Issuance of fresh show cause notice is mandatory for license cancellation after an initial suspension.

The petitioner, Jhanwer Medical Agencies, held a license to operate as a retailer and wholesaler under the Drugs and Cosmetics Act, 1940.

It was alleged that the petitioner committed irregularities in stock maintenance and drug supply under the Rajasthan Government Health Scheme, leading to fiscal loss to the Government.

An FIR (No. 265/2023 dated 20.09.2023) was registered, and the petitioner was arrested, with records and materials seized from their premises.

Respondent No.3, the Drugs Licensing Officer-cum-Assistant Drugs Controller, served a show cause notice dated 19.03.2024, alleging violations of Sections 18(a)(vi) and 18-B of the Act of 1940 and Rules 65(3), 65(4), 65(5), 65(6), and 65(9) of the Drugs and Cosmetics Rules, 1945.

The petitioner, who was in judicial custody at the time, requested more time to respond, later submitting a detailed reply on 02.05.2024.

Dissatisfied with the explanation, Respondent No.3 suspended the petitioner's license for 60 days (20.06.2024 to 18.08.2024) via an order dated 13.06.2024, citing Rule 66(1) of the Rules of 1945.

The petitioner's appeal against this suspension was rejected by the Appellate Authority, which modified the suspension period to 19.08.2024 to 18.09.2024.

Following the suspension period, Respondent No.3, by an order dated 23.09.2024, cancelled the drug license, valid until 01.05.2027, based on findings of violations of the Act and Rules.

The petitioner’s subsequent appeal (No. 42/2024) against the cancellation was also rejected by the Appellate Authority on 03.01.2025.

1. Whether the cancellation of the petitioner's drug license without issuing a fresh show cause notice after the initial suspension order violated the principles of natural justice?

2. Whether Rule 66(1) of the Drugs and Cosmetics Rules, 1945, necessitates separate show cause notices for suspension and subsequent cancellation of a drug license?

The court primarily applied Rule 66(1) of the Drugs and Cosmetics Rules, 1945, which grants the Licensing Authority the power to cancel or suspend a license after providing the licensee an opportunity to show cause.

The court distinguished between suspension, which has a temporary effect, and cancellation, which results in permanent deprivation and carries serious civil consequences, affecting the right to livelihood.

It referenced the principles of natural justice, specifically the mandatory requirement of giving an opportunity of hearing before taking drastic administrative action that results in manifest injustice.

The court also cited *Mangilal v. District Excise Officer, Ajmer, AIR 1971 Raj 46*, which highlighted the distinct nature of license suspension compared to the suspension of a government servant, implying a higher bar for justifying such actions.

The court found that while Rule 66(1) provides for both suspension and cancellation, these are distinct powers with different consequences.

Although the petitioner received a show cause notice before the license suspension, the suspension order itself indicated that a detailed inquiry for cancellation was contemplated.

The Licensing Authority, by choosing to suspend rather than cancel initially, signaled that it had not yet formed an opinion to terminate the license permanently.

Given that cancellation has far more severe and permanent consequences, directly impacting the petitioner's right to livelihood, a fresh show cause notice specifically indicating why cancellation was proposed, along with an opportunity for the petitioner to explain, was mandatory.

The non-issuance of such a notice denied the petitioner a fair opportunity to be heard regarding the more extreme penalty of cancellation, thereby violating the principles of natural justice.

The court emphasized that the requirement of a show cause notice is not a mere formality but a substantial safeguard.

The court allowed the civil writ petition and quashed and set aside both impugned orders.

However, the court clarified that this decision does not prevent Respondent No.3 from initiating fresh proceedings against the petitioner-firm in accordance with the law, by issuing a fresh show cause notice and adhering to the principles of natural justice as mandated under Rule 66(1) of the Rules of 1945.