Theon Pharmaceuticals Limited vs Madhya Pradesh Public Health ...
2022 Latest Caselaw 15253 MP

                                                       1


        HIGH COURT OF MADHYA PRADESH, PRINCIPAL SEAT AT
                                               JABALPUR
 (SINGLE BENCH : HON'BLE SHRI JUSTICE VIJAY KUMAR SHUKLA)
                                Arbitration Case No. 89/2021
 Theon Pharmaceuticals Limited Registered Office;- House No. 50,
  Sector-28-A, Chandigarh (U.T.) & Also :-Corporate Office at:-Plot
    No. 400, Phase-1, Industrial Area, Punchkula, Haryana-134113
      Through its Authorized Signatory Mr. Puran Chand Joshi
                                  Vs.
1. Madhya Pradesh Public Health Services Corporation Ltd. Bhopal
       (M.P.P.H.S.C.L) Through its, MD/Director Adminstration
   2. General Manager (Technical) Madhya Pradesh Public Health
         Services Corporation Ltd. Bhopal, (M.P.P.H.S.C.L.)

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Shri Yogesh Bhatnagar, learned counsel for the applicant.
Shri Rohit Jain, learned counsel for the non-applicants.
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Whether approved for reporting : (Yes / No).
                                                ORDER

(21/11/2022)

Present petition is filed under Section 11(6) of Arbitration and Conciliation (Amendment) Act, 1996 seeking appointment of an arbitrator to resolve the dispute that has arisen between the parties.

2. The applicant-company is dealing with manufacturing of various kinds of formulations and drugs as defined under Drugs and Cosmetics Act, 1940 and has been granted manufacturing licenses in form 25 and 28 of Schedule-A of the Drugs and Cosmetics Rules, 1945 by the competent authority.

3. The respondent No.1 herein, M.P. Public Health Services Corporation Ltd. Bhopal (herein after referred in short as 'MPPHSCL') is a nodal agency incorporated and created by the Government of Madhya Pradesh for purchase and procurement of various kinds of drugs and for their subsequent distribution to various Government Health Institutions in State of M.P. The non-applicant issued notice inviting Tender (in short 'NIT') dated 12/04/2016 calling upon pharmaceutical manufacturers for submitting their bids under the rate contract agreement with the non-applicant for a period of one year for procurement of various drugs. The applicant-company had participated in the above-mentioned tender process and was awarded the contract for supply of various pharmaceuticals products in government hospitals, vide notifications of award dated 20/05/2016. In terms and conditions of the tender document an agreement dated 30/05/2016 executed between both the parties.

4. The applicant received various purchase orders from various government hospitals to supply the pharmaceuticals products as per the notification of award (NOA). The applicant had supplied pharmaceuticals to the various government hospitals as per the specifications and had raised the invoices,

but the respondent office has failed to pay the outstanding dues of Rs.1,25,270.70/- to the applicant-company. The applicant- company on various occasions both verbal and in writing corresponded with respondent with the respondent/office to clear the outstanding dues but no payment was made, due to which applicant-company has suffered business and financial loss and the non-applicant committed breach of terms and conditions of the aforesaid agreement and NIT. As per clause 24(2) of the NIT, the applicant invoked arbitration clause through notice dated 12/05/2021 under Section 21 of Arbitration and Conciliation Act, 1996. The respondent asked the applicant to approach the concern hospitals for payment.

5. Since the non-applicant failed to act on the request of the applicant for appointment of Arbitrator within 30 days of the last request, the applicant filed present application for appointment of independent Arbitrator for adjudication of dispute arose between applicant and non-applicant. Non- applicant filed the reply and admitted the agreement dated 30/05/2016 executed between the applicant and non-applicant. It is submitted that the non-applicant is an annual rate contracting agency and he is not the purchaser of the pharmaceuticals and medicines, therefore, the claim of the

applicant is not maintainable against the non-applicant. The supply was made to the various government Medical Colleges and Hospitals of the State of M.P., which come under the administrative control of Director of Health Services, the State Authority as mentioned in the purchase order. As per Clause 17 of the tender document, the purchasing authority is the Director of Medical Services, CMHO Medical Heath Services etc., who soever placed purchase orders and the successful bidder has to make payment and shall be liable for the sale as per the clause 17 of the agreement. The clause 24 of Arbitration is not applicable between the parties as there is no dispute between the applicant and the non-applicant.

6. Counsel for the non-applicant further submitted that the medical colleges and hospitals being administrative control of the non-applicant and by virtue of purchase orders, there shall be deemed agreement between the applicant and those authorities and therefore, the claim of the applicant would lie against those authorities and not against the present applicant. In support of his submission, he has placed reliance on the judgment passed by apex Court in the case of Mahanagar Telephone Nigam Limited Vs. Canara Bank and Others, (2020) 12 SCC 767.

7. I have heard learned counsel for the parties.

8. Upon perusal of NIT, it is evident that the Managing Director of the non-applicant has invited online tender of annual rate contract and for supply of pharmaceuticals to various government hospitals of state of M.P. for a period of one year from the date of signing of the contract with the selected bidder. Clause 24 of the NIT, reads as under:-

" Resolution of Disputes.

(I) The purchaser and the supplier shall make every effort to resolve, amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection with the contract,

(ii) In case of a dispute or difference arising between the purchaser and a supplier relating to any matter arising out of or connected with this agreement, such dispute of difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996.The venue of arbitration shall be Bhopal."

9. As per Clause 24(ii) in case a dispute or difference between the purchaser and supplier relating to any matter arising out of any term of the agreement such dispute or difference shall be settled in accordance with Arbitration and Conciliation Act, 1996. The venue of arbitration shall be Bhopal.

10. After the successful bid of the applicant, an agreement

was executed on 30/05/2016 between the non-applicant/M.P. Health Services Corporation Limited, the purchaser and present applicant, who was called the supplier. In clause (II) the documents mentioned from Clause A to G were made part of the agreement. NIT was mentioned in Clause (b) of Clause (ii) of the agreement. Thus, the NIT was made the part of the agreement. In clause (III) of the agreement, it was provided in considerations of the payment to be made by the purchaser to the seller and the seller is oblized to provide the goods and services and to remedy the defect in conformity with all the provisions of the contract. As per Clause (IV) of the agreement the purchaser has undertaken to pay supplier the consideration of the goods and services and the remedying the defects therein. The contract price or other such sum as may become payable under the provisions of the contract and in the manner prescribed by the contract. The goods and services, which were to be supplied and provided and mentioned in the clause (IV). The clause 10.1 of the NIT en grafts that the purchase orders under the Rate Contracts shall be placed by the competent authorities of Medical Colleges of Govt. of M.P.. However, purchase order may also be placed by the Corporation and/or the authorities mentioned below. Supplier's first obligation

would be to supply against the purchase orders placed by Medical Colleges.

a. Director, Medical Services.

b. Chief Medical & Health Officer of the State. c. Chief Medical and Health Officer, Gas Rahat. d. Civil Surgeon cum Hospital Superintendent. e. Superintendent, Special Hospitals f. Superintendants, Gas Rahat Hospitals.

11. Counsel for the non-applicant argued that the non- applicant is only tender inviting agency of the annual rate contract and he has not purchased the products and orders were placed by the concern medical colleges and hospitals and therefore, payment is to be made by them. He has invited the attention of this Court to Document Annexure A/4 onwards, which are purchase orders and were issued by Chief Medical and Health Officer and also submitted that the part of payment was also made by them and therefore, no claim would lie against the non-applicant and the application is liable to be dismissed.

12. I do not find any merits in the aforesaid contention. The non-applicant invited tender and after that entered into an agreement Annexure A/2 on 30/05/2016, whereby non-applicant

was called as 'purchaser' on one part and the applicant was called as 'supplier' on the other part. As per clause (II), the NIT has been made part of the agreement. Clause (III) of the agreement reads that consideration is to be made by the purchaser to the supplier.

13. As per Clause (IV) of the agreement, the purchaser has undertaken the liability to pay consideration of the previous all the goods and services remedying the defects therein. The contract price and other such sum is payable under the provisions of the contract. There is no separate agreement between the applicant and medical colleges and hospitals. In the purchase orders A/4 and in other documents there is a reference of the tender/NIT and the purchase orders were placed by the authorities and hospitals, which are mentioned in Clause 10.1 of the NIT and in pursuant to aforesaid purchase orders supply was made by the applicant to them. The aforesaid supply to them was made in reference to NIT and agreement executed by the non-applicant with the applicant vide Annexure A/2 dated 30/05/2016. The submission of learned counsel for the non-applicant that since the medical colleges/hospitals are under the administrative control of the Government , therefore, the liability to make payment to the applicant is on medical

colleges and hospitals cannot be accepted in view of the agreement by the non-applicant with the applicant, where the non-applicant, who has been to addressed as "purchaser" and as per clause (III) and (IV) of the agreement, the "purchaser" is under obligation to pay payment for the supply.

14. The judgment pressed into service by the non-applicant would not render any assistance to the facts of the present case. In the said case the issue was regarding liability of Sister concern of a Company and the principle for invoking the Doctrine of "group of companies" was summarized.

15. In view of this, the arbitration case is allowed and I deem it appropriate to appoint Hon'ble Shri Justice Alok Verma, Former Judge, High Court of M.P., R/o Akar, HIG I/463, Arvind Bihar, Baghmogaliya, Bhopal (M.P.), 462043 as a sole arbitrator to resolve the dispute between the parties.

16. After obtaining consent in written from Hon'ble Shri Justice Alok Verma, a copy of this order be sent to him to initiate the proceedings between the parties as per law.

17. Accordingly, the petition stands disposed of to the extent indicated above.

                                                     (Vijay Kumar Shukla)
Digitally signed by SANTOSH                                  JUDGE
KUMAR TIWARI
Date: 2022.11.22 13:25:47 +05'30'