The High Court · 2025

the High Court may be pleased to subject drug of the concerned batch to an empanelled testing laboratory of the Respondent No. 2 corpo ration. Counsel for the Petitioner : SRI ANUP KOUSHIK KARAVADI Counsel for the Respondent No.1 : GP FOR MEDICAL HEALTH AND FAMILY WELFARE Counsel forthe Respondent No.2: SRI J.RAMACHANDRA REDDY, LEARNED COUNSEL, REPRESENTING SRI G.RAMA RAO The Court made the following ORDER THE HON'BLE SRI JUSTICE PULLA KARTHIK WRIT PETITION No.31615 of 2024 ORDER: This Writ Petition, under Article 226 of Constitution of India, is filed seeking the following relief: "...to issue an appropriate Writ, Order, or Direction, particularly in the nature of Writ oI Mandamus: To set aside the impugned Proceedings No.19/ph3/ NSe/Sai Parerltrals /2024-25 dated 06-1O-2O24, issued by 2"d Respondent, blacklisting the petitioner's product "Ceftriaxone Injcction 1gm [1360] [U],' for a period of three i.e. from 23-10 2024 to 22 lO 2027 , as being illegal, arbitrary, and in violation of the principJes of natural justice, as well as the procedures prescnbed under the Drugs arld Cosmetics Act, 1940, apart from being in violation of the Tender condiLions contemplated in I0 of 2O23,... "

2. The case of the petitioner is that respondent No.2 issued Tender No.lO l2022lMWITSMSIDC dated 10.11.2O22, for procurement of medicines under a rate contract, valid for a period of one year. In pursuance thereof, the petitioner Company participated in the tender process and was succcssfully declared as L1 bidder, later, executed the agreement, which was valid until 08.12.2023. While so, on OA.12.2O23, respondent No.2 issued a purchase order No.1360 /2K23_ Q3-2r2/759 (10282304663) for the supply of 9,t4,832 units of Ceftiaxone Injection lgm, totaling a_n amount of Rs.1,S1,13,O74.2O. Thereafter, lhe petitioner Company, first obtained certification from PK, J w.P.No.3161S of 2024 )(- 1 -t Sterile India private Limited and supplied the medicines as requested by respondent No.2. However, the Drug Inspector, rvho collected the samples of the medicines, alleged that they were of substandard quality arrd sent them for ter;ting by the CDSCO. Therea_fter, the sample was forwarded to the Central Drugs Laboratory, Kolkata, on 19.06.2024, arrd after testing the sample betrveen OS.OZ .2024 and, 18.07.2024, the Government Arialyst submitted his report dated 23.07.2024, in Form 13, under Section 2S(l) of the Drugs and Cosmetics Act, 1940, which cc,nfirmed that the medicine was .not of standard quality'.

3. Thereafter, the petitioner immediately senr the allegedly affected batch of medicines for testing to UMED pharma Lab, and also conducted an interna.l analysis themselves, wherein, no deviations, as alleged by the CDSCO and the report dated 23.O7.2024, were found. However, while the things stooc: thus, the CDSCO sent a letter to the petitioner on O5.O8.2024, direc:ting to re_cell the disputed batch of medicine from the market. Thereafter, on Og.Og.2O24, a show_cause notice was issued, calling the petitioner to provide al explanation as to why the disputed medicine of the petitioner Company shall not be blacklisted, in accordance with the tender conditions, In response, the petitioner submitted its repty dated 23.Og.2024, through e_mail, - .. -.L ;; "-kla-* F-T_--. &i*: t l I 3 PK, J W.P.No.3 j615 of 2024 on 26.08.2024, stating that the product has been previously tested and approved by the empaneled laboratory; indicated their intention to challenge the report in Form-13 dated 23.O7.2024, and requested .not to take further action until the appellate report is received. However, since the sard expl:rnation and request was not considered, the petitioner was constrained to file W.p.No.26757 of 2024, before this Court, cha_llenging the very show_cause notice dated Og.Oa.2O24. This Court, on 15.IO.2O24, granted an interim order, directing the respondents to consider the petitioner,s reply dated 23.Og.2O24, submitted on 26.Og.2024, and. to pass appropriate orders, in conformity with the principles of natural justice. The respondents were also directed not to take any coercive steps till then. However, without conducting an enquiry and without affording the petitioner a,, opportunity of hearing, respondent No.2 has passed the present 06.10.2024, blacklisting the petitioner,s impugned order dated product for a period of three years Hence, the present writ petition. 4 Heard Sri Anup Koushik Karavadi, learned counsel appearing for the petitioner, learned Government pleader for Medica_i and Health, on behalf of respondent No. 1 ald Sri J Ramachaldra Reddy, learned counsel, representing Sri G. Rama Rao, learned Standing Counsel for respondent No.2. PK, J \L'. P.No 316 )5 of 2024

5. Learned counsel appearing for the petitioner contended that the impugned proceedings dated 06.10.2O24 issued by rcspondent No.2, are in utter violation of the principles of natural justice, as the petitioner was never afforded a1 opportunity of personal hearing to present its case nor was its de.tailed explanation dated 26.0g.2024 was duly considered. Further, respondent No.2 committed a grave error in not conducting an errquiry before issuing the impugned proccedings, in complete disregard of the interim order of this Court dated 15.10.2024 in W.P.No .26i'57 of 2024. As such, the impugned order dated 06.10.2024 is illegal and arbitrary. It was further contended that the impugned order is not barred by jurisdiction, but also is in violation of the Tender 3onditions stipulated at Clauses 12.7 (a) arrd (d). Further, the impugned proceedings were rssued without adhering to the maldatory pror;edures prescribed under the Drugs and Cosmetics Act, 1940, more particularly, Sections 25 (3) and (a), which provides the petitioner the: right to appeal against the report of the Central Drugs Laboratory, I(olkata. However, the action of the respondents in prematurely blacklisting the product infringes the a,foresaid statutory right of tLLe petitioner and undermines due process. It was further contended that the decision to blacklist the product for three years is solely based on the report of the Central PK, J W.P.No.31615 of 2024 Drugs Laboratory, and without an independent verilication or consideration of the petitioner's internal assessment' As such, the said unilatera-1 reliance on a single report is illegal, arbitrary, unfair and in violation of Articles 14 and 19(1)(g) of the constitution of India. Further, respondent No.3 failed to adhere to the procedure and established legal protocols white collecting and forwarding the samples to the Central Drugs Laboratory, Kolkata, which raises serious concerns about the reliability of the report of the Laboratory' on the basis of which, the pre'sent impugned proceedings are issued' It was further contended that the arbitrary blacklisting causes a significant harm to the petitioner's reputation and business' jeopardizing its contracts, partnerships and longstanding relationships with its clients and healthcare providers, both domestically and internationally. Therefore, Iearned counsel appearing for the petitioner prayed this Court to allow the present writ petition by setting aside the impugned proceedings dated 06.10.2024. In support of his contentions, learned counsel for the petitioner relied on the decisions of the Hon'ble Apex Court \n Harish Kumar Sikka a. tlnion oJ Indiat, J'K' Cotton Spinning and I 2007 SCC OnLrne Del 1339 f-1 EI I'K, J ',t l'. No.31613 o[ 2024 Weaving Mills Co. Ltd..,:2 and y.S. Achuthanandan v. R. Balakrishna Pillais

6. Per contra, learned counsel appearing on behalf of respondent No.2 submitted that the respondents have initiated action against the petitioner by issuing a shou -cause notice dated 0g.Og.2024, in accordance with the terms zrnd conditions of thc tendcr datecl lO.ll.2022, and also pursu ant to the reporl issued by the Government Analyst, Central. frrugs Laboratory, Kolkata, vidc Rcport No.6-2(ll /HZ /2024-25 dated t!.3.O7.2024, wherein, rt was declared that the Ceftriaxone Injection 1gm (Batch No.S24Ol5; Manufacturing Date: O2.2O24; trxpiry Date: 01.2026) manufactured by the petitioner, is 'Not of Standard Quality', in terms of the Indian pl-rarmpacopeia 2022. It was further submitted that the injection in questlon, Ceftriaxone Inj ection 1gm, falls the catcgory of parental preparations, which are required to be sterile and safe for direct administration into blood-stretrm, muscles or tissues. and as per Condition 12.7 read with C)ondition 2.8 ol the rcnder dared 1O.I1.2022, even if one batch cf such parental prepar-ation category drugs is declared as 'Not of Staldard euality,, that product of the f-rrm , l960 SCC Online Sc t6 r (2ot r) 3 scc 317 I , w r.wo.stats oflizl 7 will be blacklisted. As such, the subject product was righfly blacklisted by respondent No.2, irrespective of its assay content, vide impugned order dated 06.1O.2024. Ir was further submitted that till date, respondent No. 2 has not received any directions from the appelrate authorities or the Central Drlgs Standard Control Organization (CDSCO), either to stay or withho Id any action against the peutioner. Furthe :r, this Court, in W.p.No.267 SZ of 2024, has directed to conduct an enquiry or grant an opportunity of personal hearing to the petitioner, followed by an independent verihcation or consideration of the petitioner,s subsequent quality control assessment. However, the respondents a_re not authorized to re_send the sample to any other laboratories, as the sample was analyzed by the Drugs Inspector, CDCSO, Hyderabad Zone, S.R. Nagar, ald the report was issued in Form_ 13, de claring the sub.lect drug as not of standard quality,. Therefore, it was prayed to dismiss the present writ petition.

7. This Court has ta_ken note of the rival submission s/contentions urged by the respective parties and perused the material on record. 8. As can be gathered from the record, in response to the tender issued by respondent No.2 vide Tender No.tO / 2022 / MWITSMSIDC, i ,i .rE:=-=--'' PK, J W.P.No.31615 o[ 2024 ..1 dated 10.11.2022 for procurement of medicines under a rate contract '/alid for one year, the petitioner has participated in the tender process, emerged as the lowest bidder (L1) and executed agreement and consequently supplied medicines based on the purchase orders placed by respondent No.2 and the agreement was valid till

08.72.2023. While so, on OA.D.ZOZ3 (i.e. on the last day of the agreement) respondent No.2 has issued Purchase Order No.736O/2K23-Q3/212/759 (1O2a23O4663) for supply of 914835 units of Ceftriaxone Injection 1 gm totaling Rs. 15,113,O74.2O/-. [n pursuance thereof, the petitioner Company has supplied the mcdicines as rcquired by respondent No.2 after obtaining certif-rcation from Sterile India Private Lrmited. However, alleging that the medicines supplied were of substandard quality, the Drug Inspector has collected samples of the medicines and sent them for testing lo Central Drug Laboratory, Kolkata, on 19.06.2024. After testing the samples between O5.O7.2024 and 18.07.2024, L}:-e Central Drug Laboratory, Kolkata, vide itsr report/Form-13 Certiltcation dated

23.07.2024, has confirmed that the medicines are not of standard quality with respect to cla-r'ity of solution, particuiate matter, appearance of solution. F\rrther, the Directorate General of Health Services, Central Drugs Standard Control Organization, Enforcement PK, J w.P.No.3l6)S of 2024 Division, also issued a letter dated 05.0g.2024 directing the petitioner Compa-ny to immediately recall the disputed batch of drugs from the market. Thereafter, based on the report d,ated 23.O7.2024, respondent No.2 issued a show cause notice dated 0g.Og.2 O24 to petitioner Compaly to submit its explanation as to why the subject medicine should not be blacklisted for Supply of substandard quality product, as per tender conditions. As the explanation of the petitioner dated

23.OA.2O24 submitted through e mail daLed 26.Oa.2O24, was not satisfactory, respondent No.2 has issued the present impugned order dated 06.10.2O24 blacklisting petitioner,s product uiz., CeLriaxone Injection I gm [1360] [U] for a period of three years from 23. lO.2O24 tlll 22.1O.2027, as per tender conditions.

9. In this context, this Court deems it apt to refer clause 12.7 of the Tender Document dated IO.ll.2022, which deals with 'Blacklisting Of ltem' and the same reads as under: S,No. (A) I 2 3 4 ForEulatio! No. of Batches that fail the Tablets/Capsules or Other formu lations Liquid preparations/ syru ps/ su spcnsions Parenteral preparations Sera/Vaccines 02 01 OI 0l @ PK, J W.P No.31615 of 2A24 5 6 Opththalmic preparation Powders 01 o1 Oualit YTest bv the Empanelled Laboratories of TSMSIDC (a) Each ald every batch of Drug/Medicines supplied by the supplier shall be subjected to quality tests by tho Empanelled laboratories. (b) The samples are collected from the Warehouses from each batch of supply o[ the same drugs and after eliminating the common batch, samples shall be taken in random, decoded and wilt be sent to the empanelled testing laboratories for testing the quatity of drugs. (c) If such sample passes q,hality test in a1l respects, TSMSIDC, will instruct its Warehouses to issue such drugs to various hospitals/Institutions (d) Such quality passed batches il received after declaration oI result of the earlier supply, the same wilt be rLgain subjected to testing and the latest report of that particular batch will prevails upon the earLier results and binding on thc entire quantity of the batch supplied and recovery will be made for the entire quantity of that batch irrespective of purchasc order date or date of supply etc. (e) rf the sample flails in a quality test and a report is received certirying that sample is "NOT OF STANDARD eLlALITy", one more sample shall be drawn from the same batch and to be sent to Government Laboratory for quality testing. (i) If such a sample passes the quality test as per thc report o[ GovemmenL Laboratory, the drugs representlng the sample shall be qualilied for issue to various Inshtutions. (ii) If such sample fails in Lhe quality test, as per the report of the (iovernment l,aboratory, the drugs of the batch are not qualihed for issue and thc supplier ])K, J w.P.No.31615 oI2024 shall take back the drugs supplicd in that batch, bcsides takrng other acttons as per the Tender conditions by TSMSIDC, (iii) If such Szrmple farls in a quality test for ASSAY contcnt of lcss than Soyo as per thc Covernment Analyst report, such product o[ thc tendcrcr will be blacklistcd for lwo years. (iv) However, 'ISMSIDC, reserves the right to reject the drugs based on reporLs lrom empanelled laboratories with the applicable penal provlstons- (f) if 3 patches of a particular drug.supplied by the supplier is reported to be failing in ASSAY content (above 50% but below prescribed limrt)/ Sterility/ BET/Toxicity/ard or other parameters, then the particular drug of the hrm shall be blacktisted after observing procedure lard dorvn in Procedure for Blacklisting besides forfeiture of Performalce Securiry of that particular product(s). (g) In all the cases the reports received from the Government Drug Testing Laboratory/decision of TSMSIDC Ltd wilt be conclusive and hnal and binding on the suppliers. (h) The amount for that batch (even if it is already consumed) witl be deducted from the performance security or amount payable to thc bidder. No purchase orders will be placed for the blacklisted item of the ilrm.

10. From the above, it is thus clear that at the initial stage, the samples collected from the warehouses shall be sent to the empanelled testing laboratories for testing the quality of drugs and if the sample fails in such quality test, then the authorities shall draw one more sarnple from the same batch and send the same to the Government Laboratory for quality tesling. L2 PK, J lU. P.No.3161 5 of 2O24

11. But, in the instart case, the respondents have forwarded the sample directly to the Central Drug Laboratory,, Kolkata, on

19.06.2024 for testing, in deviation of the procedure prescribed, staled supra. If the respondents have forwarded the sample initially to the empanelled testing lzrboratory and found the drug to be of substa-ndard quality, then the petitioner would have had the chance to get the sample tested for the second time, but due to forwarding ol sample directly to the Central Drug Laboratory, the petitioner is deprived of his valuable right of getting the drug tested for the second time, in terms of clause 12.7 (e) of the tender document dated

10.11.2022. The rcspondents having failed to follow the procedure prescribed under clause \'.L.7 (el of the tender document dated 1O.11.2022 citnnot resort to penal provision of blacklisting provided under said clause.

12. Be that as it may. Evr:n though there is a specihc direction to respondent No.2 in I.A. No.ii of 2024 dated 31. 12.2024 to send the controlled drug sample of thr: subject drug of the concerned batch to an empanelled testing laboratory of respondent No.2, till date, no steps are taken in that regard and respondents cannot shirk off their duty simply stating that the sample is available with Drug Inspector concerned ald direction be given to said authority, rvho is not even a - 13 PK, J W.P.No.316l5 of 2024 party to the present writ petition, for sending the sample for testing to the empalelled testing laboratory ald it is for respondent No.2 to undertake such exercise by making necessary correspondence with Drug I nspector concerned.

13. For the reasons elicited supra, this Court is of the view thar the impugned proceedings No.19/ph3/NSe/Sai parenterals/ 2 O24 25 dated 06.1O.2O24 issued by respondent No.2 are liable to be set asidc and are accordingly set aside.

14. Accordingly, the Writ petition is allowed IVliscellaneous applications, if any, pending in this writ petition, shall stand closed. No costs. /TTRUE COPY// SD/-MOHD. ISMAIL PUTY REGISTRAR D SECTION OFFICER I

1. The PrinciPal Secretary' DeP artment of Medical, H 2. The Managing Director, Telangana lvledical Services and lnfrastruture Secretariat Buildings, State of Telangana at Hyderabad Development CorP oration Ltd, (TGtvls rDC), Hyderabad, (An EnterPrise of Government of Telanag ana), O/o. 2nd Floor, TGMSIDC Building, DM and HS Cam pus, Koti, Sultan Baz ar, Hyderaba d- 500095

3. Two CCs to GP FOR MED ICAL HEALTH AND FAMILY WELFARE' High Ith and FamilY Welfare Court for the State of Telang ana at Hyd erabad. [OUT] One CC to SRI ANUP KOUS HIK KARA VADI, Advocate [OPUC] One CC to SRI G.RAMA RAO , Advocate (OPUC) Two CD CoPies To 4 5 6 SA GJP ot R THE S tq ( 2 4 iljr ?025 f,:q;t:i * \Jo O T * HIGH COURT DATED:1610712025 ORDER WP.No.31615 of 2024 ALLOWING THE W.P WITHOUT COSTS. g{ a\