UNION OF INDIA v. M/S. RANBAXY LABORATORIES LTD. AND OTHERS

S.B. SINHA, J. 1. Leave granted.

D 2. First respondent is a pharmaceutical company and is engaged in the manufacture, inter 2!ia, of the bulk drug Penta- zocine in the formulation of Pentazocine injection with the brand name 'Fortwin'. Sale and marketing of the said drug is con- trolled by the Drugs (Price Control) Order, 1995 (1995 Order). E The said order has been made by the Central Government in exercise of its powers under Section 3 of the Essential Com- modities Act, 1955 (1955 Act). We may notice some interpre- tation clauses in the 1955Act, which are as under:- "2.(a) "bulk drug" means any pharmaceutical, chemical, F biological or plant product including its salts, esters, stereo- isomers and derivatives, conforming to pharmacopoeia! 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; G 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- H

UNION OF INDIA V. M/S. RANBAXY 319 LABORATORIES LTD. AND OTHERS [S.B. SINHA, J.] ... _... (i) A (ii) (iii) bulk drugs and formulations; 2(1) "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 B

.. 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; c 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 D ·- ,JI and includes a ceiling price;"

3. The drug in question is one of the scheduled bulk drugs being at SI. No.43 in the First Schedule.

4. The Central Government in exercise of its powers con- E ferred upon it by paragraph 23 of the 1995 Order issued guide- lines for the purpose of grant of exemption in terms of para- graph 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 for- F mulation four months before the expiry of the period of the ex- emption. 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 G ... ~ price approval for non-ceiling packs of formulation (s) based on that bulk drug."

5. A similar provision has been made for grant of exemp- tiqns in respect of New Delivery System, in terms whereof a H

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... 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 31 •1 October, 1999.

B 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 291h April, 2002. In respQnse thereto the first respondent c 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 furt~ermore contended that the company had furnished all the informations, as and when asked for by the prescribed authorities of the appellant.

D 7. As the said reply was found to be unsatisfactory, the first respondent was asked to depcsit the alleged over charged )( - amount with interest@ 15% per annum as provided under Sec- tion 7A of the 1955 Act.

8. A writ petition was filed thereagainst by the first respon- E dent 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 201h May, 2004.

9. A Letters Patent Appeal was filed thereagainst which .. F has been allowed by a Division Bench of the said Court by rea- ,l

son of the impugned judgment and order dated 191h December, 2005. The High Court opined that the exemption Notification dated 29 1h August, 1995 clearly show that the same related to G drugs manufactured by 31•1 October, 1999 and thus the same would apply even if the drugs have been sold after the said date. .. ..

10. Mr. Gopal Subramaniam, learned Additional Solicitor General of India appering on behalf of the appellant, would sub- mit :- H

UNION OF INDIA V. M/S. RANBAXY 321 LABORATORIES LTD. AND OTHERS [S.B. SINHA, J.] _, .. 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 hot manufacture. ii) An exemption Notification must be strictly construed and so construed, it must be held Aj that no benefit could be claimed by the first respondent beyond the period of 31 51 October, 1999 as by reason of the said exemption Notification it could sell the drug at any price c 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 be charged. D )< 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. . 11. Mr. S. Ganesh, learned Senior Counsel, appearing on E 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 unassail- able ""' ).; 12. Admittedly the drug in question is an essential com- F modity within the meaning of the provisions of 1955 Act.

13Copy pinpoint13. Section 3(2)(c) of 1955Act empowers the Central Gov- ernment to make an order providing for controlling the price at which the essential commodity may be bought or sold. G

-· .. 14. Exemption clause contained in paragraph 25 of the 1995 Order vis-a-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 de- tails not only of the maximum retail price but also the date of H

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A manufacture. The price fixed in terms of paragraph 9 of the 1995 Order shall be the ceiling price. Paragraph 3(1) empowers fix- ing 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.

15Copy pinpoint15. 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 of paragraph 8 empowers the au- thority fix retail price of scheduled formulations in terms whereof revision in the price is permissible.

16Copy pinpoint16. Clause 6 of paragraph 8 of 1995 Order reads as un- der:- (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 Government. Paragraph 9 empowers the authority to fix ceiling price of scheduled formulations. Paragraph 23 provides for the power of the Central Gov- F ernment to issue guidelines and directions. Such guidelines and directions, however, must be consistent with the provisions of the Order.

17Copy pinpoint17. What is, thus, necessary to be taken into consider- G ation is the power for exempting and the Notification issued therefore by the Central Government. The power of exemption is contained In clause 25 of he Order, which reads as under :- .. ·- "25. Pqwerto exempt.-(1) Government may, having regard to tl}e factors mentioned in sub-paragraph (2) and subject to such conditions as it may specify by an order in the

UNION OF INDIA V. M/S. RANBAXY 323 LABORATORIES LTD. AND OTHERS [S.B. SINHA, J.] -' ""' Official Gazette, exempt any manufacturer from the operation of all or any of the provisions of this Order. (2) While granting exemption under sub-paragraph (1 ), the Government shall have regard to all or any of the following fac- tors,- B _.. (a) number of workers employed: (b) amount of capital invested;

(c) range/group and type of products manufactured; a) sales turnover; c b) c) production of a new drug which has not been produced elsewhere, if developed through <" )< indigenous research and development." D

18Copy pinpoint18. The exemptionNotification dated 29th August, 1995, reads thus:- "ORDER E S.O. No./ 7153 (E), in exercise of the powers conferred by sub-paragraph (1) of Paragraph 25 of the Dugs (Price Control) Order, 1995, the Central Government having regard to the factors specified in the clause(e) of sub- .i. paragraph (2) of paragraph 25 of the said order and also having been satisfied for the need to do so in the public F 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 G .j 'I 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 thereof. TABLE H

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A S.No. Name of the Name of the Period upto which Product Company the exemption is granted 1 2 3 4 B 1 Pentazocine M/s. and its formu- Ranbaxy 31-10-1999 lations Labo ratories Ltd.

c Sd/- (K. MULALIDHARAN) DESK OFFICER "

19Copy pinpoint19. For issuance of an exemption Notification the Central D Government is required to apply its mind. The factors which are JI. < , relevant, must be taken into consideration as provided for un- der paragraph 2 of clause 25 of the Order.

20Copy pinpoint20. The relevant considerations inter alia are the sales turn- E over as also production of a new drug which was not produced elsewhere, if developed through indigenous research and de- velopment.

21Copy pinpoint21. Pentazocine is used for a patient suffering from trau- matic pain. The Central Government must be held to have ap- F plied its mind before issuing the exemption notification. •

22Copy pinpoint22. 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 con- trol. Such exemption admittedly had been granted upto 31 •1 Oc- G tober, 1999. Indisputably the Central Government had the power to extend the period of exemption. It could have granted further I> "· exemption subject to any condition.

23Copy pinpoint23. The short question which arises for our consideration H is as to whether the exemption Notification would apply in re-

UNION OF INDIA V. MIS. RANBAXY 325 LABORATORIES LTD. AND OTHERS [S.B. SINHA, J.] ..., .A .

spect of drugs which were manufactured upto 31st October, 1999 A or manufactured and sold upto the said date. The exemption granted is in respect of what. It is in respect of a drug manufac- tured by a company. What is marketed for sale is the drug manu- factured. Manufacture of a drug is controlled by a different stat- ute, namely the Drugs and Cosmetics Act, 1940. Process of B 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 mar- keted contains several informations for the general public; or.e of them being the date of manufacture and the retail price. Vari- c ous other informations are also required to be furnished.

24Copy pinpoint24. 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 )i price specified in the order, in our opinion, cannot be accepted. D "' If the first respondent was entitled to avail the benefit of the ex- emption notification till the midnight of 31st October, 1979, some- time 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. E

25Copy pinpoint25. 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 291h August, .... 1995 is clear and unambiguous. By reason thereof what has been exempted is the drug which was manufactured by the com- F pany 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 G .> ... would be sold. It has no control over it. Its control over the drug would end when it is despatched to the distributor. The distribu- tor may despatch it to the whole seller. A few others may deal with the same before it reaches the hands of the retailer. The manufacturer cannot supeNise or oversee as to how others H

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A would be dealing with its product. All statutes have to be con- ... ,_ sidered in light of the object and purport of the Act. Thus, the decision relied upon by the learned Additional Solicitor Gen- eral in Union of India vs. Cynamide India Ltd. : (1987) 2 SCC 720; Prag Ince & Oil Mills vs. Union of India: (1978) 3 SCC B 459 and Sree Meenakshi Mills vs. Union of India : ( 1973) 1 sec 129 will have no applicability.

26Copy pinpoint26. 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. c Not only in terms of the Essential Commodities Act, 1955 but also under various others, for example Customs and Cen- tral Excise Act and Weights and Measures Act (if applicable) several informations are required to be furnished. If the submis- sion of Mr. Gopal Subramaniam that the first respondent was D bound not only to manufacture but also to sell at a price upto )( ., 31•1 October, 1999 is correct, the same in our opinion lead to an absurdity. Such an anomaly and absurdity must be avoided.

27Copy pinpoint27. Learned counsel wants us to apply the principle of pur- E posive 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 :- .... F "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: G "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

UNION OF INDIA V. MIS. RANBAXY 327 LABORATORIES LTD. AND OTHERS [S.S. SINHA, J.] ... " 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 -'I into the subjective intent of the author, but rather the intent the author would have had, had he or she acted reasonably." c (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 D ll the doctrine of purposive construction. Applying the principle of ~

doctrine of purposive construc·iiOn, 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. E

28Copy pinpoint28. There is no merit in this appeal which fails and is ac- cordingly dismissed with costs. Counsel's fee assessed at Rs.50,000/- R.P. Appeal dismissed. "" ,.,