VETINDIA PHARMACEUTICALS LIMITED v. THE STATE OF UTTAR PRADESH INSC 619

1. Name of the Case: Vetindia Pharmaceuticals Ltd. v. State of Uttar Pradesh and Another, Civil Appeal No. 3647 of 2020 (Arising out of S.L.P. (C) No. 6319 of 2020). (1)

2. Facts: The appellant, a licensed drug manufacturer under the Drugs and Cosmetics Act, 1940, was indefinitely blacklisted by an order dated 08.09.2009. The blacklisting was based on a report by the State Analyst (10.10.2008) that found a batch of the appellant's product misbranded. The alleged misbranding was due to a printing error on the label where "Oxytetracycline HCL INJ. I.P. VET" was printed as "Oxytetracycline INJ. I.P. VET." The product composition and brand name were correctly stated, and the product was not substandard or spurious. The appellant contested the blacklisting on grounds of bona fide error and a lack of procedural fairness, arguing that no action was taken against it under the relevant sections of the Drugs Act (Sections 23, 25, 26, and 27). The High Court dismissed the writ petition in limine, citing a 10-year delay, without addressing the substantive merits of the case. (2)

3. Issue(s): 1) Whether the indefinite blacklisting of the appellant violated principles of natural justice. 2) Whether the High Court erred in dismissing the writ petition on grounds of delay without examining the merits.

4. Holding(s): 1) Yes, the indefinite blacklisting violated principles of natural justice as the show cause notice (21.10.2008) did not clearly state that blacklisting was under contemplation. 2) Yes, the High Court erred in dismissing the writ petition solely on the ground of delay, given the continuing nature of the cause of action and the appellant’s ongoing efforts to resolve the matter. (3)

5. Rationale: 1) Principles of Natural Justice The Court emphasized that blacklisting imposes severe consequences ("civil death") on a business and requires strict adherence to natural justice. The show cause notice failed to notify the appellant about the possibility of blacklisting, depriving it of an opportunity to respond adequately. This procedural defect rendered the blacklisting order invalid. Citing Gorkha Security Services v. Government of NCT of Delhi (2014), the Court reiterated that specific mention of blacklisting in a show cause notice is mandatory. 2) Proportionality The Court noted that the alleged misbranding was due to an inadvertent error, and the product was neither spurious nor harmful. Referring to Kulja Industries Ltd. v. BSNL (2014), the Court observed that indefinite blacklisting is disproportionate and unjustified in such cases. 3) Delay The Supreme Court held that delay in filing the writ petition was adequately explained. The appellant had pursued remedies with the authorities, and the ongoing nature of the blacklisting continued to harm the appellant. The Court clarified that the Limitation Act does not strictly apply to writ petitions under Article 226, and discretionary jurisdiction must be exercised judiciously. (4)

Impact of Blacklisting: The indefinite blacklisting had broader repercussions, barring the appellant from participating in tenders (e.g., rejection by the Government of Rajasthan in 2019).

Conclusion: The Supreme Court set aside both: The High Court’s dismissal of the writ petition on grounds of delay. The blacklisting order dated 08.09.2009, deeming it invalid for violating principles of natural justice and proportionality. The appeal was allowed.

References (1) VETINDIA PHARMACEUTICALS LIMITED v. THE STATE OF UTTAR PRADESH INSC 619 (2) Indian Kanoon. <https://indiankanoon.org/doc/157043646/> (3) Ibid (4) Casemine. <https://www.casemine.com/judgement/in/6345fc67d5f9b52b6e9ebd33>