Gujarat High Court
Nestor Pharmaceuticals Limited vs Gujarat Medical Services Corporation ... on 3 September, 2024
Author: A.Y. Kogje
Bench: A.Y. Kogje, Samir J. Dave
NEUTRAL CITATION
C/SCA/10503/2024 ORDER DATED: 03/09/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10503 of 2024
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NESTOR PHARMACEUTICALS LIMITED & ANR.
Versus
GUJARAT MEDICAL SERVICES CORPORATION LTD., GOVERNMENT OF
GUJARAT
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Appearance:
MR RS SANJANWALA, SENIOR ADVOCATE assisted by M/S.TANAYA G
SHAH (8430) AND AAYOG Y DOSHI(8519) for the Petitioner(s) No. 1,2
MR MITUL SHELAT with MS DISHA N NANAVATY(2957) for the
Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.Y. KOGJE
and
HONOURABLE MR. JUSTICE SAMIR J. DAVE
Date : 03/09/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE A.Y. KOGJE)
1. This petition under Article 226 of the Constitution of India is filed challenging an order dated 03.07.2024 passed by the respondent-corporation. By this order, the petitioner company was debarred from supply of particular Pharmaceutical item being Ferrous Sulphate IP equivalent to 60mg of elemental Iron and Folic Acid IP 0.5 mg. for a period of 3 years from order date.
2. Learned Senior Advocate for the petitioner has argued it is the largest supplier of Iron and Folic Acid Tablets in India. The Petitioner has been manufacturing and supplying Iron and Folic Acid Tablets of different strength since 1987. The Petitioner has Page 1 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined been manufacturing and supplying Iron 60MG and Folic Acid 0.5 MG Tablets since the year 2000. The Petitioner 1s presently supplying Iron 60MG and Folic Acid0.5 MG Tablets in 15 states in India being Uttar Pradesh, Bihar, Andhra Pradesh, Odisha, Jharkhand, Madhya Pradesh, Jammu and Kashmir, West Bengal, Delhi, Telangana, Kerala, Assam, Rajasthan, Haryana, Punjab. The Petitioner also exports the same tablets to various countries including Afghanistan, Philippines, Nigeria etc. From 2020 till December 2023, the Petitioner has manufactured and supplied 3236 batches of 35 lakh tablet per batch, totalling to 1132 crore tablets to different State Government undertaking institutes. Out of the same, nearly 131 batches of 35 lakh tablet per batch totalling to 44 crore tablet approximately have been supplied to the Government of Gujarat itself and there is not a single complaint. 2.1 It is submitted that the Impugned Debarment Order will lead to civil death of the Petitioner. Iron and Folic Acid Tablets form 20 to 25% of the petitioner's annual turnover and its survival and survival of its employees depends on this item. The petitioner has several running contracts with various states, who on basis of the Impugned Debarment Order, are likely to raise a show cause notice as to why they should not cancel the running contract and foreclose the same. Tender condition in each of these running contracts empowers the authority to do the same on grounds of the Page 2 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined Impugned Debarment Order. Learned Senior advocate has thereafter narrated the number of contracts with different State Government which will be adversely affected. 2.2 It is argued that the impugned action of the respondent debarring the petitioner for a period of three years from business with the respondent is absolutely disproportionate, harsh and unreasonable. The Impugned Debarment Order is issued on basis of Test Report dated 10th March 2023 issued by Government Analyst, CDL Kolkata reporting Assay of Folic Acid 35.71% of claim and report of Director, CDL Kolkata reporting Assay of Folic Acid 86.90% of claim. It is argued that not only is the report of the Government Analyst on basis of which the respondent issued show cause notice dated 15th May 2023 proven to be completely wrong and widely off the mark, the report of Director, CDI. Kolkata finds variation of 03.10% in assay of Folic Acid in Iron 60 MG Folic Acid 0.5 MG tablets, which is a minor variation.
2.3 It is submitted that the Impugned Debarment Order is based only on the report of Government Analyst, CDL Kolkata and Director, CDL Kolkata. Not only has the respondent failed to consider the ground that both the said reports are at complete variance with each other and that the Government Analyst's report is widely off the mark, but the respondent has also failed to consider the ground that the sealed sample portion drawn by the Page 3 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined Drug Inspector, CDSCO was not drawn properly as per prescribed packing standards and storage conditions during transit in sending the drug to the CDL Kolkata laboratory. The respondent has not investigated into the packing and storage conditions at its own warehouse and also after the sample was drawn by the Drug Inspector and send to CDL Kolkata.
2.4 It is argued that as per provisions of the Drugs and Cosmetics Act, 1940, particularly sub section (3) of Section 19 and Section 32-A, not only a manufacturer of a drug, but even a stockist and distributor of a drug can be impleaded in a prosecution of any offence under the Act and such stockist/distributor is required to prove that the drug, while in his possession, was properly stored and remained in the same state when he acquired it. In the facts of the present case, the petitioner has objected that sealed sample portion drawn by the Drug Inspector, CDSCO was not drawn properly as per prescribed product packing and the storage conditions, consequently affecting the drugs potency. It is also plausible that the concerned batch was not stored as per prescribed storage condition at the respondent's warehouse. It is an undeniable factual situation that the batch IQTZ 371 has been found to be of standard quality meeting all prescribed parameters at the time of release of finished goods from the petitioner's end. 2.5 It is submitted that Impugned Debarment Order is in Page 4 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined violation of principles of natural justice. It is submitted that it is an established position of law that the officer who accords the hearing to the objector must also submit the report/take decision on the objection. If the decision is taken by his successor, without issuing a notice and without affording an opportunity of hearing, the order would be vitiated as having been passed in violation of principles of natural justice. In the present case, it is apparent from the record that while the show cause notice dated 15 th May 2023 and 24th November 2023 are issued by the General Manager of the Respondent, it transpires from the Impugned Debarment Order that the proposal for debarment is put forth by the Managing Director and the final decision of debarment vide the Impugned Debarment Order is taken by the Managing Director.
3. As against this, learned Advocate for the respondent has submitted that debarring the petitioner for a period of three years for Ferrous Sulphate IP equivalent to 60mg of elemental Iron and Folic Acid IP 0.5 mg is based upon the debarment policy. As per policy, if the drug supplied is declared as "not of standard quality" because of less active pharmacopeial content therein, the company supplying the same is debarred for a period of three years for concerned drug/item.
3.1 It is submitted that the Government of Gujarat through the Health and Family Welfare Department vide Government Page 5 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined Resolution dated 25.10.2005 stipulates that manufacturer whose product is declared as not of standard quality shall be kept out of tender process. In view of above policy of the Government, Petitioner is not eligible to participate in tender process and decision of the answering respondent of debarring the petitioner company is in accordance with the law and policy of the Government.
3.2 It is submitted that the Drug Inspector of CDSCO, Zonal Office, Anmedabad had drawn the samples of drug in question from batch No. IQTZ-371 supplied by the Petitioner company and had sent for testing at Central Drug Laboratory, Kolkata for testing as per provisions of Drugs and Cosmetics Act, 1940. The said samples were tested at Central Drug Laboratory and the report of the said test was issued on 10.03.2023. The said test report was communicated to the respondent-Department by Drug Inspector vide letter dated 22.03.2023. Based on this, a show cause notice was issued to petitioner on 15.05.2023 affording an opportunity to make clarification in writing within 15 days and to appear for a personal hearing. Pursuant to notice, the representative of the Petitioner company had remained present on 24.05.2023 and had appeared before the General Manager (Quality Control), Deputy General Manager (Quality Control) and Manager (Quality Control). In the said personal hearing, Petitioner had Page 6 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined informed the officers of respondent that they have informed the concerned Drug Inspector to undertake retesting of samples in question at Central Drug Laboratory, Kolkata. 3.3 It is submitted that after retesting of sample in question declared the item in question to be of "not of standard quality" vide its test report dated 18.10.2023. After acknowledgment of test report dated 18.10.2023, respondent again issued a notice to Petitioner on 24.11.2023, calling for explanation in writing within 15 days. In addition to explanation in writing, Petitioner was also afforded an opportunity of personal hearing. 3.4 It is submitted that petitioner had once again addressed a letter to General Manager (LP--QC) of the respondent praying not to take any penal action and to afford an opportunity of personal hearing. Considering the request made by the petitioner, a personal hearing was provided to Petitioner on 18.12.2023. On 18.12.2023 authorized representative of the petitioner attended the office of answering respondent for making clarification. During the said meeting, the authorized representative of the petitioner company submitted an in-house test report claiming that the product of the Petitioner company is of standard quality. The General Manager (Quality Control) and Deputy General Manager (Quality Control) after considering the representations and submissions made recommended that the Petitioner firm be Page 7 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined debarred for a period of 3 years. The Managing Director of the answering respondent considered the record and accepted the recommendations made and noted that the agenda be placed before the Board Level Committee. The entire record was placed before the Board of Level Committee of the answering respondent for consideration and approval. The Board Level Committee in its meeting held on 04.06.2024 approved the decision to debar the Petitioner Company for supplying drug "NOT OF STANDARD QUALITY' for a period of three years as per the policy of the answering respondent.
3.5 It is submitted that upon acknowledgment of the fact that Central Drug Laboratory has declared the product of the petitioner to be of "not of standard quality", respondent addressed a notice dated 18.04.2023 to petitioner to replace the entire batch of substandard quality goods or pay the full amount equivalent to the cost of entire batch of substandard goods. In response to the said notice, petitioner vide its communication dated 01.05.2023 informed the answering respondent that they will not replace the substandard quality material and submitted a demand draft towards the recovery of cost of substandard quality goods.
4. Learned Advocate for the respondent has countered the judgment on which reliance is placed by the petitioner and has, in turn, relied upon in case of State of Odisha & Ors. Vs. Panda Page 8 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined Infraproject Limited, reported in, (2022) 4 SCC 393 on para-14 to 20, unreported decision in Special Civil Application No.9214 of 2020 in case of Biogenetic Drugs Pvt.Ltd. Vs. State of Gujarat and Special Civil Application No.6168 of 2020 in case of M/s. Baroda Surgical (India) Pvt.Ltd. Vs. State of Gujarat.
5. Heard learned advocates for the parties and perused the documents placed on record. The Respondent issued a Tender bearing Notice No. MSCL/D-661/RC/2019-20 inter alia for procurement of Iron 60 MG and Folic Acid 0.5 MG 'Tablet (Item code no. 1378). The Petitioner submitted its bid on 22 nd October 2020 and was declared as the lowest bidder. The respondent issued Acceptance Letter dated 04th April 2020 in favour of the petitioner. The petitioner vide its letter dated 18 th May 2020 submitted to the respondent an Acceptance Letter duly signed and stamped along with Agreement and Performance security/bank guarantee as per tender requirements.
6. The respondent placed an order with the Petitioner vide Purchase Order dated 02nd November 2022 bearing ref No. GMSCL/DRUGS/State/20222023/1979 (10282202745) for supply of Iron and Folic Acid Tablet. As per the purchase order, the petitioner manufactured and supplied Iron and Folic Acid Tablets IP (60 MG+0.5MG) Batch No. IQTZ 371 and IQTZ 372 on 20-21 December, 2022 along with each batch supplied and invoiced to the Page 9 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined respondent.
7. The petitioner was served a notice dated 18th April 2023 from the respondent Stating that batch no. IQTZ-371 supplied by the Petitioner is declared to be of 'not of standard quality' by the Government Analyst, Central Drug Laboratory, Kolkata as per Test report dated 22nd March 2023 for reason "Assay and Uniformity of Weight" and hence as per clause M 12 of the Tender (Replacement Clause), calling upon the petitioner to replace the entire batch quantity or pay the full amount on or before 20 May 2023, failing which an amount of INR 4,47,618.6 will be recovered from the Petitioner without any further notice.
8. The Court may refer letter dated 04.05.2023 from the Drug Inspector, Central Drug Standard Control Organization, Ahmedabad ("CDSCO" for short) informing the Petitioner that the sample of Batch IQTZ 371 was drawn from the Respondent's warehouse and sent for analysis to CDL, Kolkata and vide Test Report dated 10.02.2023 and Corrigendum dated 15.03.2023, the same has been declared not of standard quality for Assay of Folic Acid (35.71%) and Uniformity of Content. Along with this letter, the Drug Inspector, CDSCO, Ahmedabad provided to the petitioner a copy of the Test Report dated 10 th March 2023 issued by the Government Analyst, CDL, Kolkata and corrigendum thereto dated 15th March 2023. The petitioner vide its letter dated 22 nd May 2023 Page 10 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined inter alia disputed the Test Report dated 10 th March 2023 issued by the Government Analyst, CDL, Kolkata and requested the Drug Inspector, CDSCO, Ahmedabad to send the legal sealed sample portion to Director, CDL, Kolkata for retesting of description Assay and Uniformity of Content of Folic Acid as per provisions of Section 25(4) of the Drugs and Cosmetics Act, 1940.
9. The petitioner was served with a show cause notice dated 15th May 2023 bearing No.GMSCL/SDI/Show cause- 04/12636/2023-24 from the General Manager of the Respondent calling upon the petitioner to show cause as to why it should not be debarred/blacklisted in terms of condition no. 2 of Acceptance of Tender for Iron and Folic Acid 'Tablet IP on basis of Test Report dated 10th March 2023 issued by Government Analyst, CDL, Kolkata declaring Batch IQTZ 371 to be not of standard quality for Assay and Uniformity of Content of Folic Acid. The petitioner attended a personal hearing before the respondent authority on 24th May 2023 and submitted its written response.
10. The respondent vide its letter dated 05th June 2023 informed the petitioner that it may challenge the 'Test Report of Government Analyst, CDL Kolkata and submit documentary evidence of the same to the Respondent. The petitioner vide its letters dated 07.06.2023 and 09.06.2023 and email dated 07.07.2023 further requested the respondent to keep the matter on Page 11 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined hold till the receipt of conclusive report from Director, CDL, Kolkata. On 02.08.2023, the Drug Inspector, Ahmedabad submitted an application before the Chief Metropolitan Magistrate, Ahmedabad to send ¢the sealed sample portion of Batch IQTZ 371 to Director, CDL, Kolkata for retesting as per Section 25(4) of the Drugs and Cosmetics Act, 1940.The Director, CDL Kolkata submitted its report on 18th October 2023 (Form 2), wherein, although the Director, CDL Kolkata has opined that the sample does not confirm to I.P with respect to Assay and Uniformity of content of Folic Acid, the Assay is declared as 86.90% of claim.
11. The General Manager (Quality Control) and Deputy General Manager (Quality Control) after considering the representations and submissions made recommended that the petitioner firm be debarred for a period of 3 years. The Managing Director of the answering respondent considered the record and accepted the recommendations made and noted that the agenda be placed before the Board Level Committee. The entire record was placed before the Board of Level Committee of the answering respondent for consideration and approval. The Board Level Committee in its meeting held on 04.06.2024 approved the decision to debar the petitioner company for supplying drug "NOT OF STANDARD QUALITY" for a period of three years as per the policy of the answering respondent.
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NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined
12. The Court may now analyze the judgments cited by the learned Advocates for the respective parties. Learned Senior advocate has relied upon the decision of the Apex Court, in case of Union of India Vs. Shiv Raj & Ors., reported in (2014) 6 SCC
564. This judgment is cited to substantiate the argument that the decision communicated to the petitioner, was by a different authority, then the authority which issued the show cause notice and gave an opportunity of hearing. In the facts of the case, as is observed by this court in the preceding para that the respondent authority has followed a prescribed procedure wherein the show cause notice was issued by the general manager, and called for their explanation. Thereafter, considering the representation, the General Manager quality control made his report to the managing director. The managing director considered the record and accepted the recommendation made by the general manager and placed it before the board level committee for the approval of the decision, ultimately, the decision taken, was approved by the board level committee and was communicated to the petitioner. Therefore, the contention of the petitioner that board committee has not given an opportunity of hearing, is not prescribed under the contract and the respondent have followed the procedure 12.1 Learned Senior Advocate has relied upon the decision in case of Daffodills Pharmaceuticals Limited Vs. State of Page 13 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined Uttar Pradesh & Anr., reported in, (2020) 18 SCC 550, particularly relying upon para 13 to argue that the order of blacklisting the petitioner was not warranted. It would be appropriate to mention that the Apex court was considering the debarment of the petitioner. Therein where the order of department did not specify the duration for which the debarment was to operate. In the facts on hands, there is no case where the debarment is for specified period.
12.2 Learned Senior advocate has thereafter relied upon latest decision of the Apex court in case of the The Blue Dreamz Advertising Pvt. Ltd. And another Vs. Kolkata Municipal Corporation & Ors., reported in, 2024 INSC 589 to emphasis on the argument that debarment is having an adverse effect and virtually amounts to a civil death, and therefore where a person raises a bonafide dispute department as a penalty may not be resorted to. The case before the this Court was with regard to the bids invited for display of advertisement on street hoardings, bus passengers, shelters, and kiosks while examining the facts as stated above, the Apex court has taken into consideration the decisions of the Apex court in case of Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal & Anr., reported in, (1975) 1 SCC 70 and also decision in case of Kulja Industries Limited v/s. Chief General Manager Western Telecom Project Page 14 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined BSNL & Ors., reported in, (2014) 14 SCC 731.
12.3 The Apex Court in Para-25 has also observed on the basis of comprehensive guidelines for 'debarment' issue work for the purpose of protecting public interest from those contrac- tors and recipients who are non-responsible like business in- tegrity, or engage in dishonest or illegal conduct or otherwise, unable to perform satisfactory. The Court indicated that the de- barment as a remedy is to be invoked in cases where there is harm or potential harm to the public interest. As is discussed in the preceding para, the non-meeting with the required parame- ters prescribed and required to be met with scrupulously by the petitioner had a potential effect on the public at large as the iron tablets meant for consumption by the patients who were pre- scribed for this medicine by the medical doctors. Therefore, this is not a case which can be equated with a contract dealing with advertisements or supply of some manpower or machinery. 12.4 Learned advocate has then relied upon the deci- sion in case of Medipol Pharmaceuticals India Private Lim- ited versus Post Graduate Institute of Medical Education and Research and another reported in (2021) 11 SCC 339. Learned advocate has submitted that identical facts with regard to the test results were also examined by the Apex Court, where there was a marginal variation in one of the parameters pre- Page 15 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024
NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined scribed and the Apex Court after comparing the two test results, which had a wide-gap in between disregarded such wide-gap in the parameters and quashed the decision for adverse action of blacklisting. The case before the Apex Court was the appellant being blacklisted for period of two years based on laboratory test reports by CDL Kolkata dated 19-08-2019, where the sample re- quired to be tested was received on 11-02-2019. The variation found was 92.01%, against the 61.96% that was found in the first test report. The Apex Court had interfered with the decision be- cause the reliance was placed for taking the decision on the sec- ond lab test results which had greatly varied from the first test result, however, the factual aspect of the case, was that the sec- ond sample was tested after period of eight months and which was after the shelf life of the medicine had expired, In the facts of the present case, though the variation in the lab test report at the first instance and the second instance was wide, however, on both the occasions, test report indicate that the parameters pre- scribed were not met with, and that the samples tasted on both the occasions were very much within the expiry date of the medicine.
12.5 Reliance is placed upon the decision of Division Bench of Kerala High Court in case of Ciron Drugs and Phar- maceuticals Private Ltd. versus State of Kerala reported in Page 16 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined 2019 SCC Online Kerala 11432. On basis of this judgment, it is argued that the test report of the drugs laboratory cannot be termed to be conclusive, if there is a possibility of the report be- ing flawed and therefore debarment cannot be based on a report and if so, then the person against whom the test report is to be used, must be given an opportunity to reboot the test report. Para-2 of this judgment refers to the facts of the case being ex- amined by the High Court. Then it is observed that the respon- dent authority therein had solely relied upon the test reports ob- tained from the Drugs Testing Laboratory of the Drugs Control Department, Kerala and on the action of the appellant to resort to remedies available under the Drugs and Cosmetics Act, 1940 for challenging the said report, it also appears that the Court had also intervened by appreciating the facts therein, where the con- tract provided for a procedure to be followed prior to blacklisting and when the Court found lacking in the procedure contem- plated, which did not provide for a meaningful opportunity to the appellant, therein to controvert the report, the Court ruled in favour of the appellant therein. The facts of the present case are different, where the test reports were provided to the petitioner and after the order passed by the concerned Court under the Drugs and Cosmetics Act, 1940, the samples were redrawn and sent for analysis and after receiving the laboratory report on the second time, also, the same was provided to the petitioner and as Page 17 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined in both the reports the petitioner not having met with the re- quired parameters, an opportunity of hearing was provided and thereafter the order came to be passed.
12.6 Learned advocate for the respondent has relied upon the decision of Division Bench of this Court in Bharat Par- enterals Limited versus State of Gujarat reported in 2022 SCC online Gujarat 1746 and submitted that in an identical fact situation, where there was repeated failure of drugs sup- plied by the petitioner, therein on the basis of analysis report of the testing laboratories, the respondent authorities therein acted in terms of the policy to debar the petitioner. Therein, the Court having examined the facts of that case and the policy applicable had held in para 29, which is as under:
"[29] From the aforesaid policy and in view of undis- puted situation that petitioners have been found to be prima facie guilty of not supplying standard quality of drugs which is clarified as defect under Category 'A', we are of the clear opinion that stand of the authority cannot be said to be erroneous in any form and not per- mitting the petitioners from participating from the ten- der process cannot be found fault with. When question of dealing with public health effecting large number of people across the State from the society who are nor- mally taking treatment from Government Hospital is concerned, we cannot ignore the public interest behind the action of State authority being the paramount con-Page 18 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024
NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined sideration, more particularly when the rate is pre- scribed lowest by the petitioners in respect of huge quantity of aforesaid two drugs i.e. Item Nos.2 and 32 from the list. The State is right in not compromising with the quality aspect by disallowing the petitioners from participating further in the tender process."
12.7 Another judgment relied upon by the respondent is an unreported decision in Special Civil Application No.9214 of 2020 [2021-GUJHC:50446-DB] in case of Biogenetic Drugs Private Ltd. Versus State of Gujarat, where the Court was examining the debarment of three years from supplying the drugs in the respective category wherein also the report of the Government Laboratory stated that the drug supplied was not of standard quality as defined under the Drugs and Cosmetics Act, 1940. The challenge made therein on the identical grounds were examined in light of Section-25 of the Drugs and Cosmetics Act, 1940, vis-a-vis, the policy for debarment and held in Para-9 and 10, which are as under:
"9) A bare perusal of Sub-Section 4 of the Section 25 of the Act would make it clear that the report of the CDL, Kolkata is a conclusive proof of evidence. In the in-
stance case, initially, the writ applicant was debarred upon receipt of the report of the Government Analyst. However, the said debarment order was put under sus- pension as the writ applicant had obtained the order from the Trial Court directing to forward the sample to Page 19 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined CDL, Kolkata under Section 25(4) of the Act. The CDL, Kolkata vide its reports dated 16.09.2019, 17.09.2019 and 23.09.2019 submitted negative report confirming the report of the Government Analyst.
10) In view of the aforesaid, in our view, the decision of debarring the writ applicant based on the report, sub- mitted by the CDL Kolkata, which is even otherwise, an expert body and its opinion is also a conclusive proof of evidence, does not require any judicial review. It is per- tinent to note that even the decision of debarring is completely within the parameters of the debarring pol- icy, more particularly, Clause-3, which says that once the drugs supplied by the firm/company is declared as "not of standard quality" due to absence of active in- gredients, the same firm/company is to be debarred for a period of three years for all drugs/items manufac- tured by them. Thus, in our view, the respondent Cor- poration has not committed any illegality in debarring the writ applicant for a period of three years for all drugs/items manufactured by them, when the sample of the writ applicant company has been declared as "not of standard quality" by the CDL, Kolkata."
13. The Court thereafter proceeded to uphold the order of debarment by the State Government.
14. It is necessary to observe that the contract is for supply of medicine which the State has to provide to the general public as a part of its obligation towards the people of the State. Therefore, stringent norms are required to be laid down and followed in letter Page 20 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined and spirit as it has a direct effect on the public health. 14.1 It is a matter of fact that the samples drawn under the provisions of law at the first instance by Drug Inspector and on the other instance at the prayer of the petitioner. Both have failed to match with prescribed parameters. The norm meeting of parameter is specified in the impugned order as under:-
No. Tender Rate Name of Batch No. Test Reason Enquiry Contract Drug Report No.& No. & No.& Date Date Date (1) (2) (3) (4) (5) (6) (7)
1. GMSCL/ GMSCL/ Ferrous IQTZ-371 32- Assay of D-661/RC/ Drugs/RC/ Sulphate 11/2022- Folic acid 2019-20, 661-1378/ IP eq. to SS/ (35.71%), Date A- 60mg of DCA(A) Uniformit 26/02/202 2/22117/2 elemental 258/3712 y of folic 0 020-21, Iron and Date: acid and Opening Date: Folic Acid 10.3.2023 Descriptio Date 28/05/202 IP 0.5 mg n 25/08/202 0 0 Valid upto (Online 31/12/202 technical 0 Bid) The Assay of report Folic after acide retesting (86.90%), was not Uniformit provided y of by the content of CDSCO folic acide Drugs and inspector. Descriptio Only n.
result is shared on dated 07.11.202 3
15. The argument advanced by the petitioner with regard Page 21 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined to the variation in the Test Report and it is not meeting parameters is that the variation between two Test Reports is by a huge margin in terms of percentage 35.71% and 86.90%. This itself is suggesting some mistake in the sampling or testing method. Learned Senior advocate has also attributed it to long time lapse condition in which samples were preserved etc. In this regard, the Court observes that the percentage of variation is in contexts of one of the constituent medical which goes on to make the final product and as is give to understand that the product deals with iron deficiency and the material which is deficient in the final product has and effect on absorbing capacity of the Iron in human body. So a small variation will multiply manifolds when it actually consumed by a human body individually. Therefore, the effect of a minor variation in the opinion of the Court can not be trivialized on the basis of the smallness of the percentage variation.
16. The Court also observes that the contract also provides for packing the tablets in such manner that the quality remain intact till the shelf life of the tablet. The supply is obviously made following this requirement. Therefore, what is sent for analysis all the series of tablets. On page 170 is the form-17 filled by the Drug Inspector of having taken samples of in all 5 products wherein also includes the product in questions. This would indicate that tablets taken as sample in 10 strips in parcel form. Therefore, there is no Page 22 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined reason to doubt sampling method or preservation when the samples were intact in the same packing provided by the petitioner. The sampling on both occasions was done within the period of shelf life. In any case, the issue raised by the petitioner in this regard will rare disputed questions of fact which will be under taken by the forum in which the action may be taken under the provisions of Drugs and Cosmetics Act, 1940. Suffice it to say that the record placed before this Court indicates failure of the samples for the procedure on two occasions.
17. Clause 'L' of the Tender document is for Agreement and Sub-clause (4) reads as under:-
"(4) The AT/RC Holder must supply the drugs and other items of stores as per the standards of quality mentioned in second schedule of Drugs &Cosmetics Act, 1940 & respective pharmacopoeia. The stores must continue to. confirm to the usual pharmacopoeia limits of potency, if tested at any time during its shelf life till its expiry date."
18. Clause 'K' is for Shelf Life and Sub-Clause-(11) reads as under:-
"11.Quality Assurance: The supplier shall guarantee that the products as packed for shipment (a) comply with all provisions of specifications and related documents (b) meet the recognized standards for Page 23 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined safety, efficacy and quality; (c) are fit for the purpose made; (d) are free from defects in workmanship and in materials and (e) the product has been manufactured as per GMP included in Schedule M of Drugs & Cosmetic Rules."
19. Clause 'M' for Quality Testing, and Sub-Clause (2) and (10) read as under:-
"2. The Drugs shall have the active ingredients within the permissible level throughout the shelf life period of the drug. The samples may also be drawn periodically during the shelf life period. The supplies will be deemed to be completed only upon receipt of the quality certificates from the laboratories.
10.It is further clarified that wherever there is a difference in the report of the testing laboratory and that of the laboratory notified under the Drugs & Cosmetics Act 1940, the latter shall prevail to the he exclusion of the former and no cl claim whatever based upon the former will be entertained."
20. The Court may refer to clause R for Warranty where it provides that the petitioner would continue to confirm to the description and quality for period of shelf life of the product.
21. The debarment policy which is to be treated as a part of the tender document (Page 80/c) provides for the action contemplates in an incident of non-confirming of the product, Page 24 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined which reads as under:-
Debarment policy for failure of quality of drugs supply:-
Sr. Reason for Category of NSQ Policy approved by Approved No. Debarment Drug. BOD changes
1. In case of single (1) zero content Five years No Change batch of drugs i.e. sample does debarment against declared Not of not said firm/company Standard due to:_ 't show presence for respective (Assay) of any active dosage firm ingredient.
(2) Less content of Three years active ingredient. debarment against No Change said firm-company for particular item/ drug.
(3) High content of
active ingredient. Two years
debarment against
said firm/company No Change
for particular item/
drug./
22. It is also argued that the contract itself provided for an analysis report of NABL Accredited Laboratory of the product supply and also incumbent upon respondent at the time of accepting the product to get the samples analyzed and for such analysis, the respondent has provision to deduct 1% to undertake the analysis at the point of supply. The amount having been deducted, the presumption would be that the analysis was undertaken at the point of supply and as there was no report of failure to meet parameters, the product has been accepted. The Court may not accept the contention as it is in the realm of presumption and a question of fact wherein has to be established Page 25 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined by evidence. Therefore, the authority had on one had the failed analysis report and the presumption as aforesaid on the other hand. The authority was satisfied in going ahead with the fact of analysis report on hand. Moreover, the prevailing sub-clause 10 of Clause-M provides for procedure of Laboratory Testing Report of Laboratory notified under Drugs and Cosmetics Act, 1940.
23. A submission is made by the learned advocate for the petitioner to the effect that the debarment order for supply of only a particular item will adversely affect the working of the petitioner on account of the widespread business of the petitioner of supplying medicines to the Government of at least 17 States and therefore, the Authorities ought to have considered the wide reputation of the petitioners while passing the orders of debarment.
24. The Court of the view that the relation between the petitioner and the State was on the basis of the contract arrived at between them and as observed in the preceding para, the non- compliance of the required parameters would result in the consequences as provided for in the debarment policy and nowhere is it provided that the Authority will have to give importance to the reputation of the company. The Court observes that in the field of public health and under the obligation of the State, supply medicines either at free of cost or subsidized price, the Page 26 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024 NEUTRAL CITATION C/SCA/10503/2024 ORDER DATED: 03/09/2024 undefined responsibilities of all the stakeholders is very high. In view of the direct impact on the public health by supplying a deficit medicine house, which will have to be viewed seriously as the reputation of the petitioner company cannot be placed on a higher pedestal than public health.
25. In view of the aforesaid discussion, the Court is not inclined to interfere with the impugned order. The petition therefore deserves to be and is hereby dismissed. Notice is discharged. Ad interim relief granted earlier stands vacated. No order as to costs.
(A.Y. KOGJE, J) (SAMIR J. DAVE,J) SHITOLE Page 27 of 27 Uploaded by SHITOLE MANISH P.(HC00188) on Wed Sep 11 2024 Downloaded on : Fri Sep 13 22:20:52 IST 2024