In the landmark judgment, Justice Aftab Alam and Justice Ranjana Prakash Desai held that the "patent product, the beta crystalline form of Imatinib Mesylate, fails in both the tests of invention and patentability" and dismissed the company's plea with cost.
Novartis had challenged in court the Chennai-based Intellectual Property Appellate Board's 2006 decision declining grant of patent for beta crystalline form of Imatinib Mesylate.
Justice Alam said the claim was "beyond the realm of patents".
"We firmly reject the appellant's (Novartis) case that Imatinib Mesylate is a new product and the outcome of an invention... We hold and find that Imatinib Mesylate is a known substance..." and its pharmacological properties are also known, the court said, in a judgment running into 36,089 words.
"In whatever way Section 3(d) of the Indian Patents Act is interpreted, Novartis cannot claim that it is a patent. It fails the test of patentability," he said.
The court held that the amended portion of Section 3 (d) was only for genuine inventions.
The legal battle for the patent of the blood cancer drug was closely watched by international pharmaceutical firms.
If the Swiss firm had won the case, Indian firms would have been barred from manufacturing generic drugs.
Health experts welcomed the ruling, saying it would ensure that patients get access to cheaper life-saving drugs.
"This is a landmark judgment. This will have a long-term and wide impact, as the generic version makes it more affordable for the poor," Y.K. Sapru of the Mumbai-based Cancer Patients Aid Association told IANS.
"Now the prices of life-saving drugs will be reduced from Rs.160,000 per month to just Rs.6,000," Sapru added.
The judgment allows firms in India to continue making copycat versions of the Novartis drug Glivec.
Sameer Kaul, a senior surgical oncologist at the Indraprastha Apollo Hospitals, also hailed the ruling.
"The government should have stepped in much earlier to negotiate the prices with the company," Kaul told IANS.
"The government should encourage the local pharmaceutical industry to spend more on research, so that we can develop own molecules. Also, the patent time-period of 20-30 years is absurd. It should not be more than two or three years," he said.
AIIMS' P.K. Julka said: "The ruling is good for poor patients. It will ensure continued access to cheap drugs."
Unni Karunakara, international president of medical humanitarian aid organisation Medecins Sans Frontieres, said: "This is a huge relief for the millions of patients and doctors in developing countries."
"The Supreme Court's decision now makes patents on the medicines that we desperately need less likely," Karunakara said.
Indian generic medicines are exported abroad to other developing countries also.
Anand Grover, the lawyer representing Indian companies, said: "We are very happy that the court has rejected attempts by Novartis to water down our patent laws."
In Mumbai, Novartis AG said the Supreme Court decision will discourage future innovation in India.
Novartis India's managing director Ranjit Shahani said: "This ruling is a setback for patients that will hinder medical progress for diseases without effective treatment options."
Stating that Novartis will continue to file for patents in India, Shahani said the company will not invest in research and development (R and D) in the country.
--IANS (Posted on 01-04-2013)