Drugs Controller Can Regulate Misleading Discount Boards In Medical Shops; Right To Business Not A Shield For Deception: Kerala High Court

"Right, liberty and freedom conferred under the Constitution of India ought not to become a weapon at the hands of private businesses to indulge in any type of conduct, under the shield of those rights," High Court of Kerala, in a significant ruling, held that the Drugs Controller possesses the authority to stipulate conditions for drug licenses that prevent the display of misleading or vague discount boards.

A bench of Justice Bechu Kurian Thomas observed that while retailers are free to sell medicines below the Maximum Retail Price (MRP), the regulatory authority has a "play in the joints" to step in and prevent deceptive practices that exploit the public under the guise of commercial freedom.

The matter arose from a Circular dated September 4, 2024, issued by the Office of the Drugs Controller, which required applicants for drug licenses to submit an undertaking that they would not exhibit discount boards in their shops. While two writ petitions were filed by pharmacy owners challenging the circular as an infringement on their right to conduct business, a third petition was filed seeking its strict implementation to curb misleading advertisements in the pharmaceutical sector.

The primary question before the court was whether the Drugs Controller has the authority to issue orders preventing medical shop owners from displaying discount sale boards. The court was also called upon to determine if such a requirement violates the fundamental right to carry on trade and business or if it constitutes a reasonable restriction intended to protect the public interest.

No Prohibition On Giving Discounts Below MRP

The Court clarified that under the Drugs and Cosmetics Act, 1940, and the Drugs Price Control Order (DPCO) 2013, there is no statutory bar preventing a dealer from selling drugs below the MRP. The bench noted that the definition of ‘maximum retail price’ under Clause 2(r) of the DPCO 2013 only restricts the sale of drugs in excess of the stipulated price, but does not prevent a reduction in the selling price for the benefit of the consumer.

The Court emphasized that the action of the regulatory authorities was not aimed at stopping the discounts themselves, but rather at the "misleading display boards" that entice customers with claims of massive rebates that are often not reflected in actual sales. The bench noted that the statutory authorities are bound to act within the four corners of the law, but this includes the power to ensure business is conducted transparently.

Licensing Authority Has Incidental Powers To Prevent Deception

Addressing the challenge to the Drugs Controller's jurisdiction, the Court held that when a specific power is conferred upon an authority to grant licenses, it carries with it all incidental powers necessary to achieve the objective of the statute. Since the licensing authority is tasked with ensuring that licensees carry on business without misleading the public, the insistence on an undertaking regarding display boards cannot be termed an unauthorized restriction.

The Court observed that the purpose of exhibiting boards should be to inform the public of genuine discounts, but the possibility of "misleading advertisements causing prejudice to innocent customers" justifies the regulatory intervention. The bench noted that such stipulations are valid conditions for the grant or renewal of a license under the existing statutory framework.

Right To Business Is Not Absolute

The Court delivered a stern reminder that constitutional freedoms are not absolute and cannot be used to protect illegalities or deceptive conduct. The bench remarked that the regulatory authority must have the discretion to step in and regulate the "myriad illegalities" that may arise in the market to protect the public interest.

"The regulatory authority will have a ‘play in the joints’, to step in to regulate and prevent the myriad illegalities by issuing directions, in public interest," the Court held. It further noted that unless a directive is so pervasive that it has no apparent benefit for the public and merely curtails business, the Court would be slow to interfere under Article 226 of the Constitution of India.

"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."

Validity Of Rephrased Undertaking Upheld

The Court took note of the fact that the Department had rephrased the undertaking to make it more specific. The new statement requires licensees to undertake that they "shall not display any discount boards containing misleading or vague claims regarding the price of drugs." The bench found this modified stipulation to be reasonable and not prejudicial to the rights of the petitioners.

The bench concluded that the power to stipulate such conditions is neither arbitrary nor warrants judicial interference. Consequently, the Court dismissed the petitions challenging the Circular and allowed the writ petition seeking its implementation, granting the respondents the liberty to initiate action against those who fail to comply with the new licensing conditions.

Date of Decision: 19 June 2026