Drug Company Faces ₹13.41 Crore Recovery for Alleged Overpricing of Osteoarthritis Medicine; Bombay High Court Quashes NPPA Pricing Notification and Entire Demand
NPPA Cannot Impose Another Formulation’s Ceiling Price Without Calculating Price Under Drugs Price Control Order: Bombay High Court
Facts
The petition was filed by M/s Pharmed Limited, a pharmaceutical manufacturer, and one of its shareholders/directors against the Union of India, National Pharmaceutical Pricing Authority (“NPPA”) and other authorities. The dispute concerned the alleged sale of a pharmaceutical formulation above the ceiling price under the Drugs (Price Control) Order, 1995 (“DPCO 1995”).
The medicine in question was Cartigen Forte Tablets, used for treatment of osteoarthritis. Pharmed contended that the Central Government had never specifically fixed a ceiling price for Cartigen Forte under DPCO 1995.
Before January 2010, Cartigen Forte contained, among other ingredients, Vitamin C and Vitamin E. From January 2010 onwards, those ingredients were removed. Its principal active pharmaceutical ingredients were Glucosamine Sulfate Potassium Chloride, Chondroitin Sulfate Sodium and Methyl Sulfonyl Methane. The High Court accepted that Cartigen Forte was neither a multivitamin nor a mineral tablet/capsule.
NPPA nevertheless sought to apply its notification dated 27 September 2007, which fixed ceiling prices for multivitamin and mineral tablets/capsules.
NPPA also relied upon a subsequent notification dated 30 January 2009, under which any formulation containing a scheduled drug as one of its ingredients was purportedly made subject to an existing ceiling price unless the manufacturer had obtained a specific price from NPPA.
On 13 October 2010, NPPA issued Pharmed a show-cause notice alleging overcharging and initially proposed recovery of ₹10,97,86,227.
The amount continued increasing with interest. By 21 November 2016, the Collector’s office issued a recovery notice under the Maharashtra Land Revenue Code demanding ₹13,41,06,802.
Pharmed approached the Bombay High Court challenging the pricing notifications as well as the consequential recovery proceedings.
Issues
The principal questions were:
- Whether the 27 September 2007 notification fixing ceiling prices for multivitamin and mineral formulations could legally be applied to Cartigen Forte.
- Whether the mere presence of Vitamin C and Vitamin E, which were scheduled bulk drugs, permitted NPPA to impose an existing ceiling price without separately fixing the ceiling price of Cartigen Forte.
- Whether NPPA was required to calculate the ceiling price by applying the statutory formula prescribed under Paragraph 7 read with Paragraph 9 of DPCO 1995.
- Whether the blanket notification dated 30 January 2009 was ultra vires DPCO 1995.
- Whether the consequential recovery demands exceeding ₹13 crore could survive if the underlying pricing notifications were invalid.
Petitioners’ Arguments
Pharmed argued that the 2007 notification concerned multivitamin and mineral tablets/capsules, whereas Cartigen Forte was an osteoarthritis formulation with entirely different active pharmaceutical ingredients.
The mere presence of small quantities of Vitamin C and Vitamin E before January 2010 could not transform Cartigen Forte into the formulation covered by the notification.
It further argued that DPCO 1995 prescribed a specific formula for calculating the price of a formulation:
R.P. = (M.C. + C.C. + P.M. + P.C.) × (1 + MAPE/100) + E.D.
This required consideration of material cost, conversion cost, packaging-material cost, packing charges, maximum allowable post-manufacturing expenses and excise duty.
NPPA had never undertaken that exercise for Cartigen Forte.
Pharmed therefore argued that the 30 January 2009 notification effectively bypassed the mandatory statutory pricing mechanism by automatically importing an existing ceiling price whenever a formulation happened to contain a scheduled ingredient.
Respondents’ Arguments
The authorities argued that under DPCO 1995, a “scheduled formulation” included a formulation containing any bulk drug specified in the First Schedule, whether individually or in combination with other drugs.
Therefore, once Vitamin C or Vitamin E—both scheduled bulk drugs—formed part of Cartigen Forte, the formulation fell within the price-control regime.
NPPA also relied upon Paragraph 11 of DPCO 1995, contending that where a manufacturer failed to submit the required application or information for price fixation, the Government could fix the price on the basis of information available to it.
Analysis of the Law
The High Court accepted an important part of NPPA’s legal proposition: Cartigen Forte could qualify as a scheduled formulation before January 2010 because it contained Vitamin C and Vitamin E, which were scheduled bulk drugs.
But that did not automatically determine its ceiling price.
The Court drew a clear distinction between:
(a) bringing a formulation within the definition of a scheduled formulation; and
(b) actually fixing the ceiling price applicable to that formulation.
Even where Paragraphs 4 and 11 empowered the authorities to fix a price using available information, Paragraph 9 required the ceiling price to be fixed in accordance with the formula prescribed by Paragraph 7.
The statutory pricing mechanism therefore could not simply be bypassed.
Court’s Reasoning
1. Cartigen Forte Was Not the Multivitamin Formulation Covered by the 2007 Notification
The Court found that Cartigen Forte was used for osteoarthritis and its active ingredients were materially different from the multivitamin/mineral formulations covered by the 27 September 2007 notification.
Before January 2010, Cartigen Forte contained Vitamin C at 37.5 mg and Vitamin E at 12.5 mg. Those quantities were themselves lower than the quantities specified in the multivitamin/mineral formulation covered by the NPPA notification.
More importantly, Vitamin C and Vitamin E ceased to be ingredients of Cartigen Forte from January 2010.
Thus, NPPA could not simply apply the ceiling price of the multivitamin/mineral formulation to Cartigen Forte.
2. A Specific Ceiling-Price Exercise Was Mandatory
The Court held that even if Cartigen Forte was a “scheduled formulation,” the Government/NPPA still had to specifically fix its ceiling price under Paragraph 9.
That exercise necessarily required application of the Paragraph 7 formula and consideration of material cost, conversion cost, packaging costs, MAPE and excise duty.
No such exercise had ever been undertaken for Cartigen Forte.
The Court observed that accepting NPPA’s interpretation would make the statutory Paragraph 7 formula “wholly unworkable.”
3. 2009 Blanket Notification Was Ultra Vires
The Court was particularly critical of NPPA’s notification dated 30 January 2009.
Under that notification, virtually any formulation containing a scheduled drug as an ingredient could automatically be subjected to the ceiling price appearing against that ingredient/formulation elsewhere.
The Court found the notification “extremely widely worded” and held that it effectively eliminated the statutory calculation required under Paragraph 7.
It was therefore ultra vires DPCO 1995.
The Court further described the notification as overbroad, expansive and beyond NPPA’s statutory power, observing that it amounted to an abdication of the obligation to specifically determine a ceiling price under Paragraph 9.
4. ₹13 Crore Recovery Lost Its Foundation
Once the two pricing notifications could not legally support the price attributed to Cartigen Forte, the very foundation of the allegation that Pharmed had “overcharged” disappeared.
Consequently, all NPPA recovery notices and the Collector’s consequential proceedings under the Maharashtra Land Revenue Code became unsustainable.
The Court additionally observed that NPPA could not benefit from delays attributable to itself by loading interest upon the manufacturer for that entire period.
Precedent Analysis
The Court referred to Franco Indian Remedies Private Limited & Anr. v. Union of India & Anr., 2016 SCC OnLine Bom 16344 while considering the question of interest.
It held that where substantial delay was attributable to NPPA and earlier demand proceedings had themselves been set aside, that intervening period could not operate to the prejudice of the manufacturer through accumulation of interest.
However, this became secondary because the Court ultimately found that the underlying ceiling-price notifications themselves could not sustain the demand.
Conclusion
The Bombay High Court allowed the writ petition.
It held that:
- the 27 September 2007 notification was quashed only to the extent it was sought to be applied to Cartigen Forte;
- the 30 January 2009 NPPA notification was quashed and set aside in its entirety;
- all consequential demand notices against Pharmed could no longer be acted upon; and
- the alleged overcharging recovery, which had ultimately reached approximately ₹13.41 crore, therefore could not survive.
The Court did not find it necessary to decide the remaining natural-justice and small-scale-industry exemption issues because the very legal foundation of the pricing and recovery action had failed.
Case Details
Case: M/s Pharmed Limited & Anr. v. Union of India & Ors.
Court: Bombay High Court, Ordinary Original Civil Jurisdiction
Case No.: Writ Petition No. 595 of 2017
Citation: 2026:BHC-OS:20781-DB
Coram: Justice Manish Pitale & Justice Shreeram V. Shirsat
Reserved: 3 September 2026
Pronounced: 22 September 2026
Result: Petition allowed; 2007 notification quashed insofar as applied to Cartigen Forte, 2009 notification quashed entirely, and consequential recovery demands rendered unenforceable.
