IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.04.2010 CORAM : THE HONOURABLE MR. JUSTICE K.N.BASHA Writ Petition No.4858 of 2010 & M.P.No.1 of 2010 Indian Immunologicals Limited, (A wholly owned subsidiary of the National Dairy Development Board) constituted under Central Act 1987 Door No.44 Jubilee Hills Road, Hyderabad 500 053 represented by the authorized signatory C.B.Saravana, Regional Incharge, Marketing .. Petitioner Vs. 1. Tamil Nadu Medical Services Corporation Limited, 417, Second Floor, Pantheon Road, Chennai – 600 008 represented by its General Manager 2. The Managing Director (Tender Inviting Authority), Tamil Nadu Medical Services Corporation Limited, 417, Second Floor, Pantheon Road, Chennai – 600 008. 3. The Secretary to Government of Tamil Nadu, Health Department (Chairman of Tamil Nadu, Medical Service Corporation Limited), Fort St. George, Chennai – 600 009. 4. Bharat Biotech International Limited, Genome Valley, Shameerpet, Hyderabad 500 078 represented by its Director 5. Chiron Bhring Waxing Private Limited, No.501, Shree Amba Shanthi Chambers, Andheri Korla Road, Andheri East, Mumbai 400 059 represented by its Director .. Respondents Prayer : Writ Petition filed under Article 226 of the Constitution of India praying for a writ of Certiorified Mandamus to call for https://hcservices.ecourts.gov.in/hcservices/ the records relating to the communication of the first respondent dated 25.02.2010 in reference No.001/M(P)/TNMSC/DRUG/2009 and quash the same and direct the first and the second respondents to consider the tender submitted by the petitioner with regard to the drug code number 579 Rabies Vaccine Human (cell culture) IP (Intra muscular) on mertis. For Petitioner : Mr.G.Rajagopalan, Senior Counsel for M/s.G.R. Associates For RR- 1 to 3 : Mr.G.Sankaran, Special Government Pleader For Respondent -4 : Mr.V.T.Gopalan, Senior Counsel for Mr.K.Ravindranath For Respondent-5 : No Appearance ORDER By mutual consent, the main petition itself is taken up for final hearing. 2. The challenge in this petition is to the communication issued by the first respondent dated 25.02.2010 in reference No.001/M(P)/TNMSC/DRUG/2009 rejecting the tender of the petitioner for the supply of a drug known as Rabies Vaccine Human (cell culture) IP (Intra muscular). 3.0. The factual background of the case which are necessary for the disposal of this writ petition are as under : 3.1. The petitioner is wholly owned subsidiary of the National Dairy Development Board constituted under the Central Act, 1937 engaged in the manufacture of various kinds of vaccines including Rabies Vaccine Human (cell culture) IP (Intra muscular). The above said vaccine is manufactured by Human Biological Institute, a division of the petitioner. 3.2. The first respondent herein through its Managing Director invited tenders for the supply of drugs and medicines including the above said particular drug Rabies Vaccine Human (cell culture) IP (Intra muscular) as per the notice dated 23.12.2009. The said notice was published in the newspaper. According to the notice, the Licensed Drugs and Medicines Manufacturers having three years market standing and for the drugs Tetanus Toxoid and Anti Rabies Vaccine having atleast one year market standing and holding Good Manufacturing Practice Certificate and Non Conviction Certificates issued by the Drug Control authority can apply. The last date for submission of tender was 22.01.2010 at 11.00 a.m. and the tenders will be opened at 11.30 a.m. on the same day. https://hcservices.ecourts.gov.in/hcservices/ 3.3. The tender documents contemplated two cover bids, viz., Cover A – Technical bid and Cover B – Price bid and the tender document contains the eligibility criteria and certain terms and conditions. 3.4. The petitioner is having valid license issued by the competent authority, viz., Director of Drug Control and Drug Controller General of India and Director General, Health Services, Ministry of Health and Family Welfare, Government of India and supplies Rabies Vaccine Human (cell culture) IP (Intra muscular) to various state Governments, accordingly, submitted its tender on 22.01.2010 for supply of three drugs, viz., Rabies Vaccine Human (cell culture) IP (Intra muscular) (Drug Code 579), Rabies Vaccine Human (cell culture) IP (intra dermal) (Drug Code 724) and Tetanus Toxoid (absorb) injection IP (Drug code 515). The fourth and fifth respondents are also the tenderers. 3.5. On opening the technical bid on 22.01.2010 and on preliminary scrutiny of the technical bid for the tender for the supply of drugs and medicines for the year 2010-2011, the first respondent stated through the communication dated 22.01.2010 that the details furnished by the petitioner company are found to be generally in order. However, the General Manager of the first respondent intimated to the petitioner as per the said communication that the bid of the petitioner would be subject to further scrutiny. 3.6. On 13.02.2010, the first respondent sent a communication to the petitioner stating that from the scrutinization of the bid documents certain discrepancies/deficiencies have been noticed as indicated in the annexure of the said communication and requested the petitioner to furnish further clarification and documents to the first respondent on or before 17.02.2010. It is made clear in that communication by the first respondent that if no clarification received in the said regard from the petitioner, further decision will be taken on the basis of the bid document on merits. The petitioner sent its clarifications through its communication dated 16.02.2010 with necessary details. After evaluation of the technical bid and the subsequent clarification furnished, the petitioner was shortlisted and called for price bid opening on 26.02.2010 through the communication of the first respondent dated 22.02.2010 to the petitioner. 3.7. Meanwhile, the third respondent said to have received an information through the fourth respondent to the effect that the petitioner had been defaulted in the supply of anti-rabies vaccine to the Kerala State Government in the first quarter of 2007-2008. The said information was verified and confirmed by the first respondent from the Kerala Medical Services Corporation Limited (hereinafter referred to as "KMSCL"), a Government of Kerala Undertaking. The KMSCL sent a letter dated 25.02.2010 stating that the petitioner have not effected supply of the product Anti rabies vaccine for the first quarter of 2007-2008 due to some reasons which were not clear to them. https://hcservices.ecourts.gov.in/hcservices/ 3.8. On verification and confirmation, as stated above, the first respondent sent the communication dated 25.02.2010 to the petitioner through its General Manager stating that the petitioner is ineligible to participate in the tender for the drug Rabies Vaccine Human (Cell Culture) Inj. Intra Muscular as per clause 2(g) of the tender conditions which contemplates that if there is any default of supply of vaccine in respect of tenders floated by the Central or State Government or any Government undertaking during the past three years, then the tenderer is not eligible to participate in the tender for that particular product as the petitioner have 100% defaulted in the supply of the above said particular drug for the first quarter of 2007-2008 to the Kerala Government which comes within the period of three years prior to the tender. The said communication is under challenge in this petition by the petitioner. 3.9. The case of the petitioner is that they have never committed any default of supply of the particular medicine on their own and they have stopped the supply only due to the non-payment of the dues to them by the Kerala Government. The petitioner has also sent a representation dated 25.02.2010 to that effect. It was also informed in the same communication that the petitioner filed a writ petition in W.P.(C)No.33383 of 2005 before the High Court of Kerala and a learned Single Judge of the High Court of Kerala by order dated 19.09.2007 directed the Kerala Government to pay the dues in installments and against the said order, the petitioner preferred writ appeal and the Division Bench of Kerala High Court by judgment dated 19.03.2008 directed the Kerala Government to pay the dues in single installment. 3.10. It is the further case of the petitioner that before rejecting their tender, they could have been given opportunity to be heard and as such, the first respondent acted arbitrarily in disqualifying them to participate in the tender. It is the further case of the petitioner that by disqualifying the petitioner from participating in the above said tender, the petitioner has been blacklisted and as such, without affording opportunity the respondents 1 to 3 passed the impugned order in violation of principles of natural justice. 3.11. The petitioner had also given a further representation on 01.03.2010 and pointed out that the first respondent could save substantially to the extent of Rs.3.50 Crore if their bid is considered. However, the first respondent sent a communication to the petitioner dated 01.03.2010 and called for negotiations only with regard to Drug code 515 and 724 and did not reply with respect to drug code 579. In view of such circumstances, the petitioner has been constrained to approach this Court challenging the impugned communication dated 25.02.2010. 4.1. The respondents 1 and 2 denying the allegations of the petitioner stated that the disqualification of the petitioner in respect of the particular drug was mainly on the basis of the https://hcservices.ecourts.gov.in/hcservices/ attraction of clause 2(g) of the tender conditions. It is further stated that the respondents 1 and 2 have not acted on the information furnished by the fourth respondent, but they have disqualified the petitioner only on the basis of the verification and confirmation from the Kerala Government on receipt of letter from KMSCL dated 25.02.2010. It is also stated in the counter that the petitioner has not been blacklisted and the petitioner have been granted tender in respect of other two medicines. The respondents 1 and 2 further stated that the respondents have not shown any favouritism to the fourth respondent. 4.2. The fourth respondent has also filed a counter affidavit denying the allegations of the petitioner. 5.1. Mr.G.Rajagopalan, learned Senior Counsel for the petitioner, while assailing the impugned order, put forward the following contentions : (i) In spite of the petitioner being qualified in the technical part under Cover A and in spite of the petitioner having been called for to attend the Cover B – price bid opening to be held on 26.02.2010, all of a sudden, the petitioner received the impugned letter dated 25.02.2010 from the first respondent signed by the General Manager stating that the petitioner company is ineligible to participate in the tender for the Rabies Vaccine Human (cell culture) IP (Intra muscular) as they came to understand that the petitioner firm have 100% defaulted in the supply of the said drug to the Government of Kerala for the year 2006-07 (first quarter of 2007-08) and as such, as per clause 2(g) of the tender condition, the petitioner is ineligible to participate in the tender. (ii) In the impugned letter dated 25.02.2010 only the tender number has been mentioned in the reference and there is no mention about the basis on which the respondents 1 and 2 took such a decision and no notice was served on the petitioner and no opportunity was given to them to prove their stand that they have not committed any default in the supply of drugs. (iii) The petitioner denied the allegation of default in supply of the said drugs to the Kerala Government on the same date of communication, i.e., on 25.02.2010 as per their letter stating that there was a contract between the petitioner and the Kerala Government for the year 2002-03 for the supply of drugs and the Kerala Government defaulted the payment and as a result, the petitioner filed a writ petition in the High Court of Kerala in W.P.(C)No.33833 of 2005 and a learned Single Judge of the High Court of Kerala by order dated 19.09.2007 directed the Kerala Government to pay the dues in installments and against the said order, the petitioner preferred writ appeal and the Division Bench of Kerala High Court by judgment dated 19.03.2008 directed the Kerala Government to pay the dues in single installment. Thereafter, the petitioner had also participated in the tender of the Kerala Government for the year 2006-07 and got the contract. Therefore, there was absolutely no default from the petitioner's side and the petitioner is the supplier to the Kerala Government and some other States even as on date and if the petitioner https://hcservices.ecourts.gov.in/hcservices/ committed any such default, the Kerala Government could not have given the contract to the petitioner. Another representation was also given by the petitioner on 01.03.2010 seeking the relief of revocation of the impugned letter dated 25.02.2010. (iv) The tender ought not to have been rejected arbitrarily without issuing notice and without affording any opportunity to the petitioner to disprove that they are not the defaulters in the supply of the said drug. (v) The disqualification of the petitioner from participating in the tender in respect of a particular drug, viz.,Rabies Vaccine Human (cell culture) IP (Intra muscular) would amount to blacklisting the petitioner and as such, the petitioner could have been given an opportunity to explain its position and the impugned order was passed without affording such opportunity to the petitioner and as such, the said order is liable to be set aside on the ground of violation of principles of natural justice. (vi) The performance certificate dated 27.03.2010 issued by the KMSCL, as produced before this Court by the petitioner, would go to show that the petitioner had supplied the product as per the terms and conditions of the tender for the period 2008-09 and 2009- 10 and their performance was satisfactory during that period and without considering all these factors, the respondents 1 and 2 arbitrarily disqualified the petitioner. (vii) The third respondent, on the representation of the fourth respondent, who is one of the contesting tenderer, to the effect that the petitioner defaulted in supply of Rabies Vaccine Human (cell culture) IP (Intra muscular) during the first quarter of 2007-08, asked the second respondent to disqualify the petitioner herein from participating in the above tender which is totally an illegal one and it goes to show that there is a clear private understanding between the third respondent and the fourth respondent. The direction given by the third respondent clearly shows that the respondents 1 and 2 have not acted on their own, but acted on the directions of the third respondent. The third respondent who is the Principal Secretary to the Government of Tamil Nadu, Health Department, is the Chairman of the TNMSC Limited and he is the appellate authority as per the Act and not tender inviting authority and such being the position, he could not have acted on the representation of the fourth respondent behind the back of the petitioner without affording any opportunity to the petitioner to explain their stand. (viii) The petitioner, a non-profit organization, was awarded the tender in respect of other medicines as per the letters of the TNMSC Limited dated 23.03.2010, but the respondents 1 and 2 arbitrarily disqualified the petitioner from participating in the tender by rejecting the tender in respect of one vaccine, Rabies Vaccine Human (cell culture) IP (Intra muscular). (ix) This Court on 10.03.2010 granted interim stay of the impugned order dated 25.02.2010 and the respondents 1 and 2 having not finalized the tender in respect of the particular vaccine, viz., Rabies Vaccine Human (cell culture) IP (Intra muscular), placed orders to the fourth respondent for the supply of 3 lakhs vials of the said vaccine on 31.03.2010 based on old rates which is 40% of the tender quantity. The State Government is already in https://hcservices.ecourts.gov.in/hcservices/ possession of enough quantity of vaccine, but they have placed orders, as stated above, and thereby given a go-by to the tender procedure and the object of the tender procedure has been defeated. There is no mention about this order in the counter of the Government and this fact has been suppressed. (x) The tender inviting authority is the Managing Director of TNMSC Limited/the second respondent herein, but the impugned communication dated 25.02.2010 disqualifying the petitioner for the supply of Rabies Vaccine Human (cell culture) IP (Intra muscular) was signed by the General Manager. 5.2. In support of his contentions, learned Senior Counsel for the petitioner would place reliance on the following decisions : (1)E. E. & C. Limited V. State of W.B. reported in AIR 1975 SC 266 ; (2)Sterling Computers Limited V. M & N Publications Limited reported in (1993) 1 SCC 445 ; and (3)Gulati, V.P. V. The Union of India reported in 1987 WLR 214; 6.1. Mr.G.Sankaran, learned Special Government Pleader, would contend that the respondents 1 to 3 have not merely acted on the representation of the fourth respondent, but the respondent called upon the reports and records from the Kerala Government and after receiving the communication along with some documents from the KMSCL dated 25.02.2010, having satisfied and confirmed the default in supply of the particular drug, Rabies Vaccine Human (cell culture) IP (Intra muscular), to the Kerala Government by the petitioner, sent the impugned order dated 25.02.2010 to the petitioner even before the opening of the Cover B – Price bid disqualifying the petitioner from participating in the tender in respect of the item Rabies Vaccine Human (cell culture) IP (Intra muscular) and as such, the petitioner has not been disqualified straight-away. 6.2. It is submitted by the learned Special Government Pleader that the tender floating/inviting authority is not an quasi- judicial authority to conduct a roving enquiry on the basis of any representation or objection, but on the basis of the representation and on the basis of the confirmation letter and documents received from the KMSCL, the first respondent disqualified the petitioner in respect of one particular vaccine, viz., Rabies Vaccine Human (cell culture) IP (Intra muscular) as per tender condition 2(g) as the default of supply to Kerala Government comes well within the period of three years prior to the tender. The learned Special Government Pleader would further contend that the said rejection or disqualification of the petitioner to participate in the tender only in respect of the particular vaccine would not amount to blacklisting the petitioner by the respondents and the said order is emanated on the basis of the tender condition, i.e., it has flown out of the tender condition or in compliance of the tender condition and as such, the question of giving any opportunity to the petitioner does not arise. https://hcservices.ecourts.gov.in/hcservices/ 6.3. The learned Special Government Pleader by placing reliance on Sections 8, 10, 11, 25 and 28 of the Act contended that only after passing an order under Section 10 of the Act relating to evaluation and acceptance of tender, the petitioner can approach the appellate authority under Section 11 of the Act. The petitioner cannot approach the appellate authority or the Court at every stage of the tender. The tenderer has no right to approach this Court in the midst of the tender process which is a time bound process and more particularly when the tender is relating to the life saving drugs. It is contended that if the petitioner or other like minded persons are permitted to disturb the tender process in the middle, the entire process would be collapsed and before completing the process contemplated under Section 10 of the Act, no right accrued to anyone much less any tenderer to question the process and as already stated, after crossing the stage of Section 10 the remedy is available under Section 11 of the Act for preferring the appeal. Therefore, it is contended that the very writ petition itself is not maintainable. It is further contended that even assuming that the petitioner is L-1, it is for the tender inviting/floating authority to decide to whom orders can be placed for effective supply of the product, apart from L-1 criteria. 6.4. It is submitted that the contention of the petitioner to the effect that the respondents 1 and 2 have placed orders to the fourth respondent on 31.03.2010 for the supply of 3,00,000 vials of Rabies Vaccine which is 40% of the tender quantity and the same ought not to have been done is not factually correct as the respondents have floated tender for 11,00,000 vials for the year 2009-2010, out of which, orders have been placed only for 7,57,000 during the said period and as such, the said order for the supply of 3,00,000 vials has been placed on 31.03.2010 and the same is well within the tender quantity. It is contended that the respondents are eligible to purchase drugs from registered contractors over and above the prescribed limit as the Act itself provided that the tender inviting authority can go ahead even 25 % over and above the tender quantity. 6.5. Lastly it is submitted that nothing wrong in sending the impugned communication to the petitioner by the General Manager, who is authorized by the second respondent. 6.6. The learned Special Government Pleader would place reliance on the following decisions in support of his contentions : (1)ION EXCHANGE WATERLEAU Limited V. The Commissioner, Madurai Municipal Corporation reported in 2008 [3] CTC 675 ; (2)Pitchammal V. The Collector, Kanyakumari District reported in 2000 [III] CTC 636 ; (3)Tata Cellaluer V. Union of India reported in (1994) 6 SCC 651 ; and (4)Union of India V. Tulsiram Patel reported in 1985 (3) SCC 398 ; https://hcservices.ecourts.gov.in/hcservices/ 7.1. Mr.V.T.Gopalan, learned Senior Counsel for the fourth respondent, submitted that there is a distinction between the exercise of statutory power and the exercise of contractual power ; Statutory power is governed by the statutory prescriptions within the four corners of the Statute and as far as contractual power is concerned, it flows from the terms and conditions of the tender notification and if any person participating in the tender and submitted tender, it would amount to the acceptance of the terms and conditions stipulated therein. 7.2. The learned Senior Counsel would contend that in the course of time, law has developed and not giving the opportunity of hearing per se is not a ground to quash the orders of the authorities and the aggrieved party must prove that how he was prejudiced by such act or otherwise, the court shall refrain from interfering with an order as per "useless formality theory". 7.3. It is contended that the tender itself specifically provided a condition in clause 2(g) of the conditions that if a particular tenderer has defaulted in the supply of vaccines in any of the tenders floated by Central/State Governments or Government institutions during the past 3 years, then he would stand disqualified. As the petitioner was a defaulter to the Kerala Government, the said clause was invoked. While invoking the said clause, the authority can take into account any material that they have come across and they cannot be fettered with by any procedural formalities and anybody can submit a representation to the Government, viz., the Principal Secretary to the Government and the Government has to dispose of such representation. Here once the fourth respondent indicated the order of the Kerala Government to the third respondent, in which, it has been shown that the petitioner is a chronic defaulter in the supply of very vaccine, for which, they offered their bids, the third respondent/Principal Secretary directed the respondents 1 and 2 to verify the same and the respondents 1 & 2 verified the same with the Kerala Government and thereafter, the decision of disqualification was taken. The disqualification of the petitioner herein is not the command of the Principal Secretary, but the command of the tender condition and that too it has been done before opening of price bid. As the petitioner was disqualified from the proceedings earlier, after opening of price bid the fourth respondent stood as L1 and the tender has been decided and formal execution of awarding contract has not done. 7.4. It is further contended that the performance certificate issued by the KMSCL goes to show that the performance of the petitioner for the period 2008-09 and 2009-10 was only satisfactory and not good. In the said certificate, there is no mention about 2007-2008 which is also the relevant period as per tender condition under clause 2(g). 7.5. It is contended