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The action of the state, not to procure indefinitely, on an assumption of complicity by Daffodils, w


The civil appeal case of M/S Daffodills Pharmaceuticals Ltd v. State of UP was brought in the Supreme Court under the bench comprising of Justice R. F. NARIMAN and Justice S. RAVINDRA BHAT. The court allowed the appeal.

Daffodills had participated in a tender process, which was required to supply medicines to various hospitals, under the control of the Medical and Health Department, U.P. for one year. The impugned direction not to procure or purchase medicines issued against it, on an assumption that a criminal case was pending against it. The appeal in the SC was made by the Daffodills.

The question law is whether the appellant was given the opportunity of hearing? The question of fact is whether Surender Chaudhary is involved with the firm or not?

The counsel appearing on behalf of the appellant made a contention that the order of the HC was passed by overlooking the noticeable aspect. Surender Chaudhary being involved in criminal cases does not bring any opposing impact on the business of the appellant.  It was further said that the HC committed an error by binding on the cases Rastriya Ispat Nigam v. Verma and Kalja Industries v. Western Telecom because it was held in these cases that an applicable well-structured order should be passed before intending to pass prohibiting or debarring orders to the parties concerned. In this case, the action taken against the appellant company is unwarranted.

The counsel for the State made an arguing statement that directing the officials of the Health Department to stop the local purchase from the appellant firm is not a debarring order.

The concerned clause 14 clearly stated that a court case means “criminal case” against the firm, Board of Directors or individual Directors. The Surender Chaudhary is a close relative of the present director so the contention made by the appellant that the criminal case against him will not affect the firm is unreliable. The appellant would not have any grievance against it, as it already filed a suit in 2014 seeking a direction not to finalize the tender for which it had bid.

This appellate court felt that even if Surender Chaudhary, the accused in the pending criminal case were involved in the appellant firm they should have given a chance of hearing. By going through the fact itself one should not have caused in unilateral action. In this case, the state made use of aginst the appellant. Further, the suit filed by Daffodills was in 2014 before the order was passed. The no show-cause notice or opportunity was granted to the appellant to signify against the proposed suit.

The SC held 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.”

In the point of view of the SC court, the HC in its Jurisdiction is extremely within the limits in holding that in the matters of award of public contracts, the scope of inquiry in judicial review.

The SC 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.”

The appropriate relief was made to the appellant as the debarring was done for 4 years and 3 months. The order passed by the Principal Secretary, Government of U.P. which resisted all the concerned departments to make a purchase from Daffodils is quashed.

Therefore the Court set aside the impugned judgment of the High Court .The appeal is allowed

–  Manusri Ramakrishna



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