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Report by Nawvi Kamalnathan

The petition was filed under Article 136 of the Indian Constitution in the name of M/S Indian Medicines Pharmaceuticals Corporation Ltd Versus Kerala Ayurvedic Co-Operative Society Ltd. & Ors. to be heard before Judges on the matter concerning tenders as the preferable method to procure contracts with the state over other discretionary and arbitrary methods which tend to be violative of Fundamental rights guaranteed under the constitution of India.

FACTS:

The first respondent herein this case is Kerela Ayurvedic Co-operative Society Limited, which is a licensed Ayurvedic and Unani drugs Manufacturer, filed this suit to contest the judgment passed by the High court of Lucknow Bench, Allahabad judicature in favour of the Indian Medicines Pharmaceutical Corporation Limited (IMPCL) and the state.

In the year of 2014, the GOI launched NAM to promote the department of AYUSH, Ministry of Health, and Family Welfare to procure a cost-effective medical system and services. In the Operation Guidelines of the same, it is provided that 75% of the admissible assistance shall be aided by the Central Government and 25% of that remaining shall be taken care of by the respective states. The UP-stateAYUSH society initiates its purchases from a single vendor IMPCL, and the purchase order is given to them without any tendering process just based on nomination.

In a petition filed by the first respondent against the appellant, they sought a decree to procure Ayurvedic Medicines under the AYUSH program through tenders. The High court held the method of procuring medicines is illegal. Therefore, the appellant was directed to invite tenders for competitive rates thus initiating the supply of quality drugs.

PLAINTIFF’S CONTENTIONS:

Mr. Naresh Kaushik, the learned counsel appearing on behalf of the Appellants contested that IMPCL has been in the picture to cater to the needs of the Central Government to procure quality medical drugs, and thereby, the GOI holds around 98.11% of its shares. One of the prime reasons to supply drugs at an affordable price is the unique organizational setup and the prices of the drugs are vetted by the union Ministry of Finance.

IMPCL has a drug testing laboratory that is certified since it’s a government manufacturing company. Also, the Ministry of AYUSH has at various times recommended the purchase of medicines from IMPCL. Paragraph 4(vi)(b) mentions the phrase ‘at least’ that can be inferred to provide a minimum benchmark for procurement and not the upper limit.

It was further contended that the procurement of medicines may be made through tenders in cases where the property is planning to dispose of and in this case, there is no reason.IMPCL is not a private entity, so, there is no scope for monopoly, when the sale is not initiated in the open market.

DEFENDANT’S CONTENTIONS:

Whereas on the other hand, Mr. Kaleeswaram Raj, the counsel appearing on behalf of the respondents contended that Para 4(vi) provides only the establishment to procure medicines and does not address the question of whom and how. The mention of the phrase ‘or’ in para 4(vi) can be inferred to indicate that all are equally eligible to supply medicines.

UP State cannot arbitrarily fix one particular party to be eligible to procure medicines and all the entities mentioned in the para shall be recognized on an equal footing. Thus, initiating purchases in a fair process that shall enable all entities for an equal opportunity to secure orders.

There is no warrant for procurement of medicines to be obtained only from IMPCL and the prices shall be vetted by the Department of Expenditure, Ministry of Finance but it does not have the power to determine the prices of Ayurvedic medicines. So, the National Pharmaceutical Pricing Authority should be the authority for determining the prices of medicines.

JUDGEMENT:

The court observed from the precedents that the state while entering a contract shall not stand on the same foot as a private person, thus, it can’t act arbitrarily while dealing with the public be it in matters of jobs or contracts. It is also essential that the state and all its instrumentalities have to conform to COI to guarantee Fundamental Rights to its citizen.

In answering the question of whether the tender is a constitutional requirement the court has pointed out certainly more than once in many of its cases that Government contracts must be initiated transparently. The first cum first service policy is arbitrarily alienating resources and this is not a preferred method of allocation.

The court considered that tender allows negotiation with a private enterprise. The reason for the public auction being reasonable is that it allows a transparent process for the public and the procurement of any goods can be made at their best quality and price. The deviation of tender should not violate Article 14 and must be fair and reasonable.

The intervention application filed in the court has the scope only to interpret para 4(vi)(b) of the Operational Guidelines and the court finds that there were no records to show that other manufacturing entities of drug suppliers cannot supply better drugs. Therefore, the appeal stands disposed of.

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