Research › Search › Judgment

Madhya Pradesh High Court · body

2021 DIGILAW 41 (MP)

Denis Chem Lab Limited v. State of Madhya Pradesh

2021-01-15

MOHAMMAD RAFIQ

body2021
ORDER : Mohammad Rafiq, CJ. 1. This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short "the Act of 1996") has been filed by the applicant-Denis Chem Lab Limited with the prayer that an independent arbitrator may be appointed to arbitrate the dispute between the applicant and the non-applicants. 2. The case set up by the applicant in the present application is that the non-applicants floated a tender dated 14.08.2015 for procurement of drugs and medicines for various hospitals of the Government of Madhya Pradesh on rate contract basis for the year 2013-14. The applicant was declared the lowest bidder for as many as nine drugs and was awarded the contract. The applicant was also awarded the contract for the subsequent year 2015-16 through another tender process. As per the terms of the contract, the supply order was to be placed with the applicant either through the non-applicants or directly by the Government Hospital. While placing the supply order, the applicant was required to ensure that each supply order is accompanied with an invoice/delivery challan indicating purchase order number, name of item, quantity, batch number, date of manufacture, expiry date, test reports/certificates etc. On 30.12.2014, an order for supply of IV Ringarlectate Injections, IV Dextrose with Saline 5% and IV Sodium Chloride was placed with the applicant by Civil Surgeon, District Hospital, Raisen. The applicant, accordingly, dispatched the required goods vide Invoice No. 4569 dated 11.02.2015, which were delivered with all the supporting documents specifically reflecting total number of 625 boxes to the Store Keeper, District Hospital, Raisen on 03.03.2015. According to the applicant, the supplied drugs and medicines were immediately put to use in the month of August, 2015. More than 90% of the supplied drugs were consumed without any complaint. However, the Civil Surgeon, District Hospital, Raisen served a show cause notice dated 01.08.2015 on the applicant alleging that the applicant instead of supplying IV Normal Saline Batch No. 150202P007 had supplied IV Normal Saline Batch No. 14MP02P007. The wrong batch contained two bottles of Dextrose 25% 500ml meant for veterinary use. The applicant was called upon to hold an enquiry and tender its explanation within a period of three days. The wrong batch contained two bottles of Dextrose 25% 500ml meant for veterinary use. The applicant was called upon to hold an enquiry and tender its explanation within a period of three days. The applicant through its Quality Assurance Team carried out the investigation and on the basis of report submitted by said team, submitted its reply to the Office of Civil Surgeon and Assistant Chief Medical Superintended, District Hospital Riasen on 01.08.2015. The applicant submitted its reply keeping in mind the fact that he did not want his future prospects to be jeopardized in any way. The applicant through his reply dated 01.08.2015 further brought to the notice that it was not possible for different batches of drugs getting mixed in packaging for the reason that the production and packaging is a continuous process. Further, the batch that was to be supplied to the non-applicants was manufactured 45 days prior to the batch for veterinary use. There was a possibility that mistake may have happened at the hands of transporters. Probably, the consignments which contain supplies for the Government Hospital, Raisen and also for trade purposes may have suffered damage and its transporters may have repacked the goods. In doing so, the transporters may have mixed up the batches leading to the inadvertent mistake. 3. Mr. Sarabvir Singh Oberoi, learned counsel for the applicant contended that while the applicant did not receive any response to its reply, he was served with another show cause notice dated 04.08.2015 by the Deputy Director, Directorate of Health Services, Bhopal, conveying the communication dated 31.07.2015 from the District Hospital, Raisen that the period of 2015-16 was going to end in the month of February, 2016. It was alleged in the said show cause notice that IV Fluid Dextrose 25% meant for veterinary usage was administered to a patient by the staff nurse and the patient has become critical. The applicant was called upon to submit its reply within a period of seven days. The applicant once again adopted conciliatory approach and reiterated the earlier reply. However, the applicant was served with yet another notice dated 07.08.2015 from the office of Controller, Food and Drugs Administration, calling upon him to produce manufacturing records and other documents. The applicant was called upon to submit its reply within a period of seven days. The applicant once again adopted conciliatory approach and reiterated the earlier reply. However, the applicant was served with yet another notice dated 07.08.2015 from the office of Controller, Food and Drugs Administration, calling upon him to produce manufacturing records and other documents. In compliance of the said show cause notice dated 07.08.2015, the applicant submitted the required documents vide covering letter dated 11.08.2015, however, to his utter surprise the Director, Public Health and Services, Bhopal by order dated 12.08.2015 held that the proper segregation between drugs meant for human and veterinary consumption was not maintained at the unit producing and packaging site. It was stated therein that the replies of the applicant not being found satisfactory, the Directorate of Health Service decided to debar the applicant from participating in any tender process for a period of five years and removed the applicant from current supplier list. 4. Learned counsel for the applicant further contended that under Clause 25 of the terms of the contract provides a right of appeal to the Commissioner (Health), Government of M.P. The applicant submitted such appeal on 25.08.2015. The appellate authority by order dated 11.05.2016 rejected the appeal. Being aggrieved by the order dated 11.05.2016, passed by the appellate authority and the order of blacklisting dated 12.08.2015, the applicant approached this Court by filing Writ Petition No. 9381/2016, [Denis Chem Ltd. v. The State of Madhya Pradesh and others]. However, this Court in view of Clause 24 of the contract, which provides for resolution of disputes by way of arbitration proceedings, permitted the applicant (petitioner therein) to withdraw the said petition with the liberty to invoke the arbitration clause vide order dated 14.12.2016. Thereafter, invoking Clause 24 of the contract, the applicant served the non-applicants by notice dated 07.09.2018 calling upon them to appoint an arbitrator. The non-applicants failed to act within a period of 30 days from the date of invocation of arbitration clause, the applicant approached this Court by filing present application under Section 11(6) of the Act of 1996 and prayed for appointment of an independent arbitrator. 5. Mr. The non-applicants failed to act within a period of 30 days from the date of invocation of arbitration clause, the applicant approached this Court by filing present application under Section 11(6) of the Act of 1996 and prayed for appointment of an independent arbitrator. 5. Mr. Pushpendra Yadav, learned Additional Advocate General appearing for the non-applicants opposed the application and submitted that since the period of five years for which the applicant was blacklisted has already come to end, no cause of action now survives. The present application therefore be dismissed having been rendered infructuous. It is contended that applicant has not made any pleading with regard to any actual losses suffered by him and, therefore, there subsists no dispute between the applicant and the non-applicants to be referred to the arbitrator. 6. I have given my anxious consideration on the rival contentions of the parties and perused the record. 7. In the present case, it is an admitted position on both sides that there is no dispute regarding the fact that there was an agreement between the parties with regard to supply of nine drugs of different types and also the fact that a dispute has arisen between the parties. It is also not disputed that Clause 24 of the contract between the parties provides for arbitration as a remedy for resolution of disputes. Clause 24 of the contract reads as under: "24. Resolution of Disputes (i) The purchaser and the supplier shall make every effort to resolve, amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection with the contract, (ii) In case of a dispute or difference arising between the purchaser and a supplier relating to any matter arising out of or connected with this agreement, such dispute of difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The venue of arbitration shall be Bhopal." 8. Merely because the period of five years for which the applicant was blacklisted is over, does not render the present application infructuous, as the applicant can very well agitate and prove the claim of loss, if any, suffered by him. This aspect of the matter cannot be gone into by this Court in view of sub-section (6a) of Section 11 of the Act of 1996. The applicant has thus made out a case for appointment of an independent arbitrator. 9. This aspect of the matter cannot be gone into by this Court in view of sub-section (6a) of Section 11 of the Act of 1996. The applicant has thus made out a case for appointment of an independent arbitrator. 9. Learned counsels for the parties have agreed for appointment of Hon'ble Shri Justice K.K. Trivedi (Retired), a Former Judge of this Court, presently residing at Block No. 3, Vasundhara Vihar, Near St. Thomas School, South Civil Lines, Jabalpur (M.P.) having contact Nos. 9425156816 and 0761-2609399 and e-mail ID- trivedikk@yahoo.com as arbitrator in the present case. Accordingly, I deem it appropriate to appoint him as provisional arbitrator to arbitrate the dispute between the parties. The Registry of this Court is directed to obtain consent/declaration from the learned provisional arbitrator as per sub- section (8) of Section 11 of the Act of 1996 and place the matter before this Court on 19th February, 2021. Needless to emphasize that the learned arbitrator shall be entitle to fees only and strictly as per the stipulation contained in Fourth Schedule of the Act of 1996.