Centurion Laboratories (Division of Centurion Remedies Pvt. Ltd.) v The State of Kerala and The Kerala Medical Services Corporation Limited

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940** ## **WP(C).No. 4351 of 2018** ## **PETITIONER/S:** **CENTURION LABORATORIES (DIVISION OF CENTURION REMEDIES PVT. LTD.) PLOT NO.G/5, G/6 AND F/19, BIDC, GORWA, VADODARA, GUJARAT, PIN-390016, REPRESENTED BY ITS DIRECTOR, MAHIPAT A.PATEL.** **BY ADVS. SRI.P.CHANDRASEKHAR SMT.MARY RESHMA GEORGE SMT.P.M.MAZNA MANSOOR SRI.C.R.SYAMKUMAR SRI.JEEVAN RAJEEV SRI.K.ARJUN VENUGOPAL SRI.R.NANDAGOPAL** ## **RESPONDENT/S:** **1 THE STATE OF KERALA REPRESENTED BY ADDITIONAL CHIEF SECRETARY TO GOVERNMENT OF KERALA, DEPARTMENT OF HEALTH & FAMILY WELFARE, SECRETARIAT, THIRUVANANTHAPURAM-695001. 2 THE KERALA MEDICAL SERVICES CORPORATION LIMITED THYCAUD P.O., THIRUVANANTHAPURAM, PIN-695014, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.M.AJAY,SC,KERALA MEDICAL SERV.CORPN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 5.12.2018, ALONG WITH WP(C).30910/2018, THE COURT ON 19.12.2018 DELIVERED THE FOLLOWING:** _**WP(C).4351 & 30910/18**_ 2 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA, 1940** **WP(C).No. 30910 of 2018** ## **PETITIONER/S:** ## **CENTURION LABORATORIES,** **(DIVISION OF CENTURION REMEDIES PVT. LTD.), PLOT NO.G/5, G/6 AND F/19, BIDC, GORWA, VADODARA, GUJARAT - 390 016, REPRESENTED BY ITS DIRECTOR, MAHIPAT A. PATEL.** **BY ADVS. SRI.P.CHANDRASEKHAR SRI.D.SREEKANTH SRI.R.NANDAGOPAL SMT.SANDHYA R.NAIR** ## **RESPONDENT/S:** **1 THE STATE OF KERALA, REPRESENTED BY ADDITIONAL CHIEF SECRETARY TO GOVERNMENT OF KERALA, DEPARTMENT OF HEALTH AND FAMILY WELFARE, SECRETARIAT, THIRUVANANTHAPURAM - 695 001. 2 THE KERALA MEDICAL SERVICES CORPORATION LIMITED, THYCAUD P.O., THIRUVANANTHAPURAM-695014, REPRESENTED BY ITS MANAGING DIRECTOR.** **BY ADVS. SRI.M.AJAY,SC,KERALA MEDICAL SERV.CORPN GOVERNMENT PLEADER** ## **OTHER PRESENT:** **SR.GP B VINOD.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 5.12.2018, ALONG WITH WP(C).4351/2018, THE COURT ON 19.12.2018 DELIVERED THE FOLLOWING:** ## **ANU SIVARAMAN, J. ----------------------------------------------W.P(C).Nos. 4351 and 30910 of 2018 ----------------------------------------------Dated this the 19[th] day of December, 2018** ## **JUDGMENT** W.P(C).No.4351 of 2018 is filed challenging an order of termination of contract while W.P(C).No.30910 of 2018 is with regard to an order of blacklisting. The appeals preferred in both the cases before the Government in terms of the agreement and the tender conditions have also been rejected and the appellate orders are also under challenge. 2. Heard learned counsel for the petitioner and the learned Senior Government Pleader appearing for the 1[st] respondent as well as the learned counsel appearing for the 2[nd] respondent. 3. The contention of the petitioner is that the termination of the contract on the ground that the petitioner stood black listed by the Haryana Medical Services Corporation Limited on 28.12.2016 is illegal. The blacklisting would not affect the right of the petitioner to participate in the tender, since the bid was submitted by the petitioner on 13.12.2016 prior to such orders of debarring being communicated to the petitioner. With regard to the blacklisting by the Gujarat Medical Services Corporation Limited dated 2.9.2016, it is stated that the said blacklisting had been stayed by the Gujarat High Court on 18.12.2016 and that after the dismissal of the said writ petition, the matter is now before the Apex Court. It is stated that the specific terms of the contract and the bid document had not been taken note of by either the 2[nd] respondent while _**WP(C).4351 & 30910/18**_ 4 terminating the contract or by the Government while considering the appeal. With respect to the action of blacklisting, it is contended that there were absolutely no complaints against the supply of materials by the petitioner and the blacklisting, on the ground of an earlier debarring by two other State Medical Services Corporations, was entered into without considering any of the relevant factual aspects of the matter. It is further contended that the three years is the maximum period of blacklisting which can be awarded and there has been no consideration of the proportionality of the offence in passing such orders. Learned counsel for the petitioners relies on the decision of the Apex Court in _**Kulja Industries Limited (M/s) v. Chief General Manager, W.T.Proj.BSNL**_ [2013 KHC 4798], the decision of the Bombay High Court in _**Sarku Engineering Services SDN BHD Malaysia v. Union of India**_ [2017 KHC 2125], the decision of the Delhi High Court in _**M/s.Avinash Em Projects Private Limited v. M/s.Gail (India) Limited**_ [W.P(C).2041/2014 & CM Nos.4256/2014 & 14287/2014] and the decision of the Gujarat High Court in _**Centurion Laboratory v. Gujarat Medical Services Corporation Ltd.**_ [Special Civil Application No.20478 of 2016] on the question of proportionality of the penalty as well as the requirement of complying with the procedure before an order of debarment or blacklisting is issued. 4. Detailed counter affidavits have been placed on record by the respondents. The 2[nd] respondent would contend that the question of _**WP(C).4351 & 30910/18**_ 5 termination of contract and imposition of penalties has to be considered in the backdrop of the specific nature of the contract entered into between the parties. It is contended that the contract between the parties is for the supply of medicines including life saving medications and that the conduct of the petitioner in not disclosing the specific orders of debarring passed by two State Medical Services Corporations would amount to complete suppression on their part and in view of the nature of the contract, the maximum penalty was liable to be imposed. It is further contended that going by the specific clauses in the tender conditions, the steps taken by the Corporation were completely justified and perfectly in order. The learned counsel relied on _**South Delhi Municipal Corporation v. SMS AAMW Tollways Private Ltd.**_ [MANU/SC/1320/2018] to contend that the order passed by the Government is evidently in exercise of appellate power and cannot be in arbitration proceedings. 5. The learned Government Pleader would contend that what has been considered in the appeals is the scope of the power of the 2[nd] respondent to pass the orders of termination of contract and the order of blacklisting in view of the clear suppression of the earlier orders of debarring passed by other State Medical Services Corporations. It is stated that it was taking note of the specific clauses in the contract that the appeals had been disposed of upholding the orders. It is further contended that a mistake in referring to a clause under which the appeal _**WP(C).4351 & 30910/18**_ 6 had been preferred by the petitioner in the appellate order, which is under challenge in W.P(C).No.4351 of 2018, cannot, by any stretch of imagination, affect the validity of the order, since the order is one issued after considering all the valid aspects of the matter and in exercise of the appellate power specifically conferred by the agreement which has been invoked by the petitioner also. 6. I have considered the contentions advanced. The contentions of the petitioners have been considered by the Government in exercise of it's appellate power as provided in the e-tender documents. Clause 5.2.7 of the tender documents produced in W.P(C).No.30910 of 2018 for the year 2017-2018 reads as follows: _“5.2.7. Tender should not be submitted for the product/products which has/have been blacklisted by KMSCL during the period of blacklisting. Tender should not be submitted for the product/products which has/have been blacklisted/debarred by any other State/Central Government's organization for reason of quality non compliances, GMP non-compliances, major violations of the Drugs and Cosmetics Act and Rules. Concern/Company which has been blacklisted by Tender Inviting Authority for any reasons or blacklisted/debarred by any State Government or Central Government Organization for the above reasons or for reason of furnishing forged/fabricated/false document should not participate in the tender during the period of blacklisting/debarring. Where a product(s)/supplier is blacklisted in any other state or by a Central Government agency for situations as detailed above occur after the submission/opening of the bid/award of contract, the product(s)/bidder will be liable for blacklisting/ rejection/termination/ cancellation of contract/purchase order/LO1_ _**WP(C).4351 & 30910/18**_ 7 _etc. The product(s)/bidder will be liable for such action in the event of any conviction/initiation of prosecution action under the Drug and Cosmetics Act at any stage after submission/opening of bid.”_ Clause 6.34.1.2 further provides as follows: _“6.34.1.2. Without prejudice to the provision of Clause 2.1.10 of this Tender Document “Fraudulent practice” means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the Tender Inviting Auithority, and includes collusive practice among bidders (prior to or after tender submission) designed to establish tender prices at artificial non-competitive levels and to deprive the Tender Inviting Authority of the benefits of free and open competition. Suppression of facts such as blacklisting of the product/bidder elsewhere for reason of failure in quality/conviction under Drugs and Cosmetics Act/submission of fake document will be deemed as fraudulent practices. Making false/incorrect statement will also be treated as fraudulent practice.”_ 7. There is a provision for appeal from an order of termination or blacklisting or imposition of any other penalty by the tender inviting authority to the State Government which specifically after such enquiry into the matter as is considered necessary and after giving an opportunity of hearing to the petitioner as it thinks fit. It is not now in dispute before me that the petitioner firm itself had been debarred by the Gujarat Medical Services Corporation Limited on 2.9.2016. Learned counsel for the petitioner contends that such debarring was without notice to the petitioner and that Exhibit P17 order of the High Court of Gujarat had resulted in stay of the said proceedings. However, it is not in dispute before me that the order of blacklisting dated 2.9.2016 was not _**WP(C).4351 & 30910/18**_ 8 ## disclosed by the petitioner while submitting the tender. 8. Clause 2.1.10 of the tender document specifically reads as follows: _“2.1.10. Blacklisting/debarring - the event occurring by the operation of the conditions under which the bidders will be prevented from participating in the future bids of Tender Inviting Authority for a period up to 3 years, the period being decided on the basis of number/nature of violations in the tender conditions and the loss/hardship caused/likely to be caused to the Tender Inviting Authority on account of such violations, generally relating to supply of substandard, misbranded, adulterated or spurious or any drugs/products manufactured/imported in contravention of any of the laws of the land and for indulging fraudulent practices or having indulged in fraudulent practices at the time of making the bid or at any time during the validity of the tender or the contract thereof. The term will include, among all other things, making false/misleading declarations statements, presenting false/misleading/fabricated/forged document(s), trying to influence/affect/stall the tender/procurement/payment processes in any way, making false/baseless complaints about other bidders or bids or products or any person/organisation/related to the tender activities etc and such activities as specified in this Tender Document. Blacklisting/debarring etc by other State/Central Government departments/agencies shall also be ground for blacklisting by the TIA.”_ It is stated that a declaration also sought for in the form of an affidavit that the petitioner does not suffer from any disqualification to participate in the tender including blacklisting. 9. In view of the specific clauses in the tender conditions and the nature of the contract between the parties, which is for supply of _**WP(C).4351 & 30910/18**_ 9 medicines including life saving medicines, I am of the opinion that the contentions raised to the effect that a proper enquiry has not been conducted by the appellate authority while deciding the issue cannot be countenanced. In view of the clear provisions at Clauses 2.1.10, 5.2.7 and 6.34.1.2 of the tender documents, I am of the opinion that the decision taken by the 2[nd] respondent as upheld by the 1[st] respondent is perfectly legal and valid. The contention of the petitioner that the products for which the debarring was effected by the other Medical Services Corporations were different cannot make any difference, since the petitioner concern itself had been debarred by the said Medical Services Corporations and this fact was willfully suppressed by the petitioner while submitting it's tender. The petitioner's contention as to the proportionality of the debarring is also not sustainable, in view of the undertaking given in affidavit by the petitioner that they suffered no disqualifications. In the above view of the matter, the prayers sought for cannot be granted. The writ petitions fail and are dismissed. Sd/- **ANU SIVARAMAN JUDGE** _vgs_ _**WP(C).4351 & 30910/18**_ 10 ## **APPENDIX OF WP(C) 4351/2018** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1TRUE COPY OF THE SHOW CAUSE NOTICE DATED 12/10/2017.** **EXHIBIT P2TRUE COPY OF THE REPLY DATED 21/10/2017.** **EXHIBIT P3TRUE COPY OF THE ORDER NO.KMSCL/DRG/ED/200CL/2017 DATED 10/01/2018.** - **EXHIBIT P4A TRUE COPY OF THE APPEAL DATED 22/01/2018. EXHIBIT P5TRUE COPY OF THE POSTAL RECEIPT EVIDENCING DISPATCH OF EXHIBIT P4 TO THE 1ST RESPONDENT.** **EXHIBIT P6TRUE COPY OF THE COMPUTER PRINT OUT OF THE DETAILS OF RECEIPT OF EXHIBIT P4 BY THE 1ST RESPONDENT.** - **EXHIBIT P7TRUE COPY OF THE SHOW CAUSE NOTICE DATED 05/01/2018 FROM THE 2ND RESPONDENT.** - **EXHIBIT P8A TRUE COPY OF THE LETTER DATED 22/01/2018 BY THE PETITIONER TO THE 2ND RESPONDENT.** - **EXHIBIT P9TRUE COPY OF THE E-TENDER DOCUMENT ISSUED BY THE 2ND RESPONDENT FOR THE YEAR 2018-2019 VIDE KMSCL/DRGED/I&II/2017/021 DATED 18/11/2017.** - **EXHIBIT P10TRUE COPY OF THE RELEVANT PAGES OF THE NOTICE OF THE 2ND RESPONDENT DATED 06/01/2018.** **EXHIBIT P11TRUE COPY OF THE LETTER OF THE PETITIONER DATED 08/01/2018.** **EXHIBIT P12TRUE COPY OF THE PROCEEDINGS NO.KMSCL/DRG/ED/757/2017(1) DATED 29/01/2018 OF THE 2ND RESPONDENT. EXHIBIT P13TRUE COPY OF THE CIRCULAR GMSCL DATED 02/09/2016. EXHIBIT P14TRUE COPY OF THE LETTER DATED 28/12/2016.** _**WP(C).4351 & 30910/18**_ 11 **EXHIBIT P15 A TRUE COPY OF THE ARGUMENT NOTES DATED 28.2.2018** **EXHIBIT P16 A TRUE COPY OF THE G.O NO.708/2018/ H AND WD DATED 1.3.2018 EXHIBIT P17 A TRUE COPY OF THE STAY ORDER OF GUJARAT HIGH COURT** **RESPONDENT'S/S EXHIBITS:** **EXHIBIT 2(A)** A TRUE COPY OF THE DECLARATION AND UNDERTAKING SUBMITTED BY THE PETITIONER DATED 9.12.2017 **EXHIBIT 2 (B)** A TRUE COPY OF THE SHOW CAUSE NOTICE ISSUED BY THE KMSCL TO THE PETITIONER DATED 5.1.2018 **EXHIBIT R2(C)** A TRUE COPY OF THE REPLY TO THE SHOW CAUSE NOTICE SUBMITTED BY THE PETITIONER DATED 22.1.2018 **EXHIBIT R2(D)** A TRUE COPY OF THE ORDER NO.KMSCL/DRG/ED/200-CL/2017 PASSED BY THE TIA OF THE KMSCL DATED 1.3.2018 **EXHIBIT R2(E)** A TRUE COPY OF THE ADDITIONAL SUBMISSIONS MADE BY THE PETITIONER DATED NIL **EXHIBIT R2(F)** A TRUE COPY OF THE ORDER OF THE FIRST RESPONDENT G.O(RT) NO.2594/2018/H AND FWD _**WP(C).4351 & 30910/18**_ 12 ## **APPENDIX OF WP(C) 30910/2018** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE SHOW CAUSE NOTICE ISSUED BY THE 2ND RESPONDENT DATED 12.10.2017** **EXHIBIT P2 TRUE COPY OF THE REPLY OF THE PETITIONER TO EXHIBIT P1 DATED 21.10.2017** - **EXHIBIT P3 TRUE COPY OF THE ORDER NO.KMSCL/DRG/ED/200CL/2017 DATED 10.1.2018 OF THE 2ND RESPONDENT** - **EXHIBIT P4 TRUE COPY OF THE APPEAL FILED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 22.1.2018** **EXHIBIT P5 TRUE COPY OF THE POSTAL RECEIPT EVIDENCING DISPATCH OF EXHIBIT P4 TO THE 1ST RESPONDENT EXHIBIT P6 TRUE COPY OF THE COMPUTER PRINT OUT OF THE DETAILS OF RECEIPT OF EXHIBIT P4 BY THE 1ST RESPONDENT EXHIBIT P7 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 5.1.2018 ISSUED BY THE 2ND RESPONDENT EXHIBIT P8 TRUE COPY OF THE REPLY OF THE PETITIONER TO EXHIBIT P7 SHOW CAUSE DATED 22.1.2018 EXHIBIT P9 TRUE COPY OF THE CIRCULAR OF THE GMSCL DATED 2.9.2016** **EXHIBIT P10 TRUE COPY OF THE LETTER OF HMSCL DATED 28.12.2016 EXHIBIT P11 TRUE COPY OF THE ORDER OF THE 2ND RESPONDENT BEARING NO.KMSCL/DRG/ED/200-CL/2017 DATED 1.3.2018** **EXHIBIT P12 TRUE COPY OF THE APPEAL OF THE PETITIONER TO THE 1ST RESPONDENT DATED 3.3.2018** **EXHIBIT P13 ARGUMENT NOTE OF THE PETITIONER PURSUANT TO EXHIBIT P12 EXHIBIT P14 TRUE COPY OF THE ORDER OF THE UNDER SECRETARY TO GOVERNMENT HEALTH AND FAMILY DEPARTMENT BEARING NO.GO(RT)2594/2018/H&FWD DATED 17.8.2018** _**WP(C).4351 & 30910/18**_ 13 ## **RESPONDENT'S/S EXHIBITS:** **EXHIBIT R1** NIL **EXHIBIT R2 A** A TRUE COPY OF THE TENDER CONDITIONS IN TENDER NO.KMSCL/DRGED/I&II/RC/2016/014 DATED 18.11.2016. **EXHIBIT R2 B** A TRUE COPY OF THE DECLARATION SUBMITTED BY THE PETITIONER ALONG WITH THE TENDER DATED 9.12.2016. **EXHIBIT R2 C** A TRUE COPY OF THE ORDER G.O.(RT).NO.708/2018/H&FWD DATED 1.3.18.