2019 (12) TMI 1520 - SC - Indian Laws

Rejection of challenge of direction to stop local purchase from the appellant - impugned letter/notice was issued by the Principal Secretary to the Government of U.P. stating that a first information report (FIR) had been lodged against Daffodills alleging that it had committed offences, and that the Central Bureau of Investigation (CBI) was inquiring into the issue - HELD THAT - In the present case, even if one assumes that Surender Chaudhary, the accused in the pending criminal case was involved and had sought to indulge in objectionable activities, that ipso facto could not have resulted in unilateral action of the kind which the State resorted to- against Daffodils, which was never granted any opportunity of hearing or a chance to represent against the impugned order. If there is one constant lodestar that lights the judicial horizon in this country, it is this 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. The High Court, in the opinion of this court, fell into error in holding that in matters of award of public contracts, the scope of inquiry in judicial review is limited. Granted, such jurisdiction is extremely circumscribed; no doubt the court had refused to grant relief to Daffodils against its plea of wrongful rejection of its tender. The appeal is allowed.

Summary

Issues:
1. Challenge to the order directing to stop local purchase from the pharmaceutical supplier.
2. Allegations of arbitrariness and lack of natural justice in the decision-making process.
3. Legal validity of the order debarring procurement from the pharmaceutical supplier.
4. Compliance with principles of natural justice in public contract awards.
5. Judicial review of state actions in awarding public contracts.

Analysis:
1. The appellant, a pharmaceutical supplier, challenged an order from the Principal Secretary of the Government of U.P. directing to stop local purchase. The appellant participated in a tender process and was selected as a bidder by the State of U.P. The order was based on an FIR against the appellant, alleging offenses by an erstwhile director. The High Court upheld the state's action, citing limited jurisdiction in contractual disputes and lack of breach of natural justice principles.

2. The appellant argued that the order was erroneous as the accused director had resigned years earlier, and the decision not to procure was arbitrary and lacked notice or hearing. The state contended that the order was not a debarring one but a directive due to the criminal case against the former director. The court highlighted the need for a hearing before drastic actions like blacklisting.

3. The High Court held that the exclusion of the appellant from the tender was legal, and the debarring occurred after dismissing the appellant's writ petition. The court noted the lack of notice or opportunity for representation before the order. The Supreme Court found the indefinite directive as debarring and disproportionate, emphasizing the requirement of a fair hearing before adverse actions.

4. The Supreme Court referenced past judgments emphasizing the importance of natural justice in executive decisions affecting parties. It criticized the state's unilateral action against the appellant without a fair hearing. The court reiterated the fundamental right to be heard before adverse orders are imposed, a principle deeply embedded in legal traditions.

5. While acknowledging limited judicial review in public contract awards, the Supreme Court found the state's action of indefinite non-procurement without a fair hearing to be a violation of natural justice. Despite the delay in the legal process, the court quashed the order and set aside the High Court's judgment, emphasizing the importance of affording parties a fair opportunity to be heard before adverse actions are taken.