This article is written by Nishtha Garhwal, a student of Alliance School of Law, Bangalore. The article describes the situation where the public displayed its anger when there were many instances of hoarding and black marketing of essential medical devices like oxygen concentrators and pulse oximeters and the different legislations that were passed by the government amidst the pandemic to regulate and monitor such illegal activities.

Introduction

India witnessed a surge in the number of COVID-19 patients leading to a huge demand for medical devices like oxygen concentrators and pulse oximeters. However, there was a shortage in the supply of these medical devices which created huge anger among the public. The health infrastructure was overburdened and the situation got worse when the manufacturers and importers took advantage of this shortage and started black marketing and hoarding of the medical devices and equipment that were required for the treatment of COVID-19. 

Many manufacturers started hoarding oxygen cylinders, oxygen concentrators, and other crucial medicines which were then sold at inflated prices. There were many attempts to turn the situation of misery in India into a profit-making means. In such a critical scenario, it becomes essential for the government to take steps to prevent such attempts. 

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The Essential Commodities Act, 1955 makes it possible for the government to control and regulate the prices of any commodity that has been declared as ‘Essential Commodities’ under the Act. However, oxygen concentrators and pulse oximeters have not yet been notified as an essential commodity under the Essential Commodities Act, 1955.

Provisions under the Essential Commodities Act, 1955

The Essential Commodities Act, 1955 is a provision that empowers the government to classify any commodity as ‘Essential commodities’ and on such a classification, the government can issue directions in order to regulate and control the prices at which such commodities can be bought or sold. The withholding of an essential commodity’s sale which is usually kept for sale can also be prevented by the government by the virtue of this Act. 

Section 3 of the Essential Commodities Act,1955 makes a provision for the central government to control an essential commodity’s production, supply and distribution and ensure its equitable distribution at fair prices. This Act primarily aims to protect the public interest. Section 2A  of the Essential Commodities Act, 1955 defines ‘Essential Commodity’ as being the one specified in its schedule. Drugs that are defined in Clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940 are the first entry to this schedule. As per Clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940, if some medical devices perform the function of preventing, mitigating, and treating a disease when externally or internally applied on the human body or an animal, they will be considered as drugs. However, a notification issued by the Ministry of Health and Family Welfare, extended this Sections scope in February 2020 to also include medical devices that help in diagnosing, preventing, alleviating, or treating any injury or disease or that help in investigating, supporting or sustaining life. 

Government can control the prices of an essential commodity as per Section 3(c) of the Essential Commodities Act, 1955. Prohibition can be made by the government for the hoarding of any ordinarily sold essential commodity by the virtue of Section 3(e). In case anybody holds or intends to hold the stocks of an essential commodity, orders can be passed by the centre to them and they can be asked to sell all these stocks or a part of them to a government authority or a government-controlled corporation as per Section 3(f) of the Act. 

In case of violation of any provision under the Essential Commodities Act, 1955, a person will be exposed to imprisonment which may not be less than 3 months and may extend up to 7 years including a fine as per Section 7 of the Act. 

National Pharmaceutical Pricing Authority (NPPA) and some notable provisions and legislations

Although oxygen gas, cylinders and some other crucial medicines have been classified as ‘Essential Commodities’ under the Essential Commodities Act, 1955, the law is still ambiguous when it comes to medical devices. However, apart from the Essential Commodities Act, 1955, there are some other legislations that are responsible for monitoring and regulating the price of medical devices and medicines. 

The Ministry of Chemical and Fertilisers controlled National Pharmaceutical Pricing Authority (NPPA) issued the Drug Prices Control Order (DPCO), 2013 through which a limit on the prices of drugs was placed and these drugs included several medical devices and medicines. The NPPA is empowered to set the maximum prices for drugs and make rules for controlling prices. It also has the authority for monitoring the current prices without setting limits. 

The Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980 is another provision of law in order to monitor black marketing. Government officials of the rank of District Magistrate, Police Commissioner, or Secretary of the state Government have the authority that if a person acts in a prejudicial manner to the maintenance of supplies of commodities which are essential to the community, they can pass orders for the preventive detention of such a person. Therefore, this Act makes a provision for the preventive detention of anyone who intends to commit or provoke someone to commit an offence punishable under the Essential Commodities Act, 1955. If anyone could be dealing in commodities classified as ‘Essential Commodities’, this provision of preventive detention also applies to such a person. However, for these legislations to be applicable, the commodity must be declared as an essential commodity by the government. 

As per an order issued by NPPA on 31 March 2020, the medical devices are reclassified as drugs that are sought to be regulated by the Drug Prices Control Order, 2013 along with the Essential Commodities Act, 1955 and this provision is meant to ensure and monitor that any manufacturer or importer do not sell any medical device at a price which exceeds 10% of the Maximum Retail Price (MRP) during a year. A penalty will be imposed in case of its violation.

An office memorandum (OM) was issued by NPPA on 29 June 2020 following this order for maintaining the MRP of pulse oximeter and oxygen concentrators. All the manufacturers and importers were issued with a notice wherein under the DPCO,2013, they had to submit MRP details. 

On 26 September 2020, an order was issued by NPPA. As per this order, medical oxygen will be considered as an Essential Public Health Commodity. The pricing limit was also set by this order for Liquid Medical Oxygen (LMO) at Rs. 15.22 per cubic metre and for the Oxygen Inhalation cylinder at Rs. 25.71 per cubic metre. Further, this order was extended for another six months in March 2020.

The Navneet Kalra Case

An FIR was filed against a Delhi-based businessman Navneet Kalra on 5 May 2021 under the following provisions:

  • Section 3 of the Essential Commodities Act, 1955 empowering the government to control the production, distribution and supply of the commodities notified as ‘Essential Commodities’.
  • Section 7 of the Essential Commodities Act, 1955  is about penalty in case of violation of anything mentioned under the Act.
  • Section 3 of the Epidemic Diseases Act, 1897  is about the penalty for not complying with any provision mentioned under the Epidemic Diseases Act, 1897.
  • Section 420 of the  Indian Penal Code, 1860 which is about cheating.
  • Section 188 of the Indian Penal Code, 1860 which is the provision for an order duly promulgated by public servant being disobeyed.
  • Section 120(B) the Indian Penal Code, 1860 which is about the criminal conspiracy.
  • Section 34 of the Indian Penal Code, 1860 which is about common intention.

He was arrested by the Delhi Police and all the oxygen concentrators from his restaurants were seized. He was alleged of indulging in black marketing of thermal scanners, oxygen concentrators and N-95 Masks by the Delhi Police. 

The contentions of Navneet Kalra in his defence were that the Sections under which the FIR has been filed against him are not attracted because oxygen concentrators and thermal scanners have not been declared as ‘Essential Commodities’ under the Essential Commodities Act, 1955. Thus, all the allegations against him cannot stand. 

However, the Delhi High Court rejected anticipatory bail to the accused. The Court had a different view and it relied on the five notifications.

The five notifications that were referred by the Court in the Navneet Kalra Case is as follows:

  1. The NPPA issued an office memorandum on 29 June 2020, through which, all the manufacturers and importers were directed to ensure that they do not increase the MRP of oxygen concentrators and pulse oximeters by more than 10% in one year. 
  2. The Ministry of Health and Family Welfare issued an office memorandum on 11 February 2020. As per this, all medical devices for the purpose of controlling the quality and monitoring the price, are to be regulated by the government as drugs.
  3. The 31 March 2020 Notification issued by NPPA was referred to in the NPPA’s 29 June 2020 office memorandum. All the medical devices were to be regulated and governed by the Drugs Price Control Order, 2013 as per this notification. This permits the monitoring of the MRPs of all the medical devices by the government.
  4. Notification issued on 30 April 2021 which made an allowance for the imports of oxygen concentrators for personal use under the category of gift through the post, e-commerce portal or courier.
  5. An Order passed on 7 May 2021 by the Drugs Control Department directed the retailers, distributors and wholesalers not to sell certain commodities at a price exceeding the MRP and to keep away from black marketing.  

The Delhi High Court after referring and citing these notifications said that oxygen concentrators come under the definition of essential commodities. In addition to this, the Court pointed to the fact that concerned authorities were never informed by the accused regarding the labelled or pasted MRPs over the boxes of the oxygen concentrators. 

Navneet Kalra being a very influential person, there was a possibility that he may tamper with the evidence and influence the witnesses. Thus, on these grounds, anticipatory bail was rejected by the Delhi High Court. 

The different interpretations 

The Delhi High Court relied on the office memorandum issued by NPPA on 29 June 2020 in order to reject anticipatory bail to Navneet Kalra. However, the District Court of Dwarka while hearing a case regarding the oxygen concentrators being seized after it was alleged that they were being hoarded and sold at an inflated price, the Principal District and Sessions Judge at Dwarka specifically pointed out that the government has not declared oxygen concentrators as essential commodities in any case. 

In this case, it was held by the Court that since oxygen concentrators have not been notified as ‘Essential Commodities’, thus, the provisions of Section 3 and Section 7 of the Essential Commodities Act, 1955 are not applicable. 

However, the police of many states have considered Section 3 and Section 7 of the Essential Commodities Act, 1955 while registering FIRs against people hoarding and indulging in black marketing of oxygen concentrators, pulse oximeters and other important medical devices important for the treatment of COVID-19. 

‘High time’ that MRPs be fixed : HC

The steps taken by the government as of now are not adequate as hoarding and black marketing of medical devices is still happening. An extremely inflated price is being demanded and charged by the manufacturers and retailers as there has been no fixed price set by the government. 

In the case of the Prag Ice and Oil Mills and Another v. Union of India (1978), and Nav Bharat Oil Mills and Another v. Union Of India (1978) it was held that an order by the government in order to fix the price of an essential commodity has to be presumed constitutionally valid. 

Section 3 of the Essential Commodities Act,1955 is specifically made to protect the interest of the public by making the essential commodities available to them at fair prices. Under the Kerala Essential Articles Control Act, 1986, an order has been passed by the Kerala Government in order to fix the pulse oximeter’s price.

In the light of the situation created by the pandemic being worsened by the hoarding and black marketing of essential medical devices, the Delhi High Court asserted that its high time to fix the MRPs of the oxygen concentrators, pulse oximeters and all the other devices that are crucial for the treatment on COVID-19 so that all the malpractices like hoarding and black marketing of these devices could be restricted and controlled.

The Delhi High Court even questioned the Centre and the Delhi Government for not declaring essential medical devices under the category of ‘Essential Commodities’. 

Need to list oxygen concentrators and pulse oximeters as essential commodities under the Essential Commodities Act

The COVID-19 pandemic created a situation of panic and chaos and in such a scenario, the Government of India under the virtue of the Essential Commodities Act, 1955, utilised its discretionary powers and notified face masks and hand sanitisers as ‘Essential Commodities’. This was, however, done temporarily. Therefore, once these were supplied adequately at fair prices, they were removed from ‘Essential Commodities’.

Although monitoring of inflation in prices has been done by the government, the two essential medical devices, that is, oxygen concentrators and pulse oximeters have not been classified as ‘Essential Commodities. Therefore, the discretionary powers that are available to the government under the Essential Commodities Act, 1955 have yet not been utilised to notify oxygen concentrators and pulse oximeters as ‘Essential Commodities’. Considering that there is increased hoarding and black marketing of these essential medical devices, steps to declare medical devices like oxygen concentrators and pulse oximeters as ‘Essential Commodities’ is the need of the hour.

Conclusion

In the situation of panic and shortage of essential medical devices created by the pandemic in India where people were fighting for oxygen, some manufacturers attempted to turn this situation into their profit by indulging in black marketing and hoarding essential medical devices. Since there was no MRP fixed by the legislative body for selling these medical devices, manufacturers exploited people by charging exorbitantly high prices. Though some measures were taken by the government to prevent such illegal activities, still they were not adequate. 

The health emergency in India should convince the government to use its discretionary powers granted by the Essential Commodities Act, 1955 and classify medical devices like oxygen concentrators and pulse oximeters as ‘Essential Commodities’. This is the only means by which their hoarding and black marketing could be prevented so that the public can have access to them at reasonable prices.

References

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