NPPA cannot impose blanket drug price ceilings without following statutory pricing formula, Bombay High Court rules; quashes 2009 notification and recovery demands

Petitioner No. 1 manufactured and marketed “Cartigen Forte Tablets”, a formulation used for osteoarthritis; Petitioner No. 2 was its shareholder and director.

The formulation contained vitamins C and E before January 2010, but its principal active ingredients were glucosamine sulphate, chondroitin sulphate and methyl sulphonyl methane. From January 2010, vitamins C and E were removed from its composition.

The NPPA issued a notification dated 27 September 2007 fixing ceiling prices for “multivitamin and mineral tablets/capsules” and subsequently issued a broader notification dated 30 January 2009 providing that formulations containing any scheduled drug would be subject to the ceiling price applicable to the relevant notification.

The respondents treated Cartigen Forte as covered by these notifications and alleged overcharging. A show-cause notice and successive demand notices were issued, claiming overcharged amounts and interest.

An earlier writ petition resulted in a remand to the NPPA for a fresh hearing and a speaking order, but further demand notices were issued without, according to the petitioners, properly determining the ceiling price under the prescribed statutory formula.

The principal challenge in the present petition was that no ceiling price had ever been specifically fixed for Cartigen Forte in accordance with the Drugs (Prices Control) Order, 1995 (“DPCO 1995”).

1. Whether the notification dated 27 September 2007, fixing ceiling prices for multivitamin and mineral tablets/capsules, could be applied to Cartigen Forte merely because its earlier composition contained small quantities of vitamins C and E.

2. Whether the notification dated 30 January 2009, which extended existing ceiling prices to any formulation containing a scheduled drug, was ultra vires the DPCO 1995 for bypassing the prescribed procedure and formula for fixing the ceiling price of a particular formulation.

3. Whether the consequential demand notices issued by the NPPA and the recovery notices issued under the Maharashtra Land Revenue Code, 1966, were legally sustainable.

The Court applied the DPCO 1995, particularly paragraph 2(v), which defines a “scheduled formulation” as a formulation containing a bulk drug specified in the First Schedule; paragraph 7, which prescribes the formula for calculating the retail price; paragraph 9, which authorises the Government to fix the ceiling price of a scheduled formulation by notification in the Official Gazette in accordance with paragraph 7; and paragraph 11, which permits price fixation where the manufacturer fails to furnish the required application or information.

The governing rule was that the mere presence of a scheduled bulk drug may bring a formulation within the definition of a scheduled formulation, but a legally enforceable ceiling price must still be specifically fixed through the mechanism of paragraphs 7, 9 and, where applicable, 11.

The Court also relied on *Franco Indian Remedies Private Limited & Anr. v. Union of India & Anr.*, 2016 SCC OnLine Bom 16344, for the principle that interest cannot be claimed for periods attributable to the authorities’ own delay or invalid proceedings.

The Court accepted that Cartigen Forte, in its pre-January 2010 composition, could technically fall within the definition of a scheduled formulation because it contained vitamins C and E, which were scheduled bulk drugs.

However, the notification dated 27 September 2007 fixed prices for specified multivitamin and mineral formulations, whose composition, strengths and costs had been considered under the paragraph 7 formula.

It did not fix a ceiling price for Cartigen Forte, whose therapeutic purpose and principal active ingredients were materially different and whose vitamin content was comparatively small.

The respondents could not isolate one or two ingredients from the notified formulations and apply the notified price to the petitioners’ distinct formulation without undertaking the statutory price-calculation exercise.

The notification dated 30 January 2009 was even broader: it deemed any formulation containing a scheduled drug to be subject to an existing ceiling price.

The Court held that this effectively eliminated the mandatory application of the paragraph 7 formula and dispensed with the requirement of specifically fixing the ceiling price of the particular formulation under paragraph 9.

Such a notification was therefore beyond the authority conferred by the DPCO 1995 and amounted to an abdication of the statutory obligation to determine the formulation-specific ceiling price.

Since no valid ceiling price had been fixed for Cartigen Forte, the allegation of overcharging lacked a legal foundation.

The consequential NPPA demands and the State’s recovery proceedings under the Maharashtra Land Revenue Code consequently could not survive.

The notification dated 27 September 2007 was quashed to the extent that it was sought to be applied to Cartigen Forte, while the notification dated 30 January 2009 was quashed in its entirety as ultra vires the DPCO 1995.

All consequential demand notices issued by the NPPA and recovery notices issued by the Collector/Tehsildar were set aside, and the respondents were directed not to act upon them.

Pending applications and the Chamber Summons were disposed of.