M/S Shree Anand Life Sciences Ltd vs State Of Karnataka
2022 Latest Caselaw 12222 Kant

           IN THE HIGH COURT OF KARNATAKA,
                    DHARWAD BENCH

       DATED THIS THE 29TH DAY OF SEPTEMBER, 2022

                          PRESENT

       THE HON'BLE MR. JUSTICE S.G. PANDIT
                      AND
 THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

               W.A. No. 100131/2022 (GM-TEN)
BETWEEN:

M/S SHREE ANAND LIFE SCIENCES LTD.
318/3B, ROYROAD, TILAKWADI,
BELAGAVI-590 006 REP. BY
CHAIRMAN & MANAGING DIRECTOR
SHRI. SATISH GHARGE S/O MOHANRAO.
                                          -         APPELLANT
(BY SRI SHIVAPRASAD SHANTANGOUDAR, ADVOCATE)

AND:

1.     STATE OF KARNATAKA REPRESENTED BY ITS
       PRINCIPAL SECRETARY, HEALTH AND
       FAMILY WELFARE DEPARTMENT, # 105, 1 FLOOR,
       VIKAS SOUDHA, BENGALURU-560 001.

2.     MANAGING DIRECTOR,
       KARNATAKA STATE MEDICAL SUPPLIES
       CORPORATION LIMITED, PHI BUILDING,
       K.R. CIRCLE, SHESHADRI ROAD,
       BENGALURU-560 001.
                                            -   RESPONDENTS
(BY SRI PRAVEEN K. UPPAR, HCGP FOR R1,
SMT. SUMANA BALIGA, ADVOCATE FOR R2)

      THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER
DATED 23.02.2022 PASSED BY THE LEARNED SINGLE JUDGE IN W.P.
NO. 104884/2021 & ETC.
                                   2



      THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT, COMING ON FOR 'PRONOUNCEMENT OF JUDGMENT'
THIS DAY, S.G.PANDIT, J DELIVERED THE FOLLOWING:

                            JUDGMENT

This intra Court appeal under Section 4 of the

Karnataka High Court Act is against the order dated

23.02.2022 in W.P. No. 104884/2021 by which the writ

petition praying to quash corrigendum for purchase order

vide Annexure-L and L1 and to quash tender notification

dated 29.11.2021 vide Annexure-V and for a writ of

mandamus directing the respondent No.2 to procure

balance 130 units of drug namely, Inj. Enoxaparin Sodium

40 mg/0.4 ml Ampoule with Syringe, Combi Pack

manufactured by the petitioner as per the purchase order

dated 06.06.2021 vide Annexure-E and also for a

mandamus directing the respondent No.2 to compensate at

the rate of 12% of the value of the original tender quantity

for the expenses incurred by the petitioner for not procuring

the drug in time, is dismissed.

2. Before the writ Court the appellant was petitioner and

respondents herein were the respondents. The parties

would be referred as they stand before the Writ Court.

3. Petitioner is a pharmaceutical Company and Medium

Enterprise registered under the Ministry of Micro, Small and

Medium Enterprise. The respondent No.2 issued

notification for quotation (IFQ) for supply of 17 items of

drugs one of which was 10 lakhs units of Inj. Enoxaparin

Sodium 40 mg/ 0.4 ml Ampoule with Syringe - Combi Pack

(for short "Inj. Enoxaparin"). The petitioner submitted his

quotation for supply of "Inj. Enoxaparin" on 25.05.2021.

The petitioner also attended price Negotiation Meeting and

on 04.06.2021 agreed to match rate of L1. The petitioner's

quotation was accepted and purchase order dated

06.06.2021 (Annexure-E) was issued for supply of "Inj.

Enoxaparin" 250000 units. The second respondent's

requirement was 10 lakhs units of "Inj. Enoxaparin". Along

with the petitioner other tenderers had also participated

and others were also issued with purchase order. The

petitioner was required to supply 1,00,000 vials quantity

within 14 days from the date of purchase order and another

1,50,000 vials quantity within 21 days from the date of

issuance of the purchase order.

Within five days from the date of issuance of purchase

order the respondent No.2 by email on 11.06.2021, extract

of which is produced as Annexure-G, informed the

petitioner that, since there is space constraint at second

respondent's warehouse, instructed not to supply scheduled

drugs until further orders. It is the case of the petitioner

that it had made all arrangements for procuring raw

material for production of "Inj. Enoxaparin" in terms of

invoice at Annexure-H series. On 05.07.2021 petitioner

received one more email from the respondent No.2

enclosing a corrigendum for purchase order. Corrigendum

purchase order requested the petitioner to supply only

50,000 vials of "Inj. Enoxaparin". The corrigendum reduced

the quantity of supply from 2,50,000 to 50,000 units.

The petitioner supplied 50,000 units with protest. The

petitioner stated to have submitted representation at

Annexure-N stating that the petitioner has already

manufactured and was ready with the entire quantity of

2,50,000 "Inj. Enoxaparin" as per purchase order and the

petitioner also made it clear that the combi pack of "Inj.

Enoxaparin" is as per specific requirement of respondent

No.2 against market product for pre filled syringe.

Therefore, it stated that the same cannot be sold in the

open market and there will be huge financial repercussion

on the petitioner.

Thereafter the respondent No.2 issued one more

supply order dated 29.07.2021 for supply of 70,000 units,

and on 30.07.2021 petitioner supplied the same to the

respondent No.2. Thus the petitioner supplied totally

1,20,000 units as against purchase order of 2,50,000 units.

Again the petitioner submitted representation to the

respondent No.2 as well as to the respondent No.1

requesting to procure remaining 1,30,000 vials of "Inj.

Enoxaparin" as per purchase order. Without taking note of

the petitioner's request, the respondent No.2 issued fresh

tender notification dated 29.11.2021 for supply of various

drugs including that of "Inj. Enoxaparin", PES Inj.

Enoxaparin Sodium 40 mg./ 0.4 ml. Aggrieved by the

action of the respondent No.2 in not procuring the

remaining 1,30,000 units of "Inj. Enoxaparin" and also

tender notification calling fresh tender for supply of "Inj.

Enoxaparin", the petitioner was before this Court in W.P.

No. 104884/2021.

4. The respondent No.2 on appearance filed its

statement of objections wherein it had contended that the

respondent No.2 invited quotation and it is not a tender.

Even though the purchase order was issued on 06.06.2021,

within five days from the date of issuance of purchase

order, i.e: 11.06.2021, the petitioner was informed not to

supply drugs. Therefore, it stated that it cannot be

accepted that petitioner purchased raw materials for supply

of drugs in terms of Annexures H1 to H5, which are dated

subsequent to 11.06.2021. Further, it stated that as per

the need and technical specification Committee

recommendation, to combat third wave of COVID-19 the

respondent No.2 had taken a decision to issue notification

or tender for supply of pre filled syringe to avoid

contamination during third wave of COVID-19. It also

stated that there is difference between drug which was

invited under Annexure-A quotation and under Annexure-V

tender notification. Further, apart from contending that the

writ petition is not maintainable as it involves disputed

question of fact, it contended that the contract cannot be

enforced under Article 226 of the Constitution of India.

5. Learned Single Judge dismissed the writ petition

observing that the petitioner is at liberty to initiate

appropriate proceedings before the competent Civil Court

alleging breach of purchase order. While dismissing the

writ petition, learned Single Judge observed that each

purchase order was a stand-alone contract entered into

between the parties. Further it observed that the purchase

order is not a concluded contract as the petitioner had not

entered into agreement and had not submitted security

deposit of 3% of the value of the order within time

specified. It also observed that due to the surging

pandemic the respondent No.2 was bound to procure supply

keeping in view the need and necessity of the medical

institutions in the State.

6. Heard learned counsel Sri Shivaprasad

Shantanagoudar for the appellant, Sri Praveen Uppar,

learned HCGP for respondent No.1, Smt. Sumana Baliga,

learned counsel for respondent No.2 and perused the entire

writ appeal papers.

7. Learned counsel for the appellant would submit that

action of the respondent No.2 in issuing corrigendum dated

05.07.2021 reducing or modifying the supply order from

2,50,000 units to 50,000 units is totally arbitrary,

unreasonable and unfair. Inviting attention of this Court to

purchase order at Annexure-E dated 06.06.2021, learned

counsel would submit that the purchase order is clear that

the respondent No.2 placed order for supply of 2,50,000

units "Inj. Enoxaparin" and in pursuance to the purchase

order the petitioner placed orders for supply of raw

materials and had kept "Inj. Enoxaparin" ready by the time

the corrigendum dated 05.07.2021 was issued reducing the

supply units from 2,50,000 to 50,000. He would point out

that the supply order dated 06.06.2021 Annexure-E

required the petitioner to supply drug within 14 days

1,00,000 vials and another 1,50,000 vials within 21 days.

Since the supply order required supply of drug within the

timeline, the petitioner was required to manufacture the

drug within the time stated therein. But he would submit

that the purchase order dated 06.06.2021 was not

cancelled nor withdrawn. Communication dated

11.06.2021 through email (Annexure-E) only informed the

petitioner not to supply drugs as there is space constraint

for the respondent No.2. The said communication

(Annexure-G) had not informed nor communicated the

petitioner not to supply drug in pursuance to the purchase

order. The petitioner was only asked not to supply since

there is space constraint. In pursuance to the invitation of

quotation the petitioner had submitted his quotation and

the same was accepted by the respondent by issuance of

supply order and therefore there is concluded contract and

unilaterally the respondent No.2 could not have reduced the

quantity of drugs from 2,50,000 to 50,000 units. Learned

counsel would submit that without canceling the purchase

order the respondent No.2 proceeded to issue fresh tender

for supply of "Inj. Enoxaparin" in a pre filled syringe which

is totally arbitrary and unfair. Learned counsel would

submit that purchase order is a contract and could not have

been cancelled without the consent of petitioner.

8. It is submitted that the petitioner would not be in a

position to sell the manufactured 1,30,000 units of drugs in

open market since it is manufactured for a specific purpose

and at the request of respondent No.2. Thus it is submitted

that the petitioner is put to great financial loss. Learned

counsel would submit that the learned Single Judge

committed an error in refusing to issue a direction to the

respondent No.2 to procure balance 1,30,000 units of "Inj.

Enoxaparin" and submits that the petitioner would be

entitled for such a mandamus since there are no disputed

question of fact.

9. It is submitted that the petitioner was initially asked

to supply 2,50,000 units of "Inj. Enoxaparin" and it also

supplied 1,20,000 units. Further it is submitted that it is an

admitted fact that the respondent No.2 has not procured

1,30,000 units. Therefore, he submits that in the facts and

circumstances of the present case the petitioner would be

entitled for a writ of mandamus directing the respondent

No.2 to procure 1,30,000 units of "Inj. Enoxaparin".

10. Learned counsel would place reliance on the decision

of the apex Court reported in (2004) 3 SCC 553 (ABL

International Ltd. and another Vs. Export Credit

Guarantee Corporation of India Ltd. and another);

2021 SCC online SC 99 (Unitech Limited and others

Vs. Telangana State Industrial Infrastructure

Corporation (TSIIC) and others, to contend that in a

given set of facts if a State acts in arbitrary manner even in

a matter of contract, the aggrieved party can approach the

Court under Article 226 of the Constitution of India and the

Court depending on the facts of the case is empowered to

grant the relief.

11. Per contra, learned counsel Smt. Sumana Baliga

submits that there was no concluded contract between the

petitioner and respondent No.2 in as much as the petitioner

failed to deposit 3% of the value of the purchase order

within the time specified and to execute the agreement as

required in terms of the purchase order. Therefore, she

submits that before the petitioner could execute the

agreement and deposit 3% of the value of the purchase

order as security deposit, within 5 (five) days from the date

of purchase order, on 11.06.2021 itself, the petitioner was

informed not to supply the scheduled drugs. Subsequently

on 05.07.2021 corrigendum was issued to the purchase

order reducing the supply from 2,50,000 units to 50,000

units. Thus she submits that as there is no concluded

contract the petitioner would not be entitled for a

mandamus as stated in the writ petition. Further, it is

submitted that the subsequent tender notification issued

vide Annexure-V is for supply of pre filled syringe of "Inj.

Enoxaparin" and the purchase order which was placed with

the petitioner was for supply of "Inj. Enoxaparin".

Therefore, it is submitted that there is difference between

the purchase order placed to the petitioner as well as the

drugs sought to be procured vide Annexure-V tender

notification dated 29.11.2021. Learned counsel would also

submit that no material is placed on record to establish that

the petitioner had purchased raw materials for preparation

of drug "Inj. Enoxaparin" before 11.06.2021, the date on

which the petitioner was asked not to supply the drug.

Annexure-H series produced by the petitioner are all the

documents subsequent to 11.06.2021.

12. On hearing the learned counsel for the parties and on

perusal of the entire writ appeal papers, the only point that

arises for consideration is as to whether the order of the

learned Single Judge impugned herein requires

interference?

13. The answer to the above point would be in the

negative for the following reasons.

14. No doubt, judicial review is permissible where the

action of the State is arbitrary, unreasonable and unfair in

the matter of contract also. The State while exercising its

powers and discharging its functions acts for public good

and in public interest. Article 14 of the Constitution

requires the State to act fairly, justly and reasonably even

in contractual matters. The Hon'ble apex Court in ABL

International (supra) has held, on a given set of facts if the

State acts in an arbitrary manner even in the matter of

contract, the aggrieved party can approach the Court by

way of Writ under Article 226 of the Constitution of India

and the Courts depending on the facts of the said case is

empowered to grant the relief. The Hon'ble Apex Court at

paragraph Nos.27 and 28 after considering various earlier

decisions has observed as follows:

"27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

28. However, while entertaining an objection as to the maintainability of writ petition under Article 226 of the Constitution of India, the Court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power (See Whirlpool Corpn. V. Registrar of Trade Marks) and this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its

instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."

---

In the above background of law, the present facts of the

case are to be examined.

15. It is an admitted fact that in pursuance to notification

of quotation under Annexure-A dated 22.05.2021, the

petitioner submitted his quotation for supply of "Inj.

Enoxaparin". There were totally 9 bidders for supply of the

said drug, i.e., "Inj. Enoxaparin". The 2nd respondent

issued purchase order on 06.06.2021 (Annexure-E) for

supply of 2,50,000 vials of "Inj. Enoxaparin". The

petitioner was required to supply 1,00,000 vials within 14

days from the date of purchase order and 1,50,000 vials

within 21 days from the date of issuance of purchase order.

The purchase order condition no. 11 reads as follows:

"11) 3% of order value to be submitted as security deposit in the form of DD and agreement to be signed on a stamp paper within two days from the issue of this Purchase Order."

The above clause of purchase order requires the petitioner

to deposit 3% of the value of the order as security deposit

and requires the petitioner to sign agreement within two

days from the issuance of purchase order.

16. It is not the case of the petitioner that the petitioner

deposited 3% of the value of the purchase order as security

deposit before 11.06.2021, the date on which the petitioner

was informed not to supply the drug nor agreement was

executed between the petitioner and respondent No.2

within the time specified nor subsequent to 11.06.2021.

Even though the petitioner's offer was accepted for supply

of "Inj. Enoxaparin" and purchase order was issued, the

petitioner has not fulfilled the condition no. 11 of the

purchase order. Since the petitioner failed to execute

agreement as required, on a stamp paper within time

specified, we are of the view that the learned Single Judge

was right in holding that the purchase order would have

resulted in a concluded contract only upon the petitioner

accepted terms of the purchase order by executing an

agreement and also furnishing a Performance Security.

Before the petitioner could deposit the Performance

Security or before he executed agreement, the petitioner

was asked not to supply drug, of course on the reason of

constraint of space. Thereafter, corrigendum was issued on

05.07.2021 to the original purchase order dated

06.06.2021 reducing the quantity of 2,50,000 units to

50,000 units which the petitioner supplied. Thereafter one

more purchase order was issued for supply of 70,000 units

of "Inj. Enoxaparin" which also the petitioner is stated to

have supplied.

"Inj. Enoxaparin" as stated by the respondent is a life

saving drug used in treatment of COVID-19. The quotation

invited on 22.05.2021 was for supply of "Inj. Enoxaparin"

sodium and subsequently based on need and technical

specification committee recommendation to combat third

wave of COVID-19 the respondent No.2 decided to procure

"Inj. Enoxaparin" in a pre filled syringe to avoid

contamination. If such a decision is based on the technical

specification committee recommendation, this Court cannot

find fault with, in inviting fresh tender notification as per

Annexure-V dated 29.11.2021. The learned Single Judge

has rightly observed that the respondent No.2 was bound to

procure supply keeping in view the need and necessity of

the medical institutions in the State.

17. The learned Single Judge is justified in observing that

if the petitioner has suffered any loss, it is open for the

petitioner to approach the competent Civil Court for breach

of purchase order dated 06.06.2021 and to establish

damages or financial loss caused. It is for the petitioner to

establish and prove that even before the corrigendum dated

05.07.2021 was issued reducing the supply order from

2,50,000 units to 50,000 units the petitioner had procured

raw material and the petitioner had kept ready 2,50,000

units for supply in terms of the purchase order dated

06.06.2021, which requires recording of evidence. It is also

for the petitioner to establish that the petitioner could not

sell the drug manufactured on specification of the State

Government in open market due to which he suffered

financial loss.

18. For the reasons recorded above, we decline to

interfere with the order of the learned Single Judge wherein

in his discretion refused to interfere with in the matter of

supply or otherwise of "Inj. Enoxaparin", a life saving drug

in treatment of COVID-19.

If the appellant initiates any proceedings before

competent Civil Court seeking damages and other

appropriate relief, same shall be considered on merits,

without being influenced by any of the observations made

either in this order or order of the learned Single Judge.

The writ appeal accordingly stands rejected.

SD JUDGE

SD JUDGE bvv