M.P. Small Scale Drug Manufacturers Association & Anr vs State of Meghalaya & Ors

Mohammad Yaqoob Mir, CJ.

Petitioners (M.P. Small Scale Drug Manufacturers Association & Anr.) have filed WP(C) No. 498 of 2018 seeking quashment of the Tender Notice and Bid documents dated 05.11.2018 issued by respondents No. 2 and 3. Alongside the writ petition, instant motion has been laid with a prayer that pending writ petition, operation of the Tender Notice and bid documents dated 05.11.2018 may be stayed.

The objections have been filed by the respondents.

Heard learned counsel for the parties.

The first contention of the learned counsel for the petitioners is that in the Tender Notice, average annual turnover of Rs. 50 crores for last three financial years i.e., 2015 - 16, 2016 - 17 and 2017 - 18 has been fixed arbitrarily having no nexus with the procurement. Elaborating this contention would submit that it is not made clear as to of which value and as to what is the requirement of procurement for a particular year. The condition in effect, has been incorporated with a design to exclude participation of the petitioners with the object of showering benefits upon some favourites.

The second contention of the learned counsel for the petitioners is that the guidelines issued by the Central Vigilance Commission dated 17.12.2002 have not being followed.

The third contention is that the respondents were required to have recourse to e-Procurement process as required in terms of the notification issued by the Secretary to the Government of Meghalaya, Finance (Establishment) Department dated 16.12.2015.

Opposing the contention No. 1 as raised by the learned counsel for the petitioners that average turnover of Rs. 50 crores is with a design is totally misplaced and without any basis. In the objections, it has been made clear at paragraph 6 that the total number of 142 bidders have participated in the tender, the basis for arriving at a minimum annual turnover of Rs. 50 crores was to attract participation of reputed, efficient and capable manufacturers so as to ensure that the best medicines of the highest quality are supplied for the people of the State. Normally, the government institutions place order for items in bulk quantity and require supply in single instalment as they have to further redistribute it to other hospitals. It is in the same background the higher annual turnover is to ascertain the production capacity of manufacturing unit so that a manufacturer is able to supply the said items within stipulated period.

The contention of the learned counsel for the petitioners at the first blush appeared to be very attractive but on scrutiny in the context of the objections as filed is found to be without any substance. A huge items of medicine of different description as contained in the list as placed on records by the petitioner is required. Learned Addl. AG was pointedly asked as to why they have not shown the actual value of procurement of the year, he was fair enough to state that procurement is in accordance with the requirement in different hospitals at different stage, as per need different medicines are being made available. The matter pertains to health sector, the respondents cannot afford to adopt in straitjacket formula but he states that the annual procurement will be minimum Rs. 70 crores in tune with the budgetary allocation, therefore, nexus between procurement and turnover is quite evident.

Meeting the second contention of the learned counsel for the petitioners, learned Addl. AG would submit that when there are 142 bidders the question of favouritism does not rise, nobody knows in whose favour contract will be allotted. The contention as raised is without any basis. Submission of learned Addl. AG has substance, 142 bidders have already submitted their bids, therefore, a healthy competition.

Another contention of the learned counsel for the petitioners that the respondents should have resorted to e-Procurement in terms of the notification dated 16.12.2015 issued by the Finance Department is also without substance because in the said notification it has been clearly provided that the departments mentioned in the notification were to have resort to e-Procurement and NIC was under instructions to take steps to integrate e-Procurement system with payment gateway of State Bank of India. Learned counsel for the petitioners was pointedly asked that there is another notification dated 07.02.2014 providing for e-Procurement but learned Addl. AG has rightly referred to notification dated 20.07.2018 issued by Order of the Governor and also Office Memorandum dated 05.04.2002 providing for availing procurement of goods otherwise.

It is advantageous to quote as to what principles have been laid down, to be followed in tendering process, by the Hon'ble Apex Court in the judgment rendered in the case of Michigan Rubber (India) Limited v. State of Karnataka and Ors.: (2012) 8 SCC 216. Paragraph 23 reads as under:

"23. From the above decisions, the following principles emerge: (a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amendable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited; (c) 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 unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted; (d) 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; and (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government."

In the same judgment at paragraph 35, it has also been laid down 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'.

While considering the submissions, stated position and the law at this stage, prima facie case is not made out for grant of any stay. It is made clear that the observations as recorded hereinabove shall remain confined only to the disposal of this application, shall be without prejudice to the rights of the petitioners to be adjudicated upon the writ petition.

Application is disposed of as above.