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Grosons Pharmaceuticals (P) Ltd. And Another v. State Of U.P And Others
Factual and Procedural Background
The appellant, a small-scale industry engaged in the manufacture and sale of drugs, was an approved contractor registered with the Directorate of Industry (Stores Purchase Section), Kanpur, Uttar Pradesh. After a vigilance inquiry revealed alleged irregularities in the purchase of medicines, the State Government seized the appellant’s records and products and initiated criminal prosecution under the Prevention of Corruption Act read with Section 120 of the Indian Penal Code.
Following these developments, the State Government issued a show-cause notice proposing to blacklist the appellant. The appellant replied, but upon the expiry of the response period, the Government blacklisted the firm “till the disposal of the case pending in court” and “till the final decision” in the investigations. A writ petition under Article 226 challenging the order was dismissed by the High Court. A special leave petition (SLP No. 10087 of 1991) before the Supreme Court resulted in a direction that the Government reconsider the matter while keeping the impugned order intact. After reconsideration, the State affirmed the blacklisting. A second writ petition was dismissed by the High Court, leading to the present appeal before the Supreme Court.
Legal Issues Presented
- Whether the failure to furnish all underlying materials along with the show-cause notice violated the principles of natural justice, rendering the blacklisting order invalid.
- Whether the blacklisting order was invalid for lack of recorded reasons.
Arguments of the Parties
Appellant’s Arguments
- Given the seriousness of blacklisting, the Government was obliged to supply all materials forming the basis of the charges along with the show-cause notice; non-supply violated natural justice.
- The impugned order was invalid because it did not disclose the reasons for blacklisting.
The opinion does not contain a detailed account of the respondent’s legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court held that the contractual relationship between the appellant and the State was not governed by any statutory rules requiring disclosure of materials. The only applicable safeguard was the principle of audi alteram partem, satisfied by giving the appellant an opportunity to show cause, which it availed and which the Government considered.
Regarding the alleged absence of reasons, the Court noted the High Court’s finding that the entire government record contained “elaborate reasons” and that a summary appeared in the impugned order itself. Accordingly, the Supreme Court accepted that adequate reasons were recorded.
Finding both objections without merit, the Court concluded that the procedure adopted by the State conformed to principles of natural justice.
Holding and Implications
Appeal Dismissed.
The blacklisting order remains in force. The judgment affirms that, in non-statutory contractual contexts, compliance with audi alteram partem—providing an opportunity to show cause—is sufficient; supply of all evidentiary materials is not mandatory. No new precedent was declared, but the decision underscores the limited procedural obligations of the State when blacklisting contractors absent specific statutory rules.
V.N Khare, J.— The appellant herein is a small-scale industry engaged in manufacture and sale of drugs and was registered with the Directorate of Industry (Stores Purchase Section), Kanpur, U.P As a result of the aforesaid registration, the appellant was an approved contractor for supply of drugs to the government departments. The appellant, in pursuance thereof, had been supplying drugs to the U.P Government. It appears that certain irregularities came to the notice of the Government in purchase of medicines and, therefore, a vigilance inquiry was set up as a result of which the record and products of the appellant were seized. Further, criminal prosecution was also launched against the appellant under provisions of the Prevention of Corruption Act read with Section 120 IPC. Under such circumstances, the State Government served a notice on the appellant to show cause why it should not be blacklisted in its dealing with the Government. It appears that the appellant sent a reply to the show-cause notice. The State Government on expiry of the period for reply by the appellant passed an order blacklisting the appellant. The order indicated that the period of blacklisting will be till the disposal of the case pending in the court as well as till the final decision is arrived at in the investigation of proceedings instituted against the firm on various accounts. The appellant challenged the aforesaid order by means of a writ petition under Article 226 of the Constitution of India. The said writ petition was dismissed. Aggrieved, the appellant challenged the said order and judgment by way of special leave petition in this Court. The said special leave petition was numbered as 10087 of 1991. When the matter came up for hearing before a Bench of this Court, this Court was of the view that the State Government was required to reconsider the matter along with the explanation submitted by the appellant while keeping the impugned order intact. With the aforesaid direction, the special leave petition was disposed of. In pursuance of the direction of this Court, the State Government reconsidered the matter and affirmed the earlier order of blacklisting the appellant. The appellant again challenged the said order by means of a writ petition before the High Court. The High Court looked into the record and found that elaborate reasons were recorded and thereafter the order of blacklisting was passed. In that view of the matter, the writ petition was dismissed. It is against the said judgment, the appellants have preferred this appeal.
2. Learned counsel appearing for the appellant urged that seeing the nature and seriousness of the order passed against the appellant, the respondent ought to have supplied all the materials on the basis of which the charges contained in the show-cause notice were based along with the show-cause notice and in the absence of supply of materials, the order impugned is against the principles of natural justice. We do not find any merit in this contention. Admittedly, the appellant has only contractual relationship with the State Government and the said relationship is not governed by any statutory rules. There is no statutory rule which requires that an approved contractor cannot be blacklisted without giving an opportunity of show-cause. It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facets of the principles of natural justice. The contention that it was incumbent upon the respondent to have supplied the material on the basis of which the charges against the appellant were based, was not the requirement of the principle of audi alteram partem. It was sufficient requirement of law that an opportunity of show-cause was given to the appellant before it was blacklisted. It is not disputed that in the present case, the appellant was given an opportunity to show cause and it did reply to the show-cause which was duly considered by the State Government. We are, therefore, of the view that the procedure adopted by the respondent while blacklisting the appellant was in conformity with the principles of natural justice.
3. It was then urged that the impugned order blacklisting the appellant does not contain any reasons and, therefore, the order is invalid. We do not find any merit in the submission. The High Court summoned the entire record and found that elaborate reasons were recorded by the State Government while passing the order blacklisting the appellant. The High Court further recorded a positive finding that the State Government has passed the impugned order after recording elaborate reasons and summary of which is contained in the impugned order.
4. For the aforesaid reasons, we do not find any merit in the appeal and it fails and is dismissed accordingly. There shall be no order as to costs.
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