India Vs. M/S.
Ranbaxy Laboratories Ltd. & Ors.  INSC 1897 (12 May 2008)
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NO. 3497 OF 2008 (Arising out of SLP (C) No. 8362 of
2006) Union of India .... Appellant Versus M/s. Ranbaxy Laboratories Ltd. and
others .... Respondents
S.B. SINHA, J.
1. Leave granted.
2. First respondent is a
pharmaceutical company and is engaged in the manufacture, inter alia, of the
bulk drug Pentazocine in the formulation of Pentazocine injection with the
brand name `Fortwin'. Sale and marketing of 2 the said drug is controlled by
the Drugs (Price Control) Order, 1995 (1995 Order). The said order has been
made by the Central Government in exercise of its powers under Section 3 of the
Essential Commodities Act, 1955 (1955 Act). We may notice some interpretation
clauses in the 1955 Act, which are as under :- "2.(a) "bulk
drug" means any pharmaceutical, chemical, biological or plant product
including its salts, esters, stereo-isomers and derivatives, conforming to
pharmacopoeial or other standards specified in the Second Schedule to the Drugs and
Cosmetics Act, 1940 (23 of 1940), and which is used as such or as an
ingredient in any formulation;
2.(c) "ceiling price"
means a price fixed by the Government for scheduled formulation in accordance
with the provisions of para. 9.
2(f) "drug" includes-
(i) .... ....
(ii) .... ....
(iii) bulk drugs and formulations;
2(l) "manufacture" in
relation to any drug, includes any process or part of a process for making,
altering, finishing, packing, labelling, breaking or otherwise treating or
adapting any drugs with a view to its sale and distribution, but does not
include the compounding or dispensing of any drug or the packing of any drug in
the ordinary course of retail business, and "to manufacture"
shall be construed accordingly;
3 2(r) "price list"
means a price list referred to in paragraphs 14 and 15 and includes a
supplementary price list;
2(s) "retail price"
means the retail price of a drug arrived at or fixed in accordance with the
provisions of this Order and includes a ceiling price;"
3. The drug in question is one of
the scheduled bulk drugs being at Sl.
No.43 in the First Schedule.
4. The Central Government in
exercise of its powers conferred upon it by paragraph 23 of the 1995 Order
issued guidelines for the purpose of grant of exemption in terms of paragraph
25 specifying that a manufacturer who had been given a price exemption for bulk
drug should submit an application in prescribed forms for fixation of price of
suck bulk drug and formulation four months before the expiry of the period of
the exemption. It was furthermore stipulated :- "However, if there is an existing
notified price for bulk drug or ceiling price for formulations, the
manufacturer shall follow the same on the expiry of the exemption and obtain
price approval for non-ceiling packs of formulation (s) based on that bulk
5. A similar provision has been
made for grant of exemptions in respect of New Delivery System, in terms
whereof a manufacturer is required, where there is an existing notified price,
to follow the same on the expiry of the exemption.
6. The exemption granted in favour
of the first respondent had expired on 31st October, 1999.
7. First respondent was asked to
show cause as to why an amount of Rs.2,59,76,070/- should not be recovered from
it and why action should not be taken under paragraphs 21 and 24 of 1995 Order
read with Section 10 of the 1955 Act by a notice dated 29th April, 2002. In
response thereto the first respondent inter alia contended that it had not
overcharged price from any customer and no amount towards any alleged over
charge was payable by it.
It was furthermore contended that
the company had furnished all the informations, as and when asked for by the
prescribed authorities of the appellant.
8. As the said reply was found to
be unsatisfactory, the first respondent was asked to deposit the alleged over
charged amount with interest @ 15% per annum as provided under Section 7A of
the 1955 Act.
9. A writ petition was filed
thereagainst by the first respondent before the Delhi High Court. The said writ
petition was dismissed by a learned Single Judge of the said High Court by an
order dated 20th May, 2004.
10. A Letters Patent Appeal was
filed thereagainst which has been allowed by a Division Bench of the said Court
by reason of the impugned judgment and order dated 19th December, 2005.
The High Court opined that the
exemption Notification dated 29th August, 1995 clearly show that the same
related to drugs manufactured by 31st October, 1999 and thus the same would
apply even if the drugs have been sold after the said date.
11. Mr. Gopal Subramaniam, learned
Additional Solicitor General of India appering on behalf of the appellant,
would submit :- 6 i) That the High Court committed a serious error in passing
the impugned judgment in so far as it failed to take into consideration that
1995 Order is concerned with distribution and not manufacture.
ii) An exemption Notification must
be strictly construed and so construed, it must be held that no benefit could
be claimed by the first respondent beyond the period of 31st October, 1999 as
by reason of the said exemption Notification it could sell the drug at any
price and not at the stipulated one and thus, as soon as the period of
exemption expired, the price provided for under the 1999 Order was required to
iii) As a manufacturer the first
respondent could sell its products but the exemption was in regard to sale only
and not to manufacturer, the impugned judgment cannot be sustained.
12. Mr. S. Ganesh, learned Senior
Counsel, appearing on behalf of the first respondent, on the other hand, would
submit that exemption Notification must be given a purposive meaning and so
construed, the impugned judgment is wholly unassailable 7
13. Admittedly the drug in
question is an essential commodity within the meaning of the provisions of 1955
15. Section 3(2)(c) of 1955 Act
empowers the Central Government to make an order providing for controlling the
price at which the essential commodity may be bought or sold.
16. Exemption clause contained in
paragraph 25 of the 1995 Order vis-`- vis Notification dated 29th August, 1995
must be construed having regard to the object and purport, which 1995 Order
seeks to achieve. A scheduled drug contains details not only of the maximum
retail price but also the date of manufacture. The price fixed in terms of
paragraph 9 of the 1995 Order shall be the ceiling price. Paragraph 3(1)
empowers fixing of the maximum sale price at which the same can be sold. The
factors which were required to be considered therefore, however, are not
required to be noticed.
17. In terms of clause 3 of
paragraph 3 of 1995 Order, a statutory prohibition had been created in terms
whereof nobody could sell the bulk price exceeding the maximum sale price fixed
under paragraph 1. Clause 2 8 of paragraph 8 empowers the authority fix retail
price of scheduled formulations in terms whereof revision in the price is
18. Clause 6 of paragraph 8 of
1995 Order reads as under :- (6) No manufacturer or importer shall market a new
pack, if not covered under sub-paragraph 3 of para 9, or a new formulation or a
new dosage form of his existing scheduled formulation without obtaining the
prior approval of its price from the Government.
Thus, what is prohibited is market
of a new pack without obtaining the prior approval of its price from the
Paragraph 9 empowers the authority
to fix ceiling price of scheduled formulations.
Paragraph 23 provides for the
power of the Central Government to issue guidelines and directions. Such
guidelines and directions, however, must be consistent with the provisions of
19. What is, thus, necessary to be
taken into consideration is the power for exempting and the Notification issued
therefore by the Central 9 Government. The power of exemption is contained in
clause 25 of he Order, which reads as under :-
25. Power to exempt.- (1)
Government may, having regard to the factors mentioned in sub-paragraph (2) and
subject to such conditions as it may specify by an order in the Official
Gazette, exempt any manufacturer from the operation of all or any of the
provisions of this Order.
granting exemption under sub-paragraph (1), the Government shall have regard to
all or any of the following factors,-
of workers employed:
(b) amount of capital invested;
(c) range/group and type of products
a) sales turnover;
b) .... .....
c) production of a new drug which
has not been produced elsewhere, if developed through indigenous research and
20. We may, at this juncture, also
notice the exemption Notification dated 29th August, 1995, which reads thus :-
" ORDER S.O. No./ 7153 (E), in exercise of the powers conferred by
sub-paragraph (1) of Paragraph 25 of the Dugs (Price 10 Control) Order, 1995,
the Central Government having regard to the factors specified in the clause(e)
of sub- paragraph (2) of paragraph 25 of the said order and also having been
satisfied for the need to do so in the public interest hereby exempts the bulk
drug and formulations based thereupon specified in column 2 of the Table bellow
which is manufactured by the company specified in the corresponding entry in
column 3 from the operation of price control stipulated in sub-paragraph (1) of
paragraph 3, sub paragraph (1) of paragraph 8 and sub-paragraph (1) of
paragraph 9 of the said order, upto the period as indicated in column 4
TABLE S.No. Name of the Name of
the Period upto which the Product Company exemption is granted 1 2 3 4 1
Pentazocine and M/s.
its formulations Ranbaxy
31-10-1999 Laboratories Ltd.
Sd/- (K. MULALIDHARAN) DESK OFFICER
21. For issuance of an exemption
Notification the Central Government is required to apply its mind. The factors
which are relevant, must be taken 11 into consideration as provided for under
paragraph 2 of clause 25 of the Order.
22. The relevant considerations
inter alia are the sales turnover as also production of a new drug which was
not produced elsewhere, if developed through indigenous research and
23. Pentazocine is used for a
patient suffering from traumatic pain. The Central Government must be held to
have applied its mind before issuing the exemption notification.
24. What must have been taken into
consideration for that purpose is that respondent No.1 fulfilled the requisite
criteria. The area of exemption is from the operation of the price control.
Such exemption admittedly had been granted upto 31st October, 1999.
Indisputably the Central Government had the power to extend the period of
exemption. It could have granted further exemption subject to any condition.
25. The short question which
arises for our consideration is as to whether the exemption Notification would
apply in respect of drugs which were manufactured upto 31st October, 1999 or
manufactured and sold upto the 12 said date. The exemption granted is in
respect of what. It is in respect of a drug manufactured by a company. What is
marketed for sale is the drug manufactured. Manufacture of a drug is controlled
by a different statute, namely the Drugs and
Cosmetics Act, 1940. Process of marketing the drug as also the maximum
price which can be charged have direct relation with manufacture and also the
date thereof. The wrapper/foil/containers in which the drug is marketed
contains several informations for the general public;
one of them being the date of
manufacture and the retail price. Various other informations are also required
to be furnished.
26. The contention of learned
Additional Solicitor General that the drug could be manufactured upto 31st
October, 1999 but on and from 1st November, 1999 it could be sold only at the
price specified in the order, in our opinion, cannot be accepted. If the first
respondent was entitled to avail the benefit of the exemption notification till
the midnight of 31st October, 1979, sometime would be necessary for it to
market the same. There must be some time lag between the period the drug is
manufactured and the actual sale by a retail dealer to the customer.
27. The Court while construing an
exemption notification cannot lose sight of the ground realities inclduing the
process of marketing and sale.
The exemption order dated 29th
August, 1995 is clear and unambiguous. By reason thereof what has been exempted
is the drug which was manufactured by the company and the area of exemption is
from the operation of the price control. They have a direct nexus. They are co
related with each other.
While construing an exemption
notification not only a pragmatic view is required to be taken but also the
practical aspect of it. A manufacturer would not know as to when the drug would
be sold. It has no control over it. Its control over the drug would end when it
is despatched to the distributor. The distributor may despatch it to the whole
seller. A few others may deal with the same before it reaches the hands of the
The manufacturer cannot supervise
or oversee as to how others would be dealing with its product. All statutes
have to be considered in light of the object and purport of the Act. Thus, the
decision relied upon by the learned Additional Solicitor General in Union of
India vs. Cynamide India Ltd. :
(1987) 2 SCC 720 ; Prag Ince &
Oil Mills vs. Union of India : (1978) 3 SCC 459 and Sree Meenakshi Mills vs.
Union of India : (1973) 1 SCC 129 will have no applicability.
28. It is true that 1995 Order was
to control the price and not the manufacture. But there cannot be any doubt
that the price is that of a manufactured drug.
Not only in terms of the Essential
Commodities Act, 1955 but also under various others, for example Customs
and Central Excise Act and Weights and Measures Act (if applicable) several
informations are required to be furnished. If the submission of Mr. Gopal Subramaniam
that the first respondent was bound not only to manufacture but also to sell at
a price upto 31st October, 1999 is correct, the same in our opinion lead to an
absurdity. Such an anomaly and absurdity must be avoided.
29. Learned counsel wants us to
apply the principle of purposive construction. It may be applied so as to give
full effect to the exemption notification. The exemption notification must be
construed to be a workable one. In New India Assurance Co. Ltd.. vs. Nusli
Neville Wadia and another : 2007 (14) SCALE 556 this Court opined :- "51.
Barak in his exhaustive work on `Purposive Construction' explains various
meanings attributed to the term "purpose". It would be in the fitness
of discussion to refer to Purposive Construction in Barak's words:
15 "Hart and Sachs also
appear to treat "purpose" as a subjective concept. I say
"appear" because, although Hart and Sachs claim that the interpreter
should imagine himself or herself in the legislator's shoes, they introduce two
elements of objectivity: First, the interpreter should assume that the
legislature is composed of reasonable people seeking to achieve reasonable
goals in a reasonable manner; and second, the interpreter should accept the
non-rebuttable presumption that members of the legislative body sought to
fulfill their constitutional duties in good faith. This formulation allows the
interpreter to inquire not into the subjective intent of the author, but rather
the intent the author would have had, had he or she acted reasonably."
(Aharon Barak, Purposive
Interpretation in Law, (2007) at pg.
87) While referring to its
decision in Oriental Insurance Co. Ltd. vs. Brij Mohan and others : 2007 (7)
Scale 753 it applied the doctrine of purposive construction. Applying the
principle of doctrine of purposive construction, we are of the opinion that
meaningful purpose could be achieved only if the construction of the
notification as indicated hereinbefore is adopted and no other.
30. There is no merit in this
appeal which fails and is accordingly dismissed with costs. Counsel's fee
assessed at Rs.50,000/- ...................................J.
( S.B. SINHA )
( V.S. SIRPURKAR ) New Delhi April , 2008
17 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. __________OF
2008 (Arising out of SLP (C) No. 8362 of 2006) Union of India .... Appellant
Versus M/s. Ranbaxy Laboratories Ltd. and others .... Respondents Dear Brother
Draft judgment in the abovementioned matter is being sent herewith for your
perusal and kind consideration.
( S.B. SINHA ), J.