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2011 Supreme(Del) 702
IN THE HIGH COURT OF DELHI AT NEW DELHI
SIDDHARTH MRIDUL & A.K. SIKRI
IN THE MATTER OF: IND-SWIFT LTD. ... APPELLANT
VERSUS
UNION OF INDIA & ORS. ...RESPONDENTS
LPA 633 OF 2010
Decided on : 16.12.2011
Mr. P.S. Patwalia, Sr. Adv. with Mr.Arvind Nagar, Mr. Pawan Guglani, Mr. Aman Preet Rahi, Advocates
Mr. Sachin Datta, CGSC
The significance of dissolution and disintegration tests in determining the effectiveness of pharmaceutical drugs and the justification for debarment based on repeated failures in these tests.
Headnote:
Pharmaceutical Drugs - Companies Act, 1956 - 9(iv), 9(v), 9(vi), 9(vii), 28 - The court discussed the provisions of the tender documents and supply order form, specifically clauses 9(iv) to (vii) and clause 28, which outlined the conditions for debarment of a supplier for supplying sub-standard quality drugs. The court highlighted the testing procedures specified in the Indian Pharmacopeia (IP) and the significance of dissolution and disintegration tests in determining the effectiveness of the drugs. The court emphasized that the debarment order was justified based on the repeated failures of the drugs and the contractual conditions.
Fact of the Case:
The appellant, a pharmaceutical company, supplied drugs to the respondent, Director General of Health Services (DGHS). The drugs were found to be of sub-standard quality in dissolution and disintegration tests, leading to show cause notices and permanent debarment. The appellant challenged the debarment orders in a writ petition, which was dismissed by the Single Judge.
Finding of the Court:
The court found that the debarment was justified based on the repeated failures of the drugs in dissolution and disintegration tests. The court held that the principles of natural justice were followed, and the debarment order did not suffer from procedural infirmity. The court also emphasized the significance of the dissolution and disintegration tests in determining the effectiveness of the drugs.
Issues: The issues included the challenge to the debarment orders based on contravention of natural justice, prescribed testing procedures, and the duration of debarment. The appellant argued that the debarment was unwarranted due to marginal variation in the tests and faulty storage by the respondents.
Ratio Decidendi: The court held that the debarment was justified based on the repeated failures of the drugs in dissolution and disintegration tests. The court emphasized the significance of the dissolution and disintegration tests in determining the effectiveness of the drugs. The court also suggested that the respondents reconsider the permanent ban and impose a specific period of debarment instead.
Final Decision: The appeal was dismissed, and the court found no merit in the appellant's arguments. The court emphasized the significance of the dissolution and disintegration tests and suggested that the respondents reconsider the permanent ban and impose a specific period of debarment instead.
1. The appellant is a company registered under the Companies Act, 1956 having its registered office at Chandigarh. The appellant claims that it belongs to Ind-Swift Group which is a well established name in the pharmaceutical industry which has broadened its horizons by placing profound and sparkling footprints on multifarious diversified fronts and has steadily and surely scripted its success story filled with enviable milestones and pioneering breakthroughs. The group today has annual turnover of about Rs.1000 crores. The appellant was enlisted as a supplier for certain categories of pharmaceutical drugs to the respondent No.2, namely, Director General of Health Services (DGHS) which comes under the Ministry of Health and Family Welfare. The appellant was enlisted as such after undergoing the tendering process. For this purpose, the respondents had adopted the tender document of NCT New Delhi for supply of those drugs. The supplies were to be made in accordance with the conditions stipulated in those tender documents. Such supplies were to be preceded by inspection and testing at the instance of the respondents. Testing was to be done at one of the Government approved testing laboratories located in National Capital Region of Delhi. The contractual conditions also provide that if the sample is not found to be of standard quality, not only the consignment could be rejected, the firm could be debarred from supplying that drug for a period of two years. Relevant conditions in this behalf contained in clauses 9(iv) to (vii) are in the following terms:
“9 (iv) If the product is found to be not of standard quality, the total cost of test will be recovered from the supplier. The supplier will however, make full payment of entire consignment against the particular invoice irrespective of the fact that part of the supplied stores may have been consumed. Where a drug supplied by the tenderer is found to be “Not of Standard Quality” the firm will be debarred from supplying that drug for a period of two years. No further orders will be placed to the firm for that particular drug and rate contract for that particular drug will be cancelled. Where more than one drug supplied by the manufacturer is found to be of, “Not of Standard Quality” the firm will be debarred from supplying any drug for a period of two years.
(v) If two items of the firm are declared as “not of standard quality” by a government approved laboratory, then the firm will be debarred to participate in tender for all its items for a period of two years. (vi) In case of immunological agents, firms are debarred to participate in the tender for five years, for that particular immunological agent in which there had been a batch failure/substandard report from any authorized testing laboratory. Five years would be counted from the date of such report. (vii) The test report from an approved laboratory would be final and no representation would ordinarily be entertained. In exceptional cases, where the report of a duly approved laboratory is not acceptable by the firm and the firm represents giving sufficient reasons why a second test is warranted, a retesting may be undertaken. A fresh sample of that batch would be taken for testing in approved laboratory different from the previous one. The report received would be taken as final and action taken accordingly. No more representation would be entertained in this regard afterwards. Cost of retesting would be borne by the firm challenging the initial test result.” Further, clause 28 of the supply order form issued by the Government Medical Store at Chennai to the appellant reads as under: “28. In the event of drugs supplied found substandard in laboratory test, the following action will be taken against the firms (i) For Category „B? defects, the manufacturer will be debarred for supply to MSO of that particular product declared not of standard quality for a period of three years.
(ii) If the manufacturer fails in suppl
