UPDATE 1-Aurobindo in court on S.Africa AIDS drug tender

* Aurobindo says was overlooked for contracts

* Treasury says submitted tender process to court

(Recasts with Treasury comment)

JOHANNESBURG, June 29 (Reuters) - Indian pharmaceutical company Aurobindo (ARBN.BO) is taking South Africa's Treasury to court after it lost out to local drug firms in a $400 million contract for anti-retroviral AIDS drugs, the Treasury said.

A Treasury spokeswoman said Aurobindo had requested, via a South African, an explanation from the government on why it was overlooked for the contracts even though its tendered price for the drugs was on average cheaper than local products.

South African firm Aspen (APNJ.J) won 50 percent of the contract to supply South Africa's health system with life-prolonging ARV drugs last year and rival Adcock Ingram (AIPJ.J) also won some of the business.

Treasury spokeswoman Thoraya Pandy said Aurobindo had asked for reasons on why it was overlooked.

"We submitted the reasons and the company will interrogate them through the courts, after which it can decide to pursue the case," said Pandy.

Other companies that were awarded the tender in June last year were GlaxoSmithKline (GSK.L), Medpro, Sonke and Merck Sharp and Dohme, a unit of Merck & Co (MRK.N).

Aurobindo could not immediately be reached for comment. (Reporting by Tiisetso Motsoeneng; Editing by Jon Loades-Carter)