Blacklisting and Misbranding Case: Supreme Court's Ruling on Due Process and Delay

The case revolves around a blacklisting order issued against Vetindia Pharmaceuticals Limited by the State of Uttar Pradesh, following allegations of supplying misbranded veterinary medicine. The appellant, Vetindia Pharmaceuticals, challenged the indefinite blacklisting order and the delay in addressing the matter. The case addresses critical issues related to blacklisting, delay in legal actions, and the procedural fairness in issuing such orders under the Drugs and Cosmetics Act, 1940.

Background of the Case

The appellant, Vetindia Pharmaceuticals, is a licensed manufacturer of veterinary drugs under the Drugs and Cosmetics Act, 1940. In 2007, they supplied Oxytetracycline HCL, branded as OXY-125, to M/s. Palak Pharmaceuticals, which was subsequently used in a tender under the Government of Uttar Pradesh. The tender documents did not accurately display the chemical composition of the medicine, leading to a claim of misbranding. The State Analyst later reported the batch to be substandard, though the appellant maintained that the misbranding was an inadvertent error.

The blacklisting order was issued in 2009, which prohibited the appellant from participating in future tenders. This order was based on the allegation of misbranding, although the appellant claimed that the issue was minor and due to a printing mistake. Despite several representations, the appellant was unable to have the blacklisting order revoked, leading to a writ petition.

Petitioner’s Arguments

The appellant, represented by Ms. Shobha Gupta, argued that:

The misbranding was a bona fide error and did not make the product substandard or spurious.
The show cause notice issued in 2008 did not specify the blacklisting action clearly, which violated the principles of natural justice.
The blacklisting order was disproportionate, and the delay in addressing the issue was unjustified.
Despite representations and clarifications, the respondents refused to lift the blacklisting order, which had severely impacted the appellant’s business.

“The blacklisting order is not just an administrative decision; it has long-lasting consequences on the appellant’s ability to operate in the pharmaceutical industry. The indefinite nature of this order, without a clear explanation or due consideration, is unlawful and disproportionate.”

Respondent’s Arguments

The respondent, the State of Uttar Pradesh, countered that:

The appellant’s product was indeed misbranded, and this violation warranted the blacklisting under the relevant provisions of the Drugs Act.
The delay in filing the writ petition was inordinate, and the appellant had ample time to challenge the blacklisting order.
The show cause notice clearly stated that action could be taken based on the findings of the State Analyst, and the blacklisting decision was justified.

“The blacklisting decision was made after careful consideration of the facts. The appellant had been informed about the alleged misbranding, and the consequences were outlined in the tender agreement.”

Supreme Court’s Ruling

The Supreme Court examined the legality of the blacklisting order and the delay in filing the writ petition. The Court held that:

The blacklisting order violated the principles of natural justice due to the vague and non-specific show cause notice issued to the appellant.
The appellant was denied a meaningful opportunity to defend itself against the blacklisting charge, as the notice failed to clearly state that blacklisting was a potential outcome.
Despite the delay, the Court concluded that the appellant had continued to pursue the matter with the authorities and that the delay did not bar the writ petition.
The indefinite blacklisting order was found to be disproportionate, and the Court emphasized that such a severe penalty could not be imposed without proper consideration of the appellant’s circumstances.

The Court cited precedents such as M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Joseph Vilangandan v. The Executive Engineer, Ernakulam, emphasizing the importance of clear communication and due process in cases of blacklisting.

“Blacklisting is a severe penalty, and its imposition must follow a fair process with clear communication. The absence of such clarity here has rendered the blacklisting order unjustified.”

Conclusion

The Supreme Court ruled in favor of the appellant, setting aside the High Court’s decision and the blacklisting order. The Court held that the delay in filing the writ petition did not bar the appellant’s claim, especially in light of the fact that the blacklisting was disproportionate and not procedurally sound. The Court’s ruling emphasized the need for transparency and fairness in administrative actions such as blacklisting, which have significant consequences for businesses.

Petitioner Name: Vetindia Pharmaceuticals Limited.
Respondent Name: State of Uttar Pradesh.
Judgment By: Justice R.F. Nariman, Justice Navin Sinha, Justice Krishna Murari.
Place Of Incident: Uttar Pradesh.
Judgment Date: 06-11-2020.

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