Daffodills Pharmaceuticals Ltd. v. State of U.P. (Supreme Court of India)
In the landmark case of Daffodills Pharmaceuticals Ltd. v. State of U.P., the Supreme Court of India addressed the issue of disproportionate blacklisting. The judgment emphasized that an indefinite or excessively long blacklisting period without due process is unfair and contrary to the principles of natural justice.
Daffodills Pharmaceuticals Ltd. (hereafter referred to as “Daffodills”) participated in a tender process by the State of Uttar Pradesh for supplying pharmaceutical products. Despite being a successful bidder, a directive issued on 21.08.2015 by the Principal Secretary, Government of U.P., halted all procurements from Daffodills due to an FIR lodged against the company. The decision was based on alleged offenses under investigation by the Central Bureau of Investigation (CBI).
High Court’s Decision
The Allahabad High Court had previously rejected Daffodills’ challenge against this directive, noting the ongoing CBI investigation and citing the company’s failure to comply with the terms of the contract. The court held that matters of policy decisions and contractual disputes fell outside the scope of judicial review under Article 226, dismissing the plea on grounds of limited jurisdiction.
Supreme Court’s Analysis
The Supreme Court granted leave and examined the broader implications of the case. Key points included:
- Disproportionate Punishment: The Court noted that the indefinite directive preventing procurement from Daffodills was far more severe than a typical blacklisting order, which usually spans three to five years.
- Natural Justice Violations: The Court highlighted the failure to provide Daffodills with a show-cause notice or an opportunity to be heard before the directive was issued. This lack of due process violated the fundamental principles of natural justice.
- Previous Judicial Precedents: The Court referenced earlier rulings, such as Erusian Equipments and Chemicals Ltd. v. State of West Bengal and Raghunath Thakur v. State of Bihar, which established that any severe adverse action like blacklisting requires prior notice and a fair hearing.
Conclusion
