The Patna High Court upheld a decision by the Bihar Medical Services and Infrastructure Corporation Ltd. (BMSICL) blacklisting a pharmaceutical company's product, Oral Rehydration Salts (O.R.S.), for a period of two years and cancelling all unexecuted purchase orders.

The Court rejected the petitioner company's plea challenging the blacklisting order, which was issued after seven batches supplied to various state healthcare warehouses in Patna, Purnia, and Muzaffarpur were declared "Not of Standard Quality" due to failed seal test parameters.

Reaffirming that public health interests paramountly supersede commercial claims and that procuring agencies hold heightened obligations in medical supply chains, the Bench emphasized that constitutional courts exercising powers of judicial review under Article 226 cannot sit as courts of appeal over expert evaluations or contractually agreed quality assurance mechanisms.

The Bench of Acting Chief Justice Sudhir Singh and Justice Rajesh Kumar Verma held, "In the present case, the respondents have proceeded on the basis that seven batches supplied by the petitioner failed the quality test. Prima facie, therefore, the action of blacklisting cannot be said to be dehors the contractual framework but is one traceable to the express stipulations accepted by the petitioner...The scope of judicial review in contractual matters is well settled. The Court is concerned with the decision-making process and not with the merits of the decision itself. Unless the action of the authority is shown to be arbitrary, mala fide or in violation of statutory or contractual provisions, interference under Article 226 is unwarranted."

Advocate Rajeev Kumar Singh appeared for the Petitioner, while Advocate General S.D. Sanjay and Senior Advocate Lalit Kishore appeared for the Respondents.

Brief Facts

The petitioner company participated in a tender floated by Bihar Medical Services and Infrastructure Corporation Ltd. (BMSICL) for the supply of Oral Rehydration Salts (O.R.S.) to various public health warehouses across the State of Bihar.

Upon being declared successful, the petitioner furnished the requisite performance security, executed an agreement with BMSICL, and commenced supplies pursuant to purchase orders issued from time to time.

During the contract period, samples drawn from multiple batches supplied by the petitioner were subjected to post-shipment quality testing by empanelled laboratories and were found to be "Not of Standard Quality" due to failure in seal test parameters.

BMSICL issued initial show-cause notices and subjected the samples to retesting, whereupon the product failed the quality test once again. BMSICL subsequently passed an impugned order blacklisting the petitioner’s quoted product for a period of two years and cancelling all unexecuted purchase orders.

Aggrieved by the blacklisting order and cancellation of purchase orders, the petitioner filed the present writ petition before the High Court.

Contentions of the Parties

The petitioner submitted that the show-cause notices issued by the respondent authority failed to put the petitioner on notice regarding the proposed penalty of blacklisting, thereby violating the principles of natural justice.

It was contended that the respondent authority invoked the specific blacklisting clauses of the tender document for the first time in the final impugned order without affording the petitioner an opportunity to defend against such drastic action.

It was further argued that the cancellation of unexecuted purchase orders ran contrary to the tender conditions, which stipulated that purchase orders issued prior to a blacklisting order should remain unaffected.

The respondent submitted that the impugned order was passed in strict conformity with the tender conditions after providing due opportunity of hearing through multiple show-cause notices.

It was contended that maintenance of strict quality standards was paramount, as O.R.S. was meant for public healthcare distribution, and failure in seal test parameters directly compromised product integrity, dosage accuracy, and safety for human consumption.

It was further submitted that, as seven batches of the product failed the retesting parameters, the action of blacklisting was fully justified under the contractual terms empowering the authority to blacklist a product if three or more batches failed quality checks.

Observations and Decision of the Court

The High Court observed that post-supply quality testing and the consequences flowing from a product being declared "Not of Standard Quality" formed an integral part of the contractual scheme voluntarily accepted by the petitioner.

The Court noted that adequate opportunity was provided to the petitioner through multiple show-cause notices and a retesting process, establishing that the authority did not act in a mechanical or arbitrary manner.

The Court emphasized that in matters involving public healthcare procurement, the procuring agency was under a heightened obligation to enforce strict quality controls, and constitutional courts exercising powers of judicial review under Article 226 could not substitute their own opinion for that of technical experts.

Reiteration was made of settled legal principles that judicial review in commercial and tender matters remained confined to the decision-making process, requiring courts to exercise restraint unless the action was shown to be manifestly arbitrary, mala fide, or perverse.

It was held, "this Court finds that the impugned action is founded upon the contractual stipulations accepted by the petitioner, preceded by quality testing, retesting and issuance of two show cause notices, and has been taken keeping in view the paramount consideration of ensuring supply of quality medicines in public interest. No material has been placed before this Court to demonstrate that the decision-making process suffers from arbitrariness, mala fides or violation of the principles of natural justice so as to warrant interference under Article 226 of the Constitution."

Accordingly, the Court dismissed the writ petition.

Cause Title: M/s. Sam Kem & Anr. v. The State of Bihar & Ors. [Civil Writ Jurisdiction Case No.12412 of 2025] 

Appearances:

Petitioners: Advocate Rajeev Kumar Singh

Respondents: Advocate General S.D. Sanjay, Senior Advocate Lalit Kishore, Advocates Rahul Kumar and Ayush Kumar

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