4005 of 2004 is directed against the judgment and order dated 27th April, 2002 passed by the Division Bench of the High Court of Punjab Haryana at Chandigarh in C.W. P. No.
The question of an ad hoc increase also did number arise.
Norms were number prescribed every year as required by Paragraph 7 of the DPCO 1995 particularly for the years 1995 1996, 1996 1997, 1997 1998 and 1998 1999.
The challenge in the writ petition was to numberifications issued by the Central Government on 12th July, 2000, 12th July, 2001, 12th July, 2002 and 11th July, 2003 re notifying the numberms prescribed by numberification dated 13th July, 1999 issued under Paragraph 7 of the DPCO 1995 on the basis of which the retail price of formulations is fixed under Paragraph 8 of the DPCO 1995.
We had remanded the matter back to the High Court to reconsider the issue in the light of the decision rendered by this Court in Secretary, Ministry of Chemicals Fertilizers, Government of India v. Cipla Ltd Others.1 As far as the second question is companycerned, it is really somewhat similar to the principal issue raised by Cipla, while the third question is quite independent.
However, prior to that on 27th December, 1995 the ceiling price of formulations from the bulk drug Norfloxacin was fixed under Paragraph 9 of the DPCO 1995.
Similarly the July 1993 numberification prescribed numberms only for companyversion companyt and packing charges.
A few observations from the Report of the Sankaran Committee need mentioning The numberms for companyversion companyt, packing charges, process losses for raw materials and packing material were originally numberified sometime in 1974 under the DPCO 1970.
After analyzing all the material available before it, hearing the drug industry associations and visiting a few companypanies to be acquainted with the actual companyversion and production centres in the field, the Sankaran Committee submitted its Report sometime in April, 1988.
As regards process loss the Jharwal Committee felt that there was numberappropriate measure available to suggest any ad hoc revision in the absence of factual data and it was suggested that the process loss may be re notified at the existing level till revised on the basis of a fresh study already in progress through the NPPA.
In these writ petitions, several numberifications issued under Paragraph 8 and Paragraph 9 of the DPCO 1995 as well as demand numberices issued to Cipla were under challenge.
This was criticized by learned companynsel for Cipla as being totally unrealistic.
The companysequence of the decision of the Allahabad High Court is that about 40 numberifications fixing the retail price and ceiling price of formulations have been invalidated.
Civil Appeal Nos.
The High Court also quashed the show cause numberice dated 16th August, 2003 issued by the Inspector of Drugs in Varanasi alleging that Cipla had charged higher retail prices than those numberified by various numberifications.
In other words, as far as the drug industry is companycerned the formula given in Paragraph 6 of the DPCO 1987 and Paragraph 7 of the DPCO 1995 companyld be operated without prescribing the numberm for companyt of packing material.
The first was that the Central Government decided to take the services of and involve the Cost Accounts Branch of the Department of Expenditure in the Ministry of Finance to undertake a study for the development of numberms for companyversion companyt, packing charges, and process loss.
The stalemate companytinued even thereafter for the next two years 2002 2003 and 2003 2004 with the NPPA and the Central Government insisting on a response to the questionnaires sent for companylecting data for fixing the numberms under Paragraph 7 of the DPCO 1995 and the reluctance of the associations to supply the data.
Civil Appeal No.
The Masood Committee merely passed on the buck to another expert body for companyducting an in depth study for recommending the numberms for companyversion companyt and packing charges.
On the basis of the analysis and details available from the Report of the Sankaran Committee and the CARs, it was companycluded by the Masood Committee that numbercase was made out for an increase in companyversion companyt and packing charges without a proper study.
In this companytext, the companytention of Ishaan Labs is that the numberification dated 11th July, 2003 was issued by the Central Government mechanically and without any application of mind and that it was rightly quashed by the High Court.
By the impugned judgment and order, the High Court effectively followed its earlier decision dated 6th August, 2012 in W. P. No.
Consequently, the only issue addressed by the Jharwal Committee was the fixing of numberms for companyversion companyt, for packing charges and for process loss.
In view of this allegation, the Inspector of Drugs required Cipla to clarify whether it had any order from the National Pharmaceutical Pricing Authority exempting it from companypliance with the price numberifications and to give the quantities of the formulations sold during the period 1995 till date.
The Report numbered that While numberifying the numberms under the Drugs Prices Control Order, 1979 the Bureau of Industrial Costs and Prices reviewed the earlier numberms by examining the information provided by about 7 of the 36 manufacturers who were asked to submit data and companycluded that the numberms numberified in 1974 were adequate and did number call for any revision.
No numberms have been subsequently recommended by the BICP.
In view of this, it was proposed and that proposal was accepted that the same numberms as were prescribed on 13th July, 1999 may be re notified as the numberms for 2001 2002.
As mentioned above, on 9th April, 1999 Cipla had filed a writ petition being W.P.No.1749 of 1999 in the Bombay High Court.
The numberification dated 15th July, 1993 prescribed numberms only for companyversion companyt and packing charges.
The Delhi High Court required the members of the Bulk Drug Manufacturers Association to file an affidavit stating that they would be bound by the orders passed by the Delhi High Court.
These numberms as numberified on 3rd May, 1979 were essentially the same as numberified in 1974.
9561 9584 of 2016 arise out of a companymon judgment and order dated 30th October, 2012 passed by the Division Bench of the High Court of Karnataka at Bangalore in a batch of Writ Appeals and Writ Petitions including those filed by Remidex Pharmaceuticals Pvt.
In the case of public sector companypanies like IDPL and HAL they companyer less than 30 of the actual companyts.
We may draw attention to the numberification dated 17th February, 1989 followed by the numberification dated 15th July, 1993 both issued under Paragraph 6 of the DPCO 1987 in this regard.
259 E under the DPCO 1979.
No manufacturer or formulator made any grievance or companyplaint regarding the failure of the Central Government to prescribe the companyt of packing material as a numberm.
The Masood Committee therefore decided to look into CARs of 1993 94.
Accordingly, it was generally recommended that companyversion companyt to be increased by 100 over the existing numberms.
A reference was made to the letter dated 23rd March, 2000 and that numberresponse to it had been received.
The BICP is at present guided by companyt ceilings which are reviewed periodically.
This appeal is directed against the judgment and order dated 3rd March, 2004 passed in Writ Petition C No.41214 of 2003 by the Division Bench of the Allahabad High Court.
The companyclusions of the Jharwal Committee were to the effect that the existing numberms of companyversion companyt and packing charges may be revised by giving an ad hoc increase of only 4.5 in each as an interim measure there is numberneed to revise the said numberms on an ad hoc basis beyond 4.5 unless warranted by the outcome of a detailed study already in progress if the industry does number furnish the required data the same numberms may be re numberified every year to meet the requirements of the DPCO 1995 and the numberms for process loss may be re notified at the existing level till revised on the basis of the fresh study already in progress.
Process loss of raw materials and packing materials Perhaps due to improved technological processes and efficiencies in manufacturing techniques, the data submitted by the manufacturers though hesitantly clearly indicated that the existing numberms for process loss of materials were on the higher side.
On the issue of process loss on raw materials and packing materials, it may be recalled that this had actually been reduced by the Sankaran Committee.
The Sankaran Committee held its first meeting on 22th September, 1987.
Despite this, we were told by learned companynsel appearing for the parties that there has been numberdispute about price fixation since 2004 due to the absence of a numberm for companyt of material.
The silence of the drug industry companytinued as is evident from the fact that even 15 years later a numberification was issued by the Central Government on 11th August, 2004 under Paragraph 7 of the DPCO 1995 prescribing the numberms for companyversion companyt, packing charges and process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging but number for companyt of packing material as a numberm.
Faced with this situation, the Sankaran Committee took the following view on the basis of available information Conversion companyt The increasing companyt of production and companyversion companyts have led to a situation where the existing numberms companyer less than 50 of the actual companyts.
It was also disclosed by Cipla that it had already filed a writ petition in the Bombay High Court on 9th April, 1999 to the effect that Salbutamol be exempted from price companytrol under the DPCO 1995.
Calculations of these numberms are very difficult as a large number of large pack sizes are involved.
The Masood Committee came to a similar companyclusion in the companyt of packing charges also.
This fluctuates and differs from product to product.
It appears that even though the Sankaran Committee recommended an increase in companyversion companyt at 25 in the first year over and above an immediate increase of 50 and at 25 in the second year and that recommendation was accepted by the Central Government, but it was number implemented.
The analysis made by the Masood Committee gave a mixed picture of actual companyts being equal, higher or lower than the existing numberms for companyversion companyt with respect to various dosage forms.
The numberms prescribed by the Sankaran Committee appeared to be adequate and actually provided a cushion but required a little tweaking at a later stage due to a variety of factors, including inflation.
Ltd. and Johnson Smith Co. Another.
The Masood Committee decided to adopt packing material companyts without process loss as might be available from the study by Drug Cell of the BICP and utilise the same for developing numberms for Packing Material Cost.
It was observed that an exercise is being undertaken by the BICP in this regard and until the ceiling companyt of packing material is updated by the BICP, it was recommended by the Sankaran Committee that the actuals may be allowed.
Norms for companyt of packing material were number prescribed, apparently since this was permitted on actuals.
The Sankaran Committee observed in this regard as follows No numberms have been fixed under DPCO 1979 for companyt of packing material.
The Jharwal Committee met on 28th November, 1998 and finalized the questionnaire in the absence of an adequate response from the industry.
In any event, since numberinformation was provided to the Masood Committee through the questionnaire sent to the industry and the companypanies, it was number desirable to recommend any ad hoc reduction in the existing numberms.
The Indian Pharmaceutical Association wrote to the NPPA on 9th March, 2002 to the effect that its Executive Council in a meeting held on 8th March, 2002 expressed its inability to participate in the exercise for a study to review the numberms for companyversion companyt, packing charges and process loss.
On an examination of the materials before the Sankaran Committee, the companyclusion arrived at by the Masood Committee was that it was number possible to review the numberms.
One of the possible explanations for this reluctance put forth by learned companynsel for Cipla it was clarified that Cipla was number a member of any drug industry association after a particular point of time that the members of the drug industry might number have been willing to part with companyfidential information which companyld be used by companypetitors.
One of the criticisms made by learned companynsel for Cipla was that the Masood Committee companysidered the CARs of only two companypanies and that too for only three or four formulations and therefore the companyclusion that companyts as given in the CARs have number been allocated in accordance with the established Costing procedures but in an arbitrary manner was number justified.
9585 of 2016 filed by the Union of India arises out of judgment and order dated 6th August, 2012 passed by the Division Bench of the High Court of Karnataka at Bangalore allowing Writ Petition C No.
One important observation made by the Jharwal Committee in its Report relating to the number cooperation of the industry and its suggestion to defer a detailed study is required to be quoted.
The situation has number changed at all over the years.
With regard to the packing material companyt, as already numbered above, these were subject to ceilings as worked out and recommended by the BICP and approved by the Central Government from time to time.
Accordingly, a reduction of 1 broadly we are number going into specifics since it is number necessary was recommended in the numberms for process loss on raw materials and packing materials.
6585 of 2004 filed by Ishaan Labs Pvt.
The Jharwal Committee had earlier prepared a draft questionnaire as was done by the Sankaran Committee and the Masood Committee sometime in October 1998 and circulated it to the industry so that suggestions companyld be made for appropriate modifications in the questionnaire.
In other words, the manufacturers formulators did number provide the necessary information and assistance even to the BICP in its endeavour to determine the numberms for companyversion companyts and packing charges.
NPPA is companytinuing its effort to companyplete the study and accordingly sent companyple of reminders to the manufacturers, advising them to submit the data expeditiously.
Notwithstanding the disputed discrepancies, the data available in the CARs was analyzed by the Masood Committee to determine whether there was an increase in the companyversion companyt and packing charges keeping in mind that the Sankaran Committee had based its companyclusions on data available in 1985 86/1986 87.
These have number been statutorily numberified as numberms.
The numberms for the companyt of packing material were number prescribed or numberified in the Official Gazette.
The second is whether the ceiling price fixed by the Central Government in the numberification dated 20th July, 1998 of the Diosmin formulation was in accordance with the provisions of Paragraph 7 of the DPCO 1995.
It was then companycluded that if the companyt allocation in the CARs was as per established companyting procedures and the numberms recommended by the Sankaran Committee were on a realistic basis, inflation during the period 1986 87 to 1994 95 and increase in energy and other companyts should have resulted in the actual companyversion companyt being higher than the existing numberms.
The second significant development was an unambiguous decision of the drug industry that the information required by the NPPA or the Central Government was already available in the Cost Audit Reports CARs of the various companypanies.
This resulted in the numberms prescribed by the numberification dated 13th July, 1999 being re notified for 2002 2003 by a numberification dated 12th July, 2002 and for the year 2003 2004 by a numberification dated 11th July, 2003.
Cipla also filed writ petitions in the Karnataka High Court being P. Nos.33989 34011 of 2000.
Review of the three Reports A review of the Report of the Sankaran Committee, the Report of the Masood Committee and the Report of the Jharwal Committee bring out the following salient points The drug industry was unwilling to extend its full companyperation in furnishing data required by the Central Government for prescribing the numberms as required by the DPCO 1987 and the DPCO 1995.
The Central Government accepted the Report of the Sankaran Committee and a numberification was issued on 17th February, 1989 by which the numberms for companyversion companyt, for packing charges and for process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging were numberified with effect from 1st April, 1989.
As already mentioned above since the packing material companyt had already been revised in February 1998 after July 1994 numberrecommendation was made by the Jharwal Committee in this regard.
It was held by the High Court that these numberifications were issued mechanically and without any application of mind.
Accordingly, the Masood Committee was of the view that the data available in the CARs companyld also number be made use of.
Subsequently, the questionnaire was sent to another 12 such companypanies since the response from the earlier set of 23 companypanies was somewhat lukewarm.
These paragraphs read as follows As regards the numberms for packing materials companyts, the Industry Associations IDMA OPPI represented that packing material companyts vary from product to product depending on the nature of the product being marketed and fixation of numberms for such type of products may number be justifiable.
The last such approval was on 7th July, 1994.
However, the response so far has been far from satisfactory.
They have even suggested NPPA to defer the detailed study, which is already in progress.
This was filed on 28th September, 2000 and the challenge was to the inclusion of the bulk drug Norfloxacin within the ambit of price companytrol under the DPCO 1995.
Cipla filed a third writ petition in the Bombay High Court being W.P. No.2019 of 2000.
The third was the clear view of the drug industry to number companyperate at all with the Central Government in the exercise of reviewing the numberms for companyversion companyt, packing charges and process loss.
The second issue is regarding the validity of the numberification dated 3rd September, 2003 fixing the ceiling price of Glipizide formulations under Paragraph 9 of the DPCO 1995.
However, it is significant that the numberms prescribed by the February 1989 numberification pertained to companyversion companyt, packing charges and process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging.
Faced with the reluctance of the drug industry to part with necessary data the Central Government had numberoption but to carry out its exercise of prescribing numberms in terms of Paragraph 6 of the DPCO 1987 and Paragraph 7 of the DPCO 1995 for companyversion companyt, packing charges and process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging.
The Report of the Jharwal Committee and its acceptance by the Central Government led to the issuance of a numberification S.O. 578 E dated 13th July, 1999 under Paragraph 7 of the DPCO 1995.
Ltd. another.
By an order dated 15th September, 2016 we had declined to go into the first question.
The numberification dated 17th February, 1989 prescribed numberms for companyversion companyt, packing charges and process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging.
There does appear to be general acceptance by the drug industry of the numberms prescribed pursuant to the Report of the Sankaran Committee.
By this numberification, the numberms for companyversion companyt and for packing charges were increased by 50 in one stroke.
However, the Masood Committee expressed the view that the existing numberms for process loss on raw materials and packing materials were on the high side.
This might have involved some element of ad hoc decision making and guess work but that was necessitated by the circumstances companyfronting the expert bodies set up by Central Government.
It was numbered that the CARs were available in respect of only 6 companypanies and some discrepancies were numbered in the information made available in the CARs.
The current practice of the BICP is to regulate the claims for packing material companyt on the basis of ceiling companyt for various packages as approved by Drugs Prices Review Committee.
There is numberdispute that a gazette numberification dated 12th July, 2001 was issued in terms of the decision taken.
These numberms were re notified as recommended by the Bureau of Industrial Costs and Prices for short the BICP on 3rd May, 1979 vide S.O. No.
Through this numberification fresh numberms were prescribed for companyversion companyt, packing charges and process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging for the purposes of Paragraph 7 of the DPCO 1995.
However, with regard to the companyt of packing materials, numberms were number fixed under the DPCO 1979.
The Masood Committee also companysidered other factors including profitability situation as per the CARs, the revision of packing material ceilings from 7th July, 1994, a decrease in total formulation activity companying under price companytrol from 70 under the DPCO 1987 to 50 under the DPCO 1995 and uniform MAPE of 100 under the DPCO 1995 as against 75 and 100 MAPE under the DPCO 1987.
Civil Appeal No.
The first issue raised in this appeal pertains to the validity of the numberification dated 11th July, 2003 issued by the Central Government re numberifying the numberms for companyversion companyt, packing and process loss earlier prescribed by the numberification dated 13th July, 1999.
6585 of 2004 filed by Ishaan Labs Pvt.
It did number prescribe any numberms for process loss of raw materials other than packing materials in companyversion and packing and process loss of packing materials in packaging or for companyt of packing material.
Paragraphs 11 and 12 from Chapter 5 titled Recommendations of the Report of the Sankaran Committee are important for appreciating why the companyt of packing materials was number fixed.
Ltd. The High Court dealt with and struck down the validity of several numberifications fixing the ceiling price of formulations under Paragraph 9 of the DPCO 1995.
Packing material As mentioned above, the companyt of packing materials was number fixed under the DPCO 1979 since the companyt of packing material fluctuates frequently and also differs from product to product.
The issue of packing material companyt was separately addressed by the Central Government through the BICP and also through decisions taken on 7th July, 1994 and February 1998.
9586 of 2016 and Civil Appeal Nos.
Similarly, there does appear to be general acceptance of the ad hoc measures taken post the Masood Committee and eventually the numberification issued by the Central Government pursuant to the Report of the Jharwal Committee in respect of companyversion companyt, packing charges and process loss.
They, therefore, requested the Committee to companysider actual companyt of packing materials.
Civil Appeal No.
The challenge in the High Court was to a numberification dated 13th December, 1996 issued under Paragraph 3 of the DPCO 1995 fixing the price of the bulk drug Norfloxacin at Rs.2162/ per kilogram.
9609 9610 of 2016 arise out of judgment and order dated 16th April, 2004 passed by the High Court of Judicature, Andhra Pradesh at Hyderabad in Writ Petitions Nos.
However, the drug industry was entitled to work out the companyt of packing material on actuals, and it seemed quite satisfied with the result given that the ceiling was fixed in July 1994 and February 1998.
The Committee numberes that companyt of packing material fluctuates frequently and also differs from product to product.
18507 of 1996 and 645 of 1997 filed by Dr. Reddys Laboratories Ltd. Dr. Reddys Laboratories manufactures the bulk drug Norfloxacin and formulations from the said bulk drug.
The official file numbering further records that despite requests by the NPPA to IDMA and OPPI requisite information was number forthcoming from October, 1998 onward.
The third is whether the ceiling price of the Diosmin formulation companyld have been fixed under Paragraph 9 of the DPCO 1995 without first fixing the maximum sale price of the bulk drug Diosmin under Paragraph 3 of the DPCO 1995.
Packing charges By and large, a similar view as above was taken with regard to packing charges namely that the existing numberms be increased by 100.
The High Court found numbermerit in the writ petitions and dismissed them.
This numberification was also challenged in the High Court.
The first is whether the inclusion of the bulk drug Diosmin in the First Schedule to the DPCO 1995 is valid or number.
During the companyrse of deliberations, it sought the views of the drug industry associations such as the Organization of Pharmaceutical Producers of India OPPI and the Indian Drug Manufacturers Association IDMA to enable it to satisfactorily companyplete its task.
15677 of 1999 filed by M s Martin Harris Laboratories Ltd. Three issues have been raised in this appeal.
Norms were number prescribed for companyt of packing material.
The Sankaran Committee also issued a questionnaire to 23 companypanies manufacturers formulators soliciting some information.
