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                 IN THE SUPREME COURT OF INDIA

                  CIVIL APPELLATE JURISDICTION

                   CIVIL APPEAL NO. 3497 OF 2008                  (Arising out of SLP (C) No. 8362 of 2006)

Union of India                                          .... Appellant

           Versus

M/s. Ranbaxy Laboratories Ltd. and others               .... Respondents

                            JUDGMENT

S.B. SINHA, J.

1.    Leave granted.

2.    First respondent is a pharmaceutical company and is engaged in the

manufacture, inter alia, of the bulk drug Pentazocine in the formulation of

Pentazocine injection with the brand name ‘Fortwin’. Sale and marketing of

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the said drug is controlled by the Drugs (Price Control) Order, 1995 (1995

Order).   The said order has been made by the Central Government in

exercise of its powers under Section 3 of the Essential Commodities Act,

1955 (1955 Act). We may notice some interpretation clauses in the 1955

Act, which are as under :-

           "2.(a) "bulk drug" means any pharmaceutical, chemical,             biological or plant product including its salts, esters,             stereo-isomers and derivatives, conforming to             pharmacopoeial or other standards specified in the             Second Schedule to the Drugs and Cosmetics Act, 1940             (23 of 1940), and which is used as such or as an             ingredient in any formulation;

           2.(c) "ceiling price" means a price fixed by the             Government for scheduled formulation in accordance             with the provisions of para. 9.

           2(f)    "drug" includes-             (i)          ....                      ....

           (ii)             ....                  ....

           (iii)   bulk drugs and formulations;

           2(l)    "manufacture" in relation to any drug, includes             any process or part of a process for making, altering,             finishing, packing, labelling, breaking or otherwise             treating or adapting any drugs with a view to its sale and             distribution, but does not include the compounding or             dispensing of any drug or the packing of any drug in the             ordinary course of retail business, and "to manufacture"             shall be construed accordingly;

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           2(r) "price list" means a price list referred to in             paragraphs 14 and 15 and includes a supplementary price             list;

           2(s) "retail price" means the retail price of a drug             arrived at or fixed in accordance with the provisions of             this Order and includes a ceiling price;"

3.    The drug in question is one of the scheduled bulk drugs being at Sl.

No.43 in the First Schedule.

4.    The Central Government in exercise of its powers conferred upon it

by paragraph 23 of the 1995 Order issued guidelines for the purpose of

grant of exemption in terms of paragraph 25 specifying that a manufacturer

who had been given a price exemption for bulk drug should submit an

application in prescribed forms for fixation of price of suck bulk drug and

formulation four months before the expiry of the period of the exemption. It

was furthermore stipulated :-

           "However, if there is an existing notified price for bulk             drug or ceiling price for formulations, the manufacturer             shall follow the same on the expiry of the exemption and             obtain price approval for non-ceiling packs of             formulation (s) based on that bulk drug."

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5.    A similar provision has been made for grant of exemptions in respect

of New Delivery System, in terms whereof a manufacturer is required,

where there is an existing notified price, to follow the same on the expiry of

the exemption.

6.    The exemption granted in favour of the first respondent had expired

on 31st October, 1999.

7.    First respondent was asked to show cause as to why an amount of

Rs.2,59,76,070/- should not be recovered from it and why action should not

be taken under paragraphs 21 and 24 of 1995 Order read with Section 10 of

the 1955 Act by a notice dated 29th April, 2002. In response thereto the first

respondent inter alia contended that it had not overcharged price from any

customer and no amount towards any alleged over charge was payable by it.

It was furthermore contended that the company had furnished all the

informations, as and when asked for by the prescribed authorities of the

appellant.

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8.    As the said reply was found to be unsatisfactory, the first respondent

was asked to deposit the alleged over charged amount with interest @ 15%

per annum as provided under Section 7A of the 1955 Act.

9.    A writ petition was filed thereagainst by the first respondent before

the Delhi High Court. The said writ petition was dismissed by a learned

Single Judge of the said High Court by an order dated 20th May, 2004.

10.   A Letters Patent Appeal was filed thereagainst which has been

allowed by a Division Bench of the said Court by reason of the impugned

judgment and order dated 19th December, 2005.

     The High Court opined that the exemption Notification dated 29th

August, 1995 clearly show that the same related to drugs manufactured by

31st October, 1999 and thus the same would apply even if the drugs have

been sold after the said date.

11.   Mr. Gopal Subramaniam, learned Additional Solicitor General of

India appering on behalf of the appellant, would submit :-

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     i)     That the High Court committed a serious error in passing the

            impugned judgment in so far as it failed to take into

            consideration that 1995 Order is concerned with distribution

            and not manufacture.

     ii)    An exemption Notification must be strictly construed and so

            construed, it must be held that no benefit could be claimed by

            the first respondent beyond the period of 31st October, 1999 as

            by reason of the said exemption Notification it could sell the

            drug at any price and not at the stipulated one and thus, as soon

            as the period of exemption expired, the price provided for

            under the 1999 Order was required to be charged.

     iii)   As a manufacturer the first respondent could sell its products

            but the exemption was in regard to sale only and not to

            manufacturer, the impugned judgment cannot be sustained.

12.   Mr. S. Ganesh, learned Senior Counsel, appearing on behalf of the

first respondent, on the other hand, would submit that exemption

Notification must be given a purposive meaning and so construed, the

impugned judgment is wholly unassailable

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13.   Admittedly the drug in question is an essential commodity within the

meaning of the provisions of 1955 Act.

15.   Section 3(2)(c) of 1955 Act empowers the Central Government to

make an order providing for controlling the price at which the essential

commodity may be bought or sold.

16.   Exemption clause contained in paragraph 25 of the 1995 Order vis-‘-

vis Notification dated 29th August, 1995 must be construed having regard to

the object and purport, which 1995 Order seeks to achieve. A scheduled

drug contains details not only of the maximum retail price but also the date

of manufacture. The price fixed in terms of paragraph 9 of the 1995 Order

shall be the ceiling price. Paragraph 3(1) empowers fixing of the maximum

sale price at which the same can be sold. The factors which were required

to be considered therefore, however, are not required to be noticed.

17.   In terms of clause 3 of paragraph 3 of 1995 Order, a statutory

prohibition had been created in terms whereof nobody could sell the bulk

price exceeding the maximum sale price fixed under paragraph 1. Clause 2

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of paragraph 8 empowers the authority fix retail price of scheduled

formulations in terms whereof revision in the price is permissible.

18.   Clause 6 of paragraph 8 of 1995 Order reads as under :-

           (6) No manufacturer or importer shall market a new             pack, if not covered under sub-paragraph 3 of para 9, or             a new formulation or a new dosage form of his existing             scheduled formulation without obtaining the prior             approval of its price from the Government.

     Thus, what is prohibited is market of a new pack without obtaining

the prior approval of its price from the Government.

     Paragraph 9 empowers the authority to fix ceiling price of scheduled

formulations.

     Paragraph 23 provides for the power of the Central Government to

issue guidelines and directions. Such guidelines and directions, however,

must be consistent with the provisions of the Order.

19.   What is, thus, necessary to be taken into consideration is the power

for exempting and the Notification issued therefore by the Central

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Government. The power of exemption is contained in clause 25 of he

Order, which reads as under :-

           25. Power to exempt.- (1) Government may, having             regard to the factors mentioned in sub-paragraph (2) and             subject to such conditions as it may specify by an order             in the Official Gazette, exempt any manufacturer from             the operation of all or any of the provisions of this Order.

           (2) While granting exemption under sub-paragraph             (1), the Government shall have regard to all or any of the             following factors,-

           (a) number of workers employed:             (b) amount of capital invested;             (c) range/group and type of products manufactured;

                     a)        sales turnover;

                          b)      ....           .....

                             c) production of a new drug which has                            not been produced elsewhere, if developed                            through    indigenous     research    and                            development."

20.   We may, at this juncture, also notice the exemption Notification dated

29th August, 1995, which reads thus :-

           "                        ORDER

           S.O. No./ 7153 (E), in exercise of the powers conferred             by sub-paragraph (1) of Paragraph 25 of the Dugs (Price

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           Control) Order, 1995, the Central Government having             regard to the factors specified in the clause(e) of sub-             paragraph (2) of paragraph 25 of the said order and also             having been satisfied for the need to do so in the public             interest hereby exempts the bulk drug and formulations             based thereupon specified in column 2 of the Table             bellow which is manufactured by the company specified             in the corresponding entry in column 3 from the             operation of price control stipulated in sub-paragraph (1)             of paragraph 3, sub paragraph (1) of paragraph 8 and             sub-paragraph (1) of paragraph 9 of the said order, upto             the period as indicated in column 4 thereof.

                                    TABLE

            S.No.     Name of the       Name of the      Period upto                                                            which the                          Product          Company        exemption is                                                             granted                1             2                3                4                1     Pentazocine and        M/s.                      its formulations     Ranbaxy        31-10-1999                                          Laboratories                                             Ltd.

                                               Sd/-

                                       (K. MULALIDHARAN)

                                       DESK OFFICER "

21.   For issuance of an exemption Notification the Central Government is

required to apply its mind. The factors which are relevant, must be taken

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into consideration as provided for under paragraph 2 of clause 25 of the

Order.

22.   The relevant considerations inter alia are the sales turnover as also

production of a new drug which was not produced elsewhere, if developed

through indigenous research and development.

23.   Pentazocine is used for a patient suffering from traumatic pain. The

Central Government must be held to have applied its mind before issuing

the exemption notification.

24.   What must have been taken into consideration for that purpose is that

respondent No.1 fulfilled the requisite criteria. The area of exemption is

from the operation of the price control. Such exemption admittedly had

been granted upto 31st October, 1999. Indisputably the Central Government

had the power to extend the period of exemption. It could have granted

further exemption subject to any condition.

25.   The short question which arises for our consideration is as to whether

the exemption Notification would apply in respect of drugs which were

manufactured upto 31st October, 1999 or manufactured and sold upto the

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said date. The exemption granted is in respect of what. It is in respect of a

drug manufactured by a company. What is marketed for sale is the drug

manufactured. Manufacture of a drug is controlled by a different statute,

namely the Drugs and Cosmetics Act, 1940. Process of marketing the drug

as also the maximum price which can be charged have direct relation with

manufacture and also the date thereof. The wrapper/foil/containers in which

the drug is marketed contains several informations for the general public;

one of them being the date of manufacture and the retail price. Various

other informations are also required to be furnished.

26.   The contention of learned Additional Solicitor General that the drug

could be manufactured upto 31st October, 1999 but on and from 1st

November, 1999 it could be sold only at the price specified in the order, in

our opinion, cannot be accepted. If the first respondent was entitled to avail

the benefit of the exemption notification till the midnight of 31st October,

1979, sometime would be necessary for it to market the same. There must

be some time lag between the period the drug is manufactured and the actual

sale by a retail dealer to the customer.

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27.    The Court while construing an exemption notification cannot lose

sight of the ground realities inclduing the process of marketing and sale.

The exemption order dated 29th August, 1995 is clear and unambiguous. By

reason thereof what has been exempted is the drug which was manufactured

by the company and the area of exemption is from the operation of the price

control. They have a direct nexus. They are co related with each other.

While construing an exemption notification not only a pragmatic view is

required to be taken but also the practical aspect of it. A manufacturer

would not know as to when the drug would be sold. It has no control over

it.   Its control over the drug would end when it is despatched to the

distributor. The distributor may despatch it to the whole seller. A few

others may deal with the same before it reaches the hands of the retailer.

The manufacturer cannot supervise or oversee as to how others would be

dealing with its product. All statutes have to be considered in light of the

object and purport of the Act. Thus, the decision relied upon by the learned

Additional Solicitor General in Union of India vs. Cynamide India Ltd. :

(1987) 2 SCC 720 ; Prag Ince & Oil Mills vs. Union of India : (1978) 3

SCC 459 and Sree Meenakshi Mills vs. Union of India : (1973) 1 SCC 129

will have no applicability.

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28.   It is true that 1995 Order was to control the price and not the

manufacture. But there cannot be any doubt that the price is that of a

manufactured drug.

     Not only in terms of the Essential Commodities Act, 1955 but also

under various others, for example Customs and Central Excise Act and

Weights and Measures Act (if applicable) several informations are required

to be furnished. If the submission of Mr. Gopal Subramaniam that the first

respondent was bound not only to manufacture but also to sell at a price

upto 31st October, 1999 is correct, the same in our opinion lead to an

absurdity. Such an anomaly and absurdity must be avoided.

29.   Learned counsel wants us to apply the principle of purposive

construction. It may be applied so as to give full effect to the exemption

notification. The exemption notification must be construed to be a workable

one. In New India Assurance Co. Ltd.. vs. Nusli Neville Wadia and

another : 2007 (14) SCALE 556 this Court opined :-

           "51. Barak in his exhaustive work on ‘Purposive             Construction’ explains various meanings attributed to the             term "purpose". It would be in the fitness of discussion             to refer to Purposive Construction in Barak’s words:

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                    "Hart and Sachs also appear to treat "purpose" as a                      subjective concept. I say "appear" because,                      although Hart and Sachs claim that the interpreter                      should imagine himself or herself in the                      legislator’s shoes, they introduce two elements of                      objectivity: First, the interpreter should assume                      that the legislature is composed of reasonable                      people seeking to achieve reasonable goals in a                      reasonable manner; and second, the interpreter                      should accept the non-rebuttable presumption that                      members of the legislative body sought to fulfill                      their constitutional duties in good faith. This                      formulation allows the interpreter to inquire not                      into the subjective intent of the author, but rather                      the intent the author would have had, had he or she                      acted reasonably."

     (Aharon Barak, Purposive Interpretation in Law, (2007) at pg. 87)

        While referring to its decision in Oriental Insurance Co. Ltd. vs. Brij

Mohan and others : 2007 (7) Scale 753 it applied the doctrine of purposive

construction. Applying the principle of doctrine of purposive construction,

we are of the opinion that meaningful purpose could be achieved only if the

construction of the notification as indicated hereinbefore is adopted and no

other.

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30.   There is no merit in this appeal which fails and is accordingly

dismissed with costs. Counsel’s fee assessed at Rs.50,000/-

                                           ...................................J.                                                ( S.B. SINHA )

                                           ..................................J.                                             ( V.S. SIRPURKAR ) New Delhi April , 2008

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                 IN THE SUPREME COURT OF INDIA

                  CIVIL APPELLATE JURISDICTION

                CIVIL APPEAL NO. __________OF 2008                  (Arising out of SLP (C) No. 8362 of 2006)

Union of India                                         .... Appellant

           Versus

M/s. Ranbaxy Laboratories Ltd. and others              .... Respondents

Dear Brother

  Draft judgment in the abovementioned matter is being sent herewith for

your perusal and kind consideration.

                                                ( S.B. SINHA ), J.

New Delhi April 24, 2008

Hon’ble Mr. Justice V.S. Sirpurkar