The High Court confirms the contractual blacklisting of Biogenetic Drugs under tender conditions, dismissing claims of procedural impropriety and violation of natural justice.
In a significant ruling, the Karnataka High Court has upheld the blacklisting of Biogenetic Drugs Private Limited by the Karnataka State Medical Supplies Corporation Limited (KSMSCL) for a period of three years. The blacklisting was imposed due to the failure of quality in two or more batches of drugs supplied by Biogenetic Drugs, which were declared "Not of Standard Quality" by the Government Analyst. The court dismissed the writ petition filed by Biogenetic Drugs, seeking to quash the blacklisting order dated March 28, 2025.
Justice Suraj Govindaraj, presiding over the case, determined that the blacklisting was a contractual action under Clause 21.1(g) of the tender conditions and not a debarment under Rule 26A of the Karnataka Transparency in Public Procurements Rules, 2000. The court found that the contractual clause was voluntarily accepted by Biogenetic Drugs during the tender process and provided a sufficient basis for the blacklisting due to quality failures in the drug batches.
The court rejected the petitioner's argument that the blacklisting required compliance with the procedural safeguards under Rule 26A, such as the constitution of a Debarment Committee and an oral hearing. It held that these requirements were not applicable in a contractual action taken under the tender conditions. The court also noted that the petitioner was afforded a reasonable opportunity to present its case through replacement notices and a show-cause notice, which it duly responded to.
The petitioner had argued that the non-furnishing of the Government Analyst's report and statutory sample portions under the Drugs and Cosmetics Act, 1940 vitiated the action. However, the court dismissed this claim, stating that any grievance regarding the report should be addressed against the Drug Inspectorate and not the KSMSCL. The court emphasized that the respondent acted within its contractual rights and obligations to ensure that only drugs of standard quality were procured for public healthcare.
The ruling underscores the court's stance on the importance of maintaining quality standards in public procurement processes and the autonomy of procurement entities to enforce contractual terms. The decision also clarifies the distinct domains of statutory debarment procedures and contractual blacklisting provisions.
The court's decision was informed by a thorough examination of the relevant statutory provisions, contractual clauses, and the principles of natural justice, ultimately affirming the respondent's actions as fair, reasonable, and in compliance with the tender conditions.
Bottom line:-
Blacklisting under a contractual clause (Clause 21.1(g) of tender conditions) does not require compliance with procedural safeguards under Rule 26A of the Karnataka Transparency in Public Procurements Rules, 2000. The Government Analyst's report, unless challenged and set aside, can be relied upon as the factual basis for blacklisting.
Statutory provision(s): Clause 21.1(g) of Tender Conditions, Rule 26A of Karnataka Transparency in Public Procurements Rules, 2000, Drugs and Cosmetics Act, 1940.
