- (1.) THE Petitioner, being a pharmaceutical limited company, having its registered office in Chandigarh seeks the quashing of an order dated 26th August 2008 passed by the Deputy Director General (MS), in compliance with a letter dated 7th August 2008 of the Directorate General of Health Services ('DGHS'), Government of India permanently deregistering the Petitioner from participation in the business and supply of drugs to the DGHS. THE Petitioner also challenges the show-cause notices dated 30th April 2007 and 18th December 2007 issued to it by the DGHS preceding the order of deregistration.
(2.) ACCORDING to the Petitioner, the DGHS (Medical Store Organization) ['MSO'], New Delhi adopted the tender document of the GNCTD for supply of drugs to its Directorate of Health Services. In terms of Clause 9 of the General Conditions for the purchase of drugs and pharmaceuticals on Running Rate Contract, the supplies were to be accompanied by an in-house test report. On receipt of the consignment, the demanding officer was to draw a sample out of each consignment and send it for testing at one of the Government approved testing laboratories located in the National Capital Region of Delhi. If the sample was found not of standard quality, the consignment was to be rejected. Clauses 9 (iv) to (vii) which are relevant for the purpose of the present case read as under: "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." It is not in dispute that the Petitioner firm supplied 58 batches of different medicines to the MSO of the DGHS in terms of the tender documents. It is stated that a sample of Tablet Norfloxacin 400 mg supplied by the Petitioner to the government Medical Store Depot, Kolkata in 2007 was tested in two different laboratories of the Government Medical Store Depot at Kolkata and Chennai and the sample was found to be sub-standard in both laboratories with respect to the dissolution test. Based on these test reports on 30th April 2007 a show-cause notice was issued to the Petitioner asking it to show-cause why the said drug should not be deregistered with immediate effect. It is further stated that the said show-cause notice was sent by registered post to the Petitioner at 181, Industrial Area, Phase-II, Chandigarh and the same was not received back undelivered. It was presumed that the said notice has been served. The case of the Petitioner is that the above show-cause notice was not sent at the correct address of the Petitioner which was 781, Industrial Area Phase- II, Chandigarh. The Petitioner therefore did not receive the notice and could not send a reply. It is submitted that in any event, the two test reports show that the strength of the medicines was found to be good and only dissolution of the medicine was not found to be in conformity with the Indian Pharmacopoeia ('IP'). The Petitioner submits that the reports do not indicate what the standard time of dissolution of the medicine was and in how much time the medicine actually dissolved.
(3.) ON 18th December 2007 the Petitioner was issued a show-cause notice with regard to rejection of another drug Atenolol 100 mg tablet which was declared as sub-standard by the DGHS, Jaipur as the sample did not conform to the test for disintegration as per the IP. A copy of the said test report was enclosed with the show-cause notice. The Petitioner is stated to have replied to the show-cause notice on 24th December 2007 which fact is however denied by the Respondents. The Respondents maintain that since no reply was sent, the Deputy Assistant Director General (Stores), Government Medical Store Depot, New Delhi recommended to the DGHS, MSO that the product i.e. Atenolol 100 mg should be deregistered under category 'A' defect as per the letter dated 2nd August 2001 of the DGHS. Separately on 22nd August 2007 another show-cause notice issued to the Petitioner by the Government Medical Store at Kolkata asking to showcause why the tablet Atenolol 100 mg supplied by it should not be deregistered. It was mentioned in the said show-cause notice that the sample of the said tablet supplied by the Petitioner in terms of the supply order dated 31st January 2007 of the Government Medical Store at Kolkata was sent for testing and found to be not in conformity with the IP with respect to the disintegration test. The test report of two laboratories, one at Kolkata and the other at Chennai were enclosed with the said show-cause notice.;