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PETITIONER: UNION OF INDIA & ANR.

       Vs.

RESPONDENT: CYNAMIDE INDIA LTD. & ANR.

DATE OF JUDGMENT10/04/1987

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) SINGH, K.N. (J)

CITATION:  1987 AIR 1802            1987 SCR  (2) 841  1987 SCC  (2) 720        JT 1987 (2)   107  1987 SCALE  (1)728  CITATOR INFO :  F          1987 SC2351  (3)  APL        1988 SC 686  (9)  D          1988 SC1301  (8)  R          1988 SC1737  (75)  R          1990 SC 334  (102)  E          1990 SC1277  (31,38,43)  R          1990 SC1851  (30)

ACT:     Drugs (Prices Control) Order, 1979: Paragraphs 3, 12, 13     &  27:      Bulk Drugs--Price fixation  of--Whether  legislative     activity--Principles  of natural justice whether  applicable     to-Cost      of  production-----Whether can be determined  by  a     subordinate legislating Body--Price  fixation-Review--Nature     of--Formulations--Fixation  of      retail  prices--Whether   to     await the result of review application.         Constitution  of  India, Articles  32  &  226--Essential     Commodities-Price fixation of---Whether matter for  investi-     gation and interference by Court.         Practice  and  Procedure:  Essential  Commodities--Price     fixation of--Interim order staying implementation of notifi-     cation fixing prices--Courts not to pass orders which  would     be against public interest.         Constitution of India, Article 39(b)--Material resources     of  the      community--Distribution  of  to  sub-serve   common     good--Obligations of State.      

HELD:

   Paragraph  3 of the Drugs (Prices Control)  Order,  1979 made  by the Central Government in exercise of powers  under s. 3(2)(c) of the Essential Commodities. Act, 1955  empowers the  Government, after making such enquiry as it deems  fit, to fix the maximum price at which the indigenously  manufac- tured  bulk  drug shall be sold. Clause (2) of  Paragraph  3 provides that while so fixing the price of a bulk drug, the Government may take into account the average cost of produc- tion of such bulk drug manufactured by a efficient  manufac- turer and allow a reasonable return on net worth.  Paragraph 12 empowers the Government to fix leader prices of  formula- tions  of categories I and II, while paragraph  13  empowers the  Government  to  fix retail prices  of  formulations  of

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category  III. Paragraph 27 enables any person aggrieved  by any  notification  or  order under  the  various  paragraphs aforesaid to appeal to the Government for a review. The Central Government issued notifications under  paragraph 3 842 of the 1979 Order fixing the maximum prices at which various indigenously  manufactured  bulk drugs could  be  sold.  The manufacturers  first filed review applications  under  para- graph  27 of the Order and thereafter writ  petitions  under Art. 226 of the Constitution challenging the  notifications. The High Court quashed those notifications on the ground  of failure to observe the principles of natural justice.  Since prices of formulations are primarily dependent on prices  of bulk  drugs, the notifications fixing the retail  prices  of formulations issued during the pendency of review  petitions were also quashed.      In  the appeal by the Union of India, it was  contended that the fixation of maximum price under paragraph 3 of  the Order was a legislative activity and, therefore, not subject to  any principle of natural justice, that paragraph  27  of the  Order  gave  a remedy to the manufacturers  to  seek  a review of the order fixing the maximum price under paragraph 3,  that  such  review did not partake the  character  of  a judicial or quasi,judicial proceedings, and that at the time of  the hearing of the review application the matter  under- went  thorough and detailed discussion between  the  parties and the Government as well as the Bureau of Industrial Costs and  Prices,  and that the prices had not been fixed  in  an arbitrary manner.      For the respondents, it was contended that unlike other price control legislations, the Drugs (Prices Control) Order was designed to induce better production by providing for  a fair return to the manufacturers; that the provision for  an enquiry proceeding the determination of the price of a  bulk drug,  the  prescription in paragraph 3, clause 2  that  the average cast of production of the bulk drug manufactured  by an  efficient manufacturer should be taken into account  and that a reasonable return on net worth should be allowed, and the  provision  for a review of the  order  determining  the price, established that price fixation under the Order was a quasi-judicial activity obliging the observance of the rules of natural justice; that the review, for which provision  is made by paragraph 27, was certainly of quasi-judicial  char- acter and, therefore, it was necessary that the  manufactur- ers should be informed of the basis for the fixation of  the price, that the price had been fixed in an arbitrary  manner and the Government was not willing to disclose the basis  on which  the  prices  were fixed on the pretext  that  it  may involve  disclosure of matters of confidential nature;  that since the price of formulations were dependent on the prices of  bulk drugs, these should not have been prescribed  until the review application was disposed of, that the undertaking given  by the parties before the High Court while  obtaining ex-parte interim order to main- 843 tain the stanus-quo on the prices of bulk drugs and formula- tions  prevailing before the issue of notifications, and  in case of dismissal of their petitions to deposit the  differ- ence in the prices of the formulations in the Court,  lapsed with  the  disposal  of the writ petition and  it  could  no longer  be  enforced; and that the delay in  filing  special leave  petitions against other manufacturers should  not  be condoned  as  the  Government was well  versed  litigant  as compared to private litigants.

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Allowing the appeal, the Court,      HELD: 1. Price fixation is neither the function nor the forte of the Court. The Court is concerned neither with  the policy  nor with the rates. But it has jurisdiction  to  en- quire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant  consid- erations  kept  out of the determination of the  price.  For example,  if the legislature has decreed the pricing  policy and prescribed the factors which should guide the determina- tion  of  the price, the Court will, if  necessary,  enquire into  the  question  whether the  policy  and  factors  were present to the mind of the authorities specifying the price. Its  examination  would stop there. The mechanics  of  price fixation  are not concern of the executive. The  Court  will not  revaluate  the considerations even if the  prices  were demonstrably  injurious to some manufacturers or  producers. It  will, of course, examine if there was any  hostile  dis- crimination. [852E-H]     Secretary of Agriculture v. Central Reig Refining Compa- ny, 338 604; Prag Ice & Oils Mills v. Union of India, [1978] 3  SCC  459  and Welcom Hotel v. State  of  Andhra  Pradesh, [1983] 4 SCC 575, referred to.     2. Profiteering, by itself, is evil. Profiteering in the scarce resources of the community, much needed life-sustain- ing  food stuffs and fife saving drugs is diabolic. It is  a menace  which has to be lettered and curbed.  The  Essential Commodities Act, 1955 is a legislation towards that end,  in keeping  with the duty of the State enshrined in Art.  39(b) of the Constitution towards securing that the ownership  and control  of the material resources of the community  are  so distributed as best to subserve the common good. [851E-F]     The right of the citizen to obtain essential articles at fair  prices and duty of the State to provide them are  thus transformed  into the power of the State to fix  prices  and obligation of the producer to charge no more than the  price fixed. [854F] 844     Shree  Meenakshi Mills Ltd. v. Union of India, [1974]  1 SCC  468;  Hari Shankar Bagla v. State  of  Madhya  Pradesh, [1955]  1  SCR 380; Union of India v.  Bhanamal  Gulzarimal, [1960]  2 SCR 627; Sri Krishna Rice Mills v. Joint  Director (Food),  (unreported),  State of Rajasthan  v.  Nathmal  and Mithamal, [1954] SCR 982; Narendra Kumar v. Union of  India, [1960] 2 SCR 375, Panipat Co-operative Sugar Mills v.  Union of India, [1973] 1 SCC 129; Anakapalle Co-operative Agricul- tural and Industrial Society Ltd. v. Union of India,  [1973] 3  SCC 435 and Premier Automobiles Ltd. v. Union  of  India, [1972] 2 SCR 526, referred to.     3.1  A  price fixation measure does not  concern  itself with the interests of an individual manufacturer or  produc- er. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general  character not directed against a particular  situa- tion.  It is intended to operate in future. It is  conceived in the interest of the general consumer public. [854E-F]     3.2  Price fixation is more in the nature of a  legisla- tive activity than administrative. A legislative act is  the creation  and  promulgation  of a general  rule  of  conduct without reference to particular cases; an administrative act is  the  making  and issue of a specific  direction  or  the application  of a general rule to a particular case  in  ac- cordance with the requirements of policy. Legislation is the process  of  formulating a general rule of  conduct  without reference  to  particular  cases and  usually  operating  in future; administration is the process of performing particu-

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lar  acts, of issuing particular orders or of  making  deci- sions which apply general rules to particular cases.  [853F- H; 854A]     Secretary of Agriculture v. Central Reig Refining Compa- ny,  338 US 604, and Saraswati Industrial Syndicate Ltd.  v. Union of India, [1974] 2 SCC 630, referred to.     3.3.1 Price fixation may occasionally assume an adminis- trative  or  quasi-judicial  character when  it  relates  to acquisition  or requisition of goods or property from  indi- viduals and it becomes necessary to fix the price separately in  relation to such individuals. Such situations may  arise when the owner of property or goods is compelled to sell his property  or goods to the Government or its nominee and  the price to be paid is directed by the legislature to be deter- mined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire  a quasi-judicial character. [854G-H; 855A] 3.3.2  Section  3(2)(f)  of the  Essential  Commodities  Act enables the 845 Central  Government  to make an order requiring  any  person engaged in the production of any essential commodity to sell the whole or a specific part of the quantity produced by him to  the Government or its nominee. Section 3(3)(C)  provides for  the  determination of the price to be paid  to  such  a person.  If  the provisions of s. 3(2)(c), under  which  the price  of  an  essential commodity may  be  controlled,  are contrasted with s. 3(3)(C) under which payment is to be made for a commodity required to be sold by an individual to  the Government, the distinction between a legislative act and  a non-legislative  act  will at once become clear.  The  order made  under s. 3(3)(c), which is not in respect of a  single transaction,  nor  directed to a particular  individual,  is clearly  a  legislative act, while an order  made  under  s. 3(3)(C), which is in respect of a particular transaction  of compulsory sale from a specific individual, is a nonlegisla- tive act. [860B-H; 861A-B]     3.3  The  order made under s.  3(2)(c)  controlling  the price  of  an essential commodity may itself  prescribe  the manner in which price is to be fixed but that will not  make the  fixation of price a non-legislative activity, when  the activity  is  not directed towards a  single  individual  or transaction  but is of a general nature, covering all  indi- viduals  and all transactions. The legislative character  of the  activity is not shed and an administrative.  or  quasi- judicial  character acquired merely because guidelines  pre- scribed  by  the statutory order have to be taken  into  ac- count. [861B-C]     3.4  Legislative action, plenary or subordinate, is  not subject to rules of natural justice. In the case of  Parlia- mentary legislation, the proposition is self evident. In the case of subordinate legislation, it may happen that  Parlia- ment  may itself provide for a notice and for a hearing,  in which case the substantial non-observance of the statutorily prescribed  mode of observing natural justice may  have  the effect  of  invalidating the  subordinate  legislation.  But where  the  legislature has not chosen to  provide  for  any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity. [852H; 853A-C]     New India Sugar Works v. State of Uttar Pradesh,  [1981] 2 SCC 293; Laxmi Khandsari v. State of Uttar Pradesh, [1981] 2  SCC  600;  Ramesh Chandra Kachardas Porwal  v.  State  of Maharashtra, [1981] 2 SCC 722; Bates v. Lord Hailsha, of St. Marylebone, [1972] 1 WLR 1973; Edinburgh and Dalkeith Rv. v.

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Wauchope Per Lord Brougham, [1842] 8 CI & F 700, 720;  Brit- ish  Railways Board v. Pickin, [1974] 1 All ER  609,  Sarkar Sasta Anaj Vikreta Sangh v. State of Madhya Pradesh, 846 [1981] 4 SCC 471 and Tharoo Mal v. Puranchand, [1978] 1  SCC 102, referred to.     3.5 Nothing in the scheme of the Drugs (Prices  Control) Order, 1979 leads to the inference that price fixation under that  Order is not a legislative activity but a  quasi-judi- cial  activity  which would attract the  observance  of  the principles of natural justice. Nor is there anything in  the scheme  or  the  provisions of that  Order  which  otherwise contemplates  the  observance of any  principle  of  natural justice  or kindred rule, the non-observance of which  would give rise to a cause of action to a suitor. [871G-H; 872A-B]     4.1 Occasionally the legislature directs the subordinate legislating  body  to make ’such enquiry as  it  think  fit’ before making the subordinate legislation. In such a  situa- tion, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the  subordinate legislation, the nature and the extent of the enquiry is  in the  discretion of the subordinate legislating body and  the subordinate  legislation  is  not open to  question  on  the ground  that  the enquiry was not as fur as  it  might  have been.  The  provision for such an enquiry  is  generally  an enabling  provision, intended to facilitate the  subordinate legislating  body to obtain relevant information’  from  all and whatever source considered necessary. It is the sort  of enquiry  which  the legislature itself my cause to  he  made before  legislating,  an enquiry which will not  confer  any right an anyone other than the enquiring body. It is differ- ent  from an enquiry in which an opportunity is required  to he given to persons likely to he affected. The former is  an enquiry  leading to a legislative activity while the  latter is  an  enquiry which ends in an  administrative  or  quasi- judicial decision. [853D-F]     4.2  In  the  present case, paragraph  3  of  the  Drugs (Prices Control) Order, 1979 is an enabling provision. "Such an  enquiry as it thinks fit" contemplated by it is  an  en- quiry of the former character to he made for the purposes of fixing  the maximum price at which a bulk drug may he  sold, with  a  view to regulating its equitable  distribution  and making  it available at a fair price for the benefit of  the ultimate  consumer  in  consonance with Art.  39(b)  of  the Constitution.  It  is primarily from the  consumer  public’s point  of view that the Government is expected to  make  its enquiry.  The  need of the consumer public is to  he  ascer- tained and making the drug available to them at a fair price is  its  ultimate aim. The enquiry is to he made  from  that angle  and  directed towards that end.  Information  may  he gathered  from whatever source considered desirable  by  the Government. [872B-E] 847     4.3  In fixing the price of a bulk drug, the  Government is expressly required by the Order to take into account  the average cost of production of such bulk drug manufactured by ’an efficient manufacturer’ and allow a reasonable return on ’net worth’. For this purpose too, the Government may gather information  from  any source including  the  manufacturers. Here  again  the enquiry by the Government need not  be  re- stricted to ’an efficient manufacturer’ or some  manufactur- ers;  nor need it be extended to all manufacturers. What  is necessary  is  that the average cost of production,  by  ’an efficient manufacturer’ must be ascertained and a reasonable return allowed on ’net worth’. Being a subordinate or  dele-

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gated  legislative  activity, the enquiry  must  necessarily comply with the statutory conditions, if any, no more and no less,  and  no implications of natural justice can  be  read into it unless it is a statutory condition. [866B-D]     5.1 The review provided by paragraph 27 of the Order, of the  order  made under paragraph 3 fixing maximum  price  of indigenously manufactured drugs, and under paragraphs 12 and 13 fixing leader and retail prices of formulations, is  akin to  a  post-decisional hearing which is  sometimes  afforded after  the  making of some administrative  orders,  but  not truly  so. It is a curious amalgam of a hearing which  occa- sianally precedes a subordinate legislative activity such as the  fixing  of municipal rates etc. and a  post  decisional hearing  after  the making of an  administrative  or  quasi- judicial order. it is a hearing which follows a  subordinate ’legislative activity intended to provide an opportunity  to affected persons such as the manufacturers, the industry and the  consumer public to bring to the notice of the  subordi- nate  legislating body the difficulties or problems  experi- enced or likely to he experienced by them consequent on  the price fixation, whereupon the Government may make  appropri- ate  orders.  More precisely it is a review  of  subordinate legislation  by  a legislating body at the  instance  of  an aggrieved person. [873B; 874C-D]     5.2 The reviewing authority has the fullest freedom  and discretion under paragraph 27 of the Order to prescribe  its own  procedure and consider the matter brought before it  so long as it does not travel beyond the parameters  prescribed by paragraph 3 in the case of a review against an order made under that paragraph and the respective other paragraphs  in the case of other orders. But whatever procedure is adopted, it must be a procedure tuned to the situation. [873H;  874A- B]     Vrajlal Manilal & Co. v. Union of India & Anr., [1964] 7 SCR 97; Shivaji Nathubhai v. Union of India & Ors., [1960] 2 SCR  775; Maneka Gandhi v. Union of India,[1978] 2 SCR  621; Swadeshi Cotton Mills v. 848 Union  of India, [1981] 2 SCR 533 and Liberty Oil  Mills  v. Union of India, [1984] 3 SCR 676, distinguished.     6.1 So long as the method prescribed and adopted by  the subordinate  legislating  body in arriving at  the  cost  of production  of bulk drugs was not arbitrary and  opposed  to the principal statutory provisions, it could not legitimate- ly be questioned. [878F]     6.2  It is open to the subordinate legislating  body  to prescribe and adopt its own mode of ascertaining the cost of production  and the items to be included and excluded in  so doing.  Such  a body is under no obligation  to  follow  the method  adopted  by the Income-tax authorities  in  allowing expenses for the purpose of ascertaining income and  assess- ing  it.  There may be many items  of  business  expenditure which may be allowed by Income-tax authorities as legitimate expenses  but which can never enter the cost of  production. It  is open to such an authority to adopt a rough  and  read but  otherwise not unreasonable formula rather than a  need- lessly intricate so-called scientific formula. [878D-H]     It  could  not therefore, be said in the  instant  case, that the subordinate legislating authority acted  unreasona- bly in prescribing the norms in the manner it has done.     7.1  From the legislative nature of the activity of  the Government,  it is clear that it is under no  obligation  to make any disclosure of any information received and  consid- ered by it in making the order but in order to render effec- tive  the right to seek a review given to an aggrieved  per-

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son, the Government, if so requested by the aggrieved  manu- facturer,  is under an obligation to disclose  any  relevant information which may reasonably be disclosed pertaining  to ’the  average cost of production of the bulk  drug  manufac- tured  by  an efficient manufacturer’  and  ’the  reasonable return on net worth’. [874C-E]     7.2  In the instant case, the procedure followed by  the Government  in furnishing the requisite particulars  at  the time of the hearing of the review applications and  discuss- ing  across the table the various items that hod been  taken into  account was sufficient compliance with the demands  of fair play in the case of the class of persons claiming to by affected  by the fixation of maximum price under  the  Drugs (Prices  Control) Order. It cannot, therefore, be said  that there  was anything unfair in the procedure adopted  by  the Government. [876D-E] 8.  This  Court  cannot constitute itself into  a  court  of appeal over 859 the  Government in the matter of price fixation.  The  ques- tions that obsolete quantitative usages had been taken  into consideration, proximate cost data had been ignored, and the data  relating  to the year ending November  1976  had  been adopted  as the basis; that there were errors in  totalling, errors in the calculation of prices of utilities, errors  in the  calculation of ’net worth’ and many other  similar  er- rors,  were questions to be raised before the Government  in the review application under paragraph 27. [877A-C]     9.1  It is the necessary duty of the Government to  pro- ceed to fix the retail price of a formulation as soon as the price  of  the parent bulk drug is fixed. Though  the  price fixation  of formulations is dependent on the price  of  the bulk drug, it is not to await the result of a review  appli- cation which in the end may turn out to be entirely  without substance. In view of the public interest, therefore, it  is necessary  that  the price of formulation  should  be  fixed close  on  the  heels of the fixation of  bulk  drug  price. [879D-E; G]     9.2  The ups and downs of commerce are inevitable it  is not  possible to devise a fool proof system to take care  of every  possible defect and objection. It is certainly not  a matter at which the court could take a hand. All that  court may do is to direct the Government to dispose of the  review application  expeditiously  according to a time  bound  pro- gramme. [879F-G]     10.  Though  the price of a bulk drug  is  dependent  on innumerable variables, it does not follow that the notifica- tion  fixing  the maximum price must necessarily  be  struck down  as obsolete by the mere passage of time. The  applica- tions for review must be dealt with expeditiously and  when- ever  they are not so dealt with, the aggrieved  person  may seek  a mandamus from the court to direct the Government  to deal  with the review application within a time  frame-work. [880B-C]     11.  Where prices of essential commodities are fixed  in order  to maintain or increase their supply or for  securing their  equitable  distribution  and  availability  at   fair prices, the court should not make any interim order  staying the  implementation of the notification fixing  the  prices. Such orders are against the public interest and ought not to be  made  by a court unless it is satisfied that  no  public interest  is  going  to suffer. In matters  of  fixation  of price,  it is the interest of the consumer public that  must come  first  and any interim order must take  care  of  that interest. [880D-F]

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850     In  the instant case, the order made by the  High  Court has the manufacturers on terms, but the consumer public  has been left high and dry. [881D]     12.  Apart  from the fact that an appeal  is  ordinarily considered to be a continuation of the original  proceeding, in  the  present case, further orders of the  Supreme  Court were  also  in contemplation and such further  orders  could only be made if appeals were preferred to the Supreme Court. There was no doubt in anyone’s mind that the matter would be taken  up in appeal to the Supreme Court whichever  way  the writ  petitions were decided. The undertakings given by  the parties  in the present cases, were thus intended to and  do continue to subsist. [881E-F]     [The  Government  is directed to dispose of  the  review applications after giving notice of hearing to the  manufac- turer.  The  hearing to be given within two months  and  the review  applications disposed of within two weeks after  the conclusion of the hearing.]

JUDGMENT:

   CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1603  of 1985 etc.     From  the  Judgment and Order dated  17.12.1984  of  the Delhi High Court in C.W.P. No. 820 of 1981.     G. Ramaswamy, Additional Solicitor General G. Subramani- um, C.V. Subba Rao and A. Subba Rao for the Appellants.     A.B.  Diwan,  S.I. Thakar, D.D. Udeshi,  H.S.  Merchant, Ravinder  Narain,  Mrs. A.K. Verma and D.N. Mishra  for  the Respondents. The Judgment of the Court was delivered by     CHINNAPPA  REDDY, J. It was just the other day that  our brothers  Ranganath  Misra and M.M. Dutt, JJ.  had  to  give directions  in  a case (Vincent Panikurbangara v.  Union  of India) where a public spirited litigant had complained about the unscrupulous exploitation of the Indian Drug and Pharma- ceutical Market by multinational Corporations by putting  in circulation low-quality and even deleterious drugs. In  this group  of  cases we are faced with a  different  problem  of alleged exploitation by big manufacturers of bulk drugs. The problem is that of high prices, bearing, it is said,  little relation to the cost of production to the manufacturers.  By way  of illustration, we may straightaway mention a  glaring instance of such high-pricing which was 851 brought to our notice at the very commencement of the  hear- ing.  ’Barlagan Ketone’, a bulk drug, was not treated as  an essential bulk drug under the Drugs (Prices Control)  Order, 1970  and was not included in the schedule to that order.  A manufacturer  was, under the provisions of that Order,  free to continue to sell the drug at the price reported by him to the  Central Government at the time of the  commencement  of the  order, but was under an obligation not to increase  the price without the prior approval of the Central  Government. The price which the manufacturer of Barlagan Kotone, report- ed  to the Central Government in 1971 was  Rs.24,735.68  per Kg.  After the 1979 Drugs (Prices Control) Order  came  into force,  the distinction between essential and  non-essential bulk drugs was abolished and a maximum price had to be fixed for Barlagan Ketone also like other bulk drugs. The manufac- turer applied for fixation of price at Rs.8,500 per Kg.  The Government, however, fixed the price at Rs.1,810 per Kg. For the  moment, ignoring the price fixed by the Government,  we see  that the price of Rs.24,735 per Kg. at which the  manu-

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facturer  was  previously selling the drug and at  which  he continues  to  market the drug to this day  because  of  the quashing of the order fixing the price by the High Court, is so  unconsciously high even compared with the price  claimed by  himself that it appears to justify the charge that  some manufacturers do indulge in ’profiteering’.     Profiteering,  by itself, is evil. Profiteering  in  the scarce resources of the community, much needed life-sustain- ing  food-stuffs and lifesaving drugs is diabolic. It  is  a menance  which  had to be lettered and curbed.  One  of  the principal objectives of the Essential Commodities Act,  1955 is  precisely  that. It must be remembered that  Art.  39(b) enjoins  a  duty  on the State towards  securing  ’that  the ownership  and  control  of the material  resources  of  the community are so distributed as best to subserve the  common good’.  The Essential Commodities Act is a  legislation  to- wards  that end. Section 3(1) of the  Essential  Commodities Act  enables  the Central Government, if it  is  of  opinion ’that it is necessary or expedient so to do for  maintaining or  increasing  supplies of any essential commodity  or  for securing  their equitable distribution and  availability  at fair  price’, to ’provide for regulating or  prohibiting  by order,  the production, supply and distribution thereof  and trade  and  commerce  therein’. In  particular,  s.  3(2)(c) enables  the Central Government, to make an order  providing for  controlling the price at which any essential  commodity may  be  bought or sold. It is in pursuance  of  the  powers granted to the Central Government by the Essential  Commodi- ties  Act that first the Drugs (Prices Control) Order,  1970 and later the Drugs (Prices Control) Order, 1979 were made. 852 Armed with authority under the Drugs (Prices Control) Order, 1979 the Central Government issued notifications fixing  the maximum  prices at which various  indigenously  manufactured bulk drugs may be sold by the manufacturers. These notifica- tions were questioned on several grounds by the  manufactur- ers  and they have been quashed by the Delhi High  Court  on the  ground of failure to observe the principles of  natural justice.  Since prices of ’formulations’ are  primarily  de- pendent on prices of ’buli drugs’, the notifications  fixing the  retail  prices of formulations were also  quashed.  The manufacturers  had  also filed review petitions  before  the Government under paragraph 27 of the 1979 Order. The  review petitions  could not survive after the notifications  sought to be reviewed had themselves been quashed. Nevertheless the High Court gave detailed directions regarding the manner  of disposal  of  the review petitions by the  High  Court.  The Union of India has preferred these appeals by Special  leave of  this Court against the judgment of the High  Court.  The case for the Union of India was presented to us ably by Shri G.  Ramaswami, the learned Additional Solicitor General  and the manufacturers were represented equally ably by Shri Anil Diwan.     Before  we turn to the terms of the Drugs  (Prices  Con- trol)  Order,  1979 we would like to  make  certain  general observations  and  explain the legal position in  regard  to them.     We  start with the observation, ’Price-fixation is  nei- ther  the function nor the forte of the Court’.  We  concern ourselves neither with the policy nor with the rates. But we do  not totally deny ourselves the jurisdiction  to  enquire into  the  question,  in  appropriate  proceedings,  whether relevant considerations have gone in and irrelevant  consid- erations  kept  out of the determination of the  price.  For example,  if the Legislature has decreed the pricing  policy

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and prescribed the factors which should guide the determina- tion  of the price, we will, if necessary, enquire into  the question  whether the policy and the factors are present  to the  mind of the authorities specifying the price.  But  our examination will stop there. We will go no further. We  will not deluge ourselves with more facts and figures. The assem- bling of the raw materials and the mechanics of price  fixa- tion  are  the concern of the executive and we leave  it  to them. And, we will not revaluate the considerations even  if the prices are demonstrably injurious to some  manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination. That is a different ’cup of tea’ altogether. The  second  observation  we wish to  make  is,  legislative action, 853 plenary  or subordinate, is not subject to rules of  natural justice.  In  the  case of  Parliamentary  legislation,  the proposition  is  self-evident. In the  case  of  subordinate ’legislation,  it  may  happen that  Parliament  may  itself provide  for  a notice and for a hearing-there  are  several instances  of  the  legislature  requiring  the  subordinate legislating  authority  to give public notice and  a  public hearing  before  say,  for  example,  levying  a   municipal rate--,in  which case the substantial non-observance of  the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. The  right  here given to rate payers or others  is  in  the nature  of  a concession which is not to  detract  from  the character of the activity as legislative and not  quasijudi- cial.  But, where the legislature has not chosen to  provide for any notice or hearing, no one can insist upon it and  it will  not be permissible to read natural justice  into  such legislative activity.     Occasionally,  the legislature directs  the  subordinate legislating  body  to make ’such enquiry as it  thinks  fit’ before making the subordinate legislation. In such a  situa- tion, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the  subordinate legislation, the nature and the extent of the enquiry is  in the  discretion of the subordinate legislating body and  the subordinate  legislation  is  not open to  question  on  the ground  that  the enquiry was not as full as it  might  have been.  The provision for ’such enquiry as it thinks fit’  is generally an enabling provision, intended to facilitate  the subordinate legislating body to obtain relevant  information from  all and whatever source and not intended to  vest  any right  in  any one other  than  the  subordinate-legislating body. It is the sort of enquiry which the legislature itself may  cause to be made before legislating, an  enquiry  which will not confer any right on anyone.     The third observation we wish to make is, price fixation is  more  in the nature of a legislative activity  than  any other. It is true that, with the proliferation of  delegated legislation, there is a tendency for the line between legis- lation and administration to vanish into an illusion. Admin- istrative, quasi-judicial decisions tend to merge in  legis- lative activity and, conversely, legislative activity  tends to fade into and present an appearance of an  administrative or  quasi-judicial activity. Any attempt to draw a  distinct line  between legislative and administrative  functions,  it has  been  said, is ’difficult in theory and  impossible  in practice’.  Though difficult, it is necessary that the  line must sometimes be drawn as different legal fights and conse- quences  may  ensue.  The distinction between  the  two  has

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usually  been expressed as ’one between the general and  the particular’. ’A legislative act is the creation 845 and promulgation of a general rule of conduct without refer- ence  to  particular  cases; an administrative  act  is  the making and issue of a specific direction or the  application of  a general rule to a particular case in  accordance  with the requirements of policy’. ’Legislation is the process  of formulating  a general rule of conduct without reference  to particular  cases and usually operating in future;  adminis- tration  is  the process of performing particular  acts,  of issuing particular orders or of making decisions which apply general  rules to particular cases.’ It has also  been  said "Rule making is normally directed toward the formulation  of requirements having a general application to all members  of a  broadly identifiable class" while, "an  adjudication,  on the  other hand, applies to specific individuals  or  situa- tions".  But, this is only a bread distinction,  not  neces- sarily always true. Administration and administrative  adju- dication may also be of general application and there may be legislation  of  particular application only.  That  is  not ruled  out. Again, adjudication determines past and  present facts and declares rights and liabilities while  legislation indicates  the  future  course of  action.  Adjudication  is determinative of the past and the present while  legislation is  indicative  of the future. The object of the  rule,  the reach of its application, the rights and obligations arising out  of it, its intended effect on past, present and  future events,  its form, the manner of its promulgation  are  some factors which may help in drawing the line between  legisla- tive and non-legislative acts. A price fixation measure does not  concern  itself  with the interests  of  an  individual manufacturer  or producer. It is generally in relation to  a particular  commodity  or class of commodities  or  transac- tions. It is a direction of a general character, not direct- ed against a particular situation. It is intended to operate in  the  future.  It is conceived in the  interests  of  the general consumer public. The right of the citizen to  obtain essential articles at fair prices and the duty of the  State to  so  provide them are transformed into the power  of  the State  to fix prices and the obligation of the  producer  to charge  n6 more than the price fixed. Viewed  from  whatever angle, the angle of general application the prospectivity of its  effect, the public interest served, and the rights  and obligations flowing therefrom, there can be no question that price fixation is ordinarily a legislative activity.  Price- fixation  may  occasionally  assume  an  administrative   or quasi-judicial  character when it relates to acquisition  or requisition  of  goods or property from individuals  and  it becomes necessary to fix the price separately in relation to such  individuals. Such situations may arise when the  owner of  property or goods is compelled to sell his  property  or goods  to the Government or its nominee and the price to  be paid is directed by the legislature to be determined accord- ing to the statutory guidelines laid down by it. In 855 such  situations  the  determination of  price  may  acquire aquasi-judicial  character.  Otherwise,  price  fixation  is generally  a legislative activity. We also wish to  clear  a misapprehension which appears to prevail in certain  circles that  price-fixation  affects the manufacturer  or  producer primarily  and therefore fairness requires that he be  given an opportunity and that fair opportunity to the manufacturer or producer must be read into the procedure for  price-fixa- tion.  We  do not agree with the basic  premise  that  price

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fixation  primarily  affects  manufacturers  and  producers. Those who are most vitally affected are the consumer public. It  is for their protection that price-fixation is  resorted to  and any increase in price affects them as  seriously  as any decrease does a manufacturer, if not more.     The  three observations made by us are well-settled  and wellfounded  on authority. The cases to which we  shall  now refer, will perhaps elucidate what we have tried,  unfelici- tously, to express.     In Shree Meenakshi Mills Ltd. v. Union of India,  [1974] 1  SCC  468 a notification fixing the  ex-factory  price  of certain  counts of cotton yarn was questioned on the  ground that  the price had been arbitrarily fixed. After  referring to  Hari Shanker Bagla v. State of Madhya Pradesh, [1955]  1 SCR 380; Union of India v. Bhanamal Gulzarimal, [1960] 2 SCR 627;  Sri  Krishna  Rice Mills  v.  Joint  Director  (Food), (unreported);  State of Rajasthan v. Nathmal  and  Mithamal, [1954]  SCR 982; Narendra Kumar v. Union of India, [1960]  2 SCR 375; Panipat Co-operative Sugar Mills v. Union of India, [1973]  1  SCC 129; Anakapalle Co-operative  Agricultural  & Industrial Society Ltd. v. Union of India, [1973] 3 SCC  435 and Premier Automobiles Ltd. v. Union of India, [1972] 2 SCR 526  a  constitution bench of the court  observed  that  the dominant  object and the purpose of the legislation was  the equitable  distribution and availability of  commodities  at fair  price and if profit and the producer’s return were  to be kept in the forefront, it would result in losing sight of the object and the purpose of the-legislation. If the prices of  yarn  or cloth were fixed in such a way  to  enable  the manufacturer or producer recover his cost of production  and secure a reasonable margin of profit, no aspect of infringe- ment of any fundamental right could be said to arise. It was to be remembered that the mere fact that some of those  were engaged in the industry, trade or commerce alleged’that they were incurring loss would not render the law stipulating the price unreasonable. It was observed,               "The control of prices may have effect  either               on  maintaining or ,increasing supply of  com-               modity or securing equit-               856               able  distribution  and availability  at  fair               prices.  The  controlled price has  to  retain               this  equilibrium in the supply and demand  of               the  commodity.  The  cost  of  production,  a               reasonable  return  to  the  producer  of  the               commodity  are to be taken into  account.  The               producer  must have an incentive  to  produce.               The fair price must be fair not only from  the               point  of view of the consumer but  also  from               the  point of view of the producer. In  fixing               the  prices,  a price line has to be  held  in               order  to  give  preference  or   pre-dominant               consideration to the interest of the  consumer               or the general public over that of the produc-               ers  in respect of essential commodities.  The               aspect of ensuring availability of the  essen-               tial commodities to the consumer equitably and               at fair price is the most important considera-               tion.                        The producer should not be driven out               of his producing business. He may have to bear               loss  in the same way as he does when he  suf-               fers  losses  on account  of  economic  forces               operating  in  the business. If  an  essential               commodity  is  in  short supply  or  there  is

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             hoarding,  concerning  or  there  is   unusual               demand,  there is abnormal increase in  price.               If  price increases, it becomes  injurious  to               the  consumer. There is no justification  that               the  producer should be given the  benefit  of               price  increase  attributable to  hoarding  or               cornering or artificial short supply. In  such               a case, if an "escalation" in price is contem-               plated at intervals, the object of  controlled               price may be stultified. The controlled  price               will enable both the consumer and the producer               to  tide  over  difficulties.  therefore,  any               restriction in excess of what would be  neces-               sary  in the interest of general public or  to               remedy  the  evil  has to  be  very  carefully               considered  so  that  the  producer  does  not               perish and the consumer is not crippled." The cases of Panipat Sugar Mills and Anakapalle Co-operative Agricultural  Society were distinguished on the ground  that they  were  governed by sub-section (3C) of sec.  3  of  the Essential Commodities Act and therefore, had no relevance to the case before the Constitution Bench. The case of  Premier Automobiles  was distinguished on the ground that the  deci- sion was rendered by invitation and on the agreement of  the parties  irrespective of technical and legal questions.  The Court  quoted  with  approval a passage  from  Secretary  of Agriculture  v. Central Reig Refining Company, 330  US  604, stating, 857               "Suffice  it to say that since Congress  fixed               the quotas on a historical basis it is not for               this  Court  to reweigh the  relevant  factors               and,  per  chance, substitute  its  notion  of               expediency and fairness for that of  Congress.               This  is so even though the quota  thus  fixed               may demonstrably be disadvantageous to certain               areas or persons. This Court is not a tribunal               for  relief from the crudities and  inequities               of complicated experimental economic  legisla-               tion ".               In  Saraswati  Industrial  Syndicate  Ltd.  v.               Union  of India, [1974] 2 SCC 630;  the  Court               observed,               "Price-fixation  is  more in the nature  of  a               legislative  measure  even though  it  may  be               based  upon  objective  criteria  found  in  a               report or other material. It could not, there-               fore, give rise to a complaint that a rule  of               natural  justice  has  not  been  followed  in               fixing the price. Nevertheless, the  criterion               adopted  must be  reasonable.  Reasonableness,               for  purposes of judging whether there was  an               "excess  of power" or an "arbitrary"  exercise               of  it, is really the demonstration of a  rea-               sonable  nexus between the matters  which  are               taken  into account in exercising a power  and               the purposes of exercise of that power." It was also reiterated that the decision in Shree  Meenakshi Mills’  case  was based on a special agreement  between  the parties  and  therefore, had no relevance  to  the  question before them.     In Prag Ice & Oil Mills v. Union of India, [1978] 3  SCC 459  a Constitution Bench of seven judges of this court  had to consider the validity of the Mustard Oil (Price  Control) Order,  1977, an Order made in exercise of the  powers  con-

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ferred upon Central Government by the Essential  Commodities Act.  Chandrachud,  J. speaking for the court  approved  the observation  of Beg, CJ. in Saraswati  Industrial  Syndicate that  it was enough compliance with the Constitutional  man- date  if the basis adopted for price fixation was not  shown to  be  so patently unreasonable as to be in excess  of  the power to fix the price. He observed               "In  the  ultimate analysis the  mechanics  of               price  fixation has necessarily to be left  to               the judgment of the Executive and unless it is               patent  that there is hostiled  discrimination               against  a class of operators, the  processual               basis of price               858               fixation has to be accepted in the  generality               of cases as valid." Referring  to  Shri Meenakshi Mills, the learned  CJ.  reaf- firmed  the approval accorded to the statement in  Secretary of Agriculture v. Central Reig Refining Company (supra) that Courts  of  Law could not be converted  into  tribunals  for relief  from  the crudities and  inequities  of  complicated experimental economic legislation. Panipat Sugar and Anakap- palle Society were again referred to and it was pointed  out that  those cases turned on the language of s. 3(3C) of  the Essential  Commodities Act. Premier Automobiles was  consid- ered  and  it was affirmed that the judgment  in  that  case could  not be treated as precedent and could not afford  any appreciable  assistance  in the decision of  price  fixation cases  as it proceeded partly on agreement between the  par- ties and partly on concessions made at the bar. Beg, CJ. who delivered  a separate opinion for himself and for Desai,  J. agreed  that the judgment in Premier Automobiles was not  to provide  a precedent in price fixation case. He  also  reaf- firmed the proposition that price fixation was in the nature of  a legislative measure and could not give rise to a  com- plaint  that natural justice was not observed. He  indicated the  indicia  which  led him to the  conclusion  that  price fixation was a legislative measure. He observed:               "We  think  that  unless, by the  terms  of  a               ’particular statute, or order, price  fixation               is  made a quasi-judicial function for  speci-               fied purposes or cases, it is really  legisla-               tive in character in the type of control order               which  is now before us because  it  satisfies               the tests of legislation. A legislative  meas-               ure does not concern itself with the facts  of               an individual case. It is meant to lay down  a               general  rule  applicable to  all  persons  or               objects  or transactions of a particular  kind               or  class. In the case before us, the  Control               Order applies to sales of mustard oil anywhere               in India by any dealer. Its validity does  not               depend  on the observance of any procedure  to               be  complied with or particular types of  evi-               dence to be taken on any specified matters  as               conditions precedent to its validity. The test               of validity is constituted by the nexus  shown               between the order passed and the purposes  for               which  it can be passed, or in other words  by               reasonableness judged by possible or  probable               consequences." In New India Sugar Works v. State of Uttar Pradesh, [1981] 2 SCC 293 859 there  was  an  indication though it was  not  expressly  so

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stated  that the question of observing natural  justice  did not arise in cases of price fixation. In Laxmi Khandsari  v. State  of Uttar Pradesh, [1981] 2 SCC 600 it was  held  that the Sugar Cane Control Order, 1966 was a legislative measure and therefore, rules of natural justice were not  attracted. In  Rameshchandra Kachardas Porwal v. State of  Maharashtra, [1981]  2 SCC 722 it was observed that legislative  activity did not invite natural justice and that making of a declara- tion  that a certain place shall be a principal market  yard for  a market area under the relevant  Agricultural  Produce Markets Acts was an act legislative in character. The obser- vation  of  Magarry,  J. in Bates v. Lord  Hailsha,  of  St. Marylebone  [1972]  1  WLR 1973 that the  rules  of  natural justice do not run in the sphere of legislation, primary  or delegated,  was cited with approval and two well known  text books writers Paul Kackson and Wades H.W.R. were also  quot- ed. The former had said, "There is no doubt that a minister, or  any other body, in making legislation, for  example,  by statutory instrument or by law, is not subject to the  rules of natural justice--Bates v. Lord Hailsham of St. Marylebone (supra)--any  more than is Parliament itself; Edinburgh  and Dalkeith Rv. v. Wauchope per Lord Brougham, [1842] 8 CL &  F 700, 720; British Railways Board v. Pickin, [1974] 1 All  ER 609.  The  latter had said, "There is no right to  be  heard before  the making of legislation, whether primary or  dele- gated, unless it is provided by statutes." In Sarkari  Sasta Anaj Vikreta Sangh v. State of Madhya Pradesh, [1981] 4  SCC 471;  it  was pointed out that the amendment of  the  Madhya Pradesh Food Stuffs Distribution Control Order was a  legis- lative  function  and there was, therefore, no  question  of affording an opportunity to those who were to be affected by it.     In Welcom Hotel v. State of Andhra Pradesh, [1983] 4 SCC 575 the observations of Chandrachud, CJ. in Prag Ice and Oil Mills  were  quoted  with approval in  connection  with  the fixation of prices of food stuffs served in restaurants.     In Tharoe Mal v. Puranchand, [1978] 1 SCC 102 one of the questions  was  regarding the nature of the  hearing  to  be given  before imposing municipal taxes under the Uttar  Pra- desh Municipalities Act, 1916. It was held,               " .......  the procedure for the imposition of               the   tax  is  legislative  and   not   quasi-               judicial  ......  The right to object,  howev-               er, seems to be given at the stage of  propos-               als  of  the tax only as a concession  to  re-               quirements of               860               fairness even though the procedure is legisla-               tive and not quasi-judicial."     We  mentioned that the Panipat and the Anakapalle  eases were distinguished in Shree Meenakshi, and Prag Ice.   Pani- pat  and Anakapalle were both cases where the  question  was regarding the price payable to a person who was required  to sell to the Government a certain percentage of the  quantity of  sugar produced in his mill. The Order requiring  him  to sell  the sugar to the Government was made under s.  3(2)(f) of  the  Essential Commodities Act under which  the  Central Government was enabled to make an order requiring any person engaged in the production of any essential commodity to sell the whole or specified part of the quantity produced by  him to  the Government or its nominee. It will straight-away  be seen  that  an order under s. 3(2)(f) if  a  specific  order directed  to  a  particular individual for  the  purpose  of enabling the Central Government to purchase a certain  quan- tity  of the commodity from the person holding it. It is  an

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order for a compulsory sale. When such a compulsory sale  is required to be made under s. 3(2)(f), the question naturally arises  what is the price to be paid for the commodity  pur- chased? Section 3(3C) provides for the ascertainment of  the price. It provides that in calculating the amount to be paid for  the commodity required to be sold regard is to  be  had to--(a)  the minimum price, if any, fixed for  sugarcane  by the Central Government under this section; (b) the  manufac- turing  cost of sugar; (c) the duty or tax, if any, paid  or payable thereon; and (d) the securing of a reasonable return on  the  capital employed in the business  of  manufacturing sugar. It is further prescribed that different prices may be determined,  from time to time, for different areas  or  for different  factories or for different kinds of sugar. It  is to  be  noticed here that the payment to be  made  under  s. 3(3C)  is not necessarily the same as the  controlled  price which  may  be fixed under s. 3(2)(c) of  the  Act.  Section 3(2)(c)  of the Act, we have already seen, enables the  Cen- tral  Government to make an order controlling the  price  at which any essential commodity may be bought or sold, if  the Central  Government  is of opinion that it is  necessary  or expedient so to do for maintaining or increasing supplies of any  essential  commodity  or in  securing  their  equitable distribution and availability at fair prices. Section  3(3C) provides for the determination of the price to be paid to  a person who has been directed by the Central Government by an Order made under s. 3(2)(c) to sell a certain quantity of an essential commodity to the Government or its nominee.  While s.  3(2)(c)  contemplates an Order of a general  nature,  s. 3(3C) contemplates a specific transaction. If the provisions of s. 3(2)(c) under which the price of an essential commo- 861 dity  may be controlled are contrasted with s.  3(3C)  under which  payment is to be made for a commodity require  to  be sold  by  an individual to the Government,  the  distinction between a legislative act and a non-legislative act will  at once  become clear. The Order made under s. 3(2c), which  is not  in  respect of a single transaction,  nor  directed  to particular individual is clearly a legislative act, while an Order made under s. 3(3C) which is in respect of a  particu- lar transaction of compulsory sale from a specific individu- al is a non-legislative act. The Order made under s. 3(2)(c) controlling  the price of an essential commodity may  itself prescribe the manner in which price is to be fixed but  that will not make the fixation of price a non-legislative activ- ity,  when  the activity is not directed  towards  a  single individual or transaction but is of a general nature, cover- ing  all individuals and all transactions.  The  legislative character of the activity is not shed and an  administrative or  quasi-judicial character acquired merely because  guide- lines  prescribed  by the statutory order have to  be  taken into account.     We  may  refer  at this juncture  to  some  illuminating passages  from  Schwrtz’s book on ’Administrative  Law’.  He said:               "If a particular function is termed  "legisla-               tive"  or "rulemaking" rather than  "judicial"               or  "adjudication,"  it may  have  substantial               effects  upon  the parties concerned.  If  the               function is treated as legislative in  nature,               there  is  no  right to  notice  and  hearing,               unless a statute expressly requires them. If a               hearing is held in accordance with a statutory               requirement, it normally need not be a  formal               one, governed by the requirements discussed in

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             Chapters  6 and 7. The characterization of  an               administrative  act as legislative instead  of               judicial is thus of great significance."               XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX               XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X               "As a federal court has recently pointed  out,               there is no "bright line" between  rule-making               and  adjudication.  The  most  famous  pre-APA               attempt  to  explain  the  difference  between               legislative and judicial functions was made by               Justice  Holmes in Prentis v.  Atlantic  Coast               Line  Co.  "A  judicial  inquiry,"  said   he,               "investigates, declares and enforces  liabili-               ties  as they stand on present or  past  facts               and under laws supposed already to exist. That               is  its  purpose and end. Legislation  on  the               other hand looks to the future               862               and  changes existing conditions by  making  a               new  rule to be applied thereafter to  all  or               some part of those subject to its power."  The               key  factor in the Holmes analysis is time:  a               rule prescribes future patterns of conduct;  a               decision determines liabilities upon the basis               of present or past facts."               "The element of applicability has been  empha-               sized by others as the key in  differentiating               legislative from judicial functions. According               to  Chief Justice Burger, "Rulemaking is  nor-               mally  directed  toward  the  formulation   of               requirements  having a general application  to               all members of a broadly identifiable  class."               An adjudication, on the other hand, applies to               specific individuals or situations. Rulemaking               affects  the  rights  of  individuals  in  the               abstract  and  must be applied  in  a  further               proceeding  before the legal position  of  any               particular   individual  will  be   definitely               affected;  adjudication  operates   conceretly               upon    individuals   in   their    individual         X       X capacity."                   We  may now turn our attention to the  two               Drugs (Prices Control) Order of 1970 and 1979,               both of which were made by the Central Govern-               ment  in exercise of its powers under s. 3  of               the Essential Commodities Act.                   The  Drugs  (Prices Control)  Order,  1970               defined ’Bulk Drugs’ as follows:               "Bulk drugs" means "any unprecessed  phamaceu-               tical, chemical, biological and plant  product               or medicinal gas conforming to  pharmacopocial               or  other standards accepted which is used  as               such  or after being processed  into  formula-               tions and includes an essential bulk drug." Bulk drugs were divided into essential bulk drugs which were included  in the schedule and bulk drugs which were  not  so included.  In the case of essential bulk drugs, paragraph  4 of  the  order  enabled the Central Government  to  fix  the maximum  price at which such essential bulk drugs should  be sold. In the case of bulk drugs, which were not included  in the  schedule,  a manufacturer was entitled to  continue  to market the product at the same price at which he was market- ing  the  products at the time of the  commencement  of  the

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order.  He was required to report this price to the  Central Government within two 863 weeks  of  the  commencement of the order  and  was  further prohibited  from increasing the price without obtaining  the approval of the Central Government.     A Committee on Drugs and Pharmaceutical Industry,  popu- larly  known  as the Hathi Committee was  appointed  by  the Government  of India to enquire into the various facets,  of the  Drug Industry in India. One of the terms  of  reference was  ’to examine the measures taken so far to reduce  prices of  drugs  for the consumer, and to recommend  such  further measures  as may be necessary to rationalise the  prices  of basic  drugs and formulations.’ The Hathi Committee  noticed that ’in a country like India where general poverty and  the wide  disparities  in  levels of  income  between  different sections existed’ it was particularly important to emphasise ’the social utility of the industry and the urgent need  for extending as rapidly as possible certain minimum  facilities in  terms of preventive and curative medicines to the  large mass of people both urban and rural’. It was said,               "The  concern  about drug  prices,  therefore,               really arises from the fact that many of  them               are essential to the health and welfare of the               community; and that there is no  justification               for  the  drug industry  charging  prices  and               having a production pattern which is based not               upon the needs of the community but on aggres-               sive marketing tactices and created demand."               The Government of India accepted the report of               the  Hathi Committee and announced in  Parlia-               ment  the ’Statement on Drug Policy’  pursuant               to  which  the Drugs (Prices  Control)  Order,               1970  was repealed and the Drugs (Prices  Con-               trol)  Order, 1979 was made. Paragraph  44  of               the  Statement  on Drug Policy in  1978  dealt               with  ’pricing policy’ and it may be  usefully               extracted here. It was as follows:-               "The  Hathi Committee had recommended  that  a               return  post tax between 12 to 14%  on  equity               that is paid up capital plus reserves, may  be               adopted  as  the  basis  for  price  fixation,               depending on the importance and complexity  of               the  bulk drug. In the case  of  formulations,               the Hathi Committee felt that the principle of               selectivity  could be introduced in  terms  of               (a)  the size of the units, (b)  selection  of               items; and (c) controlling the prices only  of               market leaders, in particular, of products for               which price control is contemplated. The Hathi               Committee considered that units (other               864               than MRTP units) having only turnover of  less               than  Rs.1  crore may be exempted  from  price               control.   Alternatively,   all   formulations               (other  than  those  marketed  under   generic               names) which have an annual sale in the  coun-               try  in  excess of Rs.15 lakhs  (inclusive  of               excise  duty) may be subjected to  price  con-               trol, irrespective of whether or not the total               annual  turnover of the unit is in  excess  of               Rs.1  crore. The ceiling price will be  deter-               mined taking into account the production costs               and  a reasonable return for the  units  which               are the market leaders. Yet another variant of

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             a selectivity, according to the Hathi  Commit-               tee, would be to identify product groups which               individually  are important and which  collec-               tively  constitute the bulk of the  output  of               the industry. In respect of each item of  this               list,  it  would be possible to  identify  the               leading producers who account for about 60% of               the  sales between them. On the basis of  cost               analysis  in respect of those  units,  maximum               prices  may be prescribed and all other  units               may  be free to fix their prices  within  this               ceiling.  On balance, the Hathi Committee  was               of  the  view  that  this  particular  variant               selectivity may be administratively simpler."               The  Drugs  (Prices Control) Order,  1979  was               made  pursuant  to this Statement  of  Policy.               Paragraph  2(a) of the Drugs (Prices  Control)               Order,  1979 defines ’bulk drug’ to mean  "any               substance including pharmaceutical,  chemical,               biological  or plant product or medicinal  gas               conforming to pharmacological or other  stand-               ards  accepted under the Drugs  and  Cosmetics               Act,  1940,  which is used as such  or  as  in               ingredient in any formulations." "Formulation"               is defined as follows:-               "Formulation  means a medicine  processed  out               of,  or containing one or more bulk  drugs  or               drugs, with or without the use of any  pharma-               ceutical  aids  for internal or  external  use               for,  or in the diagnosis, treatment,  mitiga-               tion or prevention of disease in human  beings               or animals, but shall not include--                     (i)  any bona fide Ayurvedic  (including               Sidha) or Unani (Tibb) Systems of medicine;                     (ii)  any medicine included in the  Hom-               oeopathic system of medicine;               865                    (iii)  any substance to which the  provi-               sions  of  the Drugs and Cosmetics  Act,  1940               (XXIII of 1940), do not apply"               The   expressions   "free  reserve",   "leader               price",    "net-worth",   "now   bulk   drug",               "pooled  price," "pre-tax return",  "retention               price" are defined in the following manner:               ""Free  reserve"  means a reserve  created  by               appropriation of profits, but does not include               reserves  provided for  contingent  liability,               disputed  claims, goodwill,  revaluation,  and               other similar reserves".               "’leader  price’  means a price fixed  by  the               Government   for  formulations  specified   in               Category I, Category II or Category III of the               Third  Schedule in accordance with the  provi-               sions of paras. 10 and 11, keeping in view the               cost  of  or  efficiency, or  both,  of  major               manufacturers of such formulations."               "’net-worth’  means  the share  capital  of  a               company plus free reserve, if any."               "’new  bulk drug’ means a bulk  drug  manufac-               tured  within the country, for the first  time               after the commencement of this Order."               "’Pooled  price’ in relation to a  bulk  drug,               means the price fixed under para 7."               "’pre-tax return’ means profits before payment               of  incometax  and sur-tax and  includes  such

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             other expenses as do not form part of the cost               of formulations."               "’retention price’ in relation to a bulk  drug               means the price fixed under paras 4 and 7  for               individual  manufacturers,  or  importers,  or               distributors, or such bulk drugs." The  distinction between an essential bulk drug included  in the  schedule and a bulk drug not so included in the  sched- ule, which was made in 1970 Drugs (Prices Control) Order was abandoned  in  the  1979 Order. Bulk  drugs  were,  however, broadly divided into indigenously 866 manufactured bulk drugs, imported bulk drugs and hulk  drugs which were both manufactured indigenously as also imported.     Paragraph  3 of the 1979 Order enables  the  Government, with a view to regulating the equitable distribution of  any indigenously  manufactured bulk drug specified in the  first or  the  second schedule and making it available at  a  fair price and after making such enquiry as it deems fit, to  fix from  time to time by notification in the official  gazette, the  maximum  price at which the bulk drug  shall  be  sold. Clause (2) of Paragraph 3 provides that while so fixing  the price  of a bulk drug, the Government may take into  account the  average cost of production of such bulk  drug  manufac- tured  by an efficient manufacturer and allow  a  reasonable return  on  net worth. By way of  an  explanation  efficient manufacturer  is defined to mean "a  manufacturer-(i)  Whose production  of such bulk drug in relation to the total  pro- duction  of such bulk drug in the country is large, or  (ii) who  employs efficient technology in the production of  such bulk  drug."  We have already noticed that  ’net  worth’  is defined  to mean ’the share capital of a company  plus  free reserve,  if any’. "Free reserve" itself is  separately  de- fined. It is then prescribed by clause (3)--               "No  person shall sell a bulk drug at a  price               exceeding  the price notified under  sub-para-               graph  1,  plus local taxes, if  any  payable:               provided that until the price of bulk drug  is               so notified, the price of such bulk drug shall               be  the  price  which  prevailed   immediately               before the commencement of this order and  the               manufacture  of  such  bulk drug  at  a  price               exceeding the price which prevailed as  afore-               said." This  means that until the maximum sale price of an  indige- nously manufactured bulk drug is fixed under paragraph 3  of the  1979  Order, the price fixed under paragraph 4  of  the 1970  order or the price permitted under paragraph 5 of  the 1970  order was to be maximum sale price. Paragraph  3(4)(a) requires  a manufacturer commencing production of  the  bulk drug specified in the First or Second Schedule, the price of which  has already been notified by the Government,  not  to sell the bulk drug at a price exceeding the notified  price. Paragraph  3(4)(b) provides that where the price of  a  bulk drug  has not been notified by the Government, the  manufac- turer  shall, within 14 days of the commencement of the  the production  of  such bulk drug, make an application  to  the Government  in Form I and intimate the Government the  price at which he intends to sell the bulk drug and the Government may, 867 after making such an enquiry as it thinks fit, by order, fix a provisional price at which such bulk drug shall be sold.     Paragraph  4  of the 1979 order provides  that  notwith- standing  anything contained in paragraph 3, the  Government

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may,  if  it considers necessary or expedient so to  do  for increasing  the production of an  indigenously  manufactured bulk  drug  specified in the first or  second  schedule,  by order, fix--               "(a) a retention price of such bulk drug,                     (b)  a common sale price for  such  bulk               drug taking into account the weighted  average               of  the  retention price  fixed  under  clause               (a)." Paragraph  4 is thus in the nature of an exception to  para- graph  3.  It  is meant to provide a  fillip  to  individual manufacturers of bulk drugs whose production it is necessary to  increase. Retention price, by its very  definition  per- tains  to  individual manufacturers. Common sale  price,  we take  it, is the price at which manufacturers  whose  reten- tions  are fixed may sell the bulk drug despite the  maximum sale price fixed under paragraph 3.     Paragraph  5 deals with the power of the  Government  to fix  maximum sale price of new bulk drugs. Paragraph 6  ena- bles the Government to fix the maximum sale price of import- ed  bulk.drugs  specified  in First  and  Second  Schedules. Paragraph  7 deals with the power of the Government  to  fix retention price and pooled price for the sale of bulk  drugs specified  in the First and Second Schedules which are  both indigenously manufactured and imported. Paragraph 9 empowers the Government to direct manufacturers of bulk drugs to sell bulk  drugs to manufacturers of formulations.  Paragraph  10 prescribes  a  formula for calculating the retail  price  of formulations. The formula is:               "R.P. = (M.C.+C.C.+P.M.+P.C.) x (1+MU)+ E.D.               100               "R.P." means retail price.               "M.C."  means material cost and  includes  the               cost  of drugs and other  pharmaceutical  aids               used  including overages, if any, and  process               loss thereon in accordance with such               868               norms  as may be specified by  the  Government               from  time  to  time by  notification  in  the               official Gazette in this behalf.               "C.C.’?  means conversion cost worked  out  in               accordance with such norms as may be specified               by the Government from time to time by notifi-               cation  in the official Gazettee in  this  be-               half.               "P.M."  means  the cost  of  packing  material               including  process loss thereon worked out  in               accordance with such norms as may be specified               by the Government from time to time by notifi-               cation in the official Gazette in this behalf.               "P.C."  means  packing charges worked  out  in               accordance with such norms as may be specified               by the Government from time to time by notifi-               cation in the official Gazette in this behalf.               "M.U." means make-up referred to in para. 11.               "E.D." means excise duty." Paragraph  11  explains what ’Mark-up’ means.  Paragraph  12 empowers the Government to fix leader prices of formulations of  categories  I and II specified in  the  third  schedule. Paragraph 13 empowers the Government to fix retail price  of formulations  specified in category III of  third  schedule. Paragraph  14  contains some general  provisions  regarding- prices of formulations. Paragraph 15 empowers the Government to revise prices of formulations.     Paragraph  16  provides  that  where  any  manufacturer,

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importer  or  distributor of any bulk  drug  or  formulation fails  to  furnish information as required under  the  order within  the time specified therein, the Government  may,  on the  basis of such information as may be available with  it, by order, fix a price in respect of such bulk drug or formu- lation as the case may be. Paragraph 17 requires the Govern- ment  to maintain the Drugs Prices Equalization  Account  to which  shall be credited, by the manufacturer,  among  other items,               "the excess of the common selling price or, as               the case may be, pooled price over his  reten-               tion price." It is provided that the amount credited to the Drugs  Prices Equaliza- 869 tion Account shall be spent for paying to the  manufacturer, "the  shortfall between his retention price and  the  common selling price or as the case may be, the pooled price."     Paragraph 27 enables any person aggrieved by any notifi- cation  or order under paragraphs 3, 4, 5, 6, 7, 9, 12,  13, 14, 15 or 16 to apply to the Government for a review of  the notification or order within fifteen days of the date of the publication of the notification in the official Gazette, or, as the case may be, the receipt of the order by him.     Bulk drugs constituting categories I and II are  enumer- ated in the First Schedule. Bulk drugs constituting category III  are  enumerated in the  Second  Schedule.  Formulations constituting categories I, II and III are enumerated in  the Third  Schedule. The Fourth Schedule prescribes the  various forms  referred to in the different paragraphs of the  Drugs (Prices  Control) Order. Form No. 1 which is referred to  in paragraphs  3(4), 5 and 8(1) is titled "Form of  application for fixation or revision of prices of bulk drug". The sever- al columns of the Form provide for various particulars to be furnished  and  item 18 requires the  applicant  to  furnish ,"the  cost of production of the bulk drug as  per  proforma (attached)  duly  certified by a  practising  Cost/Chartered Accountant".  The ’proforma’ requires particulars  of  cost- data,  such as, raw materials, utilities,  conversion  cost, total  cost of production, interest on  borrowings,  minimum bonus, packing, selling expenses, transport charges, transit insurance  charges,  total  cost of  sales,  selling  price, existing  price or notional or declared prices, etc.  to  be furnished.  A note at the end of the proforma  requires  the exclusion  from  cost certain items of  expenses,  such  as, bonus  in excess of statutory minimum, bad debts and  provi- sions, donations and charities, loss/gain on sale of assets, brokerage and commission, expenses not recognised by  income tax authorities and adjustments relating to previous years.     Shri G. Ramaswamy, learned Additional Solicitor  General on behalf of the Union of India, submitted that the fixation of  maximum  price under paragraph 3 of  the  Drugs  (Prices Control)  Order was a legislative activity  and,  therefore, not  subject to any principle of natural justice.  He  urged that  relevant information was required to be furnished  and was  indeed furnished by all the manufacturers in  the  pre- scribed  form  as required by paragraph 3(4)  of  the  Drugs (Prices  Control) Order. This information obtained from  the various  manufacturers was taken into account and  a  report was  then obtained from the Bureau of Industrial  Costs  and Prices, a high-powered expert body specially constituted  to undertake the study of industrial cost struc- 870 tures and pricing problems and to advise the Government.  It was  only  thereafter that notifications fixing  the  prices

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were  issued. He further submitted that paragraph 27 of  the Central  Order gave a remedy to the manufacturers to seek  a review of the order fixing the maximum price under paragraph 3.  The review contemplated by paragraph 27 in so far as  it related  to the notification under paragraph 3, it was  sub- mitted by the learned Additional Solicitor General, did  not partake  the character of a judicial or quasi-judicial  pro- ceeding.  He  urged that the manufacturers had  invoked  the remedy  by  way of review, but before the  applications  for review  could be dealt with, they rushed to the  court  with the  writ petitions out of which the appeal and the  special leave  petitions  arise. He urged that  the  Government  had always  been ready and wilting to give a proper  hearing  to the  parties and in fact gave them a heating  in  connection with  their review applications. The grievance of the  manu- facturers in the writ petitions that they were not furnished the  details  of  the basis of the price  fixation  was  not correct since full information was furnished at the time  of the  hearing  of  the review applications  when  the  matter underwent  thorough  and  detailed  discussion  between  the parties  and the Government as well as the Bureau of  Indus- trial Costs and Prices.     The  submission of Shri Anil Diwan, learned counsel  for the respondents was that unlike other price control legisla- tions,  the  Drugs (Prices Control) Order ,was  designed  to induce  better production by providing for a fair return  to the manufacturer. Reference was made to the Hathi  Committee report which had recommended a return of 12 to 14% post  tax return on equity, that is, paid up capital plus reserves and the ’Statement on Drug Policy’ which mentioned that  ceiling prices  may be determined by taking into account  production costs  and a reasonable return. Great emphasis was  laid  on the  second  clause of paragraph 3 of the 1979  Order  which provides  that in fixing the price of a bulk drug, the  Gov- ernment may take into account the average cost of production of such bulk drug manufactured by an efficient  manufacturer and allow a reasonable return on networth. It was  submitted that  the provision for an enquiry preceding the  determina- tion of the price of a bulk drug, the prescription in  para- graph 3 clause 2 that the average cost of production of  the drug  manufactured  by an efficient manufacturer  should  be taken into account and that a reasonable return on  networth should  be  allowed and the provision for a  review  of  the order determining the price, established that price-fixation under  the  Drugs (Prices Control) Order 2979 was  a  quasi- judicial  activity obliging the observance of the  rules  of natural  justice. The suggestion of the learned counsel  was that the nature of the review under 871 paragraph  27 was so apparently quasi-judicial and that  the need to know the reasons for the order sought to be reviewed was so real if the manufacturer was effectively to  exercise his  right to seek the quasijudicial remedy of review,  that by  necessary implication it became obvious that  the  Order fixing  the  maximum price must be considered to  be  quasi- judicial and not legislative in character. The provision for enquiry in the first clause of paragraph 3 and the prescrip- tion  of the matters to be taken into account in the  second clause of paragraph 3 further strengthened the  implication, according  to the learned counsel. It was contended that  in any  case,  whatever be the nature of the  enquiry  and  the order  contemplated  by paragraph 3, the  review  for  which provision  made  by paragraph 27 was certainly of  a  quasi- judicial character and, therefore, it was necessary that the manufacturers should be informed of the basis for the  fixa-

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tion of the price and furnished with details of the same  in order  that they may truly and effectively avail  themselves of  the remedy of review. If that was not done,  the  remedy would  become  illusory.  It was argued  with  reference  to various  facts and figures that the price had been fixed  in an  arbitrary manner and the Government was not  willing  to disclose  the  basis on which the prices were fixed  on  the pretext that it may involve disclosure of matters of  confi- dential  nature. It was stated that the applications of  the manufacturers  for  review of the notifications  fixing  the prices  had not been disposed of for years though  time  was really  of  the very essence of the matter.  The  prices  of formulations  were dependent on the prices of drugs  and  it was  not right that prices of formulations should have  been fixed  even before the applications for review  against  the notifications  fixing the price of bulk drugs were  disposed of.  It  was suggested that the delay in  disposing  of  the review applications had the effect of rendering the original notifications  fixing the prices unreal and out of date  and liable to be struck down on that ground alone.     We  are  unable  to agree with the  submissions  of  the learned  counsel for the respondents either with  regard  to the  applicability of the principles of natural  justice  or with  regard to the nature and the scope of the enquiry  and review contemplated by paragraphs 3 and 27 while making  our preliminary observations, we pointed out that price fixation is essentially a legislative activity though in rare circum- stances, as in the case of a compulsory sale to the  Govern- ment  or  its nominee, it may assume the  character  ’of  an administrative  or  quasijudicial activity. Nothing  in  the scheme  of  the Drugs (Prices Control) Order induces  us  to hold  that price fixation under the Drugs  (Prices  Control) Order  is not a legislative activity, but  a  quasi-judicial activity  which would attract the observance of the  princi- ples of natural justice. 872 Nor is there anything in the scheme or the provisions of the Drugs  (Prices Control) Order which  otherwise  contemplates the  observance of any principle of natural justice or  kin- dred rule, the non-observance of which would give rise to  a cause of action to a suitor. What the order does contemplate however  is ’such enquiry’ by the Government ’as  it  thinks fit’. A provision for ’such enquiry’ as it thinks fit’ by  a subordinate legislating body, we have explained earlier,  is generally  an enabling provision to facilitate the  subordi- nate  legislating body to obtain relevant  information  from any  source and it is not intended to vest any right in  any body  other  than the subordinate legislating body.  In  the present  case,  the enquiry contemplated by paragraph  3  of Drugs (Prices Control) Order is to be made for the  purposes of  fixing  the maximum price at which a bulk  drug  may  be sold,  with a view to regulating its equitable  distribution and making it available at a fair price. The primary  object of  the enquiry is to secure the bulk drug at a  fair  price for the benefit of the ultimate consumer an object  designed to fulfil the mandate of Art. 39(b) of the Constitution.  It is  primarily from the consumer public’s point of view  that the Government is expected to make its enquiry. The need  of the consumer public is to be ascertained and making the drug available  to them at a fair price is what it is all  about. The  enquiry  is  to be made from that  angle  and  directed towards  that  end.  So, information may  be  gathered  from whatever source considered desirable by the Government.  The enquiry, obviously is not to be confined to obtaining infor- mation  from the manufacturers only and indeed must  go  be-

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yond. However, the interests of the manufacturers are not to be ignored. In fixing the price of a bulk drug, the  Govern- ment is expressly required by the Order to take into account the  average cost of production of such bulk  drug  manufac- tured by ’an efficient manufacturer’ and allow a  reasonable return on ’net worth’. For this purpose too, the  Government may  gather information from any source including the  manu- facturers. Here again the enquiry by the Government need not be  restricted to ’an efficient manufacturer’ or some  manu- facturers;  nor  need it be extended to  all  manufacturers. What is necessary is that the average cost of production  by ’an  efficient manufacturer’ must be ascertained and a  rea- sonable  return allowed on ’net worth’. Such enquiry  as  it thinks fit is an enquiry in which information is sought from whatever  source considered necessary by the enquiring  body and is different from an enquiry in which an opportunity  is required  to be given to persons likely to be affected.  The former is an enquiry leading to a legislative activity while the latter is an enquiry which ends in an administrative  or quasi-judicial  decision. The enquiry contemplated by  para- graph 3 of the Drug (Prices Control) Order is an enquiry  of the former charac- 873 ter.  The legislative activity being a subordinate or  dele- gated legislative activity, it must necessarily comply  with the statutory conditions if any, no more and no less, and no implications  of natural justice can be read into it  unless it is a statutory condition. Notwithstanding that the  price fixation is a legislative activity, the subordinate legisla- tion had taken care here to provide for a review. The review provided  by  paragraph 27 of the order is akin  to  a  post decisional  hearing  which is sometimes afforded  after  the making of some administrative orders, but not truly so.     It is a curious amalgam of a hearing which  occasionally precedes  a  subordinate legislative activity  such  as  the fixing of municipal rates etc. that we mentioned earlier and a  post-decision hearing after the making of an  administra- tive or quasi-judicial order. It is a hearing which  follows a  subordinate legislative activity intended to  provide  an opportunity  to affected persons such as the  manufacturers, the industry and the consumer public to bring to the  notice of  the  subordinate legislating body  the  difficulties  or problems  experienced  or likely to be experienced  by  them consequent  on the price fixation, whereupon the  Government may  make  appropriate  orders. Any decision  taken  by  the Government cannot be confined to the individual manufacturer seeking review but must necessarily affect all manufacturers of  the bulk drug as well as the consumer public. Since  the maximum  price of a bulk drug is required by paragraph 3  to be  notified any fresh decision taken in the proceeding  for review by way of modification of the maximum price has to be made by a fresh notification fixing the new maximum price of the bulk drug. In other words, the review if it is  fruitful must  result in fresh subordinate legislative activity.  The true nature of the review provided by paragraph 27 in so far as it relates to the fixation of maximum price of bulk drugs under  paragraph 3 leader price and prices  of  formulations under  paragraphs 12 and 13 is hard to define. It is  diffi- cult  to give it a label and to fit it into  a  pigeon-hole, legislative,  administrative  or quasi-judicial. Nor  is  it desirable to seek analogies and look to distant cousins  for guidance.  From  the  scheme of the Control  Order  and  the context and content of paragraph 27, the Review in so far as it concerns the orders under paragraph 3, 12 and 13  appears to be in the nature of a legislative review of  legislation,

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or  more precisely a review of subordinate legislation by  a subordinate legislating body at the instance of an aggrieved person. Once we have ascertained the nature and character of the  review,  the further question regarding the  scope  and extent  of the review is not very difficult to  answer.  The reviewing  authority has the fullest freedom and  discretion to prescribe its own procedure and con- 874 sider  the matter brought before it so long as it  does  not travel  beyond the parameters prescribed by paragraph  3  in the case of a review against an order under paragraph 3  and the respective other paragraphs in the case of other orders. But  whatever procedure is adopted, it must be  a  procedure tuned  to the situation. Manufacturers of any bulk drug  are either  one  or a few in number and generally  they  may  be presumed to be well informed persons, well able to take care of  themselves,  who  have the  assistance  of  Accountants, Advocates and experts to advise and espouse their cause.  In the context of the Drug industry with which we are concerned and  in  regard to which the Control Order is made  we  must proceed  on the basis that the manufacturers of  bulk  drugs are generally persons who know all that is to be known about the  price  fixed by the Government.  From  the  legislative nature  of the activity of the Government, it is clear  that the Government is under no obligation to make any disclosure of  any information received and considered by it in  making the order but in order to render effective the right to seek a  review  given to an aggrieved person we  think  that  the Government, if so requested by the aggrieved manufacturer is under  an  obligation to disclose any  relevant  information which may reasonably be disclosed pertaining to ’the average cost  of  production  of the bulk drug  manufactured  by  an efficient  manufacturer’ and ’the reasonable return  on  net worth’.  For example, the manufacturer may require the  Gov- ernment  to give information regarding the  particulars  de- tailed in Form No. 1 of the Fourth Schedule which have  been taken  into account and those which have been excluded.  The manufacturer  may also require to be informed  the  elements which were taken into account and those which were  excluded in assessing the ’free reserves’ entering into the  calcula- tion  of  ’net worth’. These particulars which he  may  seek from  the  Government  are mentioned by us only  by  way  of illustration.  He  may seek any other  relevant  information which  the Government shall not unreasonably deny.  That  we think is the nature and scope of the review contemplated  by Paragraph 27 in relation to orders made under Paragraphs  3, 12 and 13.     On  the question of the scope of a Review,  the  learned counsel for the respondents invited our attention to Vrajlal Manilal  &  Co. v. Union of India & Anr., [1964] 7  SCR  97; Shivaji  Nathubhai  v. Union of India & Ors., [1960]  2  SCR 775; Maneka Gandhi, [1978] 2 SCR 621; Swadeshi Cotton Mills, [1981] 2 SCR 533; and Liberty Oil Mills., [1984] 3 SCR  676. We  are afraid none of these cases is of any  assistance  to the correspondence since the court was not concerned in  any of 875 those cases with a review of subordinate legislation by  the subordinate legislating body.     In  Vrajlal  Manilal  & Co. v. Union  of  India  &  Anr. (supra) the court held that the Union of India when  dispos- ing of an application for review under Rule 59 of the  Mines Concession  Rules functioned as a  quasi-judicial  authority and was bound to observe the principles of natural  justice. The  decision rendered without disclosing the report of  the

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State Government and without affording reasonable opportuni- ty  to the appellants to present their case was contrary  to natural justice was therefore, void. In ShivaIi Nathubhai v. Union  of India & Ors., (supra) it was decided by the  court that  the power of review granted to the Central  Government under  Rule 54 of the Mineral Concession Rules required  the authority  to  act judicially and its decision  would  be  a quasi-judicial  act and the fact that Rule 54 gave power  to the  Central  Government to pass such order as it  may  deem ’just and proper’ did not negative the duty to act judicial- ly.  In  Maneka Gandhi’s case where Bhagwati, J.  while  ex- pounding on natural justice pointed out that in  appropriate cases  where a pre-decisional hearing was impossible,  there must atleast be a post-decisional hearing so as to meet  the requirement  of  the rule audi alteram partem.  In  Swadeshi Cotton  Mills, it was observed that in cases where owing  to the  compulsion  of the fact situation or the  necessity  of taking speedy action, no pre-decisional hearing is given but the action is followed soon by a full post-decisional  hear- ing to the person affected, there is in reality no exclusion of the audi alteram partem rule. It is no adaptation of  the rule  to meet the situational urgency. In Liberty Oil  Mills v. Union of India, (supra) the question arose whether clause 8B  of the Import Control Order which empowered the  Central Government  or  the  Chief Controller to  keep  in  abeyance applications  for  licences or allotment of  imported  goods where  any investigation is pending into an  imported  goods where  any investigation is pending into an allegation  men- tioned  in clause 8 excluded the application of the  princi- ples of natural justice. The court pointed out that it would be  impermissible  to interpret a  statutory  instrument  to exclude  natural justice unless the language of the  instru- ment  left no option to the court. As we said,  these  cases have  no application to a review of subordinate  legislation by  the  subordinate legislating body at the instance  of  a party.     We mentioned that the price fixed by the Government  may be  questioned on the ground that the considerations  stipu- lated by the order as relevant were not taken into  account. It may also be questioned on any ground on which a  subordi- nate legislation may be 876 questioned,  such  as, being contrary to  constitutional  or other  statutory  provisions. It may be  questioned  on  the ground of a denial of the right guaranteed by Art. 14 if  it is  arbitrary, that is, if either the guidelines  prescribed for  the determination are arbitrary or if, even though  the guidelines  are not arbitrary, the guidelines are worked  in an  arbitrary fashion. There is no question before  us  that paragraph  3  prescribes any arbitrary  guideline.  It  was, however,  submitted that the guidelines were not adhered  to and  that facts and figures were arbitrarily assumed. We  do not  propose  to delve into the question whether  there  has been any such arbitrary assumption of facts and figures.  We think  that  if there is any grievance on  that  score,  the proper thing for the manufacturers to do is bring it to  the notice  of the Government in their applications for  review. The  learned counsel argued that they were unable  to  bring these facts to the notice of the Government as they were not furnished  the basis on which the prices were fixed. On  the other  hand, it has been pointed out in the  counter-affida- vits  filed on behalf of the Government that  all  necessary and required information was furnished in the course of  the hearing of the review applications and. there was no  justi- fication  for the grievance that particulars were  not  fur-

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nished. We are satisfied that the procedure followed by  the Government  in furnishing the requisite particulars  at  the time of the hearing of the review applications is sufficient compliance with the demands of fair play in the case of  the class of persons claiming to be affected by the fixation  of maximum  price  under the Drugs (Prices Control)  Order.  As already stated by us, manufacturers of bulk drugs who  claim to  be affected by the Drugs (prices Control) Order,  belong to  a  class of persons who are well and fully  informed  of every  intricate detail and particular which is required  to be  taken  into account in determining the  price.  In  most cases, they are the sale manufacturers of the bulk drug  and even if they are not the sole manufacturers, they belong  to the  very  select few who manufacture the bulk drug.  It  is impossible to conceive that they cannot sit across the table and discuss item by item with the reviewing authority unless they are furnished in advance full details and  particulars. The  affidavits filed on behalf of the Union of  India  show that  the procedure which is adopted in hearing  the  review applications  is  to discuss across the  table  the  various items that have been taken into account. We do not  consider that  there is anything unfair in the procedure  adopted  by the Government. If necessary it is always open to the  manu- facturers to seek a short adjournment of the hearing of  the review  application to enable them to muster more facts  and figures on their side. Indeed we find that the hearing given to  the manufacturers is often protected. As we said  we  do not propose to examine this ques- 877 tion as we do not want to constitute ourselves into a  court of  appeal over the Government in the matter of price  fixa- tion.     The  learned  counsel  argued that  there  were  several patent  errors which came to light during the course of  the hearing  in the High Court. He said that obsolete  quantita- tive  usages  had been taken into  consideration,  proximate cost data had been ignored and the data relating to the year ending November, 1976 had been adopted as the basis. It  was submitted that there were errors in totalling, errors in the calculation  of prices of utilities, errors in the  calcula- tion  of  net-worth  and many other similar  errors.  As  we pointed  out  earlier, these are all  matters  which  should legitimately  be raised in the review application, if  there is any substance in them. These are not matters for investi- gation  in a petition under Art. 226 of the Constitution  or under  Art.  32 of the Constitution.  Despite  the  pressing invitation  of Shri Diwan to go into facts and  figures  and his  elaborate  submissions based on facts and  figures,  we have  carefully  and studiously refrained  from  making  any reference  to such facts and figures as we consider it  out- side  our  province to do so and we do not want to  set  any precedent  as  was  supposed to have been  done  in  Premier Automobiles though it was not so done and, therefore, needed explanation in later cases.     One of the submissions of Shri Diwan was that in  calcu- lating "net-worth" the cost of new works in progress and the amount  invested  outside the business  were  excluded  from ’free reserves’ and that such exclusion could not be  justi- fied  on any known principle of accountancy. We  think  that the question has to be decided with reference to the defini- tion  of  ’free reserve’ in paragraph 2(g)  of  the  Control Order and not on any assumed principle of accountancy.  This is also a question which may be raised before the Government in  the  review  application. Referring  to  the  ’proforma’ attached  to Form No. 1 of the Fourth Schedule in which  are

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set out several items which have to be taken into account in assessing  the cost of production, the learned  counsel  at- tacks the notes at the end of Item No. 14 which mentions the various items of expenses to be excluded in ascertaining the cost. The notes is as follows:-                     "Notes:-(i)  Items  of  expenses  to  be               excluded from costs--               a) Bonus in excess of statutory minimum.               (b) Bad debts and provisions.               878               (c) Donations and charities.               (d) Loss/Gain on sale of assets.               (e) Brokerage and commission.                          (f)  Expenses   not  recognized  by               Income-tax authorities   (salary/prequisities,               advertisements, etc.).               (g) Adjustments relating to previous years." In  particular, he argued that Item (a) ’bonus in excess  of statutory  minimum’  should not have been excluded  so  also items of expenditure coming under the other heads (b) to (g) which had been allowed by Income-tax authorities as  legiti- mate expenses. His submission was that where bonus in excess of statutory minimum was payable under the provisions of the Bonus  Act there was no option left to the manufacturer  not to pay the excess bonus. Similarly where expenses have  been legitimately incurred and allowed by Income-tax authorities, there  was  no justification for excluding  those  items  of expenditure from the cost. We do not agree with the  submis- sion.  It  was open to the subordinate legislating  body  to prescribe and adopt its own mode of ascertaining the cost of production  and the items to be included and excluded in  so doing. The subordinate legislating body was under no obliga- tion to adopt the method adopted by the Income-tax  authori- ties  in allowing expenses for the purpose  of  ascertaining income and assessing it. There may be many items of business expenditure  which may be allowed by Income-tax  authorities as legitimate expenses but which can never enter the cost of production. So long as the method prescribed and adopted  by the  subordinate legislating body is not arbitrary  and  op- posed  to the principal statutory provisions, it  cannot  be legitimately  questioned. Another submission of the  learned counsel relating to the norms for conversion costs,  packing charges and process loss of raw materials and packing  mate- rials required to the notified for the purpose of  calculat- ing  retail prices of formulations. The argument, for  exam- ple,  was that there should be a more scientific formula  in regard  to  conversion cost and not, as was  done,  so  many rupees  and  paise  per thousand capsules or  one  litre  of liquid.  We do not agree with the submission. It is open  to the  subordinate legislating authority to adopt a rough  and ready  but otherwise not unreasonable formula rather than  a needlessly  intricate so-called scientific formula.  We  are unable  to  say that the subordinate  legislating  authority acted unreasonably in prescribing the norms in the manner it has done. 879     While on the question on formulations, we would like  to refer to the "Oration" of Dr. N.H. Antia at the 24th  Annual Convocation  of  the National Academy  of  Medical  Sciences where he posed the question:               "Why  do  we produce  60,000  formulations  of               drugs  worth Rs.2,500 crores which reach  only               20% of the population when WHO recommends only               258  drugs and Rs.750 crores worth would  suf-               fice for all our people if used in an  ethical

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             manner?"     A general submission of the learned counsel was that the price of formulations should not have been prescribed  until the  review application filed by the manufacturer in  regard to the patent bulk drugs was disposed of. He submitted  that the price of a formulation was dependant on the price of the bulk drug and it was, therefore, not right to fix the  price of  formulation when the price of bulk drug was in  question in  the review application and there was a prospect  of  the price  of the bulk drug being increased. We do not  see  any force  in the submission. We think that it is the  necessary duty of the Government to proceed to fix the retail price of a  formulation as soon as the price of the parent bulk  drug is  fixed. Price fixation of a formulation is no  doubt  de- pendant  on  the price of the bulk drug, but it  is  not  to await  the result of a review application which in  the  end may  turn out to be entirely without substance. If a  review application  is  allowed and the price of the bulk  drug  is raised  and  if in the meanwhile, the formulation  had  been ordered to be sold at a low price, it may result in  consid- erable  loss to the manufacturer. But on the other hand,  if the  review  application turns out to  be  entirely  without substance and has to be rejected and if in the meanwhile the formulation  is  allowed to be sold at a higher  price,  the consumer public suffers. Thus, the ups and downs of commerce are inevitable and it is not possible to devise a fool proof system to take care of every possible defect and  objection. It is certainly not a matter at which the court could take a hand. All that the court may do is to direct the  Government to dispose of the review application expeditiously according to a time-bound programme. All that the Government may do is to dispose of the review application with the utmost expedi- tion.  But as we perceive the public interest, it is  neces- sary that the price of formulation should be fixed close  on the heels of the fixation of bulk drug price.     Another  submission  of Shri Diwan was  that  there  was considerable  delay in the disposal of the  review  applica- tions by the Govern- 880 ment and that even now no orders had been passed in  several cases. Accordingly to the learned counsel, the very delay in the disposal of review applications was sufficient to  viti- ate  the  entire proceeding and scheme  of  price  fixation. According  to the learned counsel, the price of a bulk  drug is  dependant on many variable factors which  keep  changing very  fast.  If time is allowed to lapse whatever  price  is fixed,  it soon becomes out of date. If review  applications are  not disposed of expeditiously the notifications  fixing the prices must be struck down as having become obsolete. It is  difficult to agree with these propositions. It  is  true that  the price of a bulk drug is dependent  on  innumerable variables.  But  it does not follow  that  the  notification fixing the maximum price must necessarily be struck down  as obsolete by the mere passage of time. We agree that applica- tions for review must be dealt with expeditiously and  when- ever  they are not so dealt with, the aggrieved  person  may seek  a mandamus from the court to direct the Government  to deal with the review application within a time framework.     We  notice  that in all these matters,  the  High  Court granted  stay of implementation of the notifications  fixing the  maximum prices of bulk drugs and the retail  prices  of formulations. We think that in matter of this nature,  where prices of essential commodities are fixed in order to  main- tain  or increase supply of the commodities or for  securing the  equitable distribution and availability at fair  prices

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of the commodity, it is not right that the court should make any interim order staying the implementation of the  notifi- cation  fixing the prices. We consider that such orders  are against  the public interest and ought not to be made  by  a court unless the court is satisfied that no public  interest is  going  to be served. In the present  case,  on  ex-parte interim  order was made on April 20, 1981 in  the  following terms:               "In  the meanwhile on the petitioners’  giving               an  undertakings to maintain prices  both  for               bulk and formulation, as were prevailing prior               to the impugned notification we stay implemen-               tation  of  the impugned bulk drug  prices  as               well as formulation prices." Thereafter on November 25, 1981, a further order was made to the following effect:                        "After  hearing learned  counsel  and               with  their consent, and arrangement has  been               worked  out as on interim measure. We,  there-               fore, confirm till further orders the               881               interim  order made by us on April  20,  1981.               The  terms of the said order, that is  on  the               undertaking given on behalf of the petitioners               to maintain status quo on the prices  prevail-               ing prior to the issue of the impugned notifi-               cation, the petitioners, through their counsel               further  given  an undertaking to  this  court               that,  in case the petition is  dismissed  and               the rule is discharged, the petitioners  shall               within  eight  weeks of the dismissal  of  the               petition by this court, deposit in this  court               the  difference in the prices of the  formula-               tions in question for being  ......  equaliza-               tion  account. The petitioners, through  their               counsel  further given an undertaking that  in               this  court the petitioners would not  contend               or challenge the said amount if deposited,  is               not  liable  to  be deposited  under  any  law               whatsoever.  It is made clear that the  under-               taking  is without prejudice to the  petition-               ers’ right to take appropriate directions from               the  Supreme Court if so advised in  this  re-               gard." No  doubt  the order as made on November 25,  1981  has  the manufacturers  On  terms, but the consumer public  has  been left high and dry. Their interests have in no way been taken care of. In matters of fixation of price, it is the interest of the consumer public that must come first and any  interim order must take care of that interest. It was argued by  the learned  counsel that the undertaking given by  the  parties lapsed  with the disposal of the writ petition by  the  High Court  and  that it could no longer be enforced. We  do  not agree  with  this submission. Apart from the  fact  that  an appeal is ordinarily considered to be a continuation of  the original  proceeding,  in the present case, we  notice  that further orders of the Supreme Court were also in  contempla- tion  and such further orders could only be if appeals  were preferred  to the Supreme Court. We do not think that  there was  any  doubt in anyone’s mind that the  matter  would  be taken  up in appeal to the Supreme Court whichever  way  the writ  petitions  were decided. We are of the view  that  the undertakings given by the parties in the present cases  were intended to and do continue to subsist.     On  the  conclusions arrived at by us we have  no  doubt

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that the appeal must be allowed and the writ petition in the High Court dismissed. However, we think that it is necessary to  give  a direction to the Government to  dispose  of  the review applications after giving a notice of hearing to  the manufacturer.  The  hearing may be given within  two  months from today and the review application disposed of within two weeks  after the conclusion of the hearing. Any  information sought by 882 the manufacturer may be given to him at the hearing in terms of what we have said in the judgment. The Union of India  is entitled to the costs of the appeal and the writ petition in the High Court.     It appears that although several writ petitions filed by different  manufacturers were disposed of by the High  Court by  a  common judgment, the Union of India filed  an  appeal within  the prescribed period of limitation against  one  of the  manufacturers,  Cynamide India Limited only.  This  was apparently done under some misapprehension that it would  be enough  if  a  single appeal was filed. Later  when  it  was realized that separate appeals were necessary, the Union  of India  filed petitions for special leave to  appeal  against the other manufacturers also. As these petitions were  filed beyond  the prescribed period of limitation,  petitions  for condoning  the  delay in filing the  petitions  for  special leave to appeal had to be and were filed. These applications are strenuously opposed by the manufacturers who contend the ordinary  rule  which is enforced in cases of  delay  namely that everyday’s delay must be properly explained should also be  rigorously enforced against the Government. It  is  con- tended  that  the  Government is a well  verse  litigant  as compared with private litigants and even if there is  justi- fication  of adopting a liberal approach in condoning  delay in the case of private litigants there was no need to  adopt such  approach in the case of the Government. In cases  like the present where parties have acted on the assumption  that no appeals had been filed against them and have proceeded to arrange  their  affairs accordingly it would  be  unjust  to condone  the delay in filing the appeals at the instance  of the  Government.  Though we see considerable  force  in  the submission of Shri Diwan, we think that the circumstances of the instant cases do justify the exercise of our  discretion to  condone the delay. Two important features  have  weighed with  us  in condoning the delay. One is that all  the  writ petitions  were  disposed  of by a common  judgment  and  an appeal  had been filed in the principal case. The  other  is that it is a ’matter of serious concern to the public inter- est.  We, therefore, condone the delay, grant special  leave in  all the petitions for special leave and direct  the  ap- peals to be listed for hearing on May 1, 1987. P.S.S.                                                Appeal allowed. 883