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Even in matters of public contracts, the scope of inquiry in judicial review is not limited and the other party cannot be debarred without being given a chance to be heard- Supreme Court of India
In this case of Daffodils Pharmaceuticals ltd and ans vs state of Uttar Pradesh and others, the appeal was filed in the Supreme court of India by daffodils pharmaceuticals challenging the decision of the Allahbad High court. In this case health department of Uttar Pradesh government had issued a tender for the purchase of medicines locally. In this tender process the Daffodils pharmaceuticals had got the contract for supply of medicines. After some time the principle secretary of health department of Uttar Pradesh government issued an order directing to stop the purchase of medicines from the appellant. The reason for stopping the purchase was that while issuing the tender the health department had one condition that the company to which tender has been given should not have any criminal proceeding going on against it. It was find out that a criminal proceeding and a CBI(chief investigation bureau) inquiry has been going against the former director of daffodils pharmaceuticals and the former director is also the blood relative of the present director.
The main issue raised by the appellant was that they were not given a chance by the Uttar Pradesh government to put forward their case and they were debarred without even being heard. When the appellant filed an appeal in the Allahbad High court against the Uttar Pradesh government, the high court gave the verdict in favour of Uttar Pradesh government and dismissed the appeal of daffodils pharmaceuticals. The high court said that in such cases the scope of jurisdiction under article 226 limited and thus the state government’s action was not contrary to public interest.
The supreme court held that even if the former director was accused then also such unilateral action by the state government is an impugned order. Subsequently The supreme court of India quashed the decision of the high court of Uttar Pradesh saying
“The High Court, in the opinion of this court, fell into error in holding that in matters of award of public contracts, the scope of inquiry in judicial review is limited.”
And held that the act of health department of Uttar Pradesh government is clearly violative of principles of natural justice. The Supreme court not only quashed the decision of Allahbad high court but also directed the government of Uttar Pradesh to grant daffodils pharmaceuticals appropriate compensation
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