IN THE HIGH COURT OF DELHI AT NEW DELHI WPfC)No.6969/2007. ^ Judgmentdeliveredon April ji ,2009 # NESTOR PHARMACEUTICALS LIMITED &ANR. .... Petitioner Through : Mr. Sunil Gupta, Sr. Adv. with Mr. Vinay Garg, Adv. Versus $ UNION OF INDIA THROUGH ITS SECRETARY (HEALTH) MINISTRY OF HEALTH & FAMILY WELFARE, NEW DELHI .... Respondent Through : Mr. Pradeep K. Bakshi, Adv. CORAM: HON'BLE MR. JUSTICE G.S.SISTANI 1. Whether reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? ^ G.S. SISTANI. I: 1. The present petition has been filed under Article 226 of the Constitution of India, 1950 and is directed against a notice dated 11.09.2007 bearing No.C.1301 9/7/2006 - vig., issued to the petitioner (Nestor Pharmaceuticals Limited) by the respondent (Union of India), and whereby the date of 24.09.207 was fixed as the date of hearing for submissions by the petitioner on a proposal for its debarment for five years from undertaking any business with the respondent! WP(C)Ho.6969/2007 Page 1 of 22 Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified The petition is also directed against the order debarring F.No.23011/12/200 - supply, dated 21.03.2006, by virtue of which the respondent had suspended business dealings with the petitioner. 2. The brief facts of this case are that the petitioner is stated to be a manufacturer and supplier of medicines, medical kits and drugs and claims to have been supplying medicaments under several contracts to the respondents for the past more than fourteen years. The petitioner claims to have an excellent track record; and unblemished performance with respect to the contracts undertaken by it; and, further claims to have never defaulted in complying with the specifications and quality conditions that were required of it. 3. The petitioner's grievance is that in the last two and a half years several contracts were awarded to it by the Central Government and various State Governments, however, subsequently the contracts were cancelled on the pretext of an inquiry (pending) even though the supplies had been made. 4. It is the case of the petitioner that on 24.06.2005 the petitioner received a fax from the respondents communicating the decision of the 'Ministry of Health and Family Welfare' to suspend any further business dealing with the petitioner pending full inquiry into allegations of irregularities in procurement and supplies undertaken through National Procurement Support Agencies. The WP(C)No.6969/2007 Page 2 of 22 Q petitioner then states to have immediately written a letter dated 25.06.2005, to the respondents, requesting them to withdraw the decision as the petitioner was not aware of any such inquiry. It was further requested that the petitioner be allowed to explain to the respondents regarding any allegations made against it. The petitioner submits that y when no further action was taken by the respondents, they were constrained to challenge the order dated 24.06.2005 by filing a writ petition bearing No.11136/2005 and in that petition this Court directed the respondents to give a detailed show cause notice to the petitioners. The operative portion of the Order reads as under: "[sjince the petitioner has not been put to dear notice of the reasons that prevailed on the respondent to order suspension of business with the petitioner, the respondent herewith withdraws the impugned order dated June 24, 2005, without prejudice to its rights to issue a •{j detailed Show Cause Notice and take whatever other actions are open to the respondent in law. AH orders subsequent to the impugned order dated June 24, 2005 shall automatically stand withdrawn " 5. Learned counsel for the petitioner submits that pursuant to the above said order of the Court, a detailed show cause notice dated 05,08.2005, was issued to the petitioner by the Central Government but the allegations contained therein were flimsy and based upon frivolous grounds. Thereafter the petitioner gave its reply to the 'Ministry of Health and Family Welfare' vide letters dated 18.08.2005 and 27.08.2005. It is the case of the petitioner that after reply WP(C)No.6969/2007 Page 3 of 22 was received by the respondent, the petitioner was awarded a contract worth Rs.4.00 crores by the State of Tamil Nadu vide notification dated 07.12.2005. Learned counsel for the petitioner further submits that, however, once again the respondent without assigning any reason or communication suspended business dealing with the petitioner and this act of the respondent compelled the petitioner to once again approach this Court by way of a Writ Petition bearing No.23718/2005. However, the petitioner subsequently withdrew its petition on an assurance given to it in the Court. 6. It is the case of the petitioner that even in the month of February, 2006, the respondent awarded a contract worth Rs.22,25,600/- in favour of the petitioner vide notification dated 07.02.2006. After ail the arrangements had been made for packing of materials, labels, raw-materials and other items required for the manufacture and supply of medicines, the petitioner received a letter dated 09.03.2006 from Hindustan Latex Limited (procurement agency of the respondent) asking them not to deliver further supplies as agreed under the contract. The learned counsel for the petitioner submits that thereafter the petitioner wrote a letter dated 23.03.2006 to Hindustan Latex Limited, detailing about the loss that they would suffer on account of non-deliverance of the supplies, but the same fell on deaf ears and subsequently via a letter dated 18.04.2006, issued by Hindustan Latex Limited to the petitioner to contract dated WP(C)No.6969/2007 Page 4 of 22 07.02.2006 between the parties was repudiated. 7. Learned counsel for the petitioner submits that in their reply dated 18.08.2005 and 27.08.2005 to the 'Ministry of Health and Family Welfare', the petitioner had specifically requested them to furnish copies of the documents/information relied upon by them and had also requested a personal hearing before any order is passed based upon the show cause notice, but to their utter shock and dismay, the order dated 21.03.2006 was communicated to the petitioner "suspending any further business with them pending full enquiry into the allegations". Learned counsel for the petitioner submits that post the order dated 21.03.2006, the petitioner thereafter received a copy of the letter dated 03.07.2007 whereby all the Health Secretaries to the respective State Governments had been asked not to procure any supplies from the petitioner. 8. Learned counsel for the petitioner further submits before this Court that the order dated 21.03.2006 to suspend business dealing with the petitioner pending inquiry is against the principles laid down In the case of Saraswati Dynamics (P) Ltd. V. Union of India, reported at 2003 IV Ad (Delhi) 225. The relevant extract relied upon by the petitioner is being reproduced herein below:- "Suspension pending enquiry in service jurisprudence cannot be equated with suspension pending inquiry in the business dealing with the contractors on the approved list of the Government. When an employee is suspended pending inquiry, his relationship with the WP(C)No.6969/2007 Page 5 of 22 employer does not come to an end; it is. merely suspended. He even draws subsistence allowance during this period. Further in case he is ultimately acquitted in the departmental inquiry, he is duly compensated and restored to its original position as not only normally he gets full salary and allowances of the suspension period after his reinstatement, the suspension period is treated as period in services for all purposes. That could not be a situation in suspending a supplier pending inquiry inasmuch as even during suspension, the said contractor/supplier is precluded from having any business dealings with the Government. If ultimately, after show cause notice relating to final action, his explanation is treated as satisfactory and the action is dropped, the damage which has been caused due to suspension pending inquiry cannot be undone because during suspension period also he was not allowed to have any business dealings and this process cannot be reversed. What is lost during suspension period is lost forver. It is for this reason OM dated 30^'' June, 1975, itself clarifies that although suspension may be of a temporary character, the ultimate effect is the same as that of banning order. In the aforesaid analysis, I am of the considered view that in the instant case the suspension order could not be restored to without affording the petitioner opportunity of being heard." 9. Learned counsel for the petitioner has further sought reliance upon the case of Eursian Equipment and Chemicals Ltd. V. State of West Bengal and Another, reported at (1975) 1 see 70. In this case the petitioner had been blacklisted by the Government and pending allegations of impropriety, the bids tendered by the petitioner were not considered by the respondent. The Court held: "But for the order of blacklisting, the petitioner would have been entitled to participate in the purchase of cinchona. Similarly the respondent in the appeal would also have been entitled but for the order of blacklisting to tender competitive rates, [para 13]. WP(C)No.6969/2007 Page 6 of 22 Where the State is dealing with the individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others [para 19] Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is v' created by the order of blacklistingindicatesthat the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist, [para 20]" 10. It is the petitioner's grievance that instead of conducting the inquiry which was supposed to have commenced almost two years back, the respondent thereby issued a notice dated 11.09.2007, whereby the date of 24.09.2007 was fixed and the petitioner was asked to be present on the said date and make submissions with regard to the proposed debarment of the petitioner for a period of five years. Learned counsel for the petitioner submits that since the petitioner is unaware of any allegation or charge against it (in view of the fact that no additional charge or allegation has been made in the notice dated 11.09.2007), the petitioner does not know as to what it should state or explain to the respondent. Learned counsel for the petitioner submits that a bare reading of the notices dated 21.03.2006 and 11.09.2007 would illustrate that in fact the respondent had already held the petitioner guilty and have also proposed a debarment for five years. Learned WP(C)No.6969/2007 Page 7 of 22 counsel for the petitioner argues that the opportunity of hearing being given to the petitioner is nothing but an empty formality. It is apparent that the respondents have already determined their course of action. Learned counsel for the petitioner further submits that to the best of its knowledge, till date no Inquiry Officer/Commission has been apppinted by V the respondent to look into the allegations of irregularities against the petitioner. Learned counsel also submits that it seems that the respondent is not interested in conducting any inquiry and is simply trying to hoodwink the petitioners. 11. Learned counsel for the petitioner submits that in respect of similar allegations, the World Bank has cleared the petitioner vide their decision dated 09.07.2007. 12. Learned counsel for the petitioner, thus, argues that the order of suspending business pending inquiry is against the tenets of law. It is contended that in the garb of pending inquiry, some persons/officials with their vested interests are trying to exclude the petitioner from supplying medicaments to the Government and more so because other bidders are not able to compete with the lesser bides of the petitioner. Learned counsel argues that this in turn is also putting an unnecessary burden on the public exchequer. 13. Learned counsel for the petitioner has further argued that this Court can within its power give a decision regarding an administrative matter and has in support thereof referred to the case of Om Kumar and Others V. Union of India, WP(C)Ho.6969/2007 Page 8 of 22 5 reported at (2001) 2 SCC 386 and the relevant extract of which lays: "54. Administrative action in India affecting fundamental freedoms has always been tested on the anvil of "proportionality" in the last fifty years even though it has not been expressly stated that the principle that is applied is the "proportionality" principle. For example, a condition in a licence issued to a cinema house to exhibit, at every show, a certain minimum length of "approved films" was questioned. The restriction was held reasonable (see R.M. Seshadri v. Distt. Magistrate Tanjore^). Union of India v. Motion Picture Assn.^ also related, inter alia, to the validity of licensing conditions. In another case, an order refusing permission to exhibit a film relating to the alleged obnoxious or unjust aspects of reservation policy was held violative of freedom of expression under Article 19(l)(a) (S. Rangarajan v. P. Jagjivan Ram^). Cases of surveillance by police came up for consideration in Malal< Singh v. State of P&H"^. Cases of orders relating to movement of goods came up in Bishambhar Dayal Chandra Mohan v. State ofU.P.^ There are hundreds of such cases dealt with by our courts. In all these matters, the proportionality of administrative action affecting the freedoms under Article 19(1) or Article 21 has been tested by the courts as a primary reviewing authority and not on the basis of Wednesbury principles. It may be that the courts did not call this proportionality but it really was. 68. Thus, when administrative action is attacked as discriminatory under Article 14, the principle of primary ^ review is for the courts by applying proportionality. However, where administrative action is questioned as "arbitrary" under Article 14, the principle of secondary review based on Wednesbury principles applies. Proportionality and punishments in service law 69. The principles explained in the last preceding paragraph in respect of Article 14 are now to be applied here where the question of "arbitrariness" of the order of punishment is questioned under Article 14. ^ AIR 1954 SC 747 : (1955) 1 SCR 686. 2 (1999) 6 see 150. ^ (1989) 2 SCC 574. ' (1981) 1 SCC 420. ^ (1982) 1 SCC 39 : 1982 SCC (Cri) 53. WP(C)No.6969/2007 Page 9 of 22 % 70. In this context, we shall only refer to these cases. In Ranjit Thakur v. Union of India^ this Court referred to "proportionality" in the quantum of punishment but the Court observed that the punishment was "shockingly" disproportionate to the misconduct proved. In B.C. Chaturvedi v. Union of India^ this Court stated that the court will not interfere unless the punishment awarded was one which shocked the conscience of the court. Even then, the court would remit the matter back to the authority and would not normally substitute one punishment for the other. However, in rare situations, the court could award an alternative penalty. It was also so stated in Ganayutham^. •xy 71. Thus, from the above principles and decided cases, it must be held that where an administrative decision relating to punishment in disciplinary cases is questioned as "arbitrary" under Article 14, the court is confined to Wednesbury principles as a secondary reviewing authority. The court will not apply proportionality as a primary reviewing court because no issue of fundamental freedoms nor of discrimination under Article 14 applies in such a context. The court while reviewing punishment and if it is satisfied that Wednesbury principles are violated, it has normally to remit the matter to the administrator for a fresh decision as to the quantum of punishment. Only in rare cases where there has been long delay in the time taken by the disciplinary proceedings and in the time taken in the courts, and such extreme or rare cases can the court substitute its own view as to the quantum of punishment." 14. In light of the above arguments made learnecl counsel for the petitioner seeks the following relief from this Court: i. a writ, order or direction be passed in the nature of Certiorari quashing the notice dated 11.09.2007 and 21.03.2006, issued by the respondent. ii. a writ, order or direction be passed in the nature of Mandamus directing the respondent to complete the inquiry within a reasonable time period. iii. a writ, order or direction be passed in the nature ®(1987) 4 see 611 : 1988 SCC (L&S) 1. ' (1995) 6 SCC 749 : 1996 SCC (L&S) 80 : (1996) 32 ATC 44. WP(C)No.6969/2007 Page 10 of 22 "V of Mandamus directing the respondent to not obstruct or interfere in the business dealings of the petitioner including those with the Central/State Governments. 15. Per contra, the respondent submits that this writ petition is an abuse of the process of the Court and nothing but a mala fide exercise on the part of the petitioner, with a view to stall and delay the domestic proceedings pending against the petitioner. Learned counsel for the respondent submits that it is settled law that the High Court under Article 226 of the Constitution should not exercise its jurisdiction and entertain a petition against a simple show cause notice, unless it is satisfied that the show cause notice is non-est in the eyes of the law for absolute want of jurisdiction of the authority to even investigate into the facts. The counsel for the respondent argues that calling upon the petitioner for hearing, by no stretch of imagination, can be said to be an action for inviting interference by this Court under Article 226 of the Constitution. Learned counsel for the respondent has relied upon the case of Special Director and another V, Mohd. Ghulam Ghouse and Another, reported at (2004) 3 see 440, to support his argument. The relevant portion of which is reproduced hereunder: "5 Unless the High Court is satisfied that the show-cause notice was totally non est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained WP(C)No.6969/2007 Page 11 of 22 for the mere asking and as a matter of routine, and the writ petitioner should invariably be directed to respond to the show-cause notice and take all stands highlighted in the writ petition. Whether the show-cause notice was founded on any legal premises, is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the court. Reliance has also been placed by the respondent on the case of Union of India and Another V. Kunisetty Satyanarayana, reported at (2006) 12 SCC 28 and which upheld that: "13. It is well settled by a series of decisions of this Court that ordinarily no writ lies against a charge-sheet or show-cause notice vide Executive Engineer, Bihar State l-lousing Board v. Ramesh Kumar Singh^, Special Director v. Mo/iof. Ghulam Ghouse^, Ulagappa v. Divisional Commr., Mysore^", State of U.P. v. Brahm Datt Sharma^\ etc. 14. The reason why ordinarily a writ petition should not be entertained against a mere show-cause notice or charge-sheet is that at that stage the writ petition may be held to be premature. A mere charge-sheet or show- cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ petition lies when some right of any party is infringed. A mere show-cause notice or charge- sheet does not infringe the right of anyone. It is only when a final order imposing some punishment or otherwise adversely affecting a party is passed, that the said party can be said to have any grievance. ®(1996) 1 SCC 327 : JT (1995) 8 SC 331. ' (2004) 3 SCC 440 : 2004 SCC (Cri) 826 : AIR 2004 SC 1467. (2001) 10 SCC 639. (1987) 2 SCC 179 : (1987) 3 ATC 319 : AIR 1987 SC 943. WP(C)No.6969/2007 Page 12 of 22 a 15. Writ jurisdiction is discretionary jurisdiction and hence sucln discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or charge-sheet. 16. No doubt, in some very rare and exceptional cases the High Court can quash a charge-sheet or show-cause notice if it is found to be wholly without jurisdiction or for some other reason if it is wholly illegal. However, ordinarily the High Court should not interfere in such a matter." V Another case relied upon by the learned counsel for the respondent is State of U.P. and Another V. Anil Kumar Ramesh Chandra Glass Works and Another, reported at (2005) 11 see 451, wherein the Supreme Court observed:- "6. In our view, the High Court proceeded on an incorrect basis. Hence, the decision cannot stand. In any event, this Court had repeatedly held that Article 226 should not be permitted to be invoked in order to challenge show-cause notices unless accepting the fact in the show-cause notices to be correct, either no offence is disclosed or the show-cause notices are ex facie without jurisdiction. That could not be said as far as the eight show-cause notices in question are concerned. The High Court, therefore, should not have interfered and should have left the respondents to pursue their remedy by way of an appeal under Section 9 of the Act from the order of assessment which, according to the High Court, had admittedly been passed before the writ petition had been filed by the respondent." 16. Learned counsel for the respondent further argues that the petitioner having responded to the show cause notice and now after two and a half years of the issue of the show cause notice, and especially, after one and a half years of the order of suspension, cannot now question the same in light of the prima facie findings against it. 17. Learned counsel for the respondent submits that the WP(C)No.6969/2007 Page 13 of 22 petitioner is trying to mislead this Court in so far as the status of the petition bearing number 23718/2005 is concerned. The counsel for the respondent argues that the statement of the petitioner that the petition was withdrawn with an assurance, is false. Rather the truth is that the petitioner very clandestinely had sought to obtain certain orders from "V the Court without impleadingthe respondentas a party and when the Court directed the petitioner to implead the respondent as a party then the petitioner withdrew the petition. 18. The respondent further submits that the contract awarded to the petitioner by Hindustan Latex Limited (a public sector undertaking) was due to a misunderstanding as the latter was unaware of the illegal acts of the petitioner. As soon as they came to know the true facts, they rightly cancelled the notification of the award of the contract. 19. Learned counsel for the respondent contends that the order 'suspending any business with tiie petitioner pending full enquiry' dated 21.03.2006, was passed after thoughtful consideration of the matter and was a reasoned order. The said order was passed keeping in mind the interest of the public and further to safeguard the lives of the citizens of this country, especially, children for whose betterment the medicines were sought from suppliers like the petitioners. The counsel further submits that the petitioner is prima facie guilty of supplying sub-standard drugs,