Selling Medicines Below MRP Is Legal, But Misleading Discount Advertising Is Not: Kerala High Court

Pharmacies Can Offer Discounts, but Misleading Discount Boards May Be Restricted: Kerala High Court

Facts

The Kerala High Court considered three connected writ petitions concerning a circular dated 4 September 2024 issued by the Kerala Drugs Controller.

The circular required applicants seeking a new drug licence or renewal of an existing licence to submit an undertaking stating that they would not display discount boards in their pharmacies. It also proposed changes to the standard affidavit filed with licence applications.

Two sets of pharmacy owners challenged the circular. They argued that they were lawfully selling medicines below the Maximum Retail Price and openly informing customers about those discounts.

According to them, neither the Drugs and Cosmetics Act, 1940 nor the Drugs Rules, 1945 prohibited the sale of medicines below MRP or the display of genuine discounts.

A separate petitioner supported the circular and sought its enforcement. He alleged that several pharmacies displayed boards promising discounts of 50%, 60% or even 80%, but customers were often given only a small discount or no discount at all.

The Drugs Controller clarified before the Court that the department was not opposed to pharmacies selling medicines at discounted prices. Its concern was limited to vague, exaggerated or misleading discount advertisements.

During the proceedings, the department rephrased the proposed undertaking to state:

“We undertake that we shall not display any discount boards containing misleading or vague claims regarding the price of drugs.”

Issues

Whether pharmacies have a legal right to sell medicines below the Maximum Retail Price.
Whether pharmacies can publicly advertise discounts offered on medicines.
Whether the Drugs Controller had the authority to require licensees to undertake that they would not display misleading or vague discount boards.
Whether the circular violated the pharmacy owners’ constitutional right to carry on business.
Whether the Court should direct the authorities to enforce the circular against pharmacies displaying misleading discount advertisements.

Petitioner’s Arguments

Arguments of the Pharmacy Owners

The pharmacy owners argued that the circular interfered with their right to carry on business under Article 19(1)(g) of the Constitution.

They submitted that the Maximum Retail Price represented only the highest permissible selling price. There was no legal prohibition against selling medicines at a lower price.

According to them, discounts benefited the public by making medicines more affordable, particularly for patients suffering from serious or long-term illnesses.

They contended that displaying discount boards was necessary to inform customers about reduced prices. Without such advertisements, the public might remain unaware that medicines were available at lower rates.

The petitioners also stated that they maintained transparency by displaying or keeping booklets containing details of the medicines and the percentage of discount offered.

They argued that the Drugs Controller could not impose a prohibition that was not expressly authorised by the Drugs and Cosmetics Act, the Drugs Rules or the Drugs Price Control Order.

The pharmacy owners relied upon constitutional decisions concerning personal liberty, statutory authority and restrictions on business rights to argue that executive authorities must act strictly within the limits of the law.

Arguments of the Petitioner Supporting the Circular

The petitioner seeking implementation of the circular argued that pharmacies frequently displayed advertisements promising very high discounts merely to attract customers.

He alleged that such claims were often false or misleading and that customers induced by these boards did not actually receive the promised discounts.

According to him, the circular was necessary to prevent manipulation and protect ordinary consumers from deceptive advertising.

Respondent’s Arguments

The Drugs Controller and the State submitted that the circular did not prohibit pharmacies from offering discounts.

They expressly acknowledged that there was no statutory restriction on selling medicines below MRP.

Their objection was only to vague and misleading boards that displayed large discount percentages without identifying the medicines covered or the actual conditions attached to the offer.

The authorities argued that such advertisements could mislead customers into believing that all medicines were available at the advertised discount.

They also raised concerns regarding the source and quality of certain medicines sold at unusually high discounts.

The State submitted that the licensing authority was responsible for ensuring compliance with the Drugs and Cosmetics Act, the Drugs and Magic Remedies (Objectionable Advertisements) Act and the Drugs Price Control Order.

It argued that the power to grant or renew licences included incidental authority to impose reasonable conditions intended to prevent misleading practices and protect the public.

The Government clarified that pharmacies could display specific and transparent details regarding discounted medicines. Only vague claims such as general advertisements promising discounts of up to 80% were sought to be restricted.

Analysis of the Law

The Court examined the definitions of “ceiling price” and “maximum retail price” under the Drugs Price Control Order, 2013.

It held that the statutory framework prohibits the sale of medicines above the Maximum Retail Price.

However, it does not prohibit a retailer from selling medicines below MRP.

Therefore, pharmacies are legally entitled to offer discounts to consumers.

The Court rejected the pharmacy owners’ argument that the circular indirectly compelled them to sell medicines without discounts. The circular did not regulate the actual selling price or prohibit reduced prices.

The dispute concerned only the manner in which discounts were advertised.

The Court accepted the principle that statutory authorities must operate within the four corners of the law and cannot impose restrictions without legal authority.

However, where an authority is entrusted with licensing and regulation, it also possesses incidental powers necessary to discharge those responsibilities effectively.

The Drugs Controller could therefore insist upon reasonable licence conditions intended to prevent consumers from being misled.

The Court distinguished between:

truthful and transparent disclosure of specific discounts; and
vague or exaggerated claims that could create a false impression in the minds of customers.

Only the second category was targeted by the revised undertaking.

Precedent Analysis

The pharmacy owners relied on Ganapati Singhji v. State of Ajmer, Kharak Singh v. State of Uttar Pradesh and Self Financing Para Medical Managements Association v. State of Kerala.

These decisions were cited to support the principle that executive authorities cannot impose restrictions upon constitutional or statutory rights without legal authority.

The High Court accepted this general proposition but found that the circular did not impose an unauthorised prohibition on the pharmacies’ business.

The State relied upon Akshay N. Patel v. Reserve Bank of India, where the Supreme Court recognised the special regulatory role exercised by expert bodies such as the Reserve Bank of India.

The Kerala High Court applied a similar principle to the Drugs Controller.

It observed that courts should ordinarily allow regulatory authorities a reasonable “play in the joints” when they issue directions in public interest within their field of expertise.

Judicial interference would be warranted where a regulatory direction was arbitrary, excessively restrictive, unrelated to public benefit or substantially impaired the right to conduct business.

The revised undertaking did not fall into any of those categories.

Court’s Reasoning

The Court held that there was no statutory prohibition against offering discounts on medicines.

Pharmacies could lawfully sell medicines below MRP and provide customers with clear information regarding the actual discounts available.

However, the right to conduct business could not be used as a shield for misleading advertising.

The revised undertaking did not impose a blanket ban on discount boards. It prohibited only boards containing “misleading or vague claims” concerning the price of medicines.

The Court found that this condition did not prejudice any legitimate right of the pharmacy owners.

Rather, it reflected an obligation already owed by retailers and dealers not to mislead customers.

The licensing authority had a significant role in regulating the sale of medicines and protecting the public.

Its power to grant and renew licences carried incidental authority to impose conditions designed to ensure that the business was conducted honestly and without deception.

The Court also noted that regulatory directions must be assessed in light of the nature of the business involved. Medicines directly affect public health, and misleading claims concerning their prices could exploit vulnerable consumers.

The revised condition allowed pharmacies to communicate genuine discounts while preventing exaggerated and non-transparent advertisements.

The Court therefore declined to interfere with the circular.

Conclusion

The Kerala High Court dismissed the two writ petitions filed by pharmacy owners challenging the Drugs Controller’s circular.

It upheld the authority of the Drugs Controller to require pharmacy licence applicants and existing licensees to undertake that they would not display discount boards containing misleading or vague claims.

The Court clarified that:

pharmacies may lawfully sell medicines below MRP;
genuine discounts are not prohibited;
pharmacies may transparently disclose the medicines and discounts offered;
vague or misleading advertisements promising large discounts may be restricted; and
the Drugs Controller may take appropriate action against pharmacies violating the revised condition.

The writ petition seeking implementation of the circular was allowed, and the authorities were given liberty to initiate action in cases of non-compliance.

Case Details

Case: M/s Pharmadude Pharmacy Vannappuram v. State of Kerala & Connected Cases
Court: High Court of Kerala at Ernakulam
Case Numbers: W.P.(C) Nos. 39706 of 2024, 41978 of 2024 and 1447 of 2025
Judge: Justice Bechu Kurian Thomas
Date: 19 June 2026
Result: Challenges to the circular dismissed; petition seeking its enforcement allowed