Full Text
HIGH COURT OF DELHI
W.P.(C) 11047/2017 & CM No. 45210/2017
SOFTDESULE PRIVATE LIMITED ..... Petitioner
Through: Mr Ashish Aggarwal, Ms Gurkamal Hora Arora and Ms
Sanyogita Jatin, Advocates.
Through: Mr Jasmeet Singh, CGSC with Mr Saurabh Tiwari, Advocate for UOI.
VIBHU BAKHRU, J
JUDGMENT
1. The petitioner has filed the present petition, inter alia, impugning an order dated 30.10.2017 passed by the Central Government rejecting the petitioner‟s review application preferred under paragraph 12 of the Drugs Price Control Order, 1995 (hereafter „the DPCO‟). The Central Government (Reviewing Authority) had rejected the review petition on the ground that the said petition is not maintainable against any overcharging order under paragraph 13 of the DPCO, as it proceeded on the basis that the demand order dated 11.05.2017, which was impugned by the petitioner in the said review petition, was passed under paragraph 13 of the DPCO.
2. This case has a chequered history. The petitioner is engaged in the 2019:DHC:1348 business of manufacturing pharmaceutical products including the formulation „Fersis Caps‟. The said drug includes a bulk drug Vitamin B[1] (Thiamine). Thiamine was included in the National List of Essential Medicines. On 23.12.1998, the National Pharmaceutical Pricing Authority (NPPA) fixed the price of the said drug. Thereafter, on 27.09.2007, the NPPA issued a Price Fixation Notification being S.O. 1665(E) dated 27.09.2007, fixing the price of certain formulations. However, the product Fersis Caps was not covered under the said Notification. The said Notification was subsequently amended on 27.11.2008, by virtue of a notification – S.O.2809(E). By way of the said amendment, the formulation Fersis Caps was included in the Price Fixation Notification.
3. Thereafter, on 01.07.2009, the petitioner received a communication from NPPA calling upon the petitioner to provide explanation for not complying with the ceiling price in respect of the formulation Fersis Caps. The petitioner responded to the same by a letter dated 17.07.2009 contending that the formulation was not covered under the Notification dated 27.09.2007.
4. On 18.09.2009, NPPA issued a show cause notice alleging that an amount of `1,72,65,190/- was overcharged by the petitioner in respect of the formulation Fersis Capsules, and called upon the petitioner to show cause as to why the overcharged amount not be demanded from it. The petitioner contested the said computation.
5. Thereafter, on 06.10.2009, NPPA issued a demand notice directing the petitioner to deposit a sum of `1,73,53,889/- which consisted of the alleged overcharged amount as well as interest calculated at the rate of 15% p.a. on the overcharged amount upto 15.10.2009. This was followed by another demand notice on 14.10.2009.
6. Two years thereafter, NPPA sent yet another demand notice, inter alia, refuting the petitioner‟s claim that the formulation in question was not covered under the Price Notification dated 27.09.2007.
7. On 18.11.2013, NPPA issued another demand notice demanding a sum of `2,87,62,140/- in respect of overcharging in respect of the drug in question. This included an amount of `1,57,79,895/- as the amount overcharged and interest computed at `1,29,82,245/-. This was followed by a Recovery Certificate, which was issued by the NPPA on 28.01.2014.
8. The petitioner challenged the recovery proceedings by filing a writ petition being W.P.(C) 1838/2014. Pursuant to the said writ petition, the petitioner deposited a sum of `1,57,79,895/- (being the amount of allegedly overcharged by the petitioner) with NPPA. It also furnished a bank guarantee for a sum of `1,36,30,734/- to the Registry of this Court. The aforementioned writ petition was disposed of on 23.02.2015, inter alia, directing the petitioner to file a review petition before the reviewing authority and further directing it to pass a reasoned order.
9. Pursuant to the aforesaid directions, the petitioner filed a Review Petition on 18.03.2015. This petition was disposed of by the Reviewing Authority (Central Government) by an order dated 19.10.2015, wherein it was held that the petitioner was liable to pay the amount overcharged with effect from 27.11.2008 along with interest. Insofar as the period commencing from 27.11.2008 is concerned, the Reviewing Authority observed that NPPA could initiate action against the petitioner for not filing an appropriate application under paragraph 8(2) of the DPCO.
10. Thereafter, on 16.12.2015, NPPA issued another demand notice claiming a sum of `3,81,26,977/-. This amount also included amounts on account of sales made by the petitioner for the period September, 2007 to September, 2008.
11. An amount of `1,57,79,895/- already paid by the petitioner was adjusted against the aforesaid amount, and NPPA claimed the balance amount of `2,23,47,082/- as the balance payable towards unauthorized sale as well as overcharged amount in respect of drug Fersis Caps. In addition, NPPA also claimed interest of `1,86,76,163/-, which was calculated upto 31.12.2015.
12. Aggrieved by the same, the petitioner approached this Court by filing a writ petition (being W.P.(C) 1706/2016) impugning the aforesaid demand. The said petition was disposed of by this Court by an order dated 02.03.2016, which reads as under:- “Present writ petition has been filed challenging the demand notice dated 16th December, 2015 issued by the respondents on the ground that the same is in violation of principles of natural justice. After some arguments, it is agreed between the counsel for the parties that the impugned demand notice dated 16th December, 2015 shall be treated as a show cause notice in accordance with the paragraph 8(2) of the Drugs (Price Control) order dated 6th January, 1995. The petitioner is given an opportunity to file a reply to the said show cause notice within a period of three weeks. The parties are directed to appear before the authority that issued the impugned notice, on 8th April,
2016. The authority shall pass a reasoned order, which shall be communicated to the petitioner by way of registered AD post. The bank guarantee furnished by the petitioner vide orders dated 21st March, 2014 and 4th April, 2014 in W.P.(C) No.1838/2014 shall be kept alive, till disposal of the proceedings. In view thereof, the writ petition and the application are disposed of. This Court however clarifies that it has not expressed any opinion on the merits of the controversy. The rights and contentions of all the parties are left open.”
13. In compliance with the aforesaid order, an opportunity of personal hearing was afforded to the petitioner on 12.05.2016 and the petitioner also filed its written submissions. After considering the same, the said proceedings culminated in an order dated 08.05.2017/11.05.2017, whereby NPPA held that the petitioner was liable to pay a total overcharged amount of `1,94,50,815/- from September, 2007 to June, 2009 and further interest of `1,91,69,987/- towards interest calculated upto 31.05.2017.
14. Aggrieved by the same, the petitioner filed a Review Petition under paragraph 22 of the DPCO, inter alia, seeking review of the order dated 08.05.2017/11.05.2017. However, the same has been rejected on the ground that a review under paragraph 22 of the DPCO is not maintainable against the order of demand issued under paragraph 13 of the DPCO.
15. Before proceeding further, it would be relevant to refer paragraph 8(1) and 8(2) of the DPCO, which reads as under:-
16. It is apparent from the plain reading of the aforesaid paragraphs that sub paragraph (2) of paragraph 8 of the DPCO makes it obligatory upon manufacturer, which utilises a bulk drug for making a scheduled formulation, to apply within a period of 30 days for fixation of revision in price so fixed in Form III. And, if the Central Government considers it necessary to fix or revise the price of such formulation, it shall do so.
17. Admittedly, the petitioner had not applied for fixation of price of its formulation after 27.09.2007. It is the petitioner‟s case that it was not required to make any such application since the price had not been fixed by the Government and, therefore, the question of filing an application did not arise. This was stoutly disputed by the NPPA and it was contended that the price had already been fixed. It is in this context that this Court had passed an order dated 02.03.2016 requiring the respondent to consider the order dated 16.12.2015 as show cause under paragraph 8(1) of the DPCO. Therefore, NPPA was required to examine, first of all whether any price had been fixed in respect of the formulation; and second, whether the petitioner was obliged to make an application under paragraph 8(2) of the DPCO. NPPA was also required to consider the review order dated 19.10.2015, whereby the Central Government had left it open for NPPA to take an appropriate action under paragraph 8(2) of the DPCO. It does appear from the order dated 11.05.2017 that NPPA proceeded to issue a demand without addressing any of the aforesaid contentions. It is also seen from the table annexed to the said order that the ceiling price for the formulation for the period 27.09.2007 to 27.11.2008 has been considered as „nil‟ and, therefore, the entire sale proceeds collected by the petitioner is demanded as overcharged amount.
18. It is seen that since the order was couched as demand notice under paragraph 13 of the DPCO, the Central Government has rejected the review as not maintainable. The Reviewing Authority has not considered the context in which the said order was passed, particularly, the order dated 02.03.2016 passed by this court, inter alia, directing that the demand notice dated 16th December, 2015 be treated as a show cause notice in accordance with the paragraph 8(2) of the DPCO.
19. The plain import of the order dated 19.10.2015 is that NPPA was required to fix the price for the period 27.09.2007 to 27.11.2008 and, therefore, determine the amount as overcharged. The said exercise has also not been done. In view of the above, the impugned order dated 30.10.2017 as well as the order dated 08.05.2017/11/05.2017 are set aside and the matter is remanded to the NPPA to decide afresh having regard to the order dated 19.10.2015.
20. The petition is disposed of in the aforesaid terms. The bank guarantees furnished by the petitioner with the Registrar General of this Court shall continue to be kept alive till a fresh order is passed by the NPPA.
21. The pending application is disposed of.
22. Order dasti.
VIBHU BAKHRU, J FEBRUARY 27, 2019 MK