DPCO Provisions Cannot Be Given Restricted Interpretation: SC Rejects Sun Pharmaceuticals' Claim That It Is Not ‘Distributor’ Of Roscilox Drug

The Court said that the intent and purpose of the order is 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.

The Court was hearing a Civil Appeal that challenged the decision which dismissed the appeal of the Appellants to the demand notices.

The bench of Justice Sanjay Kumar and Justice Augustine George Masih observed, “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.”

The issue in this case is whether the National Pharmaceutical Pricing Authority (NPPA) was justified in demanding recovery from the appellant for charging higher prices for Roscilox, a Cloxacillin-based drug, than those set by the Government under the Drugs (Price Control) Order, 1995. The NPPA issued a demand notice for the overcharged principal amount and also interest payable directing the appellant to deposit the total amount of ₹4.65 Cr.

The Court perused Paragraph 13 ‘Power to recover Overcharged Amount’, Paragraph 2(d) ‘dealer’, Paragraph 2(e) ‘distributor’ and Paragraph 2(y) ‘wholesaler’ of the DPCO and observed, “definitions demonstrate 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 within the ambit of a ‘distributor’ under Paragraph 2(e). There is, thus, no clear and absolute delineation amongst the definitions.”

The Court noted that the appellant was directly in contact with the manufacturer as 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.

The Court observed, “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’.”

The Court said that the definitions of ‘distributor’ and ‘dealer’ under the DPCO are not mutually exclusive and it is very much possible in the present scheme a ‘distributor’ may play a dual role by becoming a ‘wholesaler’ or ‘retailer’ also and satisfy the definition of ‘dealer’ under Paragraph 2(d) of DPCO.

The Court also noted that the authorities failed to show any relation between the manufacturer and the appellant about the purchase and sale of Roscilox.

The Court further noted that despite sufficient opportunity the authorities failed to give complete disclosure as to its arrangement with Oscar Laboratories Pvt. Ltd. for the distribution of the drug formulation and came up with a new version that it had purchased the drug formulation from Delta Aromatics Pvt. Ltd.

Accordingly, the Court said that given its inconsistent versions, it was not open to it to baldly claim that it was not a ‘distributor’ but only a ‘dealer’.

Finally, the Court upheld the decision of the High Court and dismissed the Appeal.

Cause Title: M/s Sun Pharmaceutical Industires Ltd. v. Union of India (Neutral Citation: 2024 INSC 521)