M/S Cadila Prarmaceuticals Ltd. Vs the State of Assam and 3 Ors.

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GAHC010164592025

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2025:GAU-AS:16734

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THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

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Case No. : WP(C)/4231/2025

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M/S CADILA PRARMACEUTICALS LTD.

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A COMPANY DULY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956 AND VALIDLY EXISTING UNDER COMPANIES AT CADILA CORPORATE CAMPUS, SARKHE) DHOLKA ROAD, BHAT, AHMEDABAD, GUJARAT 382210, INDIA AND FACTORY PREMISES AT CADILA PHARMACEUTICALS LTD., PLOT NO. 1389, TRASAD ROAD, DHOLKA, AHMEDABAD, GUJARAT AND IGC, SIDCO, SAMBA 184121 JAMMU AND KASHMIR AND IS REPRESENTED BY ITS AUTHORISED SIGNATORY AND ASST. VICE PRESIDENT, SHRI SANJEEV KUMAR SINGH.

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VERSUS

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THE STATE OF ASSAM AND 3 ORS REPRESENTED BY THE COMMISSIONER AND SECY. TO THE GOVT. OF ASSAM, HEALTH AND FAMILY WELFARE, DEPTT., DISPUR, GUWAHATI 6

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2:THE MISSION DIRECTOR

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OFFICE OF THE MISSION DIRECTOR NATIONAL HEALTH MISSION SAIKIA COMMERCIAL COPLEX SRINAGAR PATH CHRISTIAN BASTI G.S. ROAD GUWAHATI 781005 ASSAM.

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3:THE MANAGING DIRECTOR

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ASSAM MEDICAL SERVICES CORPORATION LTD. CENTRAL DRUG WARE HOUSE COMPUS PATHERQUERRY

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NARENGI GUWAHATI ASSAM 781026

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4:THE GENERAL MANAGER PROCUREMENT QC IT LOGISTICS ASSAM MEDICAL SERVICES CORPORATION LTD. CENTRAL DRUG WARE HOUSE COMPUS PATHERQUERRY NARENGI GUWAHATI ASSAM 78102

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BEFORE HONOURABLE MR. JUSTICE DEVASHIS BARUAH

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For the Petitioner(s) : Mr. G.N. Sahewalla, Sr. Advocate

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Mr. M. Sahewalla, Advocate

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For the Respondent(s) : Mr. B. Gogoi, Addl. A.G.

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Date on which judgment was reserved : NA

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Date of pronouncement of judgment : 02.12.2025

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Whether the pronouncement is of the Operative part of the judgment? : NA Whether the full judgment has been pronounced? : NA

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JUDGMENT AND ORDER (ORAL)

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Heard Mr. G.N. Sahewalla, the learned Senior Counsel assisted by Mr. M. Sahewalla, the learned counsel appearing on behalf of the petitioner. Mr. B. Gogoi, the learned Additional Advocate General who is also the Standing Counsel of the Health Department appears on behalf of the respondents.

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The petitioner herein by way of the present writ petition has assailed the Firm Debarment Notice bearing e-File No. 556245/11872 dated 11.03.2025.

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The facts of the present case are that the petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of manufacturing and supplying of various products ranging from active pharmaceutical intermediate, finished formulations, food supplements, biotechnology products, pharmaceutical machinery, etc.

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A tender bearing No. 345545/2838 dated 01.08.2023 and a Corrigendum No. 1 bearing No. E-345545/2266 dated 18.08.2023 was issued by the Managing Director of the Assam Medical Services Corporation Limited i.e. the respondent No. 3 for supply of essential drugs. The petitioner participated in the said tender process. In pursuance to that, a Letter of Intent was issued bearing ECF No. 34556 dated 31.10.2023 thereby empanelling the petitioner for supply of essential drugs for a period of 3 (three) years with an option of

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extension for a further period of 1 (one) year.

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A perusal of the said Letter of Intent dated 31.10.2023 reveals that it contains various terms and conditions. It is mentioned at Clause E of the said Letter of Intent that a successful bidder shall execute an agreement on non-judicial stamp paper of the value of Rs. 100/- within 10 (ten) working days from the date of intimation from the Tender Inviting Authority informing that his tender has been accepted. The specimen form of the agreement is at Annexure-XIII of the bid document.

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Clause L of the Letter of Intent dated 31.10.2023 refers to the Penalty for Delayed Service Delivery. The said Clause being relevant is reproduced herein under:

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“ L. Penalty for Delayed Service Delivery:

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In case there is delay in delivery beyond the stipulated period as mentioned in the purchase order, there shall be penal deduction @ 2.0% of the value of delayed goods per week of delay or part thereof subject to a maximum of 10% of the total order value. Once the maximum price reduction is reached, termination of the Purchase Order will be considered.

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In case alternate purchase is made, the incremental/ additional cost, if any incurred for such purchase shall be recovered from the defaulter.”

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Clause M of the Letter of Intent dated 31.10.2023 is of relevance for the purpose of the instant proceedings inasmuch as the said

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Clause relates to Debarment/Blacklisting for failure in execution of supply/non-supply/default in supply. The said Clause M being relevant is reproduced herein under:

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M. Debarment/Blacklisting for failure in execution of supply/nonsupply/default in supply:

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Product debarment: In case of non-supply or incomplete supply (i.e. less than 90% of the total ordered quantity) by the approved manufacturer / importer (Firm) within agreed delivery period including the delay penalty period or any such extended delivery period then the empanelment for that particular product shall be cancelled and the manufacturer/importer (Firm) shall be debarred for participating in any bid called by the Authority for a period of 5 years from the date of debarment for that item. In case the manufacturer/importer (Firm) supply 90% or more of the ordered quantity but fails to supply the entire quantity within the allowed delivery period then the firm shall be levied a penalty @ 10% of the value of the short-supplied item and same shall be adjusted against the payment for supply.

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Firm Debarment: The firm shall be blacklisted and debarred from participating in any tender by the TIA or procuring agency for 3 (three) years if the company is debarred for all the items (where it has empanelment for less than 3 items) or at least 3 items (where it is empanelment for more than equal to 3 items).

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Forfeiture of Performance Security:

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In case of Product debarment: In addition to product debarment the performance security deposited by the supplier for that particular product shall be forfeited and apportioned towards financial penalty.

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In case of Firm debarment: In addition to firm debarment the entire

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performance security deposited by the supplier shall be forfeited and

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apportioned towards financial penalty.

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The order stands cancelled after the expiration of delivery period, and if the extension is not granted with or without liquidated damages. Apart from risk/alternate purchase action, the Bidder shall also suffer forfeiture of the performance security and shall invite other penal action like blacklisting/Debarring disqualification from participating in present and future Bids of Bid Inviting Authority /ordering authority.

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If the supplier, or any of its approved items gets debarred/banned/blacklisted in any state after entering into agreement with AMSCL it shall be the responsibility of the supplier to inform AMSCL without any delay about the same.

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The Successful Bidder shall not, at any time, assign, sub-let or hand over the contract or the benefit thereof or any part thereof to any person or persons whatsoever.

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It shall be the responsibility of the supplier for any shortages/damage at the time of receipt in warehouse. AMSCL is not responsible for the items supplier at the point of delivery, for which no order is placed.”

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From a perusal of the above quoted Clause M of the Letter of Intent dated 31.10.2023, it is seen that there are 2 (two) types of debarment. One is the Product debarment and the other is the Firm debarment. It is very pertinent to mention that for imposing the penalty of Firm debarment, there is a requirement that a company be debarred from all the items (where it is empanelled for less than 3 items) or at least 3 items (where it is empanelled for more than equal to 3 items).

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It is the case of the petitioner that pursuant to the issuance of the Letter of Intent, the petitioner had received various purchase orders for supply of different items. The details of those purchase orders are given in the chart at paragraph No. 5 of the present writ petition which is reproduced herein under:

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Sl.	Purchase Order No and	Item Name	Quantity	Amount
No.	Purchase Order Date
1	E-440169/MCH/2020102384011 28-02-2024	Streptokinase Injection 15,00,000 IU	630	5,15,088
2	E-440169/MCH/2020102384493 26-06-2024	Biphasic Isophane Insulin Injection	8,610	7,50,619.80
3	E-440169/MCH/2020102384722	Streptokinase	410	3,44,400
	27-06-2024	Injection 15,00,000 IU
4	E-441069/MCH/2020102385379	Insulin	8,640	7,34,832
	23.09.2024	Injection IP Soluble Insulin, Neutral Injection
5	E-440169/MCH/2020102385382	Biphasic	8,600	7,49,748
	23-09-2024	Isophane Insulin Injection

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The record reveals that there were certain difficulties faced by the petitioner, for which, supplies could not be made on time. Be that as it may, the Respondent Authorities granted extension from time to time. On 22.11.2024, a show cause notice was issued for default in supplying an item, namely Streptokinase Injection 15,00,000 IU whereby the petitioner was asked to show cause, as to why, the products of the petitioner should not be debarred and the petitioner was further given the liberty to submit the reply within 3 (three) days from the date of issuance of the said letter. It was also mentioned that upon non-submission of the reply, administrative as well as financial penalties would be levied as per the relevant tender clauses.

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A reply thereupon was submitted by the petitioner seeking extension of the delivery period by more than 1 (one) month. In pursuance thereto, the Respondent Authorities have granted extension to the petitioner from time to time.

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The record further reveals that vide the Firm Debarment Notice dated 11.03.2025, the petitioner’s company was blacklisted and debarred from participating in any tender for 3 (three) years due to non-supply of 3 (three) numbers of ordered essential drugs as per Clause 5, Sub-Clause H, Pt. no. (ii), Pt. no. (iii) and Sub-Clause M. To the said Firm Debarment Notice which have been impugned in the instant proceedings, details have been mentioned in Annexure-A to

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the said Firm Debarment Notice whereby the petitioner failed to supply as many as 7 (seven) items. Being aggrieved by the Firm Debarment Notice, the petitioner approached this Court by filing the present writ petition on 25.07.2025.

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This Court issued notice making it returnable on 19.08.2025 and the respondents were directed to bring on record their stand by filing the affidavit. The record reveals that the respondents in spite of various opportunities being granted did not file the affidavit.

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On 28.11.2025, when the matter was listed, Mr. G.N. Sahewalla, the learned Senior Counsel appearing on behalf of the petitioner submitted that the issue involved in the present writ petition is squarely covered by the judgment passed by this Court in the case of M/s Agron Remedies Pvt. Ltd. Vs. the State of Assam & 4 Others dated 18.11.2025 in WP(C) No. 2556/2025. On the said date, Mr. B. Gogoi, the learned Additional Advocate General submitted that he would like to produce the records on the next date. Accordingly, the instant writ petition was fixed today.

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SUBMISSIONS MADE BY THE LEARNED COUNSELS APPEARING ON BEHALF OF THE PARTIES

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Mr. G.N. Sahewalla, the learned Senior Counsel appearing on behalf of the petitioner submitted that the Firm Debarment Notice

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dated 11.03.2025 is without authority and jurisdiction inasmuch as it is the Managing Director i.e., the respondent No. 3 who could have issued the Firm Debarment Notice dated 11.03.2025 and not the respondent No. 4 in view of the stipulations contained in the agreement entered into by and between the petitioner and the Respondent Authorities pursuant to the Letter of Intent dated 31.10.2023. The learned Senior Counsel further submitted that Clause G of the Tender Conditions stipulates as regards Delivery, Shortage and Delay Penalty. Further, Clause H of the Tender Conditions stipulates the penalty of Debarment/Blacklisting for failure in execution of the supply/non-supply/default in supply. The learned Senior Counsel submitted that the steps for Firm debarment can only be taken when there is a failure on the part of the company in supplying all the items (where it has RC- “Rate Contract” for less than 3 items) or at least 3 items (where it holds RC-“Rate Contract” for more than equal to 3 items. In the instant case, as it would be seen from the show cause notice dated 22.11.2024, the allegation was only in respect to 1 (one) item. However, the respondent No. 4 had issued the Firm Debarment Notice dated 11.03.2025, taking into account 3 (three) items which is not the subject matter of the show cause notice. Therefore, the learned Senior Counsel submitted that the Firm Debarment Notice dated 11.03.2025 is in violation to the principles of natural justice.

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Per contra, Mr. B. Gogoi, the learned Additional Advocate General appearing on behalf of the Respondent Authorities submitted that the records would show that the respondent No. 3, who is the Managing Director had approved the Note put up by the respondent No. 4 on 10.03.2025 and on the basis thereof the respondent No. 4 had issued the Firm Debarment Notice on 11.03.2025. He therefore submitted that the decision was taken by the respondent No. 3 i.e. the Managing Director and not by the respondent No. 4 and the respondent No. 4 only intimated the decision by the impugned Firm Debarment Notice dated 11.03.2025.

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Be that as it may, the learned Additional Advocate General, however, with all fairness submitted that in the show cause notice dated 22.11.2024, the reference was only to 1 (one) item, but in the Firm Debarment Notice dated 11.03.2025, the Respondent Authorities took into consideration the non-supply by the petitioner in respect to 3 (three) items. The learned Additional Advocate General further submitted that the supplies which are required to be made by the petitioner are essential medicines to various Government Hospitals. The delay in supplying these medicines impacts in the functioning of the Hospitals. Under such circumstances, taking into account the conduct of the petitioner, this Court may not interfere with the impugned Firm Debarment Notice dated 11.03.2025.

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ANALYSIS AND DETERMINATION

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From the materials on record including the records so placed by the learned Additional Advocate General and further taking into account the submissions made by the learned counsels appearing on behalf of the parties, 2 (two) points for consideration arise which are as follows:

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Whether the General Manager, Procurement, QC, IT, Logistics, Assam Medical Services Corporation Limited i.e. the respondent No. 4 had the authority to issue the impugned Firm Debarment Notice dated 11.03.2025 thereby debarring the petitioner’s company for a period of 3 (three) years?

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Whether the impugned Firm Debarment Notice dated 11.03.2025 is in consonance with the principles of natural justice?

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FIRST POINT FOR DETERMINATION

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The first point for determination is, as to whether, the respondent No. 4 could have issued the impugned Firm Debarment Notice dated 11.03.2025. It is relevant to take note of that in terms with Clause E of the Letter of Intent dated 31.10.2023 there is a requirement for the successful bidder to enter into an agreement on non-judicial stamp paper of the value of Rs. 100/- as per the

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specimen form of agreement at Annexure-XIII of the tender documents. Clause 8 of the specimen form of the agreement reads as follows:

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“8. And it is hereby agreed and declared between the parties hereto that in case any question of dispute arises touching the construction or wording of any of clause herein contained on the rights, duties, liabilities of the parties hereto or any other way, touching or arising out of the presents, the decision of the Managing Director, AMSCL, Assam in the mater Shall be final and binding.”

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From a perusal of the above quoted Clause 8 of the specimen form of the Agreement would reveal that it is the Managing Director i.e. the respondent No. 3 who have been empowered by the Contract to decide disputes pertaining to any question which arises touching on the construction or wording of any Clause contained in the Agreement as well as on the rights, duties, liabilities of the parties in any way touching or arising out of the terms of the Agreement. Under such circumstances, in terms with Clause 8 of the agreement, it is the respondent No. 3 and not the respondent No. 4 who has been empowered to take a decision in respect to the rights, duties, and liabilities inter se between the parties to the contract. It is the opinion of this Court, which is also not in dispute, that this power which has been conferred upon the respondent No. 3 includes the power to debar or backlist the petitioner.

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In the instant case, it is the submission of the learned Additional

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Advocate General that the decision was taken by the respondent No. 3 and not by the respondent No. 4 and the respondent No. 4 had only intimated the said decision vide the impugned Firm Debarment Notice dated 11.03.2025. The learned Additional Advocate General referred to the records and, more particularly, to Note #67 and Note #69. A perusal of Note #67 reveals that the respondent No. 4 has proposed that the petitioner’s company may be blacklisted as 3 (three) products have not been supplied in spite of additional time being granted. A perusal of Note #69 reveals that the respondent No. 4 used the following expression “may be approved, as proposed in Note #67”. This Court further finds it relevant to take note of Note #74, Note #75 and Note #76. Note #74 reveals that Executive (Procurement Drugs/QC) has placed the Draft Debarment Notice for perusal and necessary action. Thereupon, the Senior Manager (Supply Chain Management) further forwarded the said Draft Debarment Notice to the GM (Procurement) i.e. the respondent No. 4. Thereupon, the GM (Procurement) in Note #76 digitally signed in the said Draft Debarment Notice.

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From the above materials what is seen is that the respondent No. 3 who is the only person authorized as per Clause 8 of the Agreement had not passed any order giving reasons, as to why, the Firm Debarment Notice dated 11.03.2025 is to be issued to the petitioner. There are also no contemporaneous records maintained

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that the respondent No. 3 had passed any order, rather, in Note #69, the respondent No. 3 only used the expression “may be approved, as proposed in Note #67”. Therefore, there is no decision of the respondent No. 3. Further to that, it is also apposite to observe that in terms of Clause 8, such decision is to be intimated by the respondent no. 3 i.e. the Managing Director and not by the respondent No. 4. Accordingly, in view of the above analysis, it is therefore the opinion of this Court that the impugned Firm Debarment Notice dated 11.03.2025 suffers from lack of competence and authority.

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SECOND POINT FOR DETERMINATION

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The second point for determination is, as to whether, the Firm Debarment Notice dated 11.03.2025 is in consonance with the principles of natural justice. It is relevant herein to observe that in view of the decision in the first point for determination, the impugned Firm Debarment Notice dated 11.03.2025 cannot withstand the scrutiny of law as it has been issued by an authority who lacks authority and competence. Be that it may, this Court finds it relevant to decide the second point for determination as it touches on the very jurisdiction to issue the Firm Debarment Notice dated 11.03.2025. At this stage, this Court finds it very pertinent to refer to sub Clauses i and ii of Clause H of the Bid document which is reproduced herein under:

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“i. Product debarment: In case of non-supply or incomplete supply (i.e. less than 90% of the total ordered quantity) by the approved manufacturer/importer (Firm) within agreed delivery period including the delay penalty period or any such extended delivery period then the concerned rate contract shall be cancelled and the manufacturer/importer (Firm) shall be debarred for participating in any bid called by the Authority for 5 years from the date of debarment for that item. In case the manufacturer/ importer (Firm) supply 90% or more of the ordered quantity but fails to supply the entire quantity within the allowed delivery period then the firm shall be levied penalty @ 10% of the value of the short supplied item and same shall be adjusted against the payment for supply.

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ii. Firm Debarment: The firm shall be blacklisted and debarred from participating in any tender by the TIA or procuring agency for 3 (three) years if the company is debarred for all the items (where it has RC-"Rate Contract" for less than 3 items) or at least 3 items (where it holds RC-"Rate Contract" for more than equal to 3 items).”

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From a perusal of the above quoted Clause, it is seen that recourse to Firm debarment can be taken if the company had failed to supply all the items (where it has a RC –“Rate Contract” for less than 3 items) or at least 3 items (where it holds RC –“Rate Contract” for more than equal to 3 items). In this respect, this Court finds it relevant to take note of the show cause notice dated 22.11.2024. A perusal of the said show cause notice reveals that the allegations contained is in respect to failure to supply 1 (one) item. However, in the impugned Firm Debarment Notice dated 11.03.2025, the Respondent Authorities have taken note of 3 (three) items. In other

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words, the Respondent Authorities while deciding to issue the impugned Firm Debarment Notice dated 11.03.2025 took into consideration further materials which are not the part of the show cause notice dated 22.11.2024. The fortiori to the above analysis is that the impugned Firm Debarment Notice dated 11.03.2025 is not in consonance with the principles of natural justice. The second point for determination accordingly stands decided.

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Accordingly, the instant writ petition stands disposed of with the following observations and directions:

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(i) The impugned Firm Debarment Notice dated 11.03.2025 is set aside and quashed.

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(ii) The setting aside and quashing of the Firm Debarment Notice dated 11.03.2025 shall not act as a bar upon the Respondent Authorities to take such action as envisaged under the terms of the contract.

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(iii) The writ petition accordingly stands allowed to the extent indicated above.

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Before parting with the record, this Court finds it relevant to observe that a perusal of the credentials mentioned by the petitioner in the present writ petition suggests that the petitioner company is a very reputed company. It is expected from a company of such repute

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to supply the essential medicines in due time, inasmuch as delay or non-supply not only amounts to breach, but also affects the public interest as those supplies pertains to essential medicines. This Court hopes and expects that the petitioner if provided a further chance by the Respondent Authorities would keep the said aspect into consideration.

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JUDGE

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Comparing Assistant

M/S Cadila Prarmaceuticals Ltd. v. the State of Assam and 3 Ors.

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M/S Cadila Prarmaceuticals Ltd. v. the State of Assam and 3 Ors.

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