Mumbai: The World Bank has declared two Indian pharmaceutical firms, Nestor Pharmaceuticals Ltd (Nestor) and Pure Pharma Ltd (Pure Pharma), ineligible for contracts financed by it as the two have allegedly indulged in collusive practices.

It barred Nestor, which also has a manufacturing unit in Britain, from doing business with the World Bank for three years and Pharma for one year, the bank said in a statement.

Both firms were found to have engaged in collusive practices in connection with the World Bank-financed Reproductive and Child Health Project (RCH-I) in India.

Investigations found the firms guilty of impropriety in procurement of pharmaceuticals under the RCH-I project, following which the bank''s sanctions committee recommended barring the two from doing further business.

"The sanctions board''s decisions were based on evidence from an investigation by the World Bank''s Department of Institutional Integrity (INT) into allegations of impropriety in the procurement of pharmaceuticals under the RCH I project," the sanctions committee said in a statement.

The case had prompted former bank president Paul Wolfowitz to halt loans to India''s health sector in 2006 until improvements were made to the country''s procurement methods. But his action sparked tensions with the Indian government and a wider feud between him and bank shareholders over the bank''s role in tackling corruption.

Britain and other shareholder nations argued that by halting the loans the bank was hurting the poor. Instead, they argued, the bank should keep the loans flowing while working with countries to fix the problem.

"The sanctions committee decision is in keeping with the bank''s mandate to ensure that its funds are properly utilised, and in this case, it was found that the two firms had behaved improperly and the requisite penalties were imposed," Danny Leipziger, vice president of the World Bank and chairman of the bank''s sanctions committee, said.

Praful Patel, the bank''s vice president for South Asia, said the project was designed by the Indian government to help deliver much-needed medical services to some of the country''s most vulnerable sections. "The actions of both companies harmed the very people this project was meant to help," he added.

The World Bank has blacklisted more than 330 firms and individuals for fraud, bribery and corruption since it set up a formal mechanism to investigate corruption in development projects it funds in poor countries.