Medicines expired before the retest happened, so Supreme Court quashes Madhya Pradesh drug supplier blacklisting

A bench of Justices Vikram Nath, Augustine George Masih and Sandeep Mehta held that blacklisting without the second-laboratory test the tender required could not stand once the batches expired untested.

The tender under which M/s Jpee Drugs supplied Vitamin C and Ethambutol tablets to Madhya Pradesh's government hospitals contained a safeguard. If a sample failed a quality test, a second sample from the same batch had to be sent to another laboratory, and the supplier could be blacklisted only if that laboratory confirmed the failure. The State's procurement corporation blacklisted the firm on the first reports alone. The High Court found the procedure had been broken, but kept the blacklisting in force until a retest was done. The retest never happened, and every batch has now expired. In an order dated 6 October 2026, a three-judge bench of the Supreme Court quashed the blacklisting and debarment orders. Justice Sandeep Mehta wrote for the bench.

Four failed batches and a seven-day notice

Jpee Drugs, a licensed manufacturer, won a tender issued through the M.P. Public Health Services Corporation Limited (MPPHSCL), Bhopal, for Ascorbic Acid (Vitamin C) Tablets IP 500 mg and Ethambutol Hydrochloride Tablets IP 400 mg, and supplied them to hospitals and health centres across the State. On 23 September 2024 MPPHSCL issued a show-cause notice. Laboratory reports had declared four batches Not of Standard Quality (NSQ): three of Vitamin C and one of Ethambutol.

The tender's blacklisting terms were strict. One NSQ batch meant the product would be debarred for at least two years. Three NSQ batches of one or more products under a tender meant the firm itself would be blacklisted for at least three years.

The firm was given seven days to reply. It denied supplying substandard drugs and blamed poor storage and handling after delivery. On 30 September 2024, the day the reply was filed, the Managing Director passed two orders recording that no reply had been received. One debarred the firm from supplying Ethambutol for two years and ordered recovery of ₹3,47,375. The other blacklisted the firm for three years from all MPPHSCL tenders and ordered recovery of ₹6,77,219 for the Vitamin C batches. On 1 October an order considered the reply, rejected it and reaffirmed both decisions.

The High Court's half-measure

The firm's writ petition before the Madhya Pradesh High Court at Jabalpur was disposed of on 27 October 2025. The High Court accepted that the authorities had not followed Clause 6 of Annexure IX to the tender document. That clause required a second sample to be drawn from the same batch and tested by another laboratory. If the two reports conflicted, the report of a Government laboratory or a third laboratory would be final. The High Court did not quash the orders. It directed that fresh samples be sent to a Central Government laboratory within 15 days. The blacklisting would stand if the drugs again failed and would fall if they passed.

Both sides sought review, and both review petitions were dismissed on 12 February 2026. By then no sample had been drawn. MPPHSCL told the High Court that the medicines were not in its custody but with the State government, which had received the supply. The High Court repeated its direction and asked the State to help. On 26 May 2026 the Supreme Court stayed the blacklisting. Even then, more than six months after the 15-day deadline, the retest had not been done.

The arguments

Senior counsel Siddharth Bhatnagar, for the firm, said the orders were passed in haste on the very day the reply was filed. He relied on Section 25(3) and (4) of the Drugs and Cosmetics Act, 1940, under which a Government Analyst's report is not conclusive if the person from whom the sample was taken gives notice of intention to contest it, in which case the sample can go to the Central Drugs Laboratory. Clause 6 made a second test mandatory. It did not matter that the firm had not asked for one. He described blacklisting as civil death.

Senior counsel S.K. Gangele, for the respondents, said the High Court's order already protected the firm, and that until a second test was done it could not be allowed to bid or to sell drugs found substandard. He could not dispute that the show-cause notice had been issued without complying with Clause 6.

Why the orders could not survive

The Court held that once the High Court found the blacklisting orders were passed without the mandatory second-laboratory test, it should not have made their quashing depend on a future report.

Time had also made the retest impossible. The rate contracts had ended: Tender T-279 for Vitamin C on 11 April 2024, and Tender T-528 for Ethambutol on 11 October 2025. Batch JDT-7744 of Vitamin C expired in January 2026, JDT-8316 in July 2026, and Ethambutol batch JDT-8054 in April 2026. For Vitamin C batch JDT-8007, the laboratory records gave January 2026 and the show-cause notice March 2026. Either way, all four batches had expired, and the purpose of the retest had been defeated.

The Court applied Medipol Pharmaceutical India v. PGIMER (2021), which in turn relied on Medicamen Biotech v. Rubina Bose and Laborate Pharmaceuticals v. State of Tamil Nadu. Those cases recognise a valuable right to have a disputed sample retested by a superior laboratory. Where delay mainly attributable to the State causes that opportunity to be lost, a penalty based on the disputed analysis cannot be sustained. Medipol and the earlier cases arose from prosecutions. The bench held that the same principle applies to blacklisting and debarment, which carry serious civil consequences. The breach of Clause 6, followed by the failure to comply with the High Court's 15-day direction, had permanently deprived the firm of a chance to challenge the reports on which the action rested.

Order

The blacklisting and debarment orders of 30 September 2024 and 1 October 2024 were quashed. The High Court's order of 27 October 2025 and the review order of 12 February 2026 were set aside to the extent they declined to quash those orders and made them depend on a retest. The appeals were allowed.