Chhattisgarh High Court: In the writ petition challenging the blacklisting order passed by Chhattisgarh Medical Services Corporation Limited (Medical Corporation), the Division Bench of Ramesh Sinha CJ*, and Ravindra Kumar Agarwal, J., stated that the term “indicative quantity” did not permit the procuring agency to impose an extraordinary increase in demand and thereafter penalise the supplier for non-compliance without considering the prevailing circumstances. The Court found that Cipla, had consistently informed the respondents of the difficulties caused by the second wave of COVID-19, including shortages of raw materials, supply chain disruptions, reduced manufacturing capacity, and Central Government allocation directives.
The Court held that the respondents failed to consider these relevant factors and that the 3-year blacklisting and forfeiture of the security deposit were arbitrary and disproportionate. Accordingly, the Court quashed the impugned orders.
Background
The petitioner, a pharmaceutical company named Cipla, participated in an e-tender floated by CGMSCL on 26 March 2021, for the supply of Remdesivir injections, with an indicative quantity of 5000 vials. Within days of the agreement, Medical Corporation issued multiple purchase orders, thereby escalating demand manifold, with a substantial quantity ordered each day. Cipla supplied the entire first order and a partial quantity under the second but could not fulfil the remaining orders owing to acute raw material shortages, supply chain disruptions, reduced manufacturing capacity, and Central Government allocation directives governing nationwide Remdesivir distribution during the peak of the second COVID-19 wave.
Medical Corporation issued a show-cause notice proposing to blacklist Cipla. The petitioner submitted a detailed reply, reiterating the extraordinary circumstances prevailing due to the pandemic. However, the Medical Corporation blacklisted Cipla’s product for 3 years and forfeited the security deposit. Cipla’s subsequent representation was also rejected, and thus the present petition was filed.
Analysis, Law, and Decision
The Court stated that while the quantity under the tender was variable, the term “indicative quantity” did not authorise the procuring agency to impose an unlimited increase in demand and then penalise the supplier for failing to meet it. The overnight escalation from 5000 to over 60,000 vials during a national health emergency required a fair and pragmatic assessment before resorting to blacklisting and forfeiture of the security deposit. The Court emphasized that even contractual actions of the State must satisfy the requirements of fairness and non-arbitrariness under Article 14 of the Constitution.
The Court stated that Cipla had consistently apprised the respondents of the practical difficulties in meeting the extraordinary demand during the second wave of the pandemic, including shortages of raw materials, supply chain disruptions, reduced manufacturing capacity, and Government of India allocation orders for nationwide distribution of Remdesivir. However, the impugned order did not reflect any objective consideration of these factors and proceeded solely based on contractual default. The Court observed that the respondents failed to examine whether the default was deliberate, mala fide, or caused by circumstances beyond the petitioner’s control, rendering the decision-making process vulnerable to judicial review.
The Court stated that the doctrine of proportionality required the respondents to consider whether a less severe measure could achieve the intended purpose. Cipla had supplied the entire quantity under the first purchase order and part of the second, and the default occurred during the extraordinary circumstances of the COVID-19 public health crisis. In the absence of any allegation of fraud, misrepresentation, supply of substandard products, or moral turpitude, the Court found the 3-year blacklisting and forfeiture of the security deposit to be excessive and disproportionate.
Accordingly, the Court held that the impugned orders could not be sustained, as they were arbitrary for failing to consider the extraordinary conditions prevailing during the second wave of the pandemic, the unprecedented increase in demand beyond the indicative quantity, and the requirement of proportionality in imposing penal consequences.
[Cipla Ltd. v. Chhattisgarh Medical Services Corpn. Ltd., WPC No. 181 of 2022, decided on 15-6-2026]
*Judgement authored by: Chief Justice Shri Ramesh Sinha
Advocates who appeared in this case:
For Petitioner: Shri Abhishek Sinha, Senior Advocate along with Shri Samrath Singh Marhas, and Shri DL Dewangan, Advocates
For Respondent/State: Shri Shashank Thakur, Addl AG
For Respondent-2: Shri Trivikram Nayak, Advocate
