A) ABSTRACT / HEADNOTE

The judgment examines the legality, proportionality, and procedural validity of an indefinite blacklisting order passed against a licensed pharmaceutical manufacturer without any direct supply of the drug to the State authority. The dispute arose from allegations of misbranding of a veterinary drug, based on a State Analyst’s report, even though the appellant was neither a successful tenderer nor a supplier under the concerned tender. The Supreme Court scrutinised the scope of tender conditions, principles of natural justice, and the constitutional limits on administrative discretion while imposing blacklisting.

The Court held that blacklisting is a drastic civil consequence amounting to commercial civil death and therefore mandates strict adherence to procedural safeguards. It reaffirmed that a show-cause notice must expressly or by necessary implication disclose the proposed action of blacklisting. Invocation of tender clauses against a non-supplier was held to be a fundamental jurisdictional error reflecting complete non-application of mind.

On the issue of delay, the Court clarified that limitation does not strictly apply to writ jurisdiction under Article 226, and delay cannot defeat relief where the illegality is continuing and the petitioner has been diligently pursuing remedies. The judgment also reiterated that permanent or excessively long blacklisting is arbitrary and disproportionate, ordinarily exceeding permissible administrative limits.

The decision strengthens procedural fairness in public procurement, restricts arbitrary blacklisting, and balances State power with constitutional equity.

Keywords: Blacklisting, Misbranding, Natural Justice, Proportionality, Delay in Writs, Tender Jurisdiction

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The judgment arose from an appeal challenging the summary dismissal of a writ petition by the Allahabad High Court solely on the ground of delay. The appellant, a licensed pharmaceutical manufacturer under the Drugs and Cosmetics Act, 1940, was subjected to an indefinite blacklisting order passed by the State Animal Husbandry Department in 2009. The blacklisting was based on alleged misbranding of a veterinary drug batch supplied under a government tender.

However, the appellant contended that it had never supplied any drugs directly to the State, nor was it a successful tenderer. Supplies were allegedly made by an intermediary distributor. Despite this, tender clauses were invoked directly against the manufacturer. The show-cause notice did not disclose any proposal to blacklist, nor did it specify duration.

Over the years, the appellant continuously pursued representations before authorities seeking revocation of the blacklisting. The continuing effect of the order culminated in rejection of its bid by the Government of Rajasthan in 2019, triggering the writ petition.

The Supreme Court was therefore required to examine whether procedural fairness, jurisdictional competence, proportionality, and equitable discretion under Article 226 had been adhered to. The case provided an opportunity to re-emphasise safeguards governing blacklisting, especially where commercial consequences are severe and long-lasting.

D) FACTS OF THE CASE

The appellant was a valid licence holder manufacturing veterinary medicines under Form 28 read with Rule 76 of the Drugs and Cosmetics Rules. In 2007, it supplied medicines to a private distributor, M/s Palak Pharmaceuticals Pvt. Ltd., which in turn supplied drugs to the State pursuant to a tender dated 04.10.2006.

A State Analyst report dated 10.10.2008 declared a drug batch misbranded under Section 9 of the Drugs Act due to omission of “HCL” in the label description. The drug was otherwise neither adulterated nor spurious.

A show-cause notice dated 21.10.2008 was issued to the appellant referring to action under tender clauses 8.12 and 8.23. The notice neither alleged direct supply by the appellant nor proposed blacklisting. The appellant replied explaining that the defect was a bona fide printing error.

Despite this, an order dated 08.09.2009 blacklisted the appellant indefinitely. No proceedings were initiated under Sections 23, 25, 26 or 27 of the Drugs Act. Repeated representations made between 2011 and 2019 were ignored or summarily rejected.

In 2019, the appellant’s tender was rejected by the Government of Rajasthan solely due to the subsisting blacklisting order, prompting the writ petition which was dismissed for delay. This dismissal formed the subject matter of the present appeal.

E) LEGAL ISSUES RAISED

i. Whether an order of blacklisting can be sustained against a manufacturer who was not a supplier under the tender?
ii. Whether absence of express proposal of blacklisting in a show-cause notice violates principles of natural justice?
iii. Whether an indefinite or permanent blacklisting order is arbitrary and disproportionate?
iv. Whether delay alone can defeat a writ petition where the cause of action is continuing?
v. Whether compliance with Section 9 of the Drugs Act can bypass mandatory procedural safeguards under Sections 23–26?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellant submitted that the blacklisting order was jurisdictionally flawed since the appellant was never a tenderer or supplier to the State. Invocation of tender clauses was therefore ultra vires.

It was argued that the show-cause notice failed to disclose any intention to blacklist, violating audi alteram partem. Reliance was placed on Gorkha Security Services v. GNCTD to assert that such omission itself causes prejudice.

The appellant emphasised that misbranding was merely a technical printing error and not a quality defect. No statutory procedure under the Drugs Act was followed.

On delay, it was submitted that the appellant continuously pursued remedies and that the civil death caused by indefinite blacklisting constituted a recurring cause of action.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondent State contended that the writ petition was rightly dismissed due to gross delay of ten years.

It was argued that misbranding under Section 9 was established through analyst report and that tender clauses permitted blacklisting. Any defect in the show-cause notice, according to the State, caused no prejudice.

The State attempted to justify compliance with the Drugs Act by producing alleged purchase records under Form 14A, which the Court later rejected as unreliable.

H) JUDGEMENT 

The Supreme Court allowed the appeal and set aside both the High Court order and the blacklisting order. The Court held that absence of any supply by the appellant rendered invocation of tender clauses fundamentally illegal. The blacklisting order reflected non-application of mind and was vitiated at inception.

The Court reaffirmed that blacklisting has severe civil consequences extending beyond the present and potentially destroying commercial existence. Indefinite blacklisting was held unjustified.

The Court rejected the State’s reliance on the Drugs Act, holding that mandatory procedures under Sections 23, 25 and 26 were never followed. Alleged evidence of sample purchase was characterised as an attempt to create evidence where none existed.

On delay, the Court clarified that writ jurisdiction is equitable. Where delay is explained and illegality is manifest with no third-party rights affected, dismissal on delay is unsustainable.

a) RATIO DECIDENDI

The ratio decidendi of the judgment rests on four interlinked principles. First, blacklisting cannot be imposed without jurisdiction. Where the entity is neither a tenderer nor a supplier, tender conditions cannot be enforced against it.

Second, natural justice mandates clear disclosure. A show-cause notice must explicitly or by necessary implication indicate the proposed penalty of blacklisting. Failure causes inherent prejudice.

Third, proportionality governs administrative sanctions. Permanent or excessively long blacklisting amounts to arbitrariness under Article 14. Ordinarily, blacklisting beyond three to five years is disproportionate.

Fourth, delay does not extinguish equitable relief. Article 226 discretion must consider continuing prejudice, diligence of the petitioner, and absence of third-party rights.

b) OBITER DICTA

The Court observed that blacklisting often results in commercial civil death. Such orders attach stigma transcending time and geography. Administrative authorities must therefore exercise restraint and fairness.

The Court also emphasised the need for structured guidelines to regulate duration of blacklisting, echoing concerns expressed earlier in Kulja Industries Ltd.

Additionally, the Court cautioned against administrative attempts to retrospectively justify illegal orders through fabricated compliance.

c) GUIDELINES

i. Blacklisting must be preceded by a specific and informed show-cause notice.
ii. Authorities must ensure jurisdictional competence before invoking tender clauses.
iii. Duration of blacklisting must be finite and proportionate.
iv. Compliance with statutory procedures cannot be presumed or retrospectively created.
v. Writ courts must balance delay against continuing illegality and equity.

I) CONCLUSION & COMMENTS

The judgment reinforces constitutional control over administrative blacklisting. It re-establishes that public procurement power is not absolute and must operate within bounds of fairness, proportionality, and jurisdiction.

By invalidating indefinite blacklisting and rejecting technical defences based on delay, the Court restored equilibrium between State authority and commercial rights. The decision serves as a critical precedent protecting manufacturers from arbitrary exclusion while maintaining regulatory discipline.

The ruling also advances jurisprudence on equitable writ jurisdiction, confirming that courts must examine substance over form and injustice over delay.

J) REFERENCES

a) Important Cases Referred

• M/s Erusian Equipment & Chemicals Ltd. v. State of West Bengal, [1975] 2 SCR 674

• Joseph Vilangandan v. Executive Engineer, [1978] 3 SCR 514

• Gorkha Security Services v. GNCTD, [2014] 13 SCR 617

• Kulja Industries Ltd. v. BSNL, [2013] 14 SCR 430

• Basanti Prasad v. Bihar School Examination Board, [2009] 9 SCR 367

b) Important Statutes Referred

• Constitution of India

• Drugs and Cosmetics Act, 1940