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Glaxo Smithkline Pharmaceuticals Ltd. & Anr. v. Union of India & Ors.

Civil Appeal · 2017 INSC 635Decided 18 Jul 2017
Civil Appeal No. 6178 of 2009
Justice Rohinton Fali Nariman · Justice Sanjay Kishan Kaul

Background

Glaxo had been granted a temporary exemption (under Paragraph 28 of the Drugs (Prices Control) Order, 1987) from statutory price control for a bulk drug it manufactured, valid until 31 December 1994. After the exemption period expired, the government issued a show-cause notice and later an order demanding roughly Rs. 2.04 crore (including interest) from Glaxo for allegedly overcharging by continuing to sell at its own price for a period in 1995 instead of switching to the government-fixed price within the time allowed.

Decision Breakdown

The Supreme Court held that once the exemption period ended, there was a brief window during which no government-fixed price yet existed for Glaxo's drug: the company had to charge some price, and in the absence of a government-fixed price under the Drugs Price Control Order, there could be no finding of "overcharging." The Court also rejected reliance on an unrelated precedent (Ranbaxy Laboratories) as inapplicable, since that case concerned a different type of notification (price-fixation versus exemption) under a different, later version of the pricing order. Since no single price had actually been fixed and communicated to Glaxo for that period, the demand for recovery of the alleged overcharge could not stand, and the Court allowed the appeal, setting aside the High Court's judgment.

Lesson Learnt

A company cannot be penalised for "overcharging" under a price-control law unless the government had actually fixed and communicated a specific price for that exact period: liability for overcharging requires a concrete fixed price to compare against, not just the expiry of an earlier exemption.

Official source (sci.gov.in)View Judgment (PDF)

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