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2009 DIGILAW 308 (PAT)

M/s Zest Pharma v. State Of Bihar

2009-02-24

NAVANITI PRASAD SINGH

body2009
JUDGEMENT 1. The State Health Society, Bihar is a society formed by the Government of Bihar in the Department of Health and Family Welfare. The society has been formed to perform or get performed all State functions by outsourcing services to private entrepreneurs. It is nothing but an extension of the State itself. 2. The State Health Society issued notice inviting tender from Companies and Firms for rate contracting of drugs. Under this tender it is not that the Firms are selected for any particular order of any drug in any quantity but rates of various drugs are settled for a particular period of supply as may be required by the State. The notice inviting tender is Annexure-A to the counter affidavit. One of the conditions of minimum eligibility criteria is a market standing of minimum three years issued by the Licensing Authority of the concerned State. The tenders have to be submitted in two separate envelopes in respect of two separate stages. First is the technical bid where as is usual eligibility to participate is decided. Once this eligibility bid is opened and the tenderer is deemed to be eligible then comes the financial bid which is opened. At the technical bid stage there is no intra party competition, the dispute if any is essential between the State Health Society and the tenderer whose eligibility is in question. It is this stage with which we are concerned in the present case. 3. Petitioner having been held ineligible and having not been communicated with any grounds for holding him ineligible filed the present writ application before this Court. He was only verbally told that as he could not produce the manufacturing license of more than three years duration, he was held to be ineligible. A comprehensive counter affidavit has been filed by the State Health Society. In that the decision of the Technical Core Committee has also been appended. In the counter affidavit the license as filed by the petitioner has also been appended and petitioners clarification given is also appended. It may be stated that the clarification was not given on basis of any clarification or show cause issued by the Society but was a clarification given after the petitioner came to know that his financial bid was not being considered. It may be stated that the clarification was not given on basis of any clarification or show cause issued by the Society but was a clarification given after the petitioner came to know that his financial bid was not being considered. It may be noted that the technical bids were opened on 11th July, 2008 and the clarification is submitted on 14th September, 2008 even without disclosure of grounds as to why petitioner was held to be non-eligible. In this writ application, we have thus to consider whether the rejection of the technical bid of the petitioner was correct or not. 4. In fairness to learned counsel who have tried to appear for intervener, in my view, they have no locus standi as dispute is essentially between the State Health Society and the petitioner whose technical bid has been rejected. Sri S.D. Sanjay and Sri Rajeev Kumar Singh who have sought to intervene did not press their intervention because they submitted that their intervention was only for the purposes of seeking to get the interim stay vacated so that the tender process may continue and they are not interested in either petitioner succeeding or failing before this Court. As the writ petition is being disposed of, their intervention applications itself has become infructuous. 5. At this stage I may also notice one aspect of the matter in the preliminary. The decision of the Technical Core Committee by which petitioner has been excluded is contained in the resolution as taken by the Technical Core Committee and appended to the counter affidavit of the State Health Society. As against item No. 53 is petitioners case, the only ground given therein is quoted hereunder "License is not of three complete years (issue date 30.11.2006)". 6. In the counter affidavit the State Health Society has tried to give several other grounds for disqualifying the petitioner in an effort to see that somehow or the other petitioner is kept out. All I can do is to refer to often quoted case of Mohinder Singh Gill and Another vs. The Chief Election Commissioner reported in A.I.R. 1978 SC 851 wherein their Lordships have held thus: When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. 7. In the present case the Core Committee having taken a decision only on the ground of three years license, they cannot be heard on other grounds that are being sought to be urged in the writ petition because that was not the ground on which action was taken. I may also note that now it is well settled that if a tender is to be rejected then a party whose tender is rejected must be immediately communicated the reason thereof. In the present case, it is not disputed that never was any reason disclosed to the petitioner and petitioner was kept guessing all along the grounds thereon. Such an attitude of a State functionary or State within the meaning of Article 12 is reprehensible. It destroys the very nature of transparency which is required by State in decision making process. 8. Now coming to the merits of the contention. Petitioners license has been appended to the counter affidavit as he had filed before the State Health Society in response to the said tender. The license under the Drugs and Cosmetics Act has been issued to a partnership Firm M/s Zest Pharma of Indore (M.P.) License Number is 28/2/94 issued on 26.4.2007 for the period 30.11.2006 to 29.11.2011. The State submits that this license is in Form-28 of the Drugs and Cosmetics Rules which is a form for new licenses. State submits that from this it is clear that the petitioner had been a new licensee from 30.11.2006 which is less than three years from the tender date and therefore the decision of the Technical Core Committee to hold that the petitioner was ineligible could not be questioned. 9. I am afraid, it cannot be accepted. The facts aforesaid are only half the facts as mentioned on the license as appended to the counter affidavit itself. The more relevant part thereof is that this license itself bears a clear endorsement that the fresh license/new license was being given due to change in the constitution of the Firm and secondly that the original license number is of the year 1994. These two endorsements on the license itself belie the stand of the State in all respect. 10. The more relevant part thereof is that this license itself bears a clear endorsement that the fresh license/new license was being given due to change in the constitution of the Firm and secondly that the original license number is of the year 1994. These two endorsements on the license itself belie the stand of the State in all respect. 10. While this order was being dictated, learned counsel for the State intervened and points out that though the license may be of 1994 its continuity up to the time when this was given is not shown. The answer is simple. It was not required to be shown nor was it asked to be shown. If the Authority had any confusion then the proper thing was to seek a clarification rather than reject an application. It cannot be forgotten that the Technical Core Committee while taking commercial decision must be careful as they represent the State for State function and all aspects of their functions are governed by Article 14 of the Constitution of India. Their actions are distinct from private individuals. A matter which was settled by the Apex Court as far back as thirty years has not gone down throat of the State of this State as yet. Reference may be made to AIR 1979 SC 1628 in particular Paragraph 12 thereof. 11. It is not disputed that it is the Firm that is a licensee and a new license was necessitated because there was a change in the constitution of the partners. Though it is not necessary to refer but as the respondents themselves have annexed the clarification given by the petitioner suomoto the clarification indeed makes explicit what was implicit in the license as annexed. It clearly shows that uninterrupted from 1994 the petitioner-Firm held manufacturing license with the same number as the present license and had been renewed from year to year as required by the Act and the rules framed thereunder. 12. Thus found clearly the decision of the Technical Core Committee cannot be supported. It clearly shows that uninterrupted from 1994 the petitioner-Firm held manufacturing license with the same number as the present license and had been renewed from year to year as required by the Act and the rules framed thereunder. 12. Thus found clearly the decision of the Technical Core Committee cannot be supported. I must add at this point that if parties are under any confusion rather than reject they can always seek clarification because if by clarification a person is saved from rejection all that will happen is there would be greater competition and greater participation than restricted competition because we are at the technical bid stage and not the financial bid stage. It is always advantageous for the State to have greater participation and competition though it is disadvantageous to private tenderers because their scope of competition decreases if parties are rejected at an early stage itself. State must keep this in mind in view of the findings as aforesaid. 13. Before parting I may only point out to one other interesting aspect which appears from the counter affidavit filed by the State Health Committee itself. The proceedings of the Core Committee dated 18.9.2008 has been annexed by Society itself. While petitioners technical bid was outrightly rejected on the ground that the petitioner did not have three years manufacturing license without any clarification being sought, the Technical Core Committee in the same very meeting deals with tenderers who had filed their tenders without valid renewal certificates. Instead of renewal certificates they had appended a limited validity certificate. These validity certificates were limited in time. By the time they came to be considered by the Technical Core Committee even the validity certificates stood expired. Thus, on these facts itself they had neither a renewed license nor a valid validity certificate still the Technical Core Committee white rejecting petitioners application decided to permit these tenderers to produce renewal certificates of three years at the time when Rate Contract matters (Financial bids) are opened. Except for noticing this diabolical stand I say no more. 14. The writ petition is thus allowed. The decision of the Technical Core Committee to hold petitioner to be ineligible is set aside. Petitioners technical bid would be held to be valid. The tender process should now proceed without any undue delay.