Supreme Court upholds demand for recovery of overcharged amount from Sun Pharmaceutical Industries
Justices Sanjay Kumar & Augustine G Masih [15-07-2024]

Read Order: M/S. SUN PHARMACEUTICAL INDUSTRIES LTD v. UNION OF INDIA AND OTHERS [SC- CA NO. 7209 OF 2019]

New Delhi, July 15, 2024: The Supreme Court has dismissed an appeal filed by Sun Pharmaceutical Industries Ltd. against the Union of India and others, upholding the demand notices issued by the National Pharmaceutical Pricing Authority (NPPA) to recover the excess amount charged for a Cloxacillin-based drug formulation.

The case pertained to the demand notices dated February 8, 2005, and June 13, 2005, issued by the NPPA, directing Sun Pharmaceutical Industries to deposit the overcharged principal amount of Rs. 2,15,62,077/- for the period from April 1996 to July 2003, along with interest amounting to Rs. 2,49,46,256/-, aggregating to a total of Rs. 4,65,08,333/-. Sun Pharmaceutical Industries had challenged the demand notices before the Delhi High Court, contending that it was not a manufacturer, importer, or distributor and, therefore, could not be held accountable under Paragraph 13 of the Drugs (Price Control) Order, 1995 (DPCO).

However, the High Court dismissed the writ petition and the subsequent appeal filed by the company. The Supreme Court, in its judgment, noted that Sun Pharmaceutical Industries had failed to provide proper documentation and had given inconsistent versions regarding its arrangement with the manufacturer for the purchase and sale of the drug formulation. The court held that given the laudable objective of controlling drug prices for the common man, Paragraph 13 of the DPCO cannot be subjected to a restricted interpretation.

The apex court further stated that the definitions of 'distributor' and 'dealer' under the DPCO are not mutually exclusive, and it is possible for a 'distributor' to play a dual role by becoming a 'wholesaler' or 'retailer', thereby satisfying the definition of a 'dealer' under the DPCO. Consequently, the Supreme Court dismissed the appeal filed by Sun Pharmaceutical Industries, finding no error in the High Court's decision to reject the company's claim. The order of status quo, which had been in place since November 10, 2014, has thereby been vacated.