Case Note & Summary
The appeals by special leave challenged the decision of the Allahabad High Court which had rejected writ petitions filed by the appellants, M/s T.C. Healthcare P. Ltd. and Modi Mundipharma Pvt. Ltd., against notifications dated 11th July 2006 and 30th April 2009 imposing ceiling prices on drug formulations Frusemide and Theophylline. The appellants were small scale units manufacturing these formulations and were initially exempt from price fixation under the Drugs (Price Control) Order, 1995 (DPCO). However, the Central Government issued notifications fixing ceiling prices for these formulations under Para 9 of the DPCO. The appellants contended that the price fixation was arbitrary, without application of mind, and ultra vires Para 7 of the DPCO as there were no norms for sustained release technology. They also argued that they were not given an opportunity to be heard. The High Court negatived these contentions, holding that price fixation is a legislative exercise and that the government had collected data from major manufacturers through questionnaires and press releases. The Supreme Court, in this judgment, upheld the High Court's decision, reiterating that price fixation is a legislative function and does not require individual hearing. The court also rejected the argument that sustained release technology exempts the formulations from price control. The appeals were dismissed, and the notifications were upheld as valid.
Headnote
A) Constitutional Law - Price Fixation - Legislative Function - The fixation of ceiling prices for scheduled formulations under the Drugs (Price Control) Order, 1995 is a legislative exercise and does not require individual notice or hearing to manufacturers. The court relied on Union of India v. Cynamide India Ltd. (1987) 2 SCC 720 to hold that price fixation is essentially a legislative function. (Paras 1-6) B) Drugs and Cosmetics - Price Control - Sustained Release Technology - The use of sustained release or continuous release technology in drug formulations does not exempt them from price fixation under the DPCO, 1995. The court rejected the argument that such technologies were not contemplated by the DPCO. (Paras 4-6) C) Drugs and Cosmetics - Ceiling Price - Para 9 DPCO 1995 - The Central Government has the power to fix ceiling prices of scheduled formulations in accordance with the formula laid down in Para 7, keeping in view the cost or efficiency of major manufacturers. The court upheld the notifications as valid. (Paras 7-9)
Issue of Consideration
Whether the notifications dated 11th July 2006 and 30th April 2009 fixing ceiling prices for drug formulations containing Frusemide and Theophylline are ultra vires the Drugs (Price Control) Order, 1995, and whether the price fixation process was arbitrary and violative of principles of natural justice.
Final Decision
The Supreme Court dismissed the appeals, upholding the notifications dated 11th July 2006 and 30th April 2009 fixing ceiling prices for formulations containing Frusemide and Theophylline. The court held that price fixation is a legislative function and does not require individual hearing, and that sustained release technology does not exempt formulations from price control.
Law Points
- Price fixation is a legislative function
- No requirement of individual hearing in price fixation
- Sustained release technology does not exempt from price control
- Ceiling price fixation under Para 9 DPCO 1995 is valid
- Cost norms can be fixed based on data from major manufacturers
