Patna HC Upholds BMSICL's Two-Year Blacklisting of ORS Supplier After Seven Batches Failed Quality Tests
The Patna High Court dismissed a writ petition challenging the blacklisting of a drug supplier by Bihar's medical procurement body after seven batches of Oral Rehydration Salts failed quality tests, holding that the contractual quality-assurance mechanism was followed and public health considerations precluded interference.
A Division Bench of the Patna High Court, comprising Acting Chief Justice Sudhir Singh and Justice Rajesh Kumar Verma, dismissed a writ petition filed by M/s Sam Kem, an Indore-based pharmaceutical company, and its authorised representative Rajiv Shukla, against an order of the Bihar Medical Services and Infrastructure Corporation Ltd. (BMSICL) that blacklisted the company's Oral Rehydration Salts (ORS) product for two years and cancelled all unexecuted purchase orders. The impugned order, dated 17 July 2025, followed testing and retesting by BMSICL-empanelled laboratories, which declared seven batches of the supplied ORS as “Not of Standard Quality” on seal test parameters. The bench found no arbitrariness, mala fides or breach of natural justice in the decision-making process, and held that courts exercising jurisdiction under Article 226 must defer to technical evaluations made by procurement authorities in matters affecting public health.
The Dispute Before the High Court
BMSICL, the nodal procurement agency for medicines in Bihar, issued a tender on 20 September 2023 for procurement and supply of various drugs to healthcare facilities across the State. M/s Sam Kem participated in the tender for supply of ORS and, upon being declared successful, received a Letter of Intent dated 15 January 2024. The company furnished performance security and executed an agreement with BMSICL on 25 January 2024. Purchase orders followed, and the company supplied ORS to multiple BMSICL warehouses including those at Patna, Purnia and Muzaffarpur.
During the contract period, BMSICL drew samples from supplied batches and sent them to its empanelled laboratories for testing under the Standard Bid Document (SBD) framework. The laboratories found seven batches — bearing batch numbers P24/0651, P24/0654, P24/0657, P24/0664, P24/0665, P24/0671 and P24/0684 — to be not of standard quality with respect to seal test parameters. A show cause notice was issued on 3 December 2024. The company disputed the laboratory findings and requested retesting. Upon retesting, the batches again failed. A second show cause notice followed on 21 February 2025, and the company again replied, disputing the conclusions. The competent authority considered both replies and passed the impugned order on 17 July 2025, blacklisting the company's ORS product for a minimum of two years and directing cancellation of all unexecuted purchase orders.
The company filed Civil Writ Jurisdiction Case No. 12412 of 2025 seeking three reliefs: quashing the blacklisting order, a direction to BMSICL to accept pending ORS stock (which the petitioners said was nearing expiry and standing outside warehouses), and an extension of the agreement by one month without late delivery charges.
The Legal Issues Raised
Counsel for the petitioners, Mr. Rajeev Kumar Singh, advanced two principal arguments. First, neither of the two show cause notices proposed or put the company on notice that blacklisting under Clause 27 of the Tender Conditions was being considered. The relevant clauses — 27B(1), 27B(3) and 27C — were invoked for the first time only in the impugned order. The company was therefore denied an opportunity to show cause against the specific proposed penalty, rendering the blacklisting order unsustainable for violation of natural justice.
Second, the cancellation of all unexecuted purchase orders was said to directly contradict Clause 27C(ii) of the Tender Document, which the petitioners read as expressly preserving purchase orders already issued prior to any blacklisting order, with only stricter quality checks to apply to future supplies.
BMSICL, represented by Senior Advocate Mr. Lalit Kishore with Mr. Ayush Kumar, countered that the impugned order was passed strictly in accordance with the SBD and after adequate opportunity of hearing. The corporation pressed the public health dimension: the seal test is a critical parameter for ORS because a compromised seal can cause moisture ingress, contamination, loss of dosage accuracy and deterioration, making the product unsafe for human consumption. The Advocate General, Mr. S.D. Sanjay, and Additional Counsel Mr. Rahul Kumar appeared for the State.
How the Bench Reasoned
The bench identified the limited issue before it as whether the blacklisting order dated 17 July 2025 suffered from illegality, arbitrariness or violation of natural justice warranting interference under Article 226.
The court began with the contractual framework. M/s Sam Kem voluntarily participated in the tender, accepted all terms in the SBD through a requisite affidavit, and entered the agreement. The bench held that the company was therefore bound by the quality assurance stipulations and their consequences.
Reading the SBD clauses together, the bench found the procurement scheme unambiguous. Clause 20(a) required supplied drugs to meet standards under the Drugs and Cosmetics Act, 1940. Clause 24(c) authorised post-shipment random sampling by empanelled laboratories. Clauses 24(e), 24(f) and 24(g) prescribed rejection of failed batches, return at the supplier's cost, and initiation of action under the tender conditions. Clause 27B(3) specifically provided for blacklisting of a product for a minimum of two years where three batches failed prescribed quality parameters. With seven batches having failed, the bench found the blacklisting action prima facie traceable to the express contractual stipulations accepted by the company.
On natural justice, the bench rejected the petitioners' argument. It pointed out that BMSICL did not proceed immediately after the first round of testing but subjected the products to retesting before issuing a second show cause notice. Replies to both notices were considered before the order was passed. The bench recorded that this demonstrated the respondents “did not act in a mechanical or arbitrary manner.”
On the public health dimension, the bench observed that ORS is a drug intended for public healthcare distribution. The procuring agency carries a heightened obligation to ensure that only products satisfying prescribed quality standards reach beneficiaries. Once the agreed contractual quality-assurance mechanism has been followed, the court exercising judicial review under Article 226 “cannot substitute its own opinion for that of the technical experts entrusted with such evaluation.”
The bench drew on three Supreme Court decisions to articulate the scope of judicial review in tender and contractual matters. In Michigan Rubber (India) Ltd. v. State of Karnataka, reported in (2012) 8 SCC 216, the Supreme Court laid down that the author of a tender document is the best judge of its requirements and courts should exercise restraint unless the action is arbitrary, mala fide or a misuse of statutory powers. In Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., reported in (2016) 16 SCC 818, the Supreme Court held that constitutional courts must defer to the tendering authority's interpretation of its own documents unless there is mala fide or perversity. In Silppi Constructions Contractors v. Union of India, reported in (2020) 16 SCC 489, the Supreme Court reiterated that interference in contractual and commercial matters must be restricted to cases of clear arbitrariness, mala fides, bias or irrationality, and that courts must give “fair play in the joints” to government and public sector undertakings.
Applying these principles, the bench found no material on record to show that the decision-making process suffered from arbitrariness, mala fides or breach of natural justice. The action was founded on contractual stipulations accepted by the petitioner, preceded by testing, retesting and two rounds of show cause proceedings, and was taken in the public interest of ensuring quality medicines reached the population. The issue was accordingly answered against the petitioner.
Outcome
The writ petition was dismissed. All three reliefs sought by the petitioners — quashing of the blacklisting order, a direction to accept pending ORS stock, and an extension of the supply agreement — were refused. Pending applications, if any, were also disposed of.