Delhi High Court
Rhydburg Pharmaceuticals Ltd. vs Esi Corporation on 25 July, 2014
Author: S.Ravindra Bhat
$~SS-3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 25.07.2014
+ REV. PET.217/2014, C.M. NO. 5895/2014 & 5896/2014 in
W.P.(C) 4557/2013
RHYDBURG PHARMACEUTICALS LTD...... Petitioner
Through : Sh. Rajat Aneja and Sh. Ishaan
Chhaya, Advocates.
versus
ESI CORPORATION ..... Respondent
Through : Ms. Rekha Palli, Ms. Punam
Singh and Ms. Ankita Patnaik, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
C.M. NO. 5895/2014 (for condonation of delay)
For the reasons mentioned in the application, C.M.
No.5895/2014 is allowed.
C.M. NO. 5896/2014 (for exemption)
Allowed, subject to all just exceptions.
REV. PET.217/2014
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 1
1. The review petitioner seeks recall of the judgment and order of
this Court dated 22.07.2013. The petitioner had challenged an order of
blacklisting issued by the respondent on 17.06.2013. The petitioner
had entered into a contract with the respondent for supply of specific
pharmaceutical products under the terms and conditions of the Rate
Contract existing at that time. The respondent had intimated on
06.12.2012 that two categories of drugs supplied were sub-standard.
Subsequently, a Show Cause Notice dated 21.02.2013 was received,
proposing penal action, including the possibility of debarring. The
petitioner replied to this, contending that under the terms and
conditions of the Rate Contract, it had complied with the demand for
the failed batches by replacing the entire quantity and also refunded
the amounts received by it. In the light of these developments, the
respondent issued the impugned order debarring the petitioner, for a
period of three years, from entering into any contract with it. This
Court had, by its judgment and order, (the review of which is sought
for), held that there is no fault with the debarring order and had given
an opportunity to the petitioner to approach the respondent authorities
in the light of the decision of the Chief Judicial Magistrate with
respect to the samples.
2. The review petitioner urges that this Court fell into error in
overlooking the terms of the contract between the parties, especially
Clause 15(iii)(a) of the Rate Contract. It was urged that the Show
Cause Notice dated 21.02.2013 failed to mention any condition, much
less Clause 15 (iii)(d), or even to disclose to the petitioner that the
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 2
alleged failed samples fell within the description of that condition as
they were Category 'A' major defects. Learned counsel for the
respondent urged that no review is called for. She relied upon the
report of the Technical Evaluation Committee (TEC) in respect of the
petitioner's Rate Contract dated 18.02.2013 which had indicated that
the defects were classifiable properly in Category 'A'.
3. We have considered the submissions. As is evident from a plain
reading of Show Cause Notice dated 21.02.2013, the respondent did
not specify or spell-out as to the conditions that they were likely to
invoke at the time they proposed the debarring order. Having regard to
the fact that the petitioner had concededly complied with the previous
demand for substitution of the failed batches/supplies and also
refunded the amount, it could reasonably assume that the conditions
spelt out in Clause 15(iii)(a) had been fulfilled, and rest content with
the assurance that no debarring would take place. In these
circumstances, we are of the opinion that the writ petition deserved to
be allowed. It is accordingly allowed.
W.P.(C) 4557/2013
4. With consent, we have heard learned counsel for the parties.
The detailed narrative of the fact is unnecessary in view of the fact
that the essential circumstances have been set-out in the order which
has led to the review petition. The Show Cause Notice in the present
case issued on 21.02.2013 reads as follows:
"To,
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 3
M/s. Rhydburg pharmaceuticals Ltd.,
C-2&3, Sara Industrial Estate,
Rampur Village, Selaqui,
Dehradun, Uttarakhand,
Dehradun.
SHOW CAUSE NOTICE
Subject: Purchase of drugs/medicines under ESI
Rate Contract-Declaration of drug as 'Not of
Standard Quality".
Sir,
I am directed to say that Med. Supdt., ESIH Jammu
has reported to this office that the following
drug/medicines supplied by your firm have been declared
as "Not of Standard Quality" on analysis by Govt.
approved lab.
NAME ITEM BATCH REPORT NAME OF
OF NAME NO. LAB
THE NO. &
FIRM ITEM DOM DATE
NO.
DOE
RCNO.
M/s. Tab. T1- JSZ/1- Regional
Rhydbu Amlode 12075 1/BB/ACT/2 Drug
rg pine 3/2012 dated Testing
Pharma and DOM: 10.12.2012 Laboratory,
ceutical Atenolo 01/2012 Chandigarh
s Ltd. l DOE:
Tablets 12/2013
Item
No.137
RC
No.133/
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 4
In this connection, I am to draw your attention to the
terms & conditions of the Rate Contract under which you
are required to replace the entire consignment or make full
payment irrespective of the fact that the part of the goods
may have been consumed by the time of the report received
from the drug laboratory and to request you to replace/make
payment for the entire consignment(s) of above batch(es) of
above said drug(s) supplied to ESI Scheme
institutions/hospital of Jammu and other states immediately.
It is requested to explain as to why action should not
be taken as per terms & conditions of ESI Rate Contract.
You are hereby advised to submit your reply within 15 days
on receipt of this letter failing which necessary action
including debarring of firm will be taken without any
intimation.
A line in confirmation to the action taken in this
regard may be intimated urgently.
Copy of Test Report is enclosed
Please acknowledge the receipt of this letter."
5. Prior to the issue of Show Cause Notice dated 21.02.2013, the
respondent had issued another letter pointing the defects in the specific
samples provided by the petitioner. At this stage, before proceeding on
the issue, it is essential to set-out the conditions in the Rates Contract
which were invoked by the respondent while passing the impugned
order.
"15. (i) The stores offered should comply with the
provisions of the Drugs and Cosmetics Act, 1940 and the
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 5
Rules made thereunder as amended upto date and Drug
Price Control Order.
(ii) While quoting against items with ISI Mark, it should
be ensured that ISI code number is indicated on quotation
and at the time of making the supplies, the firm should
ensure that the items supplied has ISI Mark as well as
Code Number, as is the statutory requirement of the
Bureau of Indian Standards. The attested copy of the valid
ISI Marking license issued by Bureau of Indian Standards
should be enclosed alongwith the quotation.
(iii) (a) If any store/stores supplied against this Rate
Contract are found to be not of standard quality on test
analysis from approved laboratory and/or on inspection
by competent authority, the contractor will be liable to
replace the entire quantity or make full payment of entire
consignment against the particular invoice irrespective of
fact that part or whole of the supplied stores may have
been consumed.
(b) If the produce is found to be 'not of standard
quality', the cost of testing will be recovered from the
supplier.
(c) If the firm fails to replace the batch declared to be
'not of standard quality' or fails to make payment in lieu
of that, the firm is liable to be debarred for two years in
respect of the one or more or all the items in the Rate
Contract of the Corporation.
(d) If Category A (major) defect is found, the firm will
be debarred for three years for one or more or all the
products in the Rate Contract of ESI Corporation. The
classification of defects into:- A category (major) and B
category (minor) defects will be as per the guidelines
issued by the Drug Controller General of India."
6. The respondent today relies upon the decisions taken by the
TEC in respect of the petitioner's Rate Contract dated 18.02.2013. The
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 6
said list contains the names and description of several suppliers,
including the petitioner's firm, which are part of an enclosure to the
said minutes of the TEC. The minutes and the relevant extracts of the
tabular statement, enclosed as Annexure-A are extracted below:
"Meeting of Technical Evaluation Committee in r/o Rate
Contract No.138, held on 18.02.2013 in the Committee
Room, ESIC, Hqrs. Office
The Technical Evaluation Committee as approved by
Director General met on 5th and 6th February, 2013 in
Committee Room, ESIC Hqrs. Office, New Delhi to
evaluate the technical bids received against the Tender
Enquiry for Rate contract No.138 and to make
recommendations regarding eligibility of various firms and
drug quoted by the participating tenderers.
The Meeting was attended by following officials:-
1. Dr. S.R. Chauhan, Medical Commissioner -
Chairman.
2. Dr. Anil Malik, Civil Surgeon-on behalf of Director -
ESIS, Haryana.
3. Dr. Shashi Avasthi, Manager, Central Stores-on
behalf of D(M)D.
4. Shri Ashok Verma, Dy. Director, Finance, Hqrs.
Office.
5. Dr. Kayam Singh, Dy. Med. Commissioner (RC).
Director-ESI Scheme, Karnataka, Gujarat and
representative from DGCI did not attend the meeting.
As per Terms and conditions of DGESIC RC clause 19(f)
& Tender Enquiry 15(iii)(d) in r/o Testing of drugs -
Quality Control - If Category (A)(Major) defect is found,
the firm will be debarred for three years for one or more
or all the products in the rate contract of ESI
corporation. The classification of defects into - category
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 7
A (Major) and category B (Minor) defects will be as per
the guidelines issued by Drug Controller General of India
(F/A).
Total items 28 (Twenty eight) which have been declared
'Not of standard quality' by govt. approved labs during the
July 2011 to Jan'2013 has been scrutinized into Category
A (Major) or category 'B' (Minor) defects as per DCGA
guideline No.X-19013/6/92-D dated 13.5.93.
Accordingly, a drug/dressing material of a firm
having Category 'A' (Major) defect upto two different
drugs/dressings material Or two different batches of single
drug/dressing material within last 03 years, i.e. January,
2010 to January, 2013 should be debarred for those
particular items for 03 years for running Rate Contract
and to participate in future DG-ESIC rate contracts. The
recommendation of the committee are placed at Annexure
'A'.
Further the committee also reviewed the drugs/dressing
materials declared 'NSQ' during last 03 years and
recommended that either three or more than three different
drugs/dressing materials or if three or more than three
batches of single drugs/dressing material w.r.t. a
particular firm have been declared 'Not of Standard
Quality' having category 'A' Defect (Major) within last 03
years, i.e. since January, 2010 to January, 2013, the firm
should be debarred for a period of 3 years in running Rate
contract and to participate in future ESIC rate contracts as
per T&C No.15(iii)(d) of Tender Enquiry and Clause 19(f)
of DG-ESIC Rate Contracts. Accordingly, the
recommendations of committee are as per Annexure 'B'.
Further w.r.t. Technical Evaluation of Tenders in TE-138,
the Committee recommends that in all cases where a
clarification has been sought from various agencies in r/o
eligibility of the firm/item, the price-bid/bids of these
firms/item may be opened provisionally and final decision
will be taken by TEC at the time of finalization of Rate
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 8
Contract based on the reply/clarification received from the
concerned agency and in absence of such
reply/clarification, decision will be taken by the Competent
Authority of ESI Corporation.
Sd/- Sd/-
Ashok Verma Dr. Anil Malik
Dy. Directr (Fin & A/c) Civil Surgeon, ESI
Scheme
Haryana
Sd/- Sd/-
Dr. Kayam Singh Dr. Shashi Avasthi
Dy. Med. Commissioner
(RC) Manager, Central
Stores
Sd/-
Dr. S.R. Chauhan
Medical Commissioner
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 9
DETAILS OF DRUG DECLARED 'NOT OF STANDARD QUALITY'
(July 2011 to January 2013)
SI. Name of Name Name of Batch Test report Reports Date Reply Natur Propose
No Purchasi of the the No. no., Date finding of receive e of d
. ng firm drug/item and Name Show d from defect Action
Authority and no. & RC Dt. Of of Cause firms
Addres No. Mfg. Laboratory
s
Dt. Of
Exp.
1. Dir (ESIS) M/s. Tab. T10- Vatsa Assay does 03/11/1 Firm 'A' Item to
Rhydbur Amlodepin 4352 Testing not comply 1 challeng defect be
Haryana g e Laboratory, as per ed the (Majo debarred
10/10 Sonepat claim - test r) for a
Pharma 5 mg 80.4% report. tablet period of
Ltd. Haryana (40.2 mg) Vide (i) 03 years
Limit 4.5 letter dt. from the
Item No.53
to 5.5 mg. 13.12.11 date of
F201101220
firm was approval
RC 133 26 dated
advised .
22.1.2011
to submit
Test
Report of
'SQ'
from
appellate
lab. No
report
has been
furnished
over the
period of
months.
2. M.S. M/s. Tab. T51153 SGS India Fails in 18.4.12 Firm has 'A' Item to
Kerala Rhydbur Amlodepin 20 Pvt. ld. uniformity requeste defect be
g e Besylate 2265008500 of content d to (Major debarred
5 mg 05/11 ranging provide ) for a
Pharma Dt. 6.1.12 from sample tablet period of
Ltd. RC 133 04/13 79.36% to of said (vi) 03 years
140% batch. &(i) from the
Date of
Approval
3. Dy. M.S., M/s. Tab. T5- DCL Does not 01/02/1 'A' Item to
Marol, Rhydbur Atorvastati 11249 Mumbai comply 2 defect be
Mumbai g on 10 mg Maharashtra with IP (Major debarred
05/11 state requireme ) for a
Pharma Item no. nt for tablet period of
Ltd. 368b 04/13 M dissolution (iii) 03 years
1886/2011 test from the
RC 135 dt. 21.11.11 Date of
Approval
XXXXX XXXXX XXXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXXX
27. Med.
Suptd.
M/s.
Rhydbur
Tab.
Amlodepin
T1-
12075
Regional
Drug Testing
Does not
claim
Notice
being
'A'
defect
`-do-
Jammu g e& Laboratory, assay of issued (Major
Atenolol 01/2012 Chandigarh Amlodepin )
Pharma tab. e, i.e. tablet
Ltd. 12/2013 JSZ1-1 BB 51.60% (i)
Item ACT 2
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 10
No.1373 3 2012 dated
RC 133 10.12.2012
7. The Show Cause Notice nowhere indicates or lists out that the
respondent intended to take action under Clause 15(iii)(d). This
circumstance was crucial because as on the date when the Show Cause
Notice was issued on 21.02.2013, the respondent was in possession of
the report of the TEC, which had recommended the action of
debarring the petitioner for three years, on the ground of defect of
Category-A in respect of three items supplied. As these aspects were
neither considered by the Court nor was such material available, the
writ petition was restored to the file of the Court. Applying the ratio of
the Supreme Court ruling in Erusian Equipment & Chemicals Ltd. v.
State of West Bengal AIR 1975 SC 266 and Raghunath Thakur v.
State of Bihar 1989 (1) SCC 229, it is evident that a fair reading
would, in the circumstances of the case, mean citing of the relevant
conditions or stipulations which the respondents sought to invoke for
the purpose of debarring the petitioner. Furthermore, the respondent is
under a duty to indicate at least the conclusions of the TEC, if not
furnish the entire copy of the TEC Report to the petitioner, so as to
afford it an effective and reasonable opportunity to represent against
the proposed action. In these circumstances, ordinarily the Court
would have to proceed to quash the impugned order. However, given
the seriousness of the allegations that, on more than one occasion,
Category A defects were found and the drugs are alleged to be have
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 11
been of sub-standard quality, and having regard to the circumstances,
we are not inclined to set aside or quash the impugned order. At the
same time, the respondent is directed to issue a fresh Show Cause
Notice outlining specifically the grounds upon which the proposed
action of debarring action is proposed to be taken and setting-out the
relevant conditions. As stated earlier, the respondent shall also enclose
the relevant material, including copies of minutes and extracts thereof,
to enable the petitioner to give an effective reply or representation
against it. A fresh notice is directed to be issued within two weeks
from today. Upon its receipt, the petitioner shall give its
reply/response within four weeks thereafter. The respondent shall
proceed to pass a reasoned order within eight weeks from today and
directly communicate it to the petitioner. All rights and contentions of
the parties are expressly reserved. The writ petition is allowed in the
above terms to the above extent.
S. RAVINDRA BHAT
(JUDGE)
NAJMI WAZIRI
(JUDGE)
JULY 25, 2014
'ajk'
REV.PET.217/2014 IN W.P.(C)4557/2013 Page 12
