In a recent, remarkable and righteous decision titled Medipol Pharmaceutical India Pvt. Ltd. vs. Post Graduate Institute of Medical Education & Research in Civil Appeal No. 2903 of 2020 (arising out of SLP (C) No. 26349 of 2019) delivered on August 5, 2020 by a two Judge Bench of the Apex Court comprising of Justice RF Nariman and Justice Navin Sinha have observed categorically and convincingly that considerable unexplained delay on the part of drug authorities to test a sample can render any penalty under Drugs and Cosmetics Act, 1940, based upon the said analysis of the sample as void. The Court was considering an appeal filed by Medipol Pharmaceutical India Pvt. Ltd. which was blacklisted. The writ petition filed by this Medipol company before the Punjab and Haryana High Court was dismissed. But the Apex Court found the State order of blacklisting the company as arbitrary and therefore it set aside this blacklisting order and made it clear that while exercising its power to blacklist a company, the State has to act fairly and rationally without in any way being arbitrary. Very rightly so!
To start with, this latest, landmark and laudable judgment authored by Justice RF Nariman for himself and Justice Navin Sinha first and foremost after granting leave then goes on to observe in para 2 that, “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:
DEMAND QUANTITY REQUIRED
1st YEAR 3400 tubes
2nd YEAR 3400 tubes
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 would 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 self-same 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 impugned order of blacklisting.”
As a corollary, it is then stated in para 3 that, “What is clear from the narration of the facts stated above is that the Drug Inspector drew samples on 29.11.2017 which was long after supplies had been made to the Respondent on 08.04.2016 and complaints received. From the date of drawal of smaples on 29.11.2017 till the date on which the samples were received by the Government Analyst on 26.12.2017, there is yet another delay of almost one month. Also, owing to no fault of the Appellant, the sample that could be sent to the Central Drugs Laboratory, Kolkata, under Section 25(3) of the Drugs and Cosmetics Act, was received by the aforesaid Laboratory only on 11.02.2019, long after the expiry date of the goods in question, which was in April, 2018. Even this sample, when tested yielded a result of 92.01%, which is only roughly 3% below the required minimum standard. What is important to note is that the Government Analyst’s report was shown to be completely wrong. Finally, to cap it all, after a post-decisional hearing given to the Appellant, the seven-member Committee opined that there was no reason to recall the blacklisting order based on the result of the first laboratory test report, completely ignoring the appellate test report.”
To state the obvious, it is then stated in para 4 that, “On these facts, we find that the impugned decision reflected in the minutes dated 18.09.2019 is wholly perverse inasmuch as it is based only upon the first laboratory test report.”
To put things in perspective, para 5 then envisages that, “The High Court, instead of striking down this decision in judicial review proceedings, went into the appellate laboratory test report itself and stated that as it was 3% below the prescribed percentage of 95%, the blacklisting order ought not to be interfered with.”
As it turned out, the Bench then minces no words to state unambiguously in para 6 that, “The High Court ought not to have gone into the appellate laboratory test report by itself. It ought to have struck down the impugned decision on the ground that it relied upon something irrelevant, namely, the first laboratory test report and ignored the appellate report. The High Court ought also to have appreciated that the appellate laboratory report was at complete variance with the first laboratory test report – the variation being a huge figure of 30%. This was despite the fact that the appellate laboratory test report tested a sample of the Appellant’s product long after its shelf life had expired.”
Be it noted, it is then stipulated in para 12 that, “Though the aforesaid judgments pertain to criminal prosecutions under the Drugs and Cosmetics Act, Prevention of Food Adulteration Act and Insecticides Act, yet, they lay down that a valuable right is granted to a person who is sought to be penalized under these Acts to have a sample tested by the Government Analyst that is found against such person, to be tested by a superior or appellate authority, namely, the Central Drugs Laboratory. These judgments lay down that if owing to delay which is predominantly attributable to the State or any of its entities, owing to which an article which deteriorates with time is tested as not containing the requisite standard, any prosecution or penalty inflictable by virtue of such sample being tested, cannot then be sustained. We have seen that on the facts of this case, the sample drawn and analyzed by the Government Analyst was delayed for a considerable period resulting in the sample being drawn towards the end of its shelf life. Even insofar as the samples sent to the Central Drugs Laboratory, there was a considerable delay which resulted in the sample being sent and tested 8 months beyond the shelf life of the product in this case. It is thus clear that the valuable right granted by Section 25 of the Drugs and Cosmetics Act kicks in on the facts of this case, which would necessarily render any penalty based upon the said analysis of the sample as void.”
Finally and far most importantly, it is then held in para 15 that, “We have seen in the present case that the post-decisional hearing proved to be an eyewash as the seven-member Committee did not even refer to the findings of the appellate report, which showed that the Government Analyst’s report was wholly incorrect, 61.96% being widely off the mark. Given the fact that there is considerable unexplained delay on the part of the Drug authorities and the Respondent resulting in the first and second samples being tested late – the second sample being tested 8 months after its shelf life had expired – it is clear that the order of blacklisting dated 21.02.2019, as confirmed by the order dated 18.09.2019, is infirm and is therefore, set aside. Concomitantly, the impugned High Court judgment is also set aside.”
To conclude, the two Judge Bench of the Apex Court comprising of Justice RF Nariman and Justice Navin Sinha have very rightly held that considerable unexplained delay on the part of drug authorities to test a sample can render any penalty under the Drugs and Cosmetics Act, 1940, based upon the said analysis of the sample, as void. It has also remarkably put forth very cogent and convincing reasons for holding so as we have already noted above. The State must always adhere to what the Apex Court has held so rightly in this notable case and act fairly and rationally without in any way being arbitrary. Thus we see that the blacklisting order was so very rightly set aside here!