Sun Pharmaceutical’s Appeal Against Drug Pricing Demand Dismissed by Supreme Court
The Supreme Court of India, in its judgment dated July 15, 2024, dismissed the appeal filed by Sun Pharmaceutical Industries Ltd. against the demand raised by the National Pharmaceutical Pricing Authority (NPPA) under the Drugs (Price Control) Order, 1995 (DPCO). The case revolved around whether Sun Pharma, as a distributor of the drug Roscilox, could be held liable for overcharging beyond the price fixed by the government.
Background of the Case
Sun Pharma filed a writ petition in the Delhi High Court challenging two demand notices issued by the NPPA:
- Notice dated February 8, 2005, demanding ₹2.15 crores as the principal amount of overcharged price.
- Notice dated June 13, 2005, demanding ₹2.49 crores as interest on the overcharged amount.
- Total demand: ₹4.65 crores.
The single judge of the High Court dismissed the petition on July 13, 2005. Sun Pharma then filed an LPA (Letters Patent Appeal), but the Division Bench upheld the single judge’s ruling on August 6, 2014. Consequently, Sun Pharma approached the Supreme Court.
Arguments by Sun Pharmaceutical
Sun Pharma’s main contention was that it was not a manufacturer or an importer and hence could not be held liable under Paragraph 13 of the DPCO, which empowers the government to recover overcharged amounts.
- The company argued that it was merely a dealer, not a distributor.
- It purchased Roscilox from Oscar Laboratories Pvt. Ltd., which was the actual manufacturer.
- It claimed that Paragraph 13 applied only to manufacturers, importers, or distributors, not dealers.
- It raised issues regarding the computation of the demand but had not presented them in its initial writ petition.
Arguments by the Government (NPPA)
The NPPA countered that:
- Sun Pharma purchased the drug directly from the manufacturer, thereby falling under the definition of a distributor under the DPCO.
- It played a dual role—both as a distributor and a wholesaler, making it liable under Paragraph 13.
- The intent of the DPCO was to regulate prices to ensure affordability, and allowing Sun Pharma’s argument would defeat this purpose.
- The company failed to submit agreements with Oscar Laboratories or Delta Aromatics Pvt. Ltd. to support its claims.
Supreme Court’s Observations
1. Sun Pharma’s Status as a Distributor
The Court ruled that Sun Pharma acted as a distributor, rejecting its claim of being just a dealer.
“The appellant had direct contact with the manufacturer and procured the drug for further sale. It cannot escape liability under the guise of being a dealer.”
2. Failure to Produce Agreements
The Court noted that Sun Pharma failed to submit any agreement proving its claim that it purchased drugs from Delta Aromatics Pvt. Ltd. after 1999.
“The appellant’s version changed during litigation, and no documentary evidence was provided to substantiate the claim.”
3. Intent and Purpose of DPCO
The Supreme Court emphasized that the DPCO’s purpose was to prevent overpricing and that a restrictive interpretation of Paragraph 13 would defeat its objective.
“The objective of price control laws is to ensure essential medicines remain affordable to the public. A company involved in the drug’s distribution chain cannot claim immunity.”
Final Judgment
- The Supreme Court dismissed Sun Pharma’s appeal.
- The earlier order of status quo dated November 10, 2014, was vacated.
- Pending applications were dismissed.
- Each party was ordered to bear its own costs.
Key Takeaways
- Distributor Liability Under DPCO: Companies purchasing drugs directly from manufacturers cannot evade liability by labeling themselves as mere dealers.
- Failure to Produce Agreements Weakens Claims: Sun Pharma’s case was weakened by its inability to provide documentary proof of its transactions.
- Strict Interpretation of Price Control Laws: The Court reinforced that price control orders should be interpreted in a way that upholds consumer protection.
- Judicial Consistency: The Supreme Court upheld the decisions of both the single judge and Division Bench of the Delhi High Court.
Conclusion
This ruling reinforces the principle that pharmaceutical companies must comply with government price controls. It sets a precedent that entities involved in drug distribution will be held accountable if they charge above the government-fixed price, ensuring greater transparency and adherence to pricing regulations.
Petitioner Name: M/S. Sun Pharmaceutical Industries Ltd..Respondent Name: Union of India and Others.Judgment By: Justice Sanjay Kumar, Justice Augustine George Masih.Place Of Incident: India.Judgment Date: 14-07-2024.
Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!
Download Judgment: ms.-sun-pharmaceuti-vs-union-of-india-and-o-supreme-court-of-india-judgment-dated-14-07-2024.pdf
Directly Download Judgment: Directly download this Judgment
See all petitions in unfair trade practices
See all petitions in Corporate Compliance
See all petitions in Judgment by Sanjay Kumar
See all petitions in Judgment by Augustine George Masih
See all petitions in dismissed
See all petitions in supreme court of India judgments July 2024
See all petitions in 2024 judgments
See all posts in Corporate and Commercial Cases Category
See all allowed petitions in Corporate and Commercial Cases Category
See all Dismissed petitions in Corporate and Commercial Cases Category
See all partially allowed petitions in Corporate and Commercial Cases Category
