Innova Captab Limited vs Gujarat Medical Service Corporation ...

Gujarat High Court

Innova Captab Limited vs Gujarat Medical Service Corporation ... on 6 October, 2025

Author: A. S. Supehia

Bench: A.S. Supehia

                                                                                                                        NEUTRAL CITATION




                             C/SCA/9917/2025                                           JUDGMENT DATED: 06/10/2025

                                                                                                                         undefined




                                      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                                        R/SPECIAL CIVIL APPLICATION NO. 9917 of 2025
                                                            With
                                        R/SPECIAL CIVIL APPLICATION NO. 9899 of 2025
                                                            With
                                        R/SPECIAL CIVIL APPLICATION NO. 9790 of 2025

                        FOR APPROVAL AND SIGNATURE:

                        HONOURABLE MR. JUSTICE A.S. SUPEHIA
                        and
                        HONOURABLE MR.JUSTICE L. S. PIRZADA
                        ==========================================================
                                     Approved for Reporting                          Yes             No

                        ==========================================================
                                              INNOVA CAPTAB LIMITED
                                                      Versus
                                GUJARAT MEDICAL SERVICE CORPORATION LIMITED & ORS.
                        ==========================================================
                        Appearance:
                        MR DIGANT POPAT with MR. BHAVIK P SHAH(6391) for the Petitioner(s)
                        MS SHRUTI DHRUVE AGP for the Respondent(s) No. 1,2
                        MR UTKARSH SHARMA for the Respondent(s) No.3
                        ==========================================================
                           CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                                 and
                                 HONOURABLE MR.JUSTICE L. S. PIRZADA
                                               Date : 06/10/2025
                                            COMMON ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. By way of present writ petition, the petitioner - Company, in Special Civil Application No.9917 of 2025, has sought for the following reliefs:

"A. Your Lordships may be pleased to admit and allow this application;

B. Your Lordships may be pleased to pass an appropriate writ, order or direction directing the Respondent no.1 to pay the petitioner, the full amount of Rs. 29,32,349/- towards clearance of invoices along with the interest at the rate of 18% in the interest of justice;

C. Pending admission and final hearing of the petition, Your Lordships may direct the respondent no.1 to pay the total outstanding amount of Rs.29,32,349/- along with the interest as this Hon'ble Court deems fit in the interest of justice; D. Pending admission and final hearing of the Petition, Your Lordships may direct the respondent no.1 to not deduct any amount in future invoices raised by the petitioner without following due process of law; **"

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined 1.1 The petitioner - Company, in Special Civil Application No.9899 of 2025, has sought for the following reliefs:

"A. Your Lordships may be pleased to admit and allow this application;

B. Your Lordships may be pleased to pass an appropriate writ, order or direction directing the Respondent no.1 to pay the petitioner, the full amount of Rs. 2,70,410 /- towards clearance of invoices along with the interest at the rate of 18% in the interest of justice.

C. Pending admission and final hearing of the petition, Your Lordships may direct the Respondent no.1 to pay the total outstanding amount of Rs.2,70,410/- along with the interest as this Hon'ble Court deems fit in the interest of justice;

D. Pending admission and final hearing of the Petition, Your Lordships may direct the Respondent no.1 to not deduct any amount in future invoices raised by the petitioner;

**""

1.2 The petitioner - Company, in Special Civil Application No.9790 of 2025, has sought for the following reliefs:

A. Your Lordships may be pleased to admit and allow this application:

B. Your Lordships may be pleased to pass an appropriate writ, order or direction directing the Respondent no.1 to pay the petitioner, the full amount of Rs. 3,66,292/- towards clearance of invoices along with the interest at the rate of 18% in the interest of justice.

C. Pending admission and final hearing of the petition, Your Lordships may direct the Respondent no.1 to pay the total outstanding amount of Rs.3,66,292/- in the interest of justice;

D. Pending admission and final hearing of the Petition, Your Lordships may direct the Respondent no.1 to not deduct any amount in future invoices raised by the petitioner without following due process of law.

**"

2. RULE. Learned advocates appearing for the respective respondents waives service of notice of rule. The affidavit-in-reply tendered by learned advocate Mr.Sharma dated 06.10.2025, is ordered to be taken on record.

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined

3. Since a short issue is involved, the matters are taken up for final hearing today.

4. At the outset, learned advocate Mr. Digant Popat appearing with learned advocate Mr.Bhavik P. Shah for the petitioner, has submitted that the present matter was left out and de-tagged from Special Civil Application No.8535 of 2025, on the request of learned advocate Mr.Utkarsh Sharma appearing for the respondent for want of the affidavit and since the said writ petition was actually allowed by quashing and setting aside the action of the respondents vide judgment and order dated 30.09.2025, the present writ petition may also be allowed in terms of the said judgment. However, learned advocate Mr.Sharma appearing for the respondent-Corporation has submitted that he was unable to point out the relevant clauses in that writ petition due to lack of instructions and there were some additional contentions which are raised by the respondent-Corporation in the present writ petition and hence it is urged that he may be allowed to further argue the matter and advance the submissions which are not made in the writ petition being Special Civil Application No. 8535 of 2025, which has been decided by the judgment dated 30.09.2025.

5. Learned advocate Mr.Popat appearing for the petitioner - Company, at the outset has submitted that the respondent - Corporation without issuing any show-cause notice or without affording any opportunity of hearing, by an illegal, arbitrary, and absolutely irrational action, unilaterally and wrongfully deducted the outstanding amounts pertaining to the supplied products under validly issued requisition orders of corresponding invoices. It is submitted that the amount of Rs.35,69,051/- (combined amount of all three petitions) has already been recovered from the petitioner Page 3 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025 NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined and during the pendency of the writ petition the respondents have not released the outstanding dues of total Rs.71,63,333/- for the period from 10.07.2025 to 23.08.2025. It is therefore urged that the action of the respondents may be set aside and they may be directed to pay the amount with 18% interest.

6. In response to the aforesaid submissions, learned advocate Mr.Sharma appearing for the respondent-Corporation has submitted that the respondent-Corporation was constrained to recover the aforementioned amount, in view of the Risk Purchase Clause of the earlier tender which was floated in the year 2021. It is submitted that in the year 2021, in view of the tender document and the contract entered between the Corporation and the present petitioner, an acceptance letter was issued on 12.04.2021, for supplying of the drugs and such contract was entered, however, since the petitioner - Company did not supply the requisite drugs, a show-cause notice dated 01.04.2023, was issued to them by the department, citing tender condition no.F(6) and the petitioner responded to the same vide reply dated 10.04.2023, and thereafter since the department was left with no other option but the recover and stop further payment in view of the undertaking dated 16.04.2021.

7. Thus, it is submitted that the respondent-Corporation by invoking the Clauses N(9),(10),(11),(12) has recovered the amount from the earlier contract in view of the Risk Purchase differential amount. Reliance is placed on the judgment dated 07.07.2022 in the case of Overseas Healthcare Pvt. Ltd. vs. the State of Gujarat in Special Civil Application No.19597 of 2021.

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined

8. Learned advocate Mr. Sharma has further submitted that the present writ petition may not be entertained in view of the Clause 33 of the Rate Contract Booklet which permits the parties to avail the arbitration. Thus, it is urged that the present writ petition may not be entertained.

9. In response to the aforesaid submissions, learned advocate Mr. Popat has submitted that the Clauses mentioned in the present contract being clauses 9, 10, 11 and 12 cannot be attracted in the facts of the case and the respondent-Corporation cannot recover any amount from the earlier contract of the year 2021. It is further submitted that if such approach is permitted then the parties to the contract will be always at the risk of recovery even after passage of more than 10 years.

9.1 Learned advocate Mr.Popat has further pointed out that pursuant to the show-cause notice dated 01.04.2023, issued by the respondent-Corporation alleging the back out from tender process and not supplying of the products, the petitioner-Company gave a detailed reply on 10.04.2023, pointing out the reasons of COVID-19 pandemic and the war between Russia and Ukraine, which has adversely affected the procuring of raw-materials. He has also submitted that in fact the Central Government i.e. the Ministry of Finance had issued an office Memorandum with regard to disruption of supply chain due to spread of corona virus in China and any other country, will be covered under Forced Majeure Clause (FMC).

9.2 It is submitted that further office memorandums were also issued by the Central Government in this regard and all these aspects were pointed out to the respondent- Corporation, however, without any reference or passing any order in this regard by an Page 5 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025 NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined arbitrary and illegal action and without following principles of natural justice, the respondent-Corporation has not only recovered the amount of the earlier contract but also has stopped payment of the invoices raised by the petitioner-Company for the supply of the goods. It is submitted that thus, since there is violation of principles of natural justice, the writ petition is maintainable.

10. In support of his submission learned advocate Mr.Popat has placed reliance on the order dated 06.08.2021 passed by the Division Bench of this Court in Special Civil Application No. 9793 of 2021 in the case of Ranjit Buildcon Limited Through Managing Director Gaurav Ranchhodbhai Patel vs. Gujarat Water Supply And Sewerage Board, and has submitted that the recovery of the pending bills of the earlier contract cannot be recovered from the current contract unless the claim is crystallized. It is submitted that in the present case, since the respondents have not yet opined anything on the representation filed by the petitioners and has directly affected recovery from the current contract, such action is required to be quashed and set aside.

11. We have heard the learned advocates appearing for the respective parties at length.

12. As we have noted hereinabove, on an identical issue and similar action taken by the respondent, vide judgment dated 30.09.2025 passed in Special Civil Application No.8535 of 2025, we had already set aside the recovery of the outstanding dues with the current contract. However, some additional submissions are advanced by learned advocate Mr.Sharma appearing for the respondent-Corporation, which we are dealing as under :-

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined 12.1 It is an established fact from the pleadings and in fact admitted by the respondent-Corporation that it has not only recovered the aforementioned amount, but also has stopped the further payment of the products which are supplied during the pendency of the writ petition only on the ground that in the earlier contract which was entered in the year 2021 between the petitioners and the Corporation, the petitioners were unable to supply the products.

12.2 The earlier contract which was executed between the petitioner and Corporation for supplying of the drugs, however, the same were not supplied and the respondent - Corporation has invoked the Risk Purchase Recovery, in accordance with the terms and conditions of the earlier tender document as well as the present tender document.

12.3 It is not in dispute that so far as the present contract is concerned the petitioner has not defaulted in any manner and the petitioner has been continuously supplying the drugs as per the contract entered between the parties.

13. In the captioned petitions, the details of supplying the drugs under the Tender Document for Tablet & Capsule, Injection and Miscellaneous Item, are as follows:

Case No. Tender Notice Tender Enquiry No Requisition Item No. order date SCA No.9917 GMSCL/D- GMSCL/D-717/RC/ 28.01.2025 Ofloxacin of 2025 03/2023-24 2023-24 Tablets 200 mg SCA No.9899 of GMSCL/D- GMSCL/D-707/RC/ 06.11.2024 Atorvastatin 2025 10/2022-23 2022-23 Tablet 40 mg SCA No.9790 GMSCL/D- GMSCL/D-727/RC/ 28.01.2025 Oscarbazepine of 2025 02/2024-25 2024-235 Tablet 30 mg Page 7 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025 NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined

14. The petitioners-Company had participated in the tender process and ultimately requisition order dated 28.01.2025 and 06.11.2024 were issued pursuant to the Rate Contract fixed by the respondent no.1.

15. At this stage, we may also refer that the present petitioner -

Company and the respondent - Corporation had also entered into a contract in the year 2021 for supplying of the drugs. Since the petitioner - Company failed to supply the drugs, the respondent - Corporation issued a show-cause notice dated 01.04.2023, relating to "backout from the tender proceedings at any interim level". The respondent - Corporation also informed the petitioner that the penal action such as forfeiture of AMD / security deposit / debarment and recovery of differential amount if Risk Purchase done will be contemplated. Accordingly, the petitioner-Company on receipt of such show-cause notice filed a detailed reply on 10.04.2023 pointing out that the supply chain was adversely disrupted due to COVID-19 pandemic and war between Russia and Ukraine and the situation went beyond control and can be said to be Force Majure. A detailed representation was filed by the petitioner - company. The petitioner has also relied upon the office memorandum issued by the central Government from the Ministry of Finance, through its Department of Expenditure's Procurement Policy Division dated 19.02.2020, 13.05.2020, 02.11.2021 and 06.02.2023. All these office memorandums were annexed along with their reply, which categorically mentions that disruption of supply chain due to COVID-19 in China or any other country will be covered under FMC.

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined

16. Thus, so far as the breach of contract or conditions of earlier contract of the year 2021 is concerned, the respondent - Corporation has in fact issued show-cause notices to the petitioner- Company and the petitioner respondent to the same. However, nothing was done in this regard for almost for three years and unpredictably, they recovered the outstanding amount of (2021) contract from the invoices raised for the supply of drugs in the present (2025) contract.

17. During the pendency of writ petition the respondents have also not paid the outstanding amount of supply of drugs as mentioned hereinabove.

18. Neither any opportunity of hearing is given nor any show- cause notice or any intimation worth the name has been give to the petitioner, and unilaterally, without passing any order, the respondent- Corporation has not only recovered the outstanding amount, but also has stopped further payment.

19. The respondent - Corporation has invoked the clauses (9), (10),(11),(12) of the tender document the same reads as under:

"9. An amount of GST as applicable to be shown separately in the bill/invoice raised. Further an amount of GST so collected should be remitted to the Government within prescribed time limit, otherwise strict action will be taken against defaulters.

10. The payment against supply of stores shall be made within 30 to 45 days from the date of receipt of the goods in food and acceptable conditions at the destination. However, no interest will be chargeable by the A.T/R.C Holder, if the payment is delayed.

11. The payment of the bill shall be made after deducting Government/Corporate dues, if any.

12. The payment of the bills shall be withheld in the following circumstances:

a) The goods are found sub-standard or in non-acceptable conditions.

b) Breach of condition of any contract by the A.T/R.C Holder.

c) Previous Government dues of A.T/R.C Holder."

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20. Clause no. 11 and 12( c) enables the deduction of government dues from the bills and withholding of the bills respectively. The respondents issued show-cause notice dated 01.04.2023 for taking suitable action for breach of supply of products for 2021 contract. Instead of taking further action, the Corporation has invoked Clause 11 and 12(b) and (c) of the present tender document of 2025. This is impermissible, since the Corporation cannot interject two distinct clauses of independent clauses of the contract in wake of the fact that, the remedy in the former contract has been already resorted by issuing show-cause notice to which the petitioner - company has already carved out its case for non-supplying of products due to disruption in supply chain in view of COVID-19 pandemic and war between Russia and Ukraine in the reply dated 10.04.2023. The petitioner has placed reliance on the Office Memorandums issued by the Ministry of Finance, Department of Expenditure Procurement Policy declaring disruptions of the supply chain due to spread of corona virus to be covered in the Force Majeure Clause. It is pertinent to note that the petitioner clarified that risk purchase recovery was already done of an amount of non- supply quantity in the year 2022. The petitioner also clarified that out of seven purchase orders, five were executed and only two were not executed for non-supply issues, and the respondents had already done risk purchase recovery. Thus, without applying the mind to the explanation, it was not open for the respondent- Corporation to invoke the aforesaid clauses by adopting a short cut without dealing with the factors pointed out by the writ petitioner to the show-cause notice in its representation dated 10.04.2023. Until, the action initiated by the respondents pursuant to the show cause notice dated 01.04.2023 is taken to its logical end and the amount is finalized/crystalized, after considering the detailed Page 10 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025 NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined representation and the factors highlighted by the petitioner, it is not open for the respondents to take shelter under clause 11 and 12 and affect risk purchase recovery and further stop payment of the petitioner for the supply of products for the present contract of 2025.

21. Albeit, it is noticed by us that the judgment of this Court in the case of M/s. Overseas Healthcare Pvt. Ltd.(supra), is on the issue of affecting risk purchase recovery in similar set of fact of non supply of drugs and umbrage taken under Force Majeur Clause of COVID-19 by the concerned Company for non-supply, however it cannot come to the rescue of the respondent-Corporation. The primary distinguishing feature, is that in the said case, the risk purchase recovery has been done for the breach of the same contract, and not of the difference contract, which is not the case in the present writ petitions, and when the suppliers/contractor did not supply the products, the State had passed the risk purchase orders which are missing in the present case. No orders are passed by the respondents for affecting risk purchase recovery.

22. In light of the aforementioned established facts, the respondent-Corporation has traveled beyond its show-cause notice dated 01.04.2023 issued for the breach of 2021 contract. The respondent - corporation went into slumber and did not take any action for three years against the petitioner company as mentioned in the show-cause notice. No provision in the contract prevents the respondents to undertake necessary procedure for risk purchase recovery, however the same has to be done in accordance with law, after following principles of natural justice.

NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined

23. At this stage, we may deal with the contentions raised as regards the maintainability of the present writ petitions. The Supreme Court in the case of Uttar Pradesh Power Transmission Corporation Ltd.& Anr vs. CG Power and Industrial Solutions Ltd.& Anr, (2021) 6 S.C.C. 15 has held thus:

"66. Even though there is an arbitration clause, the Petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition.

67. It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge. Reference may be made to Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. reported in AIR 1999 SC 22 and Pimpri Chinchwad Municipal Corporation and Ors. V. Gayatri Construction Company and Ors, reported in (2008) 8 SCC 172, cited on behalf of Respondent No.1."

24. Thus, Supreme Court has held that even if there is an arbitration clause, the writ petition can be entertained and the arbitration clause does not debar the Court from entertaining the writ petition in an appropriate case. It is held that the High Court may entertain the writ petition notwithstanding the availability of an alternative remedy, more particularly, (i) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice; or (iii) where the impugned orders or proceedings are wholly without jurisdiction; or (iv) the vires of an Act is under challenge.

25. In the present case, not only there is violation of principles of natural justice, but there is no order or communication intimating the petitioner affecting risk purchase recovery of former contract Page 12 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025 NEUTRAL CITATION C/SCA/9917/2025 JUDGMENT DATED: 06/10/2025 undefined and further to withhold the amount of supply of products in the ongoing contract has been passed by the Corporation. Thus, the objections raised by the respondent-Corporation with regard to maintainability of present writ petitions fails.

26. The writ petitions are allowed and we direct the respondent no.1 to pay the petitioner the full outstanding amount of Rs.1,19,61,487.60/-, [which includes the outstanding amount of Rs.4,79,814.60/- (from 09.05.2025 to 08.07.2025) + Rs.71,63,333/- (from 10.07.2025 to 23.08.2025)], with interest at the rate of 6% per annum. The aforesaid amount shall be paid within a period of four weeks from the date of receipt of this order, failing which the same shall carry interest of 9% per annum. However, we clarify that the observations recorded in the present order shall not prevent the respondents in recovering the amount of the former contract in accordance with law.

The writ petition is allowed. Rule is made absolute. Direct service is permitted.

(A. S. SUPEHIA, J) (L. S. PIRZADA, J) Radhika / 41, 42, 43 Page 13 of 13 Uploaded by Radhika Srinivasan(HCD0042) on Mon Oct 13 2025 Downloaded on : Mon Oct 13 21:29:38 IST 2025