Facts
The Petitioner, a successful bidder for supplying Ascorbic Acid Tablets (500 mg) to the Respondent (GMSCL), challenged a recovery order and a debarment order
Source reference: p. 1-2Based on a "pre-dispatch testing" procedure introduced in July 2023, the Respondent alleged six batches (T3528, T3530, T3532, T3533, T3535, T3536) were "Not of Standard Quality" (NSQ) regarding description
Source reference: p. 4-5Consequently, the Respondent issued a recovery order (₹15,27,483/-) on 27.02.2025 and a three-year debarment order on 20.12.2025
Source reference: p. 2five of the six batches were subsequently tested by the Government Analyst under the Drugs and Cosmetics Act, 1940, and declared to be of "standard quality"
Source reference: p. 5Following the High Court’s interim direction on 08.01.2026, the final remaining batch (T3528) was also retested and confirmed to be of standard quality as of 24.02.2026
Source reference: p. 9-15Issues
1. Whether the Respondent was justified in withholding the security deposit and recovering amounts under the rate contract and the Drugs and Cosmetics Act
Source reference: p. 152. Whether the Respondent had the authority to debar the Petitioner given that the samples ultimately met the prescribed standards
Source reference: p. 15-16Law Applied
The court primarily applied Articles 14 and 226 of the Constitution of India regarding the prevention of arbitrary state action
Source reference: p. 1Drugs and Cosmetics Act, 1940, specifically the statutory weight given to reports from the Government Analyst (Form 13)
Source reference: p. 5Conditions 9 and 10 of the Rate Contract, which stipulate that reports from a laboratory notified under the Drugs & Cosmetics Act prevail over other testing laboratory reports
Source reference: p. 10-11Respondent’s own Debarment Policy, which requires at least four batches to be NSQ within a financial year before a three-year debarment can be imposed
Source reference: p. 8Reasoning
The court reasoned that since all six batches—initially flagged as NSQ during pre-dispatch—were subsequently declared to be of "standard quality" by the Government Analyst and the Food and Drugs Laboratory, Vadodara, the factual basis for the Respondent’s coercive actions vanished
Source reference: p. 16The court noted that the Respondent continued with debarment and recovery despite five batches being cleared earlier, which demonstrated a "non-application of mind" and "pre-determined" approach
Source reference: p. 7, 15Under Condition 10 of the contract, the statutory report from the Government Analyst prevails over the pre-dispatch report; thus, the Respondent had no legal throughway to maintain that the drugs were NSQ
Source reference: p. 11The court found the refusal to initially retest Batch T3528 was arbitrary, especially after the other five batches passed re-testing
Source reference: p. 14Holding
The court held that the Respondent’s actions were unjust, arbitrary, and contrary to law
It quashed and set aside the recovery order dated 27.02.2025 and the debarment order dated 20.12.2025
Source reference: p. 17The Respondent was directed to refund the security deposit and the recovered amounts (totaling approximately ₹60,61,376/-)
Source reference: p. 10, 16-17Additionally, the court ordered the Respondent to pay interest at 6% per annum from the respective dates of the standard quality reports
Source reference: p. 17Original Court PDF
STALLION LABORATORIES PRIVATE LIMITEDvsGUJARAT MEDICAL SERVICES CORPORATION LIMITED
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