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Blacklisting operates to prejudice of commercial person not only in praesenti but also puts taint:SC

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 arguments addressed before us. 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. (para 13)

VETINDIA PHARMACEUTICALS LIMITED V STATE OF UTTAR PRADESH AND ANOTHER, CIVIL APPEAL NO.3647 OF 2020 (Arising out of S.L.P (C) No. 6319 of 2020), November 6, 2020. The Supreme Court bench comprising of Justice R.F. Nariman, Justice Navin Sinha, and Justice Krishna Murari have set aside an indefinite order of blacklisting dated 08.09.2009 which was served 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 appellants to be of substandard quantity. The appellants contend that it was a bonafide inadvertent printing error as “OXYTETRACYCLINE INJ. I.P. VET” in place of “OXYTETRACYCLINE HCL INJ. I.P. VET”, which resulted in misbranding and the products were not substandard. The Writ petition filed before the High court was dismissed in limine only on the ground of ten years delay in challenging the order of blacklisting. 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. (Para 5) Respondents submitted that the Writ Petition was rightly dismissed by the High Court on the ground of inordinate delay and the veterinary medicine was misbranded under Section 9 of the Drugs Act, 1940. The Hon’ble Supreme Court relied on M/s. Erusian Equipment & Chemicals Ltd. vs. State of West Bengal and another, (1975) 1 SCC 70, where it was observed that held that there could not be arbitrary blacklisting and that too in violation of the principles of natural justice. Regarding 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, the court has relied on Gorkha Security Services vs. Government (NCT of Delhi) & Ors., (2014) 9 SCC 105 and observed as below, 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. (Para 12) In addressing the issue of delay by the appellants in approaching the High Court, the Supreme Court observed that, 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 or 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) The court held that, 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. (Para 16) View/Download Judgment: VETINDIA PHARMACEUTICALS LIMITED V STATE OF UTTAR PRADESH AND ANOTHER



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