IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 5512 of 2010(L)
1. M/S.RKG PHARMA PVT.LTD, 12TH MILE STONE,
... Petitioner
2. M/S.UNICURE (INDIA)PVT.LTD,C-22&23,
3. M/S.VIVEK PHARMACHEM (INDIA)LTD.,
Vs
1. STATE OF KERALA, REPRESENTED BY THE
... Respondent
2. THE KERALA MEDICAL SERVICES CORPORATION
For Petitioner :SRI.M.RAMESH CHANDER
For Respondent :SRI.M.AJAY,SC,KERALA MEDICAL SERV.CORPN
The Hon'ble MR. Justice P.N.RAVINDRAN
Dated :23/06/2010
O R D E R
P.N.RAVINDRAN, J.
-------------------------------------
W.P.(C)Nos.5512 & 5606 of 2010
--------------------------------------
Dated 23rd June, 2010
JUDGMENT
The petitioners in these writ petition are manufacturers of
drugs. They have filed these writ petitions challenging Ext.P4
Government order and Ext.P5 corrigendum issued by the second
respondent Corporation. The brief facts of the case are as follows.
W.P.(C)No.5512 of 2010
2. The second respondent, the Kerala Medical Services
Corporation Limited (hereinafter referred to as `the Corporation’ for
short), is a Government company incorporated under the Companies
Act, 1956. The Corporation was formed to harness resources for the
timely procurement and prompt distribution of medicines in health
care institutions in an efficient, transparent and cost effective way
thereby ensuring full utilization of funds. The purpose for which the
Corporation was established is set out in Ext.P1 Government order
dated 1.11.2007 by which, the Government approved the
Memorandum and Articles of Association of the Corporation.
3. After the Corporation was established, during the year
2009, it invited tenders for supply of medicines. As per the tender
conditions, small scale industrial units were exempted from
WP(C).Nos.5512 & 5606/2010 2
furnishing earnest money deposit. Later, after the tender was
awarded to them, the Corporation insisted that they should furnish
security deposit. The small scale industrial units thereupon filed W.P.
(C)Nos.8915 and 8940 of 2009 in this Court challenging the direction
issued by the Corporation to furnish security deposit. Referring to
G.O.(P)No.385/2008/Fin. dated 27.8.2008, a copy of which was
produced and marked as Ext.P6 in W.P.(C)No.8915 of 2009, it was
contended that the stipulation in clause (c) thereof does not apply to
the Corporation for the reason that it is not a public sector
undertaking working on a competitive basis but a service
organization. A copy of Ext.P6 is on record as Ext.R3(4). Reliance
was placed on Ext.R3(5) letter dated 23.1.2009 sent by the Principal
Secretary to Government, Finance Department to a small scale
industrial unit wherein it was stated that the Corporation is a service
organization of the Government of Kerala and that it does not
undertake sales or compete in open market and therefore it is not a
competitive public sector undertaking. When W.P.(C)Nos.8915 and
8940 of 2009 came up for hearing on 23.3.2009, a learned single
Judge of this Court after considering the rival contentions passed the
following interim order:
“Although this is a common order in the two writ
petitions, Exhibits referred to in this order are as obtaining
in W.P.(C)No.8915 of 2009. The petitioners in these twoWP(C).Nos.5512 & 5606/2010 3
writ petitions are S.S.I.Units, who have submitted tenders
for supply of medicines pursuant to notification inviting
tenders floated by the 1st respondent Public Sector
Undertaking. They have been exempted from the condition
of submitting Earnest Money Deposit for the tender. They
have been awarded the tender. Now they have been
directed to furnish security deposit as provided under the
conditions of tender and to execute an agreement.
According to the petitioners, by virtue of Ext.p6
Government Order, they are exempted from furnishing
security deposit and Earnest Money Deposit. The
petitioners, therefore, seek an interim order directing the
1st respondent to permit the petitioners to execute the
agreement without insisting on furnishing security deposit.
2. Sri.M.Ajay takes notice on behalf of the 1st
respondent. The learned Government Pleader takes notice
on behalf of the other respondents. The learned counsel for
the 1st respondent submits that Clause (c) of Ext.P6 is not
applicable to Public Sector Undertakings that are working
on competitive basis and since the 1st respondent is a Public
Sector Undertaking working on a competitive basis, the
conditions of Ext.P6 are not applicable to the notification
inviting tenders floated by the 1st respondent. He would
further contend that the Earnest Money Deposit has been
waived not as per Ext.P6, but in accordance with the tender
conditions.
3. In answer to the same, the petitioners point out
that the very question as to whether the 1st respondent is a
Public Sector Undertaking working on a competitive basis
was the subject matter of a clarification pursuant to Ext.p12
letter addressed by one of the petitioners to the
Government, to which the Government replied by Ext.p13
that the 1st respondent is a service organization of
Government of Kerala, which does not undertake any sales
or compete in open market and therefore is not a
competitive Public Sector Undertaking.
4. The learned counsel for the 1st respondent
submits that in view of Ext.P13, the 1st respondent has
taken up the matter with the Government and the
Government is yet to give reply to the same.
5. I have heard both sides. In the facts and
WP(C).Nos.5512 & 5606/2010 4
circumstances of the case, I pass the following interim
order:
The 1st respondent shall permit the petitioners to
execute the agreement provisionally without insisting on
furnishing of security deposit, which shall be subject to
further orders of this Court. In the meanwhile, the 2nd
respondent shall take a final decision in the matter, as to
whether the 1st respondent is a competitive Public Sector
Undertaking, within a period of two weeks from the date of
receipt of a copy of this order. This order shall be served
by the 1st respondent before the 2nd respondent for
compliance.”
Pursuant to the said direction, the State Government heard the
parties to the aforesaid writ petitions, the representative of the
Corporation and the representatives of the Industries and Finance
Departments and passed Ext.P3 order dated 13.5.2009 holding that
the Corporation is a competitive public sector undertaking and not a
service organization and therefore it is not liable to grant the benefits
contemplated in Ext.R3(4) Government order dated 27.8.2008 which
was produced and marked as Ext.P6 in W.P.(C)No.8915 of 2009
referred to above.
4. After Ext.P3 order was passed, the Corporation issued
Ext.P2 tender notice inviting tenders for the supply of drugs and
supplies to the Corporation for the period from 1.4.2010 to
31.3.2011. The sale of the tender documents was to commence on
7.1.2010 and to close at 5 p.m. on 3.2.2010. The last date
stipulated for submission of tenders was 11 a.m. on 4.2.2010 and
WP(C).Nos.5512 & 5606/2010 5
the tenders were to be opened at 11.30 a.m. on 4.2.2010 in the
head office of the Corporation. In Ext.P2 tender notice, in paragraph
3(i) it was provided that price preference not exceeding 5% for
Domestic Micro, Small and Medium Enterprises and for State/Central
Public Sector Undertakings shall be available only for products
manufactured by them within the State of Kerala. In the note to
paragraph 3(i) it was stipulated that `Domestic, Micro, Small and
Medium Enterprises’ means industrial units as classified in clause 7
(1) of chapter III of the Micro, Small and Medium Enterprises
Development Act, 2006 which manufactures the goods within the
State and are registered with the competent authority of the
Industries and Commerce Department of Government of Kerala. In
paragraph 7 of Ext.P2 it was stipulated that State micro, small and
medium enterprises registered with Government of Kerala are
exempted from remittance of Earnest Money Deposit. In paragraph
10 of Ext.P2 tender notice it was stipulated that tenders will be
evaluated with reference to various criteria and that the rate per unit
(landed price) will be the criteria for determining the L1 rate
(Lowest rate). It was also stipulated that the evaluation and
comparison shall include 5% price preference for domestic small
scale industrial units and State/Central public sector undertakings for
WP(C).Nos.5512 & 5606/2010 6
products manufactured by them within the State of Kerala. In
paragraph 3(vi)(a) it was stipulated that at any time prior to the date
of submission of tender, the tender inviting authority (the
Corporation) may, for any reason, or as per directions of the
Government, modify the condition in the tender documents by an
amendment and that such amendment will be binding on all
prospective tenderers.
5. Pursuant to Ext.P2 tender notice, the petitioners,
additional respondents 3 to 10 and others submitted tenders.
However, before the last date stipulated for sale of tender
documents, the Government issued Ext.P4 order dated 2.2.2010
directing that 10% price preference will be extended to small scale
industries in Kerala as ordered in Ext.R3(4) Government order dated
27.8.2008 in the tenders floated by the Corporation for procurement
of drugs and supplies including the tender due for opening on
4.2.2010, as a special case. The Managing Director of the
Corporation thereupon issued Ext.P5 corrigendum dated 3.2.2010
amending clause 3(i) of Ext.P2 and sub clause 2 to clause 10 of
Ext.P2 wherein it was stipulated that Domestic Micro, Small and
Medium Enterprises and State/Central Public Sector Undertakings
shall be entitled to 10% price preference for drugs manufactured by
WP(C).Nos.5512 & 5606/2010 7
them within the State of Kerala. In view of the said amendment, the
last date for sale of tender documents was postponed to 19.2.2010
and the last date for receipt of tenders and opening of tenders was
postponed to 20.2.2010. It was ordered that all other conditions in
the tender notification shall stand unaltered. This writ petition was
thereupon filed challenging Exts.P4 and P5 and seeking a direction to
the Corporation to proceed with the tender on the basis of the
conditions incorporated in Ext.P2. It is contended that Ext.P4 is a
non-speaking order, that it does not give any reason for deviating
from Ext.P3 and that it is arbitrary and illegal. The petitioners have
also prayed for a direction to the respondents to consider whether
only 20 to 25% of the order could be granted to small scale industrial
units/public sector undertakings and to award the rest of the orders
to the lowest bidders in order to save public money.
6. A counter affidavit dated 25.3.2010 has been sworn to
by the Under Secretary to Government, Health and Family Welfare
Department on behalf of the first respondent. Paragraphs 6 to 10
thereof are extracted below for easy reference:
“6. Subsequently, Kerala Pharmaceutical
Manufacturer’s Association represented by its Secretary
submitted a representation to Government stating that as
per G.O.(P)No.385/08/Fin. Dated 27/08/08, price
preference of 5% that was admissible to Small Scale Units
has been increased to 10% and all Small Scale Units
registered with store Purchase Department of Kerala have
WP(C).Nos.5512 & 5606/2010 8
been exempted by EMD bid security and security deposit.
The Association further represented that this benefits was
not extended by Kerala Medical Services Corporation
Limited in the tender for 2009-2010 and that the
authorities promised to give them the above benefits from
the tender for the year 2010-11 onwards. The association
has also stated that if the above concessions are extended
the total amount involved would be very meager as total
business done by the Small Sale Units is less than 10% of
the total purchase done by the Kerala Medical Services
Corporation Limited in a year and further that these
concessions are a great help to their units to become
more competitive.
7. It is submitted that Government had re-
examined the matter in detail and come to the conclusion
that the Kerala Medical Services Corporation Limited is
now in a better position financially to comply with
Government Order dated 27/08/08 and hence
Government as per Ext.P4, ordered to extend 10% price
preference to Small Scale Units in Kerala in line with G.O.
(P)No.385/08/Fin. dated 27/08/08, in the tenders floated
by the Kerala Medical Services Corporation Limited for the
procurement of Drugs and Supplies for the year 2010-
2011 including in the tender which was due for opening on
04/02/2010.
8. The above order was issued after considering the
fact that Small Scale Units in the State have to be
provided price preference since they are competing with
the medium and large scale industries with large
infrastructure facilities, capacity to mobilize funds and
manpower. Originally the proposal of industries
Department in Government was for restoration of the
benefit of 15% price preference to the Small Scale Units
within the State and to exempt these Units from remitting
of EMD, bid security and security deposit. However, after
thorough consideration of all aspects, Government in G.O.
(P)No.385/08/Fin. Dated 27/08/08 ordered to enhance the
price preference from 5% to 10% till 31/03/12.
9. The Kerala Medical Services Corporation Limited
is provided Rs.130 crore in the year 2009-10 as grant by
Government of Kerala for purchase of drugs and supplies
for Government Hospitals. In the year 2010-11,
WP(C).Nos.5512 & 5606/2010 9
Government of Kerala has budgeted Rs.145 crore to be
given to Kerala Medical Services Corporation Limited for
procurement of drugs. Kerala Medical Services
Corporation Limited after procuring drugs and supplies
through open tender supplies them free of cost to
Government Hospitals, based on their requirement.
Kerala Medical Services Corporation Limited thus acts as a
procurement arm of Government of Kerala, registered as
a wholly owned company of Government of Kerala under
the Companies Act. Kerala Medical Services Corporation
Limited is performing a role similar to that was being
performed by the Central Purchase Committee (CPC) for
purchase of drugs and supplies for Government Hospitals,
before Kerala Medical Services Corporation Limited was
incorporated. Thus, it is apparent that it will be incorrect
to assert that now KMSCL is running as a competitive
Public Sector Undertaking. Earlier, when Kerala Medical
Services Corporation Limited was incorporated, it was
envisaged that Kerala Medical Services Corporation
Limited would work as a Competitive Public Sector
Undertaking. However, as far as procurement of drugs
and supplies using Government grant and distributing
them to Government Hospitals is concerned, operation of
Kerala Medical Services Corporation Limited cannot be
termed, as being run as competitive Public Sector
Undertaking. Thus, on re-examination Government came
to the view that Government Order No.385/08/Fin. dated
27/08/08 should apply to Kerala Medical Services
Corporation Limited and that 10% price preference to
SSI’s decided in the said Government Order should be
extended by Kerala Medical Services Corporation Limited.
10. Government reviewed the clarification issued in
G.O.(Ms)No.112/09/H & FWD dated 13/05/09 and came
to the conclusion that the Kerala Medical Services
Corporation Limited, is not a Public Sector Undertaking
working on competitive basis at present and hence Kerala
Medical Services Corporation Limited has to comply with
the Government Orders from time to time. The matter
cannot be left in a state of uncertainty since it will lead to
a crisis in the hospitals once the present stocks of
medicines are consumed. What is ordered in Ext.P4
Government Order is that Kerala Medical Services
Corporation Limited will extend 10% price preference to
Small Scale Units for the tender which was due for
WP(C).Nos.5512 & 5606/2010 10
opening on 4th February, 2010.”
The substance of the contention raised by the first respondent is that
Ext.P4 was issued with a view to promote small scale industrial units,
that the Government have allocated Rs.145 crores to the Corporation
for procurement of drugs which is Rs.15 lakhs more than the
allocation made during the previous year 2009-2010 and that
adequate funds are available at the disposal of the Corporation to
procure drugs even if 10% price preference is given to small scale
industrial units manufacturing drugs within the limits of Kerala. It is
also contended that the Government have reviewed Ext.P3 and come
to the conclusion that the Corporation is not a public sector
undertaking working on a competitive basis at present and therefore
the Corporation has to comply with the Government orders issued
from time to time.
7. Additional respondents 3 to 10 have in their application
for impleadment justified the stand taken by the Government in
Ext.P4. Relying on Ext.R3(3) order dated 13.10.2005, Ext.R3(4)
order dated 27.08.2008 and Ext.R3(5) letter dated 23.1.2009, it is
contended that the price preference given to small scale industrial
units which was originally fixed at 5% in Ext.R3(3) order dated
13.10.2005 was raised to 10% by Ext.R3(4) dated 27.08.2008 and
WP(C).Nos.5512 & 5606/2010 11
that the said concession is available to small scale industrial units
even in respect of the tenders invited by the Corporation for the
reason that it is not a public sector undertaking working on a
competitive basis.
8. I heard Sri.M.Ramesh Chander, learned counsel
appearing for the petitioners, Smt.Smitha Sukumaran, learned
Government Pleader appearing for the first respondent, Sri.M.Ajay,
learned standing counsel appearing for the second respondent
Corporation and Sri.Anil D Nair, learned counsel appearing for
additional respondents 3 to 10. I have also considered the pleadings
and the materials on record. Sri.M.Ramesh Chander, learned counsel
for the petitioners contended that the Government have not given
any reason in Ext.P4 when it directed the Corporation to give 10%
price preference to small scale industrial units manufacturing drugs
within the State of Kerala. The learned counsel contended that the
Government have in Ext.P3, after an elaborate consideration of
various aspects of the matter, held in categorical terms that the
Corporation is a competitive public sector undertaking and not a
service organization and that in the absence of any reason justifying
the change in the opinion of the Government, Ext.P4 is liable to be
struck down as an arbitrary exercise of power. The learned counsel
WP(C).Nos.5512 & 5606/2010 12
contended that small scale industrial units had been given 5% price
preference even in Ext.P2 and that certain other benefits like
dispensing with earnest money deposit had also been extended to
them. The learned counsel also contended that if 10% price
preference is extended to small scale industrial units, it will adversely
affect public interest. The learned counsel submitted that if for
example the petitioners are able to supply 10 strips of Crocin tablets
for Rs.100/-, the Corporation will have to spend Rs.110/- to buy it
from a small scale industrial unit and that for the said amount,
persons like the petitioners will be able to supply 11 strips in the place
of 10. Relying on Ext.P1 the learned counsel for the petitioners
contended that the Corporation was established to harness resources
for timely procurement and prompt distribution of medicines in health
care institutions in an efficient, transparent and cost effective way
thereby ensuring full utilization of the funds. He submitted that if the
stand of the Government is accepted, it will defeat the very purpose for
which the Corporation was established. Per contra, learned counsel
for the respondents contended that small scale industrial units were
given 10% price preference with a view to promote small scale
industrial units and that the Government have a social obligation to
promote the welfare of workers employed in such small scale
WP(C).Nos.5512 & 5606/2010 13
industrial units. The learned counsel went to the extent of stating
that the Corporation is flush with funds and therefore it does’nt
matter if additional expenditure of 10% is incurred by the
Corporation for purchasing medicines which are to be distributed to
patients availing the services of Government hospitals and
dispensaries.
9. Ext.P1 discloses that the Corporation was established
with a view to harness resources for the timely procurement and
prompt distribution of medicines in health care institutions in an
efficient, transparent and cost effective way thereby ensuring full
utilization of the funds. Paragraph 3 thereof reads as follows:
“3. Government are spending roughly an
amount of Rs.120 crores annually for purchase of
medicines and other medical items excluding diet for
health care institutions under Directorate of Health
Services and Directorate of Medical Education. For
the current year (2007-08), the allotment for
purchase of medicines is roughly Rs.120 crores under
various heads of accounts. Apart from the budgetary
allocation, funds available from Hospital Development
Committees (HDCs). LSGIs and emergency
allotments are used for purchase of medicines and
medical items in hospitals. Harnessing these
resources for timely procurement and prompt
distribution of all these items in a most efficient,
transparent and cost effective way through an
effective computerized system ensuring full
utilization of funds, will be the main objective of the
new Corporation.”
It is evident from Ext.P1 that the Corporation was established to
WP(C).Nos.5512 & 5606/2010 14
ensure procurement and distribution of medicines and supplies in a
cost effective way. The Government have in Ext.P3 considered the
purpose for which the Corporation was established and after
ascertaining the views of the Industries and Finance Departments
and after hearing the writ petitioners in W.P.(C)Nos.8915 and 8940
of 2009 who are party respondents herein, held in categorical terms
as follows:
“7. The objectives of the Kerala Medical Services
Corporation Limited are enumerated in G.O.(P)
No.448/07/H&FWD dated 1/11/07, read as 1st paper above,
by which the Corporation was set up. One of the main
objectives of the Kerala Medical Services Corporation
Limited is to procure and stock quality drugs and medicines
at competitive prices. The Corporation has been set up as
a company under the Companies Act, 1956 and not as a
society under the Charitable Societies Act. Based on the
mandates given in the Memorandum of Association, the
Corporation can sell, supply, distribute or deliver all kinds
and varieties of generic and patented medicines, medical
supplies, surgical accessories etc. to Government Hospitals
and institutions in the private sector. The objects
incidental or ancillary to attainment of the main objects
permits the Corporation to enter into partnership joint
venture, reciprocal concessions or other ways with any
person, firm association or body corporate. Kerala Medical
Services Corporation Limited is procuring drugs and
supplies at the most competitive rates through competitive
tenders invited.
8. In the sittings of the Estimates Committee of the
Kerala Legislative Assembly held at the Medical College,
Kozhikode on 28.08.2008 and in the meeting of the
Assurance Committee of the House held at the legislature
complex on 2/2/2009 it was pointed out that the
procurement cost of the medicines purchased by the Kerala
Medical Services Corporation Limited for treatment of
cancer, kidney diseases, heart diseases are very lowWP(C).Nos.5512 & 5606/2010 15
compared to the market price of the same. Since the poor
patients cannot afford to buy these costly medicines from
the open market paying huge amounts, the above
Committee had suggested that Kerala Medical Services
Corporation Limited should open retail sales outlets at least
in all Medical College Hospitals and in District Hospitals in
the State. The Kerala Medical Services Corporation Limited
is contemplating starting retail sales outlets as suggested
by the Committees of the Kerala Legislative Assembly.
9. In this connection it is also pertinent to point out
that as per the decisions of the Board of Directors of the
Corporation, in all the tenders floated by the Corporation
5% price preference is allowed to State SSI Units and the
annual turn over conditions of R.2 (two) crores was
reduced to Rs.50 lakh for SSIs as an exemption. This was
in suo motu fulfillment of the Corporation’s social
obligations to small scale industries functioning in the
State. If 10% price preference is allowed to SSI Units, the
Corporation will not be able to procure medicine at
competitive rates for the use in the Government Hospitals.
Protection of the interests of the SSI units should not and
cannot be at the expense of the poor people depending the
services of the Government Hospitals. Security deposit is
insisted from SSI Units also as to safeguard against
unsatisfactory performance or violation of contract
agreement by the supplier. It is pointed out that during
the previous year there was failure on the part of one SSI
Unit in giving supply as per the Schedule in the purchase
order placed. The Kerala Medical Services Corporation
Limited had to arrange alternate purchase and could
recover the additional cost involved in the alternate
purchase of medicines from the defaulted supplier, only
because there was sufficient security deposit available with
the Corporation. If no security deposit is insisted from the
suppliers, the Corporation may not be able to realize the
additional expenditure on account of alternate purchase to
provide medicines to public sector hospitals in time.
10. The Kerala Medical Services Corporation Limited
has been established exclusively to ensure uninterrupted
supply of medicines and allied products in the health care
institutions in Government Sector in the whole State at the
most competitive rates for the use of the not so affluent
patients, who are mostly depending upon the GovernmentWP(C).Nos.5512 & 5606/2010 16
Institutions. The Corporation is procuring medicines
adopting a transparent competitive system while also
ensuring quality of the supplies. There is no dispute that
the corporation is a fully Government owned institution in
all respects. However, being a Corporation solely engaging
in procurement and supply of good quality medicines which
are essential for saving the lives of the people, the
Corporation cannot be equated with LSGIs, Development
Authorities, Khadi Board, KSRTC, KSEB, KWA etc. who are
directed to allow some concessions to the SSI Units. It is
very clear that the KMSCL is a PSU working on competitive
basis and is not a service organization and that it is not
liable to allow any concessions to SSI Units as directed in
the Government Order read as 2nd paper above.”
(emphasis supplied)
It was in view of the reasons stated above that the Government held
in Ext.P3 that the Corporation is a competitive public sector
undertaking. When Ext.P2 tender notice was issued, though as per
Ext.P3 small scale industrial units were not entitled to any price
preference in terms of Ext.R3(4) Government order dated
27.08.2008, the Corporation extended certain benefits to them by
which small scale industrial units manufacturing drugs within the
State of Kerala were given 5% price preference. (vide paragraphs 3
(i), 10(1) and 10(2)) They were also exempted from payment of
earnest money deposit. The Government thereafter issued Ext.P4
order extending 10% price preference to small scale industrial units
in Kerala in the tenders floated by the Kerala Medical Services
Corporation Limited, including Ext.P2 tender, as a special case. The
Government have not in Ext.P4 given any reason justifying the
WP(C).Nos.5512 & 5606/2010 17
deviation from the stand taken by them in Ext.P3. The Government
have in Ext.P3 held in categorical terms that protection of the
interests of small scale industrial units should not and cannot be at
the expense of the poor people depending upon the services of
Government hospitals. The Government have in Ext.P3 also noticed
that in all the tenders floated by the Corporation, the Corporation is
providing 5% price preference to small scale industrial units in the
State and that fulfills the Corporation’s social obligation to small scale
industrial units. The Government have not given any reason
justifying the deviation from the stand taken in Ext.P3. Ext.P4 is in
my opinion, patently arbitrary. As rightly pointed out by the learned
counsel for the petitioners, if 10% price preference is extended in
respect of drugs manufactured by small scale industrial units, the
Corporation will be able to procure only lesser quantity of drugs. If
for example, the petitioners have offered 10 strips of Crocin tablets
for Rs.100/-, the small scale industrial units which are entitled to
10% price preference will be able to supply only nine strips. The
mere fact that the Corporation is flush with funds is therefore not a
justification to enhance the price preference to be extended to small
scale industrial units from 5% to 10%. The instant case is one where
no price preference at all is given to small scale industrial units. As a
WP(C).Nos.5512 & 5606/2010 18
matter of fact, they were given 5% price preference and also certain
other benefits.
10. The Government do not appear to had taken into
account the impact the said order will have on the procurement of
drugs and resultantly on the availability of cheaper drugs to patients
who depend on Government hospitals and dispensaries. The
Government have in Ext.P3 also stated that the Corporation cannot
be equated with Local Self Government Institutions, Development
Authorities, the Khadi Board, the Kerala State Road Transport
Corporation, the Kerala State Electricity Board and the Kerala Water
Authority which are bound to follow Ext.R3(3) Government order. In
Ext.P4 no reason at all is stated as to why the said stand requires to
be changed. In my considered opinion, in the absence of any reason
given in Ext.P4 or in the absence of any material to show that the
Government had any further materials before it when it passed
Ext.P4, the stand taken by the Government in Ext.P4 cannot be
sustained. On the materials available, I am of the considered opinion
that the decision taken by the Government in Ext.P4, to extend 10%
price preference to small scale industrial units cannot be sustained.
11. I shall now consider whether in the view that I have
taken the steps taken by the Corporation pursuant to Ext.P5
WP(C).Nos.5512 & 5606/2010 19
corrigendum notice should be set at naught and the Corporation
should be directed to proceed afresh from the stage immediately
prior to Exts.P4 and P5. The learned counsel for the Corporation
brought to my notice that as no interim order restraining the
Corporation from proceeding with the tender was in force, after
W.A.Nos.744 and 745 of were disposed of by judgment delivered on
17.5.2010, the Corporation has in some cases accepted bids made by
small scale industrial units/public sector undertakings by giving them
price preference in excess of 5% and that supply of drugs has also
commenced. The tender invited by the Corporation is for supply of
medicines to health care institutions run by the Government which
cater to the needs of patients who are not affluent. The Corporation
was also established to supply medicines to health care institutions in
the Government sector at competitive rates. In such circumstances,
I am of the opinion that it would not be proper for this Court to
interfere with the acceptance of bids made by small scale industrial
units/public sector undertakings and orders placed by the
Corporation with them having regard to the larger public interest. I
am of the opinion that the interests of justice can be met if in cases
where Corporation has accepted bids by small scale industrial
units/public sector undertakings manufacturing drugs in the State of
WP(C).Nos.5512 & 5606/2010 20
Kerala by giving them price preference in excess of 5%, such price
preference is scaled down to a maximum of 5%. In other cases
where bids have not been accepted, the Corporation shall proceed to
finalise the tender on the basis of Ext.P2 tender notification, ignoring
Exts.P4 and P5.
In the result, I allow the writ petition, quash Ext.P4 order
and P5 corrigendum notification. The Corporation is directed to
proceed further with Ext.P2 tender notification, based on the terms
and conditions stipulated therein. If pursuant to Ext.P2 tender
notification the Corporation has accepted bids by small scale
industrial units/public sector undertakings manufacturing drugs
within the State of kerala by giving them price preference in excess
of 5%, the Corporation shall give them an opportunity to scale down
the price quoted by them limiting it to 5% in terms of Ext.P2. In
other words, small scale industrial units whose tenders had been
accepted will be entitled only for 5% price preference and payment
shall be made only on that basis. It is clarified that the award of
contract already made to the small scale industrial units need be
reopened only for the said limited purpose. The bids submitted by
persons other than small scale industrial units, if already accepted,
shall not be disturbed. It is also clarified that the Corporation need
WP(C).Nos.5512 & 5606/2010 21
not offer an opportunity to persons who have quoted a rate lower
than small scale industrial units and to whom the contract has been
awarded and that the Corporation need only scale down the offer
made by the small scale industrial units whose bid has been accepted
limiting the price preference to 5%. The entire exercise shall be
carried out within one month from today. If any one of the small
scale industrial units which have availed the benefit of price
preference beyond 5% fails to scale down their offer to a maximum
of 5%, it will be open to the Corporation to cancel such tenders and
to award the work to other tenderers.
W.P.(C)No.5606 of 2010
The issue raised in this writ petition is covered by the
decision of this Court in W.P.(C)No.5512 of 2010. The writ petition is
accordingly disposed of with the observation that the judgment in
W.P.(C)No.5512 of 2010 will govern this case also.
P.N.RAVINDRAN
Judge
TKS