Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3647 OF 2020
(Arising out of S.L.P (C) No. 6319 of 2020)
| VETINDIA PHARMACEUTICALS LIMITED |
|---|
VERSUS
STATE OF UTTAR PRADESH AND ANOTHER ...RESPONDENT(S)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The appellant is aggrieved by indefinite order of blacklisting
dated 08.09.2009. The High Court dismissed the writ petition in
limine, only on the ground of delay, as having been preferred ten
years later.
3. Ms. Shobha Gupta, learned counsel for the appellant,
submits that it holds a valid licence under the Drugs and
Cosmetics Act, 1940 (hereinafter referred to as ‘the Drugs Act’) in
Form 28 (Rule 76) issued by the Drugs Control Administration,
Signature Not Verified
Government of Andhra Pradesh. M/s Palak Pharmaceuticals
Digitally signed by
ASHA SUNDRIYAL
Date: 2020.11.10
11:02:12 IST
Reason:
Private Limited had obtained supplies from the appellant in the
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year 2007, and in turn had supplied it to the respondent under a
tender notice dated 04.10.2006. The brand name of the medicine
was correctly mentioned as “OXY125”. The composition of the
medicine was also correctly mentioned as “Oxytetracycline HCL
IP Vet 125 mg”. The generic term “Hcl” was only missing on the
label, and it was written as “OXYTETRACYCLINE INJ. I.P. VET”
in place of “OXYTETRACYCLINE HCL INJ. I.P. VET”. It was
therefore a case of bonafide inadvertent printing error which
resulted in misbranding. The product was not substandard or
spurious veterinary medicine.
4. The appellant was served with an order of blacklisting dated
08.09.2009 by the Office of Director, Animal Husbandry
Department of the respondent referring to the State Analyst
report dated 10.10.2008, declaring the batch supplied by the
appellant to be of substandard quality (misbranded/not in
accordance with Oxytetracycline injection), thus violating clauses
8.12 and 8.23 of the Tender of 200607. The appellant informed
the respondents that it had never made any supplies to them
under the Tender in question. The misbranding referred to was
an inadvertent error. The respondents required certain further
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clarifications which were furnished on 04.05.2019 but to no
outcome. The order of blacklisting is causing great prejudice to
the appellant preventing it from participating in similar tenders,
the most recent being the rejection by the Government of
Rajasthan dated 05.07.2019 for the said reason. No proceedings
were taken out by the respondents against the appellant under
Sections 23, 25, 26 and 27 of the Drugs Act.
5. The explanation furnished for the delay in the writ petition
has not been considered properly. The order of blacklisting being
in violation of the principles of natural justice, delay is irrelevant
and the cause of action continues because of its indefinite nature
and consequences. Learned counsel has relied heavily on
Gorkha Security Services vs. Government (NCT of Delhi) &
, (2014) 9 SCC 105, to submit that the show cause notice
Ors.
dated 21.10.2008 did not meet the requirement of the law. She
has further relied upon M/s Daffodills Pharmaceuticals Ltd. &
, 2019 (17) SCALE 758, where this
Anr. vs. State of U.P. & Anr.
Court opined that a debarment of approximately four years was
sufficient.
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6. Shri Ankit Goel, learned counsel for the respondents,
submits that the writ petition was rightly dismissed on grounds
of gross and inordinate delay of ten years in challenging the order
of blacklisting. It was preceded by a show cause notice dated
21.10.2008, and consideration of the reply submitted. The
veterinary medicine was misbranded in terms of Section 9 of the
Drugs Act, duly supported by the report of the analyst. Any
latent defect in the show cause notice has not caused any
prejudice to the appellant. The impugned orders therefore merit
no interference.
7. We have considered the submissions on behalf of the parties
and are satisfied that the writ petition deserves to be allowed for
more than one reason.
8. The appellant is a licensed drug manufacturer. The drugs
in question have been found to be misbranded and not spurious
or adulterated. The appellant took the plea of a bonafide
inadvertent printing error on the label, by stating
“OXYTETRACYCLINE INJ. I.P. VET” in place of
“OXYTETRACYCLINE HCL INJ. I.P. VET”. This explanation by
the appellant dated 15.11.2008 in reply to the show cause notice
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finds no consideration by the respondents at any stage. The
appellant initially sought to purse matters with the respondents.
On 19.05.2011, the appellant requested the respondents for
allowing it to participate in further tenders for 20112012. The
matter was also subsequently followed up by the appellants in
writing with the respondents. On 01.05.2019, the appellant again
requested to withdraw the order dated 08.09.2009. The
respondents on 03.05.2019 rejected the request of the appellant
reiterating violation of clauses 8.12 and 8.23 of the Tender of
200607. It however sought certain additional information to
consider the representation of the appellant which was submitted
on 04.05.2019. The appellant was also debarred from
consideration by the State of Rajasthan on 05.07.2019 by reason
of the impugned order of blacklisting. In absence of any response
thereafter from the respondents, the writ petition came to be
instituted.
9. There is no dispute that the injection was not supplied to
the respondents by the appellant. Yet the show cause notice
dated 21.10.2008 referred to further action in terms of the
Tender for supplying misbranded medicine to the respondent.
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Furthermore, the show cause notice did not state that action by
blacklisting was to be taken, or was under contemplation. It only
mentioned appropriate action in accordance with the rules of the
Tender. The fact that the terms of the tender may have provided
for blacklisting is irrelevant in the facts of the case. In absence of
any supply by the appellant, the order of blacklisting dated
08.09.2009 invoking clauses 8.12 and 8.23 of the Tender is a
fundamental flaw, vitiating the impugned order on the face of it
reflecting non application of mind to the issues involved. Even
after the appellant brought this fact to the attention of the
respondents, they refused to pay any heed to it. Further, it
specifies no duration for the same.
10. M/s. Erusian Equipment & Chemicals Ltd. vs. State of
1975) 1 SCC 70, held that there
West Bengal and another , (
could not be arbitrary blacklisting and that too in violation of the
principles of natural justice. In Joseph Vilangandan vs. The
(1978) 3
Executive Engineer, (PWD), Ernakulam and others,
SCC 36, this Court was considering a show cause notice as
:
follows
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“17. ….“You are therefore requested to show
cause ... why the work may not be arranged
otherwise at your risk and loss, through other
agencies after debarring you as a defaulter ....”
The crucial words are those that have been
underlined (herein in italics). They take their colour
from the context. Construed along with the links of
the sentence which precede and succeed them, the
words “debarring you as a defaulter”, could be
understood as conveying no more than that an action
with reference to the contract in question, only, was
under contemplation. There are no words in the
notice which could give a clear intimation to the
addressee that it was proposed to debar him from
taking any contract, whatever, in future under the
Department.…”
11. The question whether a show cause notice prior to
blacklisting mandates express communication why blacklisting
be not ordered or was in contemplation of the authorities, this
Court in Gorkha Security Services (supra) held as follows:
“27. We are, therefore, of the opinion that it was
incumbent on the part of the Department to state in
the showcause notice that the competent authority
intended to impose such a penalty of blacklisting, so
as to provide adequate and meaningful opportunity
to the appellant to show cause against the same.
However, we may also add that even if it is not
mentioned specifically but from the reading of the
showcause notice, it can be clearly inferred that
such an action was proposed, that would fulfil this
requirement. In the present case, however, reading of
the showcause notice does not suggest that noticee
could find out that such an action could also be
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taken. We say so for the reasons that are recorded
hereinafter.
28. In the instant case, no doubt the showcause
notice dated 622013 was served upon the
appellant. Relevant portion thereof has already been
extracted above ( see para 5). This showcause notice
is conspicuously silent about the blacklisting action.
On the contrary, after stating in detail the nature of
alleged defaults and breaches of the agreement
committed by the appellant the notice specifically
mentions that because of the said defaults the
appellant was “as such liable to be levied the cost
accordingly”. It further says “why the action as
mentioned above may not be taken against the firm,
besides other action as deemed fit by the competent
authority”. It follows from the above that main action
which the respondents wanted to take was to levy the
cost. No doubt, the notice further mentions that the
competent authority could take other actions as
deemed fit. However, that may not fulfil the
requirement of putting the defaulter to the notice
that action of blacklisting was also in the mind of the
competent authority. Mere existence of Clause 27 in
the agreement entered into between the parties,
would not suffice the aforesaid mandatory
requirement by vaguely mentioning other “actions as
deemed fit”. As already pointed out above insofar as
penalty of blacklisting and forfeiture of earnest
money/security deposit is concerned it can be
imposed only, “if so warranted”. Therefore, without
any specific stipulation in this behalf, the respondent
could not have imposed the penalty of blacklisting.
xxxxxxx
33. When we apply the ratio of the aforesaid
judgment to the facts of the present case, it becomes
difficult to accept the argument of the learned
Additional Solicitor General. In the first instance, we
may point out that no such case was set up by the
respondents that by omitting to state the proposed
action of blacklisting the appellant in the showcause
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notice, has not caused any prejudice to the appellant.
Moreover, had the action of blacklisting being
specifically proposed in the showcause notice, the
appellant could have mentioned as to why such
extreme penalty is not justified. It could have come
out with extenuating circumstances defending such
an action even if the defaults were there and the
Department was not satisfied with the explanation
qua the defaults. It could have even pleaded with the
Department not to blacklist the appellant or do it for
a lesser period in case the Department still wanted to
blacklist the appellant. Therefore, it is not at all
acceptable that nonmentioning of proposed
blacklisting in the showcause notice has not caused
any prejudice to the appellant. This apart, the
extreme nature of such a harsh penalty like
blacklisting with severe consequences, would itself
amount to causing prejudice to the appellant.”
12. If the respondents had expressed their mind in the show
cause notice to blacklist, the appellant could have filed an
appropriate response to the same. The insistence of the
respondents to support the impugned order by reference to the
terms of the tender cannot cure the illegality in absence of the
appellant being a successful tenderer and supplier. We therefore
hold that the order of blacklisting dated 08.09.2009 stands
vitiated from the very inception on more than one ground and
merits interference.
13. In view of the aforesaid conclusion, there may have been no
need to go into the question of the duration of the blacklisting,
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but for the arguments addressed before us. An order of
blacklisting operates to the prejudice of a commercial person not
only in praesenti but also puts a taint which attaches far beyond
and may well spell the death knell of the organisation/institution
for all times to come described as a civil death. The
repercussions on the appellant were clearly spelt out by it in the
representations as also in the writ petition, including the
consequences under the Rajasthan tender, where it stood
debarred expressly because of the present impugned order. The
possibility always remains that if a proper show cause notice had
been given and the reply furnished would have been considered
in accordance with law, even if the respondents decided to
blacklist the appellant, entirely different considerations may have
prevailed in their minds especially with regard to the duration.
This court in Kulja Industries Limited vs. Chief General
Manager, Western Telecom Project Bharat Sanchar Nigam
(2014) 14 SCC 731, despite declining to
Limited and others,
interfere with an order of blacklisting, but noticing that an order
of permanent debarment was unjustified, observed:
“28.2. Secondly, because while determining the
period for which the blacklisting should be effective
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the respondent Corporation may for the sake of
objectivity and transparency formulate broad
guidelines to be followed in such cases. Different
periods of debarment depending upon the gravity of
the offences, violations and breaches may be
prescribed by such guidelines. While it may not be
possible to exhaustively enumerate all types of
offences and acts of misdemeanour, or violations of
contractual obligations by a contractor, the
respondent Corporation may do so as far as possible
to reduce if not totally eliminate arbitrariness in the
exercise of the power vested in it and inspire
confidence in the fairness of the order which the
competent authority may pass against a defaulting
contractor.”
Since the order of blacklisting has been found to be
unsustainable by us, and considering the long passage of time,
we are not inclined to remand the matter to the authorities. In
M/s Daffodills Pharmaceuticals (supra), relied upon by the
appellant, this court has observed that an order of blacklisting
beyond 3 years or maximum of 5 years was disproportionate.
14. That brings us to the question of delay. There is no doubt
that the High Court in its discretionary jurisdiction may decline
to exercise the discretionary writ jurisdiction on ground of delay
in approaching the court. But it is only a rule of discretion by
exercise of selfrestraint evolved by the court in exercise of the
discretionary equitable jurisdiction and not a mandatory
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requirement that every delayed petition must be dismissed on the
ground of delay. The Limitation Act stricto sensu does not apply
to the writ jurisdiction. The discretion vested in the court under
Article 226 of the Constitution therefore has to be a judicious
exercise of the discretion after considering all pros and cons of
the matter, including the nature of the dispute, the explanation
for the delay, whether any thirdparty rights have intervened etc.
The jurisdiction under Article 226 being equitable in nature,
questions of proportionality in considering whether the impugned
order merits interference or not in exercise of the discretionary
jurisdiction will also arise. This Court in Basanti Prasad vs.
, (2009) 6 SCC
Bihar School Examination Board and others
791 , after referring to Moon Mills Ltd. vs. Industrial Court , AIR
1967 SC 1450,
Maharashtra SRTC vs. Balwant Regular
Motor Service , AIR 1969 SC 329 and State of M.P. and Others
, (1986) 4 SCC 566, held that if
vs. Nandlal Jaiswal and others
the delay is properly explained and no third party rights are
being affected, the writ court under Article 226 of the
Constitution may condone the delay, holding as follows:
12
“18. In the normal course, we would not have taken
exception to the order passed by the High Court.
They are justified in saying that a delinquent
employee should not be permitted to revive the stale
claim and the High Court in exercise of its discretion
would not ordinarily assist the tardy and indolent
person. This is the traditional view and is well
supported by a plethora of decisions of this Court.
This Court also has taken the view that there is no
inviolable rule, that, whenever there is delay the
Court must refuse to entertain a petition. This Court
has stated that the writ court in exercise of its
extraordinary jurisdiction under Article 226 of the
Constitution may condone the delay in filing the
petition, if the delay is satisfactorily explained.”
15. The contention of the respondents that they have acted in
accordance with the provisions of the Drugs Act pursuant to the
report of the analyst for misbranded product under Section 9 is
devoid of substance and merits no consideration. It is not the
case of the respondents that the procedure prescribed under
Sections 23, 25 and 26 of the Drug Act has been followed. The
feeble attempt to show compliance with provisions of the Drugs
Act by alleged purchase of the samples under Form 14A at
Annexure R5 to the counter affidavit dated 21.07.2008 from an
unknown source and date must be rejected outright as an
attempt to create evidence where none exists.
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16. The aforesaid discussion, therefore, leads us to the
conclusion that the writ petition was not barred by unexplained
delay as the appellant had been pursuing the matter with the
authorities and it is they who sat over it, triggering rejection of
appellants tender by the Rajasthan Government on 05.07.2019
leading to the institution of the writ petition on 24.07.2019. The
High Court therefore erred in dismissing the writ petition on
grounds of delay. The illegality and the disproportionate nature
of the order dated 08.09.2009, with no third party rights affected,
never engaged the attention of the High Court in judicious
exercise of the discretionary equitable jurisdiction.
Consequently, the impugned order of the High Court as well as
order dated 08.09.2009 of the respondents are set aside, and the
appeal is allowed.
…………...................J.
[R.F. NARIMAN]
…………...................J.
[NAVIN SINHA]
…………...................J.
[KRISHNA MURARI]
NEW DELHI
NOVEMBER 06, 2020.
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