Introduction:

In Intas Pharmaceuticals Limited v. State of Himachal Pradesh and another (CWP No. 1834 of 2018, decided on 31.12.2025), the Himachal Pradesh High Court delivered a significant ruling reinforcing the sanctity of tender conditions, bid validity periods, and procedural fairness in government contracting. A Division Bench comprising Chief Justice G.S. Sandhawalia and Justice Jiya Lal Bhardwaj examined the legality of forfeiture of Earnest Money Deposit and imposition of a three-year debarment on a pharmaceutical company that had declined to extend its bid validity after the contractually stipulated period had expired. The dispute arose from an e-tender issued by the State for supply of medicines and drugs, with the last date for submission of bids being 23.05.2023 and a clearly specified bid validity of 180 days. The petitioner participated in the tender and deposited an Earnest Money Deposit of ₹2,00,000 in accordance with the tender conditions. Nearly nine months later, long after the bid validity period had lapsed, the State sought extension of bid validity for certain products, which the petitioner refused on the ground that its offer was no longer alive. Treating this refusal as a breach, the State not only forfeited the EMD but also imposed a three-year debarment, effectively blacklisting the petitioner from participating in future tenders. Challenging these actions as arbitrary, illegal, and violative of natural justice, the petitioner approached the High Court, bringing into focus fundamental questions concerning contractual obligations post-expiry, limits of executive power in tender matters, and the constitutional requirement of fairness in administrative action.

Arguments:

On behalf of the petitioner, it was contended that the entire action of the State was founded on a misreading of the tender conditions and an impermissible attempt to resurrect contractual obligations that had already lapsed by efflux of time. Senior counsel argued that Clause 2 of the tender document unequivocally provided that each bid would remain valid for a period of 180 days from the last date of submission, which in the present case expired on 24.11.2023. Once this period elapsed without acceptance, the bid stood extinguished in law, and no obligation survived that could compel the bidder to extend validity or confirm rates. It was urged that the request made in February 2024, nearly 271 days after bid submission, was dehors the tender conditions, and refusal to accede to such a request could not be construed as non-compliance or breach. The forfeiture of EMD, it was submitted, was therefore wholly arbitrary and contrary to the express terms of the tender. With regard to debarment, the petitioner contended that blacklisting has grave civil consequences, affecting the fundamental right to carry on trade and business under Article 19(1)(g) of the Constitution, and cannot be imposed without strict adherence to principles of natural justice. No show-cause notice proposing blacklisting was ever issued, nor was the petitioner given an opportunity to explain why such an extreme penalty should not be imposed, rendering the impugned action void ab initio.

The State, on the other hand, sought to justify its action by relying upon Clause 5(F) of the tender document, contending that the petitioner failed to confirm rates and thus attracted forfeiture of EMD. It was further argued that the petitioner had submitted deficient documents on 25.08.2023, and therefore the 180-day bid validity period ought to be reckoned from that date and not from the original last date of bid submission. According to the State, once the validity period was recalculated in this manner, the request for extension and subsequent penal action were within the permissible contractual framework. On the issue of debarment, the State attempted to characterise the action as a consequential administrative measure arising out of breach of tender conditions, asserting that the petitioner was aware of the implications of non-compliance and thus could not complain of violation of natural justice.

Court’s Judgment:

The High Court decisively rejected the State’s contentions and allowed the writ petition in its entirety, holding that both the forfeiture of Earnest Money Deposit and the imposition of three-year debarment were illegal, arbitrary, and unsustainable in law. Interpreting Clause 2 of the tender document, the Bench held that the bid validity period of 180 days commenced from the last date of bid submission, i.e., 23.05.2023, and expired on 24.11.2023, leaving no ambiguity whatsoever. The Court categorically termed the State’s argument that the validity period should begin from the date of submission of deficient documents as “ill-founded,” observing that such an interpretation would amount to rewriting the tender conditions to the detriment of bidders. Once the validity period expired, the petitioner was under no contractual or legal obligation to extend the bid or confirm rates, and any refusal thereafter could not attract penal consequences. The Bench further held that Clause 5(F) could not be invoked after the expiry of bid validity, as forfeiture provisions presuppose the subsistence of a valid and binding bid. Characterising the forfeiture as unjust and arbitrary, the Court directed refund of the EMD to the petitioner.

On the issue of blacklisting, the Court underscored that debarment for three years carries serious civil and adverse consequences, effectively excluding an entity from participating in public procurement and impacting its business reputation. Relying on the Supreme Court’s decision in Gorkha Security Services v. Government of NCT of Delhi, the Bench reiterated that blacklisting amounts to “civil death” and mandates strict compliance with the principles of natural justice, including prior issuance of a clear and specific show-cause notice. Since no such notice was issued to the petitioner, the impugned debarment order was held to be vitiated by violation of audi alteram partem. Importantly, the Court clarified that it would not remand the matter for reconsideration of blacklisting, as the very foundation of the State’s action—the alleged breach arising from refusal to extend bid validity—was found to be legally untenable. Accordingly, the writ petition was allowed, the forfeiture and debarment were quashed, and the State was directed to refund the Earnest Money Deposit, reaffirming that executive action in tender matters must remain strictly within the four corners of contractual terms and constitutional fairness.