IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.06.2008 CORAM THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Writ Petition Nos.20038, 20077 and 20078 of 2007, M.P.Nos.2 of 2007 in W.P.Nos. 20038, 20077 and 20078/07 and M.P.Nos.3 of 2007 in W.P.Nos. 20038, 20077 and 20078/07 Siliconlabs Private Limited, 21, Kambar Street, East Tambaram, Chennai - 600 059. ... Petitioner in all WPs vs. Tamil Nadu Medical Services Corporation Limited, (A Govt. of TN Undertaking) 417, Pantheon Road, Egmore, Chennai - 600 008. ... Respondent in all WPs Common Prayer:- Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorarified mandamus, calling for the records in Tender Ref.Nos.022/CPC/CAT/TNMSC, 021/CPC/CAR/TNMSC dated 14.05.2007 and 020/CPC/PAE/TNMSC dated 11.05.2007 respectively for supply of instruments, equipments and appliances for the Department of Cardiology and Department of Pediatrics and Neonatology of Government Medical Institutions for the year 2007-2009 and quash condition Nos.11(h) and (i) read with/repeated in condition No.2(c) & (d) and consequently direct the respondent to consider the petitioner's tender Application Nos.038, 023 and 024 respectively submitted for quoted products without reference or regard to such conditions in accordance with law. For Petitioner in all W.Ps : Mr.R.Muthukumaraswamy, SC for Mr.T.D.Selvan Babu For Respondent in all W.Ps : Mr.P.S.Raman Additional Advocate General(I) for Mr.Shivakumar https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER Though the miscellaneous petitions are listed today, by consent of both sides, the writ petitions are taken up for final disposal. 2.These writ petitions have been filed for the issuance of writ of certiorarified mandamus calling for the records of the respondent in Tender Ref.Nos.022/CPC/CAT/TNMSC, 021/CPC/CAR/TNMSC dated 14.05.2007 and 020/CPC/PAE/TNMSC dated 11.05.2007 respectively for the supply of instruments, equipments and appliances etc., for the Department of Cardiology/Pediatrics and Neonatology of Government Medical Institutions for the year 2007-2009 and to quash condition Nos.11(h) & (i) read with/repeated in condition No.2(c) & (d) and consequently to direct the respondent to consider the petitioner's tender Application Nos.038, 023 and 024 respectively submitted for quoted products without reference or regard to such conditions in accordance with law. 3.In all the three tenders, among others, there are two specific conditions viz., condition Nos.11(h) & (i) read with/repeated in condition No.2(c) & (d) in respect of which the petitioner feels aggrieved. Therefore, challenging those two conditions, the petitioner has filed these writ petitions. (i)W.P.No.20038 of 2007 has been filed in respect of Tender Ref.No.022/CPC/CAT/TNMSC, dated 14.05.2007. (ii)W.P.No.20077 of 2007 has been filed in respect of Tender Ref.No.021/CPC/CAR/TNMSC, dated 14.05.2007. (iii)W.P.No.20078 of 2007 has been filed in respect of Tender Ref.No.020/CPC/PAE/TNMSC, dated 11.05.2007. 4.The two conditions which are sought to be quashed are as follows:- The tenderer should produce:- "11(h):The attested copy of the ISI/CE/FDA certificate for the firm manufacture the surgical instruments and equipments and renewed upto date. 11(i):Attested certificate of DIN EN ISO 13845: 2001 for the applicable items." 5.On admitting these writ petitions, this Court has granted interim stay and as such, to vacate the interim stay, miscellaneous petitions have been filed by the respondent. https://hcservices.ecourts.gov.in/hcservices/ 6.Heard Mr.R.Muthukumaraswamy, learned Senior Counsel appearing for the petitioner and Mr.P.S.Raman, learned Additional Advocate General(I) appearing for the respondent. 7.The facts necessary for the disposal of these writ petitions are as follows:- The petitioner company is an indigenous company manufacturing and supplying medical instruments, equipments and appliances etc. The petitioner company is supplying such materials to various Government Departments as well as private medical institutions all over India. The products of the petitioner company are tested and certified by the Electronics Test and Development Centre (STQC Directorate), Ministry of Communications and Information Technology, Government of India. It is further stated by the petitioner that the petitioner company participated in the tenders floated by the respondent for the last five years in a row for supply of the products manufactured by the petitioner and petitioner was a successful bidder therefor. But for the first time in the present tenders, two new conditions which are under challenge have been incorporated. Even in a subsequent tender floated on 18.05.2007 under Ref.No.TNHSP/TNMSC/P2E16/2007 these two conditions are not found. Hence, the petitioner would further contend that the impugned conditions are non est in the eye of law because ISI/CE/FDA standards certification are issued only for specific products and not for "firms". It is to be remembered that as per Condition No.11(h), ISI/CE/FDA certificate is required to be produced for the firm manufacturing instruments, equipments appliances etc. Likewise, the certificate namely, DIN EN ISO 13845: 2001 is not issued for the products but it is issued only for organisations. In these circumstances, according to the petitioner, the imposition of these two conditions would show the total non application of mind on the part of the respondent. 8.It is further contended by the petitioner that the impugned conditions are arbitrary and without jurisdiction. Since the CE body exist in Europe and FDA exist in USA, in the event of upholding these two conditions, it will enable only firms selling products manufactured in Europe and USA thereby depriving the chance of indigenous companies like that of the petitioner to participate in the tender process. Thus, there is a glaring discrimination between the indigenous products and the products manufactured out side India. 9.The next contention is that, the impugned conditions are irrational and there is no material to justify these two conditions. The very fact that in the tenders floated previously and subsequent to these tenders in question there are no such conditions imposed and the same would go to show that without any material or without any basis these two conditions have been imposed arbitrarily only with a view to favour some non indigenous companies. https://hcservices.ecourts.gov.in/hcservices/ 10.The next contention is that the impugned conditions are so illogical and they do not promote any acceptable objections. Since the products of the petitioner are certified by an Agency of Government of India, forcing the petitioner company to get such certificate from foreign agencies is un-reasonable. He would further submit that ISO 13845:2001 certification cannot be issued to these products because ISO has not prescribed any standards for these kinds of products. 11.A detailed counter affidavit has been filed by the respondent. The first and foremost objection raised in the counter is that, the writ petition traverses matters relating to private law domain relating to contractual obligations and so, the writ petitions are not maintainable. 12.The next contention is that there are several disputed questions of facts which cannot be adjudicated upon in these proceedings. It is the further contention of the respondent that the respondent Corporation is a nodal agency for procurement and distribution of human and veterinary drugs, medical equipments, surgical and suture items etc., for about 1,000 Government Medical Institutions/Hospitals all over Tamil Nadu. Proper management of drug procurement and distribution has been a major concern for the Government and the respondent implements the Government policy of proper drug procurement and distribution, without sacrificing the quality. It is further stated in the counter that the respondent Corporation is following the provisions of the Tamil Nadu Transparency in Tenders Act 1998 and has been following the "Two cover System" viz., Cover A and Cover B. Yet another main contention raised by the respondent is that the respondent corporation has been given the responsibility of fixing rate contract for various medical equipments under the Central Purchase Committee System (CPC) for about 21 medical specialties with validity of 2 years. Under CPC the respondent specifies the technical specifications based on the recommendations of experts and selects the tenderer and model of the equipment following due tender process, fixes the rate per unit, which is valid for two years. Using this rate contract, the hospitals and medical institutions throughout Tamil Nadu, can directly place orders on the successful bidder at the prefixed rate. Eight tenderers who have participated in the tender have also submitted their tender documents. The technical bids of the tenders were already opened on 31.05.2007 and on preliminary evaluation of the technical details all the tenderers will be asked to furnish documents not furnished in their tenders. Based on the documents furnished, the tenderers will be further evaluated and samples of the products will be called for clinical evaluation by the specialists committee consisting of medical experts. Based on the sample evaluation, the tenderers will be shortlisted for price bid opening. The lowest bidder will be selected for the rate contract. 13.It is further contended that the conditions imposed in these writ petitions are not discriminatory or arbitrary. The said clauses https://hcservices.ecourts.gov.in/hcservices/ were introduced not with an intention of excluding tenderers who manufacturing and selling the products within India but for selecting the qualified tenderers. On the contrary, these impugned conditions have been introduced consistent with the respondent's policy of excellence and to raise the standards of quality of products at par with international standards, so that the patients are able to get the best available health care delivery system in the medical institutions. 14.It is further contended that the tenderers do not have any locus standi to interfere with the tender conditions, which are stipulated by the experts. 15.In respect of tender under Ref.No.TNHSP/TNMSC/ PEE16/2007 dated 18.05.2007 referred by the petitioner, it is contended that it relates to procurement of infusion pumps for the Tamil Nadu Health System Products funded by the World Bank. The specifications, terms and conditions for the World Bank funded tenders are based on the clearance of the World Bank. But the present tenders are based on the specifications finalised by the nominated medical experts and so, the earlier tenders cannot be equated to the present tenders. 16.According to the respondent, the allegation that these two conditions have been incorporated without proper application of mind is not correct since, these two conditions were incorporated based on the specifications finalised by the medical experts. These tender conditions are neither discriminatory nor arbitrary, it is contended by the respondent. 17.Now let me consider the rival contentions of the parties. The first and foremost contention on the side of the respondent is that the writ petitions are not maintainable since the scope of judicial review of tender conditions is very limited under Article 226 of the Constitution of India and this Court cannot go into the tender conditions unless these conditions are found to be malicious and misuse of statutory powers, arbitrary, discriminatory or actuated by bias. 18.In Tata Cellular v. Union of India (1994 (6) SCC 651) while dealing with the scope of judicial review of Government contracts, the Hon'ble Supreme Court has deduced the following principles:- "(1) The modern 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 https://hcservices.ecourts.gov.in/hcservices/ 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 Wedensbury 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." 19.In Association of Registration Plates v. Union of India and others (2005(1) SCC 679) the Hon'ble Supreme Court has held as follows:- "38.In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable....... 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 a 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 the Government in https://hcservices.ecourts.gov.in/hcservices/ its dealings with tenderers and contractors. 44......... In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufactures, judicial interference is uncalled for." 20.In Directorate of Education v. Educomp Datamatics Ltd., (2004 (2) CTC 221) the Hon'ble Supreme Court has held as follows:- "12.It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the government must have a free hand in setting the terms of the tender. It must have reasonable play in its points as a necessary concomitant for an administrative body in an administrative sphere. The Courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The Courts cannot strike down 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 Courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide." 21.A close analysis of the above judgments of the Hon'ble Supreme Court would manifestly make it clear that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Therefore, the freedom of the Government in prescribing certain conditions in the tender cannot be judicially scrutinized by this Court under Article 226 of the Constitution of India. 22.At the same time, as held by the Hon'ble Supreme Court in the above judgments, it is to be seen whether any of the conditions so incorporated in the tender are arbitrary, discriminatory, mala fide or actuated by bias. If only any condition in the tender falls within any one of the above, then the power of judicial scrutiny is always open. Keeping in mind the above, let me now analyse the impugned conditions to see whether they fall within any one of the above categories. 23.Mr.R.Muthukumaraswamy, learned Senior Counsel appearing for the petitioner would submit that the impugned conditions are discriminatory and arbitrary. He does not contend that these conditions fall within the mischief of mala fides or bias. Regarding the question of arbitrariness, https://hcservices.ecourts.gov.in/hcservices/ the learned Senior Counsel would submit that in the previous tenders held for purchase of similar items, there was no such conditions but in the present tenders, the impugned conditions have been incorporated arbitrarily without any rational behind the same. 24.But, Mr.P.S.Raman, learned Additional Advocate General (I) appearing for the respondent would submit that these conditions have been incorporated consistent with the respondent's policy of excellence and to raise the standards of quality of products at par with international standards, so that the patients are able to get the best available health care delivery system in the medical institutions. In my considered opinion, more than the business interest of the petitioner, it is the welfare of the people more particularly, the poor of the society who come to the hospitals for better treatment should be the paramount consideration in the mind of the Government. We cannot close our eyes without knowing the ground realities that there is an impression among the general public that the instruments, equipments and appliances maintained in the private hospitals are for better than the same maintained in the Government hospitals. Therefore, the intention of the respondent to purchase these instruments, equipments and appliances etc., with the international standards has to be necessarily appreciated. Prescribing such a higher standard is certainly within the pleasure of the Government and the first respondent which cannot be denigrated at all. Therefore, prescribing the impugned conditions in the tender cannot be stated to be arbitrary so as to bring the same within the scope of the judicial scrutiny. 25.The next contention of the learned Senior Counsel is that the impugned conditions are discriminatory violating Article 14 of the Constitution of India. The learned Senior Counsel would submit that these conditions are un-reasonable and irrational which completely denies the right to participate in the bid by the indigenous companies. It is further contended that if the impugned conditions are allowed to be followed, then the result would be that those who are importing these materials from foreign countries and at times, the foreign countries directly would be selected for the contract which ultimately excludes the participation of the indigenous companies since, the indigenous companies like the petitioner company do not have the certifications as stated in the impugned conditions. According to the learned Senior Counsel appearing for the petitioner, even if these materials are sent to these countries, it will take normally more than six months for the authorities to assess and to issue such certificates. The learned Senior Counsel would submit that in the mean time, if the tenders are accepted going by the impugned conditions, certainly it will exclude the perspective of the petitioner company which has been all along supplying the materials to the Government and thus, the impugned conditions discriminate the petitioner from the others. https://hcservices.ecourts.gov.in/hcservices/ 26.But the learned Additional Advocate General would submit that there is no discrimination at all and the petitioner is not precluded from participating in the tender. He would further submit that though it may be true that the petitioner company does not have the certifications as enumerated in the impugned conditions, it cannot be said by the petitioner that similar companies in India manufacturing these materials do not have these certifications. Admittedly, the Indian Standard Institute has not prescribed any standard for the instruments, equipments etc., for which the tenders floated by the respondent. Therefore, it is for the tenderers to have any one of the certificates. The said certificates are issued by CE body existing in Europe and FDA existing in USA. 27. In my considered opinion, when the ISI has not prescribed any standards in respect of the instruments for which these tenders have been floated, there is nothing wrong on the part of the Government and on the part of the respondent in insisting for the certificates to be issued by the authorities CE/FDA who maintain international standards. The petitioner being the tenderer cannot dictate terms to the Government or to the respondent, not to insist for these certificates. Similarly, the certificate IN EN ISO 13845: 2001 also can be insisted upon by the respondent. 28.Therefore, having regard to the above facts and the legal submissions made by the learned Senior Counsel and the learned Additional Advocate General, I am of the clear opinion that the power of the respondent to prescribe the conditions for certificates from ISI/CE/FDA, IN EN ISO 13845: 2001 cannot be called in question by the petitioner as the same is not within the scope of the judicial review of this Court. 29.The learned Senior Counsel would also submit that there is total non application of mind on the part of the respondent while introducing these two impugned conditions and on that ground at least the impugned conditions may be quashed. According to him as stated above, the Indian standards Institute has not so far prescribed any specific standards in respect of the instruments, equipments for which the tenders have been floated by the respondent. 30.The learned Additional Advocate General would fairly concede that ISI has not so far prescribed any such standard for any firm. Therefore, the condition that ISI certification for the firm in respect of these instruments, equipments as introduced in the condition ii(h), in my considered opinion is due to total non application of mind on the part of the respondent. https://hcservices.ecourts.gov.in/hcservices/ 31.In respect of CE/FDA certificates for the firm manufacturing the instruments, equipments etc., the learned Senior Counsel would submit that these certificates are issued by the international bodies not for any firm but they are issued only in respect of each kind of instruments, equipments etc. In the counter, the respondent has conceded that these two Agencies do not issue any such certificate in respect of the firm manufacturing the same. Therefore, I have no hesitation to hold that condition No.11(h) has been introduced as a result of total non application of mind on the part of the respondent. 32.Similarly, in respect of condition No.11(i), which stipulates a certificate of IN EN ISO 13845: 2001 for the applicable items, the learned Senior Counsel appearing for the petitioner would submit that such certification is not issued for the products but it is issued only for organizations. In the counter, the said contention is accepted. When there is no such certifications available for the items, there cannot be any second opinion that introduction of clause 11(i) is also the result of total non application of mind on the part of the respondent. 33.The learned Additional Advocate General would submit that it is a clerical mistake. It may be true that it is a clerical mistake, but this would certainly mislead the companies or tenderers who would wish to participate in the tender process. Many companies would have been mislead by the same and they would not have submitted their tender documents as they might have been under the impression that these certificates are very much necessary as strictly mentioned in these two conditions. It is seen that on realising the so-called clerical mistake, no further notification was issued rectifying the said mistake. Now, it is too late to issue any variation in the conditions rectifying the clerical mistakes as it would amount to changing the rules of the game after the play has started. When that be so, based on the two impugned conditions, which are impossible to be complied with, the tender process cannot be allowed to be proceeded with further. Thus the impugned conditions in the present form do not satisfy the Wedensbury principle of reasonableness. In all fairness to attract more competent companies who do possess certificates like CE/FDA for their goods and IN EN ISO 13845: 2001 certificate for the firms, it is absolutely necessary to call for fresh tenders after rectifying these two mistakes. At this juncture, I want to make it clear that it should not be misunderstood as if this Court has taken the view that the respondent cannot impose any such tender conditions prescribing standards for the goods like CE/FDA certificates and IN EN ISO 13845: 2001 certificate for the firms. Since there is a clerical mistake in these two conditions, as it is stated by the learned Additional Advocate General, without rectifying the said mistakes by calling for fresh tenders, the present tender process cannot be allowed to go on. If it is the case of the respondent that the further notification was issued before the due date of the tender rectifying the mistakes, then the position would have been