UNION OF INDIA & ORS. vs. M/S. SWISS GARNIER LIFE SCIENCES ORS.

* HIGH COURT OF DELHI : NEW DELHI

Judgment delivered on: 15.03.2011

+ LPA. 634/2010

UNION OF INDIA & ORS. ......Appellants


Versus


M/S. SWISS GARNIER LIFE SCIENCES & ORS. ……Respondents

AND

+ LPA. 790/2010

UNION OF INDIA & ANR. ......Appellants


Versus


M/s MARS THERAPUTICS AND CHEMICALS LIMITED.
……Respondents

Advocates who appeared in this case :-

For the Appellants: Mr Mukesh Kumar Tiwari with Mr Sanjiv Kumar
Saxena for Mr Ruchir Mishra, Advocate for UOI.

For the Respondents: Mr S. Ganesh, Sr. Advocate with Mr Varun Singh,
Advocate in LPA 634/2010.
Mr S. Ganesh, Sr. Advocate with Mr Deepak Khurana
& Mr Shobhit Chandra, Advocates in LPA 790/2010.

Coram:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
be allowed to see the judgment? Yes.

2. To be referred to Reporter or not? Yes.

3. Whether the judgment should be reported Yes.
in the Digest?

BADAR DURREZ AHMED, J. (ORAL)

1. These appeals arise out of the common judgment dated
19.05.2010 passed by a learned Single Judge of this Court in W.P.(C)

LPA 634 & 790/2010 Page 1 of 12

Nos. 10277/2009 and 12958/2009. The said writ petitions had been filed
challenging the price fixation notifications dated 30.04.2009 and
17.11.2009 whereby the government had fixed the prices of Doxofylline
formulations. By virtue of the impugned judgment it has been held that
Doxofylline is not a bulk drug within the meaning ascribed to it under
paragraph 2(a) of the Drugs (Prices Control) Order 1995 (hereinafter
referred to as ‗the DPCO, 1995‘). The contention of the appellant before
us and the respondent before the learned Single Judge was that
Doxofylline was a bulk drug under the said paragraph 2(a) and, therefore,
the government was entitled to fix the price of its formulations under
paragraph 9 of the DPCO, 1995 and it is pursuant to that power that the
said notifications dated 30.04.2009 and 17.11.2009 were issued, fixing
the prices of Doxofylline formulations.
2. On the other hand, it was contended on behalf of the
respondents herein and the petitioners before the learned Single Judge
that Doxofylline was not a bulk drug within the meaning of paragraph
2(a) of the DPCO, 1995. Mr Ganesh, the learned Senior Counsel
appearing on behalf of the respondents further submitted that even if it
were to be assumed, without admitting, that Doxofylline was a bulk drug,
as defined in paragraph 2(a) of the DPCO, 1995, the prices of
Doxofylline formulations could not be fixed under paragraph 9 or 11 of
the DPCO, 1995 because paragraph 9 and consequently paragraph 11
only relates to scheduled formulations. He submitted that Doxofylline
formulations in respect of which the said notifications were issued were

LPA 634 & 790/2010 Page 2 of 12

not scheduled formulations and, therefore, on this ground also the
notifications were liable to be struck down. It was further contended by
Mr Ganesh that even if we ignore the first two points, the issue of
satisfaction of the criteria specified under paragraph 22.7-2 of the new
drugs policy would still have to be considered. He submitted that the
criteria which are set out in the said paragraph are not at all satisfied in
the present cases. He further submitted that though this point was noted
by the learned Single Judge in paragraphs 12 and 13 of the impugned
judgment, he did not think it necessary to deal with the same because of
the view, that he took, that Doxofylline was not a bulk drug.
3. Mr Ganesh further pointed out that the learned Single Judge
took note of the review orders passed in the case of both the writ
petitioners wherein the Reviewing Authority namely the Under Secretary
to the Government of India, Ministry of Chemicals & Fertilizers,
Department of Pharmaceuticals observed as under:

―It has been observed from the facts available
on records that NPPA has fixed the price of
Doxofylline formulations considering the cost
of Theophylline which is not used in the
manufacture of these formulations.‖

The learned Single Judge relied on this observation and finding to hold
against the appellants that Doxofylline could not be considered to be a
derivative of Theophylline in the facts of the present cases.
4. We shall take up the first point and that is whether Doxofylline
is a bulk drug within the meaning of paragraph 2(a) of the DPCO, 1995.
Bulk drug has been defined in the said paragraph as under:

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―bulk drug‖ means any pharmaceutical,
chemical, biological or plant product including
its salts, esters, stereo-isomers and derivatives,
conforming to pharmacopoeial 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.‖

5. According to the learned counsel for the appellants, the said
definition implies that once a pharmaceutical, chemical or biological or
plant product has been established to be a bulk drug, its derivative would
automatically be covered under the definition of bulk drug also. On the
other hand Mr Ganesh appearing on behalf of the respondents submitted
that the second part of the definition which relates to the product or its
derivatives conforming to pharmacopoeial or other standards specified in
the Second Schedule to the Drugs and Chemicals Act, 1994 would
equally apply to the product and its derivatives. We find that the
definition of bulk drug has been analyzed by the learned Single Judge in
the following manner:
―A careful reading of the above definition
shows that a bulk drug should be:


(i) Any pharmaceutical, chemical,
biological or plant product.

(ii) Such product could include salts,
esters, stereo isomers and derivatives of
such product.

(iii) Both the product and its salts, esters,
stereo-isomers and derivatives have to
conform to pharmacopoeial or other
standards specified in the Second
Schedule to the DCA.


LPA 634 & 790/2010 Page 4 of 12

(iv) The product or its derivatives should be
used as such or as an ingredient in any
formulation.‖

6. There is no dispute with regard to the conditions (i), (ii) and
(iv). The learned counsel for the appellants submitted that the
interpretation given by the learned Single Judge, as it appears in (iii)
above, is not the correct interpretation. However, we are of the view that
the learned Single Judge has correctly analyzed the said definition and has
broken it up into constituent components. It is also clear that both, the
product and its salts, esters, stereo-isomers and derivatives are qualified
by the expression ―conforming to pharmacopoeial or other standards
specified in the Second Schedule to the Drugs and Cosmetics Act,
1940‖. Therefore, it would not be sufficient if a bulk drug by itself
conforms to the pharmacopoeial or other standards specified in the
Second Schedule to the said Act, the derivative would also have to
conform to such standards before it can be included in the definition of
bulk drug.
7. In this context, it is clear that even if we assume that
Doxofylline is a derivative of Theophylline, it must further be established
that Doxofylline conforms to pharmacopoeial or other standards specified
in the Second Schedule to the Drugs and Cosmetics Act, 1940. Serial
No. 5 of the Second Schedule to the Drugs and Cosmetics Act, 1940 is
relevant for our purposes and the same reads as under:

LPA 634 & 790/2010 Page 5 of 12

8. From the said entry it is apparent that before a drug qualifies
to be one which is specified in the Second Schedule, it must either be
included in the Indian pharmacopoeia or in the official pharmacopoeia of
any other country. For the first time, by way of a notification dated
23.08.2010 (w.e.f. 01.12.2010), Doxofylline has been listed in the Indian
Pharmacopoeia. But, at the point of time when the impugned
notifications fixing the prices of Doxofylline formulations were issued,
Doxofylline was not mentioned in the Indian pharmacopoeia. We had

LPA 634 & 790/2010 Page 6 of 12

granted time on previous occasions to the appellants to point out as to
whether Doxofylline was included in any official pharmacopoeia of any
other country. They have not been able to point out any official
pharmacopoeia of any other country which included Doxofylline at the
time the impugned notifications were issued.
9. The learned counsel for the appellants also made a submission
that there are several opinions available with them from experts to
indicate that Doxofylline was a derivative of Theophylline. However, we
find that in the review orders the government itself has given a finding
that Theophylline is not used in the manufacture of Doxofylline in the
present cases. This is factual finding from which the appellants cannot
shy away.
10. However, even if we were to consider Doxofylline to be a
derivative of Theophylline, it does not conform to pharmacopoeial or
other standards specified in the Second Schedule to the Drugs and
Cosmetics Act, 1940. Therefore, we are in complete agreement with the
conclusion arrived at by the learned Single Judge that Doxofylline could
not be regarded as a bulk drug on the dates on which the impugned
notifications were issued.
11. The second aspect of the matter is that the power to fix the
ceiling price of formulations, which is given under paragraph 9 of the
DPCO, 1995 is limited to scheduled formulations only. Paragraph 9 of
the DPCO, 1995 reads as under:
― 9. Power to fix ceiling price of Scheduled
formulations:- (1) Notwithstanding anything

LPA 634 & 790/2010 Page 7 of 12

contained in this Order, the Government may,
from time to time , by notification in the Official
Gazette, fix the ceiling price of a Scheduled
formulation in accordance with the formula laid
down in paragraph7, keeping in view the cost
or efficiency, or both, of major manufacturers
of such formulations and such price shall
operate as the ceiling sale price for all such
packs including those sold under generic name
and for every manufacture of such formulations.

(2) The Government may, either on its own
motion or on application made to it in this
behalf by a manufacturer in Form III or Form
IV, as the case may be, after calling for such
information as it may consider necessary, by
notification in the Official Gazette, fix a revised
ceiling price for Scheduled formulation.

(3) With a view to enabling the manufacturers
of similar formulations to sell those
formulations in pack size different to the pack
size for which ceiling price has been notified
under the sub-paragraphs (1) and (2),
manufacturers shall work out the price for their
respective formulation packs in accordance
with such norms, as may be notified by the
Government from time to time, and he shall
intimate the price of formulation pack, so
worked out, to the Government and such
formulation packs shall be released for sale
only after the expiry of sixty days after such
intimation.

Provided that the Government may, if
it considers necessary by order revise the price
so intimated by the manufacturer and upon such
revision, the manufacturer shall not sell such
formulation at a price exceeding the price so
revised.

Explanation – For the purpose of this
paragraph the ―Scheduled formulation‖ includes
single ingredient formulation based on bulk
drugs specified in the First Schedule and sold
under the generic name.‖


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12. It is obvious that the government has the power to fix the
ceiling price of scheduled formulations. Now, scheduled formulations are
defined in paragraph 2(v) of the DPCO, 1995 as under:

―2(v) ―Scheduled formulation‖ means a
formulation containing any bulk drug specified
in the First Schedule either individually or in
combination with other drugs, including one or
more than one drug or drugs not specified in the
First Schedule except single ingredient
formulation based on bulk drugs specified in the
First Schedule and sold under the generic
name;‖

13. The said definition indicates that the expression ―scheduled
formulation‖ refers to a formulation containing any bulk drug specified in
the First Schedule either independently or in combination with other drugs
etc. What this means is that, the formulation in question must contain a
bulk drug which is specified in the First Schedule. Even if we were to
assume that Doxofylline was a bulk drug, Doxofylline formulations could
be regarded as scheduled formulations only if Doxofylline was specified
in the First Schedule to the DPCO, 1995. We find that Doxofylline is not
so specified in the First Schedule to the DPCO, 1995. Thus Doxofylline
formulations cannot be regarded as scheduled formulations and
consequently would not be covered under paragraph 9 of the DPCO,
1995. The result of this is that even if we were to assume that
Doxofylline was a bulk drug, its formulations could not be regarded as
scheduled formulations, inasmuch as, Doxofylline was not specified in
the First Schedule to the DPCO, 1995 and, therefore, the government

LPA 634 & 790/2010 Page 9 of 12

could not invoke paragraph 9 for fixing the ceiling price for such
formulations.
14. It was contended on behalf of the appellants that although
Doxofylline is not listed in the First Schedule to the DPCO, 1995,
Theophylline is mentioned at Serial No. 34 and since Doxofylline,
according to them, is a derivative of Theophylline, therefore, indirectly
Doxofylline formulations can be regarded as scheduled formulations. We
are unable to accept this contention because a plain reading of paragraph
2(v), which defines scheduled formulations, indicates that the
formulations containing a bulk drug must be one where the bulk drug is
itself specified in the First Schedule, either independently or in
combination with other drugs. It is an admitted position that
Theophylline is not contained in the Doxofylline formulations either
independently or in combination with other drugs. Doxofylline
formulations contain Doxofylline and not Theophylline. The Doxofylline
formulations also do not contain any combination of Theophylline.
Therefore, we are of the clear view that the Doxofylline formulations are
not covered in the expression ―Scheduled formulation‖ as appearing in
paragraph 2(v) of the DPCO, 1995.
15. It was also contended on behalf of the appellants that apart
from paragraph 9 of the DPCO, 1995, the government had independent
power under paragraph 10 to fix and revise the price of bulk drugs and
formulations including non-scheduled formulations and, therefore,
notifications which are impugned were not beyond the power of the

LPA 634 & 790/2010 Page 10 of 12

government. We find that the notifications themselves have been issued
in exercise of the powers under paragraphs 9 and 11 of the DPCO, 1995
and there is no reference to paragraph 10. Therefore, the argument raised
by the learned counsel for the appellants is without any factual basis.
Furthermore, the power under paragraph 10 is different and distinct from
the power under paragraph 9. Whereas, under paragraph 10 the
government has the power to fix the retail price, under paragraph 9 the
power is in respect of fixing of the ceiling price of scheduled
formulations. The notifications purport to fix the ceiling price of
formulations and, even if it were assumed that paragraph 9 and 11 have
been wrongly mentioned, the notifications themselves do not even purport
to have been issued under paragraph 10 of the DPCO, 1995.
16. The final aspect of the matter is with regard to the satisfaction
of the criteria specified in paragraph 22.7-2 of the New Drugs Policy.
Just as the learned Single Judge did not feel it necessary to go into this
issue in view of the conclusion arrived at on other two aspects, we also
think that it would not be necessary to deal with this aspect of the matter.

17. We entirely agree with the reasoning as well as the
conclusions arrived at by the learned Single Judge and find no infirmity in
the impugned judgment. However, we may observe that the fact that
Doxofylline was not included in the Indian pharmacopoeia at the point of
time when the said notifications were issued would not come in the way
of the government in issuing fresh notifications, now that Doxofylline has
been included in the Indian pharmacopoeia, provided, they comply with

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all the other requirements of law including the DPCO, 1995. With these
observations, the appeals are dismissed.
18. No orders as to costs.


BADAR DURREZ AHMED, J



MANMOHAN SINGH, J
MARCH 15, 2011
DP

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