Delhi High Court
M/S Verve Human Care Laboratories vs Union Of India & Ors. on 2 September, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 02nd SEPTEMBER, 2022
IN THE MATTER OF:
+ W.P.(C) 3270/2022 & CM APPL. 9516/2022
M/S VERVE HUMAN CARE LABORATORIES ..... Petitioner
Through: Mr. Kirti Uppal, Sr. Advocate with
Mr. Rohit Goyal and Ms. Riya Gulati,
Advocates.
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr. Vikram Jetly, CGSC with Ms.
Shreya Jetly, Advocate for R-1 and
R-2.
Ms. Aakanksha Kaul, Mr. Manek
Singh and Mr. Aman Sahani,
Advocates for Respondent/CMSS.
+ W.P.(C) 3357/2022 & CM APPLs. 9810/2022, 9811/2022,
10103/2022
M/S MAAN PHARMACEUTICALS LTD. ..... Petitioner
Through: Mr. Deepak Jain, Mr. Pradeep K. B.,
Ms. Jaspreet Aulakh and Mr.
Tanpreet Gulati, Advocates.
versus
CENTRAL MEDICAL SERVICES SOCIETY (CMSS) & ANR.
..... Respondents
Through: Ms. Aakanksha Kaul, Mr. Manek
Singh and Mr. Aman Sahani,
Advocates for Respondent/CMSS.
Mr. Kirtiman Singh, CGSC with Mr.
Waize Ali Noor and Mr. Madhav
Signature Not Verified
Digitally Signed By:HARIOM
SINGH KIRMOLIYA W.P.(C) 3270/2022 etc. Page 1 of 31
Signing Date:03.09.2022
16:12:01
Bajaj, Advocates for R-2/UOI.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The instant writ petitions have been filed primarily seeking, inter alia,
the quashing of Tender No. CMSS/PROC/2021-22/NACO/034 published on
15.02.2022 and floated by the Respondent - Central Medical Services
Society (hereinafter referred to as „CMSS‟), an autonomous society of the
Ministry of Health and Family Welfare, and for the finalization of Tender
No. CMSS/PROC/2021-22/NACO/011 dated 27.09.2021 in favour of the
Petitioners herein. The said tenders pertain to the procurement of
Buprenorphine 2 mg and 0.4 mg.
2. The facts, in brief, leading to the instant petitions are as under:
a) It is stated that on 14.08.2020, CMSS floated Tender No.
CMSS/PROC/2020-22/NACO/009 (hereinafter referred to as
"Tender No.1") for procurement of Benzathine Penicillin,
Lopinavir 100 mg + Ritonavir 25 mg for year 2020 to 2022 and
Buprenorphine 2 mg (2020-2021). Tender No.1 enumerated the
following eligibility criteria:
"(g) Tenderer should have supplied 50% of the
quoted quantity of same or similar items during
the last three financial years. Bidder should
submit Purchase order copies and certificate duly
issued by statutory auditor of the company on his
letter head by certifying the quantities
manufactured and marketed in trade, export, open
market, sold to government institutions, private
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
bodies etc. and the marketed quantities are not
less than at least 50% of the quoted/similar item.
Similar item is defined as below:
For Sch I. - quoted/any Kit of NACO
For Sch. II- quoted/any ARV Drugs
For Sch. III- quoted/any tablet of NACO"
b) It is stated that Tender No.1 was cancelled by CMSS, and
thereafter, a second tender, being Tender No.
CMSS/PROC/2020-21/NACO/023 (hereinafter referred to as
"Tender No.2") was floated for procurement of Buprenorphine
2 mg. It is stated that M/s Consern Pharma Ltd. and M/s
Centurion Laboratories Pvt. Ltd., who had been declared as L-1
and L-2 bidders, were found to have submitted forged and
fabricated documents, and in view of the same, CMSS cancelled
Tender No.2 and did not proceed with the said bid. However, no
action was taken by CMSS against the entities alleged to have
submitted forged documents.
c) It is stated that on 27.09.2021, a third bid, being Tender No.
CMSS/PROC/2021-22/NACO/011 (hereinafter referred to as
"Tender No.3") was floated by CMSS for procurement of
Buprenorphine 2 mg and 0.4 mg. One of the criteria for
eligibility is as follows:
"(g) Tenderer should have supplied 50% of the
quoted quantity of same or similar items during
the last three financial years. Bidder should
submit Purchase order copies and certificate
duly issued by statutory auditor of the company
on his letter head by certifying the quantities
manufactured and marketed in trade, export,
open market, sold to government institutions,
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
private bodies etc. and the marketed quantities
are not less than at least 50% of the
quoted/similar item. Similar item is defined as
below: For Sch. I- quoted/any tablet of NACO"
d) It is stated that the Petitioners herein were found to be successful
bidders with the Petitioner in W.P.(C) 3357/2022 being the L-1
bidder and having to supply 70% of the required drug, and the
Petitioner in W.P.(C) 3270/2022 being the L-2 bidder and
having to supply 30% of the drug. It has been stated by the
Petitioners that negotiations took place and that an agreement
had already been reached to reduce the cost of the items by 1.5%
in both the strengths of the drug.
e) It is stated that the Petitioners, in February 2022, were informed
that the Tender No.3 had been cancelled, without any notice to
the qualified bidders, and that a fresh tender, bearing Tender No.
CMSS/PROC/2021-22/NACO/034 (hereinafter referred to as
"Tender No.4"), had been issued by CMSS. Furthermore, it is
stated that the eligibility criteria pertaining to prior supply
experience of bidders had also been relaxed. The criteria in
Tender No.4 is reproduced as under:
"(g) Tenderer should have supplied 25% of the
quoted quantity of same or similar items during the
last three financial years. Bidder should submit
Purchase order copies and certificate duly issued
by statutory auditor of the company on his letter
head by certifying the quantities manufactured and
marketed in trade, export, open market, sold to
government institutions, private bodies etc. and the
marketed quantities are not less than atleast 25%
of the quoted/similar item. Similar item is defined
as below: For Sch. I and Sch. II - ANY TABLET
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
LISTED UNDER NDPS ACT. (NARCOTIC
DRUGS AND PSYCHOTROPIC SUBSTANCES
ACT 1985)"
f) Aggrieved by the cancellation of Tender No.3 and issuance of
Tender No.4, the Petitioners have approached this Court by way
of the instant writ petitions.
3. Mr. Kirti Uppal, learned Senior Counsel appearing for Petitioner in
W.P.(C) 3270/2022, submits that the Petitioner is a company which engages
in provision of essential narcotic products for the care of critically ill
patients. He states that with regard to Tender No.2, the Petitioner had
completed all the requisite formalities that would render it eligible, however,
when the price bid of the said tender was opened, M/s Consern Pharma Ltd.
was declared as L-1 and M/s Centurion Laboratories Pvt. Ltd. was declared
as L-2. He states that it was found that the two entities who had been
declared as L-1 and L-2 had submitted forged and fabricated documents
with regard to the stability data, manufacturing and expiry dates, etc., and
the Petitioner sent mails to CMSS to intimate the manipulation of content in
the documents done by the two bidders. Consequently, Tender No.2 was
cancelled, however, no action had been taken by CMSS against the two
bidders.
4. Mr. Uppal then submits that when Tender No.3 was published, only
three bidders participated in the same, including the Petitioners herein. The
third bidder, one M/s Rusan Pharma Ltd., was rejected for technical reasons.
The Petitioner in W.P.(C) 3357/2022 was declared as L-1 and was required
to supply 70% of the required drug, and the Petitioner in W.P.(C)
3270/2022, being an MSME, was declared as L-2 and was required to
supply 30% of the Buprenorphine 0.4 mg. The learned Senior Counsel then
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
submits that negotiations had already started between both the Petitioners
and that they were in the process of arranging things for the supply of the
drugs to CMSS. He then states that, without any information provided to the
Petitioners, CMSS went ahead to cancel Tender No.3 and floated Tender
No.4 with a relaxed eligibility criteria.
5. Mr. Uppal argues that the floating of Tender No.4 was illegal and
unlawful, and it should be quashed on the ground of being bad in law. He
further states that as no reason had been assigned for the cancellation of
Tender No.3, it raises the suspicion that CMSS is involved in foul play
which can be exemplified by the relaxed eligibility criteria. He states that the
constant cancelling and reissuing of the tenders only demonstrates that
CMSS might be hand-in-glove with entities that they wish to favour or
accommodate. He further brings to the notice of the Court the fact that the
price of the both the Petitioners is now public and it can be matched by other
bidders, thereby placing the Petitioners at a disadvantage.
6. The learned Senior Counsel has brought to the attention of this Court
an Order passed by the Kerala High Court in Centurion Laboratories
(Division of Centurion Remedies Pvt. Ltd.) v. State of Kerala, 2020 SCC
OnLine Ker 1860, to state that one of the two bidders who had submitted
the forged and fabricated documents, had been involved in a similar case
and the High Court had found them guilty of having submitted false and
fabricated documents. On that premise, the blacklisting of M/s Centurion
Laboratories Pvt. Ltd. had been upheld. He states that a transparent and
thorough inquiry should be undertaken into the complaints made by the
Petitioner against the bidders.
7. Mr. Deepak Jain, learned Counsel for Petitioner in W.P.(C)
3357/2022, submits that the Petitioner had been found to be a successful L-1
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
bidder in Tender No.3 and was supposed to supply 70% of the drugs. He
states that pursuant to being declared as L-1, the Petitioner and CMSS
conducted negotiations wherein the Petitioner agreed to reduce the costs of
the items by 1.5% in both the strengths. Vide representation dated
07.01.2022, the Petitioner intimated its intention to offer a discount of 1.5%
in both the strengths, revising the rate of Buprenorphine 2 mg to Rs. 5.32/- +
GST, and Rs. 2.67/- per tablet + GST for Buprenorphine 0.4 mg. He states
that there was a legitimate expectation on the part of the Petitioner of being
awarded Tender No. 3 and this expectation has been breached by CMSS.
8. The learned Counsel submits that the issuance of Tender No.4 has
been done with mala fide intentions as is demonstrated by the relaxation of
the eligibility criteria without any justification and basis. He states that this
relaxation is being done to allow disqualified, blacklisted and previously
ineligible bidders to participate and provide the tendered drug. He draws the
attention of this Court to clarifications sought by bidders in the pre-bid
meeting held on 01.10.2021 regarding the eligibility criteria as per which it
was categorically directed that the tenderer should have supplied 50% of the
quoted quantity of same or similar items during the last three financial years.
A table has been presented by the learned Counsel exhibiting the said
deviations in the criteria; the same is reproduced as under:
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
9. Mr. Jain argues that not finalising Tender No.3 and cancelling the
same without providing any reason significantly affects the financial interest
not only of the Petitioners, but also negatively affects the society at large
due to the vulnerability of the said drug. He further relies upon Clause
7.5.11 in the Manual for Procurement of Goods 2017 issued by the
Government of India, Ministry of Finance, to state that the Respondents
have failed to follow the directions stipulated in the said manual when it
comes to cancellation of a tender and/or reissuance of the same. He
concludes his submissions by arguing that the actions of CMSS are
arbitrary, irrational and illegal, and therefore, require the interference of this
Court.
10. Per contra, Ms. Aakansha Kaul, learned Counsel appearing for
CMSS, at the outset, relies upon Bharat Coking Coal Ltd. and Ors. v. AMR
Dev Prabha and Ors.,and Uflex Limited v. Government of Tamil Nadu and
Ors., (2022) 1 SCC 165, to submit that the scope of interference of
Constitutional Courts in matters of administrative decision-making,
particularly related to tender, is extremely limited. She states that the reason
for issuing a fresh tender, being Tender No.4, was to ensure greater
participation and competition, and that this bona fide intention of CMSS is
manifest from a perusal of the internal files and records of the Respondent.
Ms. Kaul points out to a file noting dated 08.02.2022 to further submit that
despite negotiation with the Petitioners herein, the rates for Buprenorphine 2
mg were found to be non-competitive and were higher than the Last
Purchase Price (LPP) by +56.47% and +265.75%, and that another bidder
had been approached and that they were willing to participate with
aggressive rates. On account of this, the decision had been taken to reissue
the tender.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
11. Ms. Kaul submits that at least three different Government Agencies
have purchased Buprenorphine (2 mg) in the month of February 2022 at
prices/rates lower than the ones quoted by the Petitioners herein. She relies
upon purchase orders dated 02.02.2022, 15.02.2022, and 10.12.2021, issued
by the Directorate of Health Services, Government of NCT of Delhi, Delhi
State AIDS Control Society, Government of NCT of Delhi, and Haryana
Medical Services Corporation Limited (Government of Haryana
Undertaking), respectively. She states that these purchase orders are more
recent than the ones relied upon by the Petitioners and are for much larger
quantities.
12. The learned Counsel for CMSS states that the eligibility criteria
regarding the supply of 50% of the quoted quantity of same or similar items
(i.e. for Schedule 1 and Schedule 2-Tablet Buprenorphine 0.4 mg and 2 mg
and tablet or Buprenorphine + Naloxone 0.4/0.1 mg and 2.0/0.5 mg)during
the last three financial years was relaxed to 25% of the quoted quantity of
same or similar items (i.e. for Schedule 1 and Schedule 2- any tablet listed
under the Narcotic Drugs and Psychotropic Substances Act, 1985). She
states that this was in view of how only three bidders had participated in
Tender No.3, with the third bidder being rejected on account of technical
reasons, and that the relaxation in the criteria was to ensure wider
participation/competition in the tender process. Ms. Kaul argues that the
Petitioners are attempting to create a cartel by restraining CMSS from even
considering the purchase of drugs from any other entity.
13. Ms. Kaul submits that though there is a discernible reason for
cancelling Tender No.3, however, as per Clause 11.3 of the tender
document, the purchaser reserves the right to reject, accept any bid, or annul
the bidding process and reject all bids, at any time prior to award of contract,
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
without assigning any reason whatsoever. She states that CMSS was not
only not obligated to assign any reason for the cancellation of Tender No.3,
but it also had no duty to inform the Petitioners about the same; reasons
would only be given to the Court, if required. She relies upon Silppi
Constructions Contractors v. Union of India and Anr., (2020) 16 SCC 489,
to submit that while rejecting the tender, the person or the authority inviting
the tenders is not required to give reasons as the same would lead to the
commercial activities of the State coming to a grinding halt.
14. Inasmuch as taking action against the errant bidders, Ms. Kaul
submits that the issue has been escalated with the CDSCO and that the
recommendation of the Committee, which was inquiring into the complaints
raised against the two bidders, was to cancel Tender No.2 and float a fresh
tender with revised specifications. She states that no action has been taken
against the two bidders on account of the fact that Tender No.2 was
cancelled, however, furnishing of false and fabricated documents would lead
to the disqualification of a bidder from participating in further tenders. Ms.
Kaul further informs this Court that neither of the two bidders participated in
Tender No.3, and that, as per the Order dated 28.02.2022 rendered by this
Court in the instant matter, in the event that the two bidders participate in
Tender No.4, CMSS shall carry out an investigation/inquiry into the
allegations and take action in terms of the tender conditions, including
Clause 5(vi) of the tender document. Furthermore, she states that the
Petitioners cannot be aggrieved by Tender No.2 because they did not
succeed in Tender No.2.
15. In Rejoinder, the learned Senior Counsel appearing for the Petitioner
in W.P.(C) 3270/2022 submits that the decision of CMSS to issue a fresh
tender is arbitrary and malafide, and that the reasoning provided by CMSS
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
that the decision was taken on account of the exorbitant prices/rate quoted
by the Petitioners is false. He states that CMSS has falsely alleged that three
different government agencies have purchased Buprenorphine (2mg) in the
month of February 2022 at prices/rates lower than the rates quoted by the
Petitioners herein. Mr. Uppal further raises the contention that CMSS has
failed to take any action against the erring bidders who had submitted false
and fabricated documents in Tender No.2, and that this goes against their
own terms and conditions stipulated in their tenders. He states that the
actions of the bidders should be investigated by the Narcotics Control
Bureau and the Central Narcotic Bureau.
16. Mr. Uppal submits that vide Order dated 28.02.2022 in the instant
matter, this Court had directed the Respondents to place on record the
purchase order wherein the Respondents had allegedly procured the same
drugs at rates higher than the negotiated rates. He states that the
Respondents have failed to do so and have only placed on record the
purchase order of one manufacturer and of only a single drug. He further
states that no other price discovery or evaluation has been conducted by the
Respondents, and that no document has been placed on record to support the
averment that the prices quoted by the Petitioners are +56.47% and
+265.75% higher. The learned Senior Counsel also contends that the
eligibility criterion for participating in Tender No.4 was also relaxed without
any justifiable reason.
17. Heard Mr. Kirti Uppal, learned Senior Counsel for Petitioner in
W.P.(C) 3270/2022, Mr. Deepak Jain, learned Counsel appearing for
Petitioner in W.P.(C) 3357/2022, and Ms. Aakansha Kaul, learned Counsel
appearing CMSS, and perused the material on record.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
18. The judicial principles pertaining to the scope of judicial review in
contractual matters, especially those relating to tenders, have been
delineated time and again, and are well settled. The Supreme Court has
consistently stressed upon how the power of judicial review will not be
permitted to be invoked to protect private interest at the cost of public
interest, or to decide contractual disputes. In Shobikaa Impex Private
Limited and Anr. v. Central medical Services Society and Ors., (2016) 16
SCC 233, the Supreme Court had relied upon various decisions on this
aspect and stated the following:
"19. ..... In this context, we may profitably refer to the
authority in B.S.N. Joshi & Sons Ltd. v. Nair Coal
Services Ltd. [B.S.N. Joshi & Sons Ltd. v. Nair Coal
Services Ltd., (2006) 11 SCC 548] where a two-Judge
Bench, after referring to a series of judgments has
culled out the following principles: (SCC pp. 571-72,
para 66)
"(i) if there are essential conditions, the same
must be adhered to;
(ii) if there is no power of general relaxation,
ordinarily the same shall not be exercised and the
principle of strict compliance would be applied
where it is possible for all the parties to comply
with all such conditions fully;
(iii) if, however, a deviation is made in relation to
all the parties in regard to any of such conditions,
ordinarily again a power of relaxation may be
held to be existing;
(iv) the parties who have taken the benefit of such
relaxation should not ordinarily be allowed to
take a different stand in relation to compliance
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
with another part of tender contract, particularly
when he was also not in a position to comply with
all the conditions of tender fully, unless the court
otherwise finds relaxation of a condition which
being essential in nature could not be relaxed and
thus the same was wholly illegal and without
jurisdiction;
(v) when a decision is taken by the appropriate
authority upon due consideration of the tender
document submitted by all the tenderers on their
own merits and if it is ultimately found that
successful bidders had in fact substantially
complied with the purport and object for which
essential conditions were laid down, the same
may not ordinarily be interfered with;
(vi) the contractors cannot form a cartel. If
despite the same, their bids are considered and
they are given an offer to match with the rates
quoted by the lowest tenderer, public interest
would be given priority;
(vii) where a decision has been taken purely on
public interest, the court ordinarily should
exercise judicial restraint."
20. In Master Marine Services (P) Ltd. v. Metcalfe &
Hodgkinson (P) Ltd. [Master Marine Services (P) Ltd.
v. Metcalfe & Hodgkinson (P) Ltd., (2005) 6 SCC 138]
, it has been held that (SCC p. 148, para 15) the State
can choose its own method to arrive at a decision and
it is free to grant any relaxation for bona fide reasons,
if the tender conditions permit such a relaxation. It has
been further held that the State, its corporations,
instrumentalities and agencies have the public duty to
be fair to all concerned. Even when some defect is
found in the decision-making process, the Court must
exercise its discretionary powers under Article 226
with great caution and should exercise it only in
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
furtherance of public interest and not merely on the
making out of a legal point.
21. In Jagdish Mandal v. State of Orissa [Jagdish
Mandal v. State of Orissa, (2007) 14 SCC 517] , it has
been ruled that: (SCC p. 531, para 22)
"22. ... When the power of judicial review is
invoked in matters relating to tenders or award of
contracts, certain special features should be
borne in mind. A contract is a commercial
transaction. Evaluating tenders and awarding
contracts are essentially commercial functions.
Principles of equity and natural justice stay at a
distance. If the decision relating to award of
contract is bona fide and is in public interest,
courts will not, in exercise of power of judicial
review, interfere even if a procedural aberration
or error in assessment or prejudice to a tenderer,
is made out. The power of judicial review will not
be permitted to be invoked to protect private
interest at the cost of public interest, or to decide
contractual disputes."
22. In Union of India v. International Trading Co.
[Union of India v. International Trading Co., (2003) 5
SCC 437] , it has been held that: (SCC p. 445, para
15)
"15. ... The basic requirement of Article 14 is
fairness in action by the State, and non-
arbitrariness in essence and substance is the
heartbeat of fair play. Actions are amenable, in
the panorama of judicial review only to the extent
that the State must act validly for a discernible
reason, not whimsically for any ulterior purpose."
It has been further opined that: (SCC p. 445, para 15)
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
"15. ... The meaning and true import and concept
of arbitrariness is more easily visualised than
precisely defined. A question whether the
impugned action is arbitrary or not is to be
ultimately answered on the facts and
circumstances of a given case."
23. In Jespar I. Slong v. State of Meghalaya [Jespar I.
Slong v. State of Meghalaya, (2004) 11 SCC 485] , this
Court stated that: (SCC p. 494, para 17)
"17. ... fixation of a value of the tender is entirely
within the purview of the executive and courts
hardly have any role to play in this process except
for striking down such action of the executive as is
proved to be arbitrary or unreasonable.""
19. The scope of judicial review in tenders has been reiterated in Bharat
Coking Coal Ltd. v. AMR Dev Prabha, (2020) 16 SCC 759, wherein it has
been noted that principles of equity and natural justice stay at a distance, and
that the tenderer or contractor with a grievance can always seek damages in
a Civil Court [See also Uflex Ltd. v. State of Tamil Nadu (supra)]. It was
further stated that attempts by unsuccessful tenderers with imaginary
grievances, wounded pride and business rivalry, to make mountains out of
molehills of some technical/procedural violation or some prejudice to self,
and persuade courts to interfere by exercising power of judicial review,
should be resisted. The relevant paragraphs of said Judgement are
reproduced as under:
"28. The scope of judicial review in tenders has been
explored in-depth in a catena of cases. It is settled that
constitutional courts are concerned only with
lawfulness of a decision, and not its soundness.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
[Central Coalfields Ltd. v. SLL-SML (Joint Venture
Consortium), (2016) 8 SCC 622 : (2016) 4 SCC (Civ)
106; Siemens Aktiengeselischaft& Siemens Ltd. v.
DMRC, (2014) 11 SCC 288] Phrased differently, the
courts ought not to sit in appeal over decisions of
executive authorities or instrumentalities. Plausible
decisions need not be overturned, and latitude ought to
be granted to the State in exercise of executive power
so that the constitutional separation of powers is not
encroached upon. [Air India Ltd. v. Cochin
International Airport Ltd., (2000) 2 SCC 617]
However, allegations of illegality, irrationality and
procedural impropriety would be enough grounds for
courts to assume jurisdiction and remedy such ills.
This is especially true given our unique domestic
circumstances, which have demonstrated the need for
judicial intervention numerous times. Hence, it would
only be the decision-making process which would be
the subject of judicial enquiry, and not the end result
(save as may be necessary to guide determination of
the former).
29. This position of law has been succinctly summed up
in Tata Cellular v. Union of India [Tata Cellular v.
Union of India, (1994) 6 SCC 651] , where it was
famously opined that: (SCC pp. 677-78, para 77)
"77. ... Therefore, it is not for the court to
determine whether a particular policy or
particular decision taken in the fulfilment of that
policy is fair. It is only concerned with the manner
in which those decisions have been taken. The
extent of the duty to act fairly will vary from case
to case. Shortly put, the grounds upon which an
administrative action is subject to control by
judicial review can be classified as under:
(i) Illegality: This means the decision-maker
must understand correctly the law that
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
regulates his decision-making power and
must give effect to it.
(ii) Irrationality, namely, Wednesbury
[Associated Provincial Picture Houses Ltd.
v. Wednesbury Corpn., (1948) 1 KB 223
(CA)] unreasonableness.
(iii) Procedural impropriety."
30. But merely because the accusations made are
against the State or its instrumentalities does not mean
that an aggrieved person can bypass established civil
adjudicatory processes and directly seek writ relief. In
determining whether to exercise their discretion, the
writ courts ought not only confine themselves to the
identity of the opposite party but also to the nature of
the dispute and of the relief prayed for. Thus, although
every wrong has a remedy, depending upon the nature
of the wrong there would be different forums for
redress.
31. In cases where a constitutional right is infringed,
writs would ordinarily be the appropriate remedy. In
tender matters, such can be either when a party seeks
to hold the State to its duty of treating all persons
equally or prohibit it from acting arbitrarily; or when
executive actions or legislative instruments are
challenged for being in contravention to the freedom of
carrying on trade and commerce. However, writs are
impermissible when the allegation is solely with regard
to violation of a contractual right or duty. Hence, the
persons seeking writ relief must also actively satisfy the
Court that the right it is seeking is one in public law,
and not merely contractual. In doing so, a balance is
maintained between the need for commercial freedom
and the very real possibility of collusion, illegality and
squandering of public resources.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
32. Such a proposition has been noticed by this Court
even earlier in Jagdish Mandal v. State of Orissa
[Jagdish Mandal v. State of Orissa, (2007) 14 SCC
517] in the following words: (SCC p. 531, para 22)
"22. Judicial review of administrative action is
intended to prevent arbitrariness, irrationality,
unreasonableness, bias and mala fides. Its
purpose is to check whether choice or decision is
made "lawfully" and not to check whether choice
or decision is "sound". When the power of
judicial review is invoked in matters relating to
tenders or award of contracts, certain special
features should be borne in mind. A contract is a
commercial transaction. Evaluating tenders and
awarding contracts are essentially commercial
functions. Principles of equity and natural justice
stay at a distance. If the decision relating to
award of contract is bona fide and is in public
interest, courts will not, in exercise of power of
judicial review, interfere even if a procedural
aberration or error in assessment or prejudice to
a tenderer, is made out. The power of judicial
review will not be permitted to be invoked to
protect private interest at the cost of public
interest, or to decide contractual disputes. The
tenderer or contractor with a grievance can
always seek damages in a civil court. Attempts by
unsuccessful tenderers with imaginary grievances,
wounded pride and business rivalry, to make
mountains out of molehills of some
technical/procedural violation or some prejudice
to self, and persuade courts to interfere by
exercising power of judicial review, should be
resisted. Such interferences, either interim or
final, may hold up public works for years, or
delay relief and succour to thousands and millions
and may increase the project cost manifold."
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
33. Such conscious restraint is also necessary because
judicial intervention by itself has effects of time and
money, which if unchecked would have problematic
ramifications on the State's ability to enter into
contracts and trade with private entities. Further, it is
not desirable or practicable for courts to review the
thousands of contracts entered into by executive
authorities every day. Courts also must be cognizant
that often-a-times the private interest of a few can
clash with public interest of the masses, and hence a
requirement to demonstrate effect on "public interest"
has been evolved by this Court. [Jagdish Manda v.
State of Orissa, (2007) 14 SCC 517, para 22]
34. It is thus imperative that in addition to
arbitrariness, illegality or discrimination under Article
14 or encroachment of freedom under Article 19(1)(g),
public interest too is demonstrated before remedy is
sought. Although the threshold for the latter need not
be high, but it is nevertheless essential to prevent
bypassing of civil courts and use of constitutional
avenues for enforcement of contractual obligations."
20. In N.G. Projects Limited v. Vinod Kumar Jain andOrs., (2022) 6 SCC
127, while examining whether the challenge of the Respondent No.1 therein
to the finding of the Technical Evaluation Committee that its bid was
unresponsive, the Supreme Court observed that the Court does not have the
expertise to examine the terms and conditions of the present day economic
activities of the State and that any contract of public service should not be
interfered with lightly. Moreover, the Supreme Court cautioned all High
Courts to not issue any interim order that had the potential of derailing the
entire process of services meant for larger public good. These observations
of the Supreme Court can be read as under:
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
"23. In view of the above judgments of this Court, the
writ court should refrain itself from imposing its
decision over the decision of the employer as to
whether or not to accept the bid of a tenderer. The
Court does not have the expertise to examine the terms
and conditions of the present day economic activities of
the State and this limitation should be kept in view.
Courts should be even more reluctant in interfering
with contracts involving technical issues as there is a
requirement of the necessary expertise to adjudicate
upon such issues. The approach of the Court should be
not to find fault with magnifying glass in its hands,
rather the Court should examine as to whether the
decision-making process is after complying with the
procedure contemplated by the tender conditions. If the
Court finds that there is total arbitrariness or that the
tender has been granted in a mala fide manner, still the
Court should refrain from interfering in the grant of
tender but instead relegate the parties to seek damages
for the wrongful exclusion rather than to injunct the
execution of the contract. The injunction or
interference in the tender leads to additional costs on
the State and is also against public interest. Therefore,
the State and its citizens suffer twice, firstly by paying
escalation costs and secondly, by being deprived of the
infrastructure for which the present day Governments
are expected to work.
*****
26. A word of caution ought to be mentioned herein
that any contract of public service should not be
interfered with lightly and in any case, there should not
be any interim order derailing the entire process of the
services meant for larger public good. The grant of
interim injunction by the learned Single Bench of the
High Court has helped no one except a contractor who
lost a contract bid and has only caused loss to the State
with no corresponding gain to anyone.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
27. We also find that multiple layers of exercise of
jurisdiction also delay the final adjudication
challenging the grant of tender. Therefore, it would be
open to the High Courts or the Hon'ble Chief Justice to
entrust these petitions to a Division Bench of the High
Court, which would avoid at least hearing by one of
the forums."
21. In view of the aforesaid judgements, it can be ascertained that the
scope of judicial review in matters of government contracts is limited and
can only be exercised if there is patent unreasonableness, irregularity,
irrationality or illegality in the decision-making process of the authority
which places public interest at large at a risk. In the absence of such
circumstances, Courts should normally exercise judicial restraint while
deliberating upon such contractual matters so as to not generate problematic
ramifications affecting the State's ability to enter into contracts and trade
with private entities.
22. In the matter before this Court, it has been stated that Tender No.1
had been issued on 14.08.2020, however, the same did not materialize.
Tender No.2 was then floated on 11.12.2020, and two bidders, i.e. M/s
Consern Pharma Ltd. and M/s Centurion Laboratories Pvt. Ltd. were
declared as the successful bidders. However, it was found that the
documents submitted by these entities had been forged and fabricated, and
the Petitioners sent in representations to CMSS to raise the issue.
Consequently, Tender No.2 was cancelled and Tender No.3 was floated. For
Tender No.3, there were three bidders, including the Petitioners herein.
However, the third bidder was rejected on technical reasons, and being
responsive bids, the Petitioners herein were declared as L-1 and L-2 bidders.
Subsequently, negotiations were conducted between the Petitioners and
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
CMSS for reduction in the quoted rates. However, without intimating the
Petitioners or assigning reasons, Tender No.3 was cancelled as well and,
thereafter, Tender No.4 was floated.
23. The Petitioners have contended that the cancellation of Tender No.3
without informing the Petitioners or without providing reasons goes against
Clause 7.5.11 in the Manual for Procurement of Goods 2017 issued by the
Government of India, Ministry of Finance. On the other hand, it is the
contention of CMSS that the prices quoted by the Petitioners were too
exorbitant and that despite negotiation, the rates were still high by +56.47%
and +265.75%. In these circumstances, it cannot be said that the decision of
CMSS to cancel Tender No.3 and to float Tender No.4 with deviation in the
eligibility requirements is unreasonable or irrational. Taking into
consideration the fact that the said decision was solely taken to ensure
greater participation and better rates for the drugs, this Court does not intend
to exercise its jurisdiction to interfere in the decision of the authority.
Furthermore, Clause 11.3 of the tender document categorically states that
"the purchaser reserves the right to accept or reject any bid, and to annul
the bidding process and reject all bids, at any time prior to award of
contract without assigning any reason whatsoever and without thereby
incurring any liability to the affected bidder or bidders on the grounds of
purchaser‟s action". In view of this, CMSS was well within its right to
cancel Tender No.3 and was not obligated to assign any reason or intimate
the cancellation to the Petitioners.
24. The Petitioners have laid emphasis on the nature of the drug sought to
be supplied and have informed this Court about the importance of the same.
It has been stated Buprenorphine is an Opioid Partial Agonist and it is
mainly prescribed by psychiatrists to patients who are addicted to opioid
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
drugs. It is also prescribed to patients suffering from critical ailments in a
bid to relieve pain. Considering the fact that it is a scheduled drug under the
Narcotic Drugs and Psychotropic Substances Act, 1985, its manufacturing,
distribution, sale and consumption are controlled. Keeping in view the
vulnerability of the drug, the Petitioners have stated that the eligibility
criteria could not have been relaxed to state that bidders would have to have
previously supplied 25% of the quoted quantity of same or similar items (i.e.
for Schedule 1 and Schedule 2- any tablet listed under the Narcotic Drugs
and Psychotropic Substances Act, 1985) in the past three financial years.
The aforementioned submission of the Petitioners does not hold any water.
It is settled law that the authority that authors the tender document is the best
person to understand and appreciate its requirements, and the Court should
not sit like a Court of Appeal over the appropriate authority and must realise
that the authority floating the tender is the best judge of its requirements
[Refer to M/s Agmatel India Pvt. Ltd. v. M/s Resoursys Telecom
&Ors.,2022 SCC OnLine SC 113, and Silppi Constructions Contractors v.
Union of India (supra)]. It was only after due negotiation with the Petitioners
that CMSS had arrived at the conclusion that the rates quoted by the
Petitioners remained exorbitant and that only two responsive bids had been
received for Tender No.3. In view of this, a well-considered decision had
been taken to relax the eligibility criteria and re-float the tender in order to
maximise participation in furtherance of public interest. This Court does not
find the said decision to be so illegal, arbitrary or unreasonable that it may
warrant the interference by way of judicial review.
25. It has further been submitted by the Petitioners that pursuant to the
Petitioners having been declared as successful bidders, a legitimate
expectation had been created that the Petitioners were required to fulfil their
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
end of the contract and that process for procuring the drugs was already
underway. Consequently, the sudden cancellation of Tender No.3 has led to
the Petitioners incurring financial damage. This submission of the
Petitioners cannot be accepted and the remedy of the Petitioners does not lie
before this Court, but before a Civil Court for recovery of the alleged
damages.
26. The doctrine of legitimate expectation is subsumed by Article 14 of
the Constitution of India as the State and all of its instrumentalities are duty-
bound to ensure that their actions are fair and are far from arbitrary.
However, whether the expectation of the claimant is reasonable or legitimate
in the context is a question of facts in each case. Whenever this question
surfaces, it is incumbent upon the Courts to determine the same not in
accordance with the claimant's perception, but in larger public interest
wherein other more important considerations may outweigh what otherwise
would have been the legitimate expectation of the claimant. A bona fide
decision of an authority can be said to satisfy the requirement of non-
arbitrariness and withstand judicial scrutiny.
27. In the case of Food Corporation of India v. M/s Kamdhenu Cattle
Feed Industries,(1993) 1 SCC 71, the Appellant's decision to not accept the
bid of the highest tender had been challenged, and the Supreme Court
expounded upon the doctrine of legitimate expectation and when the same
would become an enforceable right. The relevant portion of the said
Judgement is as follows:
"7. In contractual sphere as in all other State actions,
the State and all its instrumentalities have to conform
to Article 14 of the Constitution of which non-
arbitrariness is a significant facet. There is no
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
unfettered discretion in public law: A public authority
possesses powers only to use them for public good.
This imposes the duty to act fairly and to adopt a
procedure which is „fairplay in action‟. Due
observance of this obligation as a part of good
administration raises a reasonable or legitimate
expectation in every citizen to be treated fairly in his
interaction with the State and its instrumentalities, with
this element forming a necessary component of the
decision-making process in all State actions. To satisfy
this requirement of non-arbitrariness in a State action,
it is, therefore, necessary to consider and give due
weight to the reasonable or legitimate expectations of
the persons likely to be affected by the decision or else
that unfairness in the exercise of the power may
amount to an abuse or excess of power apart from
affecting the bona fides of the decision in a given case.
The decision so made would be exposed to challenge
on the ground of arbitrariness. Rule of law does not
completely eliminate discretion in the exercise of
power, as it is unrealistic, but provides for control of
its exercise by judicial review.
8. The mere reasonable or legitimate expectation of a
citizen, in such a situation, may not by itself be a
distinct enforceable right, but failure to consider and
give due weight to it may render the decision arbitrary,
and this is how the requirement of due consideration of
a legitimate expectation forms part of the principle of
non-arbitrariness, a necessary concomitant of the rule
of law. Every legitimate expectation is a relevant factor
requiring due consideration in a fair decision-making
process. Whether the expectation of the claimant is
reasonable or legitimate in the context is a question of
fact in each case. Whenever the question arises, it is to
be determined not according to the claimant's
perception but in larger public interest wherein other
more important considerations may outweigh what
would otherwise have been the legitimate expectation
of the claimant. A bona fide decision of the public
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
authority reached in this manner would satisfy the
requirement of non-arbitrariness and withstand
judicial scrutiny. The doctrine of legitimate expectation
gets assimilated in the rule of law and operates in our
legal system in this manner and to this extent.
9. In Council of Civil Service Unions v. Minister for the
Civil Service [1985 AC 374 : (1984) 3 All ER 935
(HL)] the House of Lords indicated the extent to which
the legitimate expectation interfaces with exercise of
discretionary power. The impugned action was upheld
as reasonable, made on due consideration of all
relevant factors including the legitimate expectation of
the applicant, wherein the considerations of national
security were found to outweigh that which otherwise
would have been the reasonable expectation of the
applicant. Lord Scarman pointed out that "the
controlling factor in determining whether the exercise
of prerogative power is subject to judicial review is not
its source but its subject-matter". Again in Preston, in
re [1985 AC 835 : (1985) 2 All ER 327] it was stated
by Lord Scarman that "the principle of fairness has an
important place in the law of judicial review" and
"unfairness in the purported exercise of a power can
be such that it is an abuse or excess of power". These
decisions of the House of Lords give a similar
indication of the significance of the doctrine of
legitimate expectation. Shri A.K. Sen referred to Shanti
Vijay and Co. v. Princess Fatima Fouzia [(1979) 4
SCC 602 : (1980) 1 SCR 459] which holds that court
should interfere where discretionary power is not
exercised reasonably and in good faith."
28. In the instant case, the decision taken by CMSS to cancel Tender No.3
was that the rates quoted by the Petitioners were higher than the LPP, even
after negotiation. A perusal of the noting dated 08.02.2022 reveals that
another bidder had been approached and they were willing to participate in
the said tender with aggressive rates. Accordingly, approval for reissuance
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
of the tender was sought to maximise participation, and this approval was
granted which led to Tender No.4 being floated. In the considered opinion of
this Court, the reasoning provided for the cancellation of Tender No.3 is
justifiable and withstands judicial scrutiny. Furthermore, as has already been
discussed above, the scope of interference in contractual matters is
restricted, and a writ petition under Article 226 of the Constitution of India
may lie if the contractual dispute has a public law element. However, the
proper remedy of a party complaining of breach of contract and incurrence
of damages lies before a Civil Court. The Petitioners, in this context, cannot
claim damages or even a vested right being created in the name of a
legitimate expectation.
29. During the course of proceedings, CMSS produced the original record
pertaining to Tender No.2. Attention was drawn by the learned Counsel for
CMSS to the minutes of meeting of the concerned Committee held on
16.02.2021 that indicate that the Committee found substance in the
complaints made against M/s Consern Pharma Ltd. as well as M/s Centurion
Laboratories Pvt. Ltd., and decided to escalate the issue with the Central
Drugs Standard Control Organisation (CDSCO), cancel Tender No.2 and
float a fresh tender with revised specifications. The learned Counsel
appearing CMSS further submitted that no further inquiry/investigation had
been undertaken against the two bidders in view of the fact that the tender
had been cancelled. She stated that, in any case, the furnishing of false and
fabricated documents by the bidder would disqualify them from
participating in future tenders. This Court does not deem it fit to render a
decision in this regard as action, if any, against the errant bidders is to be
taken by the concerned authority and it is not within the realm of jurisdiction
of this Court to give directions on the same.
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
30. In view of the aforesaid observations, this Court is of the opinion that
the instant matter is such that it does not warrant the interference of this
Court under its writ jurisdiction. This Court, therefore, directs for the tender
process with respect to Tender No.4 to continue and for the Respondents to
finalise the same in accordance with law.
31. Accordingly, the writ petitions are dismissed, along with the pending
application(s), if any.
SATISH CHANDRA SHARMA, C.J.
SUBRAMONIUM PRASAD, J
SEPTEMBER 02, 2022
Rahul
Signature Not Verified
Digitally Signed By:HARIOM
Signing Date:03.09.2022
16:12:01
