Case Note & Summary
The dispute arose from an order issued by the Principal Secretary of the Government of U.P. directing the Health Department to cease local purchases from M/s Daffodills Pharmaceuticals Ltd. due to allegations of criminal activity involving a former director. Daffodills participated in a tender process to supply medicines but was later informed that a first information report had been lodged against it, leading to the impugned order. Daffodills contended that the order was arbitrary and amounted to blacklisting without notice or a hearing, as the criminal case pertained to a former director who had resigned in 2012. The Allahabad High Court upheld the order, stating that the State's actions were within its rights and did not violate public interest. Daffodills argued that the High Court overlooked binding precedents requiring a hearing before such adverse actions. The State maintained that the order was not a blacklisting but a necessary precaution due to the ongoing investigation. The Supreme Court found that the High Court erred in limiting its review of the State's actions and emphasized the necessity of adhering to natural justice principles. The Court quashed the order preventing local purchases, stating that the indefinite nature of the directive was disproportionate and that Daffodills had not been given a fair opportunity to defend itself. The appeal was allowed, and the High Court's judgment was set aside, with no costs awarded.
Headnote
A) Administrative Law - Natural Justice - Violation of Principles - Constitution of India, Article 226 - The court held that the appellant was not afforded an opportunity of hearing before the adverse order was made, which is a fundamental violation of natural justice principles. The indefinite directive preventing procurement from the appellant was deemed disproportionate and arbitrary, necessitating quashing of the order. (Paras 13-16).
Issue of Consideration
Whether the order preventing local purchase from the appellant constituted a violation of natural justice and whether the High Court erred in its judgment.
Final Decision
The Supreme Court quashed the order of the Principal Secretary, Government of U.P., preventing local purchases from Daffodills, and set aside the High Court's judgment, allowing the appeal.
Law Points
- natural justice
- blacklisting
- procurement
- public contracts
- judicial review
