Karnataka HC Sets Aside Blacklisting Of Firm For Supplying Poor Quality Hand Sanitisers During COVID-19, Says Firm Can't Be Blacklisted Without Notice

The Karnataka High Court has set aside an order passed by the Karnataka State Medical Supplies Corporation Limited, blacklisting a firm for having supplied hand sanitisers during the Covid-19 period which were not of standard quality.

A single-judge bench of Justice M Nagaprasanna allowed the petition filed by M/s. Sujal Pharma, and said, “I deem it appropriate to give a quietus to the issue and not remit the matter back to the hands of the respondent as the Hand Sanitizers that were supplied have naturally dried up by efflux of time.”

It was stated that during the onset of COVID-19, quotations were invited by the respondent for a supply of 5000 ml cans of Hand Sanitizers. The petitioner as a distributor submitted its quotation on 25-03-2020 for supply and the quotation submitted by the petitioner was in respect of Hand Sanitizers manufactured by one M/s Glint Cosmetics Private Limited.

It was stated that a purchase order was issued by the Corporation to the petitioner for the supply of 10,000 quantities of Hand Sanitizers with unit packing of 5000 ml at a price of Rs.2500. The total value was thus Rs.2.5 crores. In terms of the said purchase order, the petitioner supplied the product on two dates i.e., on 06-04-2020 and 29-04-2020 and placed two invoices for the quantity of supply at the warehouse, Gulbarga and warehouse at Belgavi.

It was further said that on 16-04-2021, the petitioner received a replacement notice of certain quantities of Hand Sanitizers on the ground that they were declared as not of standard quality. A second replacement notice was received on similar terms to the earlier notice dated 16-04-2021. The petitioner then submitted a representation seeking reports upon which the product was said to be of bad quality. The reports are not furnished. What comes about is an order on 29-10-2021 blacklisting several firms including the petitioner.

The petitioner argued that no notice was issued to the petitioner prior to the firm being blacklisted on the issue of shoddy quality of supply of Hand Sanitizers. The supplies were made on two dates in the year 2020 and the fault was found on 16-04-2021, close to one year after the supply allegedly based on a report. The report was not furnished. When the report was sought, what comes about is the order of blacklisting.

The respondents argued that the sample was sent to the Drugs Control Department. The Drugs Control Department found that the quality of Hand Sanitizer was very poor. Though the petitioner is not the manufacturer who had manufactured the Hand Sanitizers but it would be equally liable for distributing a poor quality Hand Sanitizer. It is her submission that though the manufacturer is also blacklisted, it has not challenged it.

The bench on going through the records said “The two notices that were sent were replacement notices. They did not indicate anywhere that the firm of the petitioner would be blacklisted. It is trite law that an order of blacklisting has several economic and civil consequences and therefore, any order that would ensue civil consequences cannot be passed except after complying with the principles of natural justice.”

It held that it was an admitted fact in the case at hand that there was no notice to show any cause issued to the petitioner as to why the firm should not be blacklisted.

"The impugned order comes to the petitioner as a bolt from the blue. Such a bolt from the blue cannot be sustainable in law unless it is preceded by a notice for such blacklisting,” the court said.

Further, rejecting the contention of the corporation that it would now comply with the principles of natural justice by issuing notice and then passing necessary orders, the court allowed the petition.

Appearance: Advocate M.K. Prithveesh for Petitioner.

Advocate M. Sumana Baliga, for Respondents.

Citation No: 2024 LiveLaw (Kar) 194

Case Title: M/s Sujal Pharma AND Karnataka State Medical Supplies Corporation Limited.

Case No: WRIT PETITION NO. 20520 OF 2021

Click Here To Read/Download Order