Orissa High Court
Afr vs State Of Odisha And Another on 11 August, 2022
ORISSA HIGH COURT: CUTTACK
W.P.(C) NO. 17471 OF 2022
In the matter of an application under Article 226 of the
Constitution of India.
---------------
AFR
M/s Kamala Agencies ..... Petitioner
-Versus-
State of Odisha and another ..... Opp. Parties
For Petitioner : Mr. Pitambar Acharya, Sr. Advocate
appearing along with
Mr. S.S. Tripathy, Advocate
For Opp. Parties : Mr. P.P. Mohanty,
Additional Government Advocate
[O.P.No.1]
Mr. A.K. Parija, Sr. Advocate
appearing along with
M/s P.K. Muduli, C.K. Rout and
S.C. Choudhury, Advocates.
[O.P.No.2]
P R E S E N T:
THE HONOURABLE DR. JUSTICE B.R.SARANGI
AND
HONOURABLE MR. JUSTICE SANJAY KUMAR MISHRA
Date of hearing: 01.08.2022: Date of judgment: 11.08.2022
// 2 //
DR. B.R. SARANGI, J. The Petitioner, which is a registered
Proprietorship Firm, by means of this Writ Petition seeks
to quash Clause-5.2 of the Tender Call Notice bearing Bid
Reference No.OSMCL/2022-23/DRUGS-VETERINARY/14
dated 20.06.2022 under Annexure-7, and to issue
direction to the Opposite Parties to allow it to participate
in the tender process for the year 2022-23.
2. The factual matrix of the case, in a nutshell, is
that Petitioner, being a registered Dealer, Whole-seller,
Supplier and Distributor of veterinary drugs, medicines,
vaccines, chemicals, veterinary instruments and
equipments having valid registration and permission from
the State as well as Central Government Authorities, has
been supplying the items, as mentioned above, to various
Government/Semi-Government Organizations as well as
PSUs for the last 15 years at a highly competitive price.
The Petitioner is the prime Distributor of veterinary items
of reputed international companies like Cadila Healthcare
Limited, Zydus and Boehringer Ingelheim etc.
// 3 //
2.1 The Director, Animal Husbandry and
Veterinary Services, issued Tender Call Notice for supply
of veterinary drugs/medicines and vaccines for the years
2015-16, 2017-18 and 2019-20 fixing the eligibility
criteria that the tenderer should be a Manufacturer or
authorized Distributor or authorized Dealer having valid
registration of the product, along with three years
experience in supplying veterinary drugs/medicines,
vaccines, instruments and equipments of its own
manufacturing or of reputed Manufacturers of national
level to Government/Semi-Government, PSUs, UNO
agencies. In the Tender Call Notice for the years 2017-18
and 2019-20, mention had been made that tenderer's
annual business turn-over in supplying veterinary
drugs/medicines, vaccines, instruments and equipments
should be Rs.5 crores for preceding three years. The
Petitioner, having satisfied the condition stipulated in the
tender documents, participated in the tender process and
came out successful for the year 2015-16, 2017-18 and
2019-20 and consequentially bilateral agreements were
// 4 //
duly executed with the Petitioner and on the basis of
purchase orders issued, it had carried on supplying the
required items.
2.2 The Director, Animal Husbandry and
Veterinary Services, invited tender for supply of veterinary
drugs/medicines and vaccines for the year 2020-21, vide
Bid Reference No. DAHVS/2020-21/Veterinary Drugs/01
dated 04.12.2020. But the Distributors, like the
Petitioner, who were otherwise allowed to participate in
the process of bid in the preceding years, were restricted
from participating in the tender process. Subsequently,
vide letter dated 24.03.2021, the tender for the year 2020-
21 was cancelled on the ground that certain procedural
lapses were observed in the said tender process by the
Departmental Tender Committee. As a consequence
thereof, for the year 2020-21, as the agreement with the
Petitioner for the year 2019-20 was still subsisting, vide
letter dated 05.07.2021, indent for supply of medicines,
// 5 //
vaccines, instruments and equipments was placed by the
Directorate of Animal Husbandry and Veterinary Services.
2.3 Deviation to the earlier practice, the tender for
supply of veterinary items like veterinary drugs/medicines
and vaccines needed for animal health care Institutions of
Odisha for the year 2021-22, vide letter dated 18.05.2021,
Opposite Party No.1 directed that the tender shall be
invited by Opposite Party No.2-Odisha State Medical
Corporation Limited (OSMCL), instead of Director, Animal
Husbandry and Veterinary Services. Accordingly,
Opposite Party No.2 invited the tender vide Bid Reference
No.OSMCL/2021-22/DRUGS-VETERI-NARY/29 dated
06.08.2021 for supply of veterinary items for the year
2021-22, in which the Distributors/Suppliers were
excluded from participating in the tender process in order
to create monopoly for the Manufacturers and Importers.
The same was challenged in W.P.(C) No. 30953 of 2021
and this Court, vide Order dated 30.09.2021, passed the
following order:
// 6 //
"W.P. (C) No.30953 of 2021 & I.A. No.14249 of
1. This matter is taken up through hybrid mode.
2. Heard Mr.Pitambar Acharya, learned Senior
Counsel for the petitioner and Mr. P.P. Mohanty,
learned Addl. Government Advocate. On our request,
Mr. B.P.Tripathy, learned counsel has also
participated in the matter which is listed under
'fresh admission' category on behalf of Odisha State
Medical Corporation Ltd.
3. Keeping in view the ratio decided in the cases of
Chitaranjan Mishra v. State of Odisha and others
reported in 2016 (II) OLR 735 and Jagruti Welfare
Organization, Bhubaneswar, represented through its
Secretary, Smruti Ranjan Panda v. State of Odisha
and another reported in (2017) 124 CLT 1041, we
are of the opinion that the petitioner's contention that
the decision taken by the Orissa Medical Corporation
to exclude the authorized distributor from bidding
process amounts to exclusion of medicines
manufactured by foreign medicine companies who
do not have any manufacturing facilities in Odisha
or in India.
4. So, we direct Mr. Acharya, learned Senior Counsel
to serve an advance copy of the brief on Mr.
B.P.Tripathy, a panel counsel for Odisha State
Medical Corporation Ltd. who shall take instruction
in the matter. If the Corporation wants to engage any
other counsel, it may do so and the said counsel will
appear before the Court on the next date.
5. List this matter on 07.10.2021.
6. We also direct Mr. B.P.Tripathy, learned panel
counsel for the Corporation to instruct the Medical
Corporation not to finalize the tender process
pursuant to Annexure-8 till the next date.
7. We hope and trust that the Medical Corporation
will come up with instructions on the next date so
that the interim application can be disposed of.
// 7 //
8. Urgent certified copy of this order be granted as
per rules."
When the matter was listed on 25.04.2022, this Court
passed the following order:-
"This matter is taken up through hybrid mode.
2. Mr. P. Acharya, learned Senior Advocate
appearing for the petitioner contended that Section-
III, Tender Schedule of the Notice Inviting Bid dated
06.08.2021, indicates that the validity of the bid is
180 days from the last date of bid submission. As
such, the period of 180 days, has already been over
and by efflux of time, the writ petition has become
infructuous.
3. Mr. A.K. Parija, learned Advocate General
contended that the since bid was for the period
2021-22, pursuant to the NIT, he wants to obtain
instruction what can be done pursuant to the present
tender.
4. On his request, call this matter tomorrow
(26.04.2022).
5. Interim order passed earlier shall continue till next
date."
Thereafter, on 26.04.2022, this Court passed the following
order:
"This matter is taken up through hybrid mode.
2. Heard Mr. Pitambar Acharya, learned Senior
Advocate for the petitioner, Mr. P.P.Mohanty, learned
Addl. Government Advocate for the State-opposite
parties, and Mr. Ashok Parija, learned Senior
Advocate along with Mr. P.K.Muduli, learned counsel
for opp. party No.5.
// 8 //
3. The petitioner files this writ petition with a prayer
to struck down clause 5.2 of the tender bearing bid
reference no. OSMCL/2021-22/ DRUGS
Veterinary/29 dated 06.08.2021 and further prayed
for direction to allow it to participate in the tender
process for the year 2021-22.
4. Mr. Pitambar Acharya, leaned Senior Advocate for
the petitioner and Mr. Ashok Parija, learned Senior
Advocate for opposite party no.5 contended that, the
period of auction for the year 2021-22 has already
been over, by efflux of time and, as such, the writ
petition has become infructuous.
5. In view of the above, the writ petition is disposed
of, as infuctuous".
2.4 On 20.06.2022, Opposite Party No.2 issued
Notice Inviting Tender bearing Bid Reference
No.OSMCL/2022-23/Drugs-Veterinary/14 for supply of
veterinary items for the year 2022-23. The schedule of
tender reads as under:-
Sl.No. Particulars Date and Time
1. Date & Time of 20/06/2022,3 PM
release of bid
2. Date & time for 23/06/2022, up to 5:00
submission of PM
queries by E-Mail
id-
[email protected]
3. Date & Time of Start Date & End Date &
Online bid Time Time
submission 29/06/2022, 19/07/2022,
3 PM 6.00 PM
4. Date & time for Start Date & End Date &
// 9 //
submission of Time Time
Tender 20/07/2022, 27/07/2022,
Documents,
Tender Document 10AM 11.00 AM
Fee of tender
document
5. Date & time of 27/07/2022,11:30 AM
online Technical
bid opening
6. Date of opening of To be informed to the
Price Bid qualified bidders
2.5 The Tender Call Notice contains the identical
arbitrary pre-qualification criteria, as contained in the
Tender Call Notice for the year 2021-22, in which the
Distributors were specifically barred from participating in
the tender process. As such, the Distributors/Suppliers
having been excluded from participating in the tender
process, it has been confined to only Manufacturers and
Importers. Thereby, it would create monopoly, as Opposite
Party No.2 has shown favour to a class of people. By
excluding the Distributors and keeping them out of the
tender process, since it will provide monopolistic trade
rights to the Manufacturers and Importers, challenging
such exclusion, the Petitioner has approached this Court
in the present Writ Petition.
// 10 //
3. Mr. Pitambar Acharya, learned Senior Counsel
appearing along with Mr. S.S. Tripathy, learned Counsel
for the Petitioner, contended that the Petitioner, being a
Distributor of medicines, earlier participated in the tender
for the years 2015-16, 2017-18 and 2019-20, and was
continuing the supply of drugs to the Opposite Parties.
But for the tender invited for the year 2020-21, the
Tendering Authority introduced a Clause excluding the
Distributors from participating in the tender process,
which was challenged by it in W.P.(C) No. 30953 of 2021
and in the said Writ Petition this Court passed interim
orders. However, subsequently, after expiry of the period
of Tender, the Writ Petition became infructuous and
disposed of as such. Therefore, question of exclusion of
Distributor was not considered and decided in the said
Writ Petition and, as such, again in the year 2022-23, the
very same condition has been incorporated in Clause-5.2
of the tender document debarring the Distributors from
participating in the tender process. It is contended that
such exclusion of Distributors from the arena of
// 11 //
participating in the tender process is arbitrary, illegal,
contrary to the provisions of law and, as such, without
having any rationale behind it and in a capricious
manner, the Petitioner has been debarred from
participating in the tender process in order to create
monopoly for the Manufacturers and Importers. As such,
such exclusion of Distributors also suffers from nepotism
and favoritism in favour of a class of people, i.e.,
Manufacturers and Importers. Thereby, the same is
unreasonable and tainted with mala fide and is against
the public policy. It is further contended the terms and
conditions under Clause-5.2 cannot be sustained in the
eye of law, as it is the settled principle that a section of
business cannot be excluded in order to favour another
class. Therefore, any administrative decision would be
regarded as unreasonable, if it is partial or unequal in its
operation between two different classes. It is further
contended that procuring veterinary items from
Manufacturers/Direct Importers will also not be at the
larger public interest, as they will be deprived from
// 12 //
availing the medicines from the Companies of
international repute. In the past, there have been
instances where it has been observed that there were
glaring irregularities on the part of local
Manufacturers/Direct Importers in supply of veterinary
items, which is evident from the acts of Opposite Party
No.2 in blacklisting as many as 35 Manufacturers for not
providing standard quality of veterinary items. These
Companies have been blacklisted in a span of around
four months. Thus, it is contended that the action of the
Authorities is arbitrary, unreasonable and contrary to the
provisions of law, as well as violative of Articles 14,
19(1)(g), 21 and Article 300-A of the Constitution of India.
3.1 It is further contended that in the recent
tender, Opposite Party No.2 has also allowed the
authorized Distributors to participate in the tender
process, so far it relates to Tender Call Notice bearing
No.OSMCL/2022-23/EQP-CARDIAC CARE/04(Annexure-
10), Tender Call Notice bearing Bid Reference No.
// 13 //
OSMCL/2022-23/ORTHO-INSTRUMENTS/03 (Annexure-
11) and Tender Call Notice vide Bid Reference No.
OSMCL/ 2022-23/ EQP-RADIOTHERAPY QA-AHPGIC/02
(Annexure-12). From these tender documents, it is made
clear that just like Importers, the authorized Distributors
are also eligible to participate in the tender process. It is
further contended that on perusal of Clauses-6.25.4 and
6.25.5 of the Tender Notice vide Annexure-7, it would be
evident that where in one hand Opposite Party No.2 on its
discretion reserves right to allow the successful bidder to
assign the contract in favour of some other person, on the
other hand it has not allowed the authorized Distributors
from participating in the tender process in the pretext of
keeping middleman at bay. It is further contended that
though the apex Court, as well as this Court in catena of
decisions have held that the scope of interference by way
of Judicial Review is very limited in a tender
process/Government contract, but in the case where the
Authorities have acted in a manner which is arbitrary,
unreasonable and discriminatory, to limit the scope of
// 14 //
competition to a chosen few by eliminating the potential
bidders from arena of competition, the same can be
subjected to Judicial Review. It is further contended that
the apex Court, as well as this Court time and again held
that any decision, be it a simply administrative decision
or a policy decision, if taken without considering the
relevant facts, can only be termed as an arbitrary
decision. If it is so, then be it a policy decision or
otherwise, it will be violative of the mandate of Article 14
of the Constitution of India.
To substantiate his contention, Mr. Pitambar
Acharya, learned Senior Counsel, has relied upon the
judgments of the apex Court as well this Court in the
cases of Tata Cellular v. Union of India, (1994) 6 SCC
651; Jagdish Mandal v. State of Orissa, (2007) 14 SCC
517; Jagruti Welfare Organization v. State of Odisha,
2017 SCC OnLine Ori 485; Ajay Kumar Jain v. State of
Odisha, 2017 SCC OnLine Ori 473; Union of India v.
Dinesh Engineering Corporation, (2001) 8 SCC 491;
// 15 //
UNION of India v. International Trading Co., (2003) 5
SCC 437; Sterling Computer Limited v. M/s. M & N
Publications Limited, (1993) 1 SCC 445; Tapan Jena v.
State of Orissa, 2011 SCC OnLine Ori 403; Reliance
Energy Limited v. Maharashtra State Road
Development Corporation Limited, (2007) 8 SCC 1 and
Chittaranjan Mishra v. State of Odisha, 2016 (II) OLR
735.
4. Mr. A.K. Parija, learned Senior Counsel
appearing along with Mr. P.K. Muduli, learned Counsel
for Opposite Party No.2, has emphatically submitted that
for the larger public interest, in the year 2020, the
Director, Animal Husbandry and Veterinary Services, took
a conscious decision to adopt the procurement policy with
due approval of the State that the Opposite Party No.2-
OSMCL to procure the veterinary drugs/ medicines etc.
directly from the Manufacturers/ Direct Importers and to
exclude the authorized Distributors/Suppliers from
participation to get the "best product at the best price".
// 16 //
After such decision, Director, Animal Husbandry and
Veterinary Services, vide letter dated 20.11.2020,
submitted the tender documents for supply of veterinary
drugs/medicines and vaccines for approval of the
Fisheries and Animal Resources Development
Department, which was duly approved and
communicated to the Director, Animal Husbandry and
Veterinary Services on 26.11.2020. Pursuant to such
conscious decision, the Notice Inviting Bid was issued by
the Director, Animal Husbandry and Veterinary Services
on 04.12.2020 containing similar Clause-5.2, which was
not challenged by the Petitioner. It is further contended
that in the year 2021, Opposite Party No.1, in a larger
public interest, took a policy decision with due approval
of the State Government to procure veterinary medicines
through the Opposite Party No.2-OSMCL. The decision of
the State Government to authorize Opposite Party No.2 to
procure veterinary medicines is to ensure transparency
and to obtain high quality medicines to livestock farmers
of the State.
// 17 //
4.1 It is further contended that Opposite Party
No.2 had already taken steps so far as procurement of
human Allopathic and Homeopathic Medicines are
concerned. Therefore, the policy decision of the State
Government is intended to bring in transformation to
procurement processes by brining in transparency and
accountability in procurement matters and for enabling
quality of medicines procured. Therefore, as per the policy
of the State Government, Opposite Party No.2 shall
procure the medicines directly from the
Manufacturers/Direct Importers and not from any
middlemen like authorized Suppliers/Distributors etc.
Accordingly, by letter dated 17.05.2021, Opposite Party
No.1, authorized Opposite Party No.2 to procure the
veterinary medicines/drugs and vaccines, hospital
instruments/equipments/ consumables on behalf of
Opposite Party No.1. Consequentially, Director, Animal
Husbandry and Veterinary Services, vide letter dated
04.06.2021, requested Opposite Party No.2 to procure the
veterinary medicines/drugs/vaccines and instrument etc.
// 18 //
Therefore, it is contended that exclusion of participation
of Distributors will no way destroy the level playing field
and, as such, the action of the Authority cannot be
considered to be arbitrary, illegal and contrary to the
provisions of law. Rather, procurement of medicines
directly from the Manufacturers/Direct Importer is to get
the "best product at the best price", which is in larger
public interest.
4.2 It is further contended that so far as the letters
issued by different foreign Companies are concerned, the
same have lost their validities since long. It is further
contended that the tenders for the years 2015-16, 2017-
18 and 2019-20 were floated by the Director, Animal
Husbandry and Veterinary Services and, as such, there
was no prohibition that once the tender conditions are
prescribed, same cannot be changed. Therefore, for the
year 2020, with the approval of the Government in
F&ARD Department, the authorized Distributors and
Suppliers were excluded from participation only to
// 19 //
procure medicines directly from the
Manufacturers/Direct Importers to get the "best product
at the best price", which has not been challenged by the
Petitioner. Though similar clauses are incorporated under
Clause-5.2, pursuant to notice inviting tender dated
04.12.2020, the Petitioner had never challenged the
same. Rather, the Petitioner challenged the present
Tender Call Notice dated 20.06.2022. But the bid of the
year 2020 was cancelled due to some procedural defects.
It is contended that incorporating similar clause, when
tender was issued for the year 2021-2022, the Petitioner
challenged the same, wherein interim orders were passed.
But the question of validity of Clause-5.2 could not be
adjudicated, as the said Writ Petition had become
infructuous by efflux of time. It is contended that
incorporation of the said clause confining to
Manufacturers/Importers is to ensure quality products at
the best price which is in accordance with the
procurement guidelines of Opposite Party No.2. Quality of
drugs is of prime concern and is in larger public interest.
// 20 //
Therefore, participation of Manufacturers/Direct
Importers is well justified and, thereby, middlemen like
Distributors/ Suppliers/ Agents/ C&F Agents/C&A
Agents have been kept out of consideration to get "best
product at best price" being prime consideration. Thus,
the same cannot be said to be illegal and arbitrary, as the
realm of contract is within the jurisdiction of Tendering
Authority and in exercise of power under Judicial Review,
the same cannot be interfered with by this Court, as has
been held by the apex Court, as well as this Court.
4.3 It is further contended that selection of bidder
through a process of open competition is not creating any
monopoly in favour of any bidder. The procurement drugs
from only Manufacturers/Direct Importers ensure quality
products. All the medical items being procured by
Opposite Party No.2 for free distribution at the Govt.
Health Care Facilities under Government's Flagship
Scheme of "Niramaya" are procured only from
Manufacturers/Direct Importers. Quality of items like
// 21 //
drugs is of prime concern. It is further contended that
over a period of six years since Opposite Party No.2
started its operation, procurement of drugs has been
made from more than 1000 approved
Suppliers/Manufacturers, of which only 32 have been
blacklisted on quality ground, which is less than 5% of
the total nos. of Suppliers over a period of six years.
Therefore, incorporation of Clause-5.2 cannot be said to
be arbitrary, unreasonable and contrary to the provisions
of law, as the same has been done for larger interest of
the public, pursuant to the conscious decision taken by
the State for procurement of medicines directly from
Manufacturers/Importers to get "best product at the best
price".
To substantiate his contention, Mr. A.K. Parija,
learned Senior Counsel, has relied upon the judgments of
the apex Court in the cases of Tata Cellular v. Union of
India, (1994) 6 SCC 651; Directorate of Education v.
Educomp Datamatics Ltd, (2004) 4 SCC 19;
// 22 //
Association of Registration Plates v Union of India,
(2005) 1 SCC 679; Shimnit Utsch India Private Ltd. v.
West Bengal Transport Infrastructure Development
Corporation Limited, (2010) 6 SCC 303; Michigan
Rubber (India) Limited v. State of Karnataka, (2012) 8
SCC 303; Montecarlo Limited v. National Thermal
Power Corporation Limited, (2016) 15 SCC 272; Afcons
Infrastructure Ltd. v. Nagpur Metro Rail, (2016) 16
SCC 818; Reliance Telecom Ltd. v. Union of India,
(2017) 4 SCC 269; Municipal Corporation, Ujjain v.
BVG India, (2018) 5 SCC 462; Caretel Infotech v.
Hindustan Petroleum Corporation Ltd. (2019) 14 SCC
81; Silppi Constructions Contractors v. Union of
India, (2020) 16 SCC 489; Uflex Ltd v. Government of
Tamil Nadu, (2022) 1 SCC 165; Balaji Ventures Pvt Ltd
v. Maharashtra State Power Generation Company
Ltd, [Special Leave to Appeal (C) No. 1616 of 2022 decided
on 11.02.2022]; Jindal Steel & Power Limited v.
Odisha Coal and Power Limited, [W.P.(C) No. 4687 of
2017 decided on 14.09.2017]; Utkal Supplies v. Maa
// 23 //
Kanak Durga, 2021 SCC OnLine SC 301; Jagdish
Mandal v. State of Orissa, (2007) 14 SCC 517; M/s
Mohapatra Binders v. State of Odisha, 2017 SCC
OnLine Ori 32 and Associated Provincial Picture
Houses Limited v. Wednesbury Corporation, [1948] 1
KB 223.
5. This Court heard Mr. Pitambar Acharya,
learned Senior Counsel appearing along with Mr. S.S.
Tripathy, learned Counsel for the Petitioner, Mr. P.P.
Mohanty, learned Addl. Government Advocate appearing
for State-Opposite Party No.1, and Mr. A.K. Parija, learned
Senior Counsel appearing along with Mr. P.K. Muduli,
learned Counsel for Opposite Party No.2 by hybrid mode
and perused the record. Pleadings having been exchanged
between the parties, with the consent of learned counsel
for the parties, this Writ Petition is being disposed of
finally at the stage of admission.
6. Before delving into the merits of the case itself,
relevant provisions of the e-tender documents for supply
// 24 //
of veterinary items on rate contract basis for a period of
one year from the date of approval of tender, vide Bid
Reference No.OSMCL/2022-23/DRUGS-VETERINARY/14
dated 20.06.2022 issued by OSMCL, a Government of
Odisha Enterprises, are extracted hereunder:
"NOTICE INVITING BID
Odisha State Medical Corporation Limited
(OSMCL)
In front of Ram Mandir, Convent Square, Unit - III,
Bhubaneswar -751 001
Tel. : (0674) 2380950, Website : www.osmcl.nic.in , Email : drugs-
[email protected] Bid Ref. No.: OSMCL/2022-23/DRUGS-VETERINARY/14Date:
20/06/2022
Online Bids through e-Tender portal
(https://tendersodisha.gov.in) are invited from
eligible bidders for supply of Veterinary Items
as per the particulars mentioned below:
Sl. No. Particulars Date and Time
Date & time of 20/06 /2022, 3 PM
1. release of bid
2. 23/06/2022, up to 5:00 PM
Date & time for
submission of queries
by E-Mail id - drugs-
[email protected]
Date & time of Online Start Date & Time End Date & Time
bid submission
3. 19/07/2022,
29/06 /2022, 3 PM
6.00 PM
4. Date & time for Start Date & Time End Date & Time
submission of 20/07 /2022, 10 AM 27/07 /2022,
Tender 11.00 AM
Documents
, Tender
5. Date & time of online 27/07/2022, 11:30 AM
Technical bid opening
6. Date of opening of To be informed to the qualified bidders
Price Bid
// 25 //
The bid document with all information relating to
the bidding process including cost of bid document,
Prequalification criteria and terms & conditions
are available in the websites: www.osmcl.nic.in
and https://tendersodisha.gov.in The Authority
reserves the right to accept / reject any part thereof
or all the bids without assigning any reason thereof.
SD/-
Managing Director OSMC Ltd., Odisha
xxx xxx xxx
SECTION V
SPECIAL CONDITIONS OF CONTRACT
5.1 Time Limits Prescribed
Sl. No. Activity Time Limit
5.1.1 Delivery period 70(Seventy) days from
date of issue of Supply
Order.
5.1.2 Submission of 15 days from the date of
Performance issue of Letter of Intent.
Security.
5.1.3 Time for making The payment will be
payments completed within 60 days
from the date of delivery of
by Tender
the last consignment/
Inviting Authority
successful delivery of the
supplied item or batch(s).
5.2 Pre qualification of Bidders:
5.2.1. Bidder shall only be a manufacturer having
valid own manufacturing license/loan/ license
with product endorsement or direct importer
holding valid import license with product
// 26 //
registration certificate issued by the Drugs Controller
General of India.
xxx xxx xxx
5.2.4 Distributors / Supplier / Agents / C&F Agents
/ C & A Agents are not eligible to participate in the
tender on behalf of any company.
5.2.5 Bidder (manufacturer/importer) shall have
minimum turnover as per Section IV Column No.7 in
each of the year for last 3(three) financial years in
India.
xxx xxx xxx
6.25.4 Assignment: - The Successful bidder shall
not assign, either in whole or in part, its contractual
duties, responsibilities and obligations to perform the
contract, except with the Tender Authority's prior
written permission.
6.25.5 Sub Contracts:- The Successful bidder
shall not sub contract the execution of the contract.
Such action, if done without the knowledge of the
Tender Inviting Authority prior to the entering of the
contract, shall not relive the Successful bidder from
any of its liability or obligation under the terms and
conditions of the contract.
xxx xxx xxx
Clause-6.29 - Quality Testing
xxx xxx xxx
Clause-6.32 - Corrupt or Fraudulent Practices
xxx xxx xxx
Clause- 6.34- Resolution of Disputes
6.34.1 If dispute or difference of any kind shall
arise between the Tender Inviting Authority and the
successful bidder in connection with or relating to
// 27 //
the contract, the parties shall make every to resolve
the same amicable by mutual consultations.
xxx xxx xxx
Clause- 6.39 - Termination of Contract."
7. In view of the aforementioned clauses
incorporated in the e-tender document vide Annexure-7
dated 20.06.2022, it is to be considered-
"Whether exclusion of Distributors/
Suppliers/ Agents/ C&F Agents/ C&A
Agents, as provided in Clause-5.2.4
mentioned in the impugned Notice Inviting
Tender, declaring them not eligible to
participate in the tender on behalf of any
company, can be construed to be justified
or not."
8. Admittedly, the Petitioner is a registered
Proprietorship Firm and Distributor of medicines and
medical equipments. In the present case, where the
expression used as "Distributor", it includes Distributors/
Suppliers/ Agents/ C&F Agents/ C&A Agents, as provided
in Clause-5.2.4 of the Notice Inviting Tender.
// 28 //
9. The word 'Distributor' is understood in
commerce as an agent or one who distributes goods to
consumers.
10. While considering Section 4(c) of Central
Excises and Salt Act, 1944, the Bombay High Court in
(1982 Tax LR 2869 (Bom.) held that "Distributor" is a
person, who distributes goods of the Manufacturer to
consumers and in so doing, acts for and on behalf of the
Manufacturer and an Agent of the Manufacturer.
11 While considering Para-2(e) of Drugs (Price
Control) Order, 1995, in Nor Nordisk India Pvt. Ltd v.
State of Karnataka, AIR 2006(NOC) 862(Kant.), it has
been held that the term 'Distributor' under Para 2(e) of the
Order includes an Importer.
12. In Union of India v. Ashok Leyland Ltd.,
1987 (30) ELT 281, it has been held that the term
'Distributor' is understood as an Agent or one who
distributed goods to consumers. Such Agent who acts for
and on behalf of a Manufacturer, earns a commission; if
// 29 //
the Manufacturer makes sales directly he will be obliged
to give what is ordinarily understood as an overriding
commission to the Distributor.
13. Taking into consideration the meaning attached
to the word 'Distributor', as discussed above, there is no
iota of doubt that Distributor is an Agent or one who
distributes the goods to consumer and acts for and on
behalf of the Manufacturer and earns commission.
14. Referring to Para-2.1 of the Drugs (Price
Control) Order, 1995 in Union of India v. Ranbaxy
Laboratories Ltd., (2008) 7 SCC 502, the apex Court
held that 'MANUFACTURE' in relation to any drug,
includes any process or part of a process for making,
altering, finishing, packing, labelling, breaking or
otherwise treating or adapting any drug with a view to its
sale and distribution, but does not include the
compounding or dispensing of any drug or the packing of
any drug in the ordinary course of retail business and 'to
Manufacturer' shall be construed accordingly.
// 30 //
15. While considering SRO 1729/93 issued under
Section 10 of the Kerala General Sales Tax Act (15 of
1963), as referred in MRF Ltd. v. CST., (2006) 8 SCC 702,
the apex Court held that 'MANUFACTURE' shall mean the
use of raw materials and production of goods
commercially different from the raw materials used but
shall not include mere packing of goods, polishing,
cleaning grading, drying blending or mixing different
varieties of the same goods, sawing, garbling, processing
one form of goods into another form of the same goods by
mixing with chemicals or gas, fumigation or any other
process applied for preserving the goods; in good
condition or easy transportation. The process of
producing desiccated coconut out of coconut shall be
deemed to be 'Manufacturer' for the purpose of the said
Notification.
16. While considering Section 2(27) of the
Rajasthan Sales Tax Act, 1994, in Kumar Motors v. CST,
(2007) 4 SCC 140, it has been held that
// 31 //
'MANUFACTURER' includes every processing of goods
which bring into existence a commercially different and
distinct commodity, but shall not include such processing
as may be notified by the State Government.
17. While considering S.2(e-1) of U.P Trade Act,
1948, in Sonebhadra Fuels v. Commr., Trade tax, Sale
Tax Tribunal, (2006) 7 SCC 322, the apex Court held
that 'MANUFACTURER' means producing, making,
mining, collecting, extracting , altering, ornamenting ,
finishing or otherwise processing, treating or adapting any
goods; but does not include such Manufactures or
manufacturing process as may be prescribed.
18. While considering Section 2 (14-A) of Karnataka
Agricultural Marketing (Regulations) Act(27 of 1966) in
ITC Ltd. v. State of Karnataka, AIR 2005 Kant 330, it
has been held that 'IMPORTER' means a person who
imports or causes goods to be imported on his own
account or as an agent for another person from outside
the market area into a market area for the purpose of
// 32 //
selling, processing, and manufacturing or for any other
purpose except for one's own domestic consumption ,but
shall not include a public carrier.
19. While considering Section 2(26) of the Customs
Act (52 of 1962), in Sitaram Rajgarhia v CC, 1997 (90)
ELT 472(T), it has been held that Importer is the person
who holds himself out to be an Importer. If the Invoice
and the Bill of entry are in the name of the Appellant and
entire risk of goods is also shown to be that of the
Appellant, he is liable to be treated as the Importer for
demanding the duty. The Appellant cannot plead that the
ultimate buyer, for whom the goods were imported,
should be treated as the Importer.
20. Similarly, while considering Section 2(26) of the
Customs Act (52 of 1962), in Associated Cement
Companies Ltd. v. Commr. of Customs, (2001) 4 SCC
593, it has been held that the word 'Importer' occurring in
S. 2(26) of the Act includes owner of the goods.
// 33 //
21. Taking into consideration the meaning of the
words 'Manufacturer' and 'Importer', as mentioned above,
to whom the privilege has been given in the impugned
Notification for supply of medicines, has justification
because they are producing medicines and also in some
cases are importing medicines by maintaining the
qualities and rate intact. Therefore, the Tendering
Authority is well justified in putting Clause-5.2.1 in the
Tender Notice, that the Bidder shall only be a
Manufacturer having valid own Manufacturing
License/Loan License with product endorsement or Direct
Importer holding valid import license with product
registration certificate issued by the Drugs Controller
General of India. The expression used "the Manufacturer
having own manufacturing license/loan license" in
Clause-5.2.1, if taken into consideration, then in that
case the provisions contained in Drugs and Cosmetics
Act, 1940 (for short "Act, 1940"), which is a Central Act
and which provides comprehensive procedure to regulate
the import, manufacture, distribution and sale of drugs
// 34 //
and cosmetics, are to be gone into. Section-33 of the Act,
1940 empowers the Central Government to formulate
Rules regarding manufacture, sale and distribution of
drugs, more specifically contained in Chapter-IV of the
Act, 1940. The Act, 1940 authorizes four different entities
to manufacture, sale, distribute and to otherwise deal
with drugs as defined in Section 3(b) of the Act, 1940. The
Act, 1940 recognizes four categories of entities, such as,
(i) Manufacturer (ii) Importers, (iii) Distributors and (iv)
Loan licensee. The Act, 1940 and Rules framed
thereunder styled as the Drug Rules, 1945 (earlier known
as the Drugs and Cosmetic Rules, 1945 and subsequently
styled as Drug Rules, 1945 after the amendment vide
G.S.R. 769(E) dated 15.12.2020), hereinafter referred to
as "Drugs Rules", lays down comprehensive procedure for
grant of license to deal with drugs. Under the Scheme of
the Act, 1940 a Manufacturer and a Distributor are
intricately related to each other. The drug manufactured
by a Manufacturer, get exposure to the market through a
Distributor. The drugs manufactured by a reputed
// 35 //
manufacturing Company, may not be accessible to the
consumers in the absence of a Distributor. A
Manufacturer necessarily therefore, gets exposed to the
market through a Distributor. Therefore, a Distributor
plays a key and pivotal role to make the products of a
branded manufacturing Company available to the open
market for the purpose of use by the ultimate
beneficiaries.
22. The reason for exclusion of such Distributor
and inclusion of Manufacturer/Importer, as assigned by
the Opposite Parties, is to get "best product at the best
price", as pleaded in Paragrpah-8 of the Counter Affidavit
filed by Opposite Party No.2 on 19.07.2022, which reads
thus:-
"8. ........... As stated earlier, for the larger
public interest, the Director, DAHVS has taken a
conscious decision with the approval of the
Government in F& ARD Department in the year
2020 to exclude the Authorized Distributors /
Suppliers from participation and only to procure
medicines directly from the Manufacturers/ Direct
Importers to get the "best product at the best
price". Accordingly, the Notice Inviting Bid was
issued by the Director, Directorate of Animal
Husbandry and Veterinary Services on
// 36 //
04.12.2020 containing similar Clause-5.2 of
Notice Inviting Bid dated 20.06.2022 which was
never challenged by the Petitioner."
(emphasis supplied).
If that be the reason, how exclusion of Distributors from
the arena of bid would suffice the object sought to be
achieved by the State, has not been indicated. Rather, by
participation of a Distributor in the bid, if it can give
"best product at the best price" matching with the offer of
the Manufacturers/Importers, then in that case, its offer
cannot and could not have been excluded by the State.
Since the State and its instrumentality or enterprises
invited the tender with an objective of fetching "best
product at the best price", if there will be larger
participation, then it can achieve its objectives in a better
manner. As such, it cannot be said that it would be
against the larger public interest. Section 3(f) of the Act,
1940, which deals with 'Manufacturer', reads as under:
"Section 3(f)- "Manufacture" in relation to
any drug or cosmetic includes any process or part of
process for making, altering ornamenting , finishing,
packing, labelling, breaking up or otherwise treating
or adopting any drug or cosmetic with a view to its
sale or distribution but does not include the
// 37 //
compounding or dispensing of any drug, or the
packing of any drug or cosmetic, in the ordinary
course of retail business; and "to manufacturer"
shall be construed accordingly;"
An entity, which is engaged in the business of
manufacturing of drugs and termed as Manufacturer,
needs to obtain a license under Rule-76 of the Drug
Rules, which reads as under:
"Rule 76: A license to manufacturer for sale or for
distribution of drugs specified in Schedules C and C
(1) other than Large Volume Parenterals, Sera and
Vaccines and Recombinant DNA (r-DNA) derived
drugs, drugs specified in Part X-B and Schedule X
shall be issued in Form 28 and a license to
manufacturer for sale or distribution of drugs
specified under Schedules C and C (1) other than
Large Volume Parenterals, Sera and Vaccines and
Recombinant DNA(r-DNA) derived drugs, drugs
specified in Part X-B and Schedule X shall be issued
in Form 28-B. A license to manufacturer for sale or
for distribution of Large Volume Parenterals, Sera
and Vaccines and Recombinant DNA (r-DNA) derived
drugs shall be issued in Form 28-D. Before a license
in Form-28 or Form 28-B or Form 28-D is granted,
[***], the following condition shall be complied with
by the applicant"
23. Therefore, a "Manufacturer" who holds a valid
license under Rule-76 is competent to appoint a
"Distributor" under law. If the Distributor can quote the
price of product less than the price quoted by
Manufacturer and provides the same goods from the
// 38 //
Manufacturer, it cannot be justified to deprive it of
participating in the tender process. Section-3(g) of the Act,
1940 has also defined the term import. The Importer is
also obliged to apply for a license in Form-10 & 10A under
Rule-23 of the Drugs Rules, which reads as under:
"Rule 23: Import Licenses - An import license in Form
10 shall be required for import of drugs, excluding
those specified in Schedule X, and an import license
in Form 10-A shall be required for the import of drugs
specified in Schedule X."
24. Similarly, the third category, i.e., the
Distributor, which term finds place in Rule-59 of the
Drugs Rules, reads as under:
"Rule 59(2) Application for the grant of license to sell,
stock, exhibit or offer for sale or distribute drugs ,
other than those included in Schedule X, Shall be
made in Form 19 accompanied by a fee of rupees one
thousand and five hundred or in Form 19-A
accompanied by a fee of rupees five hundred, as the
case may be or in the case of drugs included in
Schedule X shall be made in Form 19-C accompanied
by a fee of rupees five hundred, to the licensing
authority."
25. The above Rules make it clear that application
for grant of license to sale, stock, exhibit or offer for sale
or distribute drugs, other than those included in
Schedule-X, shall be made in Form-19-A to 19-C to the
// 39 //
Licensing Authority. Therefore, if the provisions of law
prescribes that a Manufacturer, Importer and Distributor
can carry on their business having valid license under the
provisions of the Act, 1940 and the Drugs Rules, 1945
and they are being granted such license by the Competent
Authority, in that case inclusion of two categories,
namely, 'Manufacturer' and 'Importer' and exclusion of
other category, namely, 'Distributor' from participating in
the tender, has no rationale behind it. As such, Clause-
5.2.1, which has been incorporated under Section-V of
the Special Conditions of Contract, provides that a
Manufacturer shall have a valid own Manufacturing
License/Loan License, which has been explained in Rule-
75-A of the Drugs Rules, which reads thus:
"Rule 75-A. Loan Licenses. (1) Applications for the
grant of loan licenses to manufacture for sale or for
distribution of drugs specified inn Schedule C and
C(1) excluding those specified in Part X-B and
Schedule X shall be made in Form 27-A to the
licensing authority and shall be made up to ten items
for each category of drugs referred to in Schedule M
relating to pharmaceuticals products and Schedule
M-III relating to medical devices and in-vitro
diagnostics and shall be accompanied by a license
fee of rupees six thousand and an inspection fee of
rupees one thousand and five hundred for every
inspection.
// 40 //
Explanation- For the purpose of this rule a loan
license means a license which a licensing authority
may issue to an applicant who intends to avail the
manufacturing facilities owned by a licensee owned
by a licensee in Form 28."
26 There is no iota of doubt that in accordance
with Section-33 of the Act 1940, Drugs Rules have been
framed, which is equally binding on all the Authorities.
Therefore, issuance of bid restricting it to three categories,
namely, Manufacturer, Loan Lincensee and Importer, by
eliminating the Authorized Distributor of a licensed
Manufacturer, who also holds a license to distribute such
products under the Act, cannot be said to be well justified
and the reason assigned therefor is to fetch "best product
at the best price", has no basis at all. The reason being,
even a Distributor can provide the "best product at the
best price" after procuring from the Manufacturers or
Importers. Therefore, elimination of Distributors from the
arena of competition is arbitrary, unreasonable, unfair,
and cuts at the root of the sacrosanct constitutional
principles enshrined in Articles 14, 19(1)(g) read with
// 41 //
Article 21 of the Constitution of India and, as such, it is
against the concept of "free play and fair play" and also
goes against the Principles of "level playing field". The
exclusion and/or elimination of Distributors of branded
manufacturing Companies from the arena of a free bid, is
certainly against the larger public interest and the animal
resources of the State would be deprived of getting the
benefits of the branded drugs manufactured by the
reputed manufacturing Companies globally.
27. The further contention of Opposite Party No.2
is that the Distributor is a middleman and therefore, they
have excluded such category of persons and they want to
procure medicines or allied products directly from the
Manufacturer/Loan Licensee or Importers, which is
greater interest of the State to get "best product at the
best price".
28. In Black Law Dictionary 'Middleman" has
been defined as follows:
// 42 //
"Middleman - One who merely brings parties
together in order to enable them to make their own
contract.
An agent between two parties: an intermediary who
performs the office of a broker or factor between
seller and buyer, producer and consumer, landowner
and tenant, etc.
One who has been employed as an agent by a
principal and who has employed a sub-agent under
him by authority of the principal, either express or
implied."
29. In P. Ramanatha Aiyar's Advanced Law
Lexicon, the word 'Middleman' has been defined as
follows:-
"Middleman. A person employed to bring two or
more parties together; the parties, when they meet,
do their own negotiating and make their own
bargains; an agent who merely brings the parties to
the sale together, and upon whom does not devolve
the duty of negotiating for either, and who may
contract for and receive commissions from both.
Intermediary, usually a wholesaler retailer or broker,
who acts as an agent between a buyer and a seller.
Middlemen tend to push up prices by adding their
own profit margin to the difference between the
buying and selling prices, and it may therefore be in
the interests of the buyer and seller to cut out the
middleman (as, for example, in mail order)."
30. In Whatson Law Lexicon, it has been defined
that 'Middleman', an intermediary between wholesale
// 43 //
merchants and retail dealers; a Distributor from producer
to consumer.
31. If the meaning attached to the word
'middleman', as explained above, would be taken into
consideration, the Distributor can never be termed as
middleman, as the middleman is someone who merely
brings parties together in order to enable them to make
their own contracts.
32. Therefore, elimination of the Distributors to be
a bidder, pursuant to Clause-5.2.4, declaring them as not
"eligible" cannot have any justification even if they are
discharging obligation for and on behalf of the
Manufacturer/Loan Licensee/Importers as per the
provisions of the Act 1940 and the Rules framed
thereunder with the prime consideration is to fetch "best
product at the best price". Thereby, being a Distributor, if
the Petitioner can fetch the same, it cannot be said that
inclusion of Distributor is against the larger public
interest.
// 44 //
33. As it appears from the record, for the year
2015-16, tender was invited by the Director, Animal
Husbandry and Veterinary Services, fixing following
eligibility criteria:
"Eligibility:
1. The tenderer should be a Manufacturer or
Authorised Distributor or Authorised Agency or
Authorised representative having valid
registration."
34. Similarly, for the year 2017-18, eligibility
criteria was fixed to the following effect:
"Eligibility:
A.1 The tenderer should be a Manufacturer
or Authorised Distributor or Authorised Dealers
having valid registration of the product."
35. For the year 2019-20, eligibility criteria was
fixed to the following effect:
" Eligibility:
A.1 The tenderer should be a Manufacturer or
Authorised Distributor or Authorised Dealers having
valid registration of the product."
36. For all the years, i.e., 2015-16, 2017-18 and
2019-20, the Petitioner was L1 bidder and work orders
// 45 //
were issued in its favour and, as such, it has carried out
its responsibility in terms of the agreement. For the year
2020-21, due to procedural lapses, the tender for that
year was cancelled by the Director, Animal Husbandry
and Veterinary Services at the instance of the Tendering
Authority. But for the year 2021-22, in place of Director,
Animal Husbandry, Opposite Party No.2 issued a bid,
Clause-5.2 of which reads as under:-
"5.2 Prequalification of Bidders
5.2.1 Bidder shall only be a manufacturer having
valid own manufacturing license/loan license with
product endorsement or direct importer holding valid
import license with product registration certificate
issued by the Drugs Controller General of India .
5.2.4 Distributors/Suppliers/ Agents/ C&F
Agents/C&A Agents are not eligible to participate in
the tender on behalf of any company."
37. Incorporation of Clause-5.2.4 in the bid
document was challenged before this Court in W.P.(C) No.
30953 of 2021 and this Court at the outset, by realizing
the fact preliminarily that exclusion of Distributor from
the arena of participating in the bid was not justified,
passed interim order. But the said Writ Petition was
disposed of as infructuous, vide Order dated 26.04.2022,
// 46 //
since the period was already over. For this year, i.e., for
the year 2022-23, similar condition has been put, as
mentioned above, excluding the Distributors from
participating in the bid giving way only to the
Manufacturers/Importers/Loan Licensee. But fact
remains, for the year 2022-23, the very same Opposite
Party No.2 had issued the tender for supply of medical
instruments to various hospitals of the State wherein the
authorized Manufacturers and Importers were allowed to
participate in the tender process excluding the
Distributors. But for supply of veterinary medicines such
exclusion has been made, which is arbitrary,
unreasonable and contrary to the provisions of law.
38. Mr. A.K. Parija, learned Senior Counsel
appearing along with Mr. P.K. Muduli, learned Counsel for
Opposite Party No.2, placed on record the e-tender
documents for supply of drugs and medical consumables
(Group-II) for the year 2021-22 for human consumption,
wherein similar condition has been put in Section-V of
// 47 //
Special Conditions of Contract incorporating the very
same Clauses-5.2.1 and 5.2.4 under Clause-5.2, which
read as under:-
"5.2 Pre qualification of Bidders:
5.2.1 Bidder shall only be a manufacturer
having valid own manufacturing license/loan license
with product endorsement or direct importer holding
valid import license with product registration
certificate issued by the Drugs Controller General of
India.
xxx xxx xxx
5.2.4. Distributors/ Suppliers/ Agents/ C&F
Agents/ C & A Agents are not eligible to participate
in the tender on behalf of any company."
39. Similarly, for the year 2022-23, the very same
clauses are incorporated for supply of drugs and medical
consumables (Group-I) for human consumption, which
read as under:
"5.2 Pre qualification of Bidders:
5.2.1 Bidder shall only be a manufacturer
having valid own manufacturing license/loan license
with product endorsement or direct importer holding
valid import license with product registration
certificate issued by the Drugs Controller General of
India.
xxxx xxx xxxx
// 48 //
5.2.4. Distributors/ Suppliers/ Agents/ C &F
Agents/ C & A Agents are not eligible to participate
in the tender on behalf of any company."
40. Therefore, it is contended that for supply of
drugs and medical consumables for human consumption
for the years 2021-22 and 2022-23, if such a clause has
been incorporated and on that basis the tender process is
continuing, incorporation of such a clause for supply of
veterinary items for the year 2022-23 cannot be said to be
arbitrary, unreasonable and contrary to the provisions of
law. It is contended that none of the Distributors had
challenged such condition put in the e-tender document
for supply of drugs and medical consumables Group-II for
the year 2021-22 and Group-I for supply of drugs for year
2022-23 for human consumption. Therefore, ipso facto it
cannot be said that it is not sacrosanct and unjustified
and, as such, keeping that in view the present bid has
been issued inviting tenders.
41. But merely because one wrong was committed,
that cannot be a ground to commit another wrong,
// 49 //
meaning thereby, if there was exclusion of Distributors, so
far as supply of human medicines are concerned, that
itself cannot be a ground to exclude the Distributors,
those who have come to the Court being aggrieved by
incorporation of such clause for supply of veterinary
medicines. To be more specific, due to insertion of such
Clause in the present tender the Petitioner, who is a
Distributor, being aggrieved by the action of the Authority,
has approached this Court by filing the present Writ
Petition. Therefore, the Opposite Parties are estopped from
taking the plea that since in other tender documents such
condition was not available, that is why the same Clause
is not available in the present tender. Thereby, non-
inclusion of Distributors to participate in the bid is not
justified and its reasonableness is required to be tested
with the touchstone of Article 14 of the Constitution of
India.
42. The contention raised by Mr. A.K. Parija,
learned Senior Counsel appearing along with Mr. P.K.
// 50 //
Muduli, learned Counsel for Opposite Party No.2 that the
term introduced to the tender document is a policy
decision of the Authority and, as such, the State is
entitled to change its policy. Therefore, on the basis of
"Wednesbury Principle of Reasonableness", if the
Tendering Authority has acted bonafidely, the Court, in
exercise of power under judicial review, cannot interfere
with the terms and conditions of the tender documents.
To refute such contention, it can be said that if the
condition stipulated in the tender documents is arbitrary,
unreasonable and contrary to the provisions of law, even
if it forms part of a policy decision, the Court cannot sit as
a mute spectator and give a rubber stamp to such
arbitrary and unreasonable action of the Tendering
Authority. Rather, the condition stipulated in the tender
document can be tested with the touchstone of
reasonableness, as enshrined under Article 14 of the
Constitution of India, in exercise of the power under
judicial review, which is permissible under law.
// 51 //
43. Furthermore, on examination of the provisions
of Clauses-6.25.4 and 6.25.5, as mentioned above, it is
ample clear that the successful bidder shall not assign,
either in whole or in part, its contractual duties,
responsibilities and obligations to perform the contract,
except with the Tender Inviting Authority's prior written
permission, and further, if it is done without the
knowledge of the Tender Inviting Authority prior to
entering into the contract, then it is liable for consequence
thereof. It is of relevance to note, by way of clarification in
reply to the Rejoinder Affidavit, it has been mentioned
that in view of Clause-5.2.4 of impugned Notice Inviting
Bid, Opposite Party No.2 will not allow the assignment or
sub-contract in favour of Distributors/ Suppliers/
Agents/ C&F Agents/ C&A Agents with the help of either
Clause-6.25.4 or Clause-6.25.5, if any request is made by
any successful bidder. Assignment/Sub-contract, if any,
will only be in favour of Manufacturer/Direct Importer
and not otherwise which is prohibited by the Notice
// 52 //
Inviting Bid. As such, incorporation of such Clause does
not reflect the same.
44. A Supplementary Affidavit has been filed on
28.07.2022 bringing to the notice of the Court putting
such restriction pursuant to bid dated 06.08.2021, that
47 Manufacturers and 3 Importers have participated in
the bid, which was the subject matter of challenge in
W.P.(C) No. 30953 of 2021. Even pursuant to the present
bid dated 20.06.2022, 54 bidders have participated and
after detailed technical evaluation by the experts, the
Manufacturers and Importers who have participated in
the tender process can be known. On the other hand, it
has also been brought to the notice of the Court, by filing
Annexure-A to the Supplementary Affidavit, the number
of bidders participated in the tender for procurement of
veterinary medicines and vaccines by the Directorate of
AH & VS, Odisha, for the period from 2015-16 to 2019-
20. The same is extracted hereunder:
// 53 //
"ANNEXURE-A
Information on participation of Bidders/Manufacturers/
Authorized Distributors in Tender for procurement of
Veterinary Medicines & Vaccines by the Directorate of AH
& VS, Odisha, Cuttack.
sl. Year Name of the No. of Bidders participated in the tender
No. Item
Manufacturer Authorised Total
Distributor participants in
the Bid
Vaccine
Brucellosis
Vaccine
Vaccine
5 2018-19 NIL
Vaccines
45. The reasons for participation of less number of
Manufacturers or Authorized Distributors in the bid is
well known to the Authorities, because they had fixed the
highest price turn over of Rs.5 crores to become eligible to
participate in the bid, whereas in the present bid a
Manufacturer having Rs.3 lakhs turn over can participate.
// 54 //
Therefore, reduction of turnover criteria from Rs.5 crores
to Rs.3 lakhs in case of Manufacturers, certainly has led
to submission of bids in highest number. But that ipso
facto cannot preclude a Distributor from participating in
the process of bid. It may so happen, with Rs.3 lakhs of
turnover a large number of Distributors could have
participated in the bid. Therefore, reliance placed on
Annexure-A to the reply to the Supplementary Affidavit
indicating that less number of participation was there,
cannot have any justification.
46. Both the sides have cited plethora of judgments
of this Court as well as of the apex Court laying down the
Principle of Judicial Review in contractual matters and
also the scope of the Court to interfere in such matter.
47. In Tata Cellular v. Union of India, (1994) 6
SCC 651, the apex Court held that it shall always be the
endeavor of the Government to prevent arbitrariness or
favoritism. At Paragraphs 70, 71 and 81(2), the apex
Court observed as follows:-
// 55 //
"70. It cannot be denied that the principles of
judicial review would apply to the exercise of
contractual powers by Government bodies in order
to prevent arbitrariness or favoritism. However, it
must be clearly stated that there are inherent
limitations in exercise of that power of judicial
review. Government is the guardian of the finances
of the State. It is expected to protect the financial
interest of the State. The right to refuse the lowest or
any other tender is always available to the
Government. But, the principles laid down in Article
14 of the Constitution have to be kept in view while
accepting or refusing a tender. There can be no
question of infringement of Article 14 if the
Government tries to get the best person or the best
quotation. The right to choose cannot be considered
to be an arbitrary power. Of course, if the said
power is exercised for any collateral purpose the
exercise of that power will be struck down.
71. Judicial quest in administrative matters
has been to find the right balance between the
administrative discretion to decide matters whether
contractual or political in nature or issues of social
policy; thus they are not essentially justifiable and
the need to remedy any unfairness. Such an
unfairness is set right by judicial review.
81 (2) A decision would be regarded as
unreasonable if it is impartial and unequal in its
operation as between different classes. On this
basis in R. v. Bernet London Borough Council, ex p
Johnson the condition imposed by a local authority
prohibiting participation by those affiliated with
political parties at events to be held in the
authority's parks was struck down."
At the same time, the Principle of Judicial Review has
been summarized in Paragrpah-94 of the said Judgment,
which reads as follows:-
// 56 //
"94. The principles deducible from the above are :
(1) The modem trend points to judicial restraint in
administrative action.
(2) The court does not sit as a court of appeal but
merely reviews the manner in which the decision
was made. (3) The court does not have the expertise
to correct the administrative decision. If a review of
the administrative decision is permitted it will be
substituting its own decision, without the necessary
expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be
open to judicial scrutiny because the invitation to
tender is in the realm of contract.
Normally speaking, the decision to accept the tender
or award the contract is reached by process of
negotiations through several tiers. More often than
not, such decisions are made qualitatively by
experts.
(5) The Government must have freedom of contract.
In other words, a fair play in the joints is a
necessary concomitant for an administrative body
functioning in an administrative sphere or quasi-
administrative sphere. However, the decision must
not only be tested by the application of Wednesbury
principle of reasonableness (including its other facts
pointed out above) but must be free from
arbitrariness not affected by bias or actuated by
mala fides.
(6) Quashing decisions may impose heavy
administrative burden on the administration and
lead to increased and unbudgeted expenditure.
Based on these principles we will examine the facts
of this case since they commend to us as the correct
principles."
// 57 //
At Paragraphs-151 and 154 of the said Judgment, the
apex Court also observed as follows:-
"151. In the above two cases, we are obliged to
interfere on the ground of arbitrariness and violation
of the principle of natural justice confining ourselves
to the doctrine of judicial restraint, however, by the
application of permissible parameters to set right the
decision-making process.
154. In view of the foregoing, we thus reach the
conclusion that Bharati Cellular could not claim the
experience of Talkland. This conclusion has come to
be arrived at on the basis of the parameters we have
set out in relation to the scope of judicial review. We
may reiterate that it is not our intention to substitute
our opinion to that of the experts. Apart from the fact
that the Court is hardly equipped to do so, it would
not be desirable either. Where the selection or
rejection is arbitrary, certainly this Court would
interfere."
48. The sum and substance of the Principle laid
down by the apex Court in the aforementioned case is
that in exercise of power under Judicial Review, the Court
cannot substitute its opinion to that of experts and also
cannot sit as a Court of Appeal, but will review the
manner in which the decision is made and also held the
Government must have freedom of contract. The decision
must not only be tested by the application of "Wednesbury
Principle of Reasonableness" but must be free from
// 58 //
arbitrariness not affected by bias or actuated by mala
fides. Consequently, where the selection or rejection is
arbitrary, then certainly the Court would interfere.
Therefore, with the touchstone of Article 14, 19 (1)(g) and
21 of the Constitution of India, if the scrutiny of fact and
law will be taken into consideration and if the Court
comes to a conclusion that there is arbitrary,
unreasonable exercise of power tainted with mala fide and
bias, in that case, the Court has got the power to interfere
with the same.
49. In Radha Krishna Agarwal v. State of
Bihar, AIR 1977 SC 1496, the apex Court held as
follows:-
"In case any right conferred on the citizens which is
sought to be interfered, such action is subject to
article 14 of the Constitution, and must be reasonable
and can be taken only upon lawful and relevant
grounds of public interest. Where there is
arbitrariness in State action of this type of entering or
not entering into contracts, article 14 springs up and
judicial review strikes such an action down. Every
action of the State executive authority must be
subject to rule of law and must be informed by
reason. So, whatever be the activity of the public
authority, in such monopoly or semi-monopoly
dealings, it should meet the test of article 14 of the
Constitution. If a Governmental action even in the
// 59 //
matters of entering or not entering into contracts, fails
to satisfy the test of reasonableness, the same would
be unreasonable ........ It appears to us that rule of
reason and rule against arbitrariness and
discrimination, rules of fair play and natural justice
are part of the rule of law applicable in situation or
action by State instrumentality in dealing with
citizens in a situation like the present one. Even
though the right of the citizens are in the nature of
contractual rights, the manner, the method and
motive of a decision of entering or not entering into a
contract, are subject to judicial review on the
touchstone of relevance and reasonableness, fair
play, natural justice, equality and non- discrimination
in the type of the transactions and nature of the
dealing."
50. Similar view has also been taken by the apex
Court in Mahabir Auto Stores v. Indian Oil
Corporation Ltd., AIR 1990 SC 1031, Priya Gupta v
State of Chhattisgarh, AIR 2012 SC 2413, Rashmi
Metaliks Ltd. v. Kolkata Metropolitan Development
Authority, (2013) 10 SCC 95, Kulja Industries Limited
v. Chief Gen. Manager, W.T. Proj. BSNL,, AIR 2014 SC
9, Powai Panchsheel Co-operative Housing Society v.
M.H.A.D.A., (2019) 2 SCC 294.
// 60 //
51. In In re: Special Reference No.1 of 2012,
(2012) 10 SCC 1: AIR 2013 SC (Civ) 209: 2012 AIR SCW
6194, the apex Court observed as follows:
"It is well settled that every action of the State or an
instrumentality of the State in exercise of its executive
power, must be informed by reason. In appropriate
cases, actions uniformed by reason may be
questioned as arbitrary in proceedings under article
226 or article 32 of the Constitution.
52. Similarly, in S.G.Jaisinghani v. Union of
India, AIR 1967 SC 1427, the Constitution Bench of the
apex Court observed as under :-
"In the context it is important to emphasise that
absence or arbitrary power is the first essence of the
rule of law, upon which our whole Constitutional
System is based. In a system governed by rule of
law, discretion, when conferred upon Executive
Authorities, must be confined within the clearly
defined limits. Rule of law, from this point of view,
means that the decision should be made by the
application of known principles and rules and in
general such decision should be predictable and the
citizen should know where he is, if a decision is
taken without any principle or without any rule, it is
unpredictable and such a decision is antithesis to the
decision taken in accordance with the rule of law."
53. In Ramana Dayarama Shetty v.
International Airports Authority of India, AIR 1979 SC
1628, the apex court observed that every action of the
executive Government must be informed by reasons and
// 61 //
should be free from arbitrariness. That is the very essence
of rule of law and its bare minimum requirement. Thus,
the decision taken in an arbitrary manner contradicts the
principle of legitimate expectation and the plea of
legitimate expectation relates to procedural fairness in
decision making and forms part of the rule of non-
arbitrariness as denial of administrative fairness is
Constitutional anathema.
54. In view of the aforementioned principle laid
down by the apex Court, there is no iota of doubt that if
there is no reasonable exercise of power by the Authority
and more so, if the arbitrary and unreasonable exercise of
power based on bias and mala fide, the Court has every
jurisdiction to interfere with the same in exercise of Power
under Article 226 of the Constitution of India.
55. The expression "reasonable" means: rational,
i.e. based on reasons; not excessive or immoderate;
something conformable or agreeable to reasons; having
// 62 //
regard to the facts of a particular case; something within
the limits or reasons.
56. In R.K.Garg v. Union of India, AIR 1981 SC
2138, the apex Court, while dealing with the expression
"reasonable", have observed as under:-
"The action is called 'reasonable' which an informed,
intelligent, just minded civilized man would
rationally favour. The concept of 'reasonableness'
does not exclude notions of morality and ethics."
57. In Bishambhar Dayal Chandra Mohan v.
State of Uttarpradesh , AIR 1982 SC 33, the apex Court
held the word "reasonable" implies intelligence, care and
deliberation with, as a course, which reason dictates.
58. The Courts have interpreted reasonableness as
a facet of equality. Hence, every State action should be
informed by reasonableness.
59. In M.P. Gangadharan v. State of Kerala,
(2006) 6 SCC 162 : AIR 2006 SC 2360, the apex Court
observed that the constitutional requirement for judging
// 63 //
the question of reasonableness and fairness on the part of
the statutory authority must be considered having regard
to the factual matrix obtaining in each case. It cannot be
put in a straight-jacket formula. Before an action is
struck down, the Court must be satisfied that a case has
been made out for exercise of power of judicial review.
60. In Style (Dress Land) v. Union Territory,
Chandigarh, (1999) 7 SCC 89 : AIR 1999 SC 3678, the
apex Court observed that in the absence of Rules, the
action of the Government is required to be fair and
reasonable.
61. In LIC of India v. Consumer Education &
Research Centre, (1995) 5 SCC 482 : AIR 1995 SC 1811,
the apex Court observed that in the sphere of contractual
relations the State, its instrumentalities, Public
Authorities or those whose acts bear insignia of public
element, action to public duty or obligation are enjoined
to act in a manner, i.e. fair, just and equitable, after
taking objectively all the relevant options into
// 64 //
consideration and in a manner that is reasonable,
relevant and germane to effectuate the purpose for public
good and in general public interest and it must not take
any irrelevant or irrational factors into consideration or
appear arbitrary in its decision.
62. In Jagdish Mandal (supra), at Paragraph-22,
the apex Court observed as follows:-
"Judicial review of administrative action is
intended to prevent arbitrariness, irrationality,
unreasonableness, bias and malafides. 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
// 65 //
public works for years, or delay relief and succour to
thousands and millions and may increase the project
cost manifold."
63. In Dinesh Engineering Corporation (supra),
the apex Court held that in Contractual matter like the
Government Contract, the Public Authority needs to be
rational and reasonable in their decision making process.
At Paragraph-16, it has been held as follows:-
"16. But then as has been held by this Court in
the very same judgment that a public authority even
in contractual matters should not have unfettered
discretion and in contracts having commercial
element even though some extra discretion is to be
conceded in such authorities, they are bound to
follow the norms recognised by courts while dealing
with public property. This requirement is necessary
to avoid unreasonable and arbitrary decisions being
taken by public authorities whose actions are
amenable to judicial review. Therefore, merely
because the authority has certain elbow room
available for use of discretion in accepting offer in
contracts, the same will have to be done within the
four corners of the requirements of law
especially Article 14 of the Constitution. In the
instant case, we have noticed that apart from
rejecting the offer of the writ petitioner arbitrarily, the
writ petitioner has now been virtually debarred from
competing with the EDC in the supply of spare parts
to be used in the governors by the Railways, ever
since the year 1992, and during all this while we are
told the Railways are making purchases without any
tender on a proprietary basis only from the EDC
which, in our opinion, is in flagrant violation of the
constitutional mandate of Article 14. We are also of
the opinion that the so-called policy of the Board
creating monopoly of EDC suffers from the vice of
// 66 //
non- application of mind, hence, it has to be quashed
as has been done by the High Court."
64. In Ajay Kumar Jain (supra), the apex Court at
Paragraphs-23, 24, 25 and 26, observed as follows:-
"23. In the case of Union of India Vs.
International Trading Co., reported in (2003) 5 SCC
437, Hon'ble Supreme Court at paragraph-23 has
held as under:
"23. Reasonableness of restriction is to be
determined in an objective manner and from
the standpoint of interests of the general
public and not from the standpoint of the
interest of persons upon whom the
restrictions have been imposed or upon
abstract consideration. A restriction cannot be
said to be unreasonable merely because in a
given case, it operates harshly. In
determining whether there is any unfairness
involved; the nature of the right alleged to
have been infringed the underlying purpose
of the restriction imposed, the extent and
urgency of the evil sought to be remedied
thereby, the disproportion of the imposition,
the prevailing condition at the relevant time,
enter into judicial verdict. The reasonableness
of the legitimate expectation has to be
determined with respect to the circumstances
relating to the trade or business in question.
Canalisation of a particular business in
favour of even a specified individual is
reasonable where the interests of the country
are concerned or where the business affects
the economy of the country..........." (emphasis
supplied)
24. In the case at hand, by the restriction
imposed at the pre-bid stage, the right of the potential
bidders, who are otherwise eligible to participate in
the tender process, is being arbitrarily infringed. It
// 67 //
certainly curtails the reasonable expectation of the
intending eligible bidders to participate in the bidding
process.
25. In the case of Association of Registration
Plates Vs. Union of India and others, reported in
(2005) 1 SCC 679, Hon'ble Supreme Court at
paragraph-43 held as under:
"43. Certain preconditions or qualifications
for tenders have to be laid down to ensure
that the contractor has the capacity and the
resources to successfully execute the
work, Article 14 of the Constitution prohibits
the government from arbitrarily choosing a
contractor at its will and pleasure. It has to
act reasonably, fairly and in public interest in
awarding contract. At the same time, no
person can claim fundamental right to carry
on business with the government. All that he
can claim is that in competing for the contract,
he should not be unfairly treated and
discriminated to the detriment of public
interest. Undisputedly, the legal position
which has been firmly established from
various decisions of this Court, cited at the
Bar (supra) is that government contracts are
highly valuable assets and the court should
be prepared to enforce standards of fairness
on government in its dealings with tenderers
and contractors. (emphasis supplied)
26. No purpose can certainly be served in
nipping the contractors, who are otherwise eligible, at
the threshold. There cannot be any fair competition,
as there would be lesser participants, which is
certainly detrimental to the public interest."
65. In Sterling Computers (supra), the apex Court
at Paragraphs 18 and 19 observed as follows:-
"18 While exercising the power of judicial
review, in respect of contracts entered into on behalf
of the State, the Court is concerned primarily as to
// 68 //
whether there has been any infirmity in the "decision
making process". In this connection reference may be
made to the case of Chief Constable of the North
Wales Police v. Evans, [1982] 3 All ER 141, where it
was said that
'The purpose of judicial review- "... is to
ensure that the individual receives fair
treatment, and not to ensure that the
authority, after according fair treatment,
reaches on a matter which it is authorized or
enjoined by law to decide for itself a
conclusion which is correct in the eyes of the
court."
By way of judicial review the court cannot examine
the details of the terms of the contract which have
been entered into by the public bodies or the state.
Courts have inherent limitations on the scope of any
such enquiry. But at the same time as was said by
the House of Lords in the aforesaid case, Chief
Constable of the North Wales Police v. Evans (supra),
the Courts can certainly examine whether 'decision
making process" was reasonable, rational not
arbitrary and violative of Article 14 of the
Constitution.
19. If the contract has been entered into without
ignoring the procedure which can be said to be basic
in nature and after an objective consideration of
different options available taking into account the
interest of the State and the public, then Court cannot
act as an appellate authority by substituting its
opinion in respect of selection made for entering into
such contract. But, once the procedure adopted by an
authority for purpose of entering into a contract is
held to be against the mandate of Article 14 of the
Constitution, the Courts cannot ignore such action
saying that the authorities concerned must have
some latitude or liberty in contractual matters and
any interference by court amounts to encroachment
on the exclusive right of the executive to take such
decision."
66. In Reliance Energy (supra), the apex Court at
Paragraphs 36, 37, 38 and 39 observed as follows:-
// 69 //
"36. We find merit in this civil appeal.
Standards applied by courts in judicial review must
be justified by constitutional principles which govern
the proper exercise of public power in a
democracy. Article 14 of the Constitution embodies
the principle of "non-discrimination". However, it is
not a free- standing provision. It has to be read in
conjunction with rights conferred by other articles
like Article 21 of the Constitution. The said Article
21 refers to "right to life". In includes "opportunity". In
our view, as held in the latest judgment of the
Constitution Bench of nine-Judges in the case of I.R.
Coelho vs. State of Tamil Nadu (2007) 2 SCC
1, Article 21/14 is the heart of the chapter on
fundamental rights. It covers various aspects of life.
"Level playing field" is an important concept while
construing Article 19(1)(g) of the Constitution. It is this
doctrine which is invoked by REL/HDEC in the
present case. When Article 19(1)(g) confers
fundamental right to carry on business to a company,
it is entitled to invoke the said doctrine of "level
playing field". We may clarify that this doctrine is,
however, subject to public interest. In the world of
globalization, competition is an important factor to be
kept in mind. The doctrine of "level playing field" is an
important doctrine which is embodied in Article
19(1)(g) of the Constitution. This is because the said
doctrine provides space within which equally-placed
competitors are allowed to bid so as to subserve the
larger public interest. "Globalization", in essence, is
liberalization of trade. Today India has dismantled
licence-raj. The economic reforms introduced after
1992 have brought in the concept of "globalization".
Decisions or acts which results in unequal and
discriminatory treatment, would violate the doctrine
of "level playing field" embodied in Article
19(1)(g). Time has come, therefore, to say that Article
14 which refers to the principle of "equality" should
not be read as a stand alone item but it should be
read in conjunction with Article 21 which embodies
several aspects of life. There is one more aspect
which needs to be mentioned in the matter of
implementation of the aforestated doctrine of "level
playing field". According to Lord Goldsmith -
commitment to "rule of law" is the heart of
// 70 //
parliamentary democracy. One of the important
elements of the "rule of law" is legal certainty. Article
14 applies to government policies and if the policy or
act of the government, even in contractual matters,
fails to satisfy the test of "reasonableness", then such
an act or decision would be unconstitutional.
37. In Union of India and another vs.
International Trading Co. and another - (2003) 5 SCC
437, the Division Bench of this Court speaking
through Pasayat, J. had held :
"14. It is trite law that Article 14 of the
Constitution applies also to matters of
governmental policy and if the policy or any
action of the Government, even in contractual
matters, fails to satisfy the test of
reasonableness, it would be unconstitutional.
15. While the discretion to change the
policy in exercise of the executive power, when
not trammelled by any statute or rule is wide
enough, what is imperative and implicit in
terms of Article 14 is that a change in policy
must be made fairly and should not give
impression that it was so done arbitrarily or by
any ulterior criteria. The wide sweep of Article
14 and the requirement of every State action
qualifying for its validity on this touchstone
irrespective of the field of activity of the State is
an accepted tenet. The basic requirement
of Article 14 is fairness in action by the state,
and non-arbitrariness in essence and
substance is the heart beat 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 reasons, not
whimsically for any ulterior purpose. The
meaning and true import and concept of
arbitrariness is more easily visualized 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. A basic and
obvious test to apply in such cases is to see
// 71 //
whether there is any discernible principle
emerging from the impugned action and if so,
does it really satisfy the test of
reasonableness."
38 When tenders are invited, the terms and
conditions must indicate with legal certainty, norms
and benchmarks. This "legal certainty" is an
important aspect of the rule of law. If there is
vagueness or subjectivity in the said norms it may
result in unequal and discriminatory treatment. It
may violate doctrine of "level playing field".
39. In Reliance Airport Developers (P) Ltd. v.
Airports Authority of India and others -(2006) 10 SCC
1, the Division Bench of this Court has held that in
matters of judicial review the basic test is to see
whether there is any infirmity in the decision-making
process and not in the decision itself. This means
that the decision-maker must understand correctly
the law that regulates his decision- making power
and he must give effect to it otherwise it may result in
illegality. The principle of "judicial review" cannot be
denied even in contractual matters or matters in
which the Government exercises its contractual
powers, but judicial review is intended to prevent
arbitrariness and it must be exercised in larger public
interest. Expression of different views and opinions in
exercise of contractual powers may be there,
however, such difference of opinion must be based on
specified norms. Those norms may be legal norms or
accounting norms. As long as the norms are clear and
properly understood by the decision-maker and the
bidders and other stakeholders, uncertainty and
thereby breach of rule of law will not arise. The
grounds upon which administrative action is
subjected to control by judicial review are classifiable
broadly under three heads, namely, illegality,
irrationality and procedural impropriety. In the said
judgment it has been held that all errors of law are
jurisdictional errors. One of the important principles
laid down in the aforesaid judgment is that whenever
a norm/benchmark is prescribed in the tender
process in order to provide certainty that
norm/standard should be clear. As stated above
// 72 //
"certainty" is an important aspect of rule of law. In
the case of Reliance Airport Developers (supra), the
scoring system formed part of the evaluation process.
The object of that system was to provide
identification of factors, allocation of marks of each of
the said factors and giving of marks had different
stages. Objectivity was thus provided."
67. In Chittaranjan Mishra (supra), in which one
of us (Dr. Justice B.R. Sarangi) was the Author of the
Judgment, this Court, at Paragraph-16, observed as
follows:-
"16. In S.S. Company mentioned supra, on
which reliance has been placed so far as locus standi
of the petitioner is concerned, 'it has been held that if
the tenderer did not satisfy the eligibility criteria,
even in terms of the unamended clause, and
consequently its tender was rejected thereunder, it
could not assail the amendment made in the relevant
clause in terms whereof it again failed to qualify. But,
this is not a case where the petitioner had
participated in the tender, rather by putting the
conditions by enhancing the EMD and solvency
amount, the petitioner has been precluded from
participating in the tender itself. So far as the
previous years tender conditions are concerned, such
conditions were not there and, admittedly, in respect
of other distribution systems, namely, PDS and SMP,
such stringent conditions have not been put by the
State authority and, consequentially, there was fair
participation of the bidders in view of the terms and
conditions mentioned in the previous years. But, by
putting conditions, so far as EMD, solvency certificate
and security deposits are concerned, the petitioner
being outstayed from the tender and in order to
favour group of persons such stipulations have been
made, it amounts to arbitrary and unreasonable
exercise of powers. Consequentially, the petitioner
has been discriminated and malafidely the benefit
// 73 //
has been extended to such people. Thereby, the
petitioner has got every locus to assail such terms
and conditions. Therefore, the judgment referred to
supra has no application to the present case."
In the said case, this Court, referring to Michigan
Rubber (India) Limitd v. State of Karnataka and
others, (2012) 8 SCC 216, Tata Cellurar; Dinesh
Engineering (supra), S.S. and Company v. Orissa
Mining Corporation Limited, (2008) 5 SCC 772
interfered with the Tender Call Notice dated 29.02.2016,
so far as it relates to the conditions for enhancement of
Security Deposits, EMD and Solvency Certificate, being
arbitrary, unreasonable, discriminatory and mala fide
and, thereby, quashed the same.
68. In Jagruti Welfare Organization (supra), this
Court in Paragraphs 28, 29 and 37 observed as follows:-
"28 Admittedly, pursuant to the notice inviting
tender (for short 'NIT'), four bidders had submitted
their bids. Out of four bidders, two, namely, M/s.
M.E. Infra Project Pvt. Ltd., Mumbai and M/s. Jyoti
Build Tech. Pvt. Ltd., Lucknow could not deposit the
EMD of Rs.60.00 lakh. Thus, the competition was
reduced to two competitive bidders, namely, M/s.
Global Waste Management Cell Pvt. Ltd., Mumbai
// 74 //
and M/s. SRP Clean Enviro Engineers Pvt. Ltd.,
Banagalore. Both the aforesaid bidders have quoted
exorbitantly high price, which is more than
double/triple of what is being paid to RMKY at
present. As has been discussed while answering
Issue No. 2, CMC could not satisfactorily explain the
reasonable nexus between the escalation in financial
eligibility criteria and the object to be achieved, that
is the scope of work.
29. Cumulative assessment of the discussions
made above, it can safely be concluded that the
action of the CMC in escalating the financial eligibility
criteria as per Clause 4.2 (a) of the tender call notice
is nothing but to eliminate the potential bidders like
the petitioner. Participation of only two bidders
suggests that there was no fair competition at all.
CMC has every right to incorporate stringent
condition in the tender call notice. But the same must
have a reasonable nexus with the object to be
achieved and more importantly, it must allow a fair
competition giving scope to the potential bidders to
compete. As observed by Hon'ble Apex Court in the
case of Ram & Shyam Company (supra) at para-18, it
has been held as follows:
"18. ............................And at any rate disposal
of the state property in public interest must be
by such method as would grant an opportunity
to the public at large to participate in it, the
State reserving to itself the right to dispose it of
as best subserve the public weal."
37. On a cumulative assessment of the case
law, it can be safely concluded that the Court does
not act as an appellate authority, but merely reviews
the manner in which the administrative decision is
taken. The Court does not have expertise to correct
the administrative decision because it will amount to
substituting its own decision without any necessary
expertise which itself may be fallible. The scope of
interference/judicial review is very limited and can
be made in the case where the authorities have acted
in a manner which is arbitrary, unreasonable,
discriminatory and with mala fide intention to limit
the scope of competition to a chosen few by
// 75 //
eliminating the potential bidders from arena of
competition and/or the decision so taken is against
the public interest."
69. Therefore, in view of the settled principles of
law, as discussed above, there is absolutely no bar to
interfere with the tender process, unless it satisfies the
tests of arbitrariness, unreasonableness, discrimination,
mala fide and bias, in exercise of power under Judicial
Review under Article 226 of the Constitution of India.
70. In Associated Provincial Picture Houses
Limited v. Wednesbury Corporation, [1948] 1 KB 223,
while considering the case of unreasonableness, the
Bench considered the case of discretion and it was
clarified that a person entrusted with a discretion must,
so to speak, direct himself properly in law. He must call
his own attention to the matters which he is bound to
consider. He must exclude from his consideration matters
which are irrelevant to what he has to consider. If he does
not obey those Rules, he may truly be said, and often is
said, to be acting "unreasonably." In another sense it is
// 76 //
taking into consideration extraneous matters. It is so
unreasonable that it might almost be described as being
done in bad faith; and, in fact, all these things run into
one another. Simultaneously, while dealing with Public
Interest, where it has been held that when he refers to the
public interest, it must have been proper and legitimate
thing which the Authority ought to have taken in mind.
Certainly, he does not suggest anywhere that the Court is
entitled to set up its view of the public interest against the
view of the local Authority. Therefore, the power of the
Court to interfere in each case is not as an Appellate
Authority to override the decision of the Local Authority,
but as a Judicial Authority, which is concerned and
concerned only, to see whether the Local Authority have
contravened the law by acting in excess of the powers
which Parliament has confided in them.
71. In Municipal Corporation (supra), the apex
Court, with regard to the purpose of Judicial Review, held
that the Court is not to check whether the decision is
// 77 //
sound. If bona fide and in public interest, the Court will
not interfere in exercise of power of Judicial Review, even
if there is procedural lacuna.
72. In view of the above judicial pronouncements,
this Court, in exercise of the power of Judicial Review,
intends to interfere so far as it relates to exclusion of
Distributors from participating in the tender process, but
not with the decision making process. By not including
Distributors to have a fair selection and fair participation
with an object sought to be achieved, i.e. "best product at
the best price", the Tendering Authority has acted
arbitrarily, unreasonably and malafidely with a
reasonable bias, so that the competition can only be
confined to the Manufacturers, Importers and Loan
Licensees. If for procurement of equipments, opportunity
was given to the Distributors/ Suppliers/ Agents/ C&F
Agents / C&A Agents for procurement of veterinary
medicines no valid and justifiable reason has been shown
to exclude them from participating in the bid. The only
// 78 //
reason has been shown that so far as human medicine is
concerned, though such clause of exclusion of
Distributors was provided, but the same was not
challenged. But fact remains, there was no such occasion
on the part of the Petitioner to challenge the same as he is
not a license holder for the said medicines. Merely
because such exclusion clause was made available for
procurement of human medicine, that ipso facto cannot
disentitle the Petitioner to challenge such exclusion
clause for procurement of veterinary medicines.
Therefore, on both the counts, the reason assigned for
excluding the Distributors/ Suppliers/ Agents/ C&F
Agents / C&A Agents under Clause-5.2.4 cannot be
accepted.
73. In view of the law laid down by the apex Court
in Shimnit Utsch India (supra), no doubt the discretion
lies with the Authority to make a change in the Policy, but
that change of the Policy should be within the touch stone
of reasonableness. If such change does not satisfy the
// 79 //
reasonableness, then in that case, the Policy can be
construed as arbitrary, contrary to the provisions of law
and the said Policy should be interfered with by the
Court.
74. Referring to Director of Education,
Montecarlo Ltd. and Afcons Infrastructure Ltd.
(supra), the apex Court has time and again held that the
Authority is the best Judge of the tender conditions. It is
not open for the Court to see whether the conditions
prescribed in earlier tender were better and, as such, the
Government must have a free hand and a reasonable play
in the joints and the same cannot be struck down
because it is felt that some other condition may have been
more fair, wiser or logical. As such, the Authority of the
document is the best person to understand and
appreciate the requirement and interpret the document.
The author may have a different interpretation, which is
not acceptable to the Court, but that itself is not the
reason to interfere with the interpretation. The owners
// 80 //
should always have the freedom to provide the eligibility
criteria unless it is found to be arbitrary, malafide or
tailor-made. With regard to this proposition of law laid
down by the apex Court, there is no dispute at all. Rather,
this should be in conformity with the requirement of
Articles 14 and 19 (1)(g) of the Constitution. As such, the
apex Court have observed the same taking into
consideration the provisions enshrined under Articles 14
and 19 (1)(g) of the Constitution.
75. In Silppi Constructions (supra), the apex
Court held that the Court is normally loathe to interfere
in contractual matters unless a clear cut case of
arbitrariness or mala fides or bias or irrationality is made
out.
76. Keeping in view the law laid down by the apex
Court and applying the same to the present context, this
Court is of the considered view that the Petitioner has
made out a case for interference, while there is exclusion
of one class of people from participating in the bid,
// 81 //
namely, Distributors/ Suppliers/ Agents/ C&F Agents/
C&A Agents, as mentioned in Clause-5.2.4 of the Special
Conditions of Contract. The reason for their exclusion is
tell tale to fetch "best product at the best price". If the
Distributors can satisfy the reason assigned, there is no
justification not to allow them to participate in the bid
itself.
77. In Caretel Infotech (supra), the apex Court
observed that the object cannot be that in every contract,
where some parties would lose out, they should get the
opportunity to somehow pick holes, to disqualify the
successful parties. This is not the case here and as such,
the Petitioner cannot be considered to be an unsuccessful
party. Rather, by excluding the Distributors/ Suppliers/
Agents/ C & F Agents / C & A Agents from participating
in the bid to have a larger competition and confining to a
group of persons, namely, Manufactures, Importers and
Loan Licensees, the tender invited by Opposite Party No.2
cannot sustain in the eye of law.
// 82 //
78. It is argued with vehemence that when larger
public interest is involved, in that case the judicial
intervention in the matter of contract involving the State
instrumentality in exercise of power of Judicial Review
will not be permitted to protect the private interest. In the
present case, rather for the greater public interest and for
the larger participation in the bid, instead of confining the
tender to a particular group, namely, Manufacturer,
Importers and Loan Licensees, the Tendering Authority
should have included the Distributors/ Supplier/ Agents/
C & F Agents / C & A Agents, who could have provided
"best product at the best price". Opposite Party No.2 has
misconstrued this fact and acted arbitrarily and
unreasonably, which cannot sustain in the eye of law.
79. Much reliance has been placed alleging that no
protection to private interest even if some defect is found
in the decision making process. The question of decision
making process starts by invitation of tender and in
inviting tender, if there is exclusion of a particular group,
// 83 //
namely, Distributors/ Suppliers/ Agents/ C & F Agents /
C & A Agents and, as such, the decision making process
has not yet began, in that case, the question of so called
alleged protection of private interest does not arise.
Rather, it is for the larger public interest, the opportunity
of participating in the tender should have been given to
all classes of People to fetch "best product at the best
price". Initially, Director of Animal Husbandry and
Veterinary Services was issuing the tender and as per the
requirement, the State Government has changed the
Policy to procure Veterinary Medicines through Opposite
Party No.2, to which the Petitioner has no grievance and
he has never assailed such change of Policy. Rather, the
Petitioner only assails the exclusion of Distributors from
the arena of participating in the tender, as the same is
arbitrary, irrational, unreasonable, discriminatory,
malafide, bias and affects the public interest.
80. Therefore, exclusion of Distributors/
Suppliers/ Agents/ C & F Agents / C & A Agents under
// 84 //
Clause-5.2.4 pursuant to the Notice Inviting Bid dated
20.06.2022 vide Annexure-7 is arbitrary, irrational,
unreasonable, discriminatory, malafide, bias and affects
the public interest.
81. It is worthwhile to mention here that while
entertaining this Writ Petition on 15.07.2022, since
learned Counsel for Opposite Party No.2 had entered
appearance, in course of hearing, it was brought to the
notice of this Court that pursuant to impugned Tender
Notice, as per Clause-5.2.1, 54 bidders belonging to
Manufacturer, Importer and Loan Licensee have
participated and, as such, larger participation has been
made, even excluding Distributors/ Supplier/ Agents/ C
& F Agents / C & A Agents. Therefore, this Court, instead
of passing any interim order, instructed learned Counsel
appearing for the Opposite Parties, not to take any final
decision till the matter is finally heard and disposed of, to
which unequivocal statement was made that since the
Court is hearing the matter, no final decision will be
// 85 //
taken by the Tendering Authority. As such, no 3rd party
interest has been created till now, in view of the
undertaking and commitment made by learned Counsel
for the Opposite Parties.
82. Considering the matter- both factually and
legally- Clause-5.2.4 of the Bid Ref. No. OSMCL/2022-
23/DRUGS-VETERINARY/14 dated 20.06.2022,
excluding the Distributors/ Suppliers/ Agents/ C&F
Agents / C&A Agents from participating in the Tender,
cannot sustain, as the same is arbitrary, irrational,
unreasonable, discriminatory, malafide, bias and affects
the public interest and also violates Articles 14, 19 (1)(g),
21 and 300-A of the Constitution of India. Accordingly,
the same is liable to be quashed and is hereby quashed.
Consequentially, any follow up action taken pursuant to
the Notice Inviting Bid, vide Bid Ref. No. OSMCL/ 2022-
23/ DRUGS - VETERINARY / 14 dated 20.06.2022 in
Annexure-7 is also hereby quashed. The Opposite
Parties are hereby directed for issuance of fresh tender
// 86 //
excluding Clause-5.2.4 by giving opportunity to all the
classes of bidders, namely, Manufacturers/ Importers/
Loan Licensees/ Distributors/ Suppliers/ Agents/ C&F
Agents / C&A Agents.
83. In the result, the Writ Petition is allowed.
However, there shall be no order as to costs.
..............................
DR. B.R. SARANGI,
JUDGE
S.K. MISHRA, J. I agree.
..............................
S. K. MISHRA,
JUDGE
Orissa High Court, Cuttack
The 11th August, 2022, Arun/Ashok/GDS
