M/S Fab Pharmaceuticals PVT LTD vs. Karnataka State Medical Supplies Corporation

Facts

The petitioner, M/s. Fab Pharmaceuticals Pvt. Ltd., filed a writ petition challenging a blacklisting order dated 17.12.2021 issued by the respondent, Karnataka State Medical Supplies Corporation Ltd. The blacklisting pertained to two products: Inj. Noradrenaline 2 mg/ml and Inj. Dobutamine USP 250mg/5ml, and the petitioner was listed at Sl.No.12 for the year 2021-22. The petitioner sought to quash this order. The respondent is the Karnataka State Medical Supplies Corporation Ltd. The tax period is not explicitly stated for the blacklisting itself, but the products relate to supplies made earlier. The procedural history involves the issuance of the blacklisting order by the respondent, which is now under challenge before the High Court.

Held

The High Court allowed the writ petition and quashed the blacklisting order dated 17.12.2021 issued by the respondent, Karnataka State Medical Supplies Corporation Ltd., insofar as it concerned the petitioner, M/s. Fab Pharmaceuticals Pvt. Ltd. The Court found that the issue was squarely covered by its previous judgment in M/s. Sujal Pharma vs. Karnataka State Medical Supplies Corporation Limited. In that precedent, the Court had held that an order of blacklisting, having severe civil and economic consequences, cannot be passed without adhering to the principles of natural justice, specifically by affording an opportunity of hearing to the affected party. The Court noted that the replacement notices issued by the respondent did not indicate that blacklisting was a potential consequence. Furthermore, considering the long passage of time (approximately four years since the supply and the blacklisting order), the Court, following Supreme Court judgments in Vetindia Pharmaceuticals Limited and Daffodils Pharmaceuticals Limited, declined to remand the matter back to the respondent for fresh consideration, deeming it an inappropriate remedy. The operative direction was to quash the impugned order, with a rider that it would not prevent the respondent from initiating other proceedings in accordance with law, if available.

Key Issues

1. Whether the blacklisting order dated 17.12.2021 issued by the respondent against the petitioner, M/s. Fab Pharmaceuticals Pvt. Ltd., is liable to be quashed on the grounds of violation of principles of natural justice, specifically the lack of an opportunity of hearing prior to the blacklisting. This issue turns on the interpretation and application of principles of natural justice in administrative actions with civil consequences, as discussed in pronouncements of the Supreme Court. Petitioner's Contention: The petitioner argued that no notice was issued to them prior to being blacklisted, and that the blacklisting order was passed without affording them an opportunity of hearing. They relied on the judgment of this Court in M/s. Sujal Pharma vs. Karnataka State Medical Supplies Corporation Limited, which dealt with similar circumstances. Respondent's Contention: The respondent defended the action by stating that replacement notices were issued, indicating the poor quality of the Hand Sanitizers supplied. They contended that these notices were sufficient and that the petitioner, as a distributor, was equally liable for distributing poor quality products. They also noted that the manufacturer had not challenged its blacklisting.