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M/S. Astalife, C/o. Elite Pharma, Represented by its Authorized Representative, Rep. by Jayant Surana, Chennai v/s The Union of India, Through the Deputy Secretary, Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, New Delhi & Others

    WP. No. 18433 of 2017 & W.M.P. No. 19996 of 2017
    Decided On, 27 July 2022
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MR. JUSTICE R. SUBRAMANIAN
    For the Petitioner: T.D. Selvan Babu, Advocate. For the Respondents: R1 & R2, T.L. Thirumalaisamy, Central Govt. Standing Counsel, R3, V. Yamunadevi, Special Government Pleader.


Judgment Text
(Prayer: Writ petition filed under Article 226 of the Constitution of India praying for issuance of a writ of certiorarified mandamus calling for the records of the 2nd respondent in Demand Notice F.No.21(2292)/2012/Div.IV/NPPA dated 7th/8th March, 2016 read with Order bearing Pro.No.G2/7291/2017 dated 25.05.2017 of the 3rd respondent at the behest of the 2nd respondent and quash the same and consequently forbear the respondents, their officers, men, agents and servants from demanding or collecting alleged interest amount/ arrears of interest amount from the petitioner by taking any coercive action against the petitioner, directly or through the revenue authorities in pursuance thereof.)

1. Challenge in the writ petition is to the order of the 2nd respondent requiring the petitioner to pay a sum of Rs.38,37,517/- towards interest on the over charged amount. The order impugned dated 07/08-03-2016 also states that action for recovery under the Revenue Recovery Act will be launched, if the amount demanded is not paid within 10 days from the date of receipt of the said notice.

2. The petitioner which is a Pharmaceutical Company had produced and marketed certain drugs. The respondents claim that one of the drugs manufactured by the petitioner viz., Ecosprin Gold 20 Forte capsules has been sold by the petitioner at a price higher than the price fixed under the Drugs (Price Control) Order, 1995.

3. A notice was issued to the petitioner under Section 3 of the Essential Commodities Act demanding a sum of Rs.2,86,08,105/-. The petitioner responded to the said notice claiming that the product viz., Ecosprin Gold 20 Forte capsules is a different drug combination from the products for which price have been fixed by the respondents under the Drugs (Price Control) Order, 1995. The petitioner also claimed that if at all it is liable to pay the difference in price that would only be to the extent of Rs.67,94,993/- and not Rs.2,86,08,105/- as demanded in the notice dated 08.10.2015. It appears that the respondents accepted the calculation of the petitioner and the amount as calculated by the petitioner viz., Rs.67,94,993/- was required to be paid and the same was paid on 30.11.2015.

4. After receipt of the entire amount on 30.11.2015, the Authority viz., Director of National Pharmaceutical Pricing Authority issued present impugned demand claiming an interest of Rs.38,37,517/-. The petitioner claimed that the interest charged is against the terms of the provisions of the enactment. However, the respondents issued the order impugned in the writ petition on 07/08-03-2016 requiring the petitioner to pay the interest.

5. Mr.T.D.Selvan Babu, learned counsel appearing for the petitioner would contend that the liability to pay interest would arise only on the commission of default in payment of any amount due and payable to the Government. Relying upon Section 7A of the Essential Commodities Act which reads as follows:-

7A. Power of Central Government to recover certain amounts as arrears of land revenue:-

(1) Where any person, liable to –

(a) pay any amount in pursuance of any order made under section 3 or,

(b) deposit any amount to the credit of any Account of Fund constituted by or in pursuance of any order made under that section, makes any default in paying or depositing the whole or any part of such amount, the amount in respect of which such default has been made whether such order was made before or after the commencement of the Essential Commodities (Amendment) Act, 1984, and whether the liability of such person to pay or deposit such amount arose before or after such commencement be recoverable by Government together with simple interest due thereon computed at the rate of fifteen per cent per annum from the date of such default to the date of recovery of such amount, as an arrear of land revenue or as a Public Demand.

(2) The amount recovered under sub-section (1) shall be dealt with in accordance with the order which the liability to pay or deposit such amount arose.

(3) Notwithstanding anything contained in any other law for the time being in force or any contract to the contrary, no court, tribunal or other authority shall grant any injunction or make any order prohibiting or restraining any Government from recovering any amount as an arrears of land revenue or as a Public Demand in pursuance of the provisions of sub-section (1).

(4) If any order, in pursuance of which any amount has been recovered by Government as an arrear of land revenue or as a Public Demand under sub-section (1) is declared by a competent court, after giving to the Government a reasonable opportunity of being heard, to be invalid, the Government shall refund the amount so recovered by it to the person from whom it was recovered, together with simple interest due thereon, computed at the rate of fifteen percent per annum, from the date of recovery of such amount to the date on which such refund is made. Explanation- For purposes of this section, "Government" means the Government by which the concerned order under section 3 was made or where such order was made by an officer or authority subordinate to any Government, that Government'

the learned counsel would submit that in order to enable the Government to charge interest there should be an ascertainment of the amount payable by the petitioner and there must have been a demand. The liability to pay interest would commence only if the default continues beyond 15 days from the date of the demand. Therefore, according to the learned counsel, the attempt of the respondents to charge interest from the date on which the drug was sold in the market at the higher price cannot be sustained.

6. Mr.T.D.Selvan Babu, would also rely upon the judgment of the Division Bench of the Allahabad High Court in M/s.TC Healthcare Pvt. Ltd., Vs. Union of India and another reported in 2010 SCC OnLine Allahabad 834, wherein, the Division Bench of the Allahabad High Court had gone into the question of interest and held that the default of the petitioner to pay over charged amount shall arise after 15 days from the issue of the order and the liability to pay simple interest shall arise after the default is committed as per Section 7A(1).

7. Mr.T.D.Selvan Babu would add that this judgment of the Allahabad High Court has been followed by the Delhi High Court in Best Laboratories Pvt. Ltd., Vs. Union of India and others reported in 2011 (124) DRJ 390. He would also add that the judgment of the Allahabad High Court in M/s.TC Healthcare Pvt. Ltd., Vs. Union of India and another cited supra was challenged before the Hon'ble Supreme Court in Civil Appeal No.4687 of 2010 and the said Civil Appeal came to be disposed of on 15.11.2019 and the judgment is reported in (2020) 15 SCC 117. It is seen from the said report that the question relating to the time from which the interest would be chargeable was not dealt with by the Hon'ble Supreme Court in the said judgment.

8. Mr.T.L.Thirumalaisamy, learned Central Government Standing Counsel would rely upon the judgment of the Division Bench of the Bombay High Court in N.R. Jet Enterprises Ltd., Vs. National Pharmaceutical Pricing Authority, reported in 2008(6) MHLJ 206, wherein, the Bombay High Court had held that interest would be payable from the date on which the drugs were sold at the excess price. Though an appeal was filed against this judgment before the Hon'ble Supreme Court by the Producer, they chose to withdraw the appeal and there was no opportunity for the Hon'ble Supreme Court to go into the correctness of the law laid down by the Bombay High Court.

9. I have considered the rival submissions. With due respect I am unable to persuade myself to agree with the view of the Hon'ble Division Bench of the Bombay High Court. Section 7A of the Essential Commodities Act provides for charging of interest in cases where the amount demanded is not paid.

10. A perusal of the Section would show that the Central Government has got powers to recover the amounts that are payable pursuant to a determination made under Section 3 if there is any default in paying the whole or any part of any such amount, which would mean that the liability to pay would commence from 15 days after the order made under Section 3 and the charging portion of the Section which provides for charging of 15% simple interest is clear to the effect that the interest is chargeable from the date of such default to the date of recovery.

11. Therefore, the Section imposes obligation on the persons liable to pay any amount pursuant to determination under Section 3 to pay the amount within 15 days and a right is given to the Central Government to recover the said amount with 15% interest in the event of default. In this regard, I find the reasoning and interpretation of the Division Bench of the Allahabad High Court to be more in tune with the language and t

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he intendment of the provision viz., Section 7A. 12. I therefore conclude that the interest is payable only after the expiry of 15 days from the date of the demand. In the case on hand, the original demand was on 08.10.2015 and the petitioner had 15 days time to pay the same. So the actual default at the best could be said to have occurred on 23.10.2015. The petitioner has paid the principal amount on 30.11.2015. Therefore, the period of default at best could be said to be 36 days between 24.10.2015 and 30.11.2015. The respondents would be entitled to charge interest only for this period of default and not for the earlier period as claimed by them. 13. In view of the above, the Writ petition will stand allowed and the impugned demand is quashed. The respondents will be at liberty to calculate the interest as per the directions above and upon service of notice the petitioner shall pay the same. No costs. Consequently, connected writ miscellaneous petition is closed.
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