State Can't Forfeit EMD After Bid Validity Expires; Show Cause Notice Mandatory: HP High Court Quashes Intas Pharma's Blacklisting

The Himachal Pradesh High Court has quashed an order of blacklisting and directed the refund of Earnest Money Deposit (EMD) to Intas Pharmaceuticals, holding that once the bid validity period has expired, the State cannot penalise a bidder for refusing to extend the bid validity. The Court further held that a three-year debarment has serious civil and adverse consequences and cannot be imposed without prior issuance of a show-cause notice.A Division Bench of Chief Justice G.S. Sandhawalia and Justice Jiya Lal Bhardwaj remarked:"Once Clause 2 specifically provides that each bid shall be valid for a period of 180 days… the action on the part of the respondents to forfeit the amount is unjust and arbitrary".Briefly put, the State of Himachal Pradesh issued an e-tender for the supply of medicines and drugs, and the last date for submission was 23rd May 2023. The petitioner (Intas Pharma) participated in the tender and deposited ₹2,00,000 as Earnest Money Deposit. However, in February 2024, 271 days after bid submission, the petitioner was asked to extend the bid validity period for certain products. The petitioner declined the bid, stating that the bid's validity had expired.Later, the State forfeited the petitioner's EMD and debarred the petitioner for three years on the ground that it had not complied with the terms and conditions of the tender document. Aggrieved, the petitioner filed a writ petition before the High Court.The State contended that the forfeiture was justified under Clause 5(F) as the petitioner failed to confirm rates. The State further argued that because the petitioner submitted deficient documents on 25.08.2023, the 180-day validity period should commence from that date.Rejecting the State's contention as "ill-founded", the Court stated that Clause 5(F) could not be invoked after the expiry of the bid validity period. The Court noted that the 180-day period commenced from the last date of bid submission (23.05.2023) and expired on 24.11.2023. Consequently, the petitioner was "not under any obligation to extend the validity period".On the issue of debarment, the Bench relied on the Supreme Court judgment in Gorkha Security Services vs. Govt. of NCT of Delhi, noting that blacklisting amounts to “civil death.” The Court held that the impugned order was passed without a mandatory show-cause notice, thereby violating the principles of natural justice (audi alteram partem).Thus, the Court allowed the writ petition and remarked that the forfeiture of EMD was illegal, arbitrary and beyond the terms of the tender. Significantly, the Court clarified that it would "not remand the matter for the purpose of blacklisting" because the forfeiture action itself was found to be bad on the merits due to the expiry of the bid validity.Case Name: Intas Pharmaceuticals Limited v/s State of H.P. and anotherCase No.: CWP No. 1834 of 2018Date of Decision: 31.12.2025For the Petitioner: Mr.Neeraj Gupta, Senior Advocate with Mr. Ajit Pal Singh Jaswal and Mr. Pranjal Munjal, Advocates. For the Respondents: Mr. Pranay Pratap Singh, Additional Advocate General.Click Here To Read/Download Order

State Can't Forfeit EMD After Bid Validity Expires; Show Cause Notice Mandatory: HP High Court Quashes Intas Pharma's Blacklisting

Mehak Aggarwal

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