UNION OF INDIA & ANR. ETC. versus BGP PRODUCTS OPERATIONS GMBH AND HAGENE IMMERMATT WEG. & ANR. ETC. on 22 August 2019

1. The present group of appeals raise serious issues havingfar reaching implications. The twin issues which arise forconsideration are on the one hand, the unregulated andclandestine manufacture of the drug Oxytocin, which is reportedlymisused in milch animals; and on the other hand, the continuedsupply of an essential life-saving drug, which is used as the firstline drug for prevention and treatment of post-partumhaemorrhage at the time of childbirth. The following substantial AB

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Aquestions of law arose for consideration: Whether a drugincluded in the National List of Essential Medicines publishedunder Schedule 1 of the Drugs (Prices Control) Order, 2013notified under Section 3 of the Essential Commodities Act, 1955would be subject to the provisions of Section 26A of the Drugsand Cosmetics Act, 1940? Whether the impugned notificationBhas resulted in creating a monopoly in favour of public sectorcompanies, to the complete exclusion of private sectorcompanies, and if so, whether it would be protected by Article19(6)(ii) read with Article 14 of the Constitution? Whether theclassification made by the impugned notification between licensedCpublic sector and private sector companies, in the manufactureof the drug Oxytocin for domestic use, would achieve the objectand purpose of preventing the unregulated and illegal use of thedrug? Whether it would be in public interest to restrict themanufacture of a life-saving drug for domestic use, to a singlepublic sector undertaking, to the complete exclusion of the privateDsector companies, particularly in view of the high maternalmortality rates in the country? Whether there was relevant andobjective material before the Central Government to form thebasis of satisfaction to exercise the power to prohibit themanufacture of the drug by the private sector companies forEdomestic use, under Section 26A of the Drugs and CosmeticsAct, 1940? Whether the object of curbing the clandestinemanufacture and unregulated use of the drug Oxytocin, which iscovered by Section 18 of the Drugs and Cosmetics Act, 1940,can be achieved by taking recourse to Section 26A by imposing aban on the manufacture of licensed drugs by private sectorFcompanies? Whether the exercise of power by the CentralGovernment under Section 26A of the Drugs and Cosmetics Act,1940 is legislative or executive in nature? This is a fit case torefer the matter to a larger Bench of three Judges to considerthese questions of law. [Paras 12, 13] [204-B-H; 205-A-C]

GNarang Medical Store v. Union of India [W.P.(C) No.7135/2014] ; Akadasi Pradhan v. State of Orissa AIR1963 SC 1047 : [1963] Supp (2) SCR 691 ; State ofT.N. v. P. Krishnamurthy (2006) 4 SCC 517 : [2006] 3SCR 396 ; UOI v. Cynamide India Pvt. Ltd. 1987 (2)HSCC 720 : [1987] 2 SCR 841 ; E Merck (India) Limited

v. UOI 2001 (90) DLT 16 ; Macleods PharmaceuticalsLimited v. UOI 2012 SCC Online Mad 1735 ; DrugController General of India v. West Bengal Small ScaleManufacturers AIR 2000 Cal 133 ;Uni-SanPharmaceuticals Ltd.& Anr. v. UOI AIR 2002 Ker 72 :(2001) 1 KLJ 822 ; Union of India v. Pfizer Ltd.(2018)2 SCC 39 : [2017] 12 SCR 179 ; Khoday DistilleriesLtd. v. State of Karnataka (1996) 10 SCC 304 : [1995]6 Suppl. SCR 759 ; Shimnit Utsch India (P) Ltd. v.West Bengal Transport Infrastructure Development Ltd.& Ors. (2010) 6 SCC 303 : [2010] 6 SCR 1110 ;Directorate of Film Festivals v. Gaurav Ashwin Jain &Ors. (2007) 4 SCC 737 : [2007] 5 SCR 7 ; Academy ofNutrition Improvement v. Union of India (2011) 8 SCC274 : [2011] 8 SCR 680 ; Vincent Panikurlangara v.Union of India (1987) 2 SCC 165 : [1987] 2 SCR 468; Systopic Laboratories v. Dr. Prem Gupta (1994) Suppl.1 SCC 160 : [1993] 2 Suppl. SCR 385 ; AkadasiPradhan v. State of Orissa [1963] Supp 2 SCR 691 :AIR 1963 SC 1047 Khoday Distilleries Ltd. v. State ofKarnataka (1995) 1 SCC 574 : [1994] 4 Suppl. SCR477 ; Daruka & Co v. Union of India & Ors. (1973) 2SCC 617 : [1974] 1 SCR 570 ; Indian Drugs &Pharmaceuticals Ltd. v. Punjab Drugs ManufacturersAssn. (1999) 6 SCC 247 ; Municipal Committee,Amritsar v. State of Punjab (1966) 1 SCC 475 : [1969]3 SCR 447 ; Court On Its Own Motion v. State ofHimachal Pradesh CWPIL No. 16 of 2014 Rai SahabRam Jawaya Kapur & Ors. v. State of Punjab [1955] 2SCR 225 – referred to.

Per ABHAY MANOHAR SAPRE, J. (Concurring)

1. Having regard to the nature of controversy and themyriad issues, which arose in these appeals, they have far reachingconsequences on the rights of the citizens qua State and, inparticular, the abstract legal issues such as what is the nature ofpowers exercised by the Central Government under Section 26-A of the Drugs and Cosmetics Act, whether it is legislative orexecutive, because there is no decision of this Court so far on A

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Athis issue. Secondly, what are the essential ingredients forinvoking the powers under Section 26-A of the Drugs andCosmetics Act in relation to any Drug and whether such power isin conflict with the exercise of powers conferred under theEssential Commodities Act. Thirdly, whether issuance ofBimpugned notification has resulted in creating monopoly (whetherpartial or full) in favour of the State and, if so, whether it hassatisfied the rigor of Article 14 read with Article 19(6)(ii) of theConstitution of India. Lastly, depending upon the answer to thenature of exercise of powers under Section 26-A of the Drugsand Cosmetics Act, whether material relied on by the CentralCGovernment can be held as sufficient to sustain the impugnedaction. [Paras 3-6] [205-F-H; 206-A-B]

Union of India vs Pfizer Ltd.(2018) 2 SCC 39 : [2017]12 SCR 179 – relied on

Union of India vs Pfizer Ltd.(2018) 2 SCC 39 : [2017]12 SCR 179 – relied on D2. If the exercise of power under Section 26-A of the Drugsand Cosmetics Act is held as being legislative in nature, theparameters to examine the legality of the impugned notificationwould be different whereas if it is held to be executive in nature,the parameters to examine the legality of impugned notificationEwould be somewhat different than the former one. The decisioneither way on any of these questions will have its far reachingeffect on the rights and health of public at large and especially onthe rights and health of the teenage girls, pregnant females andmilching animals. It will also decide the scope of the powers ofthe Central Government under Section 26-A of the Drugs andFCosmetics Act qua the rights of the persons, who are engaged inbusiness of manufacture and sale of Drugs specified under theDrugs and Cosmetics Act read with Essential Commodities Act.In effect, it will not be a judgment inter party but it will be in remlaying down the law on the questions. [Paras 7-9] [206-C-E]

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Case Law Reference

Per Indu Malhotra, J.[1963] Supp (2) SCR 691H[2006] 3 SCR 396

referred toPara 10.2referred toPara 10.2

UNION OF INDIA v. BGP PRODUCTS OPERATIONS GMBH AND HAGENEIMMERMATT WEG.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6588-6591 OF 2019.

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From the Judgment and Order dated 14.12.2018 of the HighCourt of Delhi at New Delhi in W.P. (C) No. 6084 of 2018 connectedwith W.P.(C) Nos. 8555, 8666 and 9601 of 2018

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Tushar Mehta, SG, Vikramjit Banerjee, ASG, Kapil Sibal, S. Ganesh,Colin Gonsalves, Ms. Meenakshi Arora, Sr. Advs., Kanu Agrawal,Ms.Seema Bengani, Rishi Sharma, Ms. Swati Ghildiyal, B. K. Satija,Anas Zaidi, Rishi Kant Singh, Ayush Anand, G. S. Makker, Ms. GayatriRoy, Ms. Soumili Das, Amit Panigrahi, Raghav Tankha, Pratyush Pandey,Ms. Anushka Sachdev, Anuj Bhandari, Phiroze Palkhivala, Ravikesh K.

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ASinha, Abhijat P. Medh, Shashi Kant, Ms.Tanya Agarwal, Satya Mitra,Amit Karkhanis, Kapil Joshi, Ms. Manju Sharma, Jetley, M/s KNC, AshishPrasad, Ms. Mukta Dutta, Akshay Nagarajan, Rohan Roy, Mahfooz ANazki, Rajesh R., M. P. Devanath, Abhishek Agarwal, Advs., for theappearing parties.

BThe Judgments of the Court were delivered by INDU MALHOTRA, J.

Leave granted.

1. The issue which arises for consideration in the present appealsCis the validity of the Notification dated 27.04.2018 issued under Section26A of the Drugs and Cosmetics Act, 1940 (hereinafter referred to asthe “Act”) by the Ministry of Health and Family Welfare.

The impugned notification restricts the manufacture of Oxytocinformulations for domestic use, only by public sector undertakings orDcompanies, to the complete exclusion of the private sector companies.However, the manufacture of the drug for export purposes is open toboth public and private sector companies.

It was notified that the notification would come into force on01.07.18.E

By a subsequent notification dated 29.06.2018, the date wasextended to 01.09.18.

2. Till the issuance of the impugned notification, Oxytocin wasbeing manufactured by private sector companies to meet the entire needFin the country.

After the issuance of the impugned notification, KarnatakaAntibiotics & Pharmaceuticals Ltd. (“KAPL”), a public sector companyhas commenced the manufacture of Oxytocin in May 2018.

G3. The Active Pharmaceutical Ingredient (“API”) or the bulk drugis manufactured in India only by one private sector company in India,viz. Hemmo Pharmaceuticals Pvt Ltd. (“Hemmo Pharma”).

4. The impugned Notification dated 27.04.2018 was challenged ina group of Writ Petitions by various private sector companies who areHinter alia manufacturing the drug Oxytocin in W.P.(C) No. 6084/2018,

W.P.(C) No. 8555/2018, W.P.(C) No. 8666/2018 and W.P.(C) No. 9601/2018 before the Delhi High Court on various grounds. The Delhi HighCourt granted stay of the operation of the impugned notification videInterim Order dated 31.08.2018. The order of stay was extended bysubsequent Orders, which remained in force till 15.12.2018. The DelhiHigh Court vide a detailed Judgment and Order dated 14.12.2018 hasquashed the impugned notification. As a consequence, the impugnednotification did not come into force at all.

5. The Appellant-Union of India has filed the present Special LeavePetitions before this Court, to challenge the judgment passed by theDelhi High Court.

6. The subject matter of the present appeals is the drug Oxytocin,which is notified as an essential drug by the World Health Organization(WHO) Model List of Essential Medicines since 2002. The concept of“Essential Medicines” was first introduced by the WHO in 1977, andhas now been adopted by many countries, NGOs and international non-profit supply agencies. Oxytocin continues to be notified in the 21[st] editionof the WHO Model List of Essential Medicines published in 2019. It islisted under the head “Medicines For Reproductive Health And PerinatalCare” and the recommended form of dosage is “Injection: 10 IU in 1-mL”.

6.1. Oxytocin is an essential life-saving drug, which is includedin the National List of Essential Medicines, 2011 (“NLEM”).It continues to be listed at S.No. 26.1.5 in the latestnotification published in 2015. The NLEM is published underthe 1[st] Schedule to the Drugs (Prices) Control Order, 2013(“DPCO”) under Section 3 of the Essential CommoditiesAct, 1955 (“EC Act”).

The NLEM specifies the recommended dosage andstrength of Oxytocin injection as 5IU per 1 ml and 10IUper 1 ml. Oxytocin injection in the form of “5 IU per ml in1ml ampoule pack” is included in the “Essential Drug Listfor the year 2016-2018” at Serial No. 228 published by theNational Health Mission, Department of Health and FamilyWelfare, Government of Himachal Pradesh.

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A6.2.The objective of the National List of Essential Medicines(NLEM) is that the drugs included in it are adequate tomeet the contemporary health needs of the generalpopulation of the country.[1] It is one of the key instrumentsin balanced healthcare delivery system of a country. TheBfirst NLEM was prepared and released in 1996. This listwas subsequently revised in 2003, 2011 and 2015.

NLEM contains those essential medicines “that satisfythe primary health needs of the country‘s population.”NLEM medicines are required to be made available at allCtimes in adequate quantities in the appropriate dosage formsto serve the larger public interest. The primary purpose ofthe NLEM is to promote rational use of medicinesconsidering three important aspects i.e cost, safety andefficacy. The list is considered to include the most cost-Deffective medicines for a particular indication.

The criteria for the inclusion of a medicine in the NLEMinter alia includes that the medicine should be approved/licensed in India; the medicine should have proven efficacyand safety profile based on valid scientific evidence; theEmedicine should be cost effective etc.[2]

The NLEM is prepared by an Expert Core Committeeconstituted by the Director General of Health Services(DGHS) out of the World Health Organization (WHO)FModel List of Essential Medicines, Essential Drugs Listsof various States, and medicines used in various NationalHealth Programmes and Emergency Care Drugs.[3]

G1 Press Release on “Essential Drugs” dated 15.03.2013 by the Press Information Bureau,Government of India, Ministry of Health and Family Welfare.2 Executive Summary, Report of the Core Committee for Revision of the National Listof Essential Medicines published in 2015.

3 Paragraph 3.1(ii) of the National Pharmaceuticals Pricing Policy, 2012 (NPPP-2012)dated 07.12.12 published by the Ministry of Chemicals and Fertilizers, Government ofHIndia

6.3. Oxytocin is recommended as the first line drug for preventionand treatment of post-partum haemorrhage (excess bleedingimmediately after child-birth).[4] Oxytocin is the drug ofchoice used for pregnant women to induce or augment labourat the time of delivery, to control post-partum bleeding anduterine hypo-tonicity and is placed under Schedule H1 ofthe said Act.[5] Oxytocin is also included in the IndianPharmacopoeia published in 2010, 2014, and 2018.

6.4. The misuse of Oxytocin has been the subject matter ofdiscussion because of rampant misuse of the drug on milchanimals. The issue was under deliberation by the DrugsTechnical Advisory Board (“DTAB”) and the DrugsConsultative Committee (“DCC”), which are statutorybodies constituted under the said Act.

The DTAB is a statutory body established under Section5 of the said Act. The DTAB consists of technical expertsto advise the Central Government and State Governmentson technical issues arising under the said Act.

The DCC has been constituted under Section 7 of thesaid Act, which consists of representatives of the CentralGovernment, and one representative of each of the StateGovernments to advise the Central and State Governments,and the DTAB, on any matter relating to secure uniformityin the administration of the Act.

6.5. The deliberations on the issue of rampant misuse of thedrug commenced from 1997 onwards.It is necessary to advert to the deliberations of themeetings of these statutory bodies to understand thebackground in which the impugned notification was passed.

6.6. The misuse of Oxytocin came up for discussion first in the31[st] meeting of the DCC held on 21.08.1997 and 22.08.1997.

4 World Health Organisation Recommendations For The Prevention And Treatment OfPostpartum Haemorrhage, 2012

5 Fifty-Ninth Report Of Parliamentary Standing Committee On Health And FamilyWelfare On The Functioning Of Central Drugs Standard Control Organization A

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The DCC noted that it had received several complaintson the misuse/abuse of Oxytocin in veterinary practice.Oxytocin injections were being misused to artificially extractmilk from cows and buffaloes. The members of theCommittee were requested to collect more information onthe issue.

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6.7. At the 48th meeting of the DTAB held on 08.07.1999, theDTAB discussed the misuse of Oxytocin in milch animalsand the deleterious effects due to consumption of such milkon consumers. The DTAB considered the suggestion ofimposing a general ban on the manufacture of Oxytocin.CHowever, 11 members opined that as the drug is “essential”in the medical field, and is included in the “Essential Druglist”, the same could not be prohibited.

The Joint Secretary, Ministry of Food Processing, aninvitee to the meeting mooted a suggestion that “perhapsDrestricting the manufacture of Oxytocin to PSUs, andthereafter keeping a track on its distribution” may beconsidered.

The representative of the Department of ConsumerAffairs agreed that the whole issue of use and misuse ofEOxytocin injection requires an in-depth examination andsuggested that a detailed paper be prepared based on theoutcome of such study.

6.8. At the 36[st] meeting of the DCC held on 23.07.05 and24.07.05, the DCC advised not to ban Oxytocin injectionFsince it formed a part of the NLEM. The DCC noted thatthe sale of Oxytocin had been regulated by amending thepackage size of Oxytocin to “single blister packs”, as againstthe earlier prescribed larger packaging of 50-100 ampoules.

6.9. At the 40[th] Meeting of the DCC held on 29.06.2009, it wasGobserved that the misuse of Oxytocin injection had beenreported in many parts of the country, and a strong vigilancewas required to stop the clandestine manufacture of thedrug. The DCC observed that the drug has a definite placein medical treatment, and is used by gynaecologistsHuniversally. The DCC urged the members/representatives of each State to ensure that the clandestine manufactureof the drug under their jurisdiction is curbed throughextensive surveys and raids.

6.10. At the 43[rd] meeting of the DCC held on 14.11.2011, theDCC observed that there was an increasing misuse of thedrug by dairy owners, because of the clandestine supply ofthe drug through illegal channels, and recommended thatits misuse can only be curbed through increasedsurveillance.

6.11. At the 44[th] meeting held on 20.07.2012, the DCC noted theimportance of continuous surveillance to stop the misuse ofthe Oxytocin. After deliberations, it was agreed that diversionof the bulk drug to illegal channels could be curtailed to alarge extent, if it was ensured that the bulk drug is sold tolicensed manufacturers only.

6.12. On 12.11.2013, the DCC convened its 46[th] meeting, whereinthe misuse of oxytocin injections to milch animals came upfor further discussion.

After deliberations, the DCC recommended that themanufacture and sale of Oxytocin injections should bebanned for veterinary use under Section 26A of the Actcoupled with the condition that the manufacturers of thebulk drug Oxytocin should supply the Active PharmaceuticalIngredient (“API”) only to licensed manufacturers ofOxytocin formulations for human use.

6.13. At the 65[th] meeting of the DTAB held on 25.11.2013, themisuse of Oxytocin by dairy owners to extract milk frommilch animals and its harmful effects on animals and humanconsumption was deliberated upon. While acknowledgingthat Oxytocin had proven medical use for inducing labour,and to control post-partum bleeding and uterine hypotonicity,the DTAB recognized the abundant availability and use ofthe drug in a clandestine manner, which was a matter ofgreat concern for public health. In spite of the action takenby the authorities to place the drug under Schedule H ofthe Drugs & Cosmetics Rules, 1945, which requires thedrug to be dispensed only on the prescription of a Registered

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Medical Practitioner, the manufacture and sale of the drugin a clandestine manner in large quantities, and its misuseby the farmers or dairy owners was rampant.

The opinion of the Department of Animal Husbandry,Dairying and Fisheries, Ministry of Agriculture, was soughtwith respect to the proposal for banning Oxytocin for Animaluse. It was opined that ban on the production and use ofOxytocin for veterinary purposes, was not recommended,since the drug has therapeutic application in case of expulsionof foetus, and retention of placenta even in animals.

After deliberations, the DTAB noted that since the drughas a definite use for therapeutic purposes, it need not beprohibited. It was, however, opined that the manufacturerof the bulk drug should supply the API only to licensedmanufacturers of the drug and veterinary hospitals. It wasfurther recommended that the State Drugs Controllers beasked to curb the misuse of the drug through increasedsurveillance and raids conducted on the possible hideoutsof clandestine manufacture and sale of the drug, and takestrict action against the offenders.

6.14. Pursuant to the recommendations made by the DTAB inthe 65[th] meeting, the Ministry of Health and Family Welfareissued a Notification G.S.R 29(E) dated 17.01.2014restricting the manufacture and sale of Oxytocin as under:

“Whereas the Central Government is satisfied thatthe drug Oxytocin has a definite therapeutic use incertain medical conditions; And whereas the Central Government is satisfied thatit is necessary and expedient to regulate and restrictthe manufacture, sale and distribution of the said drugin the country to prevent its misuse in public interest.

Now, therefore, in exercise of the powers conferredby Section 26A of the Drugs and Cosmetics Act, 1940(23 of 1940), the Central Government hereby directsthat the drug oxytocin shall be manufactured for saleor for distribution or sold in the manner specified below, in addition to the provisions contained in thesaid Act and Rules made thereunder, namely: -

1. The manufacturers of bulk oxytocin drug shallsupply the active pharmaceutical drug only to themanufacturers licensed under the Drugs andCosmetics Rules, 1945 for manufacture offormulations of the said drug.

2. The formulations meant for veterinary use shallbe sold to the veterinary hospitals only.”

(emphasis supplied)

6.15. The validity of the aforesaid Notification dated 17.01.2014was challenged before the Punjab & Haryana High Courtin Narang Medical Store v. Union of India [W.P.(C) No.7135/2014], inter alia on the ground that it was not inconsonance with the provisions of Section 26A of the Act.The High Court vide judgment and order dated 28.01.2016,upheld the validity of the Notification, to avoid the misuseof the bulk drug or Active Pharmaceutical Ingredient usedin Oxytocin injections.

6.16. At the 67[th] meeting of the DTAB held on 01.04.14, theDTAB once again recognized that the drug Oxytocin has adefinite role in the medical field for both humans and animals,and as such the legitimate manufacture and sale of the drugscannot be stopped by banning the drug. Even if the domesticmanufacturers are prohibited from manufacturing the drug,the bulk drug is liable to be smuggled from the neighbouringcountries for illegal use. Misuse can only be contained byenhanced surveillance by the regulatory authorities, followedby strict action against the violators.

After deliberations, the DTAB recommended that atthe time of sale of oxytocin by retail chemists, the nameand address of the purchaser, the name of the patient, andthe quantity supplied shall be recorded. Such records shallbe maintained for three years, and shall be kept open forinspection. This would help in not only maintaining thelegitimate supply of the drug, but also to curb misuse of thedrug through the legitimate sale channels.

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A6.17. The recommendations of DTAB came to be given statutoryeffect by an amendment to Rule 65 of the Drugs andCosmetics Rules,1945 vide Notification dated 30[th] August2013 published by the Ministry of Health and FamilyWelfare.

B6.18. On 05.11.2014, a meeting was convened by the Ministerfor Women and Child Development Ministry (MWCD),which was attended by Secretaries from various otherMinistries. In this meeting, a suggestion was mooted thaton account of the rampant misuse of Oxytocin, which ledto cows and animals contracting diseases, and the illegalCuse for increasing milk production, could be effectivelycontrolled if a “Government of India owned companymay be allowed for production of this drug in thecountry and the private companies may be prohibitedfor the same.”

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6.19. At the 69[th] DTAB meeting held on 22.04.15, the DTABreiterated its earlier recommendation that Oxytocin “neednot be prohibited as it has definite use for therapeuticpurposes. Shri A. K. Tiwari of IVRI stated that the drugoxytocin is an essential drug in the veterinary practice.EHe added that the Department of animal husbandry hadalso earlier given his opinion that the ban on productionand use of oxytocin for veterinary used is notrecommended.” The DTAB observed that the misuse ofthe drug can be controlled by stricter control over themanufacture and sale of the drug, especially throughFclandestine channels. The DTAB noted that “Constantsurveillance by the State Drug Regulatory Authoritiesand other regulatory authorities can only curb themisuse of the drug.”

6.20. In its 70[th] meeting dated 18.08.15, the DTAB was informedGthat dairy owners were getting the drug manufactured atdubious premises from unscrupulous suppliers. The DTABnoted that the raw material or the bulk drug was beingclandestinely smuggled into the country from the borderStates, which was then being crudely manufacturedHclandestinely and sold to dairy owners at a very cheap rate.

The DTAB reiterated its recommendation that “the druglegitimately manufactured is required for medicalpurposes and as such cannot be prohibited. The misuseof the drug in a crude form, can only be curbed throughconstant surveillance by the Regulatory Authorities.”

6.21. On 16.10.2015, the DCC in its 49[th] Meeting discussed therampant misuse of Oxytocin through clandestine channels.It was inter alia recommended that officials from the StateDrug Regulatory Authority must conduct periodic raids withthe assistance of the Police at suspected outlets; and thatthe manufacture and sale of oxytocin formulations by thelicenced manufacturers in the State, should be monitoredregularly.

6.22. On 12.02.2018, the DTAB in its 78[th] meeting consideredthe proposal to restrict the supply of Oxytocin formulationsfor human use only to registered hospitals and clinics inpublic and private sector to prevent misuse of the drug.The members deliberated upon the matter and “agreed ona draft notification for regulating, restricting theOxytocin formulations for human use to be suppliedonly to registered hospitals and clinics in public andprivate sector.”

The DTAB accepted in principle the proposal to amendRule 96 of the Drugs and Cosmetics Rules, 1945 to ensurethat bar-coding system is adopted for the manufacture andsale of Oxytocin formulations so as to ensure track andtraceability of the product, to avoid its misuse.

The DTAB had further agreed to prohibit the importof Oxytocin formulations under Section 10A of the said Actfor human as well as animal use.

6.23. On 09.04.2018, the DCC at the 53[rd] meeting was informedabout the recommendations of the 78[th] DTAB meeting heldon 12.02.2018 to address the misuse of Oxytocin. The DCC,in principle, agreed with the recommendations of the DTAB.

6.24. On 18.04.2018, The Ministry of Health and Family Welfare,issued a Notification, containing “Draft Rules” viz. the“Drugs and Cosmetics (Amendment) Rules, 2018, on which

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objections and suggestions were invited to within 45 days.The Draft Rules proposed to amend Rule 96 of the Drugsand Cosmetics Rules, 1945 to ensure that a 3-tier bar-codingsystem is adopted by licensed manufacturers of Oxytocinformulations to facilitate and trace their products.

The relevant extracts of Rule 1 and 2 are extractedhereinbelow for ready reference:

DRAFT RULES

“1. (1) These rules may be called the Drugs andCosmetics ( Amendment) Rules, 2018.

(2) These rules shall come into effect after onehundred eighty days of the publication of the finalrules in the Gazette of India. 2. In the Drugs andCosmetics Rules, 1945, in rule 96, in sub-rule (1),after clause (xii) the following clause shall beinserted, namely:- “(xiii) (A) The manufacturers of drug formulationsof oxytocin shall print the details specified below tofacilitate tracking and tracing of their products,namely:-

a. at primary level packaging of two dimensionalbarcode encoding unique and universal globalproduct identification code in the 14 digits GlobalTrade Item Number format along with batch number,expiry date and a unique serial number of the primarypack;

b. at secondary level packaging of one or twodimensional barcode encoding unique and universalglobal product identification code in the 14 digitsGlobal Trade Item Number format along with batchnumber, expiry date and a unique serial number ofthe secondary pack;

c. at tertiary level packaging of one dimensionalbarcode encoding unique and universal globalproduct identification code in the 14 digits GlobalTrade Item Number format along with batch number, expiry date and a unique serial number of the Tertiarypack.

(B) The manufacturer of drug formulation shallmaintain the data in the parent — child relationshipfor all three level of packaging and their movementin its supply chain.

(C) The data referred to in sub-rule (2) shall beuploaded on the central portal of the CentralGovernment by the manufacturer or its designatedagency before release of the drugs for sale ordistribution. (D) The responsibility of the correctness,completeness and ensuring timely upload of data onthe Central portal shall be that of the manufacturer.”

The Central Government did not proceed with these DraftRules, since the Impugned Notification came to be passedon 27.04.2018. As a consequence, the Draft Rules lapsed.

6.25. On 24.04.18, the Ministry of Health and Family Welfare inexercise of its powers under Section 10A of the Act issueda Notification completely prohibiting the import of ‘Oxytocinand its formulation in any name or manner’ into India.

6.26. On 27.04.18, the Ministry of Health and Family Welfare inexercise of its powers under Section 26A of the Act issuedthe Impugned Notification, which superseded theNotification dated 17.01.2014, and directed that the drugOxytocin shall be manufactured only by public sectorundertakings or companies for domestic use. However, themanufacture of Oxytocin formulations for export purposesshall be open to both public and private sector companies.

The impugned Notification date 27.04.2018 is extractedherein below for ready reference:

“G.S.R. 411(E).—Whereas the Hon’ble High Courtof Himachal Pradesh, Shimla, has, in its judgmentdated 15.3.2016 in CWPIL No. 16 of 2014 titled‘Court on its own motion’ versus State of HimachalPradesh and others, observed that there is large scaleclandestine manufacture and sale of the drug A

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Oxytocin leading to its grave misuse, which is harmfulto animals and humans; And whereas, the said Hon’ble High Court alsoobserved that the feasibility of restricting themanufacture of Oxytocin only in public sectorcompanies and also restricting and limiting themanufacture of Oxytocin by companies to whomlicenses have already been granted should beconsidered; And whereas, the Drugs Technical Advisory Boardconstituted under section 5 of the Drugs andCosmetics Act, 1940 (23 of 1940) considered the saidissue in its meeting held on the 12th February 2018and recommended that Oxytocin formulations forhuman use be regulated and restricted to be suppliedonly to registered hospitals and clinics in public andprivate sector to prevent misuse of the said drug; And whereas, the Central Government, on the basisof the recommendations of the said Board and afterexamination of the matter, is satisfied that unregulatedand illegal use of the drug Oxytocin is likely to involverisk to human beings or animals and that in the publicinterest it is necessary and expedient to regulate andrestrict the manufacture, sale and distribution of thedrug Oxytocin in the country to prevent its misuse byunauthorised persons or otherwise; Now, therefore, in exercise of the powers conferredby section 26A of the said Act, and in supersessionof the notification number G.S.R. 29(E) dated 17thJanuary, 2014, the Central Government hereby directsthat the drug Oxytocin shall be manufactured for saleor for distribution or sold in the manner specifiedbelow, namely:-

(i) The manufacture of Oxytocin formulations fordomestic use shall be by public sector undertakingsor companies only and the label of the product shallbear barcodes.

(ii) The manufacture of Oxytocin formulations forexport purposes shall be open to both public andprivate sector companies and the packs of suchmanufacture for exports shall bear barcodes.

(iii) The manufacturers of active pharmaceuticalingredient of Oxytocin shall supply the activepharmaceutical ingredient only to the public sectormanufacturers licensed under the Drugs andCosmetics Rules, 1945 for manufacture offormulations of the said drug for domestic use.

(iv) The manufacturers of active pharmaceuticalingredient of Oxytocin shall supply the said activepharmaceutical ingredient to the manufacturers inpublic and private sector licensed under the Drugsand Cosmetics Rules, 1945 for manufacture offormulations of the said drug for export purpose.

(v) The Oxytocin formulations manufactured by thepublic sector companies or undertakings licensedunder the Drugs and Cosmetics Rules, 1945 fordomestic use shall supply the formulations meant forhuman and veterinary use only,- (a) to the registered hospitals and clinics in publicand private sector directly; or (b) to the PradhanMantri Bhartiya Janaushadhi Pariyojana (PMBJP)and Affordable Medicines and Reliable Implants forTreatment (AMRIT) outlets or any other Governmententity which may be specified by the CentralGovernment for this purpose in the country whichshall further supply the drug to the registeredhospitals and clinics in public and private sector.

(vi) The Oxytocin in any form or name shall not beallowed to be sold through retail Chemist.”

(emphasis supplied)

6.27. On 25.07.18, the DTAB in its 80[th] meeting recommendedthe amendment of the Impugned Notification by deletingClause (v) and Clauses (vi) of the impugned Notification A

B

C

D

E

F

G

H

A

dated 27.04.18, so as to ensure availability of the drug forhuman use.

6.28. The Impugned Notification was subsequently amended byNotification dated 21.08.18. The Notification dated 21.08.18substituted clauses (v) and (vi), with the following amendedBclause (v), “(v) The Oxytocin formulations manufactured by thepublic sector companies or undertakings licensed underthe Drugs and Cosmetics Rules, 1945 shall be distributedor sold in accordance with such rules.”

C

As a consequence of this amendment, the effect of theimpugned notification was diluted, and Oxytocin formulationscould be sold and distributed by the public sector companiesor undertakings in accordance with the Drugs and CosmeticsRules, 1945 as against the earlier restriction whereinOxytocin formulations could only be supplied to theregistered hospitals and clinics in public and private sectordirectly; or through the Pradhan Mantri BhartiyaJanaushadhi Pariyojana (PMBJP) and AffordableMedicines and Reliable Implants for Treatment (AMRIT)outlets.

D

E

6.29. On 30.07.2018, the DCC convened the 54[th] meeting wherethe Chairman of the DCC apprised the Committee of theNotification dated 27.04.2018 (“Impugned Notification”) torestrict the manufacture for sale, sale or distribution ofOxytocin to only to public sector undertakings or companiesFfor domestic use.

The Secretary, Ministry of Health & Family Welfarerequested the State Drug Controllers to ensure theavailability of Oxytocin in their respective States by placingpurchase orders in time with Karnataka Antibiotics &GPharmaceuticals Ltd. (“KAPL”).

6.30. The Ministry of Health and Family Welfare issued anotherNotification on the same date i.e. 21.08.18, whereinOxytocin, which was included under Entry No. 382 ofSchedule ‘H’ of the Drugs and Cosmetics Rules,1945 wasHnow shifted to Schedule ‘H1’ at Entry No. 47. Schedule

H1 refers to Rules 65 and 97 of the Drugs and CosmeticsRules,1945.

As per the said Rules, Schedule H1 prescription drugsprovide for stricter control and additional precautions whencompared with Schedule H drugs.

The relevant extracts of the Rules are set out hereinbelow for ready reference:

“65. Conditions of licences. - Licences in Forms 20, 20-A, 20-B, 20-F, 20-G, 21 and 21-B shall be subject to theconditions stated therein and to the following generalconditions- ….

(3) (1) The supply of any drug [other than thosespecified in Schedule X] on a prescription of aregistered medical practitioner shall be recorded at thetime of supply in a prescription register speciallymaintained for the purpose and the serial number ofentry in this regard shall be entered on the prescription.The following particulars shall be entered in theregister:- (a) serial number of the entry, (b) the date of supply,

(c) the name and address of the prescriber, [(d) the name and address of the patient, or the nameand address of the owner of the animal if the drugsupplied is for veterinary use,]

(e) the name of the drug or preparation and the quantityor in the case of a medicine made up by the licensee,the ingredients and quantities thereof, (f) in the case of a drug specified in Schedule C orSchedule H and Schedule H1, the name of manufacturerof the drug, its batch number and the date of expiry ofpotency, if any,

A

B

C

DE

F

GH

A

B

C

D

E

F

G

H

(g) the signature of the [registered Pharmacist] by orunder whose supervision the medicine was made up orsupplied

…..

(h) the supply of a drug specified in Schedule H1 shallbe recorded in a separate register at the time of thesupply giving the name and address of the prescriber,the name of the patient, the name of the drug and thequantity supplied and such records shall be maintainedfor three years and be open for inspection.

….

(6) The licensee shall produce for inspection by anInspector appointed under the Act on demand allregisters and records maintained under these Rules, andshall supply to the Inspector such information as hemay require for the purpose of ascertaining whetherthe provisions of the Act and Rules thereunder havebeen observed.

(7) Except where otherwise provided in these Rules, allregisters and records maintained under these Rules shallbe preserved for a period of not less than two yearsfrom the date of the last entry therein.

(8) Notwithstanding anything contained in this Rule itshall not be necessary to record particulars in a registerspecially maintained for the purpose if the particularsare recorded in any other register specially maintainedunder any other law for the time being in force.

9) (a) Substances specified in Schedule H and ScheduleH1 or Schedule X shall not be sold by retail except on and in accordance with the prescription of a Registered Medical Practitionerand in the case of substancesspecified in Schedule X, the prescriptions shall be induplicate, one copy of which shall be retained by thelicensee for a period of two years.

(b) The supply of drugs specified in Schedule H andSchedule H1 or Schedule X to Registered MedicalPractitioners, Hospitals, Dispensaries and NursingHomes shall be made only against the signed order inwriting which shall be preserved by the licensee for aperiod of two years.

….

(11) The person dispensing a prescription containing adrug specified in Schedule H and Schedule H1 andSchedule X shall comply with the following requirementsin addition to other requirement of these rules.

(a) the prescription must not be dispensed more thanonce unless the prescriber has stated thereon that it maybe dispensed more than once; (b) if the prescription contains a direction that it maybe dispensed a stated number of times or at statedintervals it must not be dispensed otherwise than inaccordance with the directions;

(c) at the time of dispensing there must be noted on theprescription above the signature of the prescriber thename and address of the seller and the date on whichthe prescription is dispensed.

…..

-(11A) No person dispensing a prescription containingsubstances specified in Schedule H and Schedule H1or X, may supply any other preparation, whethercontaining the same substance or not, in lieu thereof.

97. Labelling of medicines.— 1 [(1) The container of amedicine for internal use shall—

(b) if it contains a substance specified in Schedule H,be labelled with the symbol Rx and conspicuouslydisplayed on the left top corner of the label and shallalso be labelled with the following words in legibleblack coloured font size in completely red rectangularbox:

A

B

C

D

E

F

G

H

A‘Schedule H Prescription Drug- Caution: Not to be soldby retail without the prescription of a RegisteredMedical Practitioner’

(e) if it contains a drug substance specified in ScheduleH1, be labelled with the symbol Rx, which shall be inred and conspicuously displayed on the left top cornerof the label, and shall also be labelled with the followingwords in legible black coloured font size in completelyred rectangular box:

B

“SCHEDULE H1 PRESCRIPTION DRUG –CAUTION. –

C

-It is dangerous to take this preparation except inaccordance with the medical advice.

-Not to be sold by retail without the prescription of aRegistered Medical Practitioner.

D

(emphasis supplied)

7. The Impugned Notification dated 27.04.18 was challenged bythe Respondents – BGP Products Operations GmBH, MylanPharmaceuticals Pvt. Ltd., All India Drug Action Network, NeonELaboratories Ltd. and Ciron Drugs And Pharmaceuticals Pvt. Ltd beforethe Delhi High Court in May 2018.

8. The Delhi High Court vide the Impugned Judgment dated14.12.2018 quashed the impugned Notification as being arbitrary andunreasonable. It was held there was no scientific basis, and insufficientFdata to support the conclusion that the existing availability or manner ofdistribution of Oxytocin posed a risk to human life or animals, which isone of the pre-conditions for exercise of power under Section 26A ofthe Act. The High Court held that the trigger and catalyst to the passingof the impugned Notification was the decision of the High Court ofGHimachal Pradesh, Shimla dated 15.03.2016 in Court On Its Own Motionvs State of Himachal Pradesh[6], which did not consider that Oxytocinwas an essential drug which was included in the NLEM. It was furtherheld that the Central Government did not adequately weigh the dangerto the lives of the users of Oxytocin i.e pregnant women and young H

6 CWPIL No. 16 of 2014

mothers, nor did it consider the deleterious effect to the public generallyand women particularly, of the possible restricted supply of a life-savingdrug, if the manufacture is confined to one single public sector enterprise,namely Karnataka Antibiotic and Pharmaceuticals Ltd. (“KAPL”),which admittedly has no prior experience in manufacturing the drug.The High Court opined that the risk of such a consequence can be drasticsince the scarcity of the drug, or even a restricted availability can lead toincreased maternal fatalities during childbirth, impairing lives of thousandsof innocent young mothers. It was held that there is no provision in theAct, including Section 26A, which authorized the Central Governmentto create a State monopoly in favour of one licensee, which did not fallwithin the protective ambit of Article 19(1)(6)(ii).

9. We have heard the learned Counsel for the parties, and perusedthe pleadings and written submissions filed by the parties.

10. Mr. Tushar Mehta, Learned Solicitor General and Mr.Vikramjeet Banerjee, Learned Additional Solicitor General of Indiaappeared on behalf of the Appellant-Union of India.

The Senior Counsel for the Union of India assailed the impugnedJudgment on the ground that the High Court had exceeded its jurisdictionby reviewing the sufficiency of the material relied upon by the CentralGovernment in exercise of its legislative powers under Section 26A ofthe Act. The Counsel for the Union of India-Appellants submitted asfollows:

10.1. The exercise of power under Section 26A being legislativein nature, the grounds for judicial review are limited. TheCourt should exercise judicial restraint in review of policymatters and cannot sit in appeal over a policy decision. Sincethe impugned notification creates a general restriction withrespect to all licensed manufacturers, it would not amountto an executive action.

10.2. It was further submitted that there is a presumption infavour of constitutionality or validity of a subordinatelegislation and the burden is upon the Respondents to showthat it is invalid. Reliance was placed on Akadasi Pradhanv State of Orissa[7], State of T.N. v. P. Krishnamurthy[8], 7 1963 Supp (2) SCR 691 : AIR 1963 SC 1047

8 (2006) 4 SCC 517

A

B

C

D

E

F

G

H

UOI v. Cynamide India Pvt. Ltd[9]; E Merck (India) Limitedv. UOI[10]; Macleods Pharmaceuticals Limited v. UOI[11],Drug Controller General of India vs West Bengal SmallScale Manufacturers[12], Uni-San Pharmaceuticals Ltd.&Anr. v UOI[13]

A

B

10.3. It was further argued that the Court cannot exercise judicialreview over a legislative act on the basis of sufficiency orinsufficiency of material. The Court cannot weigh and siftthrough evidence or material relied upon by the CentralGovernment in exercise of its powers under Section 26A.CThe Court cannot substitute its wisdom in place of thewisdom of the Central Government, particularly, in mattersof public health and public interest. Reliance was placed onUnion of India vs Pfizer Ltd.[14], Khoday Distilleries Ltd.v State of Karnataka[15], Shimnit Utsch India (P) Ltd.Dv West Bengal Transport Infrastructure Development Ltd.& Ors.[16], Directorate of Film Festivals v. Gaurav AshwinJain & Ors.[17], Academy of Nutrition Improvementv Union of India[18], Vincent Panikurlangara v Union ofIndia[19], Systopic Laboratories v Dr. Prem Gupta[20].

D

E10.4. It was submitted that Section 26-A confers wide powerson the Central Government to either regulate, restrict orprohibit the manufacture, sale or distribution of a drug, ifthe Central Government is “satisfied” that the conditionsmentioned in Section 26-A exist.

F

9 1987 (2) SCC 72010 2001 (90) DLT 1611 2012 SCC Online Mad 173512 AIR 2000 Cal 133G13 AIR 2002 Ker 72: (2001) 1 KLJ 82214 (2018) 2 SCC 3915 (1996) 10 SCC 30416 (2010) 6 SCC 303.17 (2007) 4 SCC 73718 (2011) 8 SCC 27419 (1987) 2 SCC 165H20 (1994) Suppl. 1 SCC 160

Section 26-A of the Act reads as under:

26A. Powers of Central Government to prohibitmanufacture, etc., of drug and cosmetic in publicinterest.—-Without prejudice to any other provisioncontained in this Chapter, if the Central Government issatisfied, that the use of any drug or cosmetic is likelyto involve any risk to human beings or animals or thatany drug does not have the therapeutic value claimedor purported to be claimed for it or contains ingredientsand in such quantity for which there is no therapeuticjustification and that in the public interest it is necessaryor expedient so to do, then, that Government may, bynotification in the Official Gazette, regulate, restrict orprohibit the manufacture, sale or distribution of suchdrug or cosmetic.”

The Central Government was not bound byrecommendations of the DTAB or the DCC. The CentralGovernment could independently arrive at a satisfaction withregard to the factum of misuse of the drug.

10.5. The misuse of Oxytocin was consistently deliberated bythe DCC and DTAB since the past 21 years from 1997onwards, and formed the basis of the impugned Notification.The minutes of the meetings of the DTAB and DCC revealthe factum of misuse of Oxytocin and its harmful effectson milch animals and humans through consumption of suchmilk. The subjective “satisfaction” of the CentralGovernment was arrived at after considering the factumof misuse which was deliberated by the DTAB and DCC.Reliance was placed on a Chart on Oxytocin DataCompilation from April 2015 to August 2018, which showedthat licensed manufacturers were manufacturing far moreOxytocin than the legitimate national requirement, and therewas a considerable amount of “leakage” in the production.The licensed manufacturers were responsible for thisleakage as they were supplying the bulk drug or APImanufactured by Hemmo Pharma to small illegal local unitsfor production of spurious Oxytocin. The Central A

BC

DEF

G

H

A

B

C

D

E

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H

Government in public interest decided to strike a balancebetween two competing interests i.e animal and humanhealth, and issued the impugned notification.

10.6. The impugned Notification does not violate or extinguishthe right to carry on any trade or business or occupation ofthe Respondent Manufacturers under Article 19(1)(g). TheImpugned Notification does not create a State Monopoly infavour of KAPL, since the Respondent-manufacturers stillhave a right to export Oxytocin and sell their productsoverseas. They are restricted only insofar as domesticmanufacture and distribution of Oxytocin is concerned. TheImpugned Notification merely regulates the manufactureof Oxytocin, and does not completely prohibit it.

Even otherwise, the High Court in the impugnedjudgment has held in favour of the Appellants to the extentthat the power to restrict or prohibit under Section 26A canbe used to “partially ban the manufacture of a drug i.eprohibit its production by private manufacturers, andreserve it, so to speak for the public sector”.

Such a measure cannot be said to be ultra vires thepower under the statute.

10.7. The Impugned Notification is protected under Article 19(6)of the Constitution of India. It was contended that Article19(6)(ii) of the Constitution empowers the State to enactlaws with regard to any trade, business, industry or service,to the complete or partial exclusion of citizens and privateentities.

In the alternative, even if the impugned notification doescreate a State monopoly, there is no requirement underArticle 19(6) to enact legislation for the creation of the same.Restrictions on trade can be created by way of notificationas well. Such a measure should be presumed to bereasonable and constitutional. Reliance was placed onAkadasi Pradhan vs State of Orissa[21], KhodayDistilleries Ltd. v State of Karnataka[22], Daruka & Co v 21 1963 Supp (2) SCR 691 : AIR 1963 SC 1047

22 (1995) 1 SCC 574

Union of India & Ors.[23], Indian Drugs &Pharmaceuticals Ltd. v. Punjab Drugs ManufacturersAssn.[24], Municipal Committee, Amritsar v State ofPunjab[25].

A

10.8. It was further submitted that the impugned notification wasissued in furtherance of legitimate public interest towardsBprotection of bovine heath, maintenance of animalhusbandry standards and protection of the environment. Theimpugned notification is also aimed to prevent the ill effectsof Oxytocin, which may affect human life due to prolongedconsumption of milk from milch animals injected with theCdrug. The Appellants placed reliance on Articles 48, 4 8 Aand 51A(g) of the Constitution, which form part of theDirective Principles of State Policy.

11. Mr. Kapil Sibal, Mr. Colin Gonsalves and Mr. S. Ganesh,Senior Advocates appeared on behalf of the Respondents. Ms. MeenakshiArora, Senior Advocate appeared for the Federation of Obstetric andGynaecological Societies of India, and Mr. Jayant Mehta, Advocateappeared on behalf of the Indian Medical Association (Intervenors).

D

The Respondents submitted as follows:

E

11.1The Respondents – BGP Products Operations GmBH,Mylan Pharmaceuticals Pvt. Ltd., and Ciron Drugs AndPharmaceuticals Pvt. Ltd have been manufacturingOxytocin injections I.P. 5IU per 1 ml under a license issuedunder Part VII of the Drugs and Cosmetics Rules, 1945for over three decades in India. They manufacture the drugonly for domestic use. It was submitted that the Respondentshave at least 50% of the market share in terms ofmanufacturing the drug. It was submitted that theRespondent-manufacturers do not sell the drug directly tothe end consumer and only sell by way of wholesale dealingto licensed distributors and licensed retail chemists, and usethe very same chain of distribution that KAPL uses.

F

G

23 (1973) 2 SCC 617

24 (1999) 6 SCC 247

25 (1966) 1 SCC 475

H

A

The license issued to the manufacturers under PartVII of the Act also carries with it the license to sell by wayof wholesale dealing within the territory of India.

As a consequence of the Impugned Notification, thelicense issued to these Respondents, for all practicalBpurposes, stood cancelled and terminated.

The impugned Notification impinges and violates Article19(1)(g) of the Constitution in as much as it has completelyprohibited the Respondents from manufacturing Oxytocinas they do not have a license to export the drug.

C

11.2It was submitted that the Act provides for a level playingfield in relation to the manufacture, distribution and sale ofdrugs by any person. Reliance was placed on Section 16read with Schedule II of the Act, to contend that the Act isconcerned with “what” is manufactured, distributed or sold;Dand, not with “who” is the manufacturer or distributor orseller of the drug.

11.3It was submitted that there was no relevant material orevidence placed before the Central Government for it toarrive at a “satisfaction” to completely prohibit theEmanufacture and sale of the drug by the Respondent-Manufacturers. It was submitted that neither the DCC norDTAB had recommended or approved the completeprohibition of manufacture of Oxytocin by private licensees.It was further submitted that the statutory bodies had neverrecommended that the manufacture of Oxytocin forFdomestic use be exclusively reserved for the public sector.

11.4It was submitted that the basis of the impugned Notificationwas the decision of the High Court of Himachal Pradesh,Shimla dated 15.03.2016 in Court On Its Own Motion vsState of Himachal Pradesh[26], which was completelyGirrelevant for forming a “satisfaction” while issuing theImpugned Notification.

11.5The Respondent-Manufacturers had never been prosecutedor even issued a Show-Cause Notice under the Act for any H26 CWPIL No. 16 of 2014

misuse or abuse of the drug, or violation of any provisionsof the Act. There was no material or evidence to show anyillegal or clandestine manufacture of Oxytocin by theRespondent-manufacturers who are licensed in accordancewith law. The Chart on Oxytocin Data Compilation fromApril 2015 to August 2018 relied on by the CentralGovernment to show unutilised quantity of the bulk drug orthe API is wholly irrelevant, and was only prepared inAugust 2018, much after the impugned Notification waspassed.

11.6It was submitted that at the 78[th] meeting of the DTAB dated12.02.18, which forms the basis of the ImpugnedNotification, the DTAB did not recommend to restrict themanufacture of Oxytocin to public sector companies only,nor did it determine that Oxytocin is likely to pose a risk toanimals or humans.

Rather, the DTAB agreed on a draft notification forregulating and restricting the supply of Oxytocinformulations only through registered hospitals and clinics inthe ‘public and private sector’.

11.7It was submitted that the Draft Rules published by theMinistry of Health and Family Welfare on 18.04.2018suggested and recommended a 3-tier system of barcodingof all Oxytocin formulations manufactured by licensedmanufacturers “so as to ensure track and traceability ofthe product to avoid its misuse”. The Central Governmentafter 10 days i.e., on 27.04.2018, took the drastic course ofprohibiting the manufacture of the drug by all private sectorlicensees, and arbitrarily issued the impugned notification.

It was submitted that there is no material on record toshow on what basis the Central Government suddenlychanged its stand between 18.04.2018 and 27.04.2018 froma 3-tier system of barcoding to that of complete prohibitionon the manufacture of the drug by licensed private sectormanufacturers.

11.8It was submitted that the impugned notification is arbitrary,unreasonable and issued with complete non-application of AB

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Amind. The power under S. 26A cannot be used in respectof a licensed drug, or in respect of a spurious, misbranded,adulterated and illegally or clandestinely manufactured drug.The “use of any drug” as used in Section 26A means itsuse only for the intended, declared and avowed purpose,and does not cover its misuse. Therefore, Section 26A couldBnot have been invoked to prohibit/regulate/restrict the misuseof an essential and licensed drug.

11.9Section 26A cannot be invoked where the manufacture,sale or distribution of a drug is already “prohibited” underSection 18 of the Act. The Act and the accompanying RulesCprovide for a robust mechanism for countering anycontravention of the Act by licensed manufacturers.Therefore, there was no public necessity to completelyprohibit all licensed manufacturers from manufacturing thedrug.

D

11.10 The exercise of power under Section 26A cannot be saidto be legislative in nature, since it is based on the“satisfaction” of the Central Government alone. The CentralGovernment in exercise of its executive/administrativepowers under Section 26A, cannot create a State monopolyEin the manufacture for domestic sale of a drug, and claimthe protection of Article 19(6) of the Constitution. Reliancewas placed on Rai Sahab Ram Jawaya Kapur & Ors. vState of Punjab[27].

F11.11 It was further submitted that Memorandum of DelegatedLegislation accompanying the Bill No.65 of 1982 introducinginsertion of Section 26A in the Act, makes no reference tothe exercise of powers under Section 26A as a form ofdelegated legislation.

G11.12 It was submitted that the Impugned notificationdiscriminates between private sector licensed manufacturersand public sector manufacturers as a State monopoly hasbeen created in favour of one public sector company, viz.KAPL. It was submitted that the impugned notification is H27 (1955) 2 SCR 225

hit by Article 14 of the Constitution of India as beingarbitrary, unreasonable, discriminatory and disproportionate.

A

11.13 By virtue of the Impugned Notification, only one publicsector company viz. Karnataka Antibiotic andPharmaceuticals Ltd. (“KAPL”), would be allowed tomanufacture the drug for domestic purposes. This wouldBcreate a monopoly in favour of a public sector corporation,which could have a disastrous effect on the supply andavailability of the drug to hospitals and patients in thecountry. It was further submitted that KAPL is completelyinexperienced, since it obtained a license to manufactureCthe drug as recently as in April 2018 i.e. a couple of weeksbefore the impugned notification was passed. It wassubmitted that the manufacturing activity commenced inMay 2018, after the impugned notification was passed.

11.14 It was further submitted that the Drug Control Department,Drug Testing Laboratory Karnataka had found that severaldrugs manufactured by KAPL, as recently as in October2018 were of Non-Standard Quality (NSQ).

D

11.15 It was further submitted that on 01.11.2017, the CabinetCommittee on Economic Affairs had given its in-principleapproval for the strategic disinvestment of the CentralGovernment’s 100% equity stake in KAPL though an auctionsale. Since the Central Government owns at least 51%equity stake in KAPL, this would mean that upon suchdisinvestment KAPL would no longer be a public sectorcompany/undertaking.

E

F

11.16 It was contended that the Central Government could nothave invoked Section 26A of the Act, since Oxytocin is an“essential drug” enlisted under the NLEM. The NLEM islisted in the 1[st] Schedule to the DPCO notified by the CentralGovernment in exercise of its powers under Section 3 ofthe Essential Commodities Act, 1955. It was submitted thatpower under Section 26A cannot be exercised in respectof NLEM drugs. Section 6 of the EC Act gives the DPCOan overriding effect over other statutes. The impugnednotification issued under Section 26A is ultra vires the said G

H

Aprovision since it runs counter to the DPCO and the Section6 of the Essential Commodities Act, 1955.

12. After having heard the Senior Counsel appearing for partieson both sides, we are of the view that the present group of appeals raiseserious issues having far reaching implications. The twin issues whichBarise for consideration are on the one hand, the unregulated andclandestine manufacture of the drug Oxytocin, which is reportedly misusedin milch animals; and on the other hand, the continued supply of anessential life-saving drug, which is used as the first line drug for preventionand treatment of post-partum haemorrhage at the time of childbirth.

CThe following substantial questions of law arise for consideration:

(i) Whether a drug included in the National List of EssentialMedicines published under Schedule 1 of the Drugs (PricesControl) Order, 2013 notified under Section 3 of the EssentialCommodities Act, 1955 would be subject to the provisions ofDSection 26A of the Drugs and Cosmetics Act, 1940?

(ii) Whether the impugned notification has resulted in creating amonopoly in favour of public sector companies, to the completeexclusion of private sector companies, and if so, whether itwould be protected by Article 19(6)(ii) read with Article 14Eof the Constitution?

(iii) Whether the classification made by the impugned notificationbetween licensed public sector and private sector companies,in the manufacture of the drug Oxytocin for domestic use,would achieve the object and purpose of preventing theFunregulated and illegal use of the drug?

(iv) Whether it would be in public interest to restrict themanufacture of a life-saving drug for domestic use, to a singlepublic sector undertaking, to the complete exclusion of theprivate sector companies, particularly in view of the highGmaternal mortality rates in the country?

(v) Whether there was relevant and objective material beforethe Central Government to form the basis of satisfaction toexercise the power to prohibit the manufacture of the drugby the private sector companies for domestic use, underHSection 26A of the Drugs and Cosmetics Act, 1940?

(vi) Whether the object of curbing the clandestine manufactureand unregulated use of the drug Oxytocin, which is coveredby Section 18 of the Drugs and Cosmetics Act, 1940, can beachieved by taking recourse to Section 26A by imposing aban on the manufacture of licensed drugs by private sectorcompanies?

(vii) Whether the exercise of power by the Central Governmentunder Section 26A of the Drugs and Cosmetics Act, 1940 islegislative or executive in nature?

13. We are of the considered view that this is a fit case to referthe matter to a larger Bench of three Judges to consider the aforesaidquestions of law, and authoritatively pronounce upon the same.Accordingly, we direct the Registry to place the present group of appealsbefore the Hon’ble Chief Justice of India for necessary directions.

ABHAY MANOHAR SAPRE, J.

1. I have had the advantage of going through an elaborate draftedjudgment proposed by my learned sister Justice Indu Malhotra. I entirelyagree with the reasoning and the conclusion arrived at by her.

2. I need not set out the facts and submissions of learned counselfor the parties as the same have been succinctly set out by my learnedsister in her draft judgment.

3. Indeed, having heard very learned and persuasive argumentsof Mr. Tushar Mehta, learned Solicitor General for the appellants andMr. Kapil Sibal, learned senior counsel for the respondents at length andon perusal of the record, I am also of the considered opinion that havingregard to the nature of controversy and the myriad issues, which arise inthe appeals, they have far reaching consequences on the rights of thecitizens qua State and, in particular, the abstract legal issues such aswhat is the nature of powers exercised by the Central Government underSection 26-A of the Drugs and Cosmetics Act, whether it is legislativeor executive, because we find that there is no decision of this Court sofar on this issue. (see observations of this Court in Union of India &Anr. vs. Pfizer Ltd. & Ors., 2018 (2) SCC 39)

4. Secondly, what are the essential ingredients for invoking thepowers under Section 26-A of the Drugs and Cosmetics Act in relationto any Drug and whether such power is in conflict with the exercise ofpowers conferred under the Essential Commodities Act.

A

B

C

D

E

F

G

H

A5. Thirdly, whether issuance of impugned notification has resultedin creating monopoly (whether partial or full) in favour of the State and,if so, whether it has satisfied the rigor of Article 14 read with Article 19(6)(ii) of the Constitution of India.

6. Lastly, depending upon the answer to the nature of exercise ofBpowers under Section 26-A of the Drugs and Cosmetics Act, whethermaterial relied on by the Central Government can be held as sufficientto sustain the impugned action.

7. In my opinion, if the exercise of power under Section 26-A ofthe Drugs and Cosmetics Act is held as being legislative in nature, theparameters to examine the legality of the impugned notification wouldCbe different whereas if it is held to be executive in nature, the parametersto examine the legality of impugned notification would be somewhatdifferent than the former one.

8. In my considered opinion, the decision either way on any ofthese questions will have its far reaching effect on the rights and healthDof public at large and especially on the rights and health of the teenagegirls, pregnant females and milching animals. It will also decide the scopeof the powers of the Central Government under Section 26-A of theDrugs and Cosmetics Act qua the rights of the persons, who are engagedin business of manufacture and sale of Drugs specified under the Drugsand Cosmetics Act read with Essential Commodities Act.E9. In effect, in my opinion, it will not be a judgment inter party butit will be in rem laying down the law on the questions.

10. It is for all these reasons, we have formulated the questionsfor being answered on their respective merits in paragraph 12 of mysister’s drafted judgment.F

11. Let the matter, therefore, be placed before Hon’ble the ChiefJustice of India under Rule VI (2) of the Supreme Court Rules for beingdealt with by the larger bench for their authoritative pronouncement onthe questions framed and for the disposal of the appeals accordingly.

12. Since I have also formed an opinion to refer the matter to beGdealt with by the larger bench under VI (2) of the Supreme Court Rules,I also do not consider it necessary to give my opinion in detail on thequestions formulated.

Devika GujralH