Debarment and recovery based on pre-dispatch testing are unsustainable if subsequent statutory laboratory reports confirm standard quality.

The Petitioner, a successful bidder for supplying Ascorbic Acid Tablets (500 mg) to the Respondent (GMSCL), challenged a recovery order and a debarment order

Based 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

Consequently, the Respondent issued a recovery order (₹15,27,483/-) on 27.02.2025 and a three-year debarment order on 20.12.2025

five 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"

Following 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

The court primarily applied Articles 14 and 226 of the Constitution of India regarding the prevention of arbitrary state action

Drugs and Cosmetics Act, 1940, specifically the statutory weight given to reports from the Government Analyst (Form 13)

Conditions 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

Respondent’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

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

The 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

Under 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

The court found the refusal to initially retest Batch T3528 was arbitrary, especially after the other five batches passed re-testing

It quashed and set aside the recovery order dated 27.02.2025 and the debarment order dated 20.12.2025

The Respondent was directed to refund the security deposit and the recovered amounts (totaling approximately ₹60,61,376/-)

Additionally, the court ordered the Respondent to pay interest at 6% per annum from the respective dates of the standard quality reports