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IN THE HIGH COURT OF KERALA AT ERNAKULAM
N. NAGARESH, J.
M/s. Bharat Parenterals Ltd. – Petitioner
Versus
The State of Kerala, Rep. by Secretary – Respondent
W.P. (C) No. 21421 of 2020
Decided On : 04-01-2021
The Drugs and Cosmetics Act, 1940- Section 9-B- Whether the 2nd respondent has exercised the power to blacklist the petitioner in a fair and judicious manner?-Issue of blacklisting a Firm/Company falls within the realm of contract blacklisting of petitioner-Company based on supply of Clobazam Tab 5 mg. was unjustified, the 2nd respondent should not have clubbed the said issue with blacklisting of another product of the petitioner-company earlier, so as to again blacklist the petitioner-Company.
Statement of facts:
The petitioner, a Pharmaceuticals Manufacturing Company, is before this Court seeking to quash Ext.P10 order of the 1st respondent blacklisting one of the products of the Company and to quash Ext.P13 order of the 2nd respondent blacklisting the Company itself for a period of three years.
Finding of the court:
Blacklisting of petitioner-Company based on supply of Clobazam Tab 5 mg. was unjustified, the 2nd respondent should not have clubbed the said issue with blacklisting of another product of the petitioner-company earlier, so as to again blacklist the petitioner-Company. By Ext.P13, the 2nd respondent has tried to overreach the appellate authority and to render Ext.P10 appellate order nugatory, which is impermissible
Result: Writ petition partly allowed
Key Points: - The petitioner seeks to quash Ext.P10 order (blacklisting a product) and Ext.P13 order (blacklisting the company) for three years. (!) - The appellate authority (Ext.P10) limited blacklisting to the product Clobazam Tab 5 mg, recognizing it as a special case needing leniency. (!) - The 2nd respondent issued Ext.P13 attempting to blacklist the petitioner-company overall after Ext.P10, based on two products being blacklisted, invoking Clause 6.29.9 of Ext.P1. (!) (!) - There is a finding by the appellate authority that there was not gross fraud or criminal intent, and the blacklisting of the company was unwarranted; petitioner’s dissolution test status and IP compliance were at issue due to IP Addendum 2016. (!) (!) - The court held Ext.P13 to be unlawful and set it aside, deciding the punishment should remain limited to the product rather than the company, thus partly allowing the writ petition. (!) - Tender conditions allowed blacklisting of a firm if two or more items supplied by the firm were blacklisted; however, the appellate authority found no justification for company-wide blacklisting in this case. (!) (!) - There was an amendment (IP Addendum 2016) that introduced IP specification requirements for Clobazam Tab 5 mg, which the petitioner argued was not applicable at the time of tender; the appellate authority acknowledged an exceptional situation regarding IP compliance. (!) (!) (!) - The 2nd respondent contended that blacklisting is for public interest and NSQ drugs, whereas the appellate authority noted the drastic nature of company-wide blacklisting and the lack of prior criminal/fraudulent acts. (!) (!) - The writ petition was partly allowed; Ext.P13 order of the 2nd respondent was set aside. (!) - The court referenced that blacklisting a firm is a drastic measure and must be tested for proportionality, not arbitrary. (!) (!) - The 1st respondent-appellate authority’s findings supported leniency and product-specific blacklisting, not company-wide. (!)
JUDGMENT :
N. NAGARESH, J.
1. The petitioner, a Pharmaceuticals Manufacturing Company, is before this Court seeking to quash Ext.P10 order of the 1st respondent blacklisting one of the products of the Company and to quash Ext.P13 order of the 2nd respondent blacklisting the Company itself for a period of three years.
2. Facts necessary to decide the lis involved in the writ petition are as follows:-
“6.29.8. If any two batches of the particular item supplied by the firm during the contract period, fail in any of the quality tests conducted by the tender Inviting Authority and/or by the Drugs Control Department, then that particular product of that firm will be blacklisted for a period upto 3 years as per Clause 6.39.
6.29.9. In the case of the bidder supplying more than one item during the contract period, and if two or more items supplied by the supplier are blacklisted based on the above process, then the firm itself will be blacklisted as per the procedure detailed in Clause 6.39.”
The 2nd respondent as per letter dated 09.03.2016, required the petitioner to supply the items as per the terms and conditions in the tender document.
3. The petitioner was required to supply Clobazam Tab 5 mg. of a total quantity of 23 lakhs units. The petitioner effected supply as against purchase orders issued by the 2nd respondent. The petitioner submitted test/analysis reports furnished by an independent NABL accredited laboratory after testing the drugs of each batch.
4. The 2nd respondent issued show-cause notice dated 03.10.2018 requiring the petitioner to show-cause why the petitioner should not be blacklisted. It was alleged in the show-cause notice that an e-mail had been received from the Drugs Controller on 06.01.2018 stating that batch No. T7026 of Clobazam Tab 5 mg. was declared as “Not of Standard Quality” on statutory sampling and the product was not complying with “dissolution test.” The petitioner pointed out to the 2nd respondent that the drug supplied by the petitioner satisfied all requisite tests and dissolution test was not mandatory as the drug was not an IP Drug (Indian Pharmacopoeia Drug).
5. It appears that IP Addendum 2016 was brought into effect from 01.04.2016, by which a test of dissolution was made one of the requisite parameters for Clobazam Tab. All IP specified drugs should have IP monograph with the name of the drug. As the tender in which the petitioner participated for supplying Clobazam Tab 5 mg. was before the IP Addendum 2016. The agreement of the petitioner with the 2nd respondent was for supplying Clobazam Tab 5 mg. (without IP monograph).
6. The petitioner would state that at no point of time the 2nd respondent had insisted the petitioner to supply Clobazam Tab IP 5 mg. having the standard prescribed in IP Addendum 2016. Therefore, the show-cause notice itself was in violation of Ext.P1 tender conditions. Clause 6.5.6 of Ext.P1 tender conditions stated that if the drug is official in Indian Pharmacopoeia, the licence to manufacture the product shall be for IP specification. Since on the date of Ext.P1 tender notification and also on the date on which the petitioner submitted their tender offering, the product was not official in Indian Pharmacopoeia, the petitioner was not required to have a licence to manufacture the said product for IP specification. In view of tender conditions, the 2nd respondent cannot insist that the drug Clobazam Tab 5 mg. should com
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