The Delhi High Court dismissed the Union of India’s appeals seeking recovery of the 16% trade margin from pharmaceutical manufacturers under the DPCO, 1995. The Court held that the margin was statutorily reserved for retailers and never accrued to manufacturers, and therefore could not be treated as “overcharge.” It further ruled that interest liability arises only after default following a government direction to deposit amounts, not retrospectively from the date of sale. Applying the doctrine of merger, the Court held that the issues stood conclusively settled by the Supreme Court and could not be reopened.

Legal Issue

Whether manufacturers are liable to repay the 16% trade margin as “overcharge” under the Drug Price Control Order (DPCO), 1995, and whether interest can be levied for the period prior to government orders directing deposit of overcharged amounts.

Brief Facts

These connected appeals arose from writ petitions filed by pharmaceutical companies against recovery proceedings initiated by the Union of India under the DPCO, 1995. Paragraph 19 of the DPCO fixed maximum retail price with a 16% trade margin for retailers, obliging manufacturers to sell at retail price minus 16%. The Union sought to recover this margin as “overcharge” from manufacturers, along with interest from the date of sale.

The Allahabad High Court in T.C. Healthcare Pvt. Ltd. v. Union of India (2010) held that the 16% margin never accrued to manufacturers and could not be recovered as overcharge, and that interest liability arose only after default following government orders directing deposit. This decision was affirmed by the Supreme Court in T.C. Healthcare Pvt. Ltd. v. Union of India (2020). Review and curative petitions filed by the Union were also dismissed. Despite this, the Union argued before the Delhi High Court that the Supreme Court had not expressly discussed these two issues, leaving them open for reconsideration. The pharmaceutical companies contended that the issues stood conclusively settled, and by doctrine of merger the Allahabad High Court’s judgment merged into the Supreme Court’s decision.

Judgment 

The Division Bench dismissed the Union’s appeals, holding that the issues were conclusively settled. The Court noted that the grounds relating to trade margin and interest were expressly raised before the Supreme Court in the Union’s pleadings, including review and curative petitions, and the Apex Court consciously affirmed the High Court’s conclusions.

On trade margin, the Court reiterated that the 16% margin was statutorily reserved for retailers and never accrued to manufacturers; hence it could not be recovered as overcharge. On interest, liability arose only after default following government orders directing deposit, not retrospectively from the date of sale. The Court applied the doctrine of merger, holding that once the Supreme Court affirmed the High Court judgment, the issues stood conclusively adjudicated and could not be reopened.

The Judgment reinforces judicial discipline by rejecting attempts to re-litigate settled issues, clarifies the scope of the doctrine of merger, and strengthens the position that manufacturers cannot be saddled with recovery of trade margins meant for retailers, while interest accrues only after default post-order under Section 7A of the Essential Commodities Act, 1955.

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Case Name

Union of India & connected appeals v. Best Laboratories Pvt. Ltd., Shimal Investment & Trading Co., Amkay Laboratories Pvt. Ltd., Hesa Pharmaceutica & Ors.

Neutral Citation

2025:DHC:11575-DB

Date

19 December 2025 (Reserved on 18 November 2025)

Bench

Hon’ble Mr. Justice Anil Kshetarpal
Hon’ble Mr. Justice Harish Vaidyanathan Shankar
(Delhi High Court, Division Bench)