M/s. Sun Pharmaceutical Industries Ltd. vs. Union of India [July 15, 2024]
Background of the Case
Sun Pharmaceutical Industries Ltd. (Sun Pharma) was involved in the sale of certain medicines, including Roscilox (a cloxacillin-based antibiotic), during the period 1996–2003.
The National Pharmaceutical Pricing Authority (NPPA) identified that Sun Pharma had allegedly overcharged consumers by selling the drug above the ceiling price fixed under the Drugs (Price Control) Order, 1995 (DPCO).
In 2005, the NPPA issued a demand notice to Sun Pharma, seeking recovery of overcharged amounts totaling ₹4.65 crore (including principal and interest).
Sun Pharma challenged this notice, arguing that:
It was not a manufacturer or distributor under the DPCO.
Therefore, it could not be held liable for recovery of overcharged amounts.
Legal Issues
The Supreme Court had to address the following main issues:
Definition under DPCO:
Whether Sun Pharma could be classified as a distributor or dealer under the DPCO, which would make it liable for compliance with price control regulations.
Authority of NPPA:
Whether the NPPA had the power to issue recovery notices for excess pricing under Paragraph 13 of the DPCO.
Objective of Price Control:
How broadly the provisions of the DPCO should be interpreted in order to protect consumers from overpricing.
Supreme Court’s Observations and Reasoning
Broad Interpretation of “Distributor” and “Dealer”
The Court noted that DPCO uses broad definitions for distributors and dealers.
A company involved in supplying medicines—even if not directly a “manufacturer”—could still fall under these definitions if it was part of the distribution chain.
Sun Pharma could not escape liability by arguing a narrow interpretation.
Purpose of the DPCO
The main goal of DPCO is consumer protection, ensuring medicines are sold at affordable prices.
Any interpretation that allows overcharging would defeat the purpose of the law.
NPPA’s Authority
Paragraph 13 of the DPCO empowers NPPA to recover overcharged amounts from entities involved in the drug distribution chain.
The Court confirmed that NPPA was legally competent to issue the recovery notice.
Liability of Sun Pharma
The Court rejected Sun Pharma’s claim that it was not liable.
As a party engaged in the supply of the drug, Sun Pharma fell within the ambit of the DPCO and was responsible for adherence to ceiling prices.
Conclusion
The Supreme Court held:
Sun Pharma was liable for overcharging under the DPCO.
The NPPA had the authority to recover the overcharged amounts, including interest.
The judgment reaffirmed that all entities in the pharmaceutical supply chain—manufacturers, distributors, or dealers—must comply with price control regulations.
Key Takeaways:
The DPCO is interpreted broadly to cover all relevant entities in drug distribution.
NPPA has strong enforcement powers to recover overcharges.
Companies cannot escape liability by arguing technical definitions if they are effectively part of the distribution chain.
The judgment protects the interests of consumers by ensuring fair pricing of essential medicines.
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