( 2025:HHC:34141 ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No.13948 of 2025 Date of Decision:- 25.09.2025 Yacca Pharmaceuticals Private Limited ....Petitioner Versus The State of Himachal Pradesh and ....Respondents Others Coram The Hon’ble Mr. Justice G.S. Sandhawalia, Chief Justice The Hon’ble Mr. Justice Bipin C. Negi, Judge. Whether approved for reporting?1 For the Petitioner : Mr. Vishwa Bhushan and Mr. Gurmeet Bhardwaj, Advocate. For the Respondents : Mr. Pranay Pratap Singh, Additional Advocate General, for the respondents-State. G.S. Sandhawalia, Chief Justice (Oral). The writ petitioner challenges the order dated 21.03.2025 (Annexure P-12), whereby on account of the non- deposit of the Performance Security, the EMD has been forfeited and has been debarred from participation in the tender of the Department of Health & Family Welfare, Government of Himachal Pradesh for a period of three years, for not submitting the request performance guarantee in purusance to the award of Contract. 1 Whether reporters of Local Papers may be allowed to see the judgment? 2 2. The arguments as such raised primarily is that the necessary show-cause notice as such was not issued regarding the debarment as such from participation of the tender for a period of three years and reliance has been placed upon the judgment passed in Gorkha Security Services Vs. Government (NCT of Delhi) and Others (2014) 9 SCC 105, in this context. 3. Counsel for the respondents-State on the other hand has submitted that the notices were sent by e-mail, vide e-mails dated 03.02.2024, 16.03.2024, 09.04.2024 and 29.04.2024 requesting the petitioner to submit the performance security within two days positively. 4. We have also gone through the said e-mails and the perusal of the said e-mails would go on to show that there is not a whisper regarding the fact that the petitioner would be debarred for a period of three years, which is the order now also passed. 5. Counsel for the respondents-State has referred to the communication dated 15.06.2024 (Annexure R-2/II) that the petitioner had been put to notice that the EMD deposited is being forfeited. It is further pointed out with reference to Clause 5, whereby the debarment Clause also found mention in the said communication. 3 6. The factual matrix apparently is that the period of Contract was one year as per the e-tender notice for supply for Medicines & Drugs to H.P. Government Health Institutions (Annexure P-2) issued and as per the terms & conditions of Clause 6 the Performance Security Deposit and Agreement was to be executed on a non-judicial stamp paper and performance security was to be given within ten days after the date of Letter of Award/Information. It is not disputed that the award was made on 26.08.2023 (Annexure P-4) and the petitioner was asked to sign the Contract Agreement on the format available and give his consent to extend the bid validity period. A perusal of the agreement which was entered into on 01.09.2023 (Annexure P- 5) would go on to show that the supply was to commence within 20 days and to be completed within 45 days from the date of issuance of the purchase order. Thus, from the above terms & conditions, it would be clear that from 01.09.2023 to 31.08.2024, the petitioner had continued to supply the medicines as such and the only action taken during the Contract period was that the EMD was being forfeited by Annexure R-2/II on 15.06.2024. 7. The petitioner had submitted a representation on 17.01.2024 (Annexure P-10) that Performance Security on 50% of the amount may be allowed to be given and once the business 4 matures, the remaining 50% security would be given and the necessary request had been made for consideration. Apparently, no specific order was passed on the said request and the respondents-State continued to sleep over the matter and the currency of the Contract ran out on 31.08.2024. As noticed earlier, decision of forfeiture of EMD of Rs. Two lakhs was issued on 15.06.2024. The impugned order dated 21.03.2025 (Annexure P-12) was than thereafter passed that the EMD was forfeited and the petitioner was also debarred for a period of three years as noticed above. The said order reads as under:- “Whereas, M/s Yacca Pharmaceuticals Private Limited did not submit the performance security/Bank Guarantee for the e-tender of Medicines & Drugs vide tender ID- 2023_DFHW_68879_1 being L1 bidder. Whereas, tender document Clause 5 Earnest Money Deposit and Cost of Tender Document (Point: F) is reproduced as under:- “In case if the successful bidder fails to sign the agreement and to deposit the Performance security as prescribed and scheduled or withdraws its bid within its validity after award of contract, the EMD will be forfeited and the successful bidder will be debarred from participation in the tender of the Department of Health & Family Welfare Govt. of HP for a period of three years.” Whereas, the above mentioned firm have not complied with the terms and conditions of the said tender, therefore, as per the decision taken in the State Level Store Purchase Committee (SLSPC) meeting dated 19.02.2025 in view of the aforementioned clause, the EMD amount of the following firm is hereby forfeited and debarred for participation in the tender of the Department of Health & Family Welfare Govt. For a period of three years”. 5 1. M/s Yacca Pharmaceuticals Private Limited, 11th KM Stone, Dehradun Road, Roorkee-247667 (Uttarakhand) The indenting officers are hereby directed not to issue supply orders to the above mentioned firm with immediate effect. All the indenting officers are also directed to initiate action as per the Clause 5 accordingly.” 8. It is thus, apparent that there was no urgency as such to debar the petitioner and the necessary show-cause notice had not been issued, which has been held to be mandatory as per the law laid down in Gorkha Security Services case (supra). The relevant portion of the said judgment reads as under:- “21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and default he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactory explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 22 to 28 xxxxxxx 29. No doubt, rules of natural justice are not embodied rules nor can they be lifted to the position of fundamental rights. However, their aim is to secure justice and to prevent miscarriage of justice. It is now well-established proposition of law that unless a statutory provision either specifically or by necessary implication excludes the application of any rules of natural justice, in exercise of 6 power prejudicially affecting another must be in conformity with the rules of natural justice.” 9. As per Clause 6 of the tender the Performance Security Deposit and Agreement was to be executed within ten days from the date of intimation of acceptance and the Department was under bounden duty as such to ensure that the Performance Guarantee was to be furnished within ten days from the letter of award and there is discretion further to annul the award and forfeit Bid Security under Clause (iii). The relevant Clause reads as under:- “6. Performance Security Deposit & Agreement A. Agreement: The successful bidder shall execute an agreement (2 copies) on a non-judicial stamp paper of value of Rs.100/- (Rs. One hundred), stamp duty to be paid by the successful bidder within Ten days from the date of the intimation from the Purchaser, informing that their tender has been accepted. The Specimen form of agreement is available in Annexure- “G”. B. Performance Security: i. Within Ten days after the issue of Letter of Award/Information about acceptance of the bid by the Purchaser, the successful bidder shall furnish to the Purchaser, Performance Security, valid up to ninety days after the date of completion of all contractual obligations by the successful bidder, including the warranty obligations. ii. The amount of Performance Security shall be @ 5% (five percent) of the estimated contract value (based on requirement as given in Annexure L) subject to a minimum of Rs.10,000.00), performance security may be furnished in the form of irrevocable Bank Guarantee (including e-Bank Guarantee), in prescribed format issued by a commercial bank in India. iii. If the successful having been called upon by the Purchaser to furnish Performance Security, fails to do so within the specified period, it shall be lawful for the 7 Purchaser at its discretion to annul the award, forfeit Bid Security, besides taking any other punitive action, debarring from participation for a period of three years.” 10. Apparently, during the pendency of the Award, no action was taken for annulling the Award. The State continued to accept the medicines after the tenure. As such, a harsh order has been passed without complying with the principles of natural justice. It is not the case of the State it has suffered any loss thereafter and counsel also does not press the issue regarding the forfeiture of the EMD and is only pressing for the relief of blacklisting. 11. In UMC Technologies Private Limited Vs. Food Corporation of India and Another (2021) 2 SCC 551, it has been held that blacklisting has also long-lasting civil consequences for the future business prospects of the blacklisted person, the domino effect, which can effectively lead to the civil death of a person. The relevant paragraphs reads as under:- “15. In the present case as well, the appellant has submitted that serious prejudice has been caused to it due to the Corporation’s order of blacklisting as several other government corporations have now terminated their contracts with the appellant and/or prevented the appellant from participating in future tenders even though the impugned blacklisting order was, in fact, limited to the Corporation’s Madhya Pradesh regional office. This domino effect, which can effectively lead to the civil death of a person, shows that the consequences of blacklisting travel far beyond the dealings of the blacklisted person with one 8 particular government corporation and in view thereof, this Court has consistently prescribed strict adherence to principles of natural justice whenever an entity is sought to be blacklisted. 16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. in the following terms: (SCC pp. 74-75, paras 12, 15 & 20) “12… The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 15. … The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are “instruments of coercion”. 20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.” 17. Similarly, this Court in Raghunath Thakur v. State of Bihar4 struck down an order of blacklisting for future contracts on the ground of non- observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows: (SCC p. 230, para 4) 9 “4. … [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.” 19. In light of the above decisions, it is clear that a prior show-cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision-making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.” 12. Keeping in view the above, we set aside the order dated 21.03.2025 to the limited extent of debarment for a period of three years, in view of the fair stand taken by the counsel for the petitioner. 13. Pending miscellaneous application(s) if any, shall also stand disposed of. (G.S. Sandhawalia) Chief Justice (Bipin C. Negi) Judge 25th September, 2025 (munish thakur)