IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27/08/2010 CORAM THE HONOURABLE MR.JUSTICE D.HARIPARANTHAMAN W.P.NO.9777 OF 2010 AND M.P.NO.1 OF 2010 M/s.Endo Labs Limited Represented by its Power of Attorney Mr.Vasant Babulal Shah ... Petitioner Versus 1. The Managing Director M/s.Tamil Nadu Medical Services Corporation Ltd., II Floor, 417, Pantheon Road, Egmore, Chennai – 600 008. 2. The State of Tamil Nadu Represented by the Secretary to Government Health & Family Welfare Department Fort St. George, Chennai – 9. ... Respondents PRAYER: Writ petition filed under Article 226 of the Constitution of India praying for the issuance of certiorari, calling for the records of the 1st respondent in the files Ref.No.5-E-B/QC/TNMSC/2009, and Ref.No.01-EF-B/QC/TNMSC/2010 and quash the order dated 16.12.2009 and the consequential order dated 08.04.2010 passed by the 1st respondent. For Petitioner : Mr.N.Viswanathan For Respondent-1 : Mr.G.Shankaran Special Government Pleader For Respondent-2 : Mrs.Lita Srinivsasan Government Advocate O R D E R The first respondent - Corporation is a Nodal agency for procurement and distribution of Drugs, Surgical and Suture items for about 11,000 Government Medical Institutions all over Tamil Nadu. For the said purpose, the first respondent called for tenders. The petitioner was the successful tenderer for the supply of Povidone https://hcservices.ecourts.gov.in/hcservices/ Iodine Solution I.P. 5% for the year 2007-2008 and 2008-2009. On being successful tenderer, the first respondent entered into an agreement with the petitioner for the supply of the aforesaid drug. The agreement provides for quality testing of the drug and medicines supplied by the suppliers. Samples of each batch of each product supplied, would be drawn at the point of supplies / distribution / storage and would be sent by the purchaser to the different analytical laboratories selected by them at their discretion for testing. On being successful in the quality test as stated above, the first respondent would instruct its warehouses for the supply of such items of drugs to various hospitals / medical institutions. If the samples fail in the quality test and a report is received from the analyst certifying that the sample is not of standard quality, one more sample would be drawn from the same batch and would be sent to the Government Laboratory for quality testing. If such sample fails the quality test conducted by the Government Analyst, the first respondent would reject the drugs supplied in the batch. If such sample passes the quality test in the Government Laboratory, then the first respondent would instruct for issue of such items of drugs to various hospitals / medical institutions. 2.According to the petitioner, they have been supplying the aforesaid drug during 2007-2008 and 2008-2009. Samples from each batch were sent to the Laboratories chosen by the first respondent and the samples also passed the test. Hence, the supply has been made. 3.While so, the first respondent issued a show cause notice dated 03.12.2009, stating that samples drawn from the 8 batches of supply of Povidone Iodine Solution I.P. 5% w/v (Drug Code: 342) for the period 2007-2008 and 2008-2009, did not conform to I.P. Specification for Povidone Iodine solution with respect to the content of available Iodine in Povidone Iodine. The aforesaid finding is based on the test reports received from the Government Analyst. It is stated further that though the samples passed the quality test in the empanelled laboratories, the samples were found not of standard quality in the quality test conducted by the Government Laboratory, during the shelf life period. The petitioner was called upon to show cause as to why his product should not be blacklisted for five years. The said notice was sent as per tender condition (2008-2009) Annexure X, Clause 10(b). 4.Thereafter, the final impugned order dated 16.12.2009 was passed blacklisting the drug that is supplied by the petitioner, for the period of 5 years, with effect from 16.12.2009. 5.The impugned order was passed without considering the explanation that was received on 15.12.2009 by the first respondent. https://hcservices.ecourts.gov.in/hcservices/ 6.The first respondent issued another notice dated 22.03.2010 stating that the first respondent contemplates issuing of show cause notice seeking explanation from the petitioner as to why the product should not be blacklisted and also as to why the petitioner - company should not be blacklisted. The said notice was issued based on the test results of the samples drawn from the said 8 batches, referred to above. The said notice also refers to the order dated 16.12.2009 of the first respondent. 7.Thereafter, the impugned order dated 08.04.2010 was issued by the first respondent blacklisting the petitioner - company for a period of five years on the ground that the samples drawn from batch No.2509 was a misbranded drug as per the report of the Government Analyst. The impugned order was passed blacklisting the company for five years invoking Annexure X, Clause-9 of the tender condition. 8.Challenging the orders dated 16.12.2009 blacklisting the product and the other order dated 08.04.2010 blacklisting the company, the petitioner has filed the present writ petition. 9.Notice of motion was ordered on 30.04.2010 and interim stay was also granted on the same day. The first respondent filed counter affidavit. 10.Heard Mr.N.Viswanathan, learned counsel for the petitioner; Mr.G.Shankaran, learned Special Government Pleader for the first respondent and Mrs.Lita Srinivasan, learned Government Advocate for the second respondent. 11.The learned counsel for the petitioner submitted that both the impugned orders are passed in violation of principles of natural justice. The first order dated 16.12.2009 proceeds, as if no explanation was submitted, while the petitioner submitted his explanation that was received by the first respondent on 15.12.2009. Hence, the first order was passed without application of mind. 12.The second order dated 08.04.2010 was passed without issuing any show cause notice, though the notice dated 22.03.2010 informed the petitioner that they will issue show cause notice, seeking their explanation as to why their company should not be blacklisted. It is further pointed out that in the impugned order dated 08.04.2010, it is stated that show cause notice dated 08.04.2010 was issued relating to the test conducted on the samples drawn from batch No.2509, saying that the drug is a misbranded one. But there is no show cause notice dated 08.04.2010 and on the other hand, the final order is dated 08.04.2010. It is also submitted that while blacklisting the company is solely based on the test https://hcservices.ecourts.gov.in/hcservices/ report received from the Government Analyst on the samples drawn from batch No.2509, that was not referred to in the notice dated 22.03.2010, though it was stated that the company could be blacklisted on the ground that the drug supplied was misbranded. The test reports relating to 8 batches referred to in the notice dated 22.03.2010 are relating to non-standard of drug and the same are not relating to misbranded drug. 13.On the other hand, the learned Special Government Pleader submitted that the supply of drug is for the poor people, who use the Government Hospitals and Medical Institutions. Therefore, when the petitioner supplied sub-standard quality drugs and also misbranded drug, the first respondent has power to blacklist the drug as well as the company. According to the learned Special Government Pleader, the impugned order dated 16.12.2009 was passed, after issuing show cause notice dated 03.12.2009 and hence, the petitioner could have no grievance. As regards the order dated 08.04.2010 blacklisting the company, the learned Special Government Pleader submitted that the procedure relating to blacklisting the company, does not contemplate issuing of notice, when the company supplies either spurious drug or misbranded drug or adulterated drug. Since the adulterated drug or misbranded or spurious drug could cause serious harm to the public, the tender conditions as well as the agreement do not contemplate issuing of notice and therefore, the petitioner is not entitled to notice, before passing the order dated 08.04.2010. 14.In reply, the learned counsel for the petitioner submitted that since the first respondent himself indicated in the notice dated 22.03.2010 that they would issue show cause notice, they could not pass the impugned order dated 08.04.2010, without issuing any show cause notice. It is further submitted that even if no notice is provided in the blacklisting procedure, the principles of natural justice require that the petitioner – company should be heard before blacklisting, since the blacklisting of the company results in very serious civil consequences. It is also illogical that the first respondent could issue show cause notice for blacklisting a particular product, but not for blacklisting the company. The learned counsel has also produced an order from the Kerala Medical Services Corporation Limited, a Government of Kerala Undertaking, rejecting the tender application submitted by the petitioner on the ground that the first respondent blacklisted their company by the order dated 08.04.2010. Thus, when serious civil consequences followed due to the impugned order, the petitioner should be heard before passing such an order. It is also submitted that apart from issuing show cause notice, the first respondent should also furnish the test reports that were relied on by the first respondent to black list the product or to blacklist the company. https://hcservices.ecourts.gov.in/hcservices/ 15.I have considered the submission made on either side and perused the materials available on record. 16.As far as the order dated 16.12.2009 is concerned, the same was passed without application of mind. The typed set of papers produced by the learned counsel for the first respondent itself contains the reply sent by the petitioner to the show cause notice dated 03.12.2009. It is seen that the reply was received by the first respondent on 15.12.2009. But the impugned order dated 16.12.2009 blacklisting the product proceeds on the basis that no reply was given to the show cause notice dated 03.12.2009. Hence, the impugned order dated 16.12.2009 is liable to be set aside. 17.It is admitted by the learned Special Government Pleader for the first respondent that no notice was issued before passing the impugned order dated 08.04.2010 blacklisting the petitioner - company. According to the learned Special Government Pleader, since the blacklisting of the company is pursuant to the test results that the petitioner supplied misbranded drug, no notice is required. The learned Special Government Pleader further submitted that the tender conditions as well as the agreement do not contemplate issuing of show cause notice before blacklisting the company. I am not in agreement with the submissions made by the learned Special Government Pleader. 18.As rightly contended by the learned counsel for the petitioner, it is illogical that the first respondent could issue show cause notice for blacklisting the product, but they could not issue show cause notice before blacklisting the company. Further, as rightly contended by the learned counsel for the petitioner, the blacklisting of the company results in serious civil consequences and hence the petitioner should be heard before passing adverse order. 19.In this case, the learned counsel for the petitioner has produced a letter issued by the Kerala Medical Services Corporation Ltd., rejecting the tender application submitted by the petitioner on the ground that the first respondent blacklisted their company on 08.04.2010. 20.It is well settled that before passing any order resulting in serious civil consequences, the concerned person should be heard before passing such order, as held by the Honourable Apex Court in BHAGVAN SHUKLA VS. UNION OF INDIA reported in 1994 (6) SCC 154. 21.Further, even if no notice is provided under the tender conditions, the principles of natural justice requires that the same should be read into the tender conditions and the agreement in https://hcservices.ecourts.gov.in/hcservices/ conformity with the principles of natural justice. In this regard, paras 7, 8 and 9 of the judgment in UMA NATH PANDEY AND OTHERS VS. STATE OF U.P AND ANOTHER reported in 2009 (2) CTC 185 are extracted hereunder: "7.The expressions "natural justice" and "legal justice" do not present a water-tight classification. It is the substance of justice which is to be secured by both, and whenever legal justice fails to achieve this solemn purpose, natural justice is called in aid of legal justice. Natural justice relieves legal justice from unnecessary technicality, grammatical pedantry or logical prevarication. It supplies the omissions of a formulated law. As Lord Buckmaster said, no form or procedure should ever be permitted to exclude the presentation of a litigants' defence. 8.The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time. When the historic document was made at Runnymede in 1215, the first statutory recognition of this principle found its way into the "Magna Carta". The classic exposition of Sir Edward Coke of natural justice requires to "vocate, interrogate and adjudicate". In the celebrated case of Cooper v. Wandsworth Board of Works, 1863 (143) ER 414, the principle was thus stated: "Even God did not pass a sentence upon Adam, before he was called upon to make his defence. "Adam" say God, "where art https://hcservices.ecourts.gov.in/hcservices/ thou? Hast thou not eaten of the tree whereof I commanded thee that thou shouldest not eat". 9.Since then the principle has been chiselled, honed and refined, enriching its content. Judicial treatment has added light and luminosity to the concept, like polishing of a diamond." 22.In view of the aforesaid facts and circumstances of the case, the impugned orders dated 16.12.2009 and 08.04.2010 of the first respondent are quashed and the writ petition is allowed. The first respondent is directed to pass fresh orders, after affording reasonable opportunity to the petitioner by furnishing the test reports and other materials, which they rely on, within a period of eight weeks from the date of receipt of a copy of this order. No costs. Consequently, connected miscellaneous petition is closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar TK To 1. The Managing Director M/s.Tamil Nadu Medical Services Corporation Ltd., II Floor, 417, Pantheon Road, Egmore, Chennai – 600 008. 2. The Secretary to Government Government of Tamil Nadu Health & Family Welfare Department Fort St. George, Chennai – 9. 2 ccs To Mr.N.Viswanathan, Advocate, SR.63611 ORDER MADE IN W.P.NO.9777 OF 2010 JSV (CO) RH (7.9.10) https://hcservices.ecourts.gov.in/hcservices/