The court reaffirmed that deductions from contracts must adhere to principles of natural justice, requiring prior notification and justification for any recovery actions.

ORDER :

ANIRUDDHA P. MAYEE, J.

1. Rule, returnable forthwith. The learned counsel Mr. Utkarsh Sharma waives service of rule on behalf of the respondent. By consent of the learned counsels for the parties, the matter is taken up for final hearing.

2. By the present Special Civil Application, the petitioner seeks a writ in the nature of mandamus to quash and set aside the order dated 02.01.2025 passed the respondent Corporation of effecting the recovery of Rs.93,29,525/-from the other ongoing contracts of the petitioner as being arbitrary and illegal.

3. The factual matrix in the present case is that the respondent Corporation published the tender notice bearing No.GMSCL/Drugs/D- 669/RC/2021 for supply of different tablets, capsules, injections, miscellaneous and surgical items as mentioned therein. That the petitioner herein submitted its bid for Amoxicillin Capsules 500mg having item code No.1016 mentioned at serial No.6 of the tender notice. The petitioner and other two companies were declared as successful bidders. The petitioner was issued an offer letter dated 31.08.2021 for supply of capsules to the extent of 30% of the order quantity. The other two companies, who were also declared as successful bidders, were awarded the order to the extent of 30% and 40% of the order quantity. The petitioner, who was awarded 30% of the order quantity, did not enter into the agreement or pay any security deposit as stated in the offer letter. Accordingly, no agreement came to be executed between the petitioner and the respondent Corporation. Due to non-submission of agreement and security deposit for issuance of rate contract by the petitioner, the respondent Corporation initiated the proceedings for debarment against the petitioner and the debarment order bearing No.GMSCL/DRUG/Debar/2023-24/22280-312 dated 25.10.2023 came to be issued by the respondent Corporation debarring the petitioner company for a period of one year for item No.1016 capsule. That the petitioner had ongoing rate contracts in respect of 20 other products. The respondent Corporation thereafter made deduction of Rs.93,29,525/- from the outstanding bills of other rate contracts towards risk purchase recovery, which was decided in the Board Level meeting dated 02.01.2025. Upon inquiry, the petitioner came to know that such amount had been deducted on account of rate difference of purchase made from Karnataka Antibiotic and Pharmaceuticals Limited in the year 2022-2023 in respect of the tender, which the petitioner had refused to accept and did not act upon in terms of the offer letter dated 31.08.2021. Aggrieved, the petitioner made a representation dated 05.03.2025 to the respondent Corporation as well as State Government in respect of such deduction of Rs.93,29,525/- pertaining to risk purchase recovery. However, the respondent Corporation and the State Government have not dealt with such representation. Hence, the petitioner is constrained to file the present Special Civil Application.

4. The learned counsel Mr. Mitul Shelat appearing for the petitioner company submits that the risk purchase recovery is in breach of principles of natural justice. He submits that no show- cause notice was given by the respondent Corporation before initiating such risk purchase recovery from the pending outstanding bills in respect of other ongoing contracts unconnected with the tender notice bearing No.GMSCL/Drugs/D-669/RC/2021. He submits that no hearing was afforded at the Board Level meeting before taking such a decision and the minutes of the meeting passed at the Board Level meeting was straightway executed from the pending outstanding bills of the petitioner in respect of other ongoing contracts without any communication to the petitioner. The learned couns