Bharat Parenterals Ltd v. The State of Kerala & Ors.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **TUESDAY, THE 25[TH] DAY OF OCTOBER 2022 / 3RD KARTHIKA, 1944** **WP(C) NO. 12559 OF 2022** ## **PETITIONER/S:** BHARAT PARENTERALS LTD 144 & 146, JROSAMILA ROAD, VILLAGE HARIPURA, TALUKA SAVIL, DISTRICT VADODARA, GUJARAT, PIN - 391 520, REPRESENTED BY ITS MANAGING DIRECTOR BHARAT R.DESAI. BY ADVS. P.CHANDRASEKHAR K.K.MOHAMED RAVUF SATHEESH V.T. MANJARI G.B. ## **RESPONDENT/S:** 1 THE STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT OF KERALA, DEPARTMENT OF HEALTH AND FAMILY WELFARE, SECRETARIAT, THIRUVANANTHAPURAM - 695 002. 2 THE KERALA MEDICAL SERVICES CORPORATION LTD. THYCAUD P.O., THIRUVANANTHAPURAM - 695 014, REPRESENTED BY ITS MANAGING DIRECTOR. 3 THE DIRECTORATE GENERAL OF HEALTH SERVICES MINISTRY OF HEALTH AND FAMILY WELFARE, ROOM NO.446-A, NIRMAN BHAWAN, NEW DELHI - 110 011. BY ADVS. M.AJAY, SC, KERALA MEDICAL SERVICES CORPORATION LTD. MANU S., ASG OF INDIA **OTHER PRESENT:** 0 GP RAJEEV JYOTHISH GEORGE **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 9.6.2022, THE COURT ON 25/10/2022 DELIVERED THE FOLLOWING:** W.P.(C) No.12559/2022 2 ## **V.G.ARUN, J.** ------------------------------------- **W.P.(C) No.12559 of 2022 ---------------------------------** Dated this the 25[th] day of October, 2022 ## **JUDGMENT** The petitioner company is engaged in manufacture, supply and sale of pharmaceutical products. Ever since its inception in 1992, the petitioner has been supplying pharmaceutical products within and outside India. As part of its business, the petitioner has also been supplying its product to the second respondent company. The second respondent invited e-tender for the procurement of drugs for the year 2022 – 23 for Category I and II drugs as per Exhibits P1 tender tender notification dated 4/12/2021. The petitioner responded to the e-tender notice and quoted for Rs.1,80,0000/- worth of pharmaceutical drugs.The petitioner also furnished EMD for Rs.1,08,99,500/-. By Ext.P2 letter the second respondent raised several queries including query as to the whether the petitioner has been black listed by the Medical Store Organization New Delhi from 5/4/2021 to W.P.(C) No.12559/2022 3 4/4/2026. In reply, the the petitioner sent Ext.P2 mail pointing out that the debarment of the order of the Medical Store Organization was under challenge before the High Court of Bombay and writ petition was not taken up for consideration only because the High Court is not hearing matters due to Covid-19 situation, and the lock down. The petitioner also relied on the 'Guidelines on Debarment of Firms from Bidding' issued by the Government of India, Department of Expenditure, Ministry of Finance, Procurement Policy Division. It was pointed out that as per Ext.P5 guidelines, debarment orders should be issued only after providing adequate and sufficient opportunity of hearing to the affected party. Moreover, as per Ext.P5, an order of debarment would apply only to the Government Medical Stores Depot and not to any other Department or Organization. Being not satisfied with the reply, the second respondent issued Ext.P6 Notice, rejecting the petitioner’s tender as per clause 5.2.9.2. of Ext.P1. Aggrieved, this writ petition is filed seeking the following reliefs **;** _i). Call for the records leading to Exhibit P6 to the extent it has rejected the offer of the petitioner pursuant to Exhibit P1 e-tender notification by issuing a writ of certiorari ;_ _ii). Declare that Clause 5.2.9.2. of Exhibit P1 tender_ W.P.(C) No.12559/2022 4 _document is unconscionable, oppressive unfair and void and inoperataive;_ _iii). Issue a writ of Mandamus or any other writ order or direction directing the 2[nd] Respondent to accept the offer of the Petitioner pursuant to Exhibit P1 for the year 2022-23 and proceed with the offer and award the contract of supply of drugs category I & II to the Petitioner;_ 2. Adv.P.Chandrasekhar, learned Counsel for the petitioner, contended that Ext.P6, in so far as it rejects the petitioner’s tender, is _ex facie_ illegal, for non- application of mind and violation of natural justice. It is contended that Ext.P4 order of debarment cannot have any impact on the petitioner’s tender, since Ext.P4 order of debarment is confined to that particular Department. It is submitted Ext.P5 Guidelines prohibit circulation of debarment order to other Ministries/Departments and makes the debarment applicable to only to the attached/subordinate office of the Department that has issued the debarment order. Moreover, Ext.P5 mandates that, before issuing the debarment order against a firm, the concerned Ministry/Department should afford reasonable opportunity of offering its explanation to the concerned firm. It is contended that Clause 5.9.2. is an unconscionable condition and militates against the petitioner’s right to do business guaranteed under Article 19 (1) (g) of the Constitution of India. Relying on the W.P.(C) No.12559/2022 5 judgment in **Jyothi Basu V. and Others v. Kerala Water Authority and Another** ( **2021 (5) KHC 77).** it is argued that, since action of public bodies bear public character and contain an element of public interest, it is necessary to strike down the unconscionable, unfair and unreasonable clause. 3. Alternatively, it is contended that, Ext.P4 order of the Medical Store Department being _void_ , _ab inito,_ no reliance can be placed on the order to reject the petitioner’s tender. In support of the contention that Ext.P4 is _void ab inito_ and ultra vires, it is submitted that the order was passed without affording an opportunity of hearing and debarment for five years is far in excess of the jurisdiction conferred on the Directorate General of Health Services. Referring to the judgment in **Devaki M.and Others v. B.P.L Group of Companies** ( **2010 (2) KHC 270),** it is submitted that if, a Public Authority having jurisdiction to do something outside its jurisdiction, that will render its decision ultra vires and a nullity. It is submitted that blacklisting is equivalent to capital punishment in business parlance and therefore should be resorted to only as a last measure, that too, after affording adequate opportunity to the firm or the company. 4. Adv. M.Ajay, learned Standing Counsel for the second W.P.(C) No.12559/2022 6 respondent, put forth the following arguments in reply; The second respondent is a fully owned Government Company set up for procurement and supply of drugs and other essential consumables for the health care facilities under the State Government. The drugs purchased by the second respondent are mostly life saving drugs. In view of the sensitive nature of business, the tender terms and conditions of the second respondent, as with most other drugs procurement agencies of State Governments and Central Government, are formulated in such a manner as as to ensure that only quality medicines fully confirming to prescribed standards under the Drugs and Cosmetics Act are procured and distributed. After publishing Ext.P1 tender document, the second respondent had invited all prospective tenders during pre bid-meeting to explain terms and conditions of the tender and, the views and proposals of the prospective bidders taken not of. The prospective bidders were supplied with required details and clarifications about tender items and conditions of tender. 5. The petitioner did not raise any objection about clause 5.2.9.2.in the pre-bid meeting held on 10/12/2021. On the other hand, the petitioner submitted its bid before the last date of W.P.(C) No.12559/2022 7 submission, i.e on 27/12/2021 itself, and voluntarily participated in the tender process, accepting the tender conditions. Having thus participated in the tender, the petitioner is precluded from turning around and questioning the tender conditions as unconscionable and oppressive. The second respondent published the general notice and the status of each bid submitted by the bidders on 22/2/2022. Accordingly, Ext.R2(a) notice was issued to the petitioner, to which the petitioner had replied vide Ext.P2. To the query whether it was debarred by the Government Medical Store Depots, the petitioner gave only a vague reply that Ext.P4 order is under challenge in W.P.(L) No.2908/2021 before the High Court of Bombay. On enquiry, the second respondent found out that W.P. (C) No.2022/2022 filed by the petitioner was listed only as a pre -admission matter on 26/4/2022, it was not listed thereafter. On being convinced that Ext.P4 order of debarment was still in force, the petitioner’s tender was rejected as per Ext.P6. Ext.P4 order of debarment was issued, since the petitioner's product failed in the dissolution test, intended to ascertain the efficacy of tablets and capsules by detecting the extent and rate of solution formation from a particular dosage. A competent authority having entered such a finding, the petitioner’s tender had to be rejected, since W.P.(C) No.12559/2022 8 there cannot be any compromise on quality and no benefit of doubt can be granted when the potential consequence could be death, disability, serious illness, etc. There is no violation of natural justice since the tender conditions provides for only publication of the notice in the web site of the second respondent, so that, not only the supplier but also the general public can comment upon or offer their views on the issues/defects noted by the tendering authority. 6. Clause 5.2.9.2 of Ext.P1 tender document, the validity of which is challenged in this writ petition, reads as under; “5.2.9.2. Tender should not be submitted for the Firms/Concern/Company which has/have been blacklisted.debarred by any State/Central Government organization for reason of Quality Non-compliances, GMP Non-compliance, Major violation of D & C Act and Rules and furnishing forged/fabricated/false documents, during the period of blacklisting/debarring.” The Clause specifically prohibits submission of tenders by firms/concerns/company which have been black listed/debarred by any State/Central Government Organization for reason of quality and non compliance. Indisputably, the petitioner firm has been debarred by the third respondent for quality non-compliance. Although, learned counsel for the petitioner argued that failing in W.P.(C) No.12559/2022 9 dissolution test cannot be considered as quality non compliance, the contention cannot be countenanced, since it is the absolute prerogative of the tender inviting authority to decide as to what would amount to quality non compliance. Moreover, when dealing with life saving drugs, even minor deviations can be taken as quality non- compliance. The fact that Ext.P4 order was in force on the date of opening of tenders cannot be disputed. All that the petitioner had done was to raise a challenge against Ext.P4 before the High Court of Mumbai. Not only had the petitioner failed to obtain any interim order against Ext.P4, but the writ petition was not even formally admitted to the files of the High Court. 7. The only other question is whether the petitioner can challenge clause 5.2.9.2 as unconscionable after having participated in the tender. In this regard, the contention of the learned Counsel for the second respondent that, even on the petitioner being put to notice about the possibility of its tender being rejected, no challenge was raised against the clause assumes relevance. In the above factual scenario, the decision in **Jyothi Basu V. and Other(supra)** which upheld the challenge against an unconscionable condition in a contract, has no application. It is by now well settled that after having participated W.P.(C) No.12559/2022 10 in a selection process, a candidate/bidder cannot turn around and challenge the term or clause in the selection notice. In this context, it may be profitable to refer to paragraph **16 of the Apex Court's decision in** _**Manish Kumar Shahi v. State of Bihar** (_ **2010) 12 SCC 576)** extracted here under: _**“16.** We also agree with the High Court that after having taken part in the process of selection knowing fully well that more than 19% marks have been earmarked for viva voce test, the petitioner is not entitled to challenge the criteria or process of selection. Surely, if the petitioner's name had appeared in the merit list, he would not have even dreamed of challenging the selection. The petitioner invoked jurisdiction of the High Court under Article 226 of the Constitution of India only after he found that his name does not figure in the merit list prepared by the Commission. This conduct of the petitioner clearly disentitles him from questioning the selection and the High Court did not commit any error by refusing to entertain the writ petition. Reference in this connection may be made to the judgments in Madan Lal v. State of J&K [(1995) 3 SCC 486 : 1995 SCC (L&S) 712 : (1995) 29 ATC 603] ,Marripati Nagaraja v.Govt. of A.P.[(2007) 11 SCC 522 : (2008) 1 SCC (L&S) 68] ,Dhananjay Malikv. State of Uttaranchal [(2008) 4 SCC 171 : (2008) 1 SCC (L&S) 1005] , Amlan Jyoti Borooah v. State of Assam [(2009) 3 SCC 227 : (2009) 1 SCC (L&S) 627] and K.A. Nagamani v.Indian Airlines [(2009) 5 SCC 515 : (2009) 2 SCC (L&S) 57] .”_ ## 8. Although learned counsel for the petitioner strenuously W.P.(C) No.12559/2022 11 argued that a collateral challenge against Ext.P4 is maintainable, since the order is _ultra vires_ and _void ab initio_ , I am not inclined to entertain the challenge, since the petitioner has directly challenged Ext.P4 before the High Court of Bombay. The facts in **Cochin College v. Ajith Kumar K. and Others** ( **2014 KHC 650)** relied on by the petitioner was rendered on different set of facts and hence, not applicable. The challenge against Ext.P6 on the ground of violation of principles of natural justice is also liable to be rejected, since the petitioner was provided an opportunity to offer its explanation vide Ext.R2(a) notice and the petitioner had availed that opportunity. 9. As held in **Asia Foundation and Construction Ltd. v.Trafalgar House Construction (I) Ltd. and Ors.** ( **1997 1 SCC 738),** in the absence of convincing proof regarding ulterior motives, favoritism, malice, or mala fides, no interference with award of contracts is called for. For the aforementioned reasons, the writ petition is dismissed. Sd/- ## **V.G.ARUN, JUDGE** dpk W.P.(C) No.12559/2022 12 ## **APPENDIX OF WP(C) 12559/2022** |PETITIONER EXHIBITS|| |---|---| |Exhibit P1|TRUE COPY OF THE E-TENDER DOCUMENT FOR THE| ||PROCUREMENT OF DRUGS CATEGORY I & II FOR THE| ||YEAR 2022-23 OF THE 2ND RESPONDENT.| |Exhibit P2|TRUE COPY OF THE REPLY DATED 28/02/2022 OF| ||THE PETITIONER TO THE 2ND RESPONDENT.| |Exhibit P3|TRUE COPY OF THE LETTER DATED 05/11/2021 OF| ||THE PETITIONER TO THE DIRECTORATE GENERAL OF| ||HEALTH SERVICES, NEW DELHI.| |Exhibit P4|TRUE COPY OF THE OFFICE MEMORANDUM DATED| ||02/11/2021 OF GOVERNMENT OF INDIA MINISTRY OF| ||HEALTH AND FAMILY WELFARE, GOVERNMENT MEDICAL| ||STORE DEPOT, MUMBAI DEBARRING THE PETITIONER| ||FOR SUPPLY OF ALL DRUGS/PRODUCTS TO MSO/GMSDS| ||FOR A PERIOD OF 5 YEARS FROM 05/04/29021 DUE| ||TO REPEATED FAILURE OF DRUG SUPPLY.| |Exhibit P5|TRUE COPY OF THE OFFICE MEMORANDUM DATED| ||02/11/2021 LAYING DOWN THE GUIDELINES ON| ||DEPARTMENT OF FIRMS FROM BIDDING OF| ||GOVERNMENT OF INDIA, DEPARTMENT OF| ||EXPENDITURE, MINISTRY OF FINANCE, PROCUREMENT| ||POLICY DIVISION.| |Exhibit P6|TRUE COPY OF THE NOTICE NO.KMSCL/ED/366/2021| ||(1) DATED 23/03/2022 OF THE 2ND RESPONDENT.| |Exhibit P7|TRUE COPY OF LETTER DATED 13/01/2022 UNDER| ||RTI ACT ISSUED BY ADMINISTRATIVE OFFICER AND| ||STATE PUBLIC INFORMATION OFFICER OF THE 2ND| ||RESPONDENT.| |RESPONDENT EXHIBITS|| |Exhibit R2a|A TRUE COPY OF THE RELEVANT PAGES OF THIS| ||NOTICE PERTAINING TO BID NO.23 SUBMITTED BY| ||THE PETITIONER (PAGES 1, 24, 25, 26,27,28 AND| ||94)|