Pharma Pricing Authority Cannot Equate 'Sustained Release' With 'Controlled Release' Drug To Fix Ceiling Prices Without Notification: Bombay HC

The Bombay High Court has held that the authority cannot equate 'sustained release' with 'controlled release' formulations to fix ceiling prices in the absence of a specific notification covering such formulations. The Court observed that a demand raised after more than a decade, without explanation and without affording a proper opportunity, violates principles of natural justice and cannot be sustained.

A Division Bench of Justices Manish Pitale and Shreeram V. Shirsat was hearing a writ petition filed challenging a demand notice dated 15.02.2016 issued by the Union of India through the Department of Pharmaceuticals, along with a consequential notice issued by the Tahsildar under Section 267 of the Maharashtra Land Revenue Code, 1966. The dispute arose under the Drugs (Price Control) Order, 1995, issued under the Essential Commodities Act, 1955, concerning whether a ceiling price applied to the petitioners' product. Initially, the CR variant manufactured by the petitioners was not covered under the order.

The CR variant was expressly brought within the scope only in 2006, by which time the petitioners had already discontinued production. Nearly nine years later, in 2015, authorities issued a notice alleging that the petitioners had failed to seek price approval and had overcharged consumers, followed by a demand notice in 2016 based on prices applicable to the SR variant. The petitioners contended that they were not liable for alleged overcharging and that the demand, raised after more than ten years, deprived them of an effective defence due to the unavailability of records.

The Court first examined the issue of delay and found that the initial notice was issued nearly nine years after the relevant period, and the demand notice was issued after more than ten years. It noted that the respondents failed to demonstrate service of any earlier notice and provided no explanation for the delay. The Court held that such belated action deprived the petitioners of the ability to effectively defend themselves, particularly when records had been destroyed in accordance with standard procedures. Relying on precedents, the Court held that even in the absence of a prescribed limitation period, an action must be initiated within a reasonable time, failing which it would be vitiated.

The Court also found that the respondents failed to act fairly, as no hearing was granted and no reasons were recorded before issuing the demand. It held that administrative actions affecting rights must comply with principles of natural justice, including granting opportunity and recording reasons.

On merits, the Court noted that the respondents had shifted their stand by superseding the earlier notice based on failure to apply for price approval and instead proceeded on the basis of alleged overcharging. The calculation of overcharging was based on treating Theophylline SR 300 mg tablets as equivalent to Theophylline CR 300 mg tablets. The Court rejected this approach, observing that if both were equivalent, there was no need for a subsequent notification in 2006 specifically including the CR variant.

“The contention of respondent No.1 that sustain release (SR) ought to be treated as equivalent to control release (CR), is unacceptable”, the court observed,

Accordingly, the writ petition was allowed, and the demand notice dated 15.02.2016, along with the notice of demand dated 30.10.2017, were quashed and set aside.

Case Title: Tridoss Laboratories Pvt. Ltd. & Anr. v. Union of India & Ors. [Writ Petition No. 2789 of 2017]

Case Title: 2026 LiveLaw (Bom) 197

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