Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
Union of India (UOI) and Anr. Vs. Cynamide India Ltd. and Anr.
AIR 1987 SC 1802, 1987 (1) SCALE 728, (1987) 2 SCC 720, [1987] 2 SCR 841
Hon’ble Judges/Coram: O. Chinnappa Reddy and K.N. Singh, JJ.
Date of Decision: 10.04.1987
FACTS: –
Paragraph 3 of the Drugs (Prices Control) Order, 1979 made by the Central Government in exercise of powers under s. 3(2)(c) of the Essential Commodities. Act, 1955 empowers the Government, after making such enquiry as it deems fit, to fix the maximum price at which the indigenously manufactured bulk drug shall be sold. Clause (2) of Paragraph 3 provides that while so fixing the price of a bulk drug, the Government may take into account the average cost of production of such bulk drug manufactured by an efficient manufacturer and allow a reasonable return on net worth. Paragraph 27 enables any person aggrieved by any notification or order under the various paragraphs aforesaid to appeal to the Government for a review. The Central Government issued notifications under paragraph 3, fixing the maximum prices at which various indigenously manufactured bulk drugs could be sold. The manufacturers first filed review applications under paragraph 27 of the Order and thereafter writ petitions under Art. 226 of the Constitution challenging the notifications. The High Court quashed those notifications on the ground of failure to observe the principles of natural justice. In the appeal by the Union of India, it was contended that the fixation of maximum price under paragraph 3 of the Order was purely a legislative activity and, therefore, not subject to any principle of natural justice. For the respondents, it was contended that the provision for a review of the order determining the price, established that price fixation under the Order was a quasi-judicial activity obliging the observance of the rules of natural justice; that the review, for which provision is made by paragraph 27, was certainly of quasi-judicial character.
ISSUE: –
Whether Price fixation of bulk drugs by the government and provisions enabling manufacturers to seek a review of any order fixing the maximum price requires application of Principle of Natural Justice?
JUDGMENT: –
Price fixation is neither the function nor the forte of the Court. The Court is concerned neither with the policy nor with the rates. But it has jurisdiction to enquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. If the legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, the Court will, if necessary, enquire into the question whether the policy and factors were present to the mind of the authorities specifying the price. Its examination would stop there. The mechanics of price fixation are not concern of the executive. The Court will not reevaluate the considerations even if the prices were demonstrably injurious to some manufacturers or producers. It will, of course, examine if there was any hostile discrimination.
Profiteering in the scarce resources of the community much needed life-sustaining food stuffs and fife saving drugs is diabolic. It is a menace which has to be lettered and curbed. The Essential Commodities Act, 1955 is legislation towards that end, in keeping with the duty of the State enshrined in Art. 39(b) of the Constitution towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. The right of the citizen to obtain essential articles at fair prices and duty of the State to provide them are thus transformed into the power of the State to fix prices and obligation of the producer to charge no more than the price fixed.
A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character not directed against a particular situation. It is intended to operate in future. It is conceived in the interest of the general consumer public. Price fixation is more in the nature of a legislative activity than administrative. A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in accordance with the requirements of policy. Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future; administration is the process of performing particular acts, of issuing particular orders or of making decisions which apply general rules to particular cases.
Price fixation may occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be determined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire a quasi-judicial character. Section 3(2)(f) of the Essential Commodities Act enables the 845 Central Government to make an order requiring any person engaged in the production of any essential commodity to sell the whole or a specific part of the quantity produced by him to the Government or its nominee. Section 3(3)(C) provides for the determination of the price to be paid to such a person. If the provisions of s. 3(2)(c), under which the price of an essential commodity may be controlled, are contrasted with s. 3(3)(C) under which payment is to be made for a commodity required to be sold by an individual to the Government, the distinction between a legislative act and a non-legislative act will at once become clear. The order made under s. 3(3)(c), which is not in respect of a single transaction, nor directed to a particular individual, is clearly a legislative act, while an order made under s. 3(3)(C), which is in respect of a particular transaction of compulsory sale from a specific individual, is a non-legislative act.
The order made under s. 3(2)(c) controlling the price of an essential commodity may itself prescribe the manner in which price is to be fixed but that will not make the fixation of price a non-legislative activity, when the activity is not directed towards a single individual or transaction but is of a general nature, covering all individuals and all transactions. The legislative character of the activity is not shed and an administrative or quasi-judicial character acquired merely because guidelines prescribed by the statutory order have to be taken into account. Legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case of Parliamentary legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing, in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. But where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity.
Nothing in the scheme of the Drugs (Prices Control) Order, 1979 leads to the inference that price fixation under that Order is not a legislative activity but a quasi-judicial activity which would attract the observance of the principles of natural justice. Nor is there anything in the scheme or the provisions of that Order which otherwise contemplates the observance of any principle of natural justice or kindred rule, the non-observance of which would give rise to a cause of action to a suitor. Occasionally the legislature directs the subordinate legislating body to make ’such enquiry as it think fit’ before making the subordinate legislation. In such a situation, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the subordinate legislation, the nature and the extent of the enquiry is in the discretion of the subordinate legislating body and the subordinate legislation is not open to question on the ground that the enquiry was not as fur as it might have been. The provision for such an enquiry is generally an enabling provision, intended to facilitate the subordinate legislating body to obtain relevant information’ from all and whatever source considered necessary. It is the sort of enquiry which the legislature itself my cause to he made before legislating, an enquiry which will not confer any right anyone other than the enquiring body. It is different from an enquiry in which an opportunity is required to the given to persons likely to the affected. The former is an enquiry leading to a legislative activity while the latter is an enquiry which ends in an administrative or quasi-judicial decision.
In the present case, paragraph 3 of the Drugs (Prices Control) Order, 1979 is an enabling provision. “Such an enquiry as it thinks fit” contemplated by it is an enquiry of the former character to he made for the purposes of fixing the maximum price at which a bulk drug may he sold, with a view to regulating its equitable distribution and making it available at a fair price for the benefit of the ultimate consumer in consonance with Art. 39(b) of the Constitution. What is necessary is that the average cost of production, by ’an efficient manufacturer’ must be ascertained and a reasonable return allowed on ’net worth’. Being a subordinate or delegated legislative activity, the enquiry must necessarily comply with the statutory conditions, if any, no more and no less, and no implications of natural justice can be read into it unless it is a statutory condition.
HELD: –
As long as the method prescribed and adopted by the subordinate legislating body in arriving at the cost of production of bulk drugs was not arbitrary and opposed to the principal statutory provisions, it could not legitimately be questioned and price fixation not being a quasi-judicial/judicial activity warrants the application of principle of natural justice.
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