Association Of Industries Madhya Pradesh vs State Of Madhya Pradesh

Prakash Shrivastava, J

This order will also govern the disposal of W.P. No. 6165/213 Association of Industries Madhya Pradesh v. State of M.P. since it is stated by

counsel for the parties that both these petitions involve the same issue on the similar fact situation.

For convenience the facts have been noted from W.P. No. 7049/2013.

In this writ petition the petitioners have sought a writ of certiorari to quash the tender dated 30.5.2013 and also to quash the contract/agreements

which may have been executed between the respondents and the private party in pursuance to the tender dated 30.5.2013, and to direct the

respondents for not incorporating condition No. (j) in future tenders in respect of supply of medicines in the hospitals. In substance, the petitioners are

aggrieved with the condition No. (j) of the impugned tender.

The petitioners are associations of drug manufacturers. The respondent no. 2 for the purpose of supply of drugs and medicines in hospitals of

Government of M.P. for a period of one year, had floated the tender dated 30.5.2013 for the year 2013 -2014. The last date of submission of tender

was 27.6.2013. The technical bid was to be opened on 28.6.2013 and financial bid was to be opened on 8.7.2013. The condition No. (j) of the tender

document require the manufacturer to have WHO-GMP inspection certificate inline with the WHO certificate scheme and product -wise certificate

of COPP (WHO-GMP) issued by the regulatory authority. According to the petitioners, the condition No. (j) is arbitrary and discriminatory, therefore,

they have approached this Court.

The respondents in the reply have opposed the writ petition taking the stand that the health department on 17.11.2012 has launched “Sardar

Ballabhbhai Patel Nishulk Aushadhi Yojnaâ€, a free scheme for drug distribution for strengthening its drug distribution system to provide minimum

essential drugs to all the patients coming to the health institutions throughout the year. Various conditions in the NIT No. 176 have been incorporated

to maintain high quality of medical and health facility for the public. The WHO-GMP certified drugs ensure the quality standards and also meet the

global standards hence accepted in international market, whereas internationally, GMP certified drugs are not accepted. The said condition No. (j) has

been incorporated in the tender to have medicines from the manufacturers of high standard. The State has also placed reliance upon the Drug Policy

of 2009 and has taken the stand that it is prerogative of the State Government (Tender Inviting Authority) to add on to various conditions which are

necessary for ensuring the objective of drug policy. The State has denied that WHO-GMP certificate manufacturers are only big manufacturers and

has submitted that the small scale industries having WHO-GMP certificate have participated and have even qualified in tender. Additional reason

assigned in the return is that WHO-GMP certificate holders in previous years had successfully supplied medicines round the year which was not the

case of the other manufacturers. It has also been stated that in pursuance to the NIT, the tenders have already been finalized and agreements have

been executed.

Learned counsel appearing for the petitioners submits that the condition No. (j) of the tender is arbitrary and discriminatory in nature. He further

submitted that members of the petitioners' association are holding the GMP certificate issued under the provisions of the Drugs and Cosmetics Act,

1940, therefore, they can not be excluded from the tender process. He has referred to Schedule M of the Drugs and Cosmetics Rules, 1945 relating to

good manufacturing practices and has submitted that the petitioners have manufactured the drugs complying with the said requirement, therefore, the

condition of having WHO-GMP certificate is irrelevant which has been incorporated with a view to exclude the small scale manufacturers. He has

also referred to the letters of the Drug Controller General (Annexure P/5) and the letter of the Dy. Drug Controller dated 13.6.2013 (Annexure P/4),

and has submitted that the WHO certificate is required only for the export purposes. Learned counsel for the petitioners in support of his submissions

has placed reliance upon the judgment of Delhi High Court in the matter of Association of Ups and Power v. Society of Applied Microwave dated

13.8.2002 reported in 2003 (1) ARBLR 339 Delhi, Jammu & Kashmir High Court in the matter of Rohit Drugs v. The State reported in AIR 2002

Jammu and Kashmir 127 and the judgment of Uttaranchal High Court in the matter of Poddar Pharmaceuticals Ltd. v. Stateof Uttaranchal in W.P.

No. 427(M/B) of 2002 dated 24.5.2013.

Learned counsel for the State opposing the writ petition has submitted that the condition No. (j) has been incorporated in the tender to get the

quality drugs in the Government hospitals. She has further submitted that the action has been taken by the State in accordance with the drug policy

and that the scope of interference by this Court in the tender matters is very limited, and similar arguments challenging the same condition have

already been rejected by the other courts. In support of her submission, she has placed reliance upon the judgment of the Supreme Court in the matter

of Michigan Rubber (India) Limited v. State of Karnataka reported in (2012) 8 SCC 216, in the matter of Directorate of Education v. Educomp

Datamatics Ltd. reported in 2004 AIR SCW 1505, in the matter of Jagdish Mandal v. State of Orissa reported in (2007) 14 SCC 517, the judgment of

the Andhra Pradesh High Court dated 21.2.2002 in the matter of Association of Drugs v. Andhra Pradhes Health, Medical, Housing reported in 2002

(2) ALD 609, the judgment of the Bombay High Court, Bench at Aurangabad in the matter of SPM Drugs (P) Limited v. State of Maharashtra dated

14.12.2009 in W.P. No. 7823/2009.

We have heard the learned counsel for the parties and perused the record.

Since in the present matter one of the condition of the tender is under challenge, therefore, it is imperative to look into the scope of interference in

such matters.

The Supreme Court in the matter of Mishgan Rubber (supra) while noting the limited scope of judicial review in the Government contracts and

auctions has held that in the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded

to the State authorities and interference by the Court is not warranted unless the action of tendering authority is found to be malicious and there is

misuse of the statutory powers and that certain pre-conditions or qualifications for tenders have to be laid down to ensure that the contractor has

capacity and resources to successfully execute the work, but at the same time if the State or its instrumentalities are expected to act reasonably, fairly

and in public interest. It has further been held that the Court before interfering in tender or contractual matters, in exercise of power of judicial review,

should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or

decision made is so arbitrary or irrational that the court can say; “the decision is such that no responsible authority acting reasonably and in

accordance with relevant law could have reachedâ€​? and

(ii) Whether the public interest is affected?

It has further been laid down that the Court would not normally interfere with the policy decision and in matters challenging the award of contract by

the State or public authorities and that the courts cannot interfere with the terms of the tender prescribed by the Government because it feels that

some other terms in the tender would have been fair, wiser or logical. The court can interfere only if the policy decision is arbitrary, discriminatory and

mala fide.

In the matter of Jagdish Mandal (supra) it has been held that evaluation of tenders and awarding of contracts are essentially commercial functions

and principles of equity and natural justice stay at a distance in such matters and if the decision relating to award of contract is bona fide and is in

public interest, courts will not interfere by exercising power of judicial review even if a procedural aberration or error in assessment or prejudice to the

tenderer is made out. Power of judicial review will not be invoked to protect private interest at the cost of public interest.

The present matter needs to be examined in the light of the aforesaid position of law laid down by the Supreme Court.

In the present case Clause (j) of the tender which is under challenge reads as under:-

“(j) The manufacturer has received a valid cGMP as per revised Schedule ‘M’ issued by Licensing Authority and WHO-GMP inspection

certificate in line with the WHO certification scheme, on pharmaceuticals being quoted, from the regulatory authority (RA) in India. Bidder product

wise Certificate of COPP (WHO-GMP) issued by Regulatory Authority of State/CDSCO, for each item offered. In case of imported drugs, labels

and product literature of all quoted product(s) must be submitted with WHOGMP issued by exporting countries like U.S. FDA etc/CI\OPP of their

Principle Manufacturing company/firm. The tenderer shall also furnish a notarized affidavit in the format given in Annexure- III declaring that the

tenderer complies the requirements of WHO-GMP whichever is applicable. All products, at the time of supply, should be WHO-GMP certified as per

his/her bid.â€​

The M.P. Govt. Drug Policy, 2009 has been framed by the State to facilitate availability of drugs, continuity of medicines at all health centres. The

objective of the drug policy is to provide quality drugs and medicines at the right time to all parts in all institutions in the State. The purchase procedure

is contained in detail in the policy and in pursuance thereof only those original drug manufacturers who follow the Schedule ‘M’ and GMP and

those who have valid manufacturing licence as per the Drugs and Cosmetics Act, 1940, can participate in the tender but at the same time the

Paragraph 8.1 of the Drug Policy also gives power to the technical committee to fix the technical specifications. The respondents have produced

before this Court the decision of the technical committee revealing that the technical committee had decided to permit the WHO-GMP firms only to

participate in the tender to ensure the supply of high quality drugs. Thus in terms of the drug policy, requirement as contained in Clause (j) has been

fixed by the technical committee.

The Schedule ‘M’ of the Drugs and Cosmetics Rules, 1945 contain the good manufacturing practices and requirements of premises, plant

and equipment for pharmaceutical products. The petitioners are holding the GMP licence in terms of the Schedule M but they do not have the WHO-

GMP certificate, as required by Clause (j) of the Tender Notice. The State has placed on record the comparison between Schedule M and WHO-

GMP certificate in Annexure R/3, which reveals that WHO-GMP certificate ensures consistency in quality and stringent quality assurance. It also

reveals that Schedule M is site specific, whereas WHO-GMP is product specific relating to drug wise certification. It has also been stated in the said

chart that WHO-GMP certificate prevents cross contamination, errors and mix ups. The Annexure P/15 placed on record by the petitioners does not

adequately controvert the facts which have been stated in the chart (Annexure R/3). That apart, the State has also placed on record the details of

WHO Good Manufacturing Practices for pharmaceutical products which contains the system which the manufacturers of pharmaceutical products

are required to follow to ensure quality assurance.

The Andhra Pradesh High Court in the matter of Association of Drugs (supra) while considering the same issue in reference to similar tender

condition, while rejecting the contention of similarly situated petitioners, has held that:-

“28. The submission that the impugned tender condition discriminates the members of the petitioner-Association and the classification has no nexus

with the object sought to be achieved, is also without any basis. Though all the drug manufacturers obtained licence under Section 18(c) of the Drugs

Act and the Rules, insofar as the good manufacturing practice is concerned, Schedule M prescribes only the basic minimum standards and it does not

prevent drug manufacturers to maintain better standards than those mentioned in Schedule M. Therefore, primary manufacturers with GMP standards

and primary manufacturers with WHO-GMP standards are two distinct and different classes. The Government having regard to the writ petition filed

before this Court as well as the recommendations of the Vigilence Commission and having regard to the drug scandal during the last year and with an

intention to adhere to quality control standards prescribed by WHO decided as a policy to buy drugs from WHO GMP manufacturers. The

classification in my considered opinion satisfies the ‘nexus test’ as well as offend Article 14 of the Constitution.

Further, it should be noted that by reason of the impugned condition in the tender, the members of the petitioner-Association have not been

included in the category of eligible members. It is well settled that in testing the validity of classification, if it were a case of excessive inclusion, the

Courts would strike down such condition and ordinarily would not interfere in cases of under inclusion. The reasons for this have been explained by

the Supreme Court in Sukhawant Ali v. State of Orissa, as follows:

“The simple answer to this contention is that legislation enacted for the achievement of a particular object or purpose need not be all embracing, it

is for the Legislature to determine what categories it would embrace within the scope of legislatin and merely because certain categories which would

stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner

discriminatory or violative of the fundamental right guaranteed by Article 14 of the Constitution.â€​

The Government as a matter of policy has decided not to categorise GMP certified manufacturers of drugs as eligible standard manufacturers of

drugs for supplying drugs on rate contract to Government hospitals, which has a rationale behind it. Therefore, the petitioner cannot be heard to say

that the members of the association have been discriminated. The Government is free to recognise the needs of the citizens and standards to be

maintained in hospitals and health centres. The impugned condition, therefore, is neither arbitrary nor discriminatory.â€​

Similar issue had come up before the Division Bench of the High Court of Judicature of Bombay, Bench at Aurangabad in the matter of SPM

Drugs (P) Limited (supra), wherein the Bombay High Court placing reliance upon the judgment of the Supreme Court in the matter of Tata Cellular v.

Union of India [(1994) 6 SCC 651] & Directorate of Education v. Educomp Datamamatics Ltd. [(2004) 4 SCC 19], while rejecting the similar

challenge to the requirement of WHO-GMP incorporated in the tender, has held that:-

“18. The requirement of production as per the standards stipulated by World health Organization's Good Manufacturing Practices (W.H.O.G.M.P.)

is, as stated earlier, to ensure that such manufacturer/importers are having good are in public interest and for public good. The W.H.O.G.M.P

condition is made mandatory since 2003 and same has been incorporated in the Government Resolution dated 17.06.2009.

We find, there is no contract as yet between the petitioner no. 1 or the Government. The terms of the tender, referred above, will have to be

assessed, as to whether they demonstrate any high-handedness or unjustness. On analysis of factual matrix, we find they do not project de hors to the

provisions or the powers vested in the Governmental authorities. The terms cannot be branded to be unconstitutional. There is no betrayal in these

terms to the normal procedure.

Writ Petition lacks merit, it is rejected. Rule discharged.â€​

Counsel for the petitioners has placed reliance upon the judgment of the High Court of Uttaranchal in the matter of Poddar Pharmaceuticals Ltd.

(supra) and Single Bench Judgment of the High Court of Jammu and Kashmir in the matter of Rohit Drugs (supra), wherein the similar condition of

tender has been struck down as arbitrary. These two judgments run counter to the judgment of the Andhra Pradesh High Court in the matter of

Association of Drugs (supra) and the judgment of the Bombay High Court, Bench at Aurangabad in the matter of SPM Drugs (P) Limited (supra),

where similar condition has been upheld. In view of the material which has been placed on record before this Court, we are in support of the view

which has been taken by the Andhra Pradesh High Court and Bombay High Court.

The petitioners have also placed reliance upon the judgment of the Delhi High Court in the matter of Association of Ups and Power (supra), but in

that matter the tender condition was different relating to requirement of having annual turnover of Rs. 10 Crores, which was found to be unreasonable

and set aside, therefore, the said judgment is of no help to petitioners.

In the present matter, we find that the incorporation of the Condition (j) in the tender has a nexus with the object which is sought to be achieved

i.e. to ensure regular supply of high quality medicine in the Government hospitals. Though the petitioners have raised an issue that the said condition

has been incorporated to exclude the small scale industries from the tender process, but the respondents have pointed out that in the meanwhile the

tender process has been completed and agreement with the qualified bidders for 56 drugs have been drawn up. The State has also placed on record

Annexure R/6 to show that in the said process the contract has been awarded to small scale industries also, whose names have been disclosed in the

said annexure. Therefore, such a contention of the petitioners can not be accepted.

The petitioners have also placed reliance upon the letters of Drug Controller General (Annexure P/5) and Dy. Drug Controller (Annexure P/14) in

support of their submission that WHO-GMP certificate is required only for the export units. So far as letter (Annexure P/5) is concerned, it is an

internal letter issued by the Drug Controller General which according to the stand of the State is advisory in nature and so far as Annexure P/14 is

concerned, it states that the manufacturers complying with the provisions of Drugs and Cosmetics Act, 1940 and the Rules made thereunder are

permitted to market their products in India, but from these letters it can not be inferred that the State is not empowered to incorporate a condition in

the tender relating to WHO-GMP certificate. No material has been placed on record by the petitioners to show that any of the member of the

petitioners had applied for WHO-GMP certificate and the same was refused on the ground that it can be issued only for the export purposes. The

incorporation of condition No. (j) is also not shown to be contrary to any statutory provision.

It is also worth noting that counsel for respondents has pointed out that meanwhile the tender process is over and contracts have been awarded

but successful bidders have not been impleaded in these writ petitions.

In view of the aforesaid analysis, we are of the view that the tender condition No. (j) is neither arbitrary nor discriminatory. It does not violate the

petitioners right under Article 19(1)(g) of the Constitution of India. No ground for interference in these matters is made out.

The writ petitions are accordingly dismissed.