IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC FRIDAY, THE 12TH AUGUST 2011 / 21ST SRAVANA 1933 WP(C).No. 19038 of 2011(D) -------------------------- PETITIONER(S): --------------------- EASTERN MEDIKIT LTD. A PUBLIC LIMITED COMPANY 3, DR.G.C.NARANG MARG DELHI 110 007, REPRESENTED BY ITS DEPUTY MANAGER (SALES) PRASHANT GOSWAMI. BY ADVS. SRI.R.T.PRADEEP SRI.SREEKANTH S.NAIR RESPONDENT(S): ------------------------ 1. KERALA MEDICAL SERVICES CORPORATION LTD. REPRESENTED BY ITS MANAGING DIRECTOR THYCAUD PO, THIRUVANANTHAPURAM. 695 003. 2. THE STATE OF KERALA REPRESENTED BY ITS SECRETARY TO GOVERNMENT, HEALTH & FAMILY WELFARE DEPARTMENT, SECRETARIAT,THIRUVANANTHAPURAM. 695 001 R1 BY ADV. SRI.M.AJAY,SC,KERALA MEDICAL SERVICES CORPORATION. R2 BY GOVERNMENT PLEADER SMT.RAJASHREE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSIN ON 12/08/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 19038 of 2011(D) -------------------------------------- APPENDIX --------------- PETITIONER'S EXHIBITS ----------------------------------- EXT.P1. COPY OF THE RESOLUTION DATED 9.6.2010 PASSED BY THE BOARD OF DIRECTORS of the PETITIONER FIRM. EXT.P2. COPY OF THE TENDER DOCUMENT FOR THE SUPPLY OF MEDICAL DEVICES (CATEGORY-III) FOR THE PERIOD FROM 1.4.2011 TO 31.3.2012. EXT.P3. COPY OF THE INSPECTION REPORT DATED 13.6.2011. EXT.P4. COPY OF THE REPRESENTATION DATED 8.7.2011 SUBMITTED BY THE PETITOINER. EXT.P5. COPY of the NOTICES DATED 06.7.2011 REJECTING THE TENDER OF PETITIONER. EXT.P6. COPY of the NOTICE DATED 672011, WHICH ENUMERATES THE SUCCESSFUL BIDDER. EXT.P7. CPY OF THE VALIDITY CERTIFICATE DATED 1.7.2011. EXT.P8. COPY OF THE COMMUNICATION DATED 30.5.2011 IN THIS REGARD FROM PETITIONER TO STATE DRUGS CONTROLLER REGARDING THE APPOINTMENT OF DEEPAK NANDA. EXT.P9. COPY OF THE ISO ACCREDITATION OF THE COMPANY OF PETITIONER, WHICH IS VALID FROM 19.9.2009 TO 19.92012. EXT.P10. COPY OF THE GMP CERTIFICATE WHICH IS VALID UPTO 11.5.2011 EXT.P11. COPY OF THE GMP UNDER CONSIDERTION CERTIFICATE DATED 30.6.2011. EXT.P12. COPY of the PRICE LIST OF M/S.B.BRAUN PUBLISHED IN THE WEBSITE. EXT.P13. COPY OF THE CE CERTIFICATE 0120 ENABLING THE PETITIONER TO EXPORT PRODUCTS TO EUROPEAN COUNTRIES. EXT.P14. COPY OF THE CERTIFICATE FOR THE YEAR 2008-2009 FOR THE TOP EXPORTER OF MEDICAL DEVICES. EXT.P15. COPY OF THE LIST OF COUNTRIES TO WHICH THE PETITIONER COMPANY EXPORTS THE MEDICAL DEVICES. WP(C).No. 19038 of 2011(D) ------------------------------------- RESPONDENT'S EXHIBITS ------------------------------------- EXT.R1 (A). COPY OF THE PROCEEDINGS .5482/PUR/KMSCL/2010 DATED 8.6.2011. EXT.R1 (B). COPY OF THE G.O. (RT) NO.2196/2011/H & FWD DATED 08.06.2011. EXT.R1 (C). COPY OF THE INSPECTION REPORT WITH THE NAME DESIGNATION AND SIGNATURES OF THE INSPECTING OFFICERS. EXT.R1 (D). COPY OF THE NOTIFICATION N.GSR 365(E) DATED 17.3.1989 ISSUED BY GOVERNMENT OF INDIA. EXT.R1(E). COPY OF THE NOTIFICATION NO. S.O 1468(E) DATED 6.10.2005. EXT.R1(F). COPY OF THE CLARIFICATION ORDER DT. 20.3.09. EXT.R1(G). COPY OF THE LICENCE NO.634-B (H) DATED 4.8.2006 VALID UPTO 7.5.2011. EXT.R1 (H). COPY OF THE APPLICATION FOR RENEWAL OF LICENCE DATED 28.4.2011. EXT.R1.(I). COPY OF THE PHOTOGRAPHS OF THE RAW-MATERIAL STORAGE AREA SUBMITTED BY THE INSPECTION TEAM. EXT.R1 (J). COPY OF THE PHOTOGRAPHS SUBMITTED BY INSPECTION TEAM, THAT DUE TO INADEQUACY OF STORGE SPACE, FINISHED GOODS WERE STORED IN THE DISPATCH BAY. EXT.R1(K) COPY OF THE 'TEST FOR STERILITY' EXTRACTED FROM THE INDIAN PHARMACOEPIA, 2007. / TRUE COPY / P.A. TO JUDGE VK ANTONY DOMINIC, J. ---------------------------------------------------- W.P.(C) No. 19038 OF 2011 ----------------------------------------------------- Dated this the 12th day of August , 2011 J U D G M E N T The petitioner Company has filed this writ petition praying to quash Exts.P3, P5 and P6 and to direct the 1st respondent to open its price bid and to award the contract to them. 2. The first respondent is a Government Company incorporated by the Government of Kerala to function as the Central Procurement Agency of all essential drugs and equipments for public health care institutions under the Government of Kerala. The first respondent published Ext.P2 tender notice, inviting tenders for supply of Medical Devices(Category III) for the period from 1.4.2011 to 31.3.2012. In response to Ext.P2, petitioner submitted its tender offering to supply 29 items of Medical Devices. The technical bids were opened on 1.2.2011 and offer of the W.P.(C) No. 19038 OF 2011 :2 : petitioner for 21 products was accepted subject to satisfactory report of inspection of the manufacturing facilities, in terms of the provisions of the tender notice. Accordingly, the factory was inspected and the inspection team submitted Ext.P3 report. In its report, the inspection team recommended as follows. “In the opinion of the inspecting team, the Company is not capable of supplying drugs as per GMP specifications, on the following reasons. (1) Manufacturing operations are not made under supervision of an expert staff in production. (2) A separate raw material store is provided but without separators as per GMP. (3) The store provided is not adequate for finished goods. Finished products are stored even at the despatch bays. W.P.(C) No. 19038 OF 2011 :3 : (4) Finished products are released for sale, without approval from the Quality Control Authorities. Hence the tender may be rejected.” 3. The inspection report was published in the website of the first respondent and Ext.P4 objection was filed by the petitioner. By Ext.P5 notice, the petitioner's tender was rejected and the reasons stated are that; “Manufacturing operations are not made under supervision of an expert staff in production. Raw material store is not in specification as per GMP. Finished product store is not adequate and the finished products are stored even at the despatch bays. Finished products are released for sale without approval from the quality control section. Hence the offer of the firm is rejected.” W.P.(C) No. 19038 OF 2011 :4 : 4. Ext.P6 contains the list of suppliers, whose tender for supply of Medical Devices(Category III) has been accepted. It is in these circumstances the writ petition has been filed challenging Exts.P3, P5 and P6 and for consequential reliefs. 5. The first respondent has filed a counter affidavit. According to the first respondent in terms of the tender conditions, the factory was to be inspected by an inspection team of external experts, constituted as provided in the tender notice. It is stated that accordingly a team consisting of a Medical Doctor from the State Health Services Department(User Institution), one Regional Drugs Inspector from the State Drugs Control Department and one Asst. Professor from Government College of Pharmaceutical Sciences, Thiruvananthapuram conducted inspection of the petitioner's manufacturing facilities on 13.6.2011 and submitted Ext.R1(c) report with W.P.(C) No. 19038 OF 2011 :5 : the recommendation to reject the tender. It is stated that the first respondent accepted the recommendation of the inspection team and accordingly the petitioner's tender was rejected. According to the first respondent rejection of the petitioner's tender is therefore fully in compliance with the tender conditions and hence does not call for interference by this court. 6. It was contended by the counsel for the petitioner that the inspection team was constituted violating the tender conditions and therefore the report submitted by such an illegally constituted inspection team, could not have been acted upon. It was also contended by him that the reasons for rejection of the petitioner's tender, on the basis of the recommendations of the inspection team, are factually erroneous. On this basis also, counsel contended that the rejection of the petitioner's tender was illegal and therefore calls for interference. W.P.(C) No. 19038 OF 2011 :6 : 7. On the other hand, Standing Counsel for the first respondent contended that the report has been submitted by an expert inspection team, consisting of officers from different Government Departments. It was contended that the inspection team has submitted a factual report and that the report disclosed that the petitioner did not qualify for price bid opening. It is therefore argued that the order of the first respondent rejecting the offer made by the petitioner did not warrant interference. 8. I have considered the submissions made. 9. Ext.P2 is the tender notice. Among the various provisions of this document, clauses 6.16.4, 6.18.1 to 6.18.11 are relevant and therefore are extracted below for reference. “6.16.4. The inspection of the production facilities of those firms which has not been inspected during W.P.(C) No. 19038 OF 2011 :7 : the past years and that of the new participants shall be conducted as detailed in clause 6.18 by a team of experts. The check list for inspection is published in the website of the Corporation. 6.18.1. Inspection of Production Facilities. In pursuance of clause 6.16.4 inspection of the production facilities will be, by different teams consisting of experts from the User Institutions/funding agencies/Drugs Control Department/College of Pharmaceutical Sciences. Specialists may also be co-opted into the team as deemed fit by the Tender Inviting Authority. 6.18.2. All the expenses incurred for the inspection will be borne by the Tender Inviting Authority. For those manufacturing facilities of tenderers, who have failed to qualify in the W.P.(C) No. 19038 OF 2011 :8 : inspections conducted by the Corporation during 2008-09, 2009-10 and 2010-11, fresh inspections will be conducted only upon remittance of Rs.1 lakh as part of the Technical Bid as Inspection Fee. 6.18.3 All the manufacturing sections (tablets, capsules, injectables, liquids etc. in the unit including the quality control section will be subjected to rigorous inspection/auditing, irrespective of the items quoted. i.e.if the manufacturer has quoted only for certain items of tablets in the tender but is having the production of injectables/liquids/capsules etc. all the sections will be subjected to inspection. The tenderer will have to provide necessary arrangements for the conduct of inspection of all the sections and failure to co-operate with the inspection of the different facilities or W.P.(C) No. 19038 OF 2011 :9 : in providing information as per the details in the standard inspection report format, published in the website, will lead to disqualification. As part of transparency policy no official of the Corporation will be accompanying the Inspection team. However, undue demands, beyond the scope of the standard inspection report format etc. made by the members of the Inspection team shall be immediately notified to the Tender Inviting Authority by the manufacturer by fax, so that the disputes could be resolved before the Inspection Team leaves the manufacturing facilities. The decisions of the Inspection team will not be communicated to the tenderer at their site and shall only be published on the website later. 6.18.4. Entry to all the areas of production including sterile products W.P.(C) No. 19038 OF 2011 :10 : manufacturing/filling areas shall be facilitated. 6.18.5 The availability of plant & machinery, technical experts, analytical facilities of quality control lab etc as claimed in the technical bids along with the compliance of standard operating procedures adapted for the production of quality assured products, and in case of drugs, all other parameters mentioned in the schedule M of the Drugs and Cosmetics Act shall be evaluated by the team for considering the eligibility of the firm. Claim of holding the valid GMP certification/valid license will not be accepted for eligibility, if the procedures are not followed as stipulated in the schedule M of the Drugs and Cosmetics Rules, or if the available plant/machinery are not in working condition at the time of W.P.(C) No. 19038 OF 2011 :11 : inspection. Tender offer will be rejected in such cases. 6.18.6 Minimum Production capacity to meet the demand of the tendered quantity with respect to available production facilities will be criteria for determining the acceptance/rejection of the firm. The Inspection team shall also verity the ability to the tenderer in fulfilling the supply schedule and manufacturing capacity as submitted in Annexure IV as part of the technical bid. 6.18.7 Control samples maintained for the batches for which the batch manufacturing records has been submitted will be cross checked during inspection. Failure to produce any one batch of the control samples will result in the rejection of that product from the tender offer. 6.18.8 Copy of one full set of W.P.(C) No. 19038 OF 2011 :12 : the technical bid should be made available at the time of inspection. 6.18.9 Originals of all the documents submitted in the technical bids, should be produced for verification by the inspection team. Failure to produce any of the original documents will result in the rejection of the tender offer. 6.18.10 Key manufacturing areas will be photographed by the inspection team, which will be published along with the inspection report in the official website of the Corporation as part of transparency and cross verification. Denial of permission for photographing will result in the rejection of tender offer. 6.18.11 Failure to observe any of the conditions of the licenses issued under the Drugs and Cosmetics Act, by the manufacturer, if reported by the W.P.(C) No. 19038 OF 2011 :13 : inspection team will result in the rejection of the tender offer.” 10. A reading of these provisions of the tender notice show that the inspection was to be conducted by a team of experts, drawn from the agencies which are mentioned in clause 6.18.1. This team was required to conduct inspection in the manner as provided in clauses 6.183, 6.184 and 6.185. 11. In this case the inspection team which submitted Ext.P3 report, consisted of a Medical Doctor from the State Health Department(User Institution), one Regional Drug Inspector from the State Drugs Control Department and one Asst. Prof. from the Government College of Pharmaceutical Sciences, Thiruvananthapuram. 12. The first contention of the petitioner is that clause 6.18.1 prescribed that the inspection team should have at least four officers, i.e, one each from User W.P.(C) No. 19038 OF 2011 :14 : Institutions/funding agencies/Drugs Control Department and College of Pharmaceutical Sciences. According to the petitioner, in addition to these four, the first respondent could also co-opt a specialist into the team as they may deem fit. On this basis, it was argued that since the inspection team had only three members, the constitution of the inspection team itself was illegal and therefore their report could not have been the basis for rejecting the tender. 13. This contention of the petitioner has been answered in the counter affidavit of the first respondent, the relevant portion of which, reads as follows. “As per the tender conditions, the inspection of the production facilities will be by a team consisting of experts from the User Institutions/Funding Agencies/Drugs Control Department/College of W.P.(C) No. 19038 OF 2011 :15 : Pharmaceutical Sciences. Specialists may be Co-opted into the team as deemed fit by the tender inviting authority. In the instant case, the funding agency is the second respondent. All the members in the inspecting team constituted vide Ext.R1(a) are the employees of the second respondent and hence an additional member representing the funding agency were not included in the team. Moreover the tender conditions never stipulate that the team should compulsorily contain 4 members. The team can be constituted by any of the members as noted in clause 6.18.1. It may also be noted that the team members have been approved by the funding agency, the second respondent, by the order vide Ext.R1(b) in response to the request by the first respondent.” W.P.(C) No. 19038 OF 2011 :16 : 14. The correctness of the petitioner's contention that absence of four members, will vitiate the constitution of the inspection team itself will have to be tested in the light of clause 16.181 and the contentions in the counter affidavit. 15. Clause 6.18.1 of the tender notice shows that the inspection team should consist of experts from User Institutions/funding agencies/Drugs Control Department and College of Pharmaceutical Sciences. Clause 6.18.1 nowhere says that the team should consist of representatives from all the aforesaid four Institutions or Departments. On the other hand the Tender Inviting Authority is given the freedom to constitute the team with officers from all the above departments or from some of them. Therefore, the freedom to choose members of the inspection team was that of the first respondent and the first respondent was under no obligation to constitute the W.P.(C) No. 19038 OF 2011 :17 : inspection team with members from all the aforesaid four organizations/departments. Having so understood clause 6.18.1 of the tender notice, I should accept the case of the respondent and reject the contention of the petitioner. 16. Yet another aspect of the matter is that the funding agency is the Government of Kerala. “User Institution” is also Department of the 2nd respondent. Since both these come under the Government, if the first respondent has decided to constitute a committee with one member representing these two categories, that decision of the first respondent is also not vitiated for any illegality. Further, the constitution of the inspection team itself was approved by the Government of Kerala as per Ext.R1(b) order. In such circumstances there is absolutely no substance in the contention raised by the petitioner regarding the alleged irregularity in the constitution of the inspection team. W.P.(C) No. 19038 OF 2011 :18 : 17. As far as the 2nd contention is concerned, rejection of the petitioner's bid was based on the recommendation of the inspection team. Ext.P3 report contains four reasons for recommending to reject the tender. The first reason is that the manufacturing operations are not made under the supervision of an expert staff in production. The reasons for making such a recommendation have been explained in the counter affidavit in the following manner. “The inspection was conducted on 13.6.2011 in the manufacturing premises of the petitioner at Plot No.195, 196, Phase -1, Udyog Vihar, Gurgaon, Haryana. As per the licence No.634-B (H) dated 4.8.2006, valid upto to 7.5.2011 the approved technically competent staff for manufacturing were Mr.Ravinder Batra, Mr.V.S.Suresh and W.P.(C) No. 19038 OF 2011 :19 : Mr.Chandrashekar. A true copy of the licence is produced herewith and marked Ext.R1(g). They were not present on the day of inspection. On enquiry it was reported that they resigned from the Company. But the date of resignation and alternate arrangements made were not furnished. It was also reported that an application in Form 27 dated 28.4.2011 was forwarded to the Drugs Control Administration for renewal of the licence. A true copy of the renewal application is produced herewith and marked Ext.R1(h). As per the copy of this application produced, the staff responsible for manufacture is Mr.Sutesh Kukreja who was also not present on the date of inspection. The petitioner could not produce any record to prove his approval as manufacturing chemist. In the W.P.(C) No. 19038 OF 2011 :20 : document produced along with the technical bid, the bidder has furnished a list of 3 technical staff, Mr.K.P. Singhania, Mr.Deepak Nanda and Mr.Sutesh Kukreja for manufacturing. The petitioner could not produce any documentary evidence to the fact that Mr.K.P.Singhania and Mr.Deepak Nanda have been appointed as manufacturing chemists by the company and approved by the regulatory authority (Drugs control Administration) though their names were included in the list of technical persons furnished along with the technical bid submitted in January, 2011. They could only produce a copy of the application in Form No.27 dated 28.4.2011 submitted before the Drugs Control Administration in which the name of Mr.Sutesh Kukreja was mentioned as manufacturing chemist. W.P.(C) No. 19038 OF 2011 :21 : Even Mr. Sutesh Kukreja was not available at the time of inspection though the manufacturing operation was going on in full swing on that day (13.06.2011). The petitioner has not substantiated its claim through any documentary evidence that the production of its medical devices is under the supervision of approved competent technical staff as stipulated in the Drugs and Cosmetics Act. Hence the findings of the inspection team is fully sustainable and not in any manner contradictory to clause 6.18.5 of Ext.P2 as alleged.” 18. In the reply affidavit filed by the petitioner, contention regarding the non availability of the manufacturing chemist noticed by the inspection team, has been answered thus; “Para 12(iii) is denied. The W.P.(C) No. 19038 OF 2011 :22 : petitioner has got 5 manufacturing plants of which inspection is confined to plants at Plot Nos.195 & 196. The manufacturing chemist as on the date of inspection was Mr.Deepak Nanda who was very much present in the plant and met the inspection team. The appointment of Deepak Nanda in the plant functioning in Plot Nos.195 & 196 was with effect from 31.5.2011 pursuant to the resignation of Mr.Sutesh Kukreja who was the former manufacturing chemist of the plant. The appointment of Mr. Deepak Nanda with effect from 31.5.2011 is under the process of approval of State Drugs Controller, Haryana. When the Drugs Licence is re- issued the name of Mr.Deepak Nanda will find a place in the licence. The copy of communication dated 30.5.2011 in this regard from petitioner to State Drugs Controller regarding the W.P.(C) No. 19038 OF 2011 :23 : appointment of Deepak Nanda is produced herewith and marked as Ext.P8. As the manufacturing Chemist was supervising the production at the time of inspection, the stipulation of the Drugs & Cosmetics Act has been fulfilled. Mr.K.P. Singhania has been Manufacturing Chemist for the Drugs Manufacturing licence No.461-B(H), for the manufacturing of I.V. Administration Sets and Blood Transfusion Sets since 1997 and his name is there on the licence since grant of licence. The copy of licence was submitted to the inspection team. The inspection team could not meet Mr.Singhania as they did not visit the premises where products are manufactured under Drugs Manufacturing Licence No.461-B(H).” W.P.(C) No. 19038 OF 2011 :24 : 19. The second reason given is that separate raw material store is provided but without separation as per GMP. The basis of such a statement has been explained in the counter affidavit in the following manner. “Para 3 of the Schedule M-III for Medical Devices of the Drugs and Cosmetics Rules, 1945 stipulates as follows “the licensee shall keep inventory of all raw-materials to be used at any stage of manufacture of devices and shall maintain records as per Schedule U. All such raw materials shall be identified and assigned control reference number. They shall be conspicuously labeled indicating the name of the material, control reference number, name of the manufacturer and be specially labeled “Under test” or “Approved” or “Rejected”. The under test, approved or rejected materials shall appropriately be segregated. They W.P.(C) No. 19038 OF 2011 :25 : shall be tested for compliance with the required standards of quality.” The Inspection team could not observe appropriate segregation as required by the Schedule. Supporting evidence as photographs of the raw-material storage area was also submitted by the inspection team which is produced herewith and marked Ext.R(1)(i). Hence this allegation of the petitioner is not correct and substantiated.” 20. Answering the allegation that the raw materials store is not separated, the petitioner has stated in its reply affidavit thus. “Para 12(iv) is denied. Para 3 of the Schedule M-III is complied with by storing the raw materials under separate labels “Under Test” (in Yellow Colour), “Tested OK” (in Green Colour), and “Rejected” (in Red Colour) for identification of test status in separate W.P.(C) No. 19038 OF 2011 :26 : palates and all records are prepared as per Schedule 'U'. The inspection team suggested that we should have separate areas for “Under Test”, “Tested OK” and “Rejected” materials and keep on moving the material as the inspection status changes, which is not practically feasible for bulky raw materials i.e. Plastic granules, in 25 kg. Packing, received by container loads. Hence Ext.R1(i) doesn't give a contradictory inference.” 21. It is further stated that the store provided is not adequate for finished goods and that finished products are stored even at the despatch bays. It is stated in the counter affidavit that the said report was made by the team on the basis of their observations during inspection. In support of this contention, the first respondent has produced photographic evidence as Ext.R1(j) which W.P.(C) No. 19038 OF 2011 :27 : substantiates this contention. 22. This contention is refuted in paragraph 17 of the reply affidavit thus: “The explanation to para 12(v) is denied. The raw materials received on that day which was yet to be checked and entered into the stocks had been placed on the receiving bay. The petitioner has a dedicated storage