Gujarat High Court
Maan Pharmaceuticals Limited vs Gujarat Medical Services Corporation ... on 10 November, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11723 of 2025
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MAAN PHARMACEUTICALS LIMITED
Versus
GUJARAT MEDICAL SERVICES CORPORATION LIMITED
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Appearance:
MR MITUL SHELAT with MR HITESH SABHNANI(10731) for Petitioner No. 1
MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
Date : 10/11/2025
ORAL ORDER
1. Rule, returnable forthwith. The learned counsel Mr. Utkarsh
Sharma waives service of rule on behalf of the respondent. By
consent of the learned counsels for the parties, the matter is taken
up for final hearing.
2. By the present Special Civil Application, the petitioner seeks a
writ in the nature of mandamus to quash and set aside the order
dated 02.01.2025 passed the respondent Corporation of effecting
the recovery of Rs.93,29,525/-from the other ongoing contracts of
the petitioner as being arbitrary and illegal.
3. The factual matrix in the present case is that the respondent
Corporation published the tender notice bearing No.GMSCL/Drugs/D-
669/RC/2021 for supply of different tablets, capsules, injections,
miscellaneous and surgical items as mentioned therein. That the
petitioner herein submitted its bid for Amoxicillin Capsules 500mg
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having item code No.1016 mentioned at serial No.6 of the tender
notice. The petitioner and other two companies were declared as
successful bidders. The petitioner was issued an offer letter dated
31.08.2021 for supply of capsules to the extent of 30% of the order
quantity. The other two companies, who were also declared as
successful bidders, were awarded the order to the extent of 30%
and 40% of the order quantity. The petitioner, who was awarded
30% of the order quantity, did not enter into the agreement or pay
any security deposit as stated in the offer letter. Accordingly, no
agreement came to be executed between the petitioner and the
respondent Corporation. Due to non-submission of agreement and
security deposit for issuance of rate contract by the petitioner, the
respondent Corporation initiated the proceedings for debarment
against the petitioner and the debarment order bearing
No.GMSCL/DRUG/Debar/2023-24/22280-312 dated 25.10.2023 came
to be issued by the respondent Corporation debarring the petitioner
company for a period of one year for item No.1016 capsule. That the
petitioner had ongoing rate contracts in respect of 20 other
products. The respondent Corporation thereafter made deduction of
Rs.93,29,525/- from the outstanding bills of other rate contracts
towards risk purchase recovery, which was decided in the
Board Level meeting dated 02.01.2025. Upon inquiry, the petitioner
came to know that such amount had been deducted on account of
rate difference of purchase made from Karnataka Antibiotic and
Pharmaceuticals Limited in the year 2022-2023 in respect of the
tender, which the petitioner had refused to accept and did not act
upon in terms of the offer letter dated 31.08.2021. Aggrieved, the
petitioner made a representation dated 05.03.2025 to the
respondent Corporation as well as State Government in respect of
such deduction of Rs.93,29,525/- pertaining to risk purchase
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recovery. However, the respondent Corporation and the State
Government have not dealt with such representation. Hence, the
petitioner is constrained to file the present Special Civil Application.
4. The learned counsel Mr. Mitul Shelat appearing for the
petitioner company submits that the risk purchase recovery is in
breach of principles of natural justice. He submits that no show-
cause notice was given by the respondent Corporation before
initiating such risk purchase recovery from the pending outstanding
bills in respect of other ongoing contracts unconnected with the
tender notice bearing No.GMSCL/Drugs/D-669/RC/2021. He submits
that no hearing was afforded at the Board Level meeting before
taking such a decision and the minutes of the meeting passed at the
Board Level meeting was straightway executed from the pending
outstanding bills of the petitioner in respect of other ongoing
contracts without any communication to the petitioner. The learned
counsel submits that the impugned action of the respondent
Corporation in respect of risk purchase recovery is without any
authority and jurisdiction in law. He submits that there is no
executed agreement or rate contract between the petitioner and the
respondent Corporation in terms of the said tender. The learned
counsel submits that since there was no contract between the
petitioner and the respondent Corporation in terms of the tender
notice bearing No.GMSCL/Drugs/D-669/RC/2021, the petitioner was
not liable to pay any risk purchase recovery for the subject item.
The learned counsel submits that due to non-execution of the
agreement by the petitioner, the respondent Corporation had issued
a show-cause-notice in terms of clause F(6) i. e. back out from
tender at any interim level during tender processing by the
communication dated 20.01.2022 and in respect of the same, the
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respondent Corporation had debarred the petitioner for that
particular drug item for a period of one year which the petitioner
had also undergone. The learned counsel submits that the
respondent Corporation thereafter could not have initiated any
proceedings for risk purchase recovery once the penalty of
debarment had been imposed by the communication dated
25.10.2023. The learned counsel submits that once the show-cause-
notice dated 20.01.2022 has been adjudicated and the petitioner
has been debarred for a period of one year, no further adjudication
could have taken place in respect of the said show-cause-notice and
that too, after a period of three years. He submits that such action is
in breach of principle of double jeopardy. He submits that such
action would amount to punishing the petitioner twice for the same
cause of action. In support of his contentions, the learned counsel
for the petitioner has relied upon the decision of the Division Bench
of this Court dated 30.09.2025 in Special Civil Application No.8535
of 2025 and the order dated 06.10.2025 in Special Civil Application
No.9917 of 2025 and other connected matters. He submits that the
present case is squarely covered by the said two orders passed by
the Division Bench of this Court.
5. Per contra, the learned counsel Mr. Utkarsh Sharma appearing
for the respondent Corporation submits that the present dispute
arises out of tender and contractual relationship between the
parties and any dispute thereafter is amenable to arbitration or
appropriate civil remedy and not by way of present writ petition. He
submits that after the petitioner refused to act on the acceptance
letter, appropriate proceedings came to be initiated and by the
order dated 25.10.2023, the petitioner was debarred for a period of
one year for the particular drug item. He submits that the said
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debarment was in view of the condition No. F(6) of the tender
document, i. e. back out from tender at interim level during tender
processing. He submits that the impugned action of risk purchase
recovery from the petitioner is in terms of clause J(5), J(6), N(11) and
N(12). The learned counsel submits that in the show-cause notice
dated 20.01.2022, which was issued to the petitioner, the
respondent Corporation clearly cited tender condition F(6). Since the
petitioner failed to comply with the same, such actions were
initiated against the petitioner. He submits that thereafter, in its
meeting dated 02.01.2025, the Board of the respondent Corporation
resolved to recover the risk purchase differential amount from the
petitioner. He submits that all the actions of recovery are in
accordance with the terms and conditions of the tender document.
He submits that the show-cause notice dated 20.01.2022
contemplated three actions to be taken against the petitioner.
Initially, the petitioner was debarred for the supply of particular drug
item for a period of one year. Thereafter, the respondent
Corporation has initiated another proposed action being recovery of
differential amount on the risk purchase. He submits that the action
was taken in terms of the said show-cause notice. The learned
counsel submits that it is not in dispute that the show-cause notice
dated 20.01.2022 was duly served upon the petitioner and the same
was adjudicated by passing the order dated 25.10.2023. The said
order has also been accepted by the petitioner. He, therefore,
submits that since the show-cause notice contemplated the
recovery for risk purchase, no fresh hearing was required to be
given to the petitioner and it cannot be said that the impugned
order of risk purchase recovery and subsequent actions for
recovering the said amount is in breach of principles of natural
justice. He, therefore, submits that the present Special Civil
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Application be dismissed.
6. Heard the learned counsels for the parties, perused the
documents on record and considered the submissions.
7. It is not disputed by the learned counsels for the parties that a
similar issue came to be considered and adjudicated by the learned
Division Bench of this Court in Special Civil Application No.9917 of
2025 and other connected matters. The learned Division Bench has
observed thus :-
"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 :-
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,
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Injection and Miscellaneous Item, are as follows:
Case No. Tender Notice Tender Requisition Item
No. Inquiry No. order date
SCA No.9917 of GMSCL/D- GMSCL/D- 28.01.2025 Ofloxacin
2025 03/2023-24 717/RC/2023- Tablets 200
24 mg
SCA No.9899 of GMSCL/D- GMSCL/D- 06.11.2024 Atorvastatin
2025 10/2022-23 707/RC/2022- Tablet 40 mg
SCA No.9790 of GMSCL/D- GMSCL/D- 28.01.2025 Oscarbazepin
2025 02/2024-25 727/RC/2024- e Tablet 30
25 mg
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 "back out 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.
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
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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."
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
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(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/crystallized, after considering the
detailed 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."
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8. In the present case, admittedly, the show-cause notice came
to be issued on 20.01.2022 for three actions, i. e. (i) Forfeiture of
E.M.D., (ii) Debarment of the said firm for that particular drug/item
for a period of one year and (iii) Recovery of differential on risk
purchase. Further, by the order dated 25.10.2023, the respondent
Corporation held that there is a breach of tender condition No. F(6)
and in view thereof, a proposal was placed before the Board of
Directors to debar the petitioner company for a period of one year.
The Board of Directors in its 36th meeting passed a resolution
debarring the petitioner company for a period of one year and the
said order also came to be communicated to the petitioner.
Thereafter, no action was taken by the respondent Corporation till
the petitioner came to know about effecting the recovery of
Rs.93,29,525/- from its other ongoing contracts with the respondent
Corporation. Admittedly, no communication/notice for such recovery
was ever issued to the petitioner company by the respondent
Corporation, nor any order was passed for such recovery. Moreover,
the said recovery was effected after a period of three years and that
too, from the outstanding bills in respect of other ongoing contracts
between the parties for different products. It is also not disputed
that all these contracts are unrelated to the tender notice bearing
No.GMSCL/Drugs/D-669/RC/2021 in pursuance to which the recovery
has been done. Further, no reasons have been placed on record by
the respondent Corporation to show how much amount has been
quantified and also the reasons for recovering such amount. The
action on risk purchase recovery is uniliteral on the part of the
respondent Corporation and sans any explanation or justification.
Such action is in complete violation of principles of natural justice.
The action of the Corporation reflects unjust and arbitrary
approach , which cannot be sustained in law.
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9. The learned counsel for the respondent Corporation could not
dispute that the order dated 06.10.2025 in Special Civil Application
No.9917 of 2025 and other connected matters and the order dated
30.09.2025 in Special Civil Application No.8535 of 2025 are squarely
applicable in the facts and circumstances of the present case and
are passed against the respondent Corporation in respect of similar
risk purchase recoveries.
10. The learned counsel for the petitioner has also raised the
issue of double jeopardy, which is not dealt with in the present
petition and is kept open since the present petition is squarely
covered by the decisions as mentioned herein above.
11. For the aforesaid observations and reasons, the Special Civil
Application is allowed. The impugned decision dated 02.01.2025 in
respect of the petitioner for seeking recovery of Rs.1,01,82,233/- is
quashed and set aside. The respondent Corporation is directed to
refund the recovered amount of Rs.93,29,525/- to the petitioner
along with interest at the rate of 6% per annum within a period of
four weeks from the date of receipt of this order, failing which, the
same shall carry interest at the rate of 9% per annum after the said
period.
12. It is further clarified that the present order shall not come in
the way of the respondent Corporation for recovering the amount, if
any, from the said tender process in accordance with law. All the
contentions as available in law to both the parties are kept open.
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13. The Special Civil Application is accordingly allowed and
disposed of. Rule is made absolute to the aforesaid extent. No order
as to costs.
Direct service is permitted.
(ANIRUDDHA P. MAYEE, J.)
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