Judgment & Order (Oral):
1. Heard Mr. M. Goswami, the learned Senior counsel assisted by Mr. R. Singha, the learned counsel appearing on behalf of the Petitioners and Mr. D. P. Borah, learned Standing counsel for the Health Department appearing on behalf of all the Respondents.
2. The present writ petition has been filed by the Petitioners challenging the Debarment Notice bearing No.588121/20193 dated 17.11.2025 whereby the Respondent Authorities have blacklisted and debarred the Petitioner No.1 from participating in any tender for three years from the date of issuance of the said letter in terms with Clause 5, Sub-Clause H, Pt. No.(ii), Pt. No.(iii) and Sub-Clause-M for default in supply of four numbers of essential drugs against four numbers purchase orders the details of which have been placed in Annexure-A to the said order dated 17.11.2025 (hereinafter referred to as the impugned order).
3. The question which arises in the instant case is as to whether the impugned order dated 17.11.2025 calls for any interference in exercise of the powers under Article 226 of the Constitution.
4. In order to adjudicate the said aspect, this Court finds it pertinent to take note of material facts which led to the filing of the present writ petition.
5. The Respondent No.4 had issued a Notice Inviting Tender (Framework Agreement) dated 09.02.2023 (hereinafter referred to as ‘the Bidding document’) inviting online bids for empanelment of manufacturers for supply of essential drugs to various health facilities under the Department of Health and Family Welfare, Government of Assam by entering into Framework Agreement valid for 3 years.
6. For the purpose of adjudication of the instant dispute, this Court finds it relevant to take note of some of the Clauses of the said Bidding document. Clause 4 of the Bidding document is with the heading “Evaluation, Selection and Acceptance of Tender”. Sub-Clause B of Clause 4 of the Bidding document refers to “Bid Evaluation”. Sub-Clause B of Clause 4 of the Bidding document being relevant is reproduced herein under:
“4(B). Bid Evaluation.
i. Tenders will be evaluated with reference to technical and commercial parameters to determine the technically empanelled bidders for all items. A contract will be signed with the empanelled bidders which will be valid for 3 years with option to further extend the period for another 1 year.
ii. After the conclusion of empanelment process, a separate process will be followed to discover the Lowest Price against a particular item amongst the empanelled bidders. The process of price discovery will be initiated against every proposed procurement.
iii. Purchase Orders will be issued in the ration 60 : 25 : 15 to the L1 : L2 : L3 subject to L2 & L3 matches the L1 rate. If L2 or L3 does not match the L1 rate, then the next lowest bidder will be offered to match the L1 rate. However, if the value of purchase is less than Rs.5.00 Lakh than the entire quantity will be awarded to the L1 bidder.
iv. If the rate quoted by the empanelled manufacturers is more than the prevailing market rate then AMSCL shall procure the item(s) from any other alternate sources.
v. The supplier(s) shall be invited to supply the item(s) of required quantity, quality and specification at the agreed rate within prescribed delivery period. The shortlisted firm(s) shall also commit contractually to furnish performance security @ 5% of the order value within 15 days of receipt of the Purchase Order. If Performance Security is not submitted within the stipulated time period, then penal provisions will be invoked. STARTUPS registered in Assam and has obtained My Assam STARTUP ID (MASI) will get 50% waiver in payment of Security Deposit.”
7. A perusal of the above quoted Clause would reveal that in terms with Clause 4B(i), the tenders so submitted for empanelment would be evaluated with reference to technical and commercial parameters to determine the technically empanelled bidders for all items. It further stipulates the requirement of entering into a contract with the empanelled bidders which would be valid for a period of three years with option to further extend the period for another one year. Clause 4B(ii) of the Bidding document further stipulates that after the conclusion of empanelment process, a separate process would be followed to discover the Lowest Price against a particular item amongst the empanelled bidders. The process of price discovery will be initiated against every proposed procurement. Clause 4B(iii) of the Bidding document further stipulates as to how the purchase orders would be issued. From a very perusal of the said Sub-Clause, it appears that the L1 bidder has a right to claim 60% of the essential drugs in question whereas L2 and L3 bidders if matches the L1 rate and if not, the authority concerned would offer for supply to the next lowest bidder.
8. This Court further finds it relevant to take note of Clause 5D of the Bidding document inasmuch as the said provision throws light on the aspect regarding Contract Rate. The said Clause 5D of the Bidding document being relevant is reproduced herein under:
“5(D). Contract Rate (Post Empanelled Process)
i. Firm Rate : After the empanelled process is completed and the empanelled manufacturers are asked to submit their price against a specific procurement, then empanelled manufacturers shall quote the rate (inclusive of all taxes, transportation, insurance, packaging charges, NABL testing charges, FOR destination and any incidental charges) for each of the items it intends to bid for. Bid with conditional/variable rates shall not be accepted. Import, Handling, clearing, transport charges etc., will not be paid separately. The delivery should be made at the location as stipulated in the purchase order placed with successful bidders. The rates as quoted, accepted and contracted shall remain firm or binding on the Bidder and any increase in the price will not be entertained till the completion of the supplies and any increase in the price (except increase due to Import Duty or any other statutory taxes) will not be entertained.
ii. No Bidder shall be allowed at any time on any ground, whatsoever it may be, to claim revision or modification in the rates quoted by him after last date fixed for receipt of bid. Representation to make correction in the Bid documents on the ground of Clerical error, typographical error, etc., committed by the Bidders in the Bids shall not be entertained after submission of the Bids.
iii. The rate shall be quoted in the unit rate and only for the composition as stated in the BOQ. All rates quoted are FOR, destination.
iv. Controlled Price/MRP: The price quoted by the bidders shall not, in any case exceed the controlled price, if any, fixed by the Government and the Maximum Retail Price (MRP). During the period of contract with the successful bidder, if the price of any item is reduced due to any reason including any Law or Act of the Central/State Government, the bidder shall be statutorily bound to intimate the reduced rates immediately to the Tender Inviting Authority and shall charge at the reduced rates. The Tender Inviting Authority is empowered to unilaterally effect such reduction as is necessary in rates, in case the bidder fails to notify or fail to agree to such reduction in rates.
v. The supplied packets/items should not contain the Price Tag, non conformity of which may cause rejection of the supply.”
9. Clause 5G of the Bidding document refers to Delivery, Shortage and Delay Penalty.
10. Clause 5H of the Bidding document stipulates debarment/blacklisting for failure in execution of supply/non-supply/default in supply. Taking into account that the Respondent Authorities vide the impugned order dated 17.11.2025 have blacklisted the Petitioner No.1, Clause 5H(i) and Clause 5H(ii) of the Bidding document assume importance and as such, the said two Clauses are reproduced herein under:
“5(H). Debarment/Blacklisting for failure in execution of supply/nonsupply/ default in supply.
i. Product debarment: In case of non-supply or incomplete supply (i.e. less than 90% of the total ordered quantity) by the approved manufacturer/importer (Firm) within agreed delivery period including the delay penalty period or any such extended delivery period then the concerned rate contract shall be cancelled and the manufacturer/importer (Firm) shall be debarred for participating in any bid called by the Authority for 5 years from the date of debarment for that item. In case the manufacturer/importer (Firm) supply 90% or more of the ordered quantity but fails to supply the entire quantity within the allowed delivery period then the firm shall be levied a penalty @ 10% of the value of the short supplied item and same shall be adjusted against the payment for supply.
ii. Firm Debarment: The firm shall be blacklisted and debarred from participating in any tender by the TIA or procuring agency for 3 (three) years if the company is debarred for all the items (where it has RC-“Rate Contract” for less than 3 times) or at least 3 items (where it holds RC-“Rate Contract” for more than equal to 3 items).”
11. From a perusal of the above quoted Clause reveals that in case of nonsupply or incomplete supply less than 90% of the total ordered quantity by the approved manufacturer/importer firm during the agreed delivery period including the delay penalty period or any such extended delivery period, then the concerned Rate Contract shall be cancelled and the manufacturer/importer firm shall be debarred for participating in any bid called by the Authority for 5 years from the date of debarment for that item. However, in the case where 90% or more of the ordered quantity have been supplied by the manufacturer/importer firm, a penalty of 10% would be levied of the value of the short supplied item and the same shall be adjusted against the payment for supply. The firm debarment is envisaged in Clause 5H(ii) of the Bidding document thereby debarring the manufacturer from participating in any tender issued by the Tender Inviting Authority or the Procuring Agency for three years, if the company is debarred from all the items (where it has RC – “Rate Contract” for less than three items) or at least three items (where it holds RC – “Rate Contract” for more than equal to 3 items).
12. A conjoint reading of Clause 5H(i) and Clause 5H(ii) of the Bidding document would show that there is a requisite for cancellation of the Rate Contract prior to taking steps for product debarment as well as firm debarment.
13. In the backdrop of the above, let this Court now take up the facts involved in the present case.
BRIEF FACTS OF THE CASE:
14. The Petitioner No.1 along with various other bidders duly participated in the said tender for empanelment issued on 09.02.2023. On 28.07.2023, the Petitioner No.1 along with 184 other companies and firms were empanelled for three years for supply of essential drugs as per specifications detailed out in the Annexure enclosed to the said Letter of Intent. The said Letter of Intent also includes various provisions which are akin to the Bidding document dated 09.02.2023 and as such, the same are not reiterated. The record further reveals that after the empanelment proceedings was over by issuance of Letter of Intent and entering into the empanelment agreements with various entities, a Notice Inviting Tender was issued on 12.02.2025 by the Respondent No.4 on behalf of the Respondent No.2 thereby inviting amongst the empanelled suppliers for submission of bids as regards the items as well as the respective tentative quantities to be supplied.
15. The Petitioner No.1 being empanelled, submitted its bid. Amongst various other essential drugs, the Petitioner No.1 was also the lowest bidder (L1 Bidder) in respect to the four essential drugs i.e. (i) Ceftriazone Powder for Injection 250 mg, Vial; (ii) Co-trimoxazole (Sulphamethaoxazole(A)plus Trimethoprime(B) Oral Suspension 200 mg (A) 40 mg (B)/5 ml, 50 ml bottle with measuring cap; (iii) Glimepiride Tablet 1 mg, 1 x 10; and (iv) Prednisolone Tablet 10 mg, 1 x 10. It is pertinent to observe that incomplete supply to these four essential drugs is subject matter of dispute in the present proceedings.
16. This Court also finds it very pertinent to observe that in the Notice Inviting Tender dated 12.02.2025, it was categorically mentioned at N.B.3 that the quantity indicated in the said Notice Inviting Tender is tentative only and purchase orders will be placed in phase wise manner as and when required.
17. The materials on record reveal that against each of the above four essential drugs, the Petitioner No.1 was issued two purchase orders each which have been enclosed as Annexures A4, A5, A6 and A7 to the Additional Affidavit filed by the Petitioners in the present proceedings.
18. It is the case of the Petitioners that in respect to these four items, the Petitioner No.1 being the L1 bidder, a Rate Contract fixing a particular rate in respect to supply of the various essential drugs including these four essential drugs have been entered into as would very much appear from a reading of Clause 5D of the Bidding document. The purchase orders which are issued in pursuance thereto are towards the procurement of supply as per the Rate Contract which have resulted pursuant to the submission of the bid by the Petitioner No.1 more particularly in respect to the four items. It is the case of the Petitioners that supply is required to be made in terms with the firm rate arrived at and all the purchase orders against each Rate Contract formed for each essential drug have to be taken up together for ascertaining the total amount of supply so made.
19. At Paragraph No.11 of the additional affidavit, the Petitioner No.1 had stated that against each of the four essential drugs, the Petitioner No.1 has been issued two purchase orders for each essential drug and the total supply so made by the Petitioner No.1 exceeds 90%. At paragraph No.11 of the said additional affidavit, a chart has been provided. Taking into account its relevance, the said chart is reproduced herein under:
20. The record further reveals that out of the eight purchase orders, in respect to four purchase orders, i.e. one purchase order against each item, the Petitioner No.1 in spite of being granted opportunity had failed to supply the entire quantity or for that matter has supplied less than 90%. Under such circumstances, a Show Cause Notice was issued on 26.08.2025 as to why penal actions for blacklisting/debarment against the Petitioner No.1 should not be taken. The Petitioner No.1 thereupon submitted a reply on 27.08.2025. Be that as it may, there were various further extension granted to the Petitioner No.1 to make the supply of the remaining quantity however, as the Petitioner No.1 failed to supply to the extent of 90% against each purchase orders for each item, the impugned Firm Debarment Notice was issued on 17.11.2025. To the said Firm Debarment Notice dated 17.11.2025, reference has been made to Annexure-A to the purchase orders where the Petitioner No.1 failed to supply the 90% of the quantity. The Petitioners being aggrieved had approached this Court by filing the present writ petition.
21. This Court vide an order dated 28.11.2025 issued notice thereby directing the Respondent Authorities to bring on record their stand so that an attempt can be made to dispose of the writ petition on the next date i.e. today.
22. It is seen that the Respondents have duly filed their affidavit-inopposition. In addition to that, the Petitioners had also filed their additional affidavit on 05.12.2025. The stand of the Respondent Authorities in the affidavit-in-opposition is specific and categorical to the extent that the Petitioner No.1 did not complete 90% of the supply against each of the four purchase orders reference to which have been made at Annexure-A to the impugned communication dated 17.11.2025. It is further mentioned that the delay in supplying had affected the supply of essential drugs to the Government Hospitals.
SUBMISSIONS MADE BY THE LEARNED COUNSELS FOR THE PARTIES:
23. Mr. M. Goswami, the learned Senior counsel appearing on behalf of the Petitioners submitted that the impugned communication dated 17.11.2025 is contrary to Clause 5H(i) and 5H(ii) of the Bidding document and as such, the impugned communication is liable to be set aside and quashed. He submitted that a perusal of the Bidding document dated 09.02.2023 would show as to how manufacturers can be empanelled for supply of essential drugs to various health facilities and upon empanelment, what is required to be done for the purpose of procurement of essential drugs. Referring to Clause 4B of the Bidding document, the learned Senior Counsel submitted that after conclusion of the empanelment process, a separate process has to be followed for the purpose of ascertaining the lowest price against a particular item amongst the empanelled bidders. Referring to Annexure A1 which is the Notice Inviting Tender (Limited Bidding) dated 12.02.2025, the learned Senior counsel submitted that the Respondent Authorities by way of this Notice Inviting Tender dated 12.02.2025 initiated the process to discover the lowest price against a particular item amongst the empanelled bidders. The learned Senior counsel further referring to Clause 4B(iii) of the Bidding document submitted that upon ascertaining the lowest price against each item, purchase orders are to be issued. The learned Senior counsel further referring to Clause 5D of the Bidding document submitted that the contract rate is to be ascertained and upon ascertaining the said contract rate, a Rate Contract comes into existence. The learned Senior counsel further referring to Annexure-A2 and A3 to the additional affidavit submitted that the Petitioner No.1 was found to be the L1 bidder in respect to various essential drugs including the four essential drugs, the incomplete supply for which the impugned actions were taken. It is the further submission of the learned Senior counsel that taking into account that the Petitioner No.1 herein was the L1 bidder in respect to the four essential drugs, the Petitioner No.1 was issued two purchase orders against each essential drug, the details of which have been given at Paragraph No.11 of the additional affidavit.
24. The learned Senior counsel referring to the Notice Inviting Tender dated 12.02.2025 further submitted that the quantity so mentioned in the said Notice Inviting Tender have been stipulated to be tentative and the purchase order would be placed in phase wise manner as and when required and therefore submitted that all purchase orders issued upon the formation of the Rate Contract would be a part of that Rate Contract. The learned Senior counsel submitted that from a perusal of Annexure A4 to A7 and the consolidated chart given in Annexure-A8 would show that against these four essential drugs, eight purchase orders were issued and the Petitioner No.1 has supplied more than 90%. The learned Senior counsel therefore referring to Clause 5H of the Bidding document submitted that as the Petitioner No.1 having supplied more than 90% against each essential drug, the question of cancellation of the Rate Contract does not arise in view of Clause 5H(i) of the Bidding document. Additionally, the learned Senior counsel submitted that without cancellation of the Rate Contract, the question of Product Debarment in terms with Clause 5H(i) of the Bidding document is not envisaged and without there being Product Debarment of at least three essential drugs, the question of Firm Debarment is not contemplated. The learned Senior counsel therefore submitted that the very basis on which the impugned communication dated 17.11.2025 was issued is contrary to the terms and conditions of the Bidding document and more particularly to Clause 5H (i) and Clause 5H(ii) of the Bidding document for which the impugned communication cannot be sustained.
25. Per contra, Mr. D. P. Borah, the learned Standing counsel appearing on behalf of the Respondents submitted that the Petitioner No.1 did not supply against the four purchase orders reference to which have been made in Annexure-A to the impugned communication dated 17.11.2025 and as such, the Respondent Authorities were justified in blacklisting and debarring the Petitioner No.1 from participating in any tender for three years in terms with the Clauses of the Bidding document as well as the Letter of Intent. The learned Standing counsel further submitted that the non-supply of the entire quantity of the essential drugs by the Petitioner No.1 has caused great inconvenience to various Government Hospitals as the drugs in question are essential drugs. He therefore submitted that this Court may not interfere with the impugned communication dated 17.11.2025 in public interest.
ANALYSIS AND DETERMINATION:
26. Before entering into the inter-se dispute between the parties to the present writ petition, this Court finds it appropriate to discuss as to what would be a Rate Contract (RC).
A Rate Contract (commonly known as RC) is an agreement between the purchaser and the supplier for supply of specified goods (and allied service, if any) at specified price and terms and conditions (as incorporated in the Agreement) during the period covered by the Rate Contract. In a Rate Contract, neither the quantity is mentioned nor there is any minimum drawal guarantee is given unless the terms of the Rate Contract provides so. In other words, the Rate Contract is in the nature of a standing offer from the supplier firm. Normally, the supplier firm/purchaser are entitled to withdraw/cancel the Rate Contract by serving an appropriate notice, if permitted by the terms of the contract. However, once a supply/purchase order is placed on the supplier for supply of a definite quantity in terms of the Rate Contract during the validity of the period of the Rate Contract, that supply order becomes a valid and binding contract.
27. This Court further finds it relevant at this stage to take note of the Assam Public Procurement Act, 2017 (for short ‘the Act of 2017’) as well as the Assam Public Procurement Rules, 2020 (for short ‘the Rules of 2020’) which are applicable in respect to the present type of procurement carried out by the Respondent Authorities.
28. Section 36(1) of the Act of 2017 specifically deals with Rate Contract. The said provision being relevant is reproduced herein under:
“36.(1) Rate Contract:
(a) A procuring entity may choose to engage in a rate contract procedure in accordance with the rules as may be made in this behalf, under this Act where it determines that. –
(i) the need for the subject-matter of procurement is expected to arise on an indefinite or repeated basis during a given period of time;
(ii) by virtue of the nature of the subject-matter of procurement, the need for it may arise during a given period of time.
(b) A procuring entity may award a rate contract on the basis of open competitive bidding or by means of other procurement methods in accordance with the provisions of this Act.
(c) Subject to the rules as may be made in this behalf, the procedure for rate contract shall include the following, namely :-
(i) the manner in which rate contract is to be entered into, including selection of the method of bidding to be followed; and
(ii) the manner in which a procurement contract has to be entered into using rate contract procedure.”
29. A perusal of the above quoted provision would show that the procedure for Rate Contract would be provided in the Rules to be framed. Rule 24 of the Rules of 2020 stipulates the methods of procurement and procedure thereof. For the purpose of Rate Contract, the procedure is spelt out in Clause (I)(1) of the Rule 24 of the Rules of 2020. Rule 24(I)(1) being relevant is reproduced herein under as the same would be relevant for adjudication of the present dispute.
“24(I)(1) Rate Contract :-
(i) Subject to the satisfactions of the conditions contained in clause (a) of sub-section (1) of Section 36 of the Act, a procuring entity may engage in a rate contract procedure in accordance with the provisions laid down herein below.
(ii) The procedure for concluding rate contracts and for procurement in the rate contract method shall consist of two phases. In the first phase, the rate contracts, including parallel rate contracts, where required, shall be concluded through Open Competitive Bidding without any commitment of quantum of procurement. In the second phase, procurement of the particular subject-matter in the required quantities, as essential and necessary to satisfy the public need, may be made from time to time by issue of supply or work orders at those rates during the period of the rate contract.
(iii) In the first phase, single envelope or two envelope bids, in terms of Section 13 of the Act, shall be invited by issuing Notice Inviting Bids as in the Open Competitive Bidding method and incorporating the following conditions in the bid documents :
(a) In the Bidding Documents, including NIB, approximate quantities of the requirement estimated on the basis of the annual off take shall be indicated along with the specifications thereof wherein it shall also be specifically mentioned that no minimum quantity of procurement is guaranteed;
[(b) The period of the rate contract shall be clearly indicated in the Notice Inviting Bids and the other Bidding Documents. The period of rate contracts shall normally be one year from the date of contract but may be shorter if the procurement entity arrives at a reasoned conclusion that market prices would fall significantly in the short term. A shorter period may be selected and specified in the bidding documents by the procuring entity after recording the reasons thereof in writing in the case file which shall form part of the procurement records;]
(c) The terms and conditions of the rate contract, including provision for liquidated damages, shall be similar to those prescribed for procurement by Open Competitive Bidding;
(d) A clause to the effect that the procuring entity or the rate contractor are both entitled to withdraw or cancel the rate contract by serving due notice on such other giving not less than fifteen (15) days' time;
(e) A clause to the effect that the procuring entity reserves its right to renegotiate the price with the rate contract holders during the validity of the rate contract;
(f) The rate contract shall be entered into for price, without commitment for quantity and time of supply of the subject-matter of procurement, with the bidder of the lowest priced bid or most advantageous bid fulfilling the laid down eligibility and qualification criteria including past performance against such rate contract, availability of ISI mark or service centres across the State and such other criteria as required and these conditions as applicable shall be specified in the bidding documents;
(g) The procuring entity shall also reserve its right to conclude parallel rate contracts with different bidders, in addition to the responsive bidder submitting the lowest priced bid or most advantageous bid, but at the rates of such bidder;
(h) That, in case the price quoted by the lowest responsive bidder is not reasonable or found to be high, the price may be negotiated with lowest responsive bidder with whom the rate contract may be concluded consequent only upon lowering of the bid price to the desired level. If otherwise, fresh bids shall be invited;
(i) The prices under a rate contract shall be invariably subject to 'price fall clause' and this shall be specified in the bidding documents. A clause regarding price fall shall be incorporated in the terms and conditions of rate contract :
Explanation I : A price fall clause is a price safety mechanism in rate contracts which provides that if the original rate contract holder quotes a lesser price or reduces its price to render similar goods, works or services of a price lower than the rate contract price to anyone in the State, at any time, during the validity of the rate contract, the rate contract price shall be automatically lowered or reduced accordingly to such lesser or reduced price quoted for the subject-matter of procurement with effect from the date of such quoting or reducing, and the rate contracts shall also be amended accordingly.
Explanation II : In such cases, the firms holding parallel rate contracts shall also be given opportunity to reduce their price by notifying the lowered or reduced price allowing them fifteen days’ time to intimate their acceptance to the revised price. Similarly, if a parallel rate contract holder firm reduces its price during the currency of the rate contract, its reduced price shall be conveyed to other parallel rate contract holders as well as the original rate contract holder for corresponding reduction in their prices. If any rate contract holders do not agree to the reduced price, further transaction with it shall not be conducted:
(iv) If, consequent to invitation of bids, only one bid is received, or consequent to technical evaluation, if only one bid is found eligible or qualified, such bid shall be termed as ‘single bid’ in respect of that subject-matter of procurement or item and in all cases where such single bid is received, bids may be handed on the lines of procedure laid down in sub-rule (20) of Rule 23.
(v) Rate contracts for Machine Tools, Information Technology Product, Original Equipment Manufacturer and Ancillary spares and other similar such products, where the design feature, performance parameters, etc., vary significantly among the products of different manufacturers and even between different models of the same manufacturer and where equitable comparison of prices of such products or services is not feasible, may be finalised and concluded on the offered percentage of discount on Net Dealer Price (NDP) or discounted MRP basis, generally known as "Catalogue basis".
(vi) Parallel rate contracts :-
(a) If the quantity of the subject-matter of procurement required is beyond the capacity of the lowest bidder or the subject-matter of procurement is of a critical or vital nature, rate contracts may be entered with more than one bidder in the order of their standing in the final evaluation of bids but at the successful lowest bid rate as parallel rate contracts :
Provided that such provision for parallel rate contracts is specified in the bidding documents.
(b) Where parallel rate contracts are needed though the price of lowest responsive bidder is reasonable, the rate contract shall first be awarded to such lowest responsive bidder. Thereafter, the price of such lowest bidder shall be counter- offered to the responsive bidder quoting the next higher rate, or rates in case more than one parallel rate contractors are needed, with intimation to the lowest bidder, asking them if they so desire to reduce their price and send revised bids accordingly in sealed covers platform, to be opened in public at a specified place, or on e-procurement platform, to be opened in public at a specified place, date and time as per the prescribed procedure. Bidders who accept the counter-offered rate or rate lower than it shall be awarded parallel rate contracts. If the lowest bidder also lowers its rate in its revised offer, the same may also be accepted with effect from that date and its rate contract amended accordingly. All such parallel rate contracts shall be awarded simultaneously for the sake of transparency.
(c) In cases where parallel rate contracts are necessary, and where even the bid quoted by the lowest responsive bidder is not reasonable, price negotiation shall be conducted with that bidder in the first instance. The rate contract may be concluded if that bidder agrees to bring down the price to the desired level and that price may be counter offered to other responsive bidders for further action in identical manner as prescribed in clause (b) above. If however, the lowest bidder does not agree to reduce its price in the first instance itself, then the price which has been decided as reasonable may be counter offered to all the other responsive bidders who had quoted higher price and also to the lowest bidder for further action as in clause (b) above.
(vii) In the second stage, the supply or work order shall be placed to the rate contractor as and when needed at the contracted price for supply or execution of the required quantity of the subject-matter of procurement mentioning the place of supply or execution and the delivery schedule.
[(viii) The procuring entities shall ensure new rate contracts become operative right after the expiry of the existing rate contracts without any gap. In case it is not possible to conclude the new rate contracts due to unavoidable reasons, the existing rate contracts may be extended at the same rates, terms and conditions for a further period not exceeding another one year after ascertaining that the wholesale market prices of the subject-matter of procurement or its constituents have not fallen during the period.]
(ix) Except as otherwise provided for in this rule, all other provisions of these rules shall, mutatis mutandis, apply to procurement by rate contracts.
[(x) For procurements using rate Contract, if it is estimated that the value of procurement shall exceed beyond the e-procurement threshold in a Financial Year, then the Rate Contract has to be done mandatorily through the e-procurement mode. For Rate Contracts done through offline mode, the procuring entity should ensure that the e-procurement threshold is not crossed during the entirety of the contract period and extension (if any).]”
30. In the backdrop of the above, let this Court now analyze the facts and disputes involved.
31. In the foregoing paragraphs of the instant judgment, this Court has duly taken note of the Notice Inviting Tender (Framework Agreement) i.e. the Bidding document dated 09.02.2023 and the relevant Clauses. A perusal of the Bidding document would show how the Manufacturers of the essential drugs would be empanelled as well as the manner in which the essential drugs are to be procured.
32. Clause 4B of the Bidding document as quoted above stipulates how the Bid evaluation would be carried out for the purpose of empanelment of the bidders and thereupon a contract would be signed with the empanelled bidders which would be valid for a period of three years with option to further extend the period for another one year.
33. A further perusal of Clause 4B of the Bidding document would transpire that the process of empanelment is completely different from the process of procurement of the essential drugs inasmuch as, after the empanelled process is over, a separate process would be initiated to discover the lowest price against the particular item amongst the empanelled bidders. It further stipulates that the process of price discovery would be initiated against every proposed procurement. The said process is akin to the stipulations contained in Rule 24(I)(1)(iii) of the Rules of 2020. This price discovery process upon being initiated and the lowest price having been ascertained against each essential drug would lead to the formation of a Rate Contract whereby against that particular essential drug, a specified firm rate is fixed as contemplated in Clause 5D of the Bidding document.
34. Clause 4B(iii) of the Bidding document contemplates two aspects. The first aspect is a slight departure from the traditional or conventional Rate Contract inasmuch as guarantee is given that the L1 Bidder would be given supply orders to the tune of 60% of the procurement and the L2 and L3 bidder if they match the L1 rate to a guarantee of 25% and 15% respectively. The second aspect of Clause 4B(iii) is the formation parallel rate contract as envisaged in Rule 24(I)(1)(vi) of the Rules of 2020. Additionally, it is also clear that though the L1 bidder is bound by the L1 rate but the L2, L3 or any other lower bidder are not bound by the L1 rate. At this stage, if Clause 5D(i) of the Bidding document is taken into account, it stipulates that the rate quoted by the L1 bidder is a firm rate which will include the price of the essential drug, the incidental costs FOR destination. In other words, the price of the essential drug is fixed till it reaches the destination.
35. In the context of the above, it is now therefore relevant to take note of Clause 5H of the Bidding document which relates to debarment/blacklisting for failure in execution of supply/non-supply/default in supply.
36. Clause 5H(i) of the Bidding document relates to Product Debarment. To appreciate the aspect of product debarment, it is to be kept in mind that the L1 bidder is bound by the rate quoted which led to the formation of the Rate Contract, whereas the L2 or L3 or any other bidder is not bound by the L1 rate rather it is optional upon them to accept the L1 rate or in other words, the L2 or L3 or any other lower bidder can agree to supply at the L1 rate and if they agree, it would result in a binding contract against them.
37. At this stage, this Court finds it apposite to discuss the concept of parallel rate contract as envisaged in Rule 24(I)(1)(vi) of the Rules of 2020. A perusal of the said provision would show that a rate contract would be formed qua the L1 bidder but upon the L2 or L3 or any other lower bidder accepting the L1 bid, it would result into a parallel rate contract. The reason why it is referred to as a parallel rate contract is that this parallel rate contract would have no relation with the rate contract with the L1 bidder but the rate at which it would be supplied would be the L1 rate. The L2 or L3 or any other lower bidder having accepted to supply at the L1 rate, it would result in issuance of procurement/purchase orders against a specified quantity and within a particular period which would be binding.
38. It is also pertinent to observe the necessity of having parallel rate contract with the other bidders other than the L1 bidder inasmuch as if these bidders who later on accepts the L1 rate but fails to supply the essential drugs or makes incomplete supply less than 90%, then such parallel rate contract would be cancelled without affecting the rate contract entered into by and between the L1 bidder and the purchaser. In the similar vein, if the rate contract entered into by and between the L1 bidder and the purchaser is cancelled, it would not affect the parallel rate contracts as they would be independent of the rate contract entered into by and between the other bidder later on accepting the L1 rate with the purchaser. This aspect is very relevant to take note of when Clause 5H(i) of the Bidding document is analyzed.
39. In the backdrop of the above, let this Court further analyze Clause 5H(i) of the Bidding document which would show that upon issuance of a purchase order to the L1 bidder or to any other bidder who agrees to supply at the L1 rate and if there is a failure to supply or there is a incomplete supply to the extent of less than 90% of the total ordered quantity, the rate contract for the essential drug would be cancelled and upon such cancellation, the manufacturer/importer firm shall be debarred from participating in any bid called by the authority for five years from the date of debarment for that essential drug/item. The cancellation of the rate contract would be qua the L1 bidder or the parallel rate contract qua the bidders who matches the L1 rate. It may not be out of place to observe herein that in a circumstance, where there is no parallel rate contract but only one rate contract and the said rate contract being cancelled, it would lead to a fresh procurement process for the purpose of ascertaining the lowest price for the item in question. It is under such circumstances, Clause 5H(i) of the Bidding document imposes a penalty of Product Debarment in respect to the item for a period of 5 years. Such penalty is in a form of deterrent so that the supplier does not fail to supply or supplies less than 90% of the total ordered quantity.
40. Clause 5H(ii) of the Bidding document pertains to ‘Firm Debarment’ i.e. the manufacturer or the importer with whom a rate contract has been entered into for less than three items when debarred for all the items or when the manufacturer/supplier is debarred at least for three items where it holds rate contract for more than or equal to three items. It is to be kept in mind that Firm Debarment is a more punitive action than a Product Debarment inasmuch as upon Product Debarment, only one item is debarred whereas in the case of Firm Debarment, the manufacturer as a whole is debarred irrespective of how many items it had a Rate Contract.
41. This Court finds it pertinent to observe that the recourse to Firm Debarment can only take place when a manufacturer is debarred for all items where it has a rate contract for less than three items and a manufacturer would be debarred when the manufacturer has a rate contract of more or equal to three items and three items have been debarred. It is apposite to observe that the items first have to be debarred by cancellation of the rate contract or in other words, Product Debarment precedes Firm Debarment.
42. It is therefore the opinion of this Court that without there being a Product Debarment upon cancellation of the Rate Contract for the item, the question of going into Firm Debarment is not envisaged on a conjoint reading of Clause 5H(i) and Clause 5H(ii) of the Bidding document.
43. In the instant case, it is seen that the Respondent Authorities have resorted to taking action for Firm Debarment in terms with Clause 5H(ii) of the Bidding document without carrying out Product Debarment of the four essential drugs of the Petitioner No.1 by cancellation of the Rate Contracts against each of the four items. On this count alone, the impugned communication dated 17.11.2025 cannot be sustained in law.
44. This Court further finds it relevant to take note of another very important aspect taking into account that the Respondents herein have on the basis of non-supply of 90% of the ordered quantity in respect to one purchase order against each four essential drugs arrived at an opinion that the Petitioner No.1 had failed to supply 90%. This aspect would be apparent from Annexure-A to the impugned communication dated 17.11.2025.
45. It is relevant to take note of that a perusal of Clause 5H(i) of the Bidding document do not refer to procurement/purchase orders but refers to the total ordered quantity and non-supply of 90% of the total ordered quantity would lead to Product Debarment.
46. In the instant case, in respect to the four items namely (i) Ceftriazone Powder for Injection 250 mg, Vial; (ii) Co-trimoxazole (Sulphamethaoxazole(A)plus Trimethoprime(B) Oral Suspension 200 mg (A) 40 mg (B)/5 ml, 50 ml bottle with measuring cap; (iii) Glimepiride Tablet 1 mg, 1 x 10; and (iv) Prednisolone Tablet 10 mg, 1 x 10, the Petitioner No.1 being the L1 bidder, separate rate contracts have come into existence by and between the Petitioner No.1 and the Respondent Authorities against all the four items. Two purchase orders each have been issued to the Petitioner No.1 as would be apparent from Annexure A4 to A7 of the Additional Affidavit. The consolidated table so prepared at Annexure-A8 to the Additional Affidavit reveals that no doubt the Petitioner No.1 did not complete 90% in respect to one purchase order against each of the four item but the overall supply so made against the total ordered quantity against each four items was much more than 90%.
47. Under such circumstances, the question of cancellation of the rate contract or product debarment in terms of Clause 5H(i) of the Bidding document did not arise. At the most, the Respondent Authorities could have resorted to Clause 5H(i) of the Bidding document to levy the penalty of 10% of the value of the short supply item by adjusting the same against the payment for the supply or could have made alternate purchase. But in no case, the question of Product Debarment or Firm Debarment arises in the facts and circumstances of the instant case.
CONCLUSION:
48. Accordingly, the instant writ petition therefore stands disposed of with the following observations and directions:
(i) The impugned Debarment Notice bearing No.588121/20193 dated 17.11.2025 is set aside and quashed.
(ii) This Court further observes that in view of the setting aside of the impugned Debarment Notice bearing No.588121/20193 dated 17.11.2025, there shall be no impediment upon the parties to act in accordance with the terms and conditions of the contract entered into by and between the Petitioner No.1 and the Respondents.
(iii) There shall be no orders as to costs.
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