An order not to procure indefinitely is harsher than blacklisting order - cannot be passed without giving hearing; SC.

Supreme Court of India

Justice S. Ravindra Bhat and Justice R F Nariman

It was held by the SC {M/S DAFFODILLS PHARMACEUTICALS LTD. & ANR. v. STATE OF U. P. & ANR. } that before any executive decision maker proposes a drastic adverse action, such as a debarring or blacklisting order, it is necessary that opportunity of hearing and representation against the proposed action is given to the party likely to be affected.

In the present case, the appellant (hereafter “Daffodills”), a pharmaceutical supplier, was 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.

It was held that the High Court fell into error in holding that in matters of award of public contracts, the scope of inquiry in judicial review is limited. The SC held granted, such jurisdiction is extremely circumscribed; no doubt the HC had refused to grant relief to Daffodils against its plea of wrongful rejection of its tender. However, it was held that what the impugned judgment clearly overlooks is that the action of the state, not to procure indefinitely, on an assumption of complicity by Daffodils, was in flagrant violation of principles of natural justice. Accordingly the order of the Government not to procure was set aside, and the appeal was allowed - setting aside the HC judgment.