Back
SUPREME COURT OF INDIA
R. F. NARIMAN, S. RAVINDRA BHAT, JJ.
M/s Daffodills Pharmaceuticals Ltd. & Anr. – Appellants
Versus
State of U. P. & Anr. – Respondents
Civil Appeal No. 9417 of 2019 (Arising Out of Special Leave Petition (C) No. 4074 of 2018)
Decided On : 13-12-2019
Government Contract – Tender – Debarment – Tender for supply of various categories of pharmaceutical products – Impugned order is nothing but an order or a directive, debarring and preventing State of U.P. from local purchase of medicines from Daffodills for an indefinite duration – Unlike a normal blacklisting order which has a finite life span (of three or maximum five years), indefinite directive (which appears to be co-terminus with lifetime of criminal case) is facially far more disproportionate than a blacklisting order – Even as on date, it is not clear whether formal charges have been framed against accused – Even if one assumes that accused in pending criminal case was involved and had sought to indulge in objectionable activities, that ipso facto could not have resulted in unilateral action of kind which State resorted to- against Daffodils which was never granted any opportunity of hearing or a chance to represent against impugned order – No one can be inflicted with an adverse order without being afforded a minimum opportunity of hearing and prior intimation of such a move – High Court fell into error in holding that in matters of award of public contracts, scope of inquiry in judicial review is limited – Action of State, not to procure indefinitely, on an assumption of complicity by Daffodils, was in flagrant violation of principles of natural justice – However, given that impugned order of debarring was made over 4 years and 3 months ago, it would be in overall interest of justice that appropriate relief is granted – Impugned judgment of High Court set aside. (Paras 13, 15, 16 and 17)
Facts of the case:
Appellant, a pharmaceutical supplier, is aggrieved by a decision of the Allahabad High Court, rejecting its challenge to order issued by the Principal Secretary, Government of U.P. to its Medical and Health Department, directing it to stop local purchase from appellant. Daffodills had participated in a tender process, in which State called for bids from interested parties, willing to supply various categories of pharmaceutical products. The successful bidder was required to supply medicines to various hospitals, under the control of the Medical and Health Department, U.P. for one year. Daffodills was one amongst 56 bidders; its bid was acceptable to the respondent, i.e. State of U.P.
Findings of Court:
Normally, this court would have quashed Government of U.P.’s decision, and left it to grant a hearing to Daffodils, before taking any action. However, given that the impugned order of debarring (i.e. directive not to procure locally from Daffodills) was made over 4 years and 3 months ago, this court is of the opinion that it would be in the overall interest of justice that appropriate relief is granted.
Result : Appeal allowed.
JUDGMENT :
S. RAVINDRA BHAT, J.
1. Leave granted. With consent, all counsel who appeared were heard.
2. The appellant (hereafter “Daffodills”), a pharmaceutical supplier, is aggrieved by a decision of the Allahabad High Court, rejecting its challenge to an order (dated 21.08.2015) issued by the Principal Secretary, Government of U.P. to its Medical and Health Department, directing it to stop local purchase from the appellant. Daffodills had participated in a tender process, in which the state called for bids from interested parties, willing to supply various categories of pharmaceutical products. The successful bidder was required to supply medicines to various hospitals, under the control of the Medical and Health Department, U.P. for one year. Daffodills was one amongst 56 bidders; its bid was acceptable to the respondent, i.e. State of U.P.
3. Daffodills was asked to match its previous bid to the Tamil Nadu Service Corporation Ltd. for the year 2015-16, at approved L1 rates, on or before, 29.05.2015 in respect of 14 specified drugs. At the time of bid submission, every tenderer/bidder had to furnish a declaration to the following effect:
“Firms should give an affidavit that there is no Court Case/Vigilance Case/CBI Case pending against the firm. All the documents given in the tender are true. If found false/fake the person/firms will have to be accepted by the firm. (Court case means “Criminal Case” against firm/board of Director/Directors/principal stock holder as per relevant law)”.
It is not disputed that Daffodills furnished the required declaration in terms of the tender.
4. While so, on 21.08.2015, the impugned letter/notice was issued by the Principal Secretary to the Government of U.P. stating that a first information report (FIR) had been lodged against Daffodills alleging that it had committed offences, and that the Central Bureau of Investigation (CBI) was inquiring into the issue. Accordingly, the offices under Department of Health was directed to desist and stop all procurements from the appellant, i.e. Daffodills under the following terms:
“I am directed to say in the described situation that no more local purchase is to be done till pre order of the government, from the above said firms which are under the investigation of CBI in the NRHM Case, by the hospitals at the rate of contract of DGS&D/ESIC and Tamil Nadu Medical Services Corporation. If medicine is purchased by any hospital in-charge from these firms without approval of the government then strict action would be taken as per rules against him.”
5. Complaining of arbitrariness on various grounds, (including that the impugned direction not to procure or purchase medicines issued against it, was on a mistaken assumption that a criminal case was pending against it), Daffodills submitted that the criminal case was filed against one Mr. Surender Chaudhary, an erstwhile Director, who had ceased to have any connection with it (i.e. Daffodills) from 22.02.2012. Besides, it was argued that the decision not to procure, amounted to blacklisting and that it was issued without notice or pre-decisional hearing and was consequently liable to be set aside.
6. In the impugned order, the High Court recalled a previous direction in other proceedings, i.e. Writ Petition No. 3611 (MB)/ 2011 where it had enquired in regard to the execution and implementation of the National Rural Health Mission in regard to utilization of funds released by the Government of India. The impugned order states that in compliance of that order, CBI registered a case for preliminary inquiry and after concluding the investigation filed a charge-sheet in the competent court against Surender Chaudhary, the then Director of Daffodils and other co-accused.
7. After noticing Daffodil’s contention that Surender Chaudhary ceased to be its Director and also that it was not given opportunity of hearing before the passing of the order, the High Court observed that in matters of contractual disputes relating to
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
