M/s Pentagon Labs Ltd. & Anr. v. All India Institute of Medical Sciences & Ors., W.P.(C) 15003/2026 – Order dated 09.10.2026

The Delhi High Court has granted interim protection to M/s Pentagon Labs Ltd., a manufacturer of critical-care crystalloids (IV fluids), against a two-year debarment imposed by the All India Institute of Medical Sciences (AIIMS), New Delhi. By its order dated 9 October 2026, the Court (Hon'ble Mr. Justice Amit Mahajan) issued notice on the writ petition and directed AIIMS not to disqualify the petitioner from participating in future tenders only on account of the impugned debarment orders. Lahoti Advocates represented the petitioners.

Background

In May 2024, AIIMS awarded Pentagon Labs a two-year rate contract for the supply of 22 crystalloid products. Over the contract period, the company supplied more than 47 lakh bottles to AIIMS departments, ICUs and operation theatres. Following complaints about the quality of certain batches, AIIMS terminated the contract in part on 27 September 2025 and debarred the company for two years. Pentagon Labs replaced the questioned stock in full and made a representation against the debarment.

In an earlier writ petition, W.P.(C) 287/2026, the Delhi High Court on 14 January 2026 directed AIIMS to decide that representation afresh. Instead of a reasoned decision on the representation, AIIMS issued a fresh notice dated 22 September 2026. That notice debarred the company from its tenders for two years across nine crystalloid products, forfeited its performance bank guarantee and continued the 2025 debarment. The present petition challenges that notice.

Submissions on behalf of the petitioners

Mr. Shashank Garg, Senior Advocate and Mr. Divyakant Lahoti, AoR appeared for the petitioners and made the following submissions:

• Although the High Court had directed in the earlier round that the representation be considered, the fresh debarment order merely repeats the show cause notice.
• Even if AIIMS's case is taken at its highest, a failure to meet a contractual requirement cannot by itself justify debarring a contracting party from future tenders. The petitioners will raise the underlying dispute, which they contest, as a contractual dispute before the appropriate forum.
• Even on AIIMS's own case, less than 1% of the supplies were found to be substandard. The petitioners also have a strong defence that any deterioration in quality was caused by inadequate storage facilities at AIIMS.

The petition also argues that the debarment breaches the principles of natural justice and is disproportionate. It relies on the Supreme Court's decisions in Kulja Industries Ltd. v. BSNL, (2014) 14 SCC 731, and Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation, 2024 SCC OnLine SC 1896, which treat debarment as a measure of last resort because of its drastic effect on a business.

The interim order

The Court issued notice and directed AIIMS, in the meantime, not to disqualify the petitioner from further participation in future tenders only on account of the impugned debarment orders. The Court clarified that the petitioner's participation will be subject to the final order passed in the petition. The matter is next listed on 12 January 2027.

Why it matters

The order allows Pentagon Labs to keep bidding for AIIMS tenders while the challenge is pending. Debarment by a major public procurer can effectively shut a supplier out of public tenders. The order reinforces the principle that a supplier should not be blacklisted on account of contractual quality disputes before its challenge is heard.

Counsel

The petitioners were represented by Mr. Shashank Garg, Senior Advocate, briefed by Lahoti Advocates: Mr. Divyakant Lahoti, Mr. Parth Rathore and Mr. Siddharth Tripathi, Advocates.

Disclaimer: This update is for general information only and is not legal advice. The matter is sub judice and the observations above describe an interim order.