Blacklisting and security forfeiture cannot rest on an inconclusive drug-analysis report obtained without statutory compliance.

The petitioner, a proprietorship concern manufacturing drugs, participated in the respondent’s tender for the supply of drugs and furnished a security deposit/bank guarantee of approximately ₹54 lakh.

A sample of “Safemec-CT Veterinary” from Batch No. SR20-012 was drawn on 14 February 2020 and declared “not of standard quality” by the Government Analyst, Central Drugs Testing Laboratory, Chennai.

The petitioner objected to the report, contending that the testing had not been conducted using its manufacturer’s specifications, working standards, or method of analysis, and expressed its intention to controvert the report.

Subsequently, on the authority’s application under Section 25(4) of the Drugs and Cosmetics Act, 1940, the Principal Civil Judge and JMFC, Dharwad, ordered retesting at the Central Drugs Laboratory, Kolkata, without issuing notice to the petitioner.

The Kolkata Laboratory later reported that the sample was not of standard quality with respect to ivermectin content, although it had earlier sought the manufacturer’s specifications and method of analysis, which were apparently not furnished.

Relying on the report, the respondent passed an order dated 13 September 2022 debarring the petitioner from participating in tenders for three years and forfeiting the security deposit under Clause 27 of the tender conditions.

Whether the respondent could debar the petitioner for three years and forfeit its security deposit on the basis of the drug-testing reports when the statutory procedure under Sections 23 and 25 of the Drugs and Cosmetics Act, 1940, had not been duly followed.

Whether the petitioner’s written objection expressing an intention to controvert the Government Analyst’s report entitled it to notice and an opportunity to adduce evidence under Section 25(4) of the Act before the sample was sent for retesting.

Whether the Central Drugs Laboratory’s report, issued without the manufacturer’s specifications and method of analysis and containing insufficient factual particulars, could constitute conclusive evidence that the drug was not of standard quality.

Whether the impugned debarment and forfeiture order was legally sustainable in light of the serious civil consequences attached to blacklisting and the principles of natural justice.

The Court applied Sections 23 and 25 of the Drugs and Cosmetics Act, 1940, which prescribe the manner of drawing, dividing, sealing, forwarding, testing, and reporting of drug samples; under Section 25(3), a Government Analyst’s report becomes conclusive only when the affected person has not, within twenty-eight days, notified an intention to adduce evidence in controversion, while Section 25(4) requires the Court to consider sending the retained sample to the Central Drugs Laboratory when such intention is notified.

Sections 22(2) and 23(6), read with the applicable criminal-procedure safeguards, require proper judicial oversight concerning seized material and its custody and preservation.

The Court relied on Dharam Deo Gupta v. State, AIR 1958 All 865, for the principle that a laboratory certificate must contain factual data and testing particulars, rather than merely the analyst’s conclusion, and on August Remedies v. State of Jammu and Kashmir for the statutory scheme governing drug samples and reports.

It further relied on Gokha Security Services v. Government (NCT of Delhi), (2014) 9 SCC 105, and Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project, BSNL, (2014) 14 SCC 731, holding that blacklisting is penal and stigmatic, carries severe civil consequences, and ordinarily requires a meaningful opportunity to show cause.

Clause 27(iii) and (x) of the tender conditions permitted blacklisting for submission of false documents or recurrent supply of drugs not of standard quality, requiring a legally reliable factual basis for such findings.

The Court held that the petitioner’s communication dated 23 June 2020 was a valid notification of its intention to controvert the Government Analyst’s report under Section 25(3).

Consequently, before ordering retesting under Section 25(4), the Magistrate was required to issue notice and provide the petitioner an opportunity to adduce evidence in controversion; the order dated 25 August 2021 showed no such notice or opportunity.

The Kolkata Laboratory had itself requested the manufacturer’s specifications and method of analysis, but the record did not establish that these materials were supplied.

Despite this, its report concluded that the sample did not conform to the manufacturer’s specifications and examined only ivermectin content.

The Court found it “beyond comprehension” how conformity with the manufacturer’s specifications could be assessed when those specifications and the method of analysis had not been furnished, and held that the report lacked sufficient factual particulars to be treated as conclusive.

The record also lacked material regarding the seizure, preservation, custody, and retention of the sample, creating doubt about its authenticity and the reliability of the subsequent test.

Since the debarment and forfeiture were based substantially on this defective and procedurally unreliable report, the respondent could not validly conclude that the petitioner had supplied drugs of substandard quality.

Given the penal and stigmatic consequences of blacklisting, strict compliance with the statutory safeguards and natural justice was necessary.

It directed the respondent to remove the petitioner’s name from the debarment list and to release the forfeited bank guarantee/security deposit.

The Court therefore answered the issues in favour of the petitioner, holding that the debarment and forfeiture could not stand because the statutory procedure under Sections 23 and 25 of the Drugs and Cosmetics Act, the requirements of natural justice, and the evidentiary requirements for relying on the laboratory report had not been satisfied.