The Hindu : Over-charged drugs: SC allows Govt. to recover 50 p.c.

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Tuesday, Aug 05, 2003

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Over-charged drugs: SC allows Govt. to recover 50 p.c.

By J. Venkatesan

NEW DELHI AUG. 4. The Supreme Court has given liberty to the Centre to recover 50 per cent of the "over-charged" amounts running to crores of rupees from drug manufacturers in respect of seven drugs excluded from the Government's price control under the Drugs Price Control Order (DPCO), pursuant to a Bombay High Court judgment.

A three-Judge Bench, comprising Justice S. Rajendra Babu, Justice P. Venkatarama Reddi and Justice Arun Kumar, set aside the High Court judgment and referred the matter back to the High Court for fresh determination of the total quantum of "over-charged" amounts.

M/s. Cipla Ltd. and other drug manufacturers challenged an order of the Union Government, including seven drugs — salbutamol, theophylline, cyproflaxacin, norfloxacin, cloxacillin, doxycycline and glipizide — in the First Schedule of the DPCO, 1995.

Notices were issued to the manufacturers to deposit the "over-charged" amounts in relation to the formulations of the scheduled drugs as they came within the purview of price fixation by the Government and the companies were selling the drugs over and above the prescribed price.

The Bombay High Court allowed a batch of writ petitions from Cipla and others challenging the inclusion of seven drugs in the DPCO and quashed notices issued for recovery of "over-charged" amounts. The appeal by the Centre was directed against the High Court judgment.

Allowing the appeal, the Bench said that going by the estimates of turnover made by the respondent companies, there was vast difference between the value of the bulk drugs worked out by them and the sale value of formulations. Moreover, in relation to some of the drugs, there was vast variation between the quantity produced, imported and utilised in formulations sold in the market.

The Bench noted that the High Court should have examined whether the petitioners had withheld relevant data they were in a position to produce and if so what would be its effect.

Holding that the approach of the High Court was wholly impermissible, the Bench said the mere vagueness or lack of clarity in the Centre's stand did not by itself advance the case of the petitioners.

The Bench while giving liberty to the authorities to recover 50 per cent of the "over-charged" amounts within four weeks stayed the recovery of the remaining 50 per cent till the matter was decided afresh by the High Court.

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