Point of Law: Drug Pharmaceuticals - Reports of Government Analysts - Blacklisting has effect of preventing a person from privilege and advantage of entering into lawful relationship with Government for purposes of gains - Fact that a disability is created by order of blacklisting indicates that relevant authority is to have an objective satisfaction. Fundamentals of fair play require that person concerned should be given an opportunity to represent his case before he is put on blacklist.

JUDGMENT

R.F. Nariman, J. - Leave granted.

2. Having heard learned counsel for the parties, it is important to first set out a few basic facts:

i) A notice inviting quotations was issued on 06.07.2015 by the Respondents herein for Clotrimazole Cream 1% 15 gm tube, the quantity being required for the first year and second year, being:

ii) To this N.I.Q., the Appellant submitted its quotation on 09.07.2015, in which it was specified that the shelf life of the said cream would be only 2 years.

iii) After rates were negotiated and re-negotiated, a supply order was issued on 04.11.2015 in which it was clearly stated :

"8. Not more than 1/6th of the shelf life should have expired when drug Pharmaceuticals are received in medical store PGI, Chandigarh."

iv) In accordance with the supply order, the first instalment of 1700 tubes of Clotrimazole Cream was supplied on 18.01.2016, there being no complaint whatsoever in respect of the said supply. However, when the second instalment of 1700 tubes of the selfsame Cream was supplied to the Respondent on 08.04.2016, various complaints were made. The first Respondent drew samples on 29.11.2017, which samples were sent for testing to the Government Analyst under Section 25(1) of the Drugs & Cosmetics Act, 1940.

v) The first test report dated 27.03.2018 specifically stated that the sample was received on 26.12.2017. This report, which is dated a few days before the shelf life of the Cream expired, found that the sample was 61.96% w/w as against an acceptable standard of 95-105%.

vi) As a result thereof, two show cause notices were issued on 13.04.2018 and 30.5.2018 by the State Drugs Controller and Drug Inspector respectively to the Appellant in which the Appellant was asked to explain why its licence should not be suspended or cancelled under Rule 85(2) of the Drugs and Cosmetics Rules, 1945 made under the Drugs and Cosmetics Act, which relates to licence to manufacture this product.

vii) The Appellant replied to the show cause notices on 26.04.2018. and 01.06.2018. However, a third show cause notice was issued on 26.09.2018 by the Respondent in which the question as to blacklisting arose for the first time.

viii) The reply of the Appellant to this show cause notice dated 04.10.2018 specifically requested the authorities not to take any action until a final report of the appellate lab, which was pending, was received.

ix) However, without waiting for this report, on 21.01.2019, the Appellant was blacklisted for a period of 2 years. A perusal of this report would show that there are no reasons given for the same. Finally, the appellate lab test report of the Central Drugs Laboratory, Kolkata, dated 19.08.2019 tested a sample that was received on 11.02.2019, that is, long after the expiry date of the Cream, in April, 2018. Even this sample, when tested, yielded a result of 92.01% which is way above the 61.96% that was found in the first test report.

x) A post-decisional hearing, based on this report, was given to the Appellant, and it was then found that the blacklisting order was in order inasmuch as on 18.09.2019 the Drug Committee, which consisted of a Chairman, two Members, two Special Invitees, one Director and one Convenor, then expressed their views on the arguments of the Appellant stating, inter alia, that on testing, the subject drug was found to be only 61.96%, which is markedly below the prescribed standard limit of 95-105%.

xi) As against the decision then taken, the Appellant filed a writ petition in the Punjab & Haryana High Court, which was dismissed by the impugned order dated 17.09.2019. After extracting the appellate lab test report, the Court found that being 3% below 95%, which is the prescribed standard, there was no good ground to interfere with the impug