Patna High Court Upholds Blacklisting Of ORS Supplier After Seven Batches Failed Quality Tests

The Patna High Court has upheld the blacklisting of an Oral Rehydration Salts (ORS) supplier, observing that in matters involving procurement of medicines for public distribution, the procuring agency is under a heightened obligation to ensure that only products meeting prescribed quality standards reach beneficiaries. The Court held that once the agreed contractual quality assurance mechanism has been followed, it cannot substitute its own opinion for that of technical experts in exercise of judicial review.

A Division Bench of Acting Chief Justice Sudhir Singh and Justice Rajesh Kumar Verma dismissed a writ petition challenging an order blacklisting the petitioner's ORS product for two years and cancelling all unexecuted purchase orders.

The Bihar Medical Services and Infrastructure Corporation Ltd. (BMSICL) had floated a tender in September 2023 for procurement and supply of medicines across the State. The petitioner successfully bid for supply of ORS, following which a Letter of Intent was issued, an agreement was executed and purchase orders were placed. During the contract period, samples drawn from certain batches of ORS supplied by the petitioner were tested in BMSICL-empanelled laboratories. Seven batches were reportedly found to be “Not of Standard Quality”. After issuance of two show cause notices and retesting of the samples, BMSICL blacklisted the petitioner's quoted product for two years and cancelled all unexecuted purchase orders.

The petitioner contended that although two show cause notices had been issued regarding the alleged quality failures, neither notice proposed blacklisting under Clause 27 of the tender conditions. It argued that the impugned order invoked Clauses 27B(1), 27B(3) and 27C for the first time, thereby denying it an opportunity to show cause against the proposed penalty.

Opposing the petition, BMSICL submitted that the action was taken strictly in accordance with the tender conditions after providing adequate opportunity to the petitioner. It further argued that the seal test is a critical quality parameter for ORS because compromised packaging can result in moisture ingress, contamination, deterioration of the product and consequent risk to public health.

The High Court observed that the petitioner had voluntarily participated in the tender process, accepted the Standard Bid Document and executed the agreement. It held that the petitioner was therefore bound by the contractual provisions governing post-supply quality testing and the consequences flowing from failure of supplied batches to satisfy prescribed standards.

The Court noted that the contractual framework specifically authorised post-supply random sampling through BMSICL's empanelled laboratories and provided for rejection of non-standard batches, replacement at the supplier's cost and blacklisting where the prescribed quality parameters were not met.

The Bench further observed that instead of proceeding immediately against the petitioner after the first adverse report, the respondents subjected the products to retesting and issued a second show cause notice after the batches were again found to be “Not of Standard Quality”. The replies to both notices were considered before the impugned order was passed. It therefore rejected the contention that the action violated principles of natural justice. Emphasising the public healthcare implications, the Court observed:

“This Court also cannot lose sight of the fact that the procurement in question pertains to Oral Rehydration Salts (O.R.S.), a drug intended for public healthcare. The respondents have consistently maintained that the seal test is a critical quality parameter as compromise of packaging integrity may result in contamination, moisture ingress, deterioration of the product and consequent risk to public health. In matters involving procurement of medicines for public distribution, the procuring agency is under a heightened obligation to ensure that only products satisfying the prescribed quality standards reach the beneficiaries.”

The Court also noted that Clause 27B(3) of the Standard Bid Document itself contemplates blacklisting where three batches of a product fail the prescribed quality parameters. Since the respondents had proceeded on the basis that seven batches supplied by the petitioner had failed the quality tests, the action was traceable to the contractual framework accepted by the petitioner.

Holding that the decision was preceded by quality testing, retesting and two show cause notices, and that no arbitrariness, mala fides or violation of natural justice had been established, the Court declined to interfere under Article 226 of the Constitution and dismissed the writ petition.

Case Title: M/s. Sam Kem and Anr. v. State of Bihar and Ors.

Case Number: Civil Writ Jurisdiction Case No. 12412 of 2025

Appearance: Mr. Rajeev Kumar Singh appeared for the Petitioner. Advocate General Mr. S.D. Sanjay and Mr. Rahul Kumar appeared for the State. Mr. Lalit Kishore, Senior Advocate, along with Mr. Ayush Kumar, appeared for BMSICL.

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