Department cannot cancel drug license without issuing fresh notice: Rajasthan High Court
In a significant judgment, the Rajasthan High Court has held that before taking a stringent action such as cancellation of a drug license, the concerned authority must mandatorily issue a fresh show-cause notice.
Cancelling a license directly without providing such an opportunity violates the principles of natural justice.
A single bench of Justice Kuldeep Mathur passed this order while hearing a petition filed by Jhanwar Medical Agencies. The petitioner was represented by Mr. C.S Kotwaniwhile the respondent was represented byMr. N.S Rajpurohit, AAG
The High Court quashed the department’s order related to license cancellation and observed that before taking such action, the affected party must be given a full opportunity to present its case.
Background of the Case
Jhanwar Medical Agencies, based in Jodhpur, was granted a license under the Drugs and Cosmetics Act, 1940, for wholesale and retail trade of medicines.
It was alleged that the firm committed irregularities in supplying medicines and maintaining stock records under the Rajasthan Government Health Scheme (RGHS), causing financial loss to the government.
Based on these allegations, an FIR was registered on 20 September 2023 at Basni Police Station under charges including cheating.
During the investigation, the police seized stock records, bills, computers, and other documents.
Subsequently, the Assistant Drug Controller issued a show-cause notice to the firm on 19 March 2024.
License Suspended First, Then Cancelled
After considering the firm’s reply, the authority issued an order on 13 June 2024 suspending the license for 60 days.
The firm challenged this order in appeal, but the appellate authority dismissed the appeal while making minor modifications to the suspension period.
After the suspension period ended, on 23 September 2024, the authority passed another order cancelling the drug license entirely, even though it was valid until 1 May 2027.
The firm again appealed, but the appellate authority dismissed the appeal on 3 January 2025.
Challenge Before the High Court
The firm then approached the High Court, arguing that no fresh show-cause notice was issued before cancelling the license, nor was any opportunity for personal hearing provided.
Counsel for the petitioner contended that suspension and cancellation are two distinct punitive actions.
It was argued that suspension is temporary, whereas cancellation has a permanent effect and severely impacts business and livelihood. Therefore, cancelling the license without issuing a fresh notice is unlawful.
High Court’s Ruling
During the hearing, the High Court referred to Rule 66(1) of the Drugs and Cosmetics Rules, 1945, stating that although the authority has the power to suspend or cancel a license, it must provide the license holder an opportunity to show cause before doing so.
The Court emphasized that suspension and cancellation are distinct powers with different consequences. While suspension is temporary, cancellation can completely shut down a business. Hence, before taking such a harsh action, issuing a fresh notice specifying the reasons is necessary.
Order Set Aside, Liberty Granted for Fresh Action
The High Court found that no fresh show-cause notice was issued at the time of cancellation, nor was an opportunity of hearing provided. This amounted to a violation of the principles of natural justice.
On this basis, the Court set aside both the cancellation order dated 23 September 2024 and the appellate order dated 3 January 2025.
However, the Court clarified that the department is free to initiate fresh proceedings in accordance with the law by issuing a proper notice.
