Case Note & Summary
The dispute arose between the Union of India and Glaxo India Ltd. regarding the legality of a demand for payment into the Drug Prices Equalization Account (DPEA) based on drug prices fixed by the Central Government. The Respondent-Company challenged the demand of ₹71.21 crores, asserting it was based on an improper interpretation of price control orders. The Central Government had issued price fixation orders under the Drugs (Price Control) Order, 1979, and subsequently revised prices on 20.11.1986 and 02.01.1989. The Respondent-Company contended that the latter order was retrospective and should relate back to the earlier price fixation order of 12.05.1981. The High Court of Delhi ruled in favor of the Respondent-Company, quashing the demand as illegal and arbitrary, stating that the demand violated the statutory provisions of the DPCO 1979. The Union of India appealed this decision, arguing that the price fixation order was prospective and that the demands were justified under the provisions of the DPCO. The Supreme Court upheld the High Court's ruling, affirming that the price fixation order dated 02.01.1989 was indeed retrospective and that the demands made by the Central Government were contrary to the established legal framework. The court also clarified the implications of supersession of notifications, indicating that previous liabilities were not wiped out by the new order. The decision reinforced the principles of price control and the rights of manufacturers under the DPCO.
Headnote
A) Administrative Law - Price Control Orders - Retrospective Effect - Drugs (Price Control) Order, 1979 - The court held that the price fixation order dated 02.01.1989 was retrospective and related back to the order dated 12.05.1981, thus invalidating the demand made by the Central Government based on the later order. The court emphasized that the demand was contrary to the directions issued by the Division Bench in the first judgment (Paras 9-10). B) Administrative Law - Supersession of Notifications - Effect of Supersession - The court clarified that the supersession of a notification does not obliterate previous liabilities incurred under it, and obligations prior to the new notification remain enforceable. This principle was supported by precedents indicating that supersession equates to repeal but does not eliminate prior obligations (Paras 28-29).
Issue of Consideration
Whether the Central Government was justified in issuing a demand based on drug prices fixed on 02.01.1989, instead of drug prices fixed on 20.11.1986, and the implications of supersession of notifications.
Final Decision
The Supreme Court upheld the High Court's decision, affirming that the demand made by the Central Government was illegal and arbitrary, and that the price fixation order dated 02.01.1989 was retrospective, relating back to the order dated 12.05.1981. The court directed the Central Government to recalculate the demand based on the revised prices of bulk drugs as notified on 02.01.1989.
Law Points
- Price control
- retrospective effect
- supersession of notifications
- unjust enrichment
- judicial review
