Supreme Court Strikes Down Unjust Blacklisting: Medipol Pharmaceuticals vs PGIMER

The case of Medipol Pharmaceutical India Pvt. Ltd. vs. Post Graduate Institute of Medical Education & Research (PGIMER) & Anr. revolves around the unjust blacklisting of a pharmaceutical company. The Supreme Court examined whether the blacklisting order was justified based on the alleged substandard quality of a drug supplied by the appellant.

Background of the Case

PGIMER had issued a tender for the supply of Clotrimazole Cream 1% (15 gm tube) in 2015. Medipol Pharmaceuticals was selected as the supplier, and an agreement was entered into with specific conditions regarding the drug’s shelf life. As per the supply order, no more than one-sixth of the shelf life should have expired when received by the medical store.

Medipol Pharmaceuticals supplied the first batch of 1700 tubes in January 2016 without any complaints. However, in April 2016, after the second batch was supplied, PGIMER claimed that the product was substandard. The government analyst tested the samples in 2017, finding the active ingredient to be 61.96% w/w, below the acceptable 95%-105% standard. Subsequently, the company was blacklisted for two years.

Key Legal Issues

• Whether the blacklisting of Medipol Pharmaceuticals was legally justified.
• Whether PGIMER violated procedural fairness by not considering the final appellate laboratory report.
• Whether the appellate lab’s report should have taken precedence over the initial government analyst report.

Arguments by the Petitioner (Medipol Pharmaceutical India Pvt. Ltd.)

• The drug was supplied in accordance with the tender conditions and met the necessary quality standards.
• The initial government analyst’s test results were erroneous and contradicted by the appellate lab report.
• The appellate test report from the Central Drugs Laboratory (CDL), Kolkata, found the sample to contain 92.01% active ingredient, which was much higher than the first test report.
• PGIMER acted arbitrarily by ignoring the final lab report and proceeding with the blacklisting.

Arguments by the Respondents (PGIMER & Anr.)

• The first test report found that the drug’s active ingredient level was below the prescribed standard.
• The delay in testing and blacklisting was due to procedural reasons and not malafide intentions.
• Even the appellate lab report showed that the active ingredient level was 3% below the required 95% standard.

Supreme Court’s Observations

The Supreme Court analyzed the provisions of the Drugs and Cosmetics Act, 1940 and relevant legal precedents. The Court noted:

• Unjustified Reliance on the First Test Report: The decision to blacklist was based solely on the first government analyst’s report, despite its findings being inconsistent with the final appellate test.
• Violation of Procedural Fairness: PGIMER failed to consider the appellate lab’s findings, which showed a substantial improvement over the initial test report.
• Failure to Provide a Proper Hearing: The appellant was denied an opportunity to challenge the erroneous test report before the blacklisting order was issued.

Final Judgment

The Supreme Court ruled in favor of Medipol Pharmaceuticals and set aside the blacklisting order, holding:

• The blacklisting was based on an incorrect and unreliable test report.
• Procedural fairness was violated as PGIMER failed to consider the final test report from the appellate lab.
• The High Court erred in upholding the blacklisting based on an incomplete analysis of the test results.

Implications of the Judgment

• Protection of Due Process: The ruling reinforces that no entity can be blacklisted without adhering to fair legal procedures.
• Finality of Appellate Reports: The decision clarifies that appellate test reports must take precedence over initial test results.
• Stronger Safeguards for Businesses: Companies supplying government institutions now have stronger legal grounds to challenge wrongful blacklisting.

The judgment serves as an important precedent ensuring fairness in administrative decision-making, particularly in cases involving allegations of substandard pharmaceutical products.

Petitioner Name: Medipol Pharmaceutical India Pvt. Ltd..
Respondent Name: Post Graduate Institute of Medical Education & Research and Anr..
Judgment By: Justice R.F. Nariman, Justice Navin Sinha.
Place Of Incident: Chandigarh.
Judgment Date: 05-08-2020.

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