Full Judgment Text
2024 INSC 521
Non-reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7209 OF 2019
M/S. SUN PHARMACEUTICAL INDUSTRIES LTD. … Appellant
Versus
UNION OF INDIA AND OTHERS … Respondents
J U D G M E N T
SANJAY KUMAR, J
1. Having failed before the Delhi High Court at both levels, the appellant
approached this Court.
2. Noting that the appellant had already paid a sum of 1.25 crores ₹
towards the demand made by the respondent authorities, this Court
directed status quo to be maintained in relation to recovery of the remaining
sum payable by the appellant, vide order dated 10.11.2014.
3. Challenge in W.P.(C) No. 10700 of 2005, filed by the appellant before
the Delhi High Court, was to the demand notices dated 08.02.2005 and
Signature Not Verified
Digitally signed by
Deepak Guglani
Date: 2024.07.15
16:28:32 IST
Reason:
13.06.2005. By order dated 13.07.2005, a learned Judge dismissed the
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said writ petition. The appellant, thereupon, filed L.P.A. No. 1629 of 2005
but the appeal met with the same fate when a Division Bench of the High
Court dismissed it by the impugned judgment dated 06.08.2014.
4. The issue for consideration is whether the National Pharmaceutical
Pricing Authority (for brevity, ‘the NPPA’), Government of India, was justified
in raising a demand against the appellant to recover the higher price
charged in relation to Roscilox, a brand of a Cloxacillin-based drug
formulation, than that fixed by the Government under the provisions of the
Drugs (Price Control) Order, 1995 (for brevity, ‘the DPCO’).
5. In this regard, the NPPA addressed demand notice dated 08.02.2005
to the appellant, directing it to deposit the overcharged principal amount of
₹ 2,15,62,077/- for the period April, 1996 to July, 2003. The notice made it
clear that the NPPA was also empowered to recover the interest due on the
said amount. Pursuant thereto, the NPPA issued demand notice dated
13.06.2005, quantifying the interest payable on the overcharged amount as
₹ 2,49,46,256/-, and the appellant was directed to deposit the overcharged
amount with interest, aggregating to 4,65,08,333/-. ₹
6. Recovery of the excess price charged was sought to be effected by
the NPPA in exercise of power under Paragraph 13 of the DPCO.
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Paragraph 13 is titled ‘Power to recover Overcharged Amount’ and it reads
as follows:
‘Notwithstanding anything contained in this order, the Government shall by
notice, require the manufacturers, importers or distributors, as the case maybe, to
deposit the amount accrued due to the charging of prices higher than those fixed or
notified by the Government under the provisions of Drugs (Price Control) Order, 1987
and under the provisions of this Order.’
Certain definitions in the DPCO may be noted at this stage.
Paragraph 2(d) of the DPCO defines ‘dealer’ as under:
‘ ‘Dealer’ means a person on the business of purchase or sale of drugs, whether
as a wholesaler or retailer and whether or not in conjunction with any other business
and includes his agent.’
Paragraph 2(e) of the DPCO defines ‘distributor’ thus:
‘ ‘Distributor’ means a distributor of drugs or his agent or a stockist appointed by
a manufacturer or an importer for stocking his drugs for sale to a dealer.’
Paragraph 2(y) defines “wholesaler” as follows:
‘ ‘Wholesaler’ means a dealer or his agent or a stockist appointed by a
manufacturer or an importer for the sale of his drugs to a retailer, hospital, dispensary,
medical, educational or research institution purchasing bulk quantities of drugs.’
A bare perusal of the aforestated definitions demonstrates that there
is some overlapping inasmuch as a ‘wholesaler’, as defined in Paragraph
2(y), would include not only a ‘dealer’, as defined in Paragraph 2(d), but
also a stockist appointed by a manufacturer or an importer, who would fall
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within the ambit of a ‘distributor’ under Paragraph 2(e). There is, thus, no
clear and absolute delineation amongst the definitions. However, the
so-called distinction in the defined categories was the basis for the claim of
the appellant that it could not be proceeded against under Paragraph 13 of
the DPCO. It asserted that it was not a manufacturer or an importer or a
distributor and, therefore, it stood beyond the grasp of Paragraph 13.
7. Though an attempt was made before us by the learned counsel for
the appellant to enlarge the scope of this appeal by questioning the very
validity of the demand made under the DPCO, we are not inclined to permit
the same. More so, as there is no evidence of the appellant having raised
such an issue properly before the Delhi High Court. Similarly, we find that
the issue as to whether computation of the demand was erroneous in the
context of Paragraph 19 of the DPCO was raised by the appellant only
during the course of arguments before the Division Bench of the High
Court. Noting this, the Division Bench specifically recorded that such a plea
had been made by the appellant before it for the first time and that the writ
petition as well as the memorandum of appeal were bereft of any pleadings
to that effect. Therefore, the appellant cannot be permitted to raise that plea
before us at this stage.
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8. Further, we do not even find a specific ground having been raised on
that issue. The learned counsel for the appellant would refer to Grounds H
and Y in the appeal in this regard, but we find the said grounds are general
in nature and do not focus on the computation made in the context of
Paragraph 19 of the DPCO. Reliance placed on the decision of the
Allahabad High Court in TC Health Care Private Limited and others vs.
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Union of India and others is, therefore, misplaced as we find that the
claim of the appellant under Paragraph 19 of the DPCO, unlike that case, is
not supported by any factual narrative and was raised for the first time
during the course of arguments before the Division Bench of the High
Court. The edict laid down therein cannot, therefore, be applied to the
appellant in a vacuum.
9. The High Court undertook the exercise of piercing the corporate veil
and found, on facts, that there was overlapping and merger of identities of
Oscar Laboratories Pvt. Ltd., from which the appellant claimed to have
purchased the drug formulation, with the appellant’s own group companies.
Various facts, in this regard, were set out at length by the Division Bench in
the impugned judgment. However, we do not propose to go into that issue
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2010 (5) ADJ 401.
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at all as we find on facts that the appellant would be accountable and liable
independent thereof.
10. The main issue that was raised before and considered by the High
Court was whether the appellant would come within the reach of Paragraph
13 of the DPCO in the light of its claim that it was not a manufacturer or
importer or distributor. In this regard, we find that the replies filed by the
appellant in response to the notices issued by the NPPA categorically
manifested that the appellant admitted purchase of the drug from the
manufacturer itself. Thus, in terms of its own admissions in its replies, the
appellant had direct contact with the ostensible manufacturer. Be it noted
that a ‘dealer’, as defined in the DPCO, would be a wholesaler or retailer
who undertakes the purchase or sale of the drug while a ‘distributor’, as
defined thereunder, would include a distributor of the drugs or a stockist
appointed by a manufacturer. Though the definition of ‘wholesaler’ under
Paragraph 2(y) of the DPCO blurs the distinction between a ‘dealer’ and a
‘distributor’, by including a dealer as well as a stockist appointed by a
manufacturer, the fact remains that a ‘distributor’ under Paragraph 2(c) of
the DPCO has links with the manufacturer directly while a ‘dealer’ does not,
as he obtains his supply of drugs from the said ‘distributor’. It is obvious
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that the definitions of ‘distributor’ and ‘dealer’ under the DPCO are not
mutually exclusive and it is very much possible in this scheme that a
‘distributor’ may play a dual role by becoming a ‘wholesaler’ or ‘retailer’ also
and thereby satisfy the definition of ‘dealer’ under Paragraph 2(d) of DPCO.
11. That appears to be the case presently as the appellant played both
roles. However, that would not be sufficient to exclude the appellant from
the ambit of Paragraph 13 of the DPCO. The intent and purpose thereof
are to control the prices at which medicinal drug formulations are made
available to the common man by holding out the threat of recovery of the
higher prices charged for such drug formulations by those involved in their
manufacture and marketing. Given the laudable objective underlying the
provision, it cannot be subjected to a restricted or hidebound interpretation.
12. Pertinent to note, the agreement, if any, between the manufacturer
and the appellant in relation to the purchase and sale of Roscilox was
never produced. This failure was explicitly raised before the Division Bench
by the respondent authorities, stating that the appellant had not made
complete disclosure, despite sufficient opportunity, as to its arrangement
with Oscar Laboratories Pvt. Ltd. for the distribution of the drug formulation.
Significantly, before the Division Bench of the High Court, the appellant
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came up with a new version that it had purchased the drug formulation from
Delta Aromatics Pvt. Ltd. from September, 1999. This story was not
accepted by the Division Bench as it was an altogether new story that was
introduced afresh.
13. Given its own inconsistent versions and in the absence of a firm
factual foundation being built up by the appellant with proper
documentation as to its status, it was not open to it to baldly claim that it
was not a ‘distributor’ but only a ‘dealer’.
14. We, therefore, find no error committed by the High Court in
rejecting the claim of the appellant.
The appeal is devoid of merit and is accordingly dismissed.
Order of status quo dated 10.11.2014 shall stand vacated.
Pending applications, if any, shall also stand dismissed.
Parties shall bear their own costs.
................................, J
Sanjay Kumar
................................, J
Augustine George Masih
July 15, 2024;
New Delhi.
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