M/S. DAFFODILLS PHARMACEUTICALS & ANR.V. STATE OF U.P. & ANR. versus STATE OF U.P. & ANR

Citation: [2019] 15 S.C.R. 125 · Decided: 13-12-2019 · Supreme Court of India · Bench: R.F. NARIMAN, S. RAVINDRA BHAT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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M/S. DAFFODILLS PHARMACEUTICALS & ANR.
v.
STATE OF U.P. & ANR.
(Civil Appeal No. 9417 of 2019)
DECEMBER 13, 2019
[R. F. NARIMAN AND S. RAVINDRA BHAT, JJ.]
Natural Justice – Opportunity of hearing – Appellant-
pharmaceutical supplier had bid for contract to supply various
categories of medicines to the Health Department of the State – The
State issued order dated 21.08.2015 directing its Medical and Health
Department to stop local purchase from the appellant – It was alleged
that there was a FIR against the appellant and CBI was inquiring
into the same – The pending criminal case amounted to violation of
the terms of the tender conditions – Appellant challenged the order
dated 21.08.2015 before the High Court – Appellant contended
that the criminal case in question was filed against an erstwhile
Director, who had ceased to have any connection with the appellant
– It was also contended that the decision of the State amounted to
blacklisting and that it was issued without notice or pre-decisional
hearing – High Court rejected the challenge – On appeal, held: In
the instant case, even if one assumes that accused in the pending
criminal case was involved and had sought to indulge in
objectionable activities, that ipso facto could not have resulted in
unilateral action of the kind which the State resorted to against the
appellant, which was never granted any opportunity of hearing or
a chance to represent against the order dated 21.08.2015 – It is
settled that 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, the scope of inquiry in
Judicial review is limited – Also, the order dated 21.08.2015 debarred
the purchase of medicines for an indefinite duration – This action
of the State, not to procure indefinitely, on assumption of complicity
by appellant was in violation of principles of natural justice –
Accordingly, order dated 21.08.2015 quashed – The impugned
judgment of the High Court set aside – Contract – Public contract.
 [2019] 15 S.C.R. 125
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SUPREME COURT REPORTS
[2019] 15 S.C.R.
Allowing the appeal, the Court
HELD: 1. The State of U.P. has argued that the impugned
order dated 21.08.2015 requiring that no procurement ought to
be made from appellant, is neither a blacklisting nor a debarring
order, in opinion of this Court, in fact and in reality, that order is
nothing but an order or a directive, debarring and preventing the
State of U.P. from local purchase of medicines from appellants for
an indefinite duration. Unlike a “normal” blacklisting order which
has a finite life span (of three or maximum five years), the
indefinite directive (which appears to be co-terminus with the
lifetime of the 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 the accused.
[Para 13][131-D-E]
2. In the present case, even if one assumes that the accused
in the pending criminal case was involved and had sought to
indulge in objectionable activities, that ipso facto could not have
resulted in unilateral action of the kind which the State resorted
to- against appellant, which was never granted any opportunity of
hearing or a chance to represent against the impugned order. If
there is one constant lodestar that lights the judicial horizon in
this country, it is this: that no one can be inflicted with an adverse
order, without being afforded a minimum opportunity of hearing,
and prior intimation of such a move. This principle is too well
entrenched in the legal ethos of this country to be ignored, as
the state did, in this case. [Para 15][132-E-F]
3. The High Court, in the opinion of this court, fell into
error in holding that in matters of award of public contracts, the
scope of inquiry in judicial review is limited. Granted, such
jurisdiction is extremely circumscribed; no doubt the court had
refused to grant relief to appellant against its plea of wrongful
rejection of its tender. However, what the impugned judgment
clearly overlooks is that the action of the state, not to procure
indefinitely, on an assumption of complicity by appellant, was in
flagrant violation of principles of natural justice. [Para 16][132-
G-H; 133-A]
Erusian Equipments and Chemicals Ltd. v. State of West
Bengal (1975) 1 SCC 70 : [1975] 2 SCR 

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