of the general population of the country and general obligation of the health administrators to ensure abundant availability of such drugs in the country. The drugs included in this list are generally safe and effective, and are approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose was deliberated. The committee took the considered view that the strength should be mentioned in the NLEM. For essentiality of requirement the medicines have been categorized as follows: - P, S and T denote essentiality at Primary, Secondary and Tertiary levels respectively while P, S, T (U in NLEM 2003) indicates essentiality at all the levels. A total of 348 medicines (excluding repetitions) are present in NLEM 2011. In the NLEM 2011, 181 medicines fall under the category of P, S and T, 106 medicines fall under the category of S, T while 61 medicines are categorized as T only. In comparison to NLEM 2003, number of medicines deleted is 47 and 43 medicines have been added. National Pharmaceuticals Pricing Policy 23. Price control over drugs was first introduced in the country in the aftermath of the Chinese aggression with the promulgation of the Drugs (Display of Prices) Order, 1962 and the Drugs (Control of Prices) Order, 1963. These were promulgated under the Defence of India Act. With these orders, the prices of drugs were frozen with effect from 01.04.1963. Thereafter, a series of price control regimes were notified through various orders in the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate criteria for ensuring essential and life saving drugs not to fall out of the price control. Subsequently, it was represented by the Union of India that it does not propose to implement the Drug Policy, 2002. Accordingly, the SLP was disposed of by the Supreme Court on 31.03.2011. 25. Thereafter, the Union of India, Ministry of Chemicals and Fertilizers, Department of Pharmaceuticals published a fresh policy called the National Pharmaceuticals Pricing Policy, 2012 (NPPP, 2012) vide notification dated 07.12.2012 in continuation of the 1994 Policy. 26. The principles for pricing the essential drugs as laid down in the National List of Essential Medicines, 2011 have been promulgated in the NPPP, 2012. It is also specifically laid down in the NPPP, 2012 that the objective of the policy is to put in place a regulatory framework for pricing of drugs so as to ensure availability of the essential medicines at reasonable prices even while providing sufficient opportunity for innovation and competition to support the growth of industry. One of the key principles for regulation of prices in NPPP, 2012 has been mentioned as essentiality of drugs‟, which is different from the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssential commodities by making orders for the said purpose and in particular Section 3(2)(c) enables making an order providing for controlling the price at which any essential commodity may be bought or sold. In exercise of the powers so conferred by Section 3 of the EC Act, 1955, the Central Government issued the Drugs Prices Control Orders from time to time regulating the prices of drugs following the Drug Policies declared by the Ministry of Chemical and Fertilizers, Department of Pharmaceuticals. 30. In tune with NPPP 2012 which seeks to promulgate the principles for pricing of essential drugs as laid down in the NLEM 2011, the Central Government in exercise of the powers conferred by Section 3 of the EC Act, and in supersession of the Drugs (Prices Control) Order, 1995 made the Drugs (Prices Control) Order 2013 vide S.O.1221(E) dated 15.05.2013 to regulate the prices of drugs and providing inter alia the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by the Government, penalties for contravention of provisions, etc. All essential medicines enumerated in NLEM, 2011 are included in the First Schedule to DPC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elled to market the branded condoms manufactured by them at the ceiling price fixed thereunder which is stated to be far less than the cost price. Hence these two writ petitions. Case of the petitioners 35. The specific case of the petitioners is that condoms which act only as physical barriers and thus protect from Sexually Transmitted Infections and unwanted pregnancy are devices‟ and that by virtue of the notification dated 20.04.2010 issued in terms of Section 3(b)(iv) of the Drugs and Cosmetics Act, 1940, by the Ministry of Health and Family Welfare, Government of India condoms‟ have been declared as notified medical devices and are brought within the definition of drug‟ under the D C Act, 1940. In the light of the same, it is pleaded in the writ petitions that though there is no controversy with regard to the position that condom‟ is a drug within the meaning of Drugs and Cosmetics Act, 1940, the challenge in the writ petitions is to the inclusion of condoms within the purview of DPCO 2013 for the following among other grounds: 35.1 DPCO, 2013 to the extent of including condoms‟ in Entry 18.3.3 of First Schedule is ultra vires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.11.2013 and 10.07.2014 is arbitrary, irrational and does not sub-serve the intent and purpose of the DPCO, 2013 since NPPA failed to collect the market share and price in respect of all brands having a market share of 1% as required under Para 4 of the DPCO, 2013. The NPPA also failed to take into consideration Wholesale Price Index‟ (WPI) for the year 2014 though the same was issued on 10.07.2014. 35.8 The average sale price to retailers of the Durex brand condoms is Rs.41.67/- whereas its ceiling price was fixed at Rs.6.56/-. Thus, the petitioner incurs a huge loss. Since the pricing mechanism prescribed in DPCO 2013 does not take into consideration the variation in the raw material used, additional ingredients, processes, additional features, applicable taxes, absence of generic version, etc., the ceiling price fixed for the brands of condoms marketed by the petitioners, which is illogical and irrational, has resulted in an absurd situation. 35.9 Premium condoms manufactured/marketed by the petitioners cannot be treated at par with basic condoms because of the method of manufacture, the technology involved, the ingredients used and research and development prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my was effected in the light of which, Foreign Direct Investment (FDI) in the pharmaceutical sector was brought in the automatic route and the limit of FDI was raised up to 100%. Following this, a new Drug Policy was introduced in the year 2002, however the same was not implemented. In the meanwhile, the Ministry of Health and Family Welfare, Government of India, in accordance with guidelines issued by the Supreme Court in Union of India vs. K.S. Gopinath (decided on 31.03.2011), revised the National List of Essential Medicines and accordingly, NLEM, 2011 which contains 348 formulations was published by Notification dated 08.06.2011. 36.2 Subsequently, the Central Government enunciated the National Pharmaceuticals Pricing Policy, 2012 (for short NPPP, 2012‟) which came into effect on 07.12.2012. The said policy is in continuation of the Drug Policy, 1994 and aimed at promulgating the principles for pricing of essential drugs as laid down in NLEM, 2011. One of the objectives of NPPP-2012 is to put in place a regulatory framework for pricing of drugs so as to ensure availability of essential medicines at reasonable prices. 36.3 Key principles for regulation of prices in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... death, account for a significant part of the burden of disease amongst adolescents and adults in developing countries. (c) In many developing countries, the risk of death for children under age five is doubled or tripled after their mothers die. WHO estimates that up to 1,00,000 maternal deaths could be avoided each year if women who did not want children used effective contraception. Nevertheless, in many developing countries, the need for family planning and reproductive health medicines and services persists. At least 200 million women of reproductive age worldwide would like to prevent or space their births but are not using effective contraception. It also has been estimated that expanding contraceptive services to meet the needs of couples who wish to avoid pregnancy but currently are not using contraception could prevent as many as 850,000 deaths per year amongst children under age five. (d) Furthermore, every year there are an estimated 120 million unwanted pregnancies, resulting in 46 million abortions, 20 percent of which are unsafe and lead to severe morbidity and mortality for women. For example, unsafe abortion accounts for 13 percent of maternal deaths. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration the retail prices of only three manufacturers whereas there are 11 manufacturers having market share of more than 1% has also been denied and it is stated that letters were issued to seven companies and out of the same, only three companies furnished the data and on the basis of the said data the price was initially fixed at Rs.6.56 per piece. Submissions of the learned counsel for the petitioners 37. We have heard Shri Kapil Sibal, Shri Arvind Nigam and Shri Arvind Datar, the learned Senior Counsels appearing for the petitioners at length, and their submissions are as follows. 37.1 Condoms‟ are not drugs‟ as defined under the Drugs and Cosmetics Act, 1940 and consequently the same cannot be considered as Essential Commodity‟ under Section 2A of EC Act read with the Schedule thereto. Therefore, inclusion of condoms in the First Schedule to DPCO, 2013 is ultra vires the EC Act. (a) Elaborating the above contention, it is submitted by Shri Kapil Sibal, the learned Senior Counsel that the expression drug‟ as defined under Section 3 (b) of Drugs and Cosmetics Act, 1940 covers four categories namely (i) all medicines used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rugs and Cosmetics Act, 1940, the learned Senior Counsel submitted that the same is not attracted at all not only because condoms do not fall within the meaning of the substances used in the context of the said clause but also because a notification is required to be issued by the Central Government in respect of the substances referred thereto. (e) According to the learned senior counsel, Section 3(b)(iii) is also not attracted since condom‟ is only an end product. (f) Coming to Section 3(b)(iv), the pleading in the writ petitions was that condom, which is a device, has been specified as a drug‟ by notification dated 20.04.2010 issued by the Ministry of Health Family Welfare, Government of India. However, placing reliance upon a subsequent Office Order dated 09.07.2014, it is contended by the learned Senior Counsel that the earlier Notification dated 20.04.2010 stood modified and condom‟ can no longer be considered as a notified device. The learned Senior Counsel would also contend that by virtue of the order dated 09.07.2014, condoms‟ cannot even be regulated under the Drugs and Cosmetics Act, 1940 with effect from 09.07.2014 and therefore rene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable distribution and availability at fair prices. According to the learned Senior Counsel, the said essential pre-condition has not been satisfied so far as condoms‟ is concerned and therefore no Control Order can be issued in exercise of the power conferred by Section 3 (1) of the EC Act, 1955. (a) It is contended by the learned Senior Counsel that the need to make the condoms available at reasonable prices has already been addressed since the Government itself distributes 55% of the condoms free or at highly subsidised prices. It is also contended that 93.97% of condoms are available at below ceiling price even before the issuance of DPCO, 2013. Therefore, according to the petitioners, the essential pre-condition for issuing a Control Order providing for controlling the price of the condoms in exercise of the powers under Section 3 of the Essential Commodities Act, 1955 is not satisfied at all. 37.4 Since the scope of DPCO, 2013 is restricted to formulations‟ as defined in Para 2 (1) (i) which means a medicine processed out of or containing in one or more drugs, condom‟ which is only a barrier device but can under no circumstances be considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v). Consequently, Paragraphs-4, 5, 6, 13 14 which exclusively deal with scheduled formulation, are not applicable at all to condoms‟ and therefore the question of fixation of ceiling price for condoms does not arise at all. 37.6 The methodology prescribed in Para-4 of DPCO, 2013 for calculation of ceiling price is unworkable in the case of condoms and does not apply at all for fixation of ceiling price for condoms since condoms do not have dosage and strength. (a) Having regard to the admitted fact that the strength and dosages are not prescribed in respect of condoms in the First Schedule to DPCO, 2013, particularly in view of the fact that in case of condoms which are medical devices the raw material, process, features and etc., would differ, the learned Senior Counsel would contend that the methodology prescribed in Paragraph-4 is unworkable. It is also contended that while fixing the ceiling price by the impugned orders none of the mandatory provisions of DPCO, 2013 were followed. It is further contended that in respect of medical devices like condoms, no collated data was available with IMS Health while issuing the impugned price fixation orders. 37.7 Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents 38. On the other hand, Shri Sanjay Jain, the learned ASG appearing on behalf of the respondents contended that Condoms are drugs‟ within the meaning of Section 3(b) of the Drugs and Cosmetics Act, 1940 and the Rules made thereunder and that all the drugs are essential commodities in terms of Section 2-A of EC Act, 1955 read with the Schedule thereto. 38.1 It is sought to be explained by the learned ASG that in exercise of the powers conferred by the Drugs and Cosmetics Act, 1940, Rules called Drugs and Cosmetics Rules are made laying down the conditions for obtaining the licenses and renewals for the manufacture of drugs and that Rule 125 (set out in Part XII) read with Schedule-R of the said Rules specifies the standards of drugs as well as the standards to be observed in the manufacture of contraceptive. It is submitted by the learned ASG that the petitioners being the licensees for manufacture/marketing of condoms granted under the Drugs and Cosmetics Act and the Rules made thereunder cannot now contend that the very product in respect of which they have sought and obtained permission from time to time is not a drug. 38.2 Referring to Chimmanlal Jagj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, no details whatsoever were submitted by the petitioners while making the price fixation exercise culminating in the order dated 10.07.2014. 38.8 Placing reliance upon K Janardhan Pillai vs. UOI; (1981) 2 SCC 45, Glaxo Pharmaceuticals Ltd. vs. UOI; 2009 (107) DRJ 539, UOI vs. Swiss Garnier; (2013) 8 SCC 615, Puma Ayurvedic Herbal (P) Ltd. vs. Commissioner, Central Excise, Nagpur, (2006) 3 SCC 266, it is contended by the learned ASG that the scheme of EC Act and DPCO, 2013 prohibits any sub-category in medicines on the basis of any consideration of luxury‟ or lifestyle‟. 38.9 It is further contended that in examining any price fixation order, the primary consideration shall be that of the interests of the consumer and as such interference by this Court is warranted only where Control Order is vitiated by palpable unreasonableness or arbitrariness. 38.10 Rebutting the contention on behalf of the petitioners that issuance of Control Order is not warranted for price fixation of the condoms under Section 3 of the EC Act, it is contended that as per Section 3(1) of EC Act, the shortage of a product is not the sine qua non for exercise of the power to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the said Act. 41. The contentions of the petitioners in this regard have already been elaborated in Paras 37.1 and 37.2 (supra). Per contra, it is contended by the respondents that condoms‟ fall under the category of medicines‟ and substances‟ under Section 3(b)(i) since various chemicals such as benzocaine‟ are used in the manufacture of condoms. Even assuming without conceding that no medicinal components are contained in condoms, according to the respondents the same is of no consequence to treat the condoms as a drug‟ having regard to the fact that even empty gelatin capsules are to be treated as drugs under Section 3(b)(iii) and various uses of condoms include mitigation and prevention of diseases or disorders in human beings. Pointing out that condoms‟ have been included in the National List of Essential Medicines (NLEM) from the year 2003 onwards treating the same as essential medicines the learned ASG would further contend that the contraceptives in the form of condoms play a crucial role both for increasing the reproductive health and decreasing and preventing innumerable life threatening diseases and therefore they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification dated 20.04.2010 the Central Government has notified condoms as a medical device and on the basis of the same it was contended that there is no controversy with regard to the position that condom is a drug within the meaning of Drugs and Cosmetics Act, 1940, but the challenge in the writ petitions is with regard to the inclusion of condoms within the purview of DPCO, 2013. However, during the course of the hearing a new stand has been taken by the learned senior counsel for the petitioners on the basis of the Office Order dated 09.07.2014 issued by the Directorate General of Health Services, Ministry of Health and Family Welfare and it is sought to be contended that by virtue of the said Office Order condom has to be treated as a non-notified device w.e.f. 09.07.2014 and thus it can no longer be considered as a drug under Section 3(b)(iv) of the Drugs and Cosmetics Act, 1940 and it cannot even be regulated under the said Act. 46. Having carefully gone through the two orders dated 20.04.2010 and 09.07.2014 relied upon by the petitioners, we are unable to hold that the said orders are the notifications issued under Section 3(b)(iv) of the Drugs and Cosmetics Act. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is also pertinent to note that NLEM, 2003 contained a new Section i.e. Section 18 under the caption Hormones, Other Endocrine Medicines Contraceptives . Under the said Section, Adrenal Hormones and Synthetic Substitutes are included at Entry 18.1 and Androgens are included at Entry 18.2 whereas Contraceptives are included at Entry 18.3. Entry 18.3 contains four categories of contraceptives enumerated from 18.3.1 to 18.3.4 as under: 18. Hormones, other Endocrine Medicines and Contraceptives Medicine Category Route of Administration/ Dosage Form Strengths 18.3 Contraceptives 18.3.1 Hormonal Contraceptives Ethinylestradiol + Levonorgesterol U Tablets .03 mg + 0.15 mg Ethinylestradiol + Norethisterone U Tablets 0.035 mg + 1.0 mg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n NPPP, 2012 is essentiality of drugs‟ and the said criteria has been met by considering the list of medicines specified in NLEM, 2011. Thus, it is clear that condoms have always been considered as medicines and from 2003 onwards they are treated as essential medicines. (d) In addition it appears to us that condoms are also substances‟ and therefore on that ground also clause (i) of Section 3(b) is attracted. It is relevant to note that Rule 125 of Drugs and Cosmetics Rule, 1945 describes contraceptives as substances intended to affect the structure or any function of human body and Schedule R thereof prescribes the standards for mechanical contraceptives. (e) Though it is contended by the petitioners that mechanical contraceptives‟ for which standards are prescribed in Schedule R of the Drugs and Cosmetics Rules, 1945 would only mean intra-uterine devices and condoms are only physical or barrier method contraceptives as has been classified in the First Schedule to DPCO-2013, we do not find any logic to draw any such distinction. The petitioners are not disputing the fact that condoms are being regulated under the Drugs and Cosmetics Act by way of licensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether liable to tax under the Central Sales Tax Act had also considered the question whether the same fell within the expression drugs and medicines and it was concluded that whether the products in question can be treated as drugs or medicines is basically a question of fact including the questions whether it is used to cure or alleviate or to prevent disease or to restore health or to preserve health. Referring to the decision in Leukoplast (India) Pvt. Ltd. (supra), the Supreme Court in Ponds India Ltd. v. Commissioner of Trade Tax Lucknow; (2008) 8 SCC 369, made similar observations with regard to the definition of drug under Section 3(b) of the Drugs and Cosmetics Act, 1940. In the said case, the court was dealing with the question whether petroleum jelly is a drug or the cosmetic within the meaning of the provisions of the UP Trade Tax Act, 1948. While noticing the provisions of the Drugs and Cosmetics Act, 1940, particularly, the definition of the drug , it was observed A drug as defined in Section 3(b) thereof would not only include a medicine which is used for external use of human beings, but if used for prevention of any disease or disorder in human b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is necessary or expedient so to do for the purpose of maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices. 55. In the light of the reasons stated supra, there can be no dispute that condom‟ is a drug‟ as specified in Item-1 of the Schedule to the Essential Commodities Act and thus it is an essential commodity‟ as declared under Section 2A of the Essential Commodities Act, 1955. 56. However, the contention of the petitioners is that the need to make the condoms available at reasonable prices has already been addressed since the Government itself distributes 55% of the condoms free or at highly subsidised prices. It is also contended that 93.97% of condoms are available at below ceiling price even before the issuance of DPCO, 2013. Therefore, according to the petitioners, the essential pre-condition for issuing a Control Order providing for controlling the price of the condoms in exercise of the powers under Section 3 of the Essential Commodities Act, 1955 is not satisfied at all. In other words, the contention is that an order under Section 3 of E.C. Act can be issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) ... the court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem. The court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination. 59. It is a matter of policy and planning for the Central Government to decide whether it would be, on adoption of a system of partial control, in the best economic interest of the sugar industry and the general public that the sugar factories are grouped together with reference to geographical-cum-agro-economic factors for the purpose of determining the price of levy sugar. Sufficient power has been delegated to the Central Government to formulate and implement its policy decision by means of statutory instruments and executive orders. Whether the policy should be altered to divide the sugar industry into groups of units with similar cost characteristics with particular reference to recovery, duration, size and age of the units and capital cost per tonne of output, without regard to their location, as recommended by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government. 63. Hence, we reject the contention that issuance of a Control Order for regulation of prices of condoms is not in conformity with the mandatory provisions of Section 3 of the EC Act, 1955. 64. For proper appreciation of the further contention of the petitioners that since the scope of DPCO-2013 is restricted only to formulations as defined in Para 2(1)(i), the inclusion of the condoms which do not fall within the said definition of formulations‟ is contrary to NPPP-2012, we may in the first instance refer to the definitions of the words ceiling price‟, formulation‟, non-scheduled formulation‟ and scheduled formulation‟ under Para 2(1) of DPCO-2013: 2(1)(d) ceiling price ‟ means a price fixed by the Government for Scheduled formulations in accordance with provisions of this Order. 2(1)(i) formulation ‟ means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include (i) any medicine included in any bona fide Ayurvedic (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and notified by the Government. (2) Where any manufacturer sells a scheduled formulation at a price higher than the ceiling price (plus local taxes as applicable) fixed and notified by the Government, such manufacturers shall be liable to deposit the overcharged amount along with interest thereon from the date of such overcharging. 66. As could be seen, the word formulation‟ has been defined as a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease. The contention of the petitioners that condoms‟ do not fall within the definition of formulation‟ is based upon the plea that condom‟ is not a medicine but only a barrier device. 67. The very same plea taken by the petitioners for the purpose of the contention that Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 is not attracted since condom‟ is neither a medicine nor a substance has already been considered in detail and rejected in para 50 (supra). We have categorically held that condoms‟ are medicines and, therefore, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CO-2013. Therefore, according to the learned ASG, once a product falls within the definition of scheduled formulation‟, Paragraph 4 is attracted irrespective of the fact whether its dosage and strength have been specified or not. 71. We find force in the submission of the learned ASG to the extent that a product would not cease to be a medicine merely on the ground that its dosage and strength have not been specified. However, we fail to understand as to how Paragraph 4 of DPCO-2013 can be made applicable to those formulations for which the dosage and strength have not been specified. 72. A perusal of Paragraph 4 of DPCO-2013 shows that the same provides for fixation of ceiling price of only a scheduled formulation of specified strength and dosage as specified under the First Schedule. Para 2(1)(d) defines ceiling price‟ as a price fixed by the Government for scheduled formulations‟ in accordance with the provisions of DPCO-2013. 73. It is evident from the First Schedule that it contains the formulations of which strength and dosage have been specified as well as the formulations of which strength and dosage have not been specified. Para 2(1)(zb) defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been defined under Para 2(1)(10) as a price list referred to in Para 24 and Para 25. Para 25 provides for display of the price fixed for scheduled formulations‟ having maximum retail price‟ of that formulation based on the ceiling price whereas Para 25 provides for display of prices of non-scheduled formulations‟ and price list thereof. On a combined reading of above-noticed provisions, it appears to us that so far as calculation/fixation of ceiling price of scheduled formulations‟ is concerned, specific distinction has been drawn between those scheduled formulations for which strength and dosage are specified under the First Schedule and the scheduled formulations‟ for which strength and dosage are not specified under the First Schedule. 78. It is no doubt true that the objective of NPPP-2012 is to put in place a regulatory framework for pricing of drugs so as to ensure availability of essential medicines‟ at reasonable prices. It is also true that as per NPPP-2012, the regulation of prices of drugs would be on the basis of essentiality of drugs and the essentiality criteria is to be met by considering the list of medicines specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enabling legislation and even lays down specific criteria to promote the policy, the criteria so evolved become the guideposts for its legislative action. In that sense, its freedom of classification will be regulated by the self-evolved criteria and there should be demonstrable justification for deviating therefrom. Though exactitude and meticulous conformance is not what is required, it is not open to the Government to go haywire and flout or debilitate the set norms either by giving distorted meaning to them or by disregarding the very facts and factors which it professed to take into account in the interest of transparency and objectivity. Otherwise, the legislative act of the delegate in choosing some drugs for price control while leaving others will attract the wrath of Article 14. That is why the Union of India has taken the stand throughout that it stood by the policy while framing the legislation and that there was every endeavour to apply the criteria spelt out in the Drug Policy of 1994 before including the drugs in question in the First Schedule. The correctness of this contention should, of course, be examined. 79. The principle laid down in the above case has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations, i.e. the formulations, the dosage and strength of which are not specified in the First Schedule. However, Paragraphs 4, 6 and 14 which exclusively deal with only those scheduled formulations of which strengths and dosages are specified in the First Schedule are not applicable. Consequently, the fixation of the ceiling price for condoms under Paragraphs 4, 6 and 14 of DPCO-2013 is impermissible under law. 83. In the light of the above conclusion, it is not necessary for us to consider the other contentions of the petitioners that the methodology prescribed in Para 4 of DPCO-2013 is unworkable in the case of condoms and that the advanced version of the pleasure condoms manufactured/ marketed by the petitioners form a distinct and separate class from the basic/utility condoms and, therefore, fixation of a common ceiling price for both the categories under the impugned orders is violative of Article 14 of the Constitution of India. 84. Since the impugned action of fixation of ceiling price is held to be bad on the ground that the NPPA exceeded the powers conferred by Para 4, 6 and 14 of DPCO-2013 and the policy decision under NPPP-2012 has not been interfered by us in an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
