Drugs Policy turnover and competition criteria upheld as requiring domestic sales data and careful factual scrutiny under Article 14.

'Turnover' under the Drugs Policy, 1994 was construed as domestic sale value of the bulk drug; export sales were excluded and production or import figures could not be treated as turnover, though they might assist estimation where sales data was lacking. For the competition criterion in paragraph 22.7.2(iii), only single-ingredient formulators were relevant, and that administrative construction was upheld as a reasonable and non-rationally arbitrary reading of the policy. The challenge under Article 14 failed because arbitrariness and discrimination claims against subordinate legislation required a firm factual foundation, which the High Court had not properly scrutinised; the matter was remitted for fresh determination.

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Issues: (i) Whether the expression "turnover" in the Drugs Policy, 1994 meant sale value of the bulk drug sold domestically and excluded export sales and the mere value of production or imports. (ii) Whether, for applying the competition criterion in paragraph 22.7.2(iii), only single-ingredient formulators were to be taken into account. (iii) Whether the High Court correctly accepted the challenge under Article 14 and the plea of discrimination without a fuller scrutiny of the factual foundation.

Issue (i): Whether the expression "turnover" in the Drugs Policy, 1994 meant sale value of the bulk drug sold domestically and excluded export sales and the mere value of production or imports.

Analysis: The policy treated high turnover as an index of domestic usage. On the ordinary meaning of turnover, it denotes the value of goods sold or supplied, not the mere stock produced or imported. Production and import figures may assist estimation where sales data is unavailable, but they cannot be equated with turnover. Export sales, though ordinarily within the meaning of turnover, were outside the policy object because the criterion was directed to the extent of use in the country and to domestic market conditions.

Conclusion: Turnover under the policy meant domestic sale value, export sales had to be excluded, and production plus imports could not be treated as turnover as such.

Issue (ii): Whether, for applying the competition criterion in paragraph 22.7.2(iii), only single-ingredient formulators were to be taken into account.

Analysis: The policy sought transparent and objective criteria for determining market share. The Government's clarification that combination formulations were not comparable for this purpose was treated as a reasonable construction of the term "formulator" and as consistent with the policy's object. The Court held that two views were possible, and the one adopted by the Government could not be characterized as irrational or as a distortion of the policy language.

Conclusion: Only single-ingredient formulators were relevant for criterion (iii), and that construction was upheld.

Issue (iii): Whether the High Court correctly accepted the challenge under Article 14 and the plea of discrimination without a fuller scrutiny of the factual foundation.

Analysis: The challenge to subordinate legislation on the ground of arbitrariness required a firm factual basis, especially where the dispute turned on technical data such as turnover, market share, and the adequacy of competition. The High Court erred in accepting the petitioners' figures at face value and in treating the Union's incomplete rebuttal as sufficient to strike down the schedule entries. The discrimination plea was also rejected because the comparisons relied upon did not establish hostile discrimination or violation of the policy criteria.

Conclusion: The High Court's acceptance of the Article 14 and discrimination challenges was unsustainable.

Final Conclusion: The judgment under appeal was set aside and the writ petitions were restored to the High Court for fresh determination in light of the legal principles stated, with interim recovery limited as directed.

Ratio Decidendi: Where delegated legislation is framed under a self-evolved policy with specific criteria, those criteria must be substantially followed, but a constitutional challenge to their application must rest on reliable factual material and be tested with due scrutiny before a court interferes on the ground of arbitrariness.

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