M/S GOLDWIN MEDICARE LIMITED CORPORATE OFFICE v THE STATE OF KERALA & KERALA MEDICAL SERVICES CORPORATION LTD

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** **WEDNESDAY, THE 20[TH] DAY OF OCTOBER 2021 / 28TH ASWINA, 1943** **WP(C) NO. 18595 OF 2021** ## **PETITIONER:** **M/S GOLDWIN MEDICARE LIMITED CORPORATE OFFICE, 101/102, VAILANKANNI TOWERS, A WING MARI NAGAR, OFF SENAPATI BAPAT MARG, MAHIM (WEST), MUMBAI-400 016, REPRESENTED BY ITS DIRECTOR SRI. RANDOLPH CLAUDE ALVES.** **BY ADVS. P.CHANDRASEKHAR K.K.MOHAMED RAVUF SATHEESH V.T.** ## **RESPONDENTS:** **1 THE STATE OF KERALA REPRESENTED BY THE PRINCIPAL SECRETARY, DEPARTMENT OF HEALTH & FAMILY WELFARE, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **2 THE KERALA MEDICAL SERVICES CORPORATION LTD, (A GOVERNMENT OF KERALA UNDERTAKING) THYCAUD P.O.,THIRUVANANTHAPURAM-695 014, REPRESENTED BY ITS MANAGING DIRECTOR.** **BY ADV.M.AJAY,SC PRINCY XAVIER, SR GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON** **20.10.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C) NO. 18595 OF 2021 2 ## **P.B.SURESH KUMAR, J.** ## **----------------------------------------** ## **W.P.(C) No.18595 of 2021** ## **----------------------------------------------Dated this the 20[th] day of October, 2021** ## **J U D G M E N T** Petitioner is a company engaged in the manufacture and supply of medical consumables. The second respondent, the Kerala Medical Services Corporation Limited (the Corporation), a Government of Kerala undertaking, invited tenders for supply of, among others, (i) disposable surgeons cap – female (ii) disposable surgeons cap - male and (iii) disposable surgeons mask (double layered with tying strap). Ext.P1 is the tender notice issued by the Corporation in this regard. In response to Ext.P1 tender notice, the petitioner submitted tender for supply of 22 products, including the three products referred to above. The tender submitted by the petitioner for 17 out of the 22 products, including the aforesaid products, was accepted and the petitioner was accordingly issued Ext.P2 Letter of Intent on 26.2.2020 directing them to supply the products after completing the formalities. The date fixed for opening of WP(C) NO. 18595 OF 2021 3 the tenders received pursuant to Ext.P1 notice was 13.12.2019. It is stated by the petitioner that the raw materials for the disposable surgeons caps and masks are procured by them from China and since they were unable to procure the raw materials for the said products due to the spread of Corona virus in China, they sent Ext.P5 letter to the Corporation on 20.2.2020 itself requesting the Corporation to defer the issuance of Letter Of Intent and it is thereafter that Ext.P2 Letter Of Intent was issued by the Corporation to the petitioner. The petitioner, in the circumstances, did not take any steps for supply of the products pursuant to the Letter of Intent. In the meanwhile, the Corporation has issued Exts.P6 to P8 purchase orders also to the petitioner for effecting the supply of the products mentioned in the Letter of Intent. Since the petitioner did not effect supply, the Corporation cancelled the purchase orders in terms of Ext.P10 communication. Later, the Corporation issued Ext.P14 notice directing the petitioner to show cause why they shall not be blacklisted from participating in the tenders of the Corporation for a period of two years for having not effected the supply of the products pursuant to the Letter of Intent and purchase orders. In the meanwhile, the petitioner sent various communications to the Corporation explaining the reasons for WP(C) NO. 18595 OF 2021 4 their inability to effect the supply of the products. In all those communications, the petitioner has stated, in addition, that the pandemic, Covid 19 that hit the country in the meanwhile has also contributed to their inability to effect the supply. In the light of the said communications, the Corporation has stated in Ext.P14 notice that the stand of the petitioner cannot be accepted since they have not explained as to how the circumstances mentioned have prevented them from effecting the supplies, and called upon them to make available evidence to substantiate their stand. The petitioner sent Ext.P15 reply to Ext.P14 notice, reiterating their earlier stand without any further evidence to substantiate the same. In terms of Ext.P17 order, the Corporation rejected the the explanation offered by the petitioner and blacklisted them from participating in the tenders of the Corporation for a period of 24 months. The petitioner though challenged Ext.P17 order in appeal before the Government as provided for in the tender conditions, the Government affirmed the decision of the Corporation in terms of Ext.P20 order. However, in terms of the said order, the Government reduced the term of blacklisting to 12 months. Exts.P17 and P20 orders are under challenge in the writ petition. 2. Heard the learned counsel for the petitioner as WP(C) NO. 18595 OF 2021 5 also the learned Standing Counsel for the Corporation. 3. The learned counsel for the petitioner, referring to the various communications addressed by the petitioner to the Corporation prior to the impugned orders, argued that since the circumstances pointed out therein made it impossible for the petitioner to effect the supplies, they are absolved from the obligations under the purchase orders, and the impugned orders which proceed on the premise that the petitioner was obliged to effect the supplies, are illegal and unsustainable. It was argued by the learned counsel that the law does not demand performance of an impossible act and when there is a disability that makes it impossible to perform an act, the disobedience of the same is always excused. The learned counsel has also brought to the notice of the Court the Force Majeure clause in the tender notice to substantiate the stand that the pandemic is treated as one of the events that make the performance of the obligations under the tender impossible. It was also pointed out by the learned counsel that the Corporation has no case that the non-supply of the products by the petitioner was deliberate or wilful. It was submitted by the learned counsel that blacklisting which involves civil consequences and serious repercussions on the reputation of a company, can be made, in a case of this 6 WP(C) NO. 18595 OF 2021 nature, only if the non-supply of the products was either deliberate or wilful. As regards the direction in Ext.P14 show cause notice to the petitioner to make available evidence in support of their case that the pandemic prevented them from effecting the supply, Exts.P3 and P4 Office Memoranda issued by the Ministry of Finance, Government of India, ought to have been accepted and acted upon by the Corporation in support of the case of the petitioner. 4. Per contra, the learned Standing Counsel for the Corporation pointed out that on 20.2.2020 when Ext.P5 letter was sent by the petitioner, the situation in the country was very much normal and the pandemic hit the country long thereafter and the decision of the petitioner to withdraw from the tender process, in the circumstances, can be regarded only as a decision taken for convenience and such decisions are not protected under the doctrine of frustration of contracts. It was also pointed out by the learned Standing Counsel that having regard to the nationwide lock down, the time prescribed for effecting supply was enlarged by the Corporation for all suppliers till 31.7.2020 without any liquidated damage, and the conduct of the petitioner in not effecting supply can, therefore, be regarded only as a deliberate one. WP(C) NO. 18595 OF 2021 7 5. I have examined the contentions put forth by the learned counsel for the parties on either side. 6. It is pleaded by the petitioner in the writ petition that a formal agreement was required to be executed in terms of the tender conditions on receipt of the Letter of Intent and the petitioner has not executed the formal agreement for supply of the three products mentioned in the impugned orders. As the said case pleaded by the petitioner in the writ petition, and the argument of the learned counsel for the petitioner that the contract was frustrated on account of impossibility of performance were found to be mutually destructive, the learned counsel for the petitioner was required to clarify the position and the learned counsel then pointed out that he is only pressing the contention that the contract was frustrated on account of the impossibility of performance. 7. As indicated in the impugned orders, the clause in the tender notice which is invoked by the Corporation for blacklisting the petitioner is 6.26.22. The said clause reads thus: 6.26.22 In respect of the firm supplying more than one item during the contract period, if purchase orders for three or more than 50% of the items, whichever is less are cancelled due to default, then the firm is liable to be blacklisted for a period of 24 months from date of such order and the firm will be ineligible to WP(C) NO. 18595 OF 2021 8 participate in any of the tenders floated by Tender inviting authority during the period of blacklisting. If in any case such practice of default supply is repeated, the firm will be blacklisted for further three years. As evident from the extracted clause, the condition precedent for invoking the same being only a default simpliciter for effecting supply and consequent cancellation of the purchase order, the contention of the petitioner that the omission on their part in effecting the supplies was not deliberate or wilful, is only to be rejected as irrelevant, for in the case on hand, there is no dispute to the fact that the petitioner has not effected supplies pursuant to the purchase orders and that the purchase orders have been cancelled consequently on account of the omission on the part of the petitioner in effecting supplies. 8. The only surviving question is as to whether the petitioner is absolved from the obligations under the purchase orders on account of impossibility of performance. Clause 6.36 in the tender notice dealing with Force Majeure events, reads thus : ## 6.36 Force Majeure 6.36.1 For purposes of this clause, Force Majeure means an event beyond the control of the successful bidder and not involving the successful bidder's fault or negligence and which is not forseeable and not brought about at the instance of the party claiming to be affected by such event and which has caused the WP(C) NO. 18595 OF 2021 9 non-performance or delay in performance. Such events may include, but are not restricted to, acts of the Tender Inviting Authority either in its sovereign or contractual capacity, wars or revolutions, hostility, acts of public enemy, civil commotion, sabotage, fires, floods, explosions, epidemics, quarantine restrictions, strikes excluding by its employees, lockouts excluding by its management, and freight embargoes. Scarcity of raw materials/shifting/upgradation of manufacturing facilities and power cut are not considered as Force Majeure. 6.36.2 If a Force Majeure situation arises, the successful bidder shall promptly notify the Tender Inviting Authority in writing of such conditions and the cause thereof with satisfactory documentary proof, within twenty one days of occurrence of such event. The time for making supply may be extended by the Tender Inviting Authority at its discretion for such period as may be considered reasonable. 6.36.3 In case due to a Force Majeure event the Tender Inviting Authority is unable to fulfil its contractual commitment and responsibility, the Tender Inviting Authority will notify the successful bidder accordingly and subsequent actions taken on similar lines described in above sub-paragraphs. As discernible from the extracted clause, though scarcity of raw material is not considered as a Force Majeure event, since epidemics are brought as Force Majeure events, as per the clause, there is force in the contention of the petitioner that inability to procure raw materials on account of the epidemic is liable to be regarded as a Force Majeure event. Doctrine of frustration recognised under Section 56 of the Indian Contract WP(C) NO. 18595 OF 2021 10 Act is based on the principle that if a supervening event subsequent to the formation of the contract makes the performance of the contract impossible, the law does not compel such performance. But in order to attract the doctrine of frustration, the supervening event should take away the basis of the contract and it should be of such a character that it strikes at the very root of the contract [See **Sushila Devi v. Hari Singh** , AIR 1971 SC 1756]. In other words, frustration of contract happens only when the execution of the contract is wholly impossible and not merely when its performance becomes difficult or onerous [See **Harikumar v. Tranvancore Devaswom Board** , 2021(2) KLT SN 17]. Reverting to the facts, clause 6.36.2 of the tender document itself prescribes that if a Force Majeure event arises, it is the obligation of the successful bidder to notify the same to the Corporation with satisfactory documentary proof in order to claim the benefit of the same. As noted, though petitioner pointed out in the letters addressed to the Corporation that they were sourcing the raw materials for the products from China, they have not produced any evidence to substantiate the said stand. That apart, it is not the case of the petitioner that the raw materials of the products are available only in China. The petitioner admits in their WP(C) NO. 18595 OF 2021 11 correspondence that the raw materials are available in India also, but they takes the stand that the Indian suppliers are over burdened due to the pandemic and they are unable to effect supplies to the petitioner. According to me, a case of this nature would not bring a contract within the doctrine of frustration so as to absolve the contracting parties from the obligations under the contract. The writ petition, in the circumstances, is without merits and the same is accordingly dismissed. **Sd/-** **P.B.SURESH KUMAR** **JUDGE** Mn WP(C) NO. 18595 OF 2021 12 ## **APPENDIX OF WP(C) 18595/2021** |**PETITIONER EXHIBITS**|| |---|---| |**Exhibit P1**|**TRUE COPY OF THE NOTIFICATION NO**| ||**KMSCL/DRGED/111-VII/RC/2020/012 DATED**| ||**12.11.2019 ISSUED BY THE 2ND RESPONDENT**| |**Exhibit P2**|**TRUE COPY OF THE LETTER OF INTENT DATED**| ||**26.2.2020 ISSUED BY THE 2ND RESPONDENT**| ||**TO THE PETITIONER**| |**Exhibit P3**|**TRUE COPY OF THE OFFICE MEMORANDUM NO**| ||**F.18/4/2020-PPD DATED 19.2.2020 ISSUED**| ||**BY DEPUTY SECRETARY TO GOVERNMENT OF**| ||**INDIA, MINISTRY OF FINANCE, DEPARTMENT**| ||**OF EXPENDITURE, PROCUREMENT POLICY**| ||**DIVISION, NEW DELHI**| |**Exhibit P4**|**TRUE COPY OF THE OFFICE MEMORANDUM NO**| ||**F.18/4/2020-PPD DATED 13.5.2020 ISSUED**| ||**BY THE DEPUTY SECRETARY TO THE**| ||**GOVERNMENT OF INDIA, MINISTRY OF**| ||**FINANCE, DEPARTMENT OF EXPENDITURE, NEW**| ||**DELHI**| |**Exhibit P5**|**TRUE COPY OF THE LETTER DATED 20.2.2020**| ||**SUBMITTED BY THE PETITIONER TO THE 2ND**| ||**RESPONDENT**| |**Exhibit P6**|**TRUE COPY OF THE PURCHASE ORDER NO**| ||**KSCL/S-1/00426/20-21 DATED 17.3.2020**| ||**ISSUED BY THE 2ND RESPONDENT**| |**Exhibit P7**|**TRUE COPY OF THE PURCHASE ORDER NO**| ||**KMSCL/S-1/00427/2021 DATED 17.3.2020**| ||**ISSUED BY THE 2ND RESPONDENT**| |**Exhibit P8**|**TRUE COPY OF THE PURCHASE ORDER NO**| ||**KMSCLA/S-1/00424/2021 DATED 17.3.2020**| ||**ISSUED BY THE 2ND RESPONDENT**| |**Exhibit P9**|**TRUE COPY OF THE LETTER DATED 17.3.2020**| ||**SUBMITTED BY THE PETITIONER TO THE 2ND**| ||**RESPONDENT**| |**Exhibit P10**|**TRUE**<br>**COPY**<br>**OF**<br>**THE**<br>**LETTER**<br>**NO**| WP(C) NO. 18595 OF 2021 13 **KMSCL/DRG/ED/111-VII/221/GML/2020 DATED 23.7.2020 ISSUED BY THE 2ND RESPONDENT** ## **Exhibit P11** **TRUE COPY OF THE LETTER DATED 21.8.2020 SUBMITTED BY THE PETITIONER TO THE 2ND RESPONDENT** **Exhibit P12** - **TRUE COPY OF THE SHOW CAUSE NOTICE NO KMSCL/DRG/ED/111 VIII/221/GML/2020 DATED 12.10.2020 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER** - **Exhibit P13** - **TRUE COPY OF THE REPLY LETTER DATED 20.10.2020 SUBMITTED BY THE PETITIONER TO EXT P-12 SHOW CAUSE NOTICE** - **Exhibit P14 TRUE COPY OF THE SHOW CAUSE NOTICE NO KMSCL/DRG/ED/111 VIII/221GML/2020 DATED 4.1.2021 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER** - **Exhibit P15 TRUE COPY OF THE REPLY LETTER DATED 6.1.2021 SUBMITTED BY THE PETITIONER TO EXT P-14 SHOW CAUSE NOTICE** - **Exhibit P16 TRUE COPY OF LETTER NO GML/6205/20-21 DATED 16TH MARCH 2021 OF SUBMITTED BY THE PETITIONER IN RESPONSE TO PERSONAL HEARING HELD ON ZOOM DATED 1ST MARCH 2021** - **Exhibit P17** - **TRUE COPY OF ORDER NO KMSCL/DRG/ED/111VIII/221-GML/2020 DATED 6.5.2021 OF THE SECOND RESPONDENT** - **Exhibit P18** - **TRUE COPY OF APPEAL DATED 3.6.2021 OF THE PETITIONER BEFORE THE 1ST RESPONDENT** - **Exhibit P19 TRUE COPY OF THE JUDGMENT DATED 25.6.2021 IN WPC NO 11564 OF 2O21** - **Exhibit P20** - **TRUE COPY OF GO(RT0 NO 1721/2021/H & FWD DATED 11.8.2021**