VETINDIA PHARMACEUTICALS LIMITED versus STATE OF UTTAR PRADESH AND ANOTHER
[2020] 9 S.C.R. 607, Supreme Court of India, 2020
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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VETINDIA PHARMACEUTICALS LIMITED
v.
STATE OF UTTAR PRADESH AND ANOTHER
(Civil Appeal No. 3647 of 2020)
NOVEMBER 06, 2020
[R. F. NARIMAN, NAVIN SINHA AND
KRISHNA MURARI, JJ.]
Drugs:
Blacklisting of drug – Propriety of – Drug in question
manufactured by appellant-company  (a valid licence-holder) –
Supplied to respondent-State – By a supplier as per a Tender –
Order of Blacklisting of the drug was served by the State to the
manufacturing company, in terms of Tender clauses – Writ petition
– Dismissed in limine  on the ground of 10 years delay in filing the
petition – Appeal to Supreme Court – Held: In absence of any supply
by the manufacturing company, the order of blacklisting invoking
Tender clauses is a fundamental flaw and hence not sustainable –
An order of blacklisting beyond 3 years or maximum 5 years is not
justified – As the manufacturing company had been pursuing the
matter with the Authorities, the Writ Petition was not barred by
unexplained delay – Delay.
Limitation:
Limitation period – For filing writ petition – Held: High Court
may decline to exercise its discretionary writ jurisdiction, on the
ground of delay – But it is only a rule of discretion and not a
mandatory requirement – Limitation Act stricto sensu does not apply
to writ jurisdiction – Therefore, such discretion has to be judicious
exercised – Constitution of India – Art. 226 – Limitation Act, 1963
– Delay.
Allowing the appeal, the Court
HELD: 1.1 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. [Para 9][613-C-E]
1.2 An order of permanent debarment is unjustified. An
order of blacklisting beyond 3 years or maximum 5 years is
disproportionate. 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. [Para 13][616-A-C]
Kulja Industries Limited v. Chief General Manager,
Western Telecom Project Bharat Sanchar Nigam Limited
and Others (2014) 14 SCC 731 : [2013] 14 SCR 430;
M/s Daffodills Pharmaceuticals Ltd. & Anr. v. State of
U.P. & Anr. 2019 (17) SCALE 758 – relied on.
1.3 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
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terms of the tender cannot cure the illegality in absence of the
appellant being a successful tenderer and supplier. Therefore
the order of blacklisting dated 08.09.2009 stands vitiated from
the very inception on more than one ground and merits
interference. [Para 12][615-F-G]
M/s. Erusian Equipment & Chemicals Ltd. v. State of
West Bengal and Another (1975) 1 SCC 70 : [1975] 2
SCR 674; Joseph Vilangandan v. The Executive
Engineer, (PWD), Ernakulam and Others (1978) 3 SCC
36 : [1978] 3 SCR 514; Gorkha Security Services v.
Government (NCT of Delhi) & Ors. (2014) 9 SCC 105:
[2014] 13 SCR 617 – relied on.
2.1 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 self-restraint evolved by
the court in exercise of the discretionary equitable jurisdiction
and not a mandatory 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 third-party 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. [Para 14][616-H; 617-
A-C]
Basanti Prasad v. Bihar School Examination Board and
Others (2009) 6 SCC 791 : [2009] 9 SCR 367; Moon
Mills Ltd. v. Industrial Court AIR 1967 SC 1450;
Maharashtra SRTC v. Balwant Regular Motor Service
AIR 1969 SC 329: [1969] 1 SCR 808;  State of M.P.
and Others v. Nandlal Jaiswal and Others, (1986) 4
SCC 566 : [1987] 1 SCR 1 – relied on.
2.2 The contention of the respondents that they have acted
in accordance with the provisions of the Drugs Act pursuant to
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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 R-5 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. [Para 15][617-G-H; 618-
A]
2.3 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. [Para 16][618-B-D]
Case Law Reference
[2014] 13 SCR 617
relied on
Para 5
[1975] 2 SCR 674
relied on
Para 10
[1978] 3 SCR 514
relied on
Para
10
[2013] 14 SCR 430
relied on
Para 13
2019 (17) SCALE 758
relied on
Para 13
[2009] 9 SCR 367
relied on
Para 14
[1969] 1 SCR 808
relied on
Para 14
[1987] 1 SCR 1
relied on
Para 14
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3647
of 2020.
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From the Judgment and Order dated 25.07.2019 of the High Court
of Judicature at Allahabad, Allahabad Bench in Writ – C No. 24253 of
2019.
Ms. Shobha Gupta, Ms. Prachi Apte, Ankit Goel, Abhinav Kaushik,
R. K. Gupta, Advs. for the appearing parties.
The Judgment of the Court was delivered by
NAVIN SINHA, J.
1. 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, Government of Andhra Pradesh.
M/s Palak Pharmaceuticals Private Limited had obtained supplies from
the appellant in the 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 “OXY-125”. 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 spuriousveterinary 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 2006-07. 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 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
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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) & Ors., (2014) 9 SCC 105, to submit that
the show cause notice dated 21.10.2008 did not meet the requirement of
the law.  She has further relied upon M/s Daffodills Pharmaceuticals
Ltd. & Anr. vs. State of U.P. & Anr., 2019 (17) SCALE 758,where this
Court opined that a debarment of approximately four years was
sufficient.
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 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 2011-2012. The matter was also subsequently followed up by the
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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 2006-07. 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. 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
West Bengal and another, (1975) 1 SCC 70, held that there could not
be arbitrary blacklisting and that too in violation of the principles of natural
justice. In Joseph Vilangandan vs. The Executive Engineer, (PWD),
Ernakulam and others, (1978) 3 SCC 36, this Court was considering a
show cause notice as follows:
“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,
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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 show-cause 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 show-cause 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 show-cause notice
does not suggest that noticee could find out that such an action
could also be taken. We say so for the reasons that are recorded
hereinafter.
28. In the instant case, no doubt the show-cause notice dated
6-2-2013 was served upon the appellant. Relevant portion thereof
has already been extracted above (see para 5). This show-cause
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
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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.
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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 show-cause notice, has not caused
any prejudice to the appellant. Moreover, had the action of
blacklisting being specifically proposed in the show-cause 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 non-mentioning of proposed blacklisting
in the show-cause 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, but for the
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arguments addressed before us. An order of blacklisting operates to the
prejudice of a commercial person not only inpraesenti 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 Limited and others, (2014)
14 SCC 731, despite declining to 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 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
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the discretionary writ jurisdiction on ground of delay in approaching the
court. But it is only a rule of discretion by exercise of self-restraint
evolved by the court in exercise of the discretionary equitable jurisdiction
and not a mandatory 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
third-party 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. Bihar School Examination Board and others, (2009) 6 SCC 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 vs. Nandlal Jaiswal and
others, (1986) 4 SCC 566, held that if 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:
“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
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provisions of the Drugs Act by alleged purchase of the samples under
Form 14A at Annexure R-5 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.
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.
Kalpana K. Tripathy
Appeal allowed.