Kerala High Court: In a batch of three writ petitions concerning the validity of a Circular dated 4-09-2024 issued by the Office of the Drugs Controller, one petition sought implementation of the circular while the other two challenged its legality. The impugned circular required applicants seeking grant or renewal of drug licences to incorporate an undertaking in the affidavit accompanying their applications that they would not display discount boards in their pharmacies. It also mandated modification of the affidavit by replacing the expression “misleading claims” with words relating specifically to discount-board claims.
Deciding the matter, a Single Judge Bench of Bechu Kurian Thomas, J. upheld the validity of the circular and held that the licensing authority possesses incidental regulatory powers to prescribe reasonable conditions while granting or renewing drug licences. The Court observed that the circular was intended to protect consumers from misleading or vague discount advertisements and to promote transparency in the sale of medicines. Holding that the circular did not prohibit pharmacies from offering discounts or selling medicines below the Maximum Retail Price (MRP), but merely regulated deceptive promotional practices, the Court ruled that the stipulation did not amount to an unreasonable restriction on the right to carry on business.
Background
The dispute arose from a Circular dated 4 September 2024 issued by the Office of the Drugs Controller. The circular mandated that applicants seeking grant or renewal of drug licences submit an affidavit undertaking not to display discount boards in their establishments and required modification of the language used in the prescribed affidavit. Pharmacy owners and drug dealers challenged the circular, contending that neither the Drugs and Cosmetics Act, 1940 nor the Drugs and Cosmetics Rules, 1945 prohibited sale of medicines below the Maximum Retail Price (MRP) or disclosure of discounts offered to customers. They argued that the circular unlawfully interfered with their right to conduct business and advertise legitimate discounts.
The petitioners asserted that offering medicines at discounted prices benefited the public by making healthcare more affordable. They contended that displaying discount information was a transparent commercial practice and that the licensing authority lacked statutory authority to impose restrictions on such advertisements. On the other hand, the State and the Drugs Controller maintained that the department did not oppose discounts as such but sought to curb misleading advertisements displaying exaggerated discount percentages, sometimes reaching 80%, which could mislead consumers into believing they were receiving substantial concessions when, in reality, such claims might not be accurate.
Analysis and Decision
Examining the provisions of the Drugs Price Control Order, 2013, the Court observed that while the law prohibits sale of medicines above the MRP, there is no restriction on selling them at a lower price. The Court clarified that the impugned circular did not prevent pharmacies from offering discounts or selling medicines below the MRP. Rather, it sought to regulate the manner in which discounts were advertised to prevent consumers from being deceived by vague or misleading promotional claims.
The Court emphasised that statutory authorities must act within the framework of law but recognised that powers expressly conferred upon an authority also carry incidental powers necessary to achieve the objectives of the statute. Since the Drugs Controller is responsible for ensuring proper regulation of the pharmaceutical sector and safeguarding public interest, the authority was entitled to prescribe conditions in licence applications to prevent misleading practices. The Court found that requiring licensees to undertake not to display deceptive discount boards did not amount to an unreasonable restriction on their fundamental right to carry on business.
Referring to the principle that regulatory authorities must be afforded a degree of flexibility or “play in the joints” while discharging their statutory functions, the Court held that judicial interference with regulatory measures is unwarranted unless such measures are arbitrary, disproportionate, or severely infringe protected rights. The Court noted that the Drugs Controller had subsequently rephrased the undertaking to state that licensees would not display “any discount boards containing misleading or vague claims regarding the price of drugs.” According to the Court, this revised formulation merely imposed an obligation of honesty and transparency upon retailers and did not prejudice their commercial interests.
“Unless such directives of the regulatory body are so pervasive and has no apparent benefit for the public and on the contrary, curtails the right of the licensee to carry on a business, it is not proper for the Court under Article 226 of the Constitution of India to interfere, with such stipulations. The Drugs Controller has a significant role in the matter of drug licensing. Hence, his wisdom in requiring incorporation of a condition in the agreement/affidavit for the public benefit cannot be said to be a ground for interference by this Court.”
Holding that the circular represented a legitimate exercise of regulatory authority intended to protect consumers from misleading advertisements, the Court dismissed the writ petitions challenging the circular. At the same time, it allowed the petition seeking enforcement of the circular and held that the authorities would be at liberty to initiate appropriate action against licensees who failed to comply with the stipulated undertaking.
[Pharmadude Pharmacy Vannappuram v. State of Kerala, W.P.(C) Nos. 39706 of 2024, 41978 of 2024 and 1447 of 2025, decided on 19-6-2026]
Advocates who appeared in this case:
For petitioners: Karthika Maria, Arun Thomas, Anil Sebastian Pulickel, Veena Raveendran, Kurian Antony Mathew, Mathew Nevin Thomas, Joe S. Adhikaram, Leah Rachel Ninan, Navya Seby, Shyni William, Anjaly Elias, Shinto Mathew Abraham, M. A. Vaheeda Babu, Babu Karukapadath, P. K. Abdul Rahiman, Arya Raghunath, Karukapadath Wazim Babu, P. Lakshmi, Aisha E. M., Abuasil A. K., Manu Krishna S. K., Haniya Nafiza V. S., Anil Kumar M. Sivaraman, Lakshmisree P. S.
For respondents: Sreejith V. S. (Senior Government Pleader), Laya Mary Joseph (Government Pleader), P. Usha Kumari, V. S. Sreejith (Senior Government Pleader), Laya Mary Joseph (Government Pleader), P. Usha Kumari, V. S. Sreejith (Senior Government Pleader), Laya Mary Joseph (Government Pleader), P. Usha Kumari
