Kerala High Court Upholds Drugs Controller's Power To Restrict Misleading Discount Boards At Medical Shops

Justice Bechu Kurian Thomas delivered the judgment in a batch of writ petitions challenging a circular issued by the Drugs Controller on September 4, 2024.

One of the writ petitions sought the implementation of the said circular, while the other two, sought to quash it. The circular directed applicants for drug licences to furnish an affidavit undertaking not to display discount boards and proposed changes to the wording of the standard affidavit submitted with licence applications.

The circular stated that the existing words in the affidavit, which stipulated that misleading claims about drugs will not be published, should be replaced by the words 'discount boards related to'.

The Court examined whether the Drugs Controller, acting as the licensing authority under the Drugs and Cosmetics regulatory framework, possesses the power to impose conditions relating to discount advertisements as part of the licensing process, despite the absence of an express statutory prohibition on selling medicines below the Maximum Retail Price (MRP).

The petitioning pharmacy owners argued that neither the Drugs and Cosmetics Act, 1940, nor the Drugs and Cosmetics Rules, 1945, prohibit retailers from selling medicines below the MRP or informing customers about discounts. They contended that the circular effectively curtailed their right to advertise legitimate discounts and interfered with their freedom to conduct business.

The respondent, Drugs Controller maintained that the circular was not intended to prohibit discounts but to prevent misleading discount claims that could deceive consumers. According to the Drugs Controller, advertisements promising discounts of up to 80% often created false impressions and induced customers to visit pharmacies without adequate transparency regarding actual pricing.

It was also asserted in an affidavit filed before the Court that the Department is not against discounts being offered to the customers, but their concern is against the misleading advertisement boards about discounts being displayed.

It was also submitted that the source of few drugs offered in some of the shops are from outside the State with its quality itself in question. It was further asserted that the lack of transparency in the business with the public being misled by the offer of discounts and ending up paying the MRP itself had prompted the circular.

It was also submitted that the circular does not prevent the retailers from displaying details of drugs sold at discount rates and all that is restricted is exhibiting vague discount percentages.

The Court first examined the legal framework governing drug pricing under the Drugs Price Control Order, 2013. It noted that while the law prohibits the sale of medicines above the MRP, there is no restriction on retailers offering medicines at prices below the MRP.

The Court observed that the impugned circular did not prevent pharmacies from granting discounts to customers; rather, it sought to regulate potentially misleading promotional boards.

“The contention of the petitioners that respondents are attempting to compel the petitioners to sell medicines, without providing any discount, is not legally tenable or factually correct, since nowhere has the respondents insisted that the petitioners should refuse discounts to customers. The action of the respondents is aimed only at preventing misleading display boards or advertisements relating to discounts.” the Court said.

The Court held that when statutory authority is conferred upon a licensing body, it carries with it incidental powers necessary to achieve the objectives of the regulatory scheme. Accordingly, the Drugs Controller could require licence applicants to undertake not to engage in misleading discount advertising as part of the licensing process.

“Since the licensing authority has all the powers to ensure that the licensee carries on the business without misleading the public, the insistence on the addition of certain words in the affidavit to be filed while applying for license or for renewal, cannot be said to be a restriction on their right to conduct business.” Court added.

The Court further emphasised that regulatory authorities must be afforded a degree of flexibility in carrying out their statutory functions.

“The regulatory authority will have a 'play in the joints', to step in to regulate and prevent the myriad illegalities by issuing directions, in public interest. Unless the rights of the licensees are infringed severely, the regulatory directives issued by the controlling officer should not be interfered with by this Court. The ground realities, the need of the hour and various other factors will have to be borne in mind by such an authority. The nature of the business and the nature of the authority, issuing such regulatory directives, do have significance, while appreciating the validity of such directives. Unless such directives of the regulatory body are so pervasive, and has no apparent benefit for the public and on the contrary, curtails the right of the licensee to carry on a business, it is not proper for the Court under Article 226 of the Constitution of India to interfere, with such stipulations.” Court noted.

The Court held that the Drugs Controller enjoys a significant regulatory role in the licensing of pharmacies and that conditions designed to protect consumers from misleading practices fall within the permissible scope of that role.

During the proceedings, the Drugs Control Department informed the Court that it had revised the wording of the undertaking. The revised condition requires licensees to undertake that they will not display “any discount boards containing misleading or vague claims regarding the price of drugs.”

The Court found this revised formulation unobjectionable, holding that it does not prejudice the rights of pharmacy owners and merely reinforces an obligation not to mislead consumers.

The High Court thus dismissed the petitions seeking to quash the circular and upheld the licensing authority's power to impose the condition. It simultaneously allowed a connected petition seeking enforcement of the circular, observing that the authorities are free to take appropriate action against non-compliance.

Case Title: M/S. Pharmadude Pharmacy Vannappuram v State of Kerala and Connected matters

Case No: WP(C) 39706/ 2024

Citation: 2026 LiveLaw (Ker) 337

Counsel for Petitioner: Karthika Maria, Arun Thomas, Anil Sebastian Pulckel, Veena Raveendran, Kurian Antony Mathew, Mathew Nevin Thomas, Joe S. Adhikaram, Leah Rachel Ninan, Navya Seby, Shyni William, Anjalu Elias, Shinto Mathew Abraham, M. A. Vaheeda Babu, Babu Karukapadath, P.K. Abdul Rahiman, Arya Raghunath, Karukapadath Wazim Babu, P. Lakshmi, Aysha E.M, Abuasil A.K., Manu Krishna S.K., Haniya Nafiza V.S., Anil Kumar M. Suvaraman, Lakshmisree P.S

Counsel for Respondents: Sreejith V.S (Sr. GP), Laya Mary Joseph (GP), P. Ushakumari