Blacklisting Orders May Cause Civil Death Of Institutions: SC Sets Aside Indefinite Blacklist Order Issued Against A Pharma Company [Read Judgment]

The Supreme Court has set aside an indefinite blacklisting order issued in the year 2009 against VETINDIA Pharmaceuticals Limited.

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, said the bench comprising Justices RF Nariman, Navin Sinha and Krishna Murari.

The company, the appellant in this case, was served with an order of blacklisting by the Office of Director, Animal Husbandry Department of UP Government referring to the State Analyst report declaring the batch supplied by it  to be of substandard quality (misbranded/not in accordance with Oxytetracycline injection), thus violating the Tender stipulations. This order was challenged in 2019 before the Bombay High Court which dismissed it on the ground of delay.

In appeal, the bench noticed that the show cause notice issued to the company did not state that action by blacklisting was to be taken, or was under contemplation. The court observed:

"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."

The court also added that, In M/s Daffodills Pharmaceuticals vs. State of U.P, it was observed that an order of blacklisting beyond 3 years or maximum of 5 years was disproportionate. Regarding the issue of delay in approaching the writ court, the bench observed that the writ petition was not barred by unexplained delay. It said:

"There is no doubt that the High Court in its discretionary jurisdiction may decline to exercise the discretionary writ jurisdiction on ground of delay in approaching the court. But it is only a rule of discretion by exercise of self restraint evolved by the court in exercise of the discretionary equitable jurisdiction and not a mandatory requirement that every delayed petition must be dismissed on the ground of delay. 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 for 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."

CASE: VETINDIA PHARMACEUTICALS LIMITED vs. STATE OF UTTAR PRADESH [CIVIL APPEAL NO.3647 OF 2020]
CORAM: Justices RF Nariman, Navin Sinha and Krishna Murari.
COUNSEL: Adv Shobha Gupta, Adv Ankit Goel

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