Delhi HC: Profit Margin on COVID Rapid Test Kits On Higher Side

The Delhi High Court has capped the price of the Rapid Test Kits for COVID19 in a dispute between a distributor and an importer of the kits observing the interest of the public over private gain. At these extraordinary times when the economy has reached a standstill and a serious pandemic is upon everyone, the Single Bench of Justice Najmi Waziri reduced the price of the Rapid Test Kits from Rs. 600 per kit to Rs. 400 per kit, noticing that a 61% profit margin on such test kits is a bit too much. According to the details of the case provided in Delhi High Court, the test kits that were being procured from China cost Rs 245 per unit on its delivery, were sold to the ICMR at Rs 600 per kit. The variation came up when Rare Metabolics Life Sciences Pvt Ltd and Aark Pharmaceuticals, the two distributors of testing kits imported by Matrix Labs approached the Delhi High Court concerning a legal dispute.

Matrix Labs is the sole importer of SARS Cov-2 Antibody kits (testing kits). Rare Metabolics entered into an agreement with importer Matrix Labs for distribution of these kits in India. In a separate agreement, Rare Metabolics appointed Aark Pharmaceuticals to be the distributors of these kits in India.

Meanwhile ICMR placed an order of 5,00,000 kits at a price of Rs.600 plus GST. Matrix Labs (importer) sold the kits to Rare Metabolics for Rs 400 per kit and the distributors supplied the kits further to ICMR for Rs 600 (plus GST) per kit. There was price disparity where the total amount that ought to be paid by Rare Metabolics and Aark (distributors) to Matrix Labs for the 5,00,000 kits was Rs 21 crore (including GST). Out of the total, a sum of Rs 12.25 crore has already been paid to Matrix Labs. They demanded clearance of the remaining amount before delivery of the remaining 224,000 kits to both the distributors. On encountering such a situation, Rare Metabolics approached the Delhi High Court filing a plea seeking the delivery of the remaining 224,000 tests which were to be delivered to ICMR.

The order stated, "The Court is of the view that a profit mark-up of Rs. 155/- i.e. 61% on the landed cost price of Rs. 245/- is much on the higher side and in any case more than sufficient for the seller, for the kits/tests to be made available in India for urgent extensive tests through the country, especially in these present extraordinary circumstances of the worldwide pandemic.......The lis between the parties should give way to the larger public good. 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 court also directed that the remaining amount of Rs 8.25 crore (at Rs 600 per test) to be paid to Matrix Labs would be done within 24 hours of receiving payment from ICMR. Also added that the remaining 450,000 units would be sold at the price of Rs 400 per unit to any government, governmental agency, or private entity. 

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