(Prayer: Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari calling for the records of the proceedings in Ref.No.1238/A1/Z3/2010, dated 21.10.2010 on the file of the second respondent so as to quash the same.)
1. The prayer in the writ petition is to quash the order dated 21.10.2010 passed by the second respondent cancelling the licence of the petitioner.
2. Brief facts necessary for disposal of this writ petition are as follows:
(a) The petitioner company was issued with wholesale trade licence under the Drugs and Cosmetics Act, 1940. The Inspector of Police registered a criminal case in Crime No.132 of 2010 against the Proprietor of the petitioner Company on 16.3.2010 for the offences under Sections 420, 468 and 465 IPC etc. Based on a complaint given by the Inspector of Drugs on the same day, the above said business premises and godowns were sealed and the bank accounts of the petitioner concern was also freezed along with two other concerns.
(b) The petitioner earlier filed W.P.No.7985 of 2010 before this Court and prayed for a direction to remove the seal placed by the respondents to the business premises with a further prayer to rescind the order freezing the bank accounts relating to the business. During pendency of the said writ petition, a show cause notice was issued calling upon the petitioner and other two agencies to file objections.
(c) When W.P.Nos.7985 & 7986 of 2010 were taken for final disposal on 18.8.2000, the learned Advocate General submitted that the sealed premises can be ordered to be opened by the respondents in the presence of the authorised representatives of the said writ petitioners and all unexpired drugs, which are not treated as spurious medicines, can be released and permitted to be identified in the presence of the Drugs Inspector and the objectionable medicines may be kept separately or may be permitted to be taken by the Police in their custody. It was further ordered that the petitioners therein can also be permitted to carry on their business so long as their Drug licences are not cancelled and the bank accounts freezed, which are not in operation as on today, can also be released. The said submission made by the learned Advocate General was recorded and further directions were issued based on the said submission.(d)In W.P.No.11240 of 2010, the petitioner challenged the notice dated 21.5.2010 and prayed for grant of sufficient time to answer the show cause notice dated 20.3.2010 after completing the inventory and by handing over the keys of the licenced premises to the petitioner. The said writ petition along with connected matters were also disposed of on 18.8.2010 and the operative portion of the order reads as follows:-
"9. The learned counsel for the petitioners submitted that the business premises of the petitioners are sealed by the Police on 16.3.2010; the show cause notice was served to the counsel for the petitioners in the open Court on 28.4.2010 when a complaint was made while hearing the writ petitions; this Court granted three weeks time to file objections; petitioners gave preliminary objections and required documents to furnish effective reply after getting access to the records and computer as the business premises including their offices are sealed. The learned counsel also submitted that the notice dated 21.5.2010 was posted on 22.5.2010 and the same were served on the petitioners/representative of the petitioners on 23.5.2010 and only one day time was given to submit objections that too without furnishing copies of the documents as sought for by the petitioner by their interim reply dated 19.5.2010 and therefore the petitioners rushed to this Court and filed these writ petitions and challenged the communication dated 21.5.2010. The learned counsel further submitted that the licences granted to the petitioners are for five years and the said licences are expiring only in the year 2011. The Inspection report dated 10.3.2010 said to have been submitted by one G.Ammukutty, Drugs Inspector, Ashok Nagar Range, Zone-III, Chennai-6, though was sought for, was not furnished, which is the basis for issuing show cause notice and denial of the said document is in violation of the principles of natural justice.
10. The learned Advocate General in answer to the said submissions submitted that the seal put up by the Police in the premises of the petitioners will be removed in terms of the order to be passed in W.P.Nos.7985 and 7986 of 2010 today and therefore there may not be any impediment to the petitioners to get access to the records and computers to prepare detailed explanation and copy of the Inspection report dated 10.3.2010, relied on in the show cause notice will also be furnished to the petitioners. The learned Advocate General further submitted that reasonable time may be given to the petitioners to submit detailed explanation to the show cause notice. The said submissions made by the leaned Advocate General are recorded.
11. In the light of the said submissions made by the learned counsel for the petitioners as well as learned Advocate General, these writ petitions are disposed of by setting aside the communication dated 21.5.2010 and the second respondent is directed to furnish copy of the documents relied on in the show cause notice, within a period of two weeks from the date of receipt of copy of this order and on receipt of the same, the petitioners are directed to give final reply to the show cause notices dated 20.3.2010 within a period of four weeks from the date of furnishing of the said documents and removal of seals from the petitioners' business premises and on receipt of the same, it is open to the second respondent to pass orders on merits strictly in accordance with law, in the action initiated through the show cause notice dated 20.3.2010. This order shall not be construed as approving the show cause notices, on merits.
The writ petitions are allowed and disposed of accordingly."
(e) According to the petitioner, the said order passed by this Court was not complied with, which resulted in filing Contempt Petition No.1563 of 2010 in the writ petition filed by M/s.Vasantha Meena Enterprises and the respondents have also cancelled the drug licence. The learned counsel for the petitioner also submitted that the Managing Director of the petitioner company was detained under Act 14 of 1982 and he remained as a detenu pursuant to the detention order passed on 8.4.2010 and the Division Bench of this Court upheld the order of detention.
(f) Criminal Appeal was filed against the dismissal of Habeas Corpus Petition and the said Criminal Appeal No.755 of 2011 and connected appeals were allowed by the Honourable Supreme Court by setting aside the order of Division Bench with an observation that the order of the Supreme Court will not affect the criminal cases pending against the alleged accused persons. The said judgment of the Supreme Court was passed on 5.4.2011 and thereafter, the Managing Director of the petitioner concern was released.
(g) The Contempt Petition filed in the connected matter was disposed of by this Court by order dated 6.6.2011. The learned Judge, while considering the contempt petition including the order impugned in this writ petition dated 21.10.2010, held that the proceedings for cancellation of licence was initiated under Rule 66(1) of the Drugs and Cosmetics Rules, 1945 framed under the provisions of the Drugs and Cosmetics Act, 1940.
(h) The learned Judge noticing the provisions contained in Rule 66 of the Drugs and Cosmetics Rules, 1945, which requires issuance of show cause notice and giving opportunity, held that there is a scope to conclude that sufficient opportunity could have been given to the petitioner to give explanation to the show cause notice dated 20.3.2010. The learned Judge further held that the same itself is not sufficient to proceed against the respondents in the contempt of court proceedings and the contempt petitioner was permitted to work out her remedy against the order of cancellation separately.
(i) Thereafter, this writ petition is filed challenging the order dated 21.10.2010 contending that the order/direction of this Court, has not been strictly followed and the petitioner was not given an opportunity to submit explanation after removing the seal and access to the records and computers and therefore, the order passed is in violation of the statutory provisions i.e., Rule 66(1) of the Drugs and Cosmetics Rules, 1940 and the said order is challenged without filing an appeal, as there is violation of principles of natural justice.
(j) In the contempt petition also, the said plea was raised by the petitioner therein. The petitioner in contempt petition contended that after getting access to the computer only, the petitioner can collect and verify the documents and submit reply and before giving access to the computer system, the licensing authority is not expected to get a reply. The learned Judge held that there is substance in the contention raised by the petitioner in the contempt petition, however, the same cannot be decided in the contempt proceedings. Relying upon the said averments, this writ petition is filed.
3. Respondents have filed a counter affidavit contending that the petitioner neither replied within the stipulated period, nor stated any reason for not replying till 21.10.2010 and therefore, the licence was cancelled under Rule 66(1) of the Drugs and Cosmetics Rules, 1945 based on the interim reply submitted and the said order is an appealable order as provided under Rule 66(2) of the Drugs and Cosmetics Rules, 1945 and prayed for dismissal of the writ petition.
4. Learned counsel for the petitioner reiterating the earlier orders passed by this Court as well as the findings rendered by this Court in contempt proceedings submitted that effective and reasonable opportunity was not given to the petitioner and even before removing the seal as ordered by this Court, the second respondent has chosen to pass the impugned order, which is in violation of the principles of natural justice and against the statutory provision viz., Rule 66(1) of the Rules. The learned counsel heavily relied on the findings rendered by this Court in Contempt Petition No.1563 of 2010 by order dated 6.6.2011 and submitted that the opportunity to show cause includes issuance of show cause notice, giving sufficient time to submit explanation on the facts and circumstances of the case and thereafter only the licence can be cancelled for violation if any, based on the finding and the said procedures having not been followed, the impugned order is liable to be set aside and the petitioner may be given a chance to file a detailed reply, so that it will be in a position to repudiate the allegations made in the show cause notice and thereafter, the appropriate authority can pass a fresh order.
5. The learned Advocate General appearing for the respondents submitted that the allegations against the petitioner being so serious, namely selling of spurious drugs etc., the criminal complaint was given against the petitioner and others by the third respondent and time given to the petitioner was not utilised by giving proper explanation and charge sheet having been filed in the criminal case in PRC No.54 of 2011 before XI Metropolitan Magistrate Court, Saidapet, Chennai-15 on 7.4.2011, the petitioner is not entitled to maintain this writ petition seeking to quash the order of cancellation of licence and if the petitioner is permitted to conduct business, it will be detrimental to public health and therefore, this Court need not interfere with the order passed. The learned Advocate General also submitted that the petitioner, without availing the appeal remedy, has rushed to this Court and the same is not maintainable in view of availability of effective statutory remedy.
6. the learned Advocate General submitted that the petitioner having been issued with a show cause notice and having submitted interim reply alone, without submitting a final reply, it is not entitled to contend that the impugned order was passed in violation of the principles of natural justice.
7. The learned counsel for the petitioner as well as the learned Advocate General cited few judgments of the Honourable Supreme Court in support of their respective contentions.
8. I have considered the rival submissions made by the learned counsel for the petitioner as well as the learned Advocate General for the respondents in the light of the previous proceedings between the parties on the same subject matter.
9. The point arises for consideration in this writ petition is, whether the principles of natural justice has been fully complied with in the light of pleadings as well as the statutory provisions before passing the impugned order.
10. The facts narrated above clearly reveal that this Court, by order dated 18.8.2010, quashed the notice dated 21.5.2010 and ordered to grant sufficient time to give a reply to the show cause notice after handing over the materials and furnishing the copy of the documents relied on in the show cause notice and four weeks time was given to submit a final reply after the removal of seal from the petitioner's premises and thereafter the authority was directed to pass final orders on merits.
11. In the contempt petition, the learned Judge narrated all previous proceedings in the order dated 6.6.2011 and in the said order, it is stated that access to computer system may be necessary for the petitioner to make a substantial defence when the cancellation of licence is challenged in appropriate forum. The learned Judge also gave a finding that there is a scope to conclude that sufficient opportunity could have been given to the petitioner to give explanation to the show cause notice dated 20.3.2010. The said finding given in respect of the same subject matter has become final. Thus, the respondents are not entitled to contend that the order is perfectly valid. The order was not passed in compliance of the principles of natural justice and in strict compliance with the order dated 18.8.2011. The cancellation of wholesale licence, which was granted in favour of the petitioner is having serious consequences of losing its right to sell and store medicine and the statutory provision mandates the authority to issue show cause notice and opportunity to repudiate the allegation.
12. Rule 66 of Drugs and Cosmetics Rules, 1945 deals with cancellation and suspension of licences, which reads thus,
"66. Cancellation and suspension of licences:- (1) The licensing authority may, after giving the licensee an opportunity to show cause why such an order should not be passed by an order in writing stating the reasons therefor, cancel a licence issued under this Part or suspend it for such period as he thinks fit, either wholly or in respect of some of the substances to which it relates, if in his opinion, the licensee has failed to comply with any of the conditions of the licence or with any provisions of the Act or Rules thereunder:
Provided that, where such failure or contravention is the consequence of an act or omission on the part of an agent or employee, the licence shall not be cancelled or suspended if the licensee proves to the satisfaction of the licensing authority-
(a) that the act or omission was not instigated or connived at by him or, if the licensee is a firm or company, by a partner of the firm or a director of the company, or
(b) that he or his agent or employee had not been guilty of any similar act or omission within twelve months before the date on which the act or omission in question took place, or where his agent or employee had been guilty of any such act or omission, the licensee had not or could not reasonably have had, knowledge of that previous act or omission, or
(c) if the act or omission was a continuing act or omission, he had not or could not reasonably have had knowledge of that previous act or omission, or
(d) that he had used due diligence to ensure that the conditions of the licence or the provisions of the Act or the rules thereunder were observed.
(2) A licensee whose licence has been suspended or cancelled may, within three months of the date of order under sub-rule (1), prefer an appeal against that order to the State Government, which shall decide the same."
On a perusal of the above rule it is evident that licence can be cancelled or suspended only after giving the licensee an opportunity to show cause stating the reasons. The provision to issue show cause notice is to get explanation from the licensee and after considering the explanation the authority can pass suitable orders. Mere issuance of show cause notice does not amount to compliance of the principles of natural justice.
13. The principles of natural justice is a minimum protection of rights for individuals against arbitrary procedure that may be adopted either by judicial, quasi-judicial or administrative authority while making an order. The Honourable Supreme Court in the decision reported in 2009 (2) CTC 663 (Uma Nath Pandey and Others vs. State of U.P. And Another) held that purpose of following principles of natural justice is prevention of miscarriage of justice. Following the principles of natural justice implies giving reasonable time after access to the materials to prepare explanation to the show cause notice. Mere issuance of show cause notice without giving sufficient time or making available documents for giving reply will be treated only as an empty formality and the same cannot be the object of the legislature in making a protection to give an opportunity of show cause. The said position is very elaborately dealt with by the Honourable Supreme Court in the above said decision.
14. The decision cited by the learned Advocate General viz., (2011) 2 Supreme Court Cases 258 (Automotive Tyre Manufacturers Association vs. Designated Authority and Others) is for the proposition that the concept of natural justice can neither be put in a straitjacket nor is it a general rule of universal application and the principle should be applied on the facts of each case. In this case on facts the petitioner was not given sufficient time to give explanation after getting access to the computer. The access to the computers will enable
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the petitioner to go through the bills prepared already and submit an effective reply to the show cause notice regarding the allegations mentioned therein. Thus, there is a possibility of submitting an effective reply and convincing the licensing authority to arrive at a different conclusion while taking final decision. It is the defence of the petitioner in the interim reply that the carbon copy of bills are not maintained since the computer billing is being followed for the sale of medicine now-a-days. Hence, I am of the view that the petitioner has made out a case to set aside the impugned order as the same was passed by the second respondent not in compliance with the principles of natural justice. 15. The petitioner concern is not doing any sale on the of basis of licence issued from 8.4.2010, that is for the past over 19 months. In the criminal compliant registered against the Managing Director of the petitioner concern and 33 others, charge sheet is filed and the Managing Director is shown as A-14 and the said criminal case is pending before the XI Metropolitan Magistrate Court, Saidapet, Chennai-15 for alleged offences under Sections 420, 468 and 465 IPC read with Section 33 (eee) (a) and 17B and 27 of the Drugs and Cosmetics Act, 1940. The case is now assigned P.R.C.No.54 of 2011. Hence, the petitioner concern is not entitled to carry on the business, particularly, when the impugned order is quashed not on merits, but only on the ground of violation of principles of natural justice. 16. In fine, the impugned order is set aside and the matter is remitted to the second respondent. The petitioner concern is directed to submit explanation/final reply, within a period of three weeks from the date of the receipt of this order and the second respondent is directed to pass fresh orders on merits and in accordance with law, within a period of three weeks on receipt of final reply/explanation from the petitioner concern. The writ petition is disposed of accordingly. No costs. Connected miscellaneous petition is closed.