GROSONS PHARMACEUTICALS (P) LTD. AND ANR.versusTHE STATE OF UTTAR PRADESH AND ORS.

         GROSONS PHARMACEUTICALS (P) LTD. AND ANR.                                 A
                                      V.

             THE STATE OF UTTAR PRADESH AND ORS.

                           SEPTEMBER 5, 2001

                 [V.N. KHARE AND B.N. AGRAWAL, JJ.]                                B


     Administrative Law-Approved Contractor-Supply of drugs
Irregularities-Show Cause notice issued-Blacklisting ordered-Validity of-
Held: Valid, since sufficient opportunity given-No violation of principles of      C
audi alterem partem.

      The appellant was an approved Contractor for supply of drugs to the
respondent, the State of U.P. On noticing certain irregularities in supplying
of drugs. Vigilance inquiry was set up and criminal prosecution was launched
against appellant under provision of Prevention of Corruption Act read with        D
Sec. 120, l.P.C. A Show Cause notice was issued to the appellant. Thereafter,
Respondent ordered blacklisting the appellant till final disposal of the pending
matter and also final decision in the investigation of proceeding initiated
against appellant.

       The appellant challenged the order of the respondent by way of a writ       E
petition, which was dismissed by the High Court. The appellant filed S.L.P
before this Court. The Court gave direction to respondent to reconsider the
matter considering the explanation submitted by the appellant, keeping the
impugned order intact. The respondent reconsidered the matter and affirmed
its earlier order.
                                                                                   F
      The appellant again challenged the order before the High Court by filing
a writ petition which was dismissed on the ground that detailed reasons were
recorded by the respondent before passing impugned order. Hence this appeal.

     The appellant contended that the respondent ought to have supplied all
the materials on the basis of which charges contained in the show cause notice G
were based.

     Dismissing the appeal, the Court

     HELD: The appellant has only contractual relationship with the                H
                                     567
    568                    SUPREME COURT REPORTS [2001] SUPP. 2 S.C.R.

A   respondent-State Government of U.P. and the said relationship is not governed
    by any statutory rules to make it obligatory on the respondent to issue show
    cause notice before passing order blacklisting the appellant. However, since
    the order blacklisting the appellant has Civil consequences, principle of audi-
    alteram partem, one of the principles of Natural Justice need to be followed.
B   However, supplying of materials on the basis of which charges against
    appellant were based was not the requirement of the -said principle. An
    opportunity to show cause was sufficient. Hence procedure adopted by the
    respondent was in conformity with the principle of Natural Justice. [569-E, F)

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 708 of

c   1993.

         From the Judgment and Order dated 24.8.91 of the Allahabad High
    Court in W.. P No. 2746 (M/B) of 1991.

         Ravi P Mehrotra, M.P.S. Tomar, Ms. Deepti R Mehrotra and Ms.
D   Sandhya Goswami for the Appellants.

            R.B. Mehrotra, and A.K. Srivastava for the Respondents.

            The Judgment of the Court was delivered by

            V. N. KHARE, J. The appellant herein is a small scale industry engaged
E   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 that certain
F   irregularities came to the notice of the government in purchase of medicines
    and, therefore, a vigilance 111quiry was set up as a result of which the record
    and product of the appellant were seized. Further, criminal prosecution was
    also launched against the appellant under provisions of Prevention of
    Corruption Act read with Section 120 !PC. Under such circumstances, the
    State government served a notice on the appellant to show cause why it
G   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
H    is arrived at in the investigation of proceedings instituted against the firm on
          GROSONS PHARMACEUTICALS (P) LTD. v. STATE [V.N. KHARE, J.] 569

     various accounts. The appellant challenged the aforesaid order by means of          A
     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 I 0087/91. When the matter came up for
     hearing before a Bench of this Court, this Court was of the view that the State     B
     Government was required to reconsider the matter along with the explanation
     submitted by the appellant while keeping the impugned order in tact. 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· C
     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.                                                                        D
           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 show cause notice
     and in the absence of supply of materials, the order impugned is against the        E
     principles of natural justice. We do not find any merit in this contention.
     Admittedly, the appellant has on:y 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      p
     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 a/teram
     par/em which is one of the facet 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         G
     was not the requirement of principle of audi a/teram 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 he did reply to the
     show cause which was duly considered by the State Government. We are,               H




..
    570                   SUPREME COURT REPORTS (2001] SUPP. 2 S.C.R.

A   therefore, of the view that that the procedure adopted by the respondent
    while blacklisting the appellant was in conformity with the principles of
    natural justice.

        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
B 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
C in the impugned order.

            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.

    S.K.S.                                                    Appeal dismissed.




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