Court rules against State's forfeiture of EMD and debarring Intas Pharmaceuticals due to procedural lapses
Court rules against State's forfeiture of EMD anIn a significant ruling, the Himachal Pradesh High Court has overturned punitive actions taken by the State against Intas Pharmaceuticals Limited concerning the forfeiture of Earnest Money Deposit (EMD) and debarring from tender participation for three years. The decision, rendered by Chief Justice G.S. Sandhawalia and Justice Jiya Lal Bhardwaj, underscores the importance of adhering to principles of natural justice and procedural fairness in tender processes.
The case, titled Intas Pharmaceuticals Limited v. State of H.P., revolved around the State's failure to act within the stipulated 180-day validity period of a tender bid submitted by Intas Pharmaceuticals for supplying medicines. Despite the expiration of the bid validity, the State proceeded to penalize the company for not extending the validity, resulting in the forfeiture of Rs. 2,00,000 as EMD and barring the firm from future tenders.
The Court critiqued the State's actions as illegal, arbitrary, and unjust, emphasizing that punitive measures, especially those with civil and evil consequences like blacklisting, must be preceded by a specific show cause notice. The absence of such notice violated the principles of natural justice, rendering the debarment order unsustainable. The judges referenced Supreme Court precedents, including Gorkha Security Services v. Govt. of NCT of Delhi, to reinforce their stance on the necessity of procedural fairness.
The judgment also highlighted the improper application of tender document clauses by the State, rejecting the argument that submission of deficient documents post the initial deadline could reset the validity period. It affirmed that the 180-day period commenced from the last date of bid submission, which was May 23, 2023, and expired on November 24, 2023. Consequently, any decision post this period was deemed unjustifiable.
The High Court's decision mandates the State to refund the forfeited EMD to Intas Pharmaceuticals within three months, marking a victory for the pharmaceutical company and reinforcing the legal requirement for governmental bodies to adhere strictly to tender document terms and the principles of natural justice.
Bottom Line:
Tender validity period strictly bound by terms of tender document - Forfeiture of earnest money deposit and debarring without adherence to principles of natural justice held illegal.
Statutory provision(s):
- Principles of Natural Justice
- Tender Validity Clauses
- Blacklisting Procedures
The ruling serves as a reminder to governmental authorities to ensure fair play and transparency in contractual dealings, particularly when punitive actions are considered. The judgment not only restores the company's right to participate in future tenders but also sets a precedent for similar cases concerning tender processes and government contracts.
Intas Pharmaceuticals Limited v. State of H.P, (Himachal Pradesh)(DB) : Law Finder Doc id # 2831748
