Sri Venkata Ramana Medical And ... vs Employees State Insurance ...
2022 Latest Caselaw 4368 Tel

  IN THE HIGH COURT FOR THE STATE OF TELANGANA
                  AT HYDERABAD

                                  *****
                  WRIT PETITION No.23437 OF 2022

Between:
Sri Venkata Ramana Medical & General
Stores                                                 .. Petitioner

                                    Vs.

Employees State Insurance Corporation
Medical College and Hospital, Ministry
Of Labour & Employment, Government of
India, at Sanathnagar, Hyderabad, represented
by its Dean                                           .. Respondents


DATE OF ORDER PRONOUNCED: 05.09.2022


                HON'BLE SRI JUSTICE K. LAKSHMAN


  1    Whether Reporters of Local newspapers
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  2    Whether the copies of judgment may be
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                                          JUSTICE K. LAKSHMAN
                                      2

     IN THE HIGH COURT FOR THE STATE OF TELANGANA
                             AT: HYDERABAD
                                 CORAM:
             * THE HON'BLE SRI JUSTICE K. LAKSHMAN

                      + WRIT PETITION No.23437 OF 2022

% Delivered on: 05-09-2022

Between:
# Sri Venkata Ramana Medical & General
  Stores                                                 .. Petitioner

                                    Vs.

$ Employees State Insurance Corporation
Medical College and Hospital, Ministry
Of Labour & Employment, Government of
India, at Sanathnagar, Hyderabad, represented
by its Dean                                             .. Respondent


! For Petitioner                          : Mr. N. Sreedhar Reddy


^ For Respondent                          : Mr. Muppu Ravinder Reddy


< Gist                                    :

> Head Note                               :

? Cases Referred                          :

1. (2014) 9 SCC 105
2. (2021) 1 SCC 804



                                          JUSTICE K. LAKSHMAN
                                   3

      THE HONOURABLE SRI JUSTICE K. LAKSHMAN

                WRIT PETITION No.23437 of 2022

ORDER:

Heard Sri N.Sreedhar Reddy, learned counsel for the

petitioner and Sri Muppu Ravinder Reddy, learned Standing

counsel appearing for respondent.

2. It is relevant to note that this Court vide order

dated 05.05.2022 granted eight (08) weeks time to the

respondent to file counter. Even on 15.05.2022, learned

counsel appearing for respondent sought time to file counter.

Today, learned counsel for the respondent on instructions

would submit that there is no need of filing counter and

proceeds with the arguments basing on the record available.

Therefore, heard him on merits.

3. This writ petition is filed to declare and set aside

the order dated 28.04.2022 in proceedings No.FP0000531506

on the file of the respondent herein, as illegal and arbitrary.

4. Perusal of the record would reveal that the

petitioner herein stood as successful bidder pursuant to tender

notification dated 04.11.2020 for empanelment of local

chemists for the year 2021-22. Both the petitioner and the

respondent have entered into an agreement for supply of the

same on 04.01.2021. The period of contract was for one year

and it was expired on 05.01.2022. Thereafter, the respondent

have extended the said contract for time to time i.e., one

month, one month, fifteen days and fifteen days respectively

and accordingly, the extension orders were issued i.e.,

23.12.2021, 05.02.2022, 05.03.2022 and 20.03.2022.

5. Perusal of the record would also reveal that

respondent has issued e-mail dt.11.10.2021 informing the

petitioner that it has supplied substandard quality of drug i.e.,

'Nepafenac Opthalmic Suspension 0.1%". The petitioner

herein had submitted explanation stating that it has not

supplied substandard quality drug. According to the

petitioner, it is only a supplier and it is not a manufacturer.

Therefore, it has addressed a letter to the manufacturer of the

said drug who inturn got the said drug tested in authorized

laboratories. The reports of the said labs were also filed before

this Court. Referring to the same, Sri N.Sreedhar Reddy,

learned counsel for the petitioner would submit that there is

no defect in the drug supplied by the petitioner. Even the

manufacturer had supplied the said drug to the Military

hospital and other several hospitals in the entire country and

there is no complaint from any of the hospitals in respect of

the said drug.

6. Without considering the same, the respondent had

issued show cause notice dated 22.01.2022 requesting the

petitioner to submit explanation as to why the agreement

entered between the petitioner and the respondent cannot be

terminated in terms of clause 18(g) of the tender agreement.

The petitioner herein had submitted his explanation on

30.01.2022 narrating the aforesaid facts. Without considering

the same, the respondent had issued impugned order dated

28.04.2022 blacklisting the petitioner for a period of five (05)

years from the date of the order.

7. Sri N.Sreedhar Reddy, learned counsel for the

petitioner would submit that the respondent has not

mentioned the proposed action in the show cause notice dated

22.01.2022. Whereas clause 18(g) of the said tender

agreement proposes termination of the contract and

blacklisting of the said chemist for a period of five years and

recovery of the amount.

8. Clause 18(g) of the said tender agreement reads as

follows:

"The medicines/drugs to be supplied will be of standard quality. In case, it is found that any particular medicine has expired, or is substandard or spurious, the Local Chemist will be liable to be black listed for a period of five (5) years for future participation in any ESIC tenderer. Besides any other legal action as deemed fit will be taken. If for any unavoidable reason beyond your control, it is not possible for local chemist to unavoidable reason beyond your control, it is not possible for local chemist to immediately supply the medicines and the hospital is compelled to procure the same from other local chemist, extra expenditure on this account will be recovered from subsequent bill (S)/security deposit. Under no circumstances, the indented medicines would have to be substituted in case the indent is of Brand item."

9. He would further submit that any show cause

notice without specifically mentioning proposed action is

illegal. He has placed reliance on the judgment of the Hon'ble

Apex Court in Gorkha Security Services vs. Government of

NCT of Delhi And Others1 in Civil Appeal Nos.7167-7168 of

2017 (Arising out of Special Leave Petition (civil) No.38898-

(2014) 9 SCC 105

38899 of 2013). The same principle was laid down by three

Judges Bench of Hon'ble Apex Court in Civil Appeal No.3647 of

2020 arising out of SLP (C).No.6319 of 2020 dated 06.11.2020.

The relevant paragraph is extracted below:

"The Central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of Show Cause Notice is to make the notice understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the notice is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action."

The Hon'ble Apex Court in Vetindia Pharmaceuticals

Limited vs. State of Uttar Pradesh and Another2 reiterated

the said principle. Though the said facts were specifically

mentioned in the reply dated 30.01.2022, respondents have

not considered said facts.

(2021) 1 SCC 804

10. Sri Muppu Ravinder Reddy, learned counsel for the

respondent referring to e-mail dt.11.10.2021 would submit

that the petitioner herein had supplied substandard material,

therefore, the respondent had blacklisted the petitioner vide

impugned order dated 28.04.2021 by following due procedure

laid down under law and also in terms of aforesaid agreement

dt.04.01.2021. Thus, there is no error in it.

11. As stated above, in the show cause notice

dt.22.01.2022, respondent had sought explanation from the

petitioner as to why his tender agreement cannot be

terminated in terms of clause 18(g) of the agreement.

Whereas, the respondent had issued impugned order

dt.28.04.2022 blacklisting the petitioner for a period of five

years from the date of order. Therefore, the impugned order is

contrary to the proposed punishment in the show cause notice

dt.22.01.2022. Therefore, the impugned order is contrary to

principle laid down by the Hon'ble Apex Court in the aforesaid

judgments.

12. It is also relevant to note that though the

respondent had issued e-mail dt.11.10.2021 intimating the

petitioner about the supply of substandard drug. Thereafter,

the respondents have issued four proceedings extending the

contract for a period of three months. On one hand,

respondent is alleging that petitioner has supplied

substandard drug. On the other hand, it has extended the

contract of the petitioner.

13. It is relevant to note that respondent had issued

performance certificate 01.01.2022 stating that the petitioner

herein had supplied drug to respondent hospital on

06.01.2021 and the performance of the petitioner is found

satisfactory till 01.01.2022. Therefore, the action of the

respondent in blacklisting the petitioner for a period of five

years in violation of terms of agreement dated 04.01.2021

apart from the principle laid down by the Hon'ble Apex Court

in the aforesaid judgments.

14. Viewed from any angle, the impugned order is liable

to be set aside, accordingly it is set aside. This order will not

preclude the respondents from taking action afresh in terms of

the said agreement dated 04.01.2021.

15. Learned counsel for the petitioner would submit

that pursuant to impugned order dated 28.04.2022,

respondent is not releasing the security deposit of

Rs.12,50,000/- deposited by the petitioner. In view of the

same, liberty is granted to the petitioner to submit a

representation by duly enclosing copy of this order to the

respondent with a request to release the said amount. On

receipt of said representation, respondent shall consider the

same and release the aforesaid amount deposited by the

petitioner towards security. No order as to costs.

Miscellaneous petitions, if any, pending, shall stand

closed.

__________________ K. LAKSHMAN, J 05.09.2022 Note:

LR copy to be marked (B/o) dv