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Hoechst Pharmaceuticals Vs. C.V.S. Mani - Court Judgment

LegalCrystal Citation
SubjectIntellectual Property Rights
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 1605 of 1981
Judge
Reported inILR1983Delhi548
ActsDrugs and Cosmetics Act, 1940 - Sections 2; Trade and Merchandise Marks Act, 1958 - Sections 6; Constitution of India - Article 14
AppellantHoechst Pharmaceuticals
RespondentC.V.S. Mani
Advocates: A.H. Desai,; S.I. Thakori,; C.M. Mariar,;
Cases ReferredDalmia v. Tendulkar
Excerpt:
(i) drugs and cosmetics act, 1940 - section 2--drugs and cosmetics rules must be in a derogation of any other valid law in force--trade and mercham dise marks act, 1958, is a valid law in force--to the extent the rules conflict with the provisions of the trade and merchandise marks act, 1958 and they must be held invalid--the rule making power is further circumscribed by sections 6, 12 & 33--the rule making authority cannot be beyond these sections--the amendments to rule 96 of the rules are beyond the rule making power and must be struck down.; (ii) constitution of india - articles 14 & 19(1)(g)--the amendments to rule 96 of the rules, as notified on 17-5-1981 are an unreasonable restrictions on the right to carry on trade and business--the amendments are also unconstitutional.....prakash narain, c.j. (1) the import, manufacture,distribution and sale of drugs and cosmetics are, inter alia,regulated by the drugs and cosmetics act, 1940, hereinafterreferred to as the act. sections 6, 12 and 33 of the actempower the central government to frame rules in themanner and to the extent mentioned in the said sections.such rules have been promulgated and are known as thedrags and cosmetics rules, 1945, hereinafter referred toas the rules.(2) the central government by a notification no. o.s.r.27(e) dated 17/01/1981 made certain amendmentsto the rules. the amended rules partly came into force on 1/08/1981 and partly on the date of the publication ofthe amended rules in the official gazette.' the challengebefore us is to these amendments, the contention being thatthe amendments.....
Judgment:

Prakash Narain, C.J.

(1) The import, manuFacture,distribution and sale of drugs and cosmetics are, inter alia,regulated by the Drugs and cosmetics Act, 1940, hereinafterreferred to as the Act. Sections 6, 12 and 33 of the Actempower the Central Government to frame rules in themanner and to the extent mentioned in the said sections.Such rules have been promulgated and are known as theDrags and Cosmetics Rules, 1945, hereinafter referred toas the Rules.

(2) The Central Government by a notification No. O.S.R.27(E) dated 17/01/1981 made certain amendmentsto the Rules. The amended rules partly came into force on 1/08/1981 and partly on the date of the publication ofthe amended rules in the Official Gazette.' The challengebefore us is to these amendments, the contention being thatthe amendments contained in the notification dated 17/01/1981 are illegal, invalid, ultra virus and unenforceable.The consequent prayer is to quash the said notification andrestrain the Central Government and its officers and authorities from taking action in consequence of the amendmentspostulated by the aforesaid notification amending the Rules.

(3) The four group of petitioners before us in the fourpetitions are Ms. Hoechst Pharmaceuticals Ltd. and others(C.W. No. 1605 of 1981), Pfizer Limited (C. W. No. 1719of 1981), Cyanamid India Limited (C.W. No. 1724 of1981), and Cosme Farma Laboratories (C.W. No. 1951 of1981). The respondents before us are Mr. C. V. S. Mani,Additional Secretary to the Government of India in theMinistry of Health and Family Welfare, New Delhi (underwhose signatures the impugned notification has been issued),the Union of India, The Drug Controller, and the Organisation of Pharmaceutical Producers of India. The petitionersare respectively the manufacturers of single ingredient drugsknown as 'Novalgin' (Hoechst), 'Vermex' (Pfizer), 'Verban' (Cyanamid) and''Mejoral' (Cosme Farma). The effectof the amendments in the rules by virtue of the impugnednotification is that the petitioners can no longer market theiraforesaid drugs under or by giving in any manner upon thelabels and containers the trade or brand names under whichthese drugs have been marketed till the issue of the impugnednotification and if the petitioners want to market their saiddrugs the same can only be marketed if these are labelledonly with their respective proper names, namely, the scientific name by which the respective drug would be known invarious pharmacopoea. The impugned amended rules,inter alia, postulate that preparations containing any newdrug as the single active ingredient and approved underRules 30A, 69B or 75B by the licensing authority shall belabelled and marketed under a generic name only. Withregard to some other drugs the amended rule provides thatthe proper name of the drug shall be printed or written in amore conspicuous manner than the trade under the properwhich shall be shown immediately after or under the propername. The dispute really is whether respondents 1, 2 and3, as above-mentioned, can acting within the scope of thepower conferred by the Act and the Rules, compel the petitioners or the other manufacturers of drugs to either not usethe brand name or trade name at all in marketing the drugsrespectively produced by them or can compel manufacturersof drugs to market the drugs by giving proper name or thescientific name more prominently than the brand name orthe trade name on the labels or containers. During thecourse of hearing the second point was not much pressed andthe petitioners said that they may even comply with thismandate of the amended rules if otherwise the rules as promulgated are within the power of the rule making authorityand the rules were not ultra virus the Act or the Constitutionof India. But on the first point, namely complete.prohibition to use the brand name or trade name, the contention isthat such prohibition is ultra virus the petitioners' rightsunder Articles 13, 14 and 19 of the Constitution. Inasmuchas the arguments in all the four petitions were identical andthe facts are not very different for the purposes of enunciatingthe law, we shall primarily notice the facts in the Hoechstmatter, C.W. No. 1605 of 1981.

(4) The first petitioner is a company registered under theCompanies Act, 1956 and is engaged in, inter alia. mamifacture, distribution and marketing of various types of phairmaceuticals. It is also the registered user of various trademarks, including 'Novalgin' (bearing registered Trade MarkNos. 148999 and 225514) within the meaning of Section 49 of the Trade Mark and Merchandise Marks Act, 1958, hereinafter referred to as the Trade Marks Act. the secondpetitioner is the registered proprietor of the trade mark'Novalgin'. It is a company registered under the laws ofthe Federal Republic of Germany. The Second petitionerholds 50 per cent equity of the first petitioner. The thirdpetitioner is a shareholder of the first petitioner and is acitizen of India. The first petitioner under permission ofthe second petitioner has been using the trade Mark 'Novalgin' on its formulations based on the bulk drug 'Analgin'.The single ingredient drug of 'Novalgin' is 'Analgin'. Thisbulk drug Analgin is known by the scientific or proper nameof Analgin. The bulk drug Analgin also has twn othrproper names, viz. 'Metamizols' aad 'Dipyrone'.

(5) The petitioners in the Hoechst matter also claim that they have developed a very effective life saving drug, namely'Betapressin', which is effective in hypertension and cardiacdisorders by sophisticated research in development establishments. This drug 'Betapressin' has not yet come intothe market but apprehending that the impugned notificationwould apply to the said drug also, the petitioners seek reliefin respect of 'Betapressin' as well. 'Novalgin' i:) already'in the market for many years.

(6) In our view the petitioners seeking relief in regard to'Betapressin', which they hope to market, is premature and.therefore, we decline to give any relief with regard to thatdrug specifically. We will, thereforee, confine our attentionto the contentions of the petitioners in relation to their drugknown by the brand name or trade name of 'Novalgia'.

(7) Before we proceed to notice the contentions of the petitioners and the stand of respondents 1, 2 and 3, we maywith advantage notice some of the provisions of the Actand the Rules as well as the relevant provisions of the rradeand Merchandise Marks Act, 1958, hereinafter referred toas the Trade Marks Act.

(8) Section 1 of the Act is the usual provision giving thename of the Act, the extent of its operation and the datefrom which it became operative. Section 2 lays down thatthe provisions of the Act are in addition to and not in derogation of the Dangerous Drugs Act, 1930 (another Act bywhich manufacture and sale of some drugs are regulated)and any other law for the time being in force (emphasisours). Section 3 of the Act is the definition section in whichmany of the words and terms used in the Act have bean Cefined. Section 3(i) defines the word 'prescribed' to meanprescribed by the Rules made under the Act. There is noone provision in the Act by which rules can be framed byan authority for the purpose of the entire Act. Rule makingpower is to be found in and has been made relevant forspecific chapters of the Act. Thus, Section 6 of the Actempowers the Central Government to make rules turn provisions in Chapter Ii which would mean for the purposesof effectuating or working out what is contemplated by theprovisions contained in Chapter Ii of the. Act. Chapter IIdeals with the Drugs Technical Advisory Board, the CentralDrugs Laboratory and the Drugs Consultative Committeecontemplated by the provisions contained in Sections 5 to 7A. Chapter Iii deals with import of drugs. Section 8 inthis Chapter defines what is 'Standards of quality' for thepurposes of the standards of quality contemplated by thevarious provisions of the Chapter. Section 9 sets out whatwould be misbranding of drugs for the purpose of ChapterIII. Section 9A(e) in terms lays down that it would bemisbranding if a drug is not labelled in the prescribed manner. Section 10(b) prohibits import of misbranded drugwhich in effect means if the drug is branded in any mannerother than the prescribed manner. Section 12(1) empowersthe Central Government after consultation with the DrugsTechnical Advisory Board and after previous publication bynotification in the Official Gazette to make rules for the purpose of giving effect to the provisions of Chapter III. Thereis a proviso laying down when prior consultation of theBoard may be postponed. Section 12(2) apart from the generality of the power given by Section 12(1) specifies the aspects in regard to which rules may specifically be framed.Section 12(2)(l) in terms lays down that rules may be framedto regulate the mode of labelling drugs imported for salein packages and prescribe the matters which shall or shallnot be included in such labels. Section 13 provides thatwhoever contravenes the provisions of Chapter Iii or ofany rule made there under shall, apart from liability underthe provisions of Section 11, can also be prosecuted andeither imprisoned or fined or both punished by award ofimprisonment and fine. Section 14 lays down that whereany offence punishable under Section 13 has been committed, the consignment of the drugs in respect of which theoffence has been committed shall be liable to confiscation.Chapter Iv deals with manufacture, sale and distributionof drugs in India. Section 16 in this Chapter defines 'Standards of quality' to mean in relation to a drug, that the drugcomplies with the standard set out in the Second Schedule.Section 17 sets out what would be misbranding of drugscovered by Chapter IV. Section 17(e) in terms lays downthat if a drug is not labelled in the prescribed manner, i.e.as prescribed by the Rules, it would be a misbranded drug.The concept appears to be the same as in 'Section 9(e) in Chapter III. Section 18 in terms prohibits the manufactureana sale of certain drugs which are not of standard qualityor are misbranded or are adulterated etc. Sections 20 to 24 give power to various governmental authorities to analyseand inspect drugs manufactured with the object of distribution or sale. Section 27 in this Chapter makes sale, stocking or exhibiting for sale or distribution of any drug, whichis, inter alia, misbranded or adulterated, punishable with imprisonment and fine. Section 33 in Chapter Iv empowersthe Central Government to make rules in the manner andto the extent mentioned therein for the purposes of givingeffect to the provisions of Chapter IV. Section 33(2)(i) and(j) read asunder :

'33(2) Without prejudice to the generality of theforegoing power, such rules may (i) prescribe the conditions to be observed in thepacking of bottles, packages, and other containers of drugs or cosmetics, and prohibitthe sale, stocking or exhibition for sale ordistribution of drugs or cosmetics packed incontravention of such conditions ;(j) regulate the mode of labelling packed drugsor cosmetics, and prescribe the matters whichshall or shall not be included in suchlabels;'

(9) The only relevant chapter of the Rules which we maynotice is Chapter IX. This Chapter deals with labelling andpacking of drugs other than homoeopathic medicines. Rule95 lays down that subject to the other provisions of theseRules, no person shall sell or distribute any drug (includinga patent or proprietary medicine) unless it is labelled inaccordance with these Rules. Rule 96, so far as it is relevant. reads as under :

'96. Manner, of Labelling. (1) Subject to the otherprovisions of these rules, the following particulars shall be either printed or written in indelible ink and shall appear in a conspicuous manner on the label of the innermost container ofany drug and on every other covering in whichthe containers is packed, namely : (i) The name of the drug :For this purpose, the proper name of the drugshall be given in an equally conspicuous manner as the trade name, if any, and shall be (a) for drugs included in Schedule F or ScheduleF(l), the name given therein ;(b) for drugs included in the Indian Pharmacopoeia or the official pharmacopoeias and official compendia of drug standards prescribedin Rule 124, the name or synonym specifiedin the respective official pharmacopoeias andofficial compendia of drug standards followed by the letters I.P.' or, as the case may be,by the recognised abbreviations of the respective official pharmacopoeia and officialcompendia of drug standards;(c) for drugs included in the National Formularyof India, the name of synonym specifiedtherein followed by the letter 'N.F.I.' ;(d) for other drugs, the international non-proprietary name, if any, published by the WorldHealth Organisation or where on international non-proprietary name is not published, thename descriptive of the true nature or originof the substance.'

(10) We may now read the relevant portions of the impugned notification. The same read as under : '1. (1) These rules may be called the Drugs andCosmetics amendment) Rules, 1981.(2) Rule 2(b), rule 2(0), in so far as it relate to theprovision of 'preparations containing any drugspecified in Schedule W as the single active ingredient' and rule 3, shall corns into force onthe 1st day of August, 1981, and the remainingprovisions of these rules shall come into forceon the date of their publication in the OfficialGazette.2. In the Drugs and Cosmetics Rules, 1945 (hereinafterreferred to as the said rules) in rule 96, in sub-rule (1), inclause (i), (a) for the words 'For this purpose,' the bricketsletters and words '(A) For this purpose,' shallbesubstituted;(b) for the words 'the proper name of the drug shallbe given in an equally conspicuous manner asthe trade name, if any, which shall be', the words'the proper name, of the drug shall be printedor written in a more conspicuous manner thanthe trade name, if any, which shall be shownimmediately after or under the proper nameand shall be' shall be substituted ;(c) after sub-clause (A) as so numbered, the following sub-clause shall be inserted, namely : '(B) The following preparations shall be labelledonly with proper name of the drug and not withany trade name : (i) Preparations containing any new drug as thesingle active ingredient and approved underrule 30A, 69B or 75B by the licensing authority subject to the condition that such preparations should be marketed under a generic name only.(ii) Preparations containing any drug specified inSchedule W as the single active ingredient.'3. In the said rules, after Schedule V, the following Schedule dule shall be inserted, namely : Schedule W(See rule 96(l)(i)(B) )Name of the drugs which shall be marketed under genericnames only: 1. Analgin2. Aspirin and its salts.3. Chlorpromazine and its salts. TD/83-64. Ferrous Sulphate5. Piperazine and its salts.(No. X-1101317199-D&MS;)C. V. S. Mani, Additional Secy.'

(11) The only provisions of the Trade Marks Act thatwe may notice are Section 2(q), Section 25, Section 28 and Section 46. Section 2(q) defines the registered proprietorin relation to a trade mark as the person for the time beingentered in the register as proprietor of the trade mark. ItConnotes property rights Section 25 lays down that theregistration of a trade mark shall be for a period of sevenyears, but may be removed from time to time in accordancewith the provisions of the said section. Section 28 sets outthe rights conferred upon the registered proprietor by virtueof the registration, including the right to exclusively use theregistered trade mark. Section 46 provides, inter alia, thatif there is discontinuance of the user of a trade mark by theregistered proprietor, his name may be removed from theregister for non-user bringing the registration of the trademark to an end. This connotes that once the trade markhas been registered, the registered proprietor must use thattrade mark on the goods in respect of which the mark isregistered and non-user may result in losing the proprietaryright or property right contemplated by Section 2(q).These are those which are contemplated or conferred bySections 25 and 28 of the said Act.

(12) As noticed earlier, the first petitioner manufacturesand markets the drug commonly known to the public asNovalgin. It is a single ingredient drug in which the bulkdrug used is Analgin. According to the petitioner themaking and formulation of drugs, even a single ingredientdrug, is a very sophisticated process requiring detailed andprecise steps, both in manufacture and quality control, whichmay vary from manufacturer to manufacturer. It is the petitioners' case that compliance with official standards alonedoes not guarantee marketable quality which depends uponthe method and control of each manufacture. They contend that for any drug to be effective, inter alia, 'the following conditions need to be fulfillled : (a) the right quality and quantity of dosage ;(b) easy absorption in the system ; and(c) easy excretion without leaving any residues.Thus, the dosage, the absorption qualities and the excretion aspect are all taken into consideration by each manufacturer to produce the drug it wants to market. It is the petitioners' case that with the bulk drug Analgin or for thatmatter Aspirin each manufacturer manufactures the particular formulation of the drug it wants to market and theefficacy of the same, though containing the same bulk drug,may be different in the products of different manufacturers.The finished product containing the same bulk drug willvary in its biopharmaceutical properties depending upon theprocess, control, research etc. available with each manufacturer. The assertion is that two products of two manufacturers containing the same ingredient do not necessarily givethe two products therapeutic equivalence for a patient. Indeed, the bio-availability, i.e. the therapeutic impact on apatient of medicines made by different manufacturers mayvary in respect of the same patient. This is because of eachmanufacturer having its own method of preparing and formulating the drug. Thus the quality of the drug is reflectedin the brand name which distinguishes each manufacturer'sproduct from the product of the other. The petitioners havecited authority in respect of this contention and go on to saythat a doctor does not prescribe medicine for a disease alonebut for a person suffering from the disease. In other words,for the same disease two different patients may be prescribedtwo different medicines keeping in view the therapeutic impact that a particular medicine may have on a particularpatient. It is the petitioners' case that the drugs made bydifferent manufacturers differ both in their therapeutic equivalence as also in the standards of production and a brandname enables a doctor to make the choice of the precise drugthat he wants to prescribe for a patient. Abolition of thebrand name, it is contended, would really mean that thechoice gets transferred from a professional person with training and knowledge both of the drug and the patient to a nonprofessional trader. It is urged that if drugs are to be soldonly by their scientific names or proper names, the trade mayeven be influenced by the commission or profit margin thateach manufacturer may give to the trader. He would not bebothered about the quality of the drug or its therapeuticimpact. Indeed, not having seen or known the patient, orhaving any qualifications to adjudge the patient and the disease with which he is suffering, he would not be in a positionto judge the therapeutic impact of the make he dispensesat all. It is further contended by the petitioners that theabolition of brand names by the impugned notification istotally unrelated to the prices of the drug which are understatutory control, by virtue of the drugs (Price Control)Order, 1979.

(13) Novalgin, it is not disputed, is produced both fororal administration and by injection. The petitioners haveset out the process at some length but it is not necessary torepeat it here. It is common case that Novalgin has beenmarketed as such for very many years.

(14) In April, 1975 the Committee on Drugs and Pharmaceutical Industry (commonly known as the Hathi Committee) presented its report to the Parliament. This report,inter alia, dealt with brand names and generic names. TheCommittee noted the argument about brand names leadingto better quality control and suggested that it was necessarythat quality control organisations should be tightened up. It,however, expressed the view that very often drugs which aremarketed under brand names are sold at higher prices. TheCommittee noted that under the earlier Drug Prices (Displayand Control) Order, 1966 items with pharmacopoeial names,i.e. generic names, were exempted from price approval. thereforee, the Committee recommended thatthe formulations based on the drugs for the purpose ofgeneric name used should be free from price regulationand suggested that a beginning should be made with13 drugs changing over to generic names. It noticed thatin order to keep the medical profession and particularly thegeneral practitioners well informed about the new drug andalso to popularise the generic names, it was essential torevise the Indian National Formulary and make it up to dateand to publish journals on the lines of Prescriber's Journalspublished in the United Kingdom and United States ofAmerica. The Hathi Committee suggested abolition ofbrand names in 13 drugs and also recommended that at thesame time they should be free from price control. These 13drugs were suggested by way of a beginning in change overfrom brand names to scientific or proper names or genericnames. On 29/03/1978 the Central Government laidon the Table of the Lok Sabha a new Drug Policy. TheNew Drug Policy while accepting the recommendations ofthe Hathi Committee, namely that the drug formulationsmarketed under the brand names should henceforth bemarketed under generic names or scientific names, did notaccept the recommendation that such drugs should be freefrom price control. Out of the 13 drugs recommended bythe Hathi Committee with which to start this process, theDrug Policy of 1978 selected five drugs, namely :(i) Analgi'n(ii) Aspirin (Acetyl Salicylic acid)(iii) Chlorpremazine(iv) Ferrous Sulphate and(v) Piperazine and all its salts such as adipate, citrateand' phosphate.In pursuance of the aforesaid policy the Central Government formulated certain draft rules intending to amend Rule96 of the Rules. These were published in the Gazette ofIndia by two separate notifications dated February 8, 1980and 8/08/1980. Objections and suggestions were invited from all persons likely to be affected by the proposedrules. By the notification dated 8/02/1980 theamendment proposed in Rule 96 was that the proper nameof the drug should be printed or written in a more conspicuous manner than the trade name. By the notificationdated 8/08/1980 what was proposed was that preparations containing any new drug as a single active ingredientwhich is approved under certain Rules by the licensing authority should be marketed under the generic name only andshould be labelled only with the proper or the generic nameof the drug and not with any trade name and also that singleingredient preparations of the aforesaid 5 drugs, namely,Analgin, Aspirin, Chlorpremazine, Ferrous Sulphate, Piperazine and its salts such as Adipate, Citrate and Phosphateshould be marketed under their generic names only. the petitioners claim that by a letter dated May 9, 1980 objections were raised to the proposed amendment to Rule 96.It is further averred that soon thereafter the 4th respondent,the Indian Drug Manufacturers' Association of India andeminent members of the medical profession made their respective representations to the Central Government. It isalleged that the proposed amendments were opposed as being Contrary to the interest of the public and the pharmaceutical industry. The 4th .respondent is said to have submitted representation in this regard on 19/05/1980, emphasising its earlier representation dated 18/09/1972 and reiterating the stand of the 4th respondent beforethe Hathi Committee. The petitioner made a further representation dated 21/10/1980 and brought to the noticeof the Central Government opinions of prominent authorsand experts on the subject. The Central Government, however, in exercise of the powers conferred by Sections 12 and 33 of the Act, by notification dated January 17, 1981, inconsultation with the Drugs Advisory Board, amended Rule96 of the Rules. The effect of the amendment, inter alia,is that drugs specified in the said notification in Schedule'W thereto containing a single active ingredient is requiredto be labelled only with the proper name of the drug andnot with any trade name. The impugned notification further amends the rules to the effect that preparations containing any new drug with a single active ingredient and approved under Rules 30A, 69B and 75B were to be marketed under the generic name only. It is the petitioners' contention that though representations were made by the petitioners and others, no opportunity of being heard was granted to them by the Central Government. The impugnednotification is challenged and in particular amendment torule 96 is challenged, inter alia, on the following grounds: (1) The amendment is ultra virus the rule makingpower postulated by Sections 12 and 33 of theAct. Rules can be framed under Section 12 forpurposes of Chapter Iii and under Section 33 for the purpose of Chapter Iv only to furtherthe objects of the Act which, according to the petitioners, is to regulate and also prevent, interalia, the manufacture, sale, distribution andstorage of drugs in such a manner that spuriousor sub-standard drugs are neither manufacturednor marketed and an unwary customer does notfall prey or victim to counterfeit or spuriousdrugs.(2) That though misbranding would include branding in such a manner which is contrary to therules, giving of trade name or brand name onthe label or packing of a drug cannot fall within the scope of the rule making power. In otherwords, by purported exercise of the powerconferred by Section 33(1) in framing rules theCentral Government cannot impinge upon thelaw relating to trade mark and prevent the useof trade names or brand names.(3) That prohibition to use trade names or brandnames amounts to interference in the proprietary or property rights of the petitioners who areregistered users or/and proprietors of trademarks. Thus, the impugned amendmentsamount to infringing property rights of the petitioners.(4) The impugned notification is also vocative ofArticle 14 of the Constitution inasmuch as thereis no valid classification having a nexus withthe objects of the Act in selecting the aforesaid5 drugs in particular and generally in banninguse of trade or brand names. The action isper se arbitrary and unreasonable besides beingunjust. The notification is liable to be struckdown for hostile discrimination both ininitially selecting 13 drugs and out of 13 only5 drugs for enforcement of the new policy.(5) The Hathi Committee had made an integratedproposal with regard to abolish of brand namesof formulations and making those available atreduced prices. Inasmuch as prices are alreadyunder statutory control, even the Committee'srecommendations are not being implementedwhich amounts to arbitrariness.(6) The impugned notification is also otherwise unreasonable and unjust inasmuch as(a) brand names are absolutely necessary to identify each drug for the consumer;(b) the formulations of the same drug by differentmanufacturers differ in therapeutic efficacy;(c) at present the choice is with the qualified person like a doctor to choose a specific drug; -(d) the chemist is a trader and would have aprofit motive in selecting a drug and will betempted to push a drug yielding higher margin of profit;(e) the proposal will shift the choice of the drugto a less competent person;(f) the doctor prescribes medicines not merelyfor the disease but for a specific person;(g) brand name means that the manufacturer isstaking its reputation on the product;(h) abolition of brand name would lead to spurious drugs being brought into the market;(i) Hathi Committee took the view that abolitioncould be done only when certain conditionswere met like after strengthening Drug Control Inspection Organisation and revising theFormulary;(j) the reason of Hathi Committee for abolishingof brand name was that the drugs will become cheaper. This whole basis now disappears by equating such formulation;(k) the experience of other countries like Pakistanshows that abolition of brand names leads tospurious drugs coming into the market;(1) the argument against irrational formulationdoes not apply to single ingredient drug; and(m) the Drug Organisation is totally inadequateto check sub-standard drugs which will beencouraged.

(15) The rule is opposed by respondents 1,2 and 3. Ithas been averred that on 8/02/1974 the Ministry ofPetroleum & Chemicals constituted a Committee on the Drugsand Pharmaceuticals industry under the Chairmanship ofShri Jaisukhial Hathi to go into various aspects relating tothe drugs and pharmaceuticals industry. This Committeesubmitted its report to the Government in April, 1975.The report contains a large number of recommendations relating to all aspects of the drugs and pharmaceuticals industry.Chapter X of the Hathi Committee report which deals withmeasures for providing essential drugs and common household remedies to the general public specially in rural areascontains recommendations relating to the substitution ofbrand names by generic names. The Committee dealt withthis subject, though it was not specifically referred to it, asit felt that the question of substitution of brand names ofthe medicines marketed by the industry by generic namesflows clearly from the other terms of reference such as reduction/rationahsation of prices of formulations for theconsumers, making the essential drugs available to the general public, attainment of leadership role by the public sector,promoting the growth of the Indian sector etc. The Committee was also of the view that this question was 'directlylinked with many important facets of the industry such asdrug patents, irrational practice of medicine, excessive useof ingredients in multi-drug formulations, proliferation ofsuch preparations and baneful influence on the medical profession etc. of medicines marketed under brand names.' TheHathi Committee having decided to look into this aspect constituted an expert panel of eminent medical specialists. Thispanel examined the question of substitution of brand namesby generic names in all its details and submitted a report tothe Committee which in turn examined the matter includingfacets such as Indianisation of brand names, impact of drugprices, bio-availability, quality of drugs, enforcement of drugcontrol, multiple ingredient preparations, exports of drugs,labelling difficulties, impact on small scale industry, patentrights, distribution system, acceptance by the medical profession, role of distributors and pharmacists, effect on thegrowth of pharmaceutical industry, difficulties and inconvenience in the use of tongue twisting generic names etc.The 'Committee also met representatives of the various organisation such as Indian Medical Association, Organisation ofthe Pharmaceutical Producers of India, Indian Drugs Manufacturers Association of India, manufacturers' organisationand members of the Development Council for Drugs andPharmaceuticals to elicit opinion on these important questions of far reaching significance. Memoranda submitted byState Governments, public sector undertakings as also smallscale sector undertakings and different associations were alsoconsidered. Aftertaking into consideration all pros andcons of the problem the Committee came to the conclusionthat there was a strong case for substitution of brand namesby generic names. The Committee, however, felt that IT would not be advisable to accomplish this change immediately and suggested that brand names should be abolishedin a phased manner and a beginning should be made forchange over to generic names starting with single ingredientpreparations of 13 drugs. The Committee also recommended that the Drugs Controller (India) should, while grantingpermission, be requested not to give recognition to brandnames of new drugs and the drugs should not be allowed tobe marketed under brand names when first introduced inthis country. This report was considered by the CentralGovernment in March, 1978 and the report was laid on theTable of the Lok Sabha on 29/03/1978. In pursuanceof the decision taken by the Government that brand namesshould be abolished in a phased manner it was decided thatto start with this policy be implemented in respect of fivesingle ingredient drugs and that no new drug should bepermitted to be marketed under brand name. Draft amended rules were published on 16/08/1980. The objections and representations received were duly considered andthe impugned notification was issued on 17/01/1981.The contentions of the petitioners that the impugned notification impinges upon Articles 14 and 19 of the Constitutionand the same is ultra virus the rule making power have notbeen specifically denied. The impugned notification, however, has been supported by contending that it was withinthe ambit of the 'rule making power. It is the respondents'case that justice and fair play requires that the impugnednotification should not be struck down as otherwise it wouldnullify the efforts of the Government of India to encouragethe marketing of drugs by their generic names. The counter affidavits sworn by Shri Panchapakesan on behalf of the firstthree respondents goes on to state, 'The multi-national drugcartels of the world are using this country for cashing in onthe brand names of their products for the last few decadeswhen the Indian Drug Industry was at its infancy. Nowthat the Indian drug industry has made phenomenal progress, it is the duty of the Union of India to ensure that thesmall and medium-scale drug manufacturers in the countryshould be given equality of opportunity to market the drugsby the generic names and compete with the products ofthe multi-national companies. So long as these drugs areof pharmacopoeial standards, their therapeutic efficacy canbe assured. The claims made by the petitioners that theirproducts are of a much higher standard than the pharmacopoeial standards are of no relevance since it is not provedwhether the same are at all necessary for medical use. TheHathi Committee has dealt at length on various stepsthat the Government of India should take to encourage theIndian small and medium-scale manufacturers to producedrugs of standard quality. The enforcement of the rule willhelp in achieving these objectives.' At another place in thesame affidavit it is said, 'The present petition has beenfiled by the petitioners in order to enable them to continue todominate the market by virtue of their brand name throughsophisticated, aggressive, high pressure promotional tactics.The drug, namely Novalgin is a prescription drug and thesame is available through chemists only on prescription. the petitioner is assuming that the present policy will enable thechemist to push them out of the market. This is, however,not the truth. The medical practitioners are still free to indicate the preference of the manufacturers on their prescription slip (emphasis ours). For example, in the instant caseit would read as Analgin-Hoechst'. The medical practitioneris taught through his medical school period Pharmacologyonly in generic terms. It is subsequently, during his practice as a medical practitioner, that he is through high pressuresalesmanship. It is to curtail this mal-practice that the highlevel committee recommended that the brand names be discontinued and drugs be known only in generic terms. Forthis reason this Hon'ble Court will not exercise its extraordinary power under the Constitution to enable the presentpetitioners to continue to dominate the market in the drugmentioned hereinabove and for this reason alone the writpetition merits dismissal.

(16) The impugned notification is in pursuance of thedecision of the Govenment of India and will be kept underconstant review in the light of actual experience. In theevent the respondents find from actual experience that theworking of the decision contained in the notification is notsatisfactory, the said notification would be reviewed.

(17) The present restriction sought to be placed by theimpugned notification is only on the use of the brand nameand not the manufacturing of the drug. The restrictionsought to be placed would also enable other manufacturersof the same drug to have a fair competition with thepresent petitioners, who are undisputedly the leaderof the drug 'Novalgin'. The petitioners do not manufacturethe basic drug contained in the brand Novalgin. The petitioner buys it mainly from Ms. Idpl which is the largestdrug manufacturer in the whole country. All that the presentpetitioners do is to market the said drug. The petitionersformulate it into tabletinjection form and market it underthe brand name. From this it would appear that the petitioners are only using their marketing strategy to dominatethe market....

(18) Respondent No. 4 in C.W. No. 1605 of 1981 i.e.the Consumer Education and Research Centre, Ahmedabad,which has been allowed to intervene, generally supported thestand of respondents 1, 2 and 3. Its stand is that there isnothing special in the formulations prepared by the petitionerwhich gets the bulk drug from Indian Drugs and Pharmaceutical Private Ltd. and that the impugned notificationwould really effectively reduce the price of the drug 'Novalgin' which the petitioner produces and markets. It alsochallenges that the petitioner's claim about the bio-availability of a drug, particularly like Novalgin, has any relevance.

(19) Learned counsel for the parties have addressed veryilluminating arguments on all the facets of the case. In theview that we are going to take it is neither necessary nordesirable that we comment upon all the aspects on whicharguments have been addressed. We would also not liketo comment upon whether it is desirableor not desirable to have brand names or trade names. Aswe have said earlier, we will also not like to express anyopinion about 'Betapressin' becaue it is neither being marketed by the petitioners nor is it one of the five drugs included in the impugned notification. We would like to confineourselves to examining the scope of the rule making power,whether the impugned notification is ultra virus the Act andthe Rules, in the first instance.

(20) The Preamble of the Act, no doubt, says tliat it isan Act to regulate the import, manufacture, distribution andsale of drugs and cosmetics but the real obJect of this Acthas been judicially examined on numerous occasions. InChimanlal Jagjivandas Sheth v. State of Maharashtra, : AIR1963SC665 , while examining whether substances likeabsorbent cotton wool, roller bandages and gauze used foror in treatment of diseases fall within the ambit of the Act,it was observed that the Legislature designedly extended thedefinition of 'drug' so as to take in substances which arenecessary aids for treating surgical or other cases. 'The mainobject of the Act is to prevent sub-standards in drugs, presumably for maintaining high standards of medical treatment.That would certainly be defeated if the necessary concomitants of medical or surgical treatment were allowed to bediluted : the very same evil which the Act intends to eradicate would continue to subsist.'

(21) Again, in Indian Chemical and PharmaceuticalWorks, Hyderabad v. The State of Andhra Pradesh andothers, : [1966]2SCR110 , a Constitution Bench ofSupreme Court held, 'The Drugs Act, 1940, which mainlyconcerned with standard and quality of drugs manufacturedin this country and, thereforee, controls, the manufacture,sale, and distribution of drugs has nothing to do with dutiesof excise and with their imposition on narcotics and narcotic drugs.'

(22) From the above two observations of Supreme Courtit becomes obvious as to what is the real object of theAct and what is the legislative scheme and policy of thisenactment. Indeed, the Act. as Section 2 lays down, is inaddition to and not in derogation of any other law and thereal purpose of the enactment is to ensure quality and standards of drugs manufactured, imported, distributed and soldin the country. If that be correct, as indeed it must beheld to be, we have to read Section 12 and Section 33 givingi the rule making power in the above context and of the provisions of Chapter Iii and Chapter Iv of the Act. We havealso to see that no rule is made under the Act which is vocative of any other law or impinges upon any other right rscognised or conferred by any other law. If a rule impingesupon any other law or any other right, it must be held tobe outside the rule making power of the Central Government. Section 2 on the one hand and Sections 12 and 33 of the Act on the other have all to be read together, beingpart of the same enactment and part of the same legislativescheme.

(23) As we have noticed earlier. Section 12 conferspower on the Central Government, after consultation withthe Board and after previous publication by a notification inthe Official Gazette, to make rules for the purpose of givingeffect to the provisions of Chapter III. Similarly, Section 33 confers a like power to be exercised in the like manner forthe purpose of giving effect to the provisions of ChapterIV of the Act. Chapter Iii is concerned with import offoreign drugs while Chapter Iv is concerned with manufacture, sale and distribution of drugs in India. Clause (1)of Section 12 and clause (j) of Section 33 in terms of regulating the mode of labelling packages in which the drugsare offered for sale either after import in one case and aftermanufacture in the other. The impugned part of Rule 96deals with what is printed or endorsed on such labels constituting the packages in which the drugs are offered for sale.The question is. Can such restriction be imposed by wayof regulating the mode of labelling

(24) Farming and promulgation of rules is, as is well-known, subordinate legislation. The grounds on whichvalidity of subordinate legislation can be challenged are bynow settled. The challenge may be on the ground that thepower to make the law could not have been exercised inthe circumstances which were prevailing at the time whenthe law was made or that the condition precedent to themaking of the legislation did not exist or the authority whichmade the law was not competent to do so or that the lawwas not made according to the procedure prescribed or thatthe provisions were outside the scope of the enabling powerin the parent statute or were otherwise vocative of its provisions or any other existing statute or a constitutional provision. The impugned portion of Rule 96, it is urged, hasbeen promulgated outside the scope of the enabling powerin Sections 12 and 33 of the Act; it is also vocative of Section 2 of the Act read with the provisioris of the TradeMarks Act and is unreasonable restriction as well as havingno nexus with the object to be achieved and so impingingthe provisions of Article 14 and 19 of the Constitution.It has also been urged that vis-a-vis the petitioners,' theimpugned rule has also to be struck down on the ground ofhostile discrimination. In our opinion, the petitioners contentions on all these counts have great force and the respondents have failed to put forth any cogent argument to refutethe claim made.

(25) It is not necessary to dilate on all the points urgedbefore us. thereforee, we shall only touch upon those contentions which, in our opinion, by themselves entitle the petitioners to succeed.

(26) In Chimanlal Jagjivandas Sheth's case and theIndian Chemical and Pharmaceutical Works, Hyderabad'scase, noticed by us earlier, the Supreme Court has clearlyStated what is the purpose and scope of the provisions ofthe Act. thereforee, powers conferred by Section 12 and 33 have to be exercised for effectuating that purpose. Forpromotion of indigenous drug industry it could be considered a reasonable policy that operations of multi-nationalcompanies entering the trade in our country should be prohibited or restricted. This object, however, is foreign tothe scheme and purposes of the Act. If imports are to bebanned altogether or are to be made difficult, it would bea negation of the provisions of Chapter III. Indeed, ChapterIII in terms postulates imports. The respondents can makea law or amend any existing law to effectuate the policywhich is discerned from the Central Government acceptingthe report of the Hathi Committee. We are however, unableto appreciate how insisting upon printing or writing of onlythe generic names could assist in effectuating such policy.The contentions of the respondents in this regard haveabsolutely no force. No doubt Hoechst, Cyanamid andPfizer are multi-national companies but they are manufacturing the drugs in question in India. They are not importing the drugs from abroad. The basic drug from whichformulations are made is also manufactured in India andobtained by the three companies from the manufacturers inIndia. How Hathi Committee's recommendations are relevant in such circumstances is beyond comprehension. The argument completely fails because when we examine thecase of one of the five drugs in question, namely, Mejarol.Mejoral, the generic name of which will be Aspirin is manufactured by an Indian Company, namely, Cosme Farme,which has no multi-national links. In this view of thematter, the impugned amendment has to be held to be arbitrary and irrational and certainly not sub-serving the professed purpose of preventing multi-nationals from dumpingtheir goods in our country. It is then said that the multinational companies by high-powered advertising and marketing techniques are exploiting their trade names. The argument is un-understandable. Mejoral, which is a formulationof aspirin for infants, provides a clear answer to the unacceptability of this stand. The power to regulate labellingcannot be used obliquely to ban imports and that too whenit adversely affects drugs which are either not imported orhave no connection with trade names used by multi-nationalcompanies. thereforee, the exarcise of the power mustbe held to be outside the ambit of the scope of the rules.

(27) The impugned rules must also be held to transgressthe scope of the power conferred by relevant clauses ofRules 12 and 33, read with Section 2 of the Act. In termsSection 2 lays down that the provisions of the Act shall bein addition to and not in derogation of the Dangerous DrugsAct and any other law for the time being in force. TheTrade Marks Act is a valid law in force. We have earliernoticed the relevant provisions of the Trade Marks Act.Prohibiting the use of trade names under the garb of thepower conferred by Section 12 and 33 brings the impugnedportion of Rule 96 in conflict with the provisions of theTrade Marks Act. The petitioners, who are proprietorsor users of the trade marks, have a right to use their trademarks under the provisions of the Trade Marks Act. Denying them this use not only puts their property rights intojeopardy but is in clear derogation of the rights guaranteedby the provisions of the Trade Marks Act. thereforee, anyrule which is framed which would be in'derogation of anothervalid law cannot be countenanced in view of the provisions of Section 2 of the Act. The rules have to be complementary to the provisions of the Act and the provisions of othervalid laws. Rules cannot be in conflict with the provisions of the Act or the provisions of other valid laws.

(28) The impugned notification must also be held to beone which results in hostle and inviduous discrimination.The contentions in this regard are set out in paragraph 19(G), (H), and (1) of the' petition filed by the Hoechst.Similar contentions have been made in the other petitionsalso. The Hathi Committee selected 13 drugs set outin Annexure 3 to Chapter X of the Committee Report. These13 drugs were selected by the Hathi Committee for trying outits proposals by way of a beginning and by way of experimentation. This report was accepted by the Central Government. There is no Explanationn given in the counter-affidavits filed by way of return as to why the Central Governmentaccepted the report of the Hathi Committee vis-a-vis 13 drugswhen there were several other drugs in the same categorieswhich were left out, namely, antibiotics, antipyretics andanalgesics. The hostile discrimination is further compounded by the Central Government picking out five drugs to beincluded in Schedule 'W' even out of the 13 drugs mentioned by Hathi Committee. On what basis and for what reasonthese five drugs were picked out by the Central Government is still not explained and the trade, the industry andeven we are kept in the dark about it. A reasonable classification is permissible under constitutional provisions. Aclassification may be reasonable even when a single individual is treated as a class by himself if there are special circumstances or reasons applicable to him alone and notapplicable to others, as laid down by the Supreme Court inR..K Dalmia v. Tendulkar, : [1959]1SCR279 . Nocircumstances have been pointed out by the Central Government as to why only five drugs have been incluled in theSchedule leaving other drugs in the same categories out ofit. There is no principle or basis or rational criterion pointed out for doing so. The Hathi Committee had laid considerable stress on placing a control on life saving drugswhich according to it should be made available to the consumer at low prices. That appeared to be the basis of therecommendations made by the Hathi Committee which byway of example mentioned 13 drugs. The prices are controlled under the Essential Commodities Act by the Drugs(Prices Control) Order. Without amending that ordervis-a-vis the five drugs in question the Same have been putin Schedule 'W to implement only a part of the proposalof the Hathi Committee which proposal was an integratedscheme. Why this departure is not known. Why life savingdrugs have been left out of Schedule 'W' is again a mystery.This makes the issue of the notification wholly arbitraryand vocative of Article 14 of the Constitution. The banning of use of the trade name, besides being vocative of theprovisions of the Trade Marks Act, as noticed by us earlier,is also vocative of the provisions of Article 19(l)(g) ofthe Constitution. This provision guarantees to every citizenthe right to practice any profession or to carry on anyoccupation, trade or business. The factual basis for thiscontention on behalf of the petitioners is set out in paragraph19, Ground (k) and sub-grounds (i) to (xiv) of the petition filed by Hoechst. Similar submissions have been madein the other petitions also. There is no specific reply tothese averments in the counter-affidavit. In our view brandnames are absolutely essential to identify each drug to theconsumer. When brand names are used the formulationsof different manufacturers are made known to the consumer leaving the choice with the doctor to prescribe a particular drug manufactured by a particular party. It wassaid on behalf of the respondents that there is no objectionto the drug being prescribed by the doctor by its generic name with the manufacturer's name being indicated. Ifthat be so, it is wholly un-understandable why the brandnames cannot be allowed to be used. If brand names arenot allowed to be used, it interferes with the right to carryon trade or business. The sale of a formulation manufactured by a particular manufacturer would be dependentupon the chemist who for monetary or other reasons mayprefer to sell one durg rather than the other. The formulator would be, thereforee, at the mercy of the chemist. The argument about high-powered marketing techniques andadvertisement has no relevance in modern India. Surely, itcould not be the respondents' intention that the Indian formulator with no multi-national connection should continueto market his goods without adopting modern marketingtechniques. In any case, the burden was on the respondentsto show the reasonableness of the restriction if respondentscontend that Article 19 of the Constitution is not violated.They fail to do so.

(29) There is one other aspect on which we would liketo comment to show how arbitrary and unreasonable theimpugned restriction is. We take the example of Mejoral.This is a formulation of aspirin for infants. It is producedby Cosme Farma. To us it is inconceivable that Mejoralmeant for infants should be sold under the generic name ofaspirin alone. A doctor or a parent who wants 'BabyAspirin' cannot be left at the mercy of the chemist whomay give aspirin meant for adults for consumption byinfants. Similarly, we cannot accept the contention thatthere would be no difference in formulations made by different formulators out of the same bulk drug. High-poweredadvertisement techniques apart, it is common knowledgeand is well supported by medical opinion that two different patients may react differently on taking the same drug.Obviously, this is because of the difference in what the petitioners call the bio-availability, i.e. therapeutic impact.Respondent No. 4's contention in support 'of what lias beensaid by first three respondents that there is no particulardifference in therapeutic impact of various formulationsmanufactured from the same bulk drug cannot be accepted.We are inclined to agree with what the petitioners saybecause that is not only based on reason but also on experience.

(30) As we have noticed earlier, the petitioners have noobjection to giving a generic name along with the tradename and even displaying the generic name more prominently than the trade name. thereforee, holding that the impugned rule is bad in law, we strike down the impugnedportion of Rule 96 to the extent that the said five drugsincluded in Schedule 'W will be marketed only under generic or proper name, Clause (B) of the impugned notificationdated 17/01/1981 is held to be illegal and ultra virus ofboth the Act, other laws and Articles 14 and 19(l)(g) ofthe Constitution. The impugned amendment in Rule 96 isstruck down. The respondents are further directed toamend the said notification and the maximum restrictionthat they can put is that the proper name of the drugwill be given more prominently than the trade name, as ispostulated by clause 2(b) of the impugned notification.No other relief need be granted. The rule is made absolutein the above terms.

(31) The petitioners will be entitled to their costs ineach case. Counsel's fee in each case: Rs. 550.


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