M/S Vital Healthcare Private Limited vs. Karnataka State Medical Supplies Corporation

Facts

The petitioner, M/s. Vital Healthcare Private Limited, filed a writ petition challenging a blacklisting order dated 17.12.2021 issued by the Karnataka State Medical Supplies Corporation Limited (KSMCL). The blacklisting pertains to two products: Inj. Noradrenaline 2 mg/ml and Inj. Dobutamine USP 250 mg/5ml, listed at Sl.No.13 for the year 2021-22. The petitioner sought to quash this blacklisting order and direct the respondent to remove its name from the list of blacklisted firms. The petition was filed under Articles 226 and 227 of the Constitution of India. The High Court noted that the issue was covered by a previous judgment in M/S. Sujal Pharma vs. Karnataka State Medical Supplies Corporation Limited.

Held

The High Court allowed the writ petition, quashing the blacklisting order dated 17.12.2021 issued by the respondent against the petitioner. 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, which dealt with a similar blacklisting order. In the cited case, the Court held that an order of blacklisting, having significant economic and civil consequences, cannot be passed without adhering to the principles of natural justice, specifically by providing prior notice and an opportunity of hearing. The Court rejected the respondent's contention that replacement notices were sufficient notice, stating they did not indicate an intent to blacklist. Furthermore, considering the long passage of time (four years since the supply and blacklisting) and citing judgments like VETINDIA PHARMACEUTICALS LIMITED v. STATE OF UTTAR PRADESH and DAFFODILLS PHARMACEUTICALS LIMITED v. STATE OF U.P., the Court held that remanding the matter back to the authorities would not be an appropriate remedy, as the products would have naturally deteriorated. The Court emphasized that while delay can be a ground for discretion, it is not a mandatory bar, and judicious exercise requires considering all aspects, including proportionality and the absence of third-party rights. The operative direction was to quash the impugned order, with a caveat that it would not prevent other lawful proceedings.

Key Issues

1. Whether the blacklisting order dated 17.12.2021 issued by the respondent against the petitioner is liable to be quashed for violation of principles of natural justice, specifically the lack of prior notice and opportunity of hearing, as per Article 14 of the Constitution of India? Petitioner's Arguments: The petitioner contended that no notice was issued to them prior to the blacklisting order. They argued that the supplies were made in 2020, and the alleged fault was found nearly a year later based on a report that was not furnished. When a request for the report was made, the blacklisting order was issued. They relied on the principle that orders entailing civil consequences must be preceded by adherence to natural justice. Respondent's Arguments: The respondent defended the blacklisting, submitting that samples were sent to the Drugs Control Department, which found the quality of the product to be poor. They argued that although the petitioner was a distributor and not the manufacturer, they were equally liable for distributing poor-quality products. The respondent also noted that the manufacturer had not challenged its blacklisting, implying the petitioner should not challenge theirs. They argued that the replacement notices issued earlier indicated the poor quality and sufficed as notice.