Allowed

M/s. Bactolax Formulations Pvt. Ltd., v. National Pharmaceutical pricing Authority

Telangana HC3 Sept 2014WP/18611/2004

Case brief

AI extract

What is this about?

The Court allowed the writ petition challenging a demand letter for overcharged drug prices. It held the order non-speaking because the respondent fixed liability without referring to or considering the petitioner's explanation and submitted information. The petition was set aside, but the respondent was permitted to pass a fresh order after an enquiry.

What did the court decide?

The impugned demand letter dated 20.09.2004 is set aside. The respondent is permitted to pass a fresh order after holding an enquiry and giving notice and opportunity of being heard.

M/s. Bactolax Formulations Pvt. Ltd., Vs National… — Consumer Protection | Telangana HC (2014)

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THE HON'BLE SRI JUSTICE A.V. SESHA SAI

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W.P.No.18611 of 2004

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Between:

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M/s. Bactolac Formulations Pvt. Ltd., Rep. by its Joint Managing Director, D. Surender Reddy

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PETITIONER

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AND

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National Pharmaceutical Pricing Authority, Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilisers, Rep. by its Director.

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RESPONDENT

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ORDER:

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This writ petition, filed under Article 226 of the Constitution of India, challenges the letter dated 20.09.2004 issued by the respondent, directing the petitioner to deposit a total amount of Rs.1,75,481/-.

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2. Heard Sri B. Vijaysen Reddy, learned counsel for the petitioner and Sri T. Venkat Raju Goud, learned counsel for the respondent, apart from perusing the material available on record.

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3. According to the petitioner, it is a company registered as a Small Scale Unit, engaged in manufacture of pharmaceutical formulations, since 1995. The respondent issued a notice dated 12.01.2004, calling upon the petitioner to submit explanation, alleging non-adherence to ceiling prices in respect of Ibuprofen 400 mg + Paracetamol 325 mg tablets. Subsequent to the said notice the petitioner submitted an explanation on 7.06.2004. Thereafter, vide notice dated 27.06.2004, the respondent asked the petitioner to submit price list, specimen sample strip/pack of formulation for all batches manufactured and sold, and production and sales details with effect from 14.09.1992 till date duly certified by the Chartered Accountant/Cost Accountant. The petitioner vide covering letter dated 8.07.2004 furnished all the details except the specimen sample/Bactofen on the ground that the product was discontinued. Subsequently, the respondent issued the impugned letter dated 20.09.2004 demanding the petitioner to pay a sum of Rs.1,75,481/which represents Rs.81,619/- towards overcharged amount and Rs.93,862/- towards interest on the overcharged amount.

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4. Assailing the said letter dated 20.09.2004 the present writ petition has been filed. This Court on 12.10.2004 issued Rule Nisi and responding to the same, a counter affidavit has been filed on behalf of the respondent, denying the averments made in the writ affidavit and in the direction of justifying the impugned action.

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5. Contentions of Sri B. Vijaysen Reddy, learned counsel for the petitioner:

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a) The impugned letter of demand is highly illegal, arbitrary and without jurisdiction and unconstitutional.

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b) The Respondent did not conduct any enquiry as to whether the drug was sold on the notified MRP price at Rs.12/- as contained on the label and there is no information in the impugned letter as to on what basis the respondent came to the conclusion that the drug was sold at a price higher than the notified price.

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c) Fixation of liability must be preceded by enquiry and not on imaginary basis and it is not known to the petitioner at what price the drug is sold by its distributors, stockists and retailers, and the petitioner company, being a small scale company, has no control over the distribution cycle.

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d) The petitioner sold the drug to its distributors in 10 + 5 scheme i.e., 5 boxes free for 10 boxes, at the rate of Rs.3.50 ps for a strip of 10 tablets.

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e) The amount demanded is also barred by time as the batch of drug was manufactured on 01.11.1996 and its life expired in 1999.

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f) Despite furnishing information, the respondent failed to consider the same, as such the impugned demand is liable to be invalidated.

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6. Contentions of Sri T. Venkata Raju Goud, learned Standing Counsel for the respondent:

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a) The impugned demand is in accordance with the Drug Price Control Order, 1995, and in the absence of any illegality or irregularity in the impugned demand, the present writ petition is not maintainable and the petitioner herein is not entitled for any relief in the present writ petition.

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b) The respondent passed the impugned order only after giving notice and ample opportunity to the petitioner, as such, the same does not warrant any interference of this Court under Article 226 of the Constitution of India.

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7. Now the issue that emerges for consideration of this Court is whether the impugned letter of demand is sustainable and tenable and whether the petitioner is entitled for any relief.

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8. In response to the notice dated 12.01.2004, the petitioner submitted explanation dated 7.06.2004, saying that being new to the market, they followed a few market leaders and other local manufacturers for arriving at the MRP of the products and that though they printed the MRP more than the selling price, the selling price ultimately was much lower and the price per box yield was around Rs.35/- per box of 10 x 10 i.e., Rs.3.50 ps. Per 10 tablets. In the said explanation, the petitioner further stated that they hardly manufactured three batches and eventually they received a legal notice from M/s. Smith Kline Beecham, with regard to trade mark infringement and they discontinued manufacturing the product.

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9. Subsequently, the respondent sought the following information vide letter dated 27.06.2004, which reads as under:

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1. Copy of the price list in form V for all the products manufactured and / or marketed by your company. All manufacturers including SSI units are required to submit form V as per para 14 and 15 of DPCO, 1995. The price list need not be printed. You can submit in form V of the DPCO, 1995.

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2. Specimen sample strip/pack of the formulations for all batches manufactured and sold during the

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above period.

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3. You are required to submit production and sale details with effect from 14/9/92 till date duly certified by chartered accountant/cost accountant.

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10. In response to the above said letter dated 27.06.2004, the petitioner vide covering letter dated 8.07.2004 furnished the said information except the specimen sample / bactofen in view of its nonavailability because of the discontinuance of product. A perusal of the impugned order manifestly discloses that the respondent, without even referring to the explanation submitted by the petitioner and the furnished information, passed the impugned order of demand, fixing the liability. As per the Drug Price Control Order, 1995, the impugned action has not only civil but also penal consequences. Having called for the explanation and received the same and having asked the petitioner to furnish further information, there is absolutely no justification on the part of the respondent in not adverting to the same while fixing the liability by virtue of the impugned demand letter. In the considered opinion of this Court, the impugned letter is a non-speaking order and as such the impugned demand letter, which failed to consider the explanation offered by the petitioner, cannot be sustained in the eye of law.

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*11. For the aforesaid reasons, the writ petition is allowed, setting aside the impugned demand letter dated 20.09.2004 issued by the respondent. However this order will not preclude the respondent from passing the orders afresh, after holding enquiry and after giving notice and opportunity of being heard to the petitioner and after duly considering the explanation submitted by the petitioner. No order as to costs. As sequel, miscellaneous petitions, if any, shall stand closed.

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3^rd September, 2014 Js.

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_______________________ JUSTICE A.V. SESHA SAI.

M/s. Bactolax Formulations Pvt. Ltd., v. National Pharmaceutical pricing Authority

Case brief

What is this about?

What did the court decide?

M/s. Bactolax Formulations Pvt. Ltd., v. National Pharmaceutical pricing Authority

Case brief

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What did the court decide?

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