{"id":163361,"date":"2003-08-01T00:00:00","date_gmt":"2003-07-31T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/secretary-ministry-of-chemicals-vs-ms-cipla-ltd-ors-on-1-august-2003"},"modified":"2016-12-25T12:57:37","modified_gmt":"2016-12-25T07:27:37","slug":"secretary-ministry-of-chemicals-vs-ms-cipla-ltd-ors-on-1-august-2003","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/secretary-ministry-of-chemicals-vs-ms-cipla-ltd-ors-on-1-august-2003","title":{"rendered":"Secretary, Ministry Of Chemicals … vs M\/S. Cipla Ltd. & Ors on 1 August, 2003"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Secretary, Ministry Of Chemicals … vs M\/S. Cipla Ltd. & Ors on 1 August, 2003<\/div>\n
Author: P V Reddi<\/div>\n
Bench: S. Rajendra Babu, P.Venkatarama Reddi, Arun Kumar.<\/div>\n
           CASE NO.:\nAppeal (civil)  3375-3384 of 2002\n\nPETITIONER:\nSecretary, Ministry of Chemicals & Fertilizers\t Government of India\n\n\nRESPONDENT:\nVs.\n\nM\/s. Cipla Ltd. & Ors.    \t\t\t\t \n\n\nDATE OF JUDGMENT: 01\/08\/2003\n\nBENCH:\nS. RAJENDRA BABU, P.VENKATARAMA REDDI & ARUN KUMAR.\n\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
P. Venkatarama Reddi, J.\n<\/p>\n
1.1\tThese appeals by special leave preferred by the Union of <\/p>\n
India are directed against the common judgment of the Bombay <\/p>\n
High Court in a batch of writ petitions filed under Article 226 of the <\/p>\n
Constitution by the manufacturers\/importers of certain bulk drugs <\/p>\n
and their formulations. The bulk drugs concerned are seven in <\/p>\n
number. They are: Salbutamol, Theophylline, Cyproflaxacin, <\/p>\n
Norfloxacin, Cloxacillin, Doxycycline and Glipizide.  These bulk <\/p>\n
drugs and the formulations made out of  them are sold within the <\/p>\n
country and part of the quantities produced are also exported <\/p>\n
outside the country. The challenge is to the inclusion of the said <\/p>\n
bulk drugs in the first schedule to the Drugs (Price Control) Order, <\/p>\n
1995 (hereinafter referred to as ‘the DPCO’). Though the fixation of  <\/p>\n
price pursuant to the provisions of the said Order was also <\/p>\n
challenged in some of the writ petitions, that issue was not gone into <\/p>\n
by the High Court and at any rate, the mechanics of  price fixation is <\/p>\n
not the contentious issue  before us. However, it may be noted that <\/p>\n
the remedy by way of review is available under paragraph 22 of the <\/p>\n
DPCO to seek reconsideration of price fixation. The immediate <\/p>\n
provocation for filing the writ petitions in the High Court seems to be <\/p>\n
the notices issued by the National Pharmaceutical Pricing Authority, <\/p>\n
calling upon some of the Respondent-Companies to deposit the <\/p>\n
overcharged amounts in relation to the formulations of  scheduled <\/p>\n
drugs.\n<\/p>\n
1.2\tThe High Court held that the concerned drugs should not have <\/p>\n
been brought within the purview of the DPCO, 1995 and <\/p>\n
consequently, there could be no fixation of price in relation to those <\/p>\n
drugs. The notices demanding overcharged amounts were <\/p>\n
quashed. The writ petitions were thus allowed by the Division Bench <\/p>\n
of High Court.\n<\/p>\n
2.1\tThe DPCO, 1995 which came into force on 6th January, 1995,  <\/p>\n
was promulgated by the Central Government in exercise of the <\/p>\n
powers conferred by Section 3 of the Essential Commodities Act. It <\/p>\n
repealed the earlier DPCO of 1987, under which more number of <\/p>\n
drugs were subjected to price control.  ‘Drug’ as defined in Drugs & <\/p>\n
Cosmetics Act is one of the essential commodities.<\/p>\n
2.2\tAccording to Section 2(a) of DPCO,   ‘Bulk Drug’ means any <\/p>\n
pharmaceutical, chemical, biological or plant product including its <\/p>\n
salts, esters, stereo-isomers and derivatives, conforming to <\/p>\n
pharmacopoeia or other standards specified in the Second <\/p>\n
Schedule to the Drugs and Cosmetics Act, 1940  and which is used <\/p>\n
as such or as an ingredient in any formulation.  ‘Formulation’ is <\/p>\n
defined to mean a medicine processed out of, or containing one or <\/p>\n
more bulk drug or drugs with or without the use of any <\/p>\n
pharmaceutical aids, for internal or external use in the diagnosis, <\/p>\n
treatment, mitigation or prevention of disease in human beings or <\/p>\n
animals.\n<\/p>\n
2.3\tParagraph 3 of DPCO empowers the Central Government to <\/p>\n
fix, from time to time, a maximum sale price at which the bulk drug <\/p>\n
specified in the first schedule shall be sold, after making such <\/p>\n
inquiry, as it deems fit.  The opening clause of sub-para (1) spells <\/p>\n
out the avowed purpose of price control on the scheduled bulk <\/p>\n
drugs. The declared objective is to regulate the equitable <\/p>\n
distribution and increasing supplies of the specified bulk drug and <\/p>\n
making them available at a fair price. There is a prohibition against <\/p>\n
the sale of bulk drug at a price exceeding the maximum sale price <\/p>\n
fixed under sub-paragraph (1) plus local taxes, if any. As already <\/p>\n
observed, we are not concerned here with the modalities of fixation <\/p>\n
of price. The very inclusion of these bulk drugs in the schedule is <\/p>\n
being assailed on the ground that it is opposed to the norms laid <\/p>\n
down by the Central Government itself in the Drug Policy of 1994 <\/p>\n
and, therefore, the delegated legislative power exercised by the <\/p>\n
Government is arbitrary and violative of Article 14 of the <\/p>\n
Constitution. The plea of the respondents was accepted by the High <\/p>\n
Court.\n<\/p>\n
2.4\tIn the Drug Policy document issued on 15th September, 1994, <\/p>\n
the Central Government noticed that during the last decade, the <\/p>\n
drug industry had grown significantly in terms of production of bulk <\/p>\n
drugs and formulations and the export performance of the industry <\/p>\n
had been commendable. It was said that the pharmaceutical sector <\/p>\n
had been able to carve a special niche for itself in the international <\/p>\n
market as a dependable exporter of bulk drugs. The drug policy with <\/p>\n
regard to pricing has been stated thus in paragraph 9 of the policy <\/p>\n
Paper:\n<\/p>\n
“9. Pricing\u2014The aberrations which have come to notice, <\/p>\n
in the listing of drugs and their categorization for the <\/p>\n
purpose of price control, need to be eliminated by the <\/p>\n
use of transparent criteria applied across the board on <\/p>\n
all the drugs with the minimum use of subjectivity. The <\/p>\n
high turnover of a drug is an index of its extent of usage <\/p>\n
and is considered to meet the requirements of objectivity <\/p>\n
justifiable on economic considerations. However, the <\/p>\n
monopoly situation in cases of drugs with comparatively <\/p>\n
lower turnover has also to be kept in view. Also, as an <\/p>\n
experimental measure, drugs having adequate <\/p>\n
competition may not be kept under price control and if <\/p>\n
this proves successful it would pave the way for further <\/p>\n
liberalization. In the event, however, of prices of these <\/p>\n
drugs not remaining within reasonable limits, the <\/p>\n
Government would reclamp price control.”\n<\/p>\n
In paragraph 11, it is stated\u2014<\/p>\n
“In the light of the apprehensions expressed in the <\/p>\n
Parliament on the likely spurt in the prices of medicines, <\/p>\n
it has been felt that it would not be desirable to allow <\/p>\n
automaticity in the pricing mechanism. The Government <\/p>\n
would set up an independent body of experts, to be <\/p>\n
called the National Pharmaceutical Pricing Authority, to <\/p>\n
do the work of price fixation. This expert body would <\/p>\n
also be entrusted with the task of updating the list of <\/p>\n
drugs under price control each year on the basis of the <\/p>\n
established criteria\/guidelines\u2026.”\n<\/p>\n
2.5\tThe Government’s resolve to closely monitor the trends of <\/p>\n
prices of medicines and to take appropriate measures to reclamp <\/p>\n
price control in case the prices of such medicines rise <\/p>\n
unreasonably, has been stressed in paragraph 12. Then, we come <\/p>\n
to the most important paragraph in the Drug Policy i.e., 22.7.2 which <\/p>\n
bears the heading ‘Span of Control’. It sets out the criteria for <\/p>\n
bringing the drugs under price control. We quote paragraph 22.7.2:-<\/p>\n
22.7.2. Span of Control\u2014<\/p>\n
(i)\tThe criterion of including drugs under price control <\/p>\n
would be the minimum annual turnover of Rs.400 <\/p>\n
lakhs.\n<\/p>\n<\/p>\n
(ii)\tDrugs of popular use in which there is a monopoly <\/p>\n
situation be kept under price control. For this <\/p>\n
purpose for any bulk drug, having an annual <\/p>\n
turnover of Rs.100 lakhs or more there is a single <\/p>\n
formulator having 90% or more market share in <\/p>\n
the Retail Trade (as per ORG) a monopoly <\/p>\n
situation would be considered as existing.\n<\/p>\n<\/p>\n
(iii)\tDrugs in which there is sufficient market <\/p>\n
competition viz., at least 5 bulk drug producers <\/p>\n
and at least 10 formulators and none having more <\/p>\n
than the 40% market share in the Retail Trade (as <\/p>\n
per ORG) may be kept outside the price control.\n<\/p>\n
However, a strict watch would be kept on the <\/p>\n
movement of prices as it is expected that their <\/p>\n
prices  would be kept in check by the forces of <\/p>\n
market competition. The Government may <\/p>\n
determine the ceiling levels beyond which <\/p>\n
increase in prices would not be permissible.\n<\/p>\n<\/p>\n
(iv)\tGovernment will keep a close watch on the prices <\/p>\n
of medicines which are taken out of price control. <\/p>\n
In case, the prices of these medicines rise <\/p>\n
unreasonably, the Government would take <\/p>\n
appropriate measures, including reclamping of <\/p>\n
price control.\n<\/p>\n
(v)\tFor applying the above criteria, to start with, the <\/p>\n
basis would be the data upto 31st March, 1990 <\/p>\n
collected for the exercise of the Review of the <\/p>\n
Drug Policy. The updating of the data will be done <\/p>\n
by the National Pharmaceutical Pricing Authority <\/p>\n
as detailed in para 22.7.4(i).\n<\/p>\n<\/p>\n
3.\tThe central theme of the arguments is that the norms set out <\/p>\n
in sub-Paras (i), (ii) & (iii) have not been adhered to by the <\/p>\n
Government while framing the first schedule to DPCO in purported <\/p>\n
implementation of  the drug policy.  There was either deviation from <\/p>\n
the criteria set out or there was no scientific or rational assessment <\/p>\n
of the factors relevant to the norms. Most of the arguments centered <\/p>\n
round the interpretation of the three clauses in para 22.7.2\u2014an <\/p>\n
exercise which is usually associated with the construction of <\/p>\n
statutes. The sum and substance of the arguments on behalf of the <\/p>\n
respondents is that the seven bulk drugs get excluded from the <\/p>\n
span of control under one or more norms spelt out in para 22.7.2, <\/p>\n
whereas the stand of the appellants is that the concerned bulk <\/p>\n
drugs were included in the schedule only after being satisfied that <\/p>\n
they came within the ambit of price control criteria. It is also the <\/p>\n
contention of the appellant that the Government’s decision to bring <\/p>\n
these important bulk drugs within price control is in accordance with <\/p>\n
the objectives underlying in Section 3 of the Essential Commodities <\/p>\n
Act, particularly, the interests of consumers. Every attempt was <\/p>\n
made to examine the facts and figures by an Expert Group of the <\/p>\n
standing committee, keeping in view the prescribed norms in Drug <\/p>\n
Policy. It is pointed out that the High Court cannot go into the <\/p>\n
intricacies of price fixation under Article 226 of the Constitution or sit <\/p>\n
in judgment over the exercise done by experts.\n<\/p>\n
4.1\tIt is axiomatic that the contents of a policy document cannot <\/p>\n
be read and interpreted as statutory provisions. Too much of <\/p>\n
legalism cannot be imported in understanding the scope and <\/p>\n
meaning of the clauses contained  in policy formulations. At the <\/p>\n
same time, the Central Government which combines the dual role of <\/p>\n
policy-maker and the delegate of legislative power,  cannot at its <\/p>\n
sweet will and pleasure give a go-bye  to the policy guidelines <\/p>\n
evolved by itself in the matter of selection  of drugs for price control. <\/p>\n
The Government itself stressed the need to evolve and adopt  <\/p>\n
transparent criteria to be applied across the board so as to minimize <\/p>\n
the scope for subjective approach and therefore came forward with <\/p>\n
specific criteria. It is nobody’s case that for any good reasons, the <\/p>\n
policy or norms have been changed or became impracticable of <\/p>\n
compliance. That being the case, the Government exercising its <\/p>\n
delegated legislative power should make a real and earnest attempt <\/p>\n
to apply the criteria laid down by itself.  The delegated legislation <\/p>\n
that follows the policy formulation should be broadly and <\/p>\n
substantially in conformity with that policy; otherwise it would be <\/p>\n
vulnerable to attack on the ground of arbitrariness resulting in <\/p>\n
violation of     Article 14.\n<\/p>\n
4.2\tIn Indian Express Newspapers Vs. Union of India [(1985) 1 <\/p>\n
SCC Page 641], the grounds on which subordinate legislation can <\/p>\n
be questioned were outlined by this Court. E.S. Venkataramiah, J. <\/p>\n
observed thus:\n<\/p>\n
“A piece of subordinate legislation does not carry the <\/p>\n
same degree of immunity which is enjoyed by a statute <\/p>\n
passed by a competent Legislature. Subordinate <\/p>\n
legislation may be questioned on any of the grounds on <\/p>\n
which plenary legislation is questioned. In addition it <\/p>\n
may also be questioned on the ground that it does not <\/p>\n
conform to the statute under which it is made.\n<\/p>\n
***\t\t\t***\t\t\t***<\/p>\n
It may also be questioned on the ground that it is <\/p>\n
unreasonable, unreasonable not in the sense of not <\/p>\n
being reasonable, but in the sense that it is manifestly <\/p>\n
arbitrary. In England, the Judges would say “Parliament <\/p>\n
never intended authority to make such rules.  They are <\/p>\n
unreasonable and ultra vires.”\n<\/p>\n
4.3\tTrue, the breach of policy decision by itself is not a ground to <\/p>\n
invalidate delegated legislation.  But, in a case like this,  the <\/p>\n
inevitable fallout of the breach of policy decision which the <\/p>\n
Government itself treated as a charter for the resultant legislation is <\/p>\n
to leave an imprint of arbitrariness on the legislation. When the <\/p>\n
selection or classification of certain drugs is involved for the purpose <\/p>\n
of price control, such selection or classification should be on rational <\/p>\n
basis and cannot be strikingly arbitrary.  No doubt, in such matters,  <\/p>\n
wide latitude is conceded to the legislature or its delegate.  Broadly, <\/p>\n
the subordinate law-making authority is guided by the policy and <\/p>\n
objectives of primary legislation disclosed by preamble and other <\/p>\n
provisions.  The delegated legislation need not be modelled on a set <\/p>\n
pattern or pre-fixed guidelines. However, where the delegate goes a <\/p>\n
step further, draws up and announces  a rational policy in keeping <\/p>\n
with the purposes of enabling legislation and even lays down <\/p>\n
specific criteria  to promote the policy, the criteria so evolved <\/p>\n
become the guide-posts for  its legislative action.   In that sense, its <\/p>\n
freedom of classification will be regulated by the self-evolved criteria <\/p>\n
and there should be demonstrable justification for deviating <\/p>\n
therefrom. Though exactitude  and meticulous conformance is not <\/p>\n
what is required, it is not open to the Government to go hay-wire <\/p>\n
and flout or debilitate the set norms either by giving distorted <\/p>\n
meaning to them or by disregarding the very facts and factors which <\/p>\n
it professed to take into account in the interest of transparency and <\/p>\n
objectivity. Otherwise, the legislative act of the delegate in choosing <\/p>\n
some drugs for price control while leaving others will attract the <\/p>\n
wrath of Article 14. That is why the Union of India has taken the <\/p>\n
stand throughout that it stood by the policy while framing the <\/p>\n
legislation and that there was every endeavour to apply the criteria <\/p>\n
spelt out in the Drug Policy of 1994 before including the drugs in <\/p>\n
question in the first schedule. The correctness of this contention <\/p>\n
should, of course, be examined.\n<\/p>\n
5.1\tWith this prologue, let us proceed to analyze the three <\/p>\n
relevant criteria in the drug policy. According to the first criterion, for <\/p>\n
bringing the drugs under the price control, the minimum annual <\/p>\n
turnover of the drug should be 400 lacs. However, this requirement <\/p>\n
is qualified by and subject to the criteria laid down in (ii) & (iii).  <\/p>\n
Where a monopoly situation prevails in respect of any bulk drug, the <\/p>\n
minimum annual turnover requirement gets reduced to 100 lacs. <\/p>\n
The monopoly situation is deemed to exist where there is a single <\/p>\n
formulator commanding 90% or more market share in the retail <\/p>\n
trade (as per ORG data). According to the 3rd criterion, even if <\/p>\n
minimum annual turnover exceeds 400 lacs, the drug will be kept <\/p>\n
outside price control in case there is sufficient market competition. <\/p>\n
The yardstick for assessing whether there is sufficient market <\/p>\n
competition, according to clause (iii) is that there are at least five <\/p>\n
producers of the particular bulk drug and at least ten formulators <\/p>\n
and none of them have more than 40%  market share in the retail <\/p>\n
trade (as per ORG data).\n<\/p>\n
The said criteria have to be worked out with reference to the <\/p>\n
data available upto 31st March, 1990 which means, the relevant <\/p>\n
facts and figures relating to the financial year 1989-90 have to be <\/p>\n
taken into account.  This is not in dispute.\n<\/p>\n
5.2\tAs already noted, there is no quarrel about the criteria that <\/p>\n
has been laid down. It is not the case of the Union of India that any <\/p>\n
different criteria had been applied while promulgating the DPCO of <\/p>\n
1995. The controversy revolves round its actual application or <\/p>\n
methodology of working out the criteria. What is the annual turnover <\/p>\n
made up of?  In other words, how to work out the turnover figures? <\/p>\n
Is there sufficient market competition as contemplated by        <\/p>\n
clause (iii)? It is with reference to these two aspects that the <\/p>\n
Government’s stand has not been accepted and the writ petitioner’s <\/p>\n
contention found its acceptance by the High Court.<\/p>\n
5.3\tFirst, we shall take up the issue of ‘annual turnover’. The <\/p>\n
stand of the appellant, as discernible from the affidavits on record <\/p>\n
sworn to by the officials of the Department of Chemicals and <\/p>\n
Petrochemicals, Government of India is that the turnover of bulk <\/p>\n
drug ought not to be mixed up with retail sale data of the <\/p>\n
formulations of that bulk drug; in other words, the retail sale data <\/p>\n
pertains to formulations of a bulk drug and not to the bulk drug itself. <\/p>\n
The broad manner in which the turnover has been assessed is <\/p>\n
indicated in paragraph 8 of the rejoinder affidavit filed in SLPs. It is <\/p>\n
stated that the expert group of the Standing Committee which went <\/p>\n
into the whole issue of exclusion\/inclusion of drugs under price <\/p>\n
control “took the data for turnover of the bulk drugs comprising of <\/p>\n
the value of its total production in the country and value of weighted <\/p>\n
average of landed cost of total imports into the country, as the basis <\/p>\n
for viewing the price scenario from different points of view”. It is then <\/p>\n
stated in paragraph 10 – “In the further respectful submission of the <\/p>\n
petitioner the intent behind using the said word (turnover) has been <\/p>\n
to determine the extent of usage of a bulk drug in the country <\/p>\n
(emphasis supplied).  This was the measure adopted by the expert <\/p>\n
group in case of each bulk drug by taking into account the <\/p>\n
aggregate of its total imports into the country and its total <\/p>\n
indigenous production in the country. This has been the connotation <\/p>\n
of the word ‘turnover’ at various levels throughout the deliberations <\/p>\n
and in implementation of the policy through DPCO 1995 and was <\/p>\n
never confined to the narrow connotation of the word ‘sales <\/p>\n
turnover’ “.  In short, it is submitted (vide paragraph 13) that the <\/p>\n
value of total production plus imports of the bulk drug in the country <\/p>\n
determines the annual turnover for the purpose of clauses (i) & (ii) <\/p>\n
of para 22.7.2. As a corollary to this stand, the contention advanced <\/p>\n
on behalf of the Union of India is that export sales could also be <\/p>\n
taken into account in arriving at the annual turnover. According to <\/p>\n
the respondents (writ petitioners), the annual turnover could only <\/p>\n
mean sales of bulk drug within the country either in the same form <\/p>\n
or by way of formulations and it has nothing to do with export sales. <\/p>\n
The entirety of production and imports cannot be regarded as <\/p>\n
turnover. It is submitted by the respondents that the bulk drugs are <\/p>\n
sold mostly in the form of formulations and the quantities of bulk <\/p>\n
drugs utilized in such formulations are given in ORG data. From <\/p>\n
this, the bulk drug turnover can be easily ascertained. The sales of <\/p>\n
the bulk drugs as such to the institutions etc., will be negligible i.e., <\/p>\n
about 15%, as per the certificate issued by ORG in one of the <\/p>\n
cases. It is, therefore, commented  that the contention that the ORG <\/p>\n
data does not afford the basis for ascertaining the annual turnover <\/p>\n
of the bulk drug, is untenable.\n<\/p>\n
5.4\tThe High Court, substantially agreeing with the contentions of <\/p>\n
the respondents\u2014writ petitioners held that the expression ‘turnover’ <\/p>\n
occurring in Drugs Policy can only mean domestic sales figures and <\/p>\n
nothing else. Export sales cannot be included within the ambit of <\/p>\n
turnover. The High Court observed that the concepts of ‘turnover’ <\/p>\n
and ‘market share’ are interrelated and inter-dependent. The <\/p>\n
expression ‘turnover’, if interpreted in a contextual and purposive <\/p>\n
manner, would not include exports. The extent of usage of the bulk <\/p>\n
drug in the country would be determinative of turnover.  By taking <\/p>\n
the export sale figures and the value of entire production of bulk <\/p>\n
drugs into account, the Central Government had acted contrary to <\/p>\n
its own guidelines contained in Drug Policy, 1994. The High Court <\/p>\n
then proceeded to discuss whether  each of the drugs concerned <\/p>\n
could be brought within the purview of DCPO, 1995 and answered <\/p>\n
that question in favour of the writ petitioners.<\/p>\n
5.5\tBefore proceeding further, we may notice that the National <\/p>\n
Pharmaceutical Pricing Authority (NPPA) constituted by the <\/p>\n
Government of India considered the representation of Bulk Drugs <\/p>\n
Manufacturers Association (BDMA) on the subject of <\/p>\n
inclusion\/exclusion of drugs under DPCO. The NPPA passed a <\/p>\n
reasoned order rejecting the representation on dt. 6.4.1998. In that <\/p>\n
order, the issues raised by BDMA regarding exclusion of six out of <\/p>\n
eight drugs with which we are concerned, were considered by the <\/p>\n
said authority. There was however no consideration as regards two <\/p>\n
drugs, namely, Doxycycline and Glipizide, probably because the <\/p>\n
representation did not cover those two drugs.\n<\/p>\n
5.6\tBefore we take up the issue of export sales, it is necessary to <\/p>\n
understand the true import and expanse of the expression ‘turnover’ <\/p>\n
occurring in clause (i) of para 22.7.2 of the Drug Policy, 1994.  What <\/p>\n
is the ‘turnover’ contemplated by the said paragraph? Can it be <\/p>\n
equated to the value of  imported bulk drug and its production, as <\/p>\n
contended by the appellant OR should it be equated to the actual <\/p>\n
sales within the country? Should the export sales be included in <\/p>\n
turnover? These are the questions to which this Court has to <\/p>\n
address itself.\n<\/p>\n
5.7\t‘Turnover’ in its ordinary sense connotes amount of business <\/p>\n
usually expressed in terms of gross revenue transacted during a <\/p>\n
specified period (vide Collins Dictionary).  Broadly speaking, it <\/p>\n
represents the value of the goods or services sold or supplied <\/p>\n
during a period of time.  The amount of money turned over or drawn <\/p>\n
in a business during certain period, is another shade of meaning. <\/p>\n
We need not refer to the definition of ‘turnover’ in Sales tax and <\/p>\n
other fiscal enactments\u2014reliance on which was placed by some of <\/p>\n
the learned counsel as they are not  quite relevant for the purpose <\/p>\n
of understanding the expression ‘turnover’ occurring in a policy <\/p>\n
document. Nor should we seek any assistance from the definition of <\/p>\n
‘sale turnover’ occurring in DPCO in a different context and for a <\/p>\n
different purpose. Going by its ordinary meaning and the way in <\/p>\n
which it is commonly understood in trade and commerce, it is <\/p>\n
difficult to equate turnover to the value of stock acquired either by <\/p>\n
means of imports or production.  For instance, the entire stock in <\/p>\n
trade, say, lying in a godown and not circulated in business, cannot <\/p>\n
be regarded as turnover, even giving broadest meaning to the <\/p>\n
expression ‘turnover’. The reasoning which could be spelt out from <\/p>\n
the order passed by NPPA (referred to supra) and in the counter <\/p>\n
affidavits filed by the appellants that indigenous production plus <\/p>\n
imports furnishes an indicia of the total business in the country in <\/p>\n
relation to a particular bulk drug, cannot be accepted.  It is only what <\/p>\n
is sold out and marketed that could be legitimately regarded as  <\/p>\n
turnover of the specified drug. It may be that in the absence of <\/p>\n
availability of reliable data regarding sales, the import value and <\/p>\n
production value could be the basis to estimate the sale value after <\/p>\n
giving due allowance to various factors such as wastage, unsold <\/p>\n
stocks etc. But, treating the turnover as nothing but the value of  <\/p>\n
stock produced or imported during a given period will be doing <\/p>\n
violence to the ordinarily accepted meaning of the expression <\/p>\n
‘turnover’.  There can be no presumption that the entire stock of <\/p>\n
bulk drug produced or imported during the year had been sold out <\/p>\n
during that year either in the form of formulations or otherwise. <\/p>\n
However, we would like to make it clear that the production and <\/p>\n
import statistics are not altogether irrelevant. They are relevant in <\/p>\n
the sense that they furnish some basis for estimating the sales <\/p>\n
when there is no other reliable and comprehensive data of sales <\/p>\n
available.\n<\/p>\n
5.8\tThe question whether export sales should also be taken into <\/p>\n
account in computing the annual turnover needs to be discussed <\/p>\n
now. There can be no doubt that the meaning of the expression <\/p>\n
‘turnover’  either in its ordinary or legal sense includes  export sales.  <\/p>\n
But, we must have regard to the terms and objectives of the policy <\/p>\n
and try to understand that expression accordingly.  Para 9 of the <\/p>\n
Drug Policy, 1994 makes it clear that the high turnover of a drug is <\/p>\n
an index of its extent of usage. ‘Usage’ has obvious reference to <\/p>\n
consumption and consumption within the domestic market. Whether <\/p>\n
the drug is extensively used within the country is one of the <\/p>\n
considerations kept in view to clamp price control.  The export <\/p>\n
potential of the drug or its usage in foreign countries could not have <\/p>\n
been the reason to notify the specified drugs for price control.  If <\/p>\n
there is any doubt in this regard, it is dispelled by what is stated in <\/p>\n
paragraph 10 of the rejoinder affidavit which we quoted supra.   To <\/p>\n
repeat, it was stated therein that the intent behind using the word <\/p>\n
‘turnover’ has been to determine the extent of usage of a bulk drug <\/p>\n
in the country.   It is also pertinent to note that the Govt. of India has <\/p>\n
not come forward with any explanation as to why export sales also <\/p>\n
should be taken into account in assessing the turnover as per the <\/p>\n
criteria laid down in the Drug Policy.  For all these reasons, we are <\/p>\n
in agreement with the High Court that the export sales ought to <\/p>\n
have been excluded while calculating the turnover.  How far the <\/p>\n
exclusion of export sales would make any difference is a different <\/p>\n
matter.\n<\/p>\n
5.9\tAnother grey area which has surfaced in the backdrop of the <\/p>\n
Drug Policy, 1994 is whether for the purpose of clause (iii), the <\/p>\n
expression ‘formulators’ should be confined to single ingredient <\/p>\n
formulators or it should extend to multi-ingredient formulators as <\/p>\n
well.  The NPPA while rejecting the representation of the Bulk Drug <\/p>\n
Manufacturers’ Association, referred to the clarification issued by <\/p>\n
the Government of India in its communication dated 10.6.1997 <\/p>\n
addressed to one of the writ petitioners which is as follows:<\/p>\n
“The basis of the single ingredient formulation as against <\/p>\n
that of the combination formulation (for purpose of <\/p>\n
calculating market share), is not only justified on account <\/p>\n
of predominance of single ingredient formulation, on <\/p>\n
over all basis, but also vindicates the objective of <\/p>\n
“promoting the rational use of drugs in the country” <\/p>\n
mentioned in paragraph 1(b) of the “Modifications in <\/p>\n
Drug Policy, 1986″. The Principle of covering only single <\/p>\n
ingredient formulations, for purposes of calculating <\/p>\n
market share is a transparent, objective and verifiable <\/p>\n
principle and hence suitable for policy issues. <\/p>\n
Formulations of a bulk drug, containing one or more <\/p>\n
other bulk drug are not comparable in terms of their <\/p>\n
sales values. Therefore, it is practically not possible to <\/p>\n
apply the criteria relating to market share of a formulator <\/p>\n
of a bulk drug on the basis of data of its combination <\/p>\n
formulations, across the board, in a transparent, <\/p>\n
objective and verifiable manner as required for policy <\/p>\n
issues.”\n<\/p>\n
It is, therefore, contended by the Union of India that only <\/p>\n
single ingredient  formulations have to be taken into account for the <\/p>\n
purpose of working out the criterion in clause (iii) and that the <\/p>\n
number of single ingredient formulators of the concerned bulk drug <\/p>\n
is not discernible from ORG data. Of course, it is the contention of <\/p>\n
the respondents that no such distinction can be drawn. It is <\/p>\n
contended that such distinction is irrational.<\/p>\n
In our view, the clarification given by the Government of India <\/p>\n
reflects a reasonable view point and it cannot be said that by <\/p>\n
adopting such approach, a distorted meaning is given to the <\/p>\n
expression ‘formulator’  much against the spirit of the policy.  At any <\/p>\n
rate, two views are possible and it is not for the Court to decide <\/p>\n
which view is preferable.\n<\/p>\n
6.\tBefore closing the discussion on the controversies <\/p>\n
surrounding the criteria evolved in the Drug Policy, there is one <\/p>\n
argument of the learned Solicitor General which we would like to <\/p>\n
refer to. The learned Solicitor General argued that the expression <\/p>\n
‘may’ occurring in clause (iii) of para 22.7.2 of the Drug Policy <\/p>\n
confers discretion and flexibility in approach to the Government of <\/p>\n
India. Even if a particular bulk drug stands outside price control by <\/p>\n
the application of such criteria, the discretion is still left to the <\/p>\n
Government to include the drug in the Schedule for good reasons. <\/p>\n
This argument cannot be countenanced for the simple reason that it <\/p>\n
is not the case of the Government that for any particular reason or <\/p>\n
reasons, the bulk drug concerned was brought within the purview of <\/p>\n
price control, though the drug qualifies for exclusion under      <\/p>\n
clause (iii). Even assuming that the discretion is available in terms <\/p>\n
of the policy, the factum of exercising such discretion for relevant <\/p>\n
reasons should be disclosed. In the absence of such disclosure, the <\/p>\n
Court must proceed on the basis that the Government stood by the <\/p>\n
criteria and saw no need to deviate therefrom.\n<\/p>\n
7.1    Now it is necessary to advert to the nature of the claim made <\/p>\n
by the writ petitioners in relation to each of the bulk drugs, the stand <\/p>\n
taken by the Union of India and the conclusions of the High Court.<\/p>\n
7.2  Salbutamol:  According to the writ petitioner-Company, the <\/p>\n
annual turnover for the year ending March, 1990 was Rs.171.17 <\/p>\n
lacs based on the ORG data. The sales of formulations in domestic <\/p>\n
market has been taken as the basis to calculate the consumption. It <\/p>\n
is then multiplied by the notified price prevalent during the relevant <\/p>\n
period. It is the further case of the writ petitioner that there were as <\/p>\n
many as 24 formulators including the petitioner, none of whom had <\/p>\n
the market share of more than 40%. Admittedly, there were more <\/p>\n
than five bulk drug producers. The writ petitioner-Company, <\/p>\n
therefore, claimed the benefit of exclusion both under clause (i) and <\/p>\n
(iii) of para 22.7.2 of the Drug Policy, 1994. The Government of <\/p>\n
India took the stand that the bulk drug turnover was Rs.11.50 crores <\/p>\n
based on the value of domestic production and imports. Moreover, <\/p>\n
there were only seven known formulators of the bulk drug. <\/p>\n
Therefore, it is contended that the drug Salbutamol does not qualify <\/p>\n
for exclusion either under clause (i) or (iii). The High Court accepted <\/p>\n
the claim of the petitioner-Company on the ground that in the <\/p>\n
counter-affidavit filed by the Union of India, there was only a bald <\/p>\n
denial and the details given by the writ petitioners were not <\/p>\n
controverted.\n<\/p>\n
7.3  Theophylline: The writ petitioners claimed exclusion under    <\/p>\n
clause (iii). The names of six bulk drug producers and 31 <\/p>\n
formulators were given in the writ petition. In the counter-affidavit, it <\/p>\n
was merely stated that there were less than five known <\/p>\n
manufacturers of bulk drug and less than 10 known formulators of <\/p>\n
the bulk drug and therefore the drug Theophylline did not qualify for <\/p>\n
exclusion under clause (iii). The High Court observed that the <\/p>\n
particulars furnished by the petitioner were not effectively <\/p>\n
controverted, there being only a bald denial. It was therefore held <\/p>\n
that the drug ought not to have been brought under price control.<\/p>\n
As per the statement furnished by the learned Solicitor <\/p>\n
General at the time of hearing, the fact that there were more than <\/p>\n
five bulk drug producers, was accepted but the number of <\/p>\n
formulators was given as seven. Therefore, the dispute is confined <\/p>\n
to the number of formulators, the term ‘formulator’ being understood <\/p>\n
in the sense in which the Government of India explained in its <\/p>\n
clarificatory letter dated 6-4-1998.\n<\/p>\n
7.4  Cloxacillin : The writ petitioners concerned are said to be the <\/p>\n
manufacturers of formulations made out of Cloxacillin. There is no <\/p>\n
dispute that the annual turnover at the relevant time was much more <\/p>\n
than 400 lacs.  The writ petitioners claimed exclusion of the drug <\/p>\n
Cloxacillin on the basis of clause (iii) of para 22.7.2. According to <\/p>\n
them, there were as many as 16 bulk drug producers and 23 <\/p>\n
formulators in respect of Cloxacillin and none of the formulators had <\/p>\n
more than 40% market share as per the ORG figures for the year <\/p>\n
1989-90 (upto March 1990). The High Court accepted the case of <\/p>\n
the petitioners on the ground that the factual particulars were not <\/p>\n
controverted, but there was only a bald denial in the counter <\/p>\n
affidavit filed by Union of India. The counter-affidavit of Union of <\/p>\n
India is not found either in S.L.P. paper books or the original record <\/p>\n
of High Court. However, the stand of Union of India, as is clear from <\/p>\n
the reply dated 6.4.1998 of the NPPA sent to the Bulk Drug <\/p>\n
Manufacturers’ Association as well as the Grounds of  SLP is that <\/p>\n
the number of single ingredient formulators of the drug was less <\/p>\n
than 10. According to the statement furnished by the learned <\/p>\n
Solicitor General in the course of the arguments, the number of <\/p>\n
formulators were only two. The NPPA clarified the position thus:<\/p>\n
“The Association has claimed that the highest market share of <\/p>\n
single formulator is 21.89%. This claim is based on consideration of <\/p>\n
sale values of both single ingredient and combination products of <\/p>\n
Cloxacillin. However, the highest market share of single drug <\/p>\n
ingredient formulation of a particular formulator works out to 93.07% <\/p>\n
which is more than the stipulated level of 40%.”<\/p>\n
Thus, there is controversy regarding the number of <\/p>\n
formulators and their market share.\n<\/p>\n
7.5  Cyproflaxacin: The 2nd petitioner in writ petition No. 3449 of <\/p>\n
1996, namely, Ranbaxy Laboratories Ltd. produced the said bulk <\/p>\n
drug during the relevant period and captively consumed the same in <\/p>\n
the manufacture of formulations marketed under the brand name of <\/p>\n
Cifran both in India and foreign countries. The petitioner in W.P.No. <\/p>\n
1974 of 2000 is Cipla Ltd. Inter alia, it is engaged in the <\/p>\n
manufacture and sale of formulations of the drug Cyproflaxacin. <\/p>\n
According to Ranbaxy Ltd., the annual domestic turnover of the <\/p>\n
drug for the year ending March, 1990 was Rs.238 lacs and <\/p>\n
according to the Cipla Ltd., it was Rs.243 lacs excluding the hospital <\/p>\n
and institutional sales to the extent of 15%. It is therefore contended <\/p>\n
that the drug stands excluded under clause (i) of para 22.7.2 of the <\/p>\n
Drugs Policy. It is their further contention that there was no <\/p>\n
monopoly situation as contemplated by clause (ii) inasmuch as <\/p>\n
there was no single formulator having 90% or more market share in <\/p>\n
the retail trade as per ORG data. The said turnover was calculated <\/p>\n
on the basis of estimated consumption purportedly arrived at with <\/p>\n
reference to the data relating to sales formulations given in ORG <\/p>\n
publication.  The quantum of consumption was then multiplied by <\/p>\n
the then prevailing market price. However, a different method of <\/p>\n
calculation of turnover was spelt out in the representation dated <\/p>\n
7.3.1995 submitted by Ranbaxy Ltd., to Government of India (vide <\/p>\n
Ext.B in W.P.No. 3449 of 1996). According to that calculation, the <\/p>\n
turnover is Rs.280 lacs.\n<\/p>\n
In the counter-affidavit, the turnover given by the writ <\/p>\n
petitioners has been disputed. It is stated that ORG data relates to <\/p>\n
formulation sales and it does not give data in regard to quantities <\/p>\n
and values of bulk drug involved.  It was also stated that <\/p>\n
Cyproflaxacin was included in the first schedule on the basis of <\/p>\n
criterion in clause (i) since the turnover in 1989-90 was taken as <\/p>\n
Rs.990 lacs based on the landed cost of imports of the drug. It is <\/p>\n
then stated that the data in regard to indigenous production is not <\/p>\n
available.\n<\/p>\n
The High Court merely referred to the contention of the writ <\/p>\n
petitioners regarding the turnover and accepted the same on the <\/p>\n
ground that there was only bald denial in the affidavit in reply. <\/p>\n
Surprisingly, the High Court extended the benefit of exclusion under <\/p>\n
clause (iii) also, though it was never the case of the writ petitioners. <\/p>\n
The High Court stated that there were admittedly 16 bulk drug <\/p>\n
producers and 20 formulators, though, no such case was set up by <\/p>\n
either of the writ petitioners. In the ORG data furnished by the <\/p>\n
petitioner in W.P.No. 3449 of 1996 and in the representation <\/p>\n
submitted to the Government of India, only the names of seven <\/p>\n
formulators was mentioned. Thus, there was an obvious error in the <\/p>\n
High Court’s judgment.  The plea of discrimination which was raised <\/p>\n
for the first time in the rejoinder affidavit filed in W.P.No. 3449 of <\/p>\n
1996 also found favour with the High Court.\n<\/p>\n
7.6  Norfloxacin : The writ petitioner seeks exclusion from the <\/p>\n
purview of DPCO on the basis of clause (iii) of para 22.7.2 of the <\/p>\n
Drugs Policy. It is the case of the petitioner that there were at least <\/p>\n
28 bulk drug manufacturers and 20 formulators and no single <\/p>\n
formulator had more than 40% market share as per the ORG <\/p>\n
figures. The names were given in the writ petition. However, the <\/p>\n
stand taken in the counter- affidavit filed by the Government of India <\/p>\n
is that there were only three manufacturers of the bulk drug and the <\/p>\n
ORG data does not disclose the number of bulk drug producers. As <\/p>\n
regards the formulators, the stand taken is that the number of single <\/p>\n
ingredient formulators using the said bulk drug is not discernible <\/p>\n
from the ORG data. It is, therefore, contended that the twin <\/p>\n
conditions of a minimum of five bulk drug producers and at least 10 <\/p>\n
formulators are not satisfied. The High Court accepted the plea of <\/p>\n
the writ petitioner on the ground that there was only a bald denial in <\/p>\n
the counter-affidavit and no specific particulars were given to <\/p>\n
controvert the contention of the petitioner. In the order passed by <\/p>\n
NPPA in response to the representation of Bulk Drug <\/p>\n
Manufacturers’ Association, it is stated that as per the records <\/p>\n
available, there were only three bulk drug manufacturers in the <\/p>\n
country during 1989-90. However, the names were not furnished <\/p>\n
either in this document or the counter affidavit.<\/p>\n
As per the ORG data, the market share of the formulation sold <\/p>\n
by the petitioner-Company was 39.56% (vide annexure at page 38 <\/p>\n
of the original writ petition record) which, as pointed out by NPPA, is <\/p>\n
technically lower than 40%. We may add that it is perilously close to <\/p>\n
40%. It should also be noted that the writ petitioner did not furnish <\/p>\n
any details of production to show that the bulk drug manufacturers <\/p>\n
mentioned by it or at least five amongst them actually produced the <\/p>\n
bulk drug.\n<\/p>\n
7.7  Doxycycline : It is the case of the writ petitioner that it <\/p>\n
manufactures and sells single ingredient formulation containing the <\/p>\n
bulk drug Doxycycline in a concentration of 100 mg per capsule <\/p>\n
under the brand name of Doxy-1. The annual turnover of the bulk <\/p>\n
drug Doxycycline, according to the writ petitioner, was Rs. 316 lacs. <\/p>\n
It is seen from the tabular statement appended to Annexure-A to the <\/p>\n
writ petition at pages 85-86 of the original record, the petitioner <\/p>\n
arrived at the total domestic consumption of the bulk drug with <\/p>\n
reference to the ORG data pertaining to sales of formulations in the <\/p>\n
market. It is the further case of the writ petitioner that as per ORG <\/p>\n
data, there were at least 19 formulators producing Doxycycline <\/p>\n
based formulations and none of them had more than 40% of market <\/p>\n
share in retail trade. Therefore, the petitioner claimed that the bulk <\/p>\n
drug Doxycycline should have been excluded from the purview of <\/p>\n
price control in terms of under clause (i) & (iii) and that monopoly <\/p>\n
situation contemplated by clause (ii) has no application because no <\/p>\n
single manufacturer had 90% or more market share in retail trade.<\/p>\n
The stand of the Government has been that the turnover of <\/p>\n
Doxycycline was above 400 lacs during the relevant period and <\/p>\n
therefore it comes under price control. Further, it is their case that <\/p>\n
clause (ii) has no application because the turnover is above 400 <\/p>\n
lacs. It is also averred in the counter affidavit that the retail trade <\/p>\n
sale data is not relevant since the need to calculate  market share <\/p>\n
does not arise. Moreover, since undisputably, there is only one <\/p>\n
manufacturer of the bulk drug, i.e., Ranbaxy Limited, the exclusion <\/p>\n
criteria laid down in clause (iii) of para 22.7.2 is not applicable.<\/p>\n
In paragraph 89 of the judgment under appeal, the High Court <\/p>\n
having merely referred to the arguments of the learned counsel for <\/p>\n
the petitioner, accepted  the case of the petitioner on the ground <\/p>\n
that in the affidavit-in-reply filed by the Government, there was only <\/p>\n
bald denial and that the particulars were not controverted.  <\/p>\n
Moreover, the High Court was under an apparent misapprehension <\/p>\n
that the Writ Petitioner sought the benefit of exclusion under    <\/p>\n
clause (iii) also. The core controversy, as already noticed, is <\/p>\n
regarding the quantum of turnover.  The Union of India took the <\/p>\n
stand that the turnover was above 400 lacs.   In the statement filed <\/p>\n
by the learned Solicitor-General at the time of argument, the figure <\/p>\n
was given as 471.77 lacs.  However, the appellant did not furnish <\/p>\n
any details as to the calculation of turnover.\n<\/p>\n
7.8  Glipizide: The writ petitioner\u2014USV Limited is a  manufacturer <\/p>\n
of the bulk drug ‘Glipizide’ which is sold under the brand name of <\/p>\n
Glynase. It does not appear that there was any other producer of <\/p>\n
bulk drug during the relevant period.  It is the case of the writ <\/p>\n
petitioner that the annual turnover for the year ending 31st March, <\/p>\n
1990 was only Rs. 82 lacs and that clause (ii) is not therefore <\/p>\n
attracted. The writ petitioner estimated the turnover figure by <\/p>\n
arriving at the consumption of the bulk drug in various formulations <\/p>\n
and by multiplying the same by the MRP (Maximum Retail Price). <\/p>\n
The ORG data relating to sales of formulations was furnished.<\/p>\n
The stand of the Central Government is that production data <\/p>\n
was not available for the year 1989-90 and the turnover of the bulk <\/p>\n
drug was determined by the expert group on the basis of the landed <\/p>\n
cost of imports during the year to the tune of Rs.322.50 lacs. As <\/p>\n
there was only one formulator as reported in ORG survey of March, <\/p>\n
1990, monopoly situation was considered to be existing “since one <\/p>\n
formulator was having 100% market share as on 31.3.1990”. <\/p>\n
Disputing the assertion of the writ petitioner that as per ORG data <\/p>\n
furnished in Ext.F to the writ petition, there was no single formulator <\/p>\n
having 90% or more market share in retail trade, it is pointed out in <\/p>\n
Paragraph (iv) of the counter-affidavit that Ext.F includes <\/p>\n
formulations based on the bulk drugs other than Glipizide. It is <\/p>\n
further stated in the same para of the counter that there is only one <\/p>\n
formulation, namely, Glynase based on Glipizide and in respect of <\/p>\n
that, the writ petitioner had 100% market share.<\/p>\n
Thus, the dispute mainly centers round the quantum of <\/p>\n
turnover.\n<\/p>\n
The High Court observed that “even assuming that the <\/p>\n
petitioners were the sole manufacturers of the said drug, as the <\/p>\n
turnover was below Rs.100 lacs, the monopoly situation, as <\/p>\n
envisaged in para 22.7.2 (ii) of Drug Policy, 1994 does not apply <\/p>\n
and as such the said drug ought to be kept out of the purview of <\/p>\n
DPCO, 1995”. The plea of discrimination between this drug and <\/p>\n
another anti- diabetic drug known as Insulin also found favour with <\/p>\n
the High Court.\n<\/p>\n
8.1\tWe are of the view that the approach of High Court in <\/p>\n
considering the question of applicability of criteria laid down in the <\/p>\n
Drugs Policy in relation to each of the above drugs is not correct <\/p>\n
and the High Court failed to address itself to various crucial aspects <\/p>\n
as indicated below:\n<\/p>\n
8.2\tORG data does not give full and clear picture of the turnover <\/p>\n
of bulk drug. ORG data relates to sales of formulations made either <\/p>\n
exclusively out of the bulk drug or in combination with other drugs. <\/p>\n
The formulations containing the particular bulk drug either wholly or <\/p>\n
in part reach the consumers through normal trade channels. The <\/p>\n
particulars of sales of such formulations entering the retail market <\/p>\n
are compiled by ORG. Bulk drug sales as such are not covered by <\/p>\n
ORG data. At best, from ORG data, it may be possible to deduce <\/p>\n
the consumption of bulk drug on estimated basis especially if it is <\/p>\n
the only drug used in that formulation.  Moreover, direct sales to <\/p>\n
institutions such as hospitals and Government organizations are not <\/p>\n
reflected in ORG compilation. According to the certificate filed in <\/p>\n
some of the cases, such sales would be about 14%. It is also borne <\/p>\n
out by the same certificate issued by the Associate Research <\/p>\n
Director of ORG (Ext. ‘C’ to W.P.No. 1974 of 2000 and Annexure-I <\/p>\n
to written submissions) that out of this 86%, the ORG data covers <\/p>\n
about 90% of the retail market sales. This is what the certificate <\/p>\n
says:\u2014<\/p>\n
“The Retail Pharma Market in India contributes to 86% <\/p>\n
of the total market and the remaining 14% towards <\/p>\n
Hospital and Institutional sales.\n<\/p>\n
I would like to confirm that out of this 86% of Retail <\/p>\n
Pharma Market, ORG-MARG covers around 90% <\/p>\n
through the Retail Store Audit (RSA).”\n<\/p>\n
8.3\tOne more aspect which deserves notice is that from the ORG <\/p>\n
data, it may not be possible to ascertain whether the formulation is <\/p>\n
made up of single ingredient of the bulk drug or it has multi- <\/p>\n
ingredients. We have held that the Government of India’s view that <\/p>\n
single ingredient formulators alone should be taken into account for <\/p>\n
the purpose of the criteria in clause (iii) of para 22.7.2 of Drugs <\/p>\n
Policy cannot be said to be against the policy or otherwise <\/p>\n
unreasonable.\n<\/p>\n
8.4\tSales of bulk drugs effected during the year by bulk drug <\/p>\n
producers including some of the respondents herein would have <\/p>\n
furnished the best indicia of domestic sale turnover of bulk drug. <\/p>\n
But, those details were not disclosed. Secondly, if the bulk drug <\/p>\n
produced was consumed by any bulk drug producer or importer and <\/p>\n
the drug was sold in the form of formulations, the statistics <\/p>\n
regarding the quantum of bulk drug utilized in such formulations and <\/p>\n
the value thereof must have been within the knowledge or reach of <\/p>\n
writ petitioners and there is no good reason why they should <\/p>\n
withhold all this relevant information and harp on ORG data. There <\/p>\n
is no need to resort to guess-work when the actual figures are <\/p>\n
available at the doorsteps of the respondents. Moreover, some of <\/p>\n
the respondents have arrived at the estimates by varying methods <\/p>\n
without reference to actual data available with them. For instance, in <\/p>\n
the case of the drug Cyproflaxacin, we have adverted to different <\/p>\n
methods of calculation given by the writ petitioners which yield <\/p>\n
different results. If we go by the estimates of turnover made by the <\/p>\n
respondents, there is vast difference between the value of the bulk <\/p>\n
drug worked out by them and the sale value of formulations. <\/p>\n
Moreover, in relation to some of the drugs, there is vast variation <\/p>\n
between the quantity produced and imported and the quantity said <\/p>\n
to have been utilized in formulations sold in the market. These <\/p>\n
factors should have put the High Court on guard to subject the <\/p>\n
petitioners’ version to close and critical scrutiny.<\/p>\n
8.5\tWhen the burden was on the writ petitioners to substantiate <\/p>\n
their plea of violation of Article 14 and when the plea predominantly <\/p>\n
rested on facts and figures, the High Court should have examined <\/p>\n
the intrinsic worth and credibility of the version put forward with <\/p>\n
regard to the turnover figures. The High Court oversimplified the <\/p>\n
whole issue by addressing itself to the only question whether there <\/p>\n
was effective rebuttal of the averments by the Union of India. The <\/p>\n
callousness on the part of the officials concerned in not meeting the <\/p>\n
points raised squarely and leaving the scope for ambiguity should <\/p>\n
not, in our view, be a ground to accept whatever is falling from the <\/p>\n
writ petitioners. The material placed before the Court should have <\/p>\n
been critically examined before reaching a conclusion that Article 14 <\/p>\n
is violated. The High Court should have also examined whether the <\/p>\n
writ petitioners withheld the relevant data which they were in a <\/p>\n
position to produce and if so, what would be its effect. None of <\/p>\n
these aspects received attention of the High Court. Before striking <\/p>\n
down the legislation, the High Court should have realized that those <\/p>\n
who challenged the legislation should lay firm factual foundation in <\/p>\n
support of their plea. The complaint of violation of norms set out in <\/p>\n
the policy leading to the alleged infraction of Article 14 depends, in <\/p>\n
the ultimate analysis, on facts and figures. As already observed, <\/p>\n
ORG data is neither comprehensive nor conclusive and moreover in <\/p>\n
regard to some of the drugs, the data does not in unequivocal <\/p>\n
terms, support the case of the writ petitioners. In such a situation, <\/p>\n
further probe and analysis was required which the High Court failed <\/p>\n
to do. The version of writ petitioners regarding the quantum of <\/p>\n
turnover was accepted to be correct on its face value. That apart, in <\/p>\n
the light of the clarification given by us that single ingredient <\/p>\n
formulators alone could be legitimately taken into account in the <\/p>\n
context of clause (iii), the need for reconsideration by the High Court <\/p>\n
becomes inevitable. We are, therefore, of the view that the crucial <\/p>\n
issues regarding the applicability of  criteria laid down in para 22.7.2 <\/p>\n
of the Drugs Policy require reconsideration by the High Court from <\/p>\n
various angles indicated supra in the light of the legal position <\/p>\n
enunciated and the observations made in this judgment.<\/p>\n
8.6\tWe have broadly indicated the aspects on which the High <\/p>\n
Court could have focused its attention before reaching the <\/p>\n
conclusion it did. Nothing precludes the High Court from having <\/p>\n
regard to other aspects or material which it considers relevant to <\/p>\n
test the correctness of the writ petitioners’ claims. However, we <\/p>\n
would like to clarify one thing. If, on reconsideration, the turnover of <\/p>\n
any drug is found to be very close to the figure\u2014400 or 100 lacs, as <\/p>\n
the case may be, the relevant criterion must be deemed to have <\/p>\n
been satisfied. As we said earlier, mathematical accuracy is not <\/p>\n
what is required.\n<\/p>\n
8.7\tThere is one more point which we have to deal with, i.e., the <\/p>\n
alleged discrimination between one drug and another. The High <\/p>\n
Court upheld such plea raised in rejoinder affidavit in relation to the <\/p>\n
drugs ‘Cyproflaxacin’ and ‘Glipizide’. We unhesitatingly vacate the <\/p>\n
findings of the High Court in this regard because we are of the view <\/p>\n
that the reasons given by the High Court for upholding such plea <\/p>\n
are too tenuous to merit even prima facie acceptance.<\/p>\n
8.8      In the case of Cyproflaxacin  in W.P.No. 3449 of 1996 it was <\/p>\n
contended that two bulk drugs, namely, Mefenamic Acid and <\/p>\n
Amikacin Sulphate were wrongly and arbitrarily deleted from the <\/p>\n
DPCO, 1995. It is difficult to comprehend as to how there could be <\/p>\n
infraction of Article 14 merely because a few bulk drugs were <\/p>\n
excluded from the purview of DPCO on a reconsideration. The <\/p>\n
exclusion of some drugs, even if such exclusion is unjustified, <\/p>\n
cannot be a ground to claim exclusion of other drugs on the so <\/p>\n
called  principle of parity. Logically, if the High Court’s view has to <\/p>\n
be accepted, the entire Schedule should be invalidated for the <\/p>\n
simple reason that one or two drugs, which were not eligible for <\/p>\n
exclusion in the light of the policy guidelines were excluded. It would <\/p>\n
then lead to a startling result  frustrating the very objective of <\/p>\n
regulating the price of essential drugs.  That apart, the turnover <\/p>\n
figures of the said two drugs furnished by the writ petitioner and <\/p>\n
referred to by the High Court, do not establish that they fall within <\/p>\n
the policy guidelines. Regarding  Mefenamic Acid, what all is stated <\/p>\n
in paragraph 16 of the rejoinder affidavit is that the turnover of this <\/p>\n
drug has been “over Rs.4 crores between 1988-89 to 1991-92 and <\/p>\n
yet it was excluded for reasons not known to the petitioners”. <\/p>\n
Nothing has been stated as to how the turnover for the relevant year <\/p>\n
was arrived at. No information was furnished regarding the number <\/p>\n
of bulk drug producers and formulators and their market share. <\/p>\n
Evidently, the petitioner made only a halfhearted attempt to put <\/p>\n
forward a plea of discrimination, but, it succeeded in its attempt. <\/p>\n
Coming to the other drug  Amikacin Sulphate, even according to the <\/p>\n
petitioner, the import value of the drug in 1989-90 was Rs.3.5 <\/p>\n
crores, which is much below the limit of Rs.4 crores and even if <\/p>\n
there was a single formulator having a market share in excess of <\/p>\n
40%, that does not make any difference. That apart, the <\/p>\n
Government of India clarified in one of the counter affidavits filed in <\/p>\n
the High Court that on the scrutiny and verification of details <\/p>\n
submitted by the manufacturers, these two drugs were <\/p>\n
subsequently deleted from the First Schedule having regard to the <\/p>\n
criteria laid down in the policy.\n<\/p>\n
We have, therefore,  no hesitation in reversing the conclusion <\/p>\n
of the High Court that the exclusion of the said two drugs from <\/p>\n
DPCO  amounted to hostile discrimination.\n<\/p>\n
 8.9\tRegarding  ‘Glipizide’, the plea of discrimination between this <\/p>\n
drug and another anti-diabetic drug known as Insulin, found favour <\/p>\n
with the High Court. The High Court, in paragraph 90 of the <\/p>\n
judgment referred to the argument that Insulin having 441 lacs <\/p>\n
turnover as on 31st March, 1990 was included in DPCO of 1995, but <\/p>\n
subsequently excluded from price control and held that there was <\/p>\n
discrimination on that account. The High Court evidently proceeded <\/p>\n
on an erroneous assumption that Insulin was excluded from the <\/p>\n
schedule. The averments in paragraph 22 of the writ petition <\/p>\n
No.5219\/1996 are otherwise. The plea of discrimination was aimed <\/p>\n
at the drug  known as Glibelclamide, which was excluded from the <\/p>\n
DPCO of 1987 and continued to remain excluded from the DPCO of <\/p>\n
1995. The respondent did not even aver that the said drug had the <\/p>\n
turnover of more than 100 lacs and therefore it would fall within the <\/p>\n
mischief of clause (ii). On the basis of a bald plea, the infraction of <\/p>\n
Article 14 ought not to have been countenanced. The finding of the <\/p>\n
High Court in this regard is palpably wrong.\n<\/p>\n
9.\tWe now summarize the conclusions as under:\n<\/p>\n
1.\tWhere the Central Government as the delegate of legislative <\/p>\n
power announces a rational policy in keeping with the <\/p>\n
purposes of enabling legislation and even lays down specific <\/p>\n
criteria to promote the policy, the criteria so evolved become <\/p>\n
the guide-posts of its legislative action.  While classifying the <\/p>\n
drugs for the purpose of price control, it is not open to the <\/p>\n
Government to flout or debilitate the set norms which  it <\/p>\n
professed to follow in the interest of transparency and <\/p>\n
objectivity. Otherwise, there will be an element of arbitrariness <\/p>\n
and the delegated legislation will not withstand the test of <\/p>\n
Article 14.\n<\/p>\n
2.\tThe expression ‘turnover’ in Drug Policy, 1994 represents the <\/p>\n
sale value of bulk drug sold as such or in the form of <\/p>\n
formulations.\n<\/p>\n
3.\tExport sales should not be taken into account while computing <\/p>\n
turnover.\n<\/p>\n
4.\tThe sum total of production and imports of bulk drug cannot <\/p>\n
be equated to turnover, though they are not altogether <\/p>\n
irrelevant in calculating the turnover.\n<\/p>\n
5.\tORG data does not  give exhaustive account of turn over of <\/p>\n
bulk drug.  It may furnish the basis for estimating the turnover, <\/p>\n
but is not the sole guide.\n<\/p>\n
6.\tFor the purpose of criterion No.(iii) of the Drug Policy, the <\/p>\n
single ingredient formulators alone ought to be taken into <\/p>\n
account as clarified by the Govt. of India.\n<\/p>\n
7.\tBurden lies on those who challenge the legislation on the <\/p>\n
ground of violation of Article 14 to make out their case by <\/p>\n
furnishing all the relevant material which is within their reach <\/p>\n
and knowledge.  There should be frank  disclosure of material <\/p>\n
facts, more so, when the plea is founded on certain factual <\/p>\n
aspects.  The mere  vagueness or lack of clarity in the stand <\/p>\n
taken by the Union of India does not by itself advance the <\/p>\n
case of the writ petitioners.\n<\/p>\n
8.\tThe plea of writ petitioners ought to have been tested and <\/p>\n
subjected to scrutiny in the light of all relevant factors instead <\/p>\n
of merely considering  whether the particulars furnished by the <\/p>\n
petitioners were effectively controverted or not.  Such an <\/p>\n
approach of the High Court  is wholly impermissible while <\/p>\n
deciding the validity of legislation\u2014plenary or delegated, from <\/p>\n
the stand point of Article 14.\n<\/p>\n
9.\tThe plea of discrimination between one drug and another is <\/p>\n
unfounded and should not have been accepted by the High <\/p>\n
Court.\n<\/p>\n
10.\t  In the result, the judgment of the High Court is set aside and <\/p>\n
the writ petitions out of which these appeals arise shall stand <\/p>\n
restored to the file of the High Court and the High Court will have to <\/p>\n
consider afresh the relevant aspects concerning the criteria laid <\/p>\n
down in para 22.7.2 of the Drug Policy, 1994 in relation to each <\/p>\n
drug, having due regard to the observations made in the judgment.  <\/p>\n
The High Court may endeavour to expedite hearing of the writ <\/p>\n
petitions.\n<\/p>\n
11.\tThe appeals are accordingly allowed without costs. We also <\/p>\n
consider it just and proper to give liberty to the appellant and the <\/p>\n
concerned statutory authorities to recover 50% of the ‘over <\/p>\n
charged’ amounts pending fresh determination by the High Court. <\/p>\n
Accordingly, we direct stay of recovery of 50% of the ‘overcharged’ <\/p>\n
amount subject to the payment of remaining 50% within the period <\/p>\n
of four weeks from the date of communication of the amount <\/p>\n
payable by each of the writ petitioners.\n<\/p><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Secretary, Ministry Of Chemicals … vs M\/S. Cipla Ltd. & Ors on 1 August, 2003 Author: P V Reddi Bench: S. Rajendra Babu, P.Venkatarama Reddi, Arun Kumar. CASE NO.: Appeal (civil) 3375-3384 of 2002 PETITIONER: Secretary, Ministry of Chemicals & Fertilizers Government of India RESPONDENT: Vs. M\/s. Cipla Ltd. & Ors. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-163361","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSecretary, Ministry Of Chemicals ... vs M\/S. 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