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The Delhi High Court has capped the maximum sale price of the COVID-19 test kits imported by Matrix Labs at Rs 400 per kit/test inclusive of GST.
The order was passed by a Single Judge Bench of Justice Najmi Waziri in the petition by Rare Metabolics Life Sciences (Petitioner) who had signed an agreement with the Respondent for being the exclusive distributor of medical products imported into India.
On March 25, the Petitioner expressed a desire to import one million/10 lakh WONDFO SARS CoV-2 Antibody tests and requested the Respondent to send it a Proforma Invoice etc at the earliest.
The Respondent acknowledged the order and replied that it would process the same soon.
Later that month, the ICMR/National Institute of Cancer Prevention and Research placed an order on the Petitioner's distributor for five lakh COVID-19 Rapid Tests at the rate of Rs 600 per test. The total value of the order was Rs 30 crores.
The Respondent, being the importer, obtained a licence to import medical material.
Of the said order for five lakh, the Court was informed that 2.76 lakh had already been delivered to ICMR and the remaining 2.24 lakh tests were expected to be delivered very shortly after the consignment lands in India.
The Petitioner contended that Rs 12.75 crores had already been paid to the Respondent and this amount covered the cost of import of 5 lakh tests at the rate of USD 3 per test and the freight cost.
According to the Respondent, the freight cost was in the range of approximately Rs 2 crores for one million tests, and thus the total cost for the ICMR destined kits/tests was Rs 12,25,00,000.
The Court was informed that the same were to be supplied to the Petitioner's distributor at an apparent profit of Rs 7.75 crores, for Rs 21 crores including GST.
Further, the Court noted that for the kits, the ICMR had to shell out an amount of Rs 30 crores plus GST, despite there being no value addition to the imported medical material.
Looking at the situation, the Court observed,
"So, from the Rs.30 crores to be paid by ICMR for the 5 lakh kits/tests, Rs.18.75 lacs will be the shared by the intermediaries because, as discussed hereinabove, the actual costs of the monies paid to supplier/exporter was only Rs.11,25,00,000/-."
The first consignment of 2.76 lakh tests was delivered to ICMR on April 17, 2020, for which invoice had been raised but the payment was awaited as monies were to be paid after the tests met the requisite standards of the ICMR.
It was the Petitioner’s case that the moment payment was received, it would be immediately remitted to the Respondent and thus sought the release of the remaining 7.24 lakh COVID-19 Rapid Test Kits by the Respondent.
The Respondent, on the other hand, contended that the import was on the understanding between the parties that there would be 100% upfront payment specifically apropos the consignment for ICMR.
Considering the fact that the kits/tests were required in the country on an urgent basis, the Court ordered that the remaining 2.24 lakh tests shall be delivered to ICMR, the moment it landed into India. It added that balance payment to the Respondent shall be paid by the Petitioner as soon as it is received from ICMR.
The Respondent also submitted that it had an order for supply of 50,000 kits/tests to the Government of Tamil Nadu, through an intermediary dealer viz. M/s Shan Biotech and Diagnostics, at the ICMR approved rate of @Rs.600 per test.
Of this order, 24,000 has been supplied and 26,000 more are to be supplied, it was added.
The Court thus took the opportunity to review the cost and sale price of the test kits and opined that the profit mark-up 61% on the landed cost price was on a much higher side.
For the remaining kits, the Court thus ordered,
"In view of the above, the kits/test should be sold at a price not beyond Rs. 400/- per kit/test inclusive of GST."
The counsel to the Respondent also undertook to supply the kits/tests at Rs 400 each plus GST i.e. at 40% lesser than the ICMR approved rate, directly to any Government or its agency or private entity duly approved to carry out these tests.
The petition was disposed of in terms of the above directions.
Petitioner was represented by Advocates Jayant Mehta, Anshumaan Sahni.
Respondent was represented by Amitabh Chaturvedi, Jeevesh Nagrath, Sangeeth Mohan, Chandan Dutta.
Read the Order: