Court mandates release of Rs. 1.5 crore with property security, orders inquiry into alleged defective supply within 90 days.
In a significant decision, the Karnataka High Court has resolved a contentious dispute involving M/s Sujal Pharma and the State of Karnataka, directing the release of a partial payment of ?1.5 crore to the pharmaceutical company. The dispute arose from a series of purchase orders issued for the supply of drugs, wherein the respondent authorities withheld payments citing alleged defects in a previous sanitizer supply contract dating back to March 2020.
The petitioner, M/s Sujal Pharma, represented by Senior Advocate Sri. Rajesh Mahale, approached the court seeking the release of ?3,14,82,599, citing no disputes regarding the supply of drugs as per the purchase orders dated between May and July 2021. The authorities had earlier refused payment, asserting the right to adjust the amount against claims of defective sanitizer supply.
Justice M.G.S. Kamal, presiding over the matter, underscored that the authorities' adjustment of dues without a formal inquiry was impermissible under contract law. The court acknowledged the petitioner's entitlement to the claimed amount for the drug supplies, noting no defects or deficiencies in their delivery.
In a balanced approach, the court accepted an affidavit from the petitioner, offering a property in Bengaluru as security. This property, valued at approximately ?1.5 crore, serves as a guarantee for the partial payment ordered by the court. The court emphasized that this payment is contingent upon the outcome of a mandated inquiry into the alleged defective sanitizer supply, which must be concluded within 90 days.
The court also directed that any remaining dues, if validated by the inquiry, should be paid with an interest of 6% per annum. The decision allows the respondent authorities to invoke the security if the petitioner is found liable for the alleged defects, with provisions for further legal recourse if necessary.
This ruling not only mandates immediate financial relief for M/s Sujal Pharma but also sets a precedent for adherence to due process in public procurement disputes, especially in the context of emergency procurements during the COVID-19 pandemic.
Bottom line:-
Writ Petition seeking payment of amounts due under purchase orders where there was no dispute regarding supply of drugs, but respondent-authorities sought to adjust due amounts against alleged defective supply of sanitizers under a prior contract. Court directed partial payment and secured balance through property offered as security.
Statutory provision(s): Contract Law, Karnataka Transparency Public Procurement Act, Section 4G
M/s Sujal Pharma v. State of Karnataka, (Karnataka) : Law Finder Doc id # 2949315
