1987 (4) TMI 478 - SC - Indian Laws

Interim stays on maximum drug price notifications harm public interest; reviews must be time-bound and expedited, undertakings remain

UOI. & ANR Versus CYNAMIDE INDIA LTD. & ANR

The SC held that notifications fixing maximum prices of bulk drugs and retail formulations should not be stayed by courts as such interim orders harm ... Price-fixation of bulk drugs - unscrupulous exploitation of the Indian Drug and Pharmaceutical Market by multinational Corporations by putting in circulation low-quality and even deleterious drugs - failure to observe the principles of natural justice - Notifications issued under the Drugs (Prices Control) Order, 1979 questioned on several grounds by the manufacturers and they have been quashed by the Delhi High Court on the ground of failure to observe the principles of natural justic. Held that:- Price fixation of a formulation is no doubt dependant on the price of the bulk drug, but it is not to await the result of a review application which in the end may turn out to be entirely without substance. If a review application is allowed and the price of the bulk drug is raised and if in the meanwhile, the formulation had been ordered to be sold at a low price, it may result in considerable loss to the manufacturer. But on the other hand, if the review application turns out to be entirely without substance and has to be rejected and if in the meanwhile the formulation is allowed to be sold at a higher price, the consumer public suffers. Thus, the ups and downs of commerce are inevitable and it is not possible to devise a fool proof system to take care of every possible defect and objection. It is certainly not a matter at which the court could take a hand. All that the court may do is to direct the Government to dispose of the review application expeditiously according to a time-bound programme. It is true that the price of a bulk drug is dependent on innumerable variables. But it does not follow that the notification fixing the maximum price must necessarily be struck down as obsolete by the mere passage of time. We agree that applications for review must be dealt with expeditiously and whenever they are not so dealt with, the aggrieved person may seek a mandamus from the court to direct the Government to deal with the review application within a time framework. We notice that in all these matters, the High Court granted stay of implementation of the notification fixing the prices were issued fixing the maximum prices of bulk drugs and the retail prices of formulations. We think that in matter of this nature, where prices of essential commodities are fixed in order to maintain or increase supply of the commodities or for securing the equitable distribution and availability at fair prices of the commodity, it is not right that the court should make any interim order staying the implementation of the notification fixing the prices. We consider that such orders are against the public interest and ought not to be made by a court unless the court is satisfied that no public interest is going to be served. No doubt the order as made on November 25, 1981 has the manufacturers On terms, but the consumer public has been left high and dry. Their interests have in no way been taken care of. In matters of fixation of price, it is the interest of the consumer public that must come first and any interim order must take care of that interest. It was argued by the learned counsel that the undertaking given by the parties lapsed with the disposal of the writ petition by the High Court and that it could no longer be enforced. We do not agree with this submission. Apart from the fact that an appeal is ordinarily considered to be a continuation of the original proceeding, in the present case, we notice that further orders of the Supreme Court were also in contemplation and such further orders could only be if appeals were preferred to the Supreme Court. We do not think that there was any doubt in anyone's mind that the matter would be taken up in appeal to the Supreme Court whichever way the writ petitions were decided. We are of the view that the undertakings given by the parties in the present cases were intended to and do continue to subsist. Issues Involved:1. Price-fixation of bulk drugs.2. Legislative vs. quasi-judicial nature of price fixation.3. Compliance with principles of natural justice.4. Review applications and their disposal.5. Interim orders and public interest.Detailed Analysis:1. Price-Fixation of Bulk Drugs:The judgment addresses the issue of high prices of bulk drugs, specifically citing the example of 'Barlagan Ketone'. The price reported by the manufacturer in 1971 was Rs. 24,735.68 per Kg, which was significantly higher than the price of Rs. 1,810 per Kg fixed by the Government in 1979. The court highlighted the problem of profiteering in essential commodities like life-saving drugs, emphasizing the need to curb such practices under the Essential Commodities Act, 1955. The Act empowers the Central Government to regulate prices to ensure equitable distribution and availability at fair prices.2. Legislative vs. Quasi-Judicial Nature of Price Fixation:The court made several observations about the nature of price fixation, asserting that 'Price-fixation is neither the function nor the forte of the Court.' It emphasized that price fixation is primarily a legislative activity, not subject to the principles of natural justice. The court stated that legislative actions are not subject to rules of natural justice unless explicitly provided by the statute. The court also noted that price fixation, being a legislative activity, does not require a pre-decisional hearing.3. Compliance with Principles of Natural Justice:The court rejected the argument that price fixation under the Drugs (Prices Control) Order, 1979, was a quasi-judicial activity requiring compliance with principles of natural justice. It stated that the enquiry for price fixation is meant to gather information from various sources and is not confined to manufacturers alone. The court clarified that the review provided under Paragraph 27 of the Order is not a judicial or quasi-judicial proceeding but a legislative review of subordinate legislation.4. Review Applications and Their Disposal:The court addressed the issue of review applications filed by manufacturers against the price notifications. It noted that the review process is akin to a post-decisional hearing and is intended to provide an opportunity for affected parties to bring their concerns to the Government. The court directed the Government to dispose of the review applications within a specified timeframe and to provide relevant information to the manufacturers during the hearing.5. Interim Orders and Public Interest:The court criticized the High Court's interim order staying the implementation of the price notifications, stating that such orders are against public interest. It emphasized that the primary concern in price fixation is the interest of the consumer public, and any interim order must take care of that interest. The court also addressed the issue of delay in disposing of review applications, stating that such delays do not automatically render the notifications obsolete.Conclusion:The appeal was allowed, and the writ petition in the High Court was dismissed. The court directed the Government to dispose of the review applications expeditiously and to provide necessary information to the manufacturers. The court also condoned the delay in filing appeals by the Union of India, considering the public interest involved. The judgment underscores the legislative nature of price fixation and the limited role of courts in such matters.