Full Text
■
2023:SHC:5869-IIB HIGH COURT OF DELHI
30180/2023 BATRA MEDICOS & ORS.
Through:
Petitioners
Through:
\ Mr. Vikas Singh, Sr. Advocate with Ms.Vrinda Kapoor Dev,Dr.S.Ritam
JGiare, Mr. Aditya Goyal and Ms. Saumya Soni,Ms.Deepika Kalia,Ms. Vaishnavi, Mr. Keshav Khandelwal, Advocates.
Respondents Mr. Chetan Sharma, ASG with Mr. Mukul Singh, CGSC, Mr. Kirtiman Singh, .CGSC, Mr. Abhigyan Siddhant, GP, Ms. Ira Singh, Mr. Varun Pratap Singh and Ms. Shreya Mehra, Advocates for Respondent
Nos. 1 and 2.
Mr. Saurabh Kirpal, Sr. Advocate with Mr. Vinay Kumar Dubey, Mr. Abhinav Agnihotri, Mr. Prateek Tiwari, Ms. Priya Dubey and Mr. Nikhil Arora,. Advocates for"Prakash
Medicos.
Mr. Parag P. Tripathi, Sr. Advocate with Mr. Kunal Miital,- Ms. Vasundhara Bakhru, Advocates for
M/s Grownbury Pharma.
Mr. Mohit Gupta,Mr.Ankit Jain,Mr. Vishal Saxena, Mr. Dhruv Mehta, Advocates for Kailash Medicos.
Mr. Sumant De with Mr. Rohiti W.P.(C)5077/2023 Page1of27
2023:LHC:S869-DB Khurana, Advocates for Gandhi
Medicos.
Mr. Samrat Nigam, Mr. Shiv Dutt Kaushik, Advocates for Kaushik
Medical Stores.
HON'BLE MR.JUSTICE SANJEEV NARULA
JUDGMENT
Order IRule 10 r/w Section 15J ofthe Code ofCivil Procedure. 1908 for impleadment)
1. For the grounds and reasons stated therein, the applications are allowed and the Applicants/Intervenors are arrayed as parties to the present petition. For expeditious disposal, we permitted the intervenors to file written submissions instead of counter affidavits, and they have been extensively heard.
2. The application is disposed of.Let amended memo ofparties be filed within a period ofone week jfrom today. W.P.(CI 5077/2023
3. The Petitioners who are pharmacists,submitted bids for empanelment as Authorized Local Chemist["ALC"]for supplying medicines to wellness centers operating within Delhi under the Central Government Health Scheme ["CGHS"]. However, their bids did not secure success. The Petitioners have raised various concerns about fairness and transparency of the tender process and allege that Respondents No. 1 and 2 deviated from W.P.(C)5077/2023 Page2of27 2023;IIHC;5869-I1B the stipulated tender conditions by awarding contracts to bidders who were below the highest bidder (known as HI), at less than highest offered discount rates. Demonstrating their commitment to equitable competition, the Petitioners express their readiness to match the proposal of HI. They assert that if the guidelines and specifications laid out in the tender documents are diligently adhered to, all eligible bidders, including themselves, would be afforded an opportunity to match HI discount, in a systematic manner.Based on this premise,the Petitioners assert thatthere is aplausible chance ofcontracts under the tender being awarded to them.
FACTUAL BACKGROUND
4. On 04^^^ January,2023,the Directorate General ofCGHS,Ministry of Health and Family Welfare,Govemment ofIndia,issued an e-tender on the Government e-marketplace ["GeM"] portal. This tender invited bids for empanelment of ALCs for supplying allopathic medicines to 102 wellness centers, hospitals, first-aid zones, and other units of the CGHS located across six zones in the Delhi-NCR region [collectively,"wellness centers"^, for a period ofthree years. The Scope of Work and Additional Terms and Conditions of Contract Empanelment [hereinafter, "Scope of Worl^"], required the bidders to quote a single uniform discount rate at which they were willing to supply the medicines to all concemed wellness centers located in different zones.,The contract was designed to be awarded to the bidder proposing the highest discountrate {i.e.,HI).Clause 7.[2] ofthe Scope of Work, stipulated that if HI bidder declined to accept the offer for a specific wellness center, they would face debarment and consequently, the W.P.(C)5077/2023 Page3of27 2023:IiHC;S869-DB bidder quoting the immediate next highest discount(H[2] bidder)would be provided anopportunityto matchthe discountofferedbytheHIbidder.
5. In terms of the Public Procurement Policy for Micro and Small Enterprise["MSB"], as specified in Clause 4.2(a) of Scope ofWork,the participating entities,who wereregistered as MSBs,were entitled to receive a procurement preference. This preference would be applicable if their quoted discount rate falls within the range ofHl-15%,and they express a readinessto align with the discountproposed by HI,anon-MSB entity.The preciselanguageofthe mentioned clauseis provided below. "4.2In compliance with PublicProcurementPolicyforMSE: a) Participating bidder who is a registered MSE, and who is quoting price within price band ofLI +15 %, shall be empaneled as ALCfor a unit by bringingdown theirprice toLIprice in asituation whereLIforthe equipment is a non MSE entity. In case ofALC discount, the chosen bidder would be the one quoting the highest discount(HI), in place oflowest price (LI). Hence purchase preference would be given to MSE bidder who is quoting discount within the range Hl-15% and is willing to bring up the quoted discount to match HI, where HI is a non MSEentity. Explanation to 4.2(a): ifa non MSE HI bidder quotes 25%for a JVC, then purchase preference would be given to all MSE bidders who have quoted a discountof25-(15% of25)=25-3.75=21.25.AllMSEbidders who havequoted discount between 21.25 and 24.[9] will be asked to match the 25% discount quoted bythe HI bidder."
6. Certain clauses contained in the Scope of Work, including Clause 7.2, underwent modifications through issuance of two corrigenda by Respondents No. 1 and 2. Resultantly,the deadline for submission ofthe bids was extended to 05:00 PM of 08^'^ February, 2023. Following the conclusion of the revised submission period, the technical evaluation committee, led by Respondent No. 2 [Additional Director of CGHS], undertook the evaluation process for the bid documents submitted by the 58 participating bidders. Within this pool,a total of48 bidders,including the W.P.(C)5077/2023 Page4of27 2023;I)HC;5S69-EB Petitioners, Respondent No.4[M/s Prakash Medicos]and the intervenors, namely M/s GrownburyPharmaceuticals Pvt.Ltd,Gandhi Medicos,Kailash Chemists, and Kaushik Medical Store [collectively referred to as "Intervenors^''],were declared technically qualified.
7. The online opening ofthe financial bids took place on 20*^ January, 2023,wherein one M/s Cure Pharma Chemist emerged as the HI bidder for various wellness centers situated across different zones. Respondent No.3, Ramesh Chemist, was declared as the H[2] bidder. The tabulation, which outlines the position of bidders based on the discounts they offered, is provided as an appendix to thisjudgment.
8. Respondents No. 1 and 2 raised a 'price justification query' on the GeM portal, requesting M/s.Cure Pharma Chemist(HI)to submit 20% of total performance security as evidence oftheir financial capability to supply indented medicines to the wellness centers. However, M/s Cure Pharma Chemist failed to respond, resulting in their disqualification. Respondents No. 1 and 2then communicated the same requirement to Ramesh Chemist, the H[2] bidder.
9. In light of events noted above, the Petitioners filed the present writ petition asserting that Respondents No. 1 and 2 have, in contravention of Clause 7.2, offered the contract for empanelment to H[2] bidder at the discount specified by H[2],rather than prompting it to align with the discount offered by the HI bidder. According to the Petitioners, the decision ofHI (M/s Cure Pharma Chemist)to not respond to the query from Respondents No. 1 and 2 effectively amounts to refusal ofthe offer. Consequently, H[2] should have been provided an opportunity to match the discount offered by HI. Since this crucial step was not taken, the Petitioners assert that the W.P. (C)5077/2023 Page5of27 2023;DHC:5869-DB integrity ofthetender processhasbeen compromised.Asaresult,theyseek the following prayers: "7.Issue a writofmandamus or any other appropriate writ, order or direction thereby directingthe respondents to recallandnotproceed with the impugned offer given to Respondent no. 3from working on the bid given by the Respondentno.3himself., j-,■
2. Issue a writ ofmandamus or any other appropriate writ, order or direction thereby directing the Respondents to offer to act in accordance to the Clause No 7 ofe-tender contract "scope ofwork and additional terms and conditions oj contract empanelment ofauthorized local chemists" dated 04.01.2023 and offer to all the eligible bidders, in seriatim, to match the discount ofH-1
10. It transpires that during the pendency ofthe writ petition, Respondent No. 3 [Ramesh Chemist] also refrained from responding to the price justification query. Consequently, M/s Prakash Medicos, the H[3] bidder, was declared as the highest bidder. This led to the execution of agreements m their favor for a total of 37 centers. Likewise, bids submitted by H[3] and other highest bidders for various other wellness centers, including the Intervenors, were also accepted. Contracts were awarded to them under the umbrella of the tender.
11. In view of the above-noted development, vide order dated 11'^ July, 2023, M/s Prakash Medicos was arrayed as a party to the present proceedings. Following this, while arguments were being presented, the Intervenors submitted applications to be impleaded in the case. Acknowledging the potential significance of the outcome of the present petition on them, their counsel were also provided ample opportunity to present their arguments.
12. Mr. Vikas Singh, Senior Counsel for Petitioners, strongly criticized W.P.(C) 5077/2023 ^ 2023:SHC:58S9-SB the manner in which Respondents No. 1 and 2have proceeded to award the tender,by making the following submissions:
12.1. Clause 4.[2] ofthe Scope ofWork,which accords purchase preference to registered MSB bidders over non-MSE bidders, is unsustainable. This condition significantly reduces the prospects of success of a non-MSE bidder. The Public Procurement Policy relied upon by Respondents No. 1 and 2 to incorporate this benefit to MSEs, is inapplicable as the Policy is intended to encourage MSE manufacturers,and not traders. Referring to the minutes ofthe pre-bid meeting held on January, 2023, which clarifies that'medium enterprises' are not eligible for the purchase preference,it was argued that there is no justification for exclusion of'medium enterprises' from the scope ofClause 4.2.
12.2. The aforesaid preference was revoked by Respondents No. 1 and 2in the midst oftender process, on 19'*' April,2023. Vide this communication. Respondents No. 1 and 2 merely stated that as per an Office Memorandum ["OM"]dated 02°*^ July, 2021 issued by the Ministry of Micro, Small and Medium Enterprises, Government ofIndia, purchase preference will not be granted. Respondents No. 1 and 2 materially changed the terms ofcontract and withdrew the preferred status ofMSEs,for which Petitioners were also eligible. This change was arbitrarily made after the opening ofthe bids, in violation ofClause 4.[2] and other original terms and conditions ofthe tender documents.
12.3. Clause 7.[2] of the Scope of Work expressly stipulates that if the HI bidder refuses the offer,,an opportunity is given to subsequent bidders to match the discount quoted by HI,in order oftheir ranking.In the eventnone ofthe participants are willing to accept the work at the HI price, then the W.P.(C)5077/2023 Page 7of27 2023;DHC:5869-IIB processhastobeconducted afreshbyfloating anew tender.However,inthe present case,subsequent to disqualification ofHI and H2bidders,H[3] has been successful in obtaining the tender at the discount rate offered by H[3] and notHI,which contradictsthe mandate ofClause 7.2.
12.4. A significant portion ofthe work has been awarded to M/s Prakasb Medicos(H[3]) without adequate due diligence. Respondents No. 1 and 2 have favored the selected bidder over others.
12.5. Respondents No. 1 and 2 have also removed the requirement for depositofearnest money as security,thus allowing participants to withdraw from the tender process without any consequences. This prejudices the chemists who are genuinely interested,such asPetitioners.
12.6. Thatapart.Respondents No.1 and2had no authorityto seek proofof financial competence from the interested bidders,by raising a query on the GeM portal. The condition to furnish 20% ofthe performance security for grantofcontract doesnotfind a mention inthe Scope ofWork and has been arbitrarily introduced at a later stage. The argument that tender issuing authority can raise queries under the rules of the GeM portal is misconceived, as the Scope of Work and minutes of the pre-bid meeting held on 11"^ January, 2023, specifically note that in case of any inconsistency betweenthe GeM rules andthe Scope ofWork,the latter shall prevail.
12.7. The reasoning supplied by Respondents No. 1 and 2 to assess the bidder's annual turnover vis-a-vis the number of wellness centers to which the medicines have to be sold,is entirely erroneous.Ifthe said Respondents wished to analyze whether the discount offered by HI bidder {i.e., 40%)is predatory in nature,they ought to have conducted a price-analysis in terms W.P.(C)5077/2023 Page8of27 2023:SHC:5869-llB ofOM dated 06^^February,2020.
12.8. Severalcontracts have been awarded to persons quoting40% discount rate,and ifthis rate was notdeemed predatoryfor such bidders,itshould not have been considered as apredatory offer bythe HI bidder. On behalfofthe RespondentsandIntervenors
13. Senior Counselforthe Respondents and Intervenors,mentioned in the appearance above,jointly madethefollowing submissions:
13.1. In accordance with Rule 170(iii) of General Financial Rules,2017, Respondents No. 1 and 2 decided to seek a Bid Securing Declaration from the bidders, in place of eamest money deposit or bid security. Further, to ensure that bidders'do not bid for multiple wellness centers,the penalty for delayed supply of medicines has been fixed at Rs. 100/- per item, per patient.
13.2. About 50 participating entities,including Petitioners, were present in the pre-bid meeting convened on 11'^ January,2023.No objection pertaining to ineligibility in availing MSB benefits wasraised during the said meeting.
13.3. It is only after the issuance ofthe tender thatthe OM dated 02"^^ July, 2021 was brought to Respondent No.2's notice. As per the aforesaid OM, MSB certificates are issued only for priority lending, and not for purchase preference. Accordingly, the purchase preference, mentioned in Clause 4.[2] ofthe Scope ofWork,was withdrawn. This OM was already in force at the time ofissuance ofthe tender but was left out due to mere oversight. This mistake was corrected before the financial bids were opened and all participating entities wereinformed ofthe decision on 19'*'April,2023.
13.4. On opening of the financial bids, it was discemed that M/s Cure W.P.(C)5077/2023 Page9of27 2023:DKC:S869-riB Pharma Chemist (HI) quoted the highest discount rate of 40.75% and Ramesh Chemist(H[2])offered 40.6%. However, at the same time, it was noticedthatM/sCurePharmaChemist(having an annualtumover ofRs.54 lakhs) had quoted 40.75% discount for 99 out of 102 wellness centers, which would result in an annual expenditure of approximately Rs. 500 crores. Similarly,the H2bidder,Ramesh Chemist(with an annualtumover ofRs.[1] crore)was willingto supply,medicines at40.6% discountto 93 out of 102 wellness centers, which would involve an annual expenditure of approximately Rs.470 crores. Such a substantial gap between their annual tumoverandthe projected annualexpenditureraised suspicionsofpredatory pricing. Considering the above and relying on OM dated 06"^ Febmary, 2020, Respondents No. 1 and 2 sought written clarifications from these bidders through the GeM Portal to ascertain their financial capability. However, as HI failed to respond to the online query within the given timeframe, their financial bid was rejected and their status as HI ceased. Likewise, H[2] also did not submit a response to the query, resulting in rejectionoftheirfinancialbid.Inthesecircumstances,theH3andothernext highest bidders who satisfied the tender criteria or were able to fiimish performancesecurity assought,weredeclared successful.
13.5. There is no deviation from Clause 7.[2] of the Scope of Work, as alleged byPetitioners.Thesaid clause applies only whenan"offerto supply medicines"is made to the HI bidder,butis rejected by them.In the present case. Respondents No. 1 and 2 never made an offer to M/s Cure Pharma Chemist and had only asked them to fiimish a proofoffinancial capacity to fiilfill the requirements oftender in order to clarify suspicions ofpredatory pricing.Keeping in view that discounts offered by HI and H2bidders were fV.P.(C)5077/2023 2023:CHG:5869-l)B abnormally low, the remaining bidders were not asked to match such unrealistic discount rates.
13.6. The selection ofthe highest bidder on the GeM portal is an automated process and Petitioners'allegation ofbias is misconceived.Respondents NO. 1 and 2have fully complied with the provisions ofthe Scope ofWork.
13.7. The scope ofinterference by the Court in matters ofawarding tenders is well-established and if the interpretation of the author of the tender is manifestly in consonance with the language of the tender document or subserving the purchase ofthe tender, then the Court should restrain itself from interfering with the same.'
13.8. The decision taken by Respondents No. 1 and 2 for the award ofthe contract was made in good faith and in public interest. This Court should not exercise judicial review, even if some procedural aberration or error in assessment is identified.
14. In addition to the above, Mr. Saurabh Kirpal and Mr.Parag Tripathi, Senior Counsel for M/s Prakash Medicos and M/s Grownbury Pharmaceuticals Pvt.Ltd.,respectively,argued as under:
14.1. The challenge to Clause 4.[2] ofthe Scope ofWork on the ground that it excludes 'medium enterprises' lacks foundational pleading. Irrespective, as all the successful H[3] and other highest bidders are also MSEs and the preference clause was subsequently omitted,this argument is futile and does not merit consideration.
14.2. The discounts offered by Petitioners range between 27.27% to 28.80%,as compared to the offer ofthe successful bidders(between 30.61% 'Reliance was placed upon N.G.Projects Linuted v. Vinod Kumar Jain and Ors.,(2022)SCC 127,JBM Electric Vehicles Private Limited v. Union ofIndia and Anr., 2022 SCC OnLine Del 2405 and Uflex W.P.(C)5077/2023 Page11of27 2023:IIHC;5869-IIB and 40.1%).Itis only during the hearing ofthe presentpetition,and notthe tender process,thattheyindicatedtheirintentionto meettherate of40.75%, which was offered by M/s CurePharma Chemist(HI).
14.3. Assuming Clause 4.[2] was still in force,yet,Petitioners would not be eligible for purchase preference as their quoted discounts are not within the range ofHl-15%.
14.4. Petitioners have engaged in collusive bidding by deliberately quoting discountsinthe samerangefor differentwellness centers.Further,they have concealed the fact that they have been acting as ALCs under previous tenders and were supplying medicines at nominal discount. Through the present writ petition, the Petitioners are attempting to seek cancellation of the tender in order to continue their supply operations to.the wellness centers,atlower discountrates.
14.5. The successfiil bidders have incurred substantial expenditure on procurementofmedicines to be supplied underthe contract.They have also furnished performance bank guarantees and invested towards capital to sustain their operations. Grave prejudice would be caused to them if the impugned tender is set-aside.
14.6. The present writ petition has been filed by misinterpreting the terms ofthe tender, with an intention to derail the process without anyjustifiable grounds.
ANALYSIS
15. The core argument presented by the Petitioners revolves around the Limited v. GovernmentofTamilNadu and Ors.,(2022)1 SCC 165. W.P. (C)5077/2023 12of27 2023:I]HC;5869-I1B w^b: purported breach of Clause 7.[2] of the Scope of Work. They claim that Respondents No. 1 and 2 deviated from standard practice by awarding contracts to a bidder offering the third-highest discount (and other next highest bidders), rather than the one quoting the highest bid (HI). In response, Respondents No. 1 and 2 vehemently counter Petitioners' claim, asserting their adherence to the stipulated tender conditions, which provide for rejection ofbids on the premise ofpredatory pricing. They maintain that their actions were driven by the need to ascertain the financial capacities of the tenderers, taking into account the contractual obligations of the tender and the broader public interest that it entails. Consequently, the crucial issues requiring determination encompass: (a)Whether the actions ofRespondents No.1 and 2were consistent with the process outlined in the Scope ofWork,specifically Clause 7.2, and aligned with the core principles oftransparency, faimess, and objectivity in tender evaluation. (b) Whether the rejection of bids submitted by HI and H[2] bidders was justified onthe grounds ofpredatory pricing. (c)Whether Respondents No.1 and 2werejustified in seeking clarifications from HI and H[2] bidders conceming their fmancial capabilities. Further, whether this course of action was reasonable and proportionate in the context ofconcems about potential predatory pricing.
(d) Whether the suspicion raised by Respondents No. 1 and 2 regarding predatory pricing is substantiated by the significant disparity between the anmial turnover ofthese bidders and the projected annual expenditures. (e)Whetherthe absence ofaresponsefrom HI and H2bidders affectedtheir eligibility and overallposition,rendering their bids non-responsive. W.P.(C)5077/2023 13of27 2023:DHC:S86S-DB (f) Does award of contract to H[3] and other next highest bidders at thenquoted discount rates, without necessitating them to match the discount proposed by the HI bidder, conforms to the language and intent ofClause 7.2,and aligns with the broader legalframeworkgovemingthetender award process. (g) Whether the decision to revoke the purchase preference clause by Respondents No. 1 and 2 was procedurally correct, considering the OM dated 02°^ July,2021,cited as the basis for its withdrawal. (h) Whether the evaluation of bids and the subsequent selection of M/s Prakash Medicos(H[3])and other highest bidders was conducted with due diligence and impartiality, free from favoritism or bias in the decisionmaking process.
FINDINGS
16. Having outlined the contentions and highlighted the pivotal questions, for clarity, we mustnow turn to the relevant clauses detailed in the Scope of Work. Tender condition for determining the HI bidder
17. Section I Clause 7 of the Scope of Work (as modified by the Corrigendum dated 18"^ January, 2023), which deals with the selection of bidder,reads as under:^ ^ The unamended Clause 7.[2] ofthe Scope ofWork is asfollows: "Ifa HI Bidder refuses to accept offerfor a Wellmss Centre/unit, he shall be debarred asperprovisions under the BidSecuringDeclaration & offershallbe made to the H2Bidder(the bidder offeringsubsequent lower discount immediately after HI,to meet the discount ofHI ofthat WC.In case ofnon-acceptance by H[2] bidder, the process will be repeated at HI discount till last eligible bidderfor that Wellness Centre is exhausted." W.P.(C)5077/2023 Page14of27 2023:I)HC:586d-CB "7.SELECTIONOFBIDDER 7.[1] The bidder(s) will be ranked in order ofhighest to lowest discount (in descending order) and termed as HI;H[2]; H[3] andso on. The bidder quoting the highest discount(herein called HI bid)shall be offered the contractfor empanelmentasAuthorisedLocalChemist,subjectto theprovisions contained in the tender clause Section 4.[2] above and successful inspection ofbidder's premises. 7.[2] IfHI Bidder refuses to accept offerfor a Wellness Centre/unit, he shall be debarred asperprovisions under the BidSecuringDeclaration and he shall be rejectedassuccessful bidderfrom all Wellness Centres/units where he is HI. The offershall be made to the H2Bidder{the bidder offeringsubsequentlower discountimmediately after HI,to meetthe discountofHIofthat WC.In case of non-acceptance by H[2] bidder, the process will be repeated at HI discount till lasteligible bidderfor that Wellness Centre is exhausted. 7.[3] If no Chemist is available for a Wellness Centre even after bidding process on GeM due to bidders not accepting the offer to supply after the bidding process, or a no response, then due to the urgent nature ofservices (supply of indented medicines), an offline limited tender process shall be followed i.e., open offer shall be made to allempaneledALCs in the city. From the pool ofregistered chemists, the offer accepting chemist, who is empaneled at the highest discount,shall be selected as the ALC,to supply the said WCor unit, till the validity ofhis contract with CGHS(along with extendable time limitaspercontract}. This would be an offline contract. 7.[4] Ifthe limited tender process alsofails,for empanelment ofALCfor the said WC or unit, repeat bidding shall be attempted on GeM portal after ensuring adequate publicity includingpublishing on website ofCGHS.In case of tender failure while empanelling ALCs for a WC, the annual turnover eligibility criterion shall be reduced to that applicablefor the next lower Class city."
18. In terms of the afore-noted clause, bidders are ranked based on the descending order oftheir quoted discounts. The bidder offering the highest discount, termed as HI, is extended the offer for the contract, subject to fulfilling other relevant provisions. In the event HI bidder declines the offer for a specific wellness center/unit, certain consequences ensue. They are debarred according to the terms of the bid securing declaration, and their status as the successful bidder for all corresponding wellness centers is revoked. The offer then shifts to H[2], the bidder next in line with a lower discount,requiring them to match the discount offered by HI.Should the H[2] W.P.(C)5077/2023 PageISof27 2023:DHC:5869-DB bidder also decline or fail to acceptthe offer,the iterative process continues at the HI discount level, until the last eligible bidder for the specific wellness center is exhausted.This process ensures an opportunityforbidders with lower discounts to step in if higher bidders refiise the offer. In cases where no pharmacist accepts the offer due to non-response or refusal, alternative measures are triggered. An offline limited tender process is initiated, followed by repeated bidding attempts on the GeM portal, if necessary,with adjusted eligibility criteriainthe case oftenderfailure.
19. The crux of the present dispute hinges on the reasoning behind Respondents No.1 and2's decision to rejectthefinancialbidsofHI and H[2] bidders due to concerns ofpredatory pricing, and their subsequent decision to award contracts to the H[3] and other higher-ranked bidders. In that light, the Court shall now analyze whether this decision is arbitrary,unreasonable or beyond the ambit ofthe conditions provided in the Scope ofWork.Our objective is to ascertain whether the impugned decision was taken in a fair and impartial manner, without any manifest arbitrariness or bias. The outcome ofthis assessment will be crucial in deciding the fate ofthe present petition. However,before delving into the issue of predatory pricing, it is imperative to address a misconception put forth by the Petitioners. Their contention that they could have secured contracts had Respondents No. 1 and 2 strictly followed Clause 7.2, is misguided. This assertion fails to acknowledge the essence ofcompetitive bidding embedded within Clause 7. According to this clause, the contract is offered to the bidder with the highest discount rate. The Petitioners' hypothetical scenario assumes subsequent bidders' refusal, which is purely speculative and lacks legal foundation. Moreover, the bid status presented to the Court ranks the fV.P.(C)5077/2023 16of27 2023:DHG:5869-DB B B Petitioners as low as Hll for certain wellness centers,^ further undermining their argument. Their stance also disregards the substantial impact of predatory pricing,the very reason behind the rejection ofHI and H2bids. PredatoryPricing
20. That said, we move on to the core issue - predatory pricing. At the crux ofimpartial tender process lies the cardinal principle ofpromoting fancompetition. If predatory pricing tactics are employed, it can distort the bidding process by discouraging genuine competitors from participating or submitting realistic bids. The analysis ofpredatory pricing in tender process holds significant importance as it ensures fair competition, prevents anti competitive practices, and safeguards the public interest. Predatory pricing can lead to sub-standard services or goods being delivered to the public, as the bidder may not be capable of providing quality products at such low prices. Proper scrutiny helps in selecting bidders who can fulfill their contractual obligations effectively. Thus, proper analysis of predatory pricing helps identify such practices and ensures a level playing field for all bidders.On this issue,the CM of February,2020 issued by the Ministry of Finance, Government of India, acts as a reference point. It underscores the need to maintain an equilibrium of pricing, thus, preventing the undue influence ofartificially low(in this case high)bids.Respondents No.1 and[2] have therefore invoked this OM as a means to safeguard the procurement process against potential predatory pricing strategies. The OM reads as follows: OFFICEMEMORANDUM 'See: Appendix to thejudgement. W.P. (C)5077/2023 Page17of27 2023:DHC:5869-DB B Subject:PredatoryPricing/AbnormallyLow Bids-Reg. It has come to the notice of this Department that procurement entities are facing difficulties in finalization of tenders, in cases of _ predatorypricing/abnormally low bids. In this connection,para 7.5.7of the Manualfor Procurement of Goods, 2017 issued by Department of Expenditure is beingreiteratedfor information: An Abnormally Low Bid is one in which the bid price, in combination with other elements of the Bid, appears so low that it raises material concerns as to the capability of the bidder to perform the contract at the offered price. Procuring Entity may in such cases seek written clarifications from the bidder, including detailed price analysesofits bidprice in relation to scope,schedule, allocation of risks and responsibilities, and any other requirements ofthe bids document. If, after evaluating the price analyses. Procuring Entity determines that the bidder has substantially failed to demonstrate its capability to deliver the contract at the offered price, the Procuring Entity may rejectthe bid/proposal. However it wouldnot be advisable tofix a normativepercentage below the estimated cost, which would be automatically be considered as an abnormally low bid. Due care should be taken while formulating the specifications at the time ofpreparation of bid document so as to have a safeguard against the submission ofabnormallylow bidfrom the bidder. Sd/-"
21. The OM,as clearly seenfrom its text,defines an'abnormallylow bid' as one where the bid price,in conjunction with other elements,appears to be unreasonably low, thereby raising doubts about the bidder's capability to execute the contract atthe offered price.In cases ofabnormallylow bids,the procuring entity has been permitted to seek written clarifications from the bidder,including detailed price analysis,to assess their capability to deliver the contract as per the offered price.The emphasis on detailed price analysis and bidder capability assessment aims to ensure,that contracts are awarded to bidders who can deliver on their commitments. Scrutiny of the price analysis allowsthe procuring entity to determineifthe bidder has adequately W.P.(C)5077/2023 Page18of27 2033:DHC:5869-SB demonstrated its capabilityto performthe contractatthe offered price.Ifthe bidder is found to have substantially failed in demonstrating their financial capacity,their bid or proposal may be rejected. However,the OM cautions against fixing a normative percentage below, the estimated cost as an automatic criterion to identify abnormally low bids. Instead,it emphasizes the importance of formulating bid specifications carefully to safeguard against the submission of such bids. The procedure for consideration of abnormally low bids, as enumerated in the aforesaid OM, also finds a mention in paragraph 7.5.[7] ofChapter 7 ofthe Manual for Procurement of Goods,2017(updated as on OP'July,2022)issued by the Department of Expenditure,Ministry ofFinance.
22. There can thus, be no doubt that Respondents No. 1 and 2 were justified in examining whether the discounts offered by the bidders constituted as predatory pricing. They were rightly concemed about determining if the quoted prices were excessively low or high, raising doubts aboutthe bidders ability to fulfill the contract atthe proposed rates. Nonetheless,the central question is whetherthe application ofthe OM dated 06'"'February,2020 by Respondents No. 1 and 2 was bothjustified and in line with principles offaimess andreasonability.In thisregard.Respondents No. 1 and 2 have provided explanation to support their decision and the methodology adopted by them in their assessment. They have also outlined' the reasons behind undertaking this exercise in the Technical Evaluation Reportand Minutes ofthe TenderInviting Authorities,''asfollows: "Note #601 XX... XX... XX
Filed pursuantto courtdirectionsissued on IS""July,2023. W.P.(C)5077/2023 Page19of27 2023;DHC:5869-IIB ]s\ some bidders who have bidfor several Wellness Centres may quote abnormally high discounts ('predatory pricing'to gain undue advantage), and hence get selected by GeMportal as HI. There is apossibility thatsuch HI bidders refuse to accept the offer to be empanelled as ALC,thereby vitiating the tender Tocess One way to counter this would be to seek Performance Security deposition, assoon as HI is declared by GeM,f accept the empanelment offer, thePEG can beforfeited. The bids of"l^er whodo notsubmitPerformanceSecurityshallbe rejectedoutrightand ^ also be debarredfromfutureparticipation in CGHStendersforf Clause 7.2of"Scope ofwork"document).Insuch cases,H2shall be declare HI hut as a devinfinn from Clause 7.2, H[2] may not be required to match HI discount,whirh should bedismissed beingthe unrealistic predatory pricing.
XX XX XX Note#601 wassubmittedwith TechnicalEvaluation Report f receivedfor Local Chemist Empanelment services, CGHS Delhi NCR and the points raised by ADs (Tender Inviting Authorities)following the meeting on piferenceNote#602byAD(HQ),itissubmittedthatwithoutactuallydefiningthe discount%above which itwouldbetermed"predatorypricing",we maygo bythe fact that, ifthe HI bidder is unwilling to submitPEG, even it is a reasonable discount,then he is anon seriousplayer. nn j *• Atthesame time,the tenderprocessrequiresthe bidderto begiven07daystimeto submitPEG. We wouldlose timeifwe keepgiving07daystime to HIfirst,then to H2on refusalbyHI,H3on refusalbyH2etc.Asdiscussed,^ wemaycalculatethe totalPEGrequiredto besubmitted byaHIbidderandinsistthathe deposit o ofthesame within 02daysofbeing declared theHI. The remainingamountof PEG may be deposited on Day 7. A non serious bidder would not be to depositeven that much amountasPEG. This would weedoutnonserious bidders in ashorterperiod oftime."
23. The above extract details the rationale behind the price justification queryposedbyRespondentsNo.1 and2ontheGeMportal,focusingonthe financialcapabilityoftheHI andH2bidders.Giventhesignificantfinancial obligations tied to supplying medicines to 99 wellness centers, it was imperativeto verify thatthebidders,especiallythoseranked asHI,hadthe means to meet the contractual requirements. Respondents No. 1 and 2s concemregardingHI bidder'sfinancialcapability,giventheirrelativelylow reported turnover ofRs.54lakhs againstthe significant annualexpenditure of Rs. 500 crores for supplying indented medicines, was well-founded. W.P.(C)5077/2023 i 2023;DHC:58E9-BB b: Additionally, the geographical dispersion of the wellness centers, some located as far as 100 kilometers apart,raised practical challenges in timely and efficient delivery of medicines. It is therefore understandable that said Respondents wanted a written clarification from M/s Cure Pharma Chemist to ascertain how they intended to manage such extensive and diverse supply requirements within the specified time frame. Therefore, we are not persuaded by Mr. Vikas Singh's argument that, in the absence of any provision within the tender documents. Respondents No. 1 and 2lacked the authority to seek clarifications on the GeM portal.In our opinion,the OM as well as the Manual for Procurement of Goods provide Respondents No. 1 and 2 the authority to seek clarifications. The written clarification process, as a means ofassessing the bidder's capability to deliver the contract at the offered price, aligns with the principles offaimess and transparency in the tendering process. By seeking clarification. Respondents No. 1 and 2 were not only fulfilling their duty to ensure the authenticity ofthe tender process, but also safeguarding the public interest,as the successfulimplementation of the tender contracts impacts the delivery of essentialhealthcare services to citizens.
24. Atthisjuncture,we mustunderscore that although Respondents No.1 and 2 had the authority to assess the financial competence of participating entities, and their concems are valid, the evaluation should have been more comprehensive and encompassing.Itseems thatthe Respondents'evaluation was predominantly centered on financial capacity, neglecting the equally crucial aspect of'price analysis'. As noted above,the OM and the Manual for Procurement ofGoods,both underline the need to evaluate not only the fmancial capability, but also to undertake a meticulous price analysis, W.P. (C)5077/2023 Page21 of27 2023:DHC:586d-DB [=] especially when confronted with bids that suggest predatory pricing or abnormally low offers.
25. The Manual for Procurement of Goods, which provides for procuring entity's ability to seek additional security deposit or bank guarantee for cases involving abnormally low bids, also stipulates that there must be compelling circumstances and approval from higher authorities in such cases.^ In this context, it is worth mentioning that in order to avoid ambiguity,thetender documents could have explicitly addressedthe issue of predatory pricing by including comprehensive guidelines to ensure that bidders engaging in such practices are disqualified at the threshold. Such upfront clarity might have served as a deterrent, minimizing the,likelihood ofpredatory bids and empowering genuine bidders to make well-informed decisions during the bidding process.
26. However, deviating marginally from established protocols or choosing a methodology to identify predatory pricing in the tendering process does notintrinsically make the decision ofRespondents No.1 and[2] capricious. The bar forjudicial interference in such administrative decisions is set remarkably high. The primary duty ofcourts is to assess the legality, soundness, and prudence of the decision-making process. As observed in AfconsInfrastructure Ltd.v.NagpurMetroRailCorporation Ltd.f unless itis demonstrated thatthe impugned decision is wholly arbitrary orirrational that no reasonable authority, acting in accordance with law, could have reached it,the constitutional courts shall notinterfere therewith.Issuance of tenders and subsequent award of contracts are commercial transactions. ' Clause 7.5.[7] ofthe Manual forProeurement ofGoods. «(2016)16SCO 818. W.P.(C)5077/2023 Page22of27 / 2023:SHC;5869-IIE m B which fall within the purview ofthe financial functions ofthe Government. Therefore,except in cases ofmanifest arbitrariness,favoritism,perversity or irrationality, the inherent autonomy and commercial opinion of Governmental authorities and experts in commercial transactions must be given paramount significance. Further,it mustbe home in mind that it is the legality of the administrative decision, not its soundness, that undergoes scrutiny in the exercise ofjudicial review.'
27. Keeping in mind the afore-mentioned judicial principles of limited intervention, we find no grounds to grant the remedies sought by the Petitioners. The crucial fact remains that both HI [M/s Cure Pharma Chemist] and H[2] [Ramesh Chemist] bidders failed to, respond to Respondents No. 1 and 2's queries. Their nop-responsiveness,coupled with their absence before the Court to assail their disqualification, raises legitimate doubts about their genuineness and willingness to execute the contract at the offered discount rates. Their inaction effectively nullified their bids.In these circumstances,the stipulation ia Clause 7.[2] ofthe Scope of Work, which mandates subsequent bidders to match the discount rates offered by HI,did not come into play. The stage ofextending an "offer to supply medicines" was never reached. With the nullification ofHI and H2's bids. Respondents No. 1 and 2 werejustified in deciding to move on to the next highest bidders and awarding the tender(s) to them, which approach also aligns with public interest keeping the object ofthe tender in view.In totality,the Courtfirmly concludes that Respondents No. 1 and 2 acted with reasonableness, grounded in valid considerations. The Petitioners have also ^ Central CoalfieldsLtd. v.SLL-SML(Joint Venture Consortium)and Ors.,(2016)8 SCC622. W.R(C)5077/2023 Page23of27 2023:DHC;5869-DB not presented any substantial evidence ofbias or favoritism on the part of Respondents. As such, the discretionary nature inherent to tendering processes allowed Respondents No. 1 and 2 to exercise their judgment within the parameters ofthe law and facts that emerged during the tender process. Consequently, the Court finds no substantial basis to uphold the challenge mounted by the Petitioners againstthe award oftenders to H3(or nexthighest)bidders.
28. Regarding the Petitioners' assertion that Respondents No. 1 and 2 awarded contracts to certain wellness centers on the same discount rate as was offered by HI, it is important to recognize that each case must be evaluated on its individual merits. The rejection of M/s Cure Pharma Chemist's bid due to predatory pricing or an abnormally low bid was primarily founded on their comparatively low tumover in relation to the substantial contractual obligations involved. In light of the foregoing analysis, the core contention raised by the Petitioners — that Respondents No. 1 and 2 acted in contravention of Clause 7.[2] ofthe Scope ofWork by awarding contracts to H[3] bidders-lacks merit. The methodology adopted by Respondents No. 1 and 2, as guided by the OM dated 06"^ February, 2020, stands as a legitimate safeguard against predatory pricing and abnormallylow bids aiming to ensurefair competition,prevent distortionsin the bidding process,and uphold the public interest. MSE Condition
29. Wenow turn to the second pointofcontention,which revolves around the revocation ofpurchase preference for MSEs as stipulated under Clause 4.[2] ofthe Scope ofWork.Mr.Vikas Singh contended thatthe Petitioners in W.P. (C)5077/2023 24of27 2023:SHC;5869-DB J their capacity as MSEs,deserved this preference, and that the Respondents No.1 and2have violated the tender conditions by awarding contractto non- MSE bidders. He further argued that Respondents No. 1 and 2 arbitrarily changed the tender conditions after the initiation of the process, which is legally and contractually impermissible. On this aspect, at the outset, we must clarify that the benefit of Clause 4.[2] has not been extended to any participating MSE.Respondents No. 1 and 2 have provided an explanation for this revocation, stating that on January, 2023 during a pre-bid ( meeting, bidders sought clarifications regarding tender conditions. Subsequently, a corrigendum was issued on 08'*' February, 2023, which brought about modifications to the requirements concerning the MSE certificate. The revised provision is as follows: "1. The documents to be attachedfor eligibility criteria 1, under IB shall include thefollowing clause, in addition to the already existingclauses: "Only MSE certificate in the form of Udhyog Aadhar Memorandum (UAM) issued with effect from 01/04/2022 or later shall be considered, for all preferences/relaxations given to MSE. This is as per Govt. notification S.O. 278(E)dated19Jan 2022,issued byMinistry ofMSME"."
30. The OM dated 02°'^ July,2021 issued by the Ministry ofMicro,Small and Medium Enterprises, Government of India, stipulates that "benefits to Retail and Wholesale trade MSMEs are to be restricted to priority sector lending only". Therefore,the MSE certificates to retailers were issued solely for the purpose of priority lending and did not confer any preference in purchase during tendering processes. As a result, prior to opening of the financial bids on 19*^ April,2023,Respondents No. 1 and 2 duly informed all technically eligible bidders(including those that were not MSEs),that no MSE purchase preference would be applied. This decision was based on the guidelines provided in the afore-mentioned OM,which emphasized that the W.P. (C)5077/2023 Page25of27 2023;IIHC:S869-IIE B eligibility ofMSB retailers for priority sector lending was limited in scope. Therefore, no MSB preference was accorded to any participating bidders, and the GeM Portal selected HI for each wellness center through an automated process,without any manualintervention.In Court's opinion,the withdrawal ofMSB preference was a legitimate and prudent decision taken by Respondents No. 1 and 2in pursuance ofthe OM dated 02"'^ My 2021. The Respondents' adherence to this guideline ensures consistency and uniformity in tender evaluations and prevents any ambiguity or misinterpretation ofthe MSB benefit.
31. The initial incorporation of MSB purchase preference under Clause 4.[2] ofScope ofWork,which might have been based on a misunderstanding or oversight, was subsequently corrected. Respondents No. 1 and 2's proactive approach in informing all technically eligible bidders, including non-MSB entities, about the non-availability of MSB purchase preference before opening ofthe financial bids affirms their commitment to providing equal opportunities to all bidders. This open communication allowed all partiesto be aware ofthe altered conditions and ensured alevel playing field for all participants. Further, the decision to withdraw MSB preference did notimpactthe overall outcome ofthe tender process,as mostofthe bidders, who were ultimately awarded the contract, were MSB entities. This fact further strengthens the notionthatthe withdrawal was notdriven by any bias against MSB entities, but rather by a strict adherence to the guidelines mentioned in the OM of02"^ My,2021.
32. Furthermore,it is essential to acknowledge that tender processes can undergo revisions and adjustments in response to evolving circumstances or regulatory mandates.The withdrawal ofMSB preference can be interpreted W.P.(C)5077/2023 Page26of27 2023:I]HC:5869-1]B m B as a rectification oftender conditions to align with Governmental policies. The Court also finds no persuasive evidence to hold that the revocation of purchase preference clause resulted in prejudice to the Petitioners. Pertinently,in order to be eligible for this benefit,Petitioners were required to fall within the zone of consideration [Hl-15%], determined by the discount offered by them.While the Petitioners did offer a discount,they did not fulfill the criteria to avail the MSB benefit. Therefore, notwithstanding the initial provision for MSB preference,the Petitioners ultimately fell short ofthe necessary qualifications to avail its advantage. Therefore, even ifthe subsequent withdrawal ofthe MSB preference is perceived as a procedural deviation, it does not impact the final outcome of the tender process. The fact remains that the Petitioners would not have been entitled to the MSB advantage even ifthe clause had persisted. As such,its revocation bears no relevance to their case, ensuring that the tendering procedure's integrity I remains intact.
33. For the foregoing reasons,the present petition is dismissed along with pending applications.
SANJEEV NAHMLA,J SATISH CHANDRA SHARMA,CJ AUGUST 18,2Q23ld.negi W.P.(C)5077/2023 Page27of27
APPENDIX BIDDER POSITION OF DINESH.BATRA AND KUNAL MEDICOS AS PER DISCOUNT OFFERED BY THEM IN ALC GeM BID FOR CGHS DEEHI WEUUNESS CENTRES ''^iCGHS.Soutli-Zone.^/"'^" ■ S.No. Name ofbidder BATRA MEDICOS (28.8%) PI KUNAL MEDICOS (27.27%) P[2] DINESH MEDICOS (27.37%) P[3] POSITION OF CURRENT SUCCESSFUL BIDDER Total Number of CGHS Wellness Centres bid for Bid for by Batra,Kunaland Dinesh Medicos 6 21 17 NAME OF WELLNESS CENTRE 1 CGHS Andrews Ganj (D30). H[9] H[8] H5(30.75%)approyed as HI 2 CGHS CBI Colony (D50A) H[3] H2(28.33%)empaneled 3 CGHS Faridabad (D70) H[7] H5(33.03%)approved as HI 4 CGHS Gurgaon Sec-5 (D92) H[7] approved asHI 5 CGHS Gurgaon Sec-55 (D92) H[8] 6 CGHS Hauz Khas(D47) H[8] H[7] H[3]:(30.W^^ empaneled) ^ 7 CGHS Jangpura(D40) H[8] H[7] H6(28.33%approved asHI) 8 CGHS Kalkaji -2(D42) 9 CGHS Kalkaji-1(D42) 10 CGHS Kasturba Nagar- 1(D24) H[5] HS'(3(j;6%'-.c empaneled) " • 11 CGHS Kasturba Nagar- 2(D72) H[5] H3(28.75%- •.empaneled)" ' 12 CGHS Kidwai Nagar (D12) H[5] H3(30.6%- ^ empaneled) > 13 CGHS Lajpat Nagar (Dll) 14 CGHS Laxmibai Nagar(D15) H[7] H12 Hll approved asHI 15 CGHS Malviya Nagar (D41) 16 CGHS MB Road(D65) H[7] 17 CGHS Moti Bagh(D16) H[8] H6(28.33%- 18 CGHS Munirka(D71) H[6] H[5] H3(30.6%empaneleH)- 19 CGHS Nanakpura (D29) H[7] H[6] H3(30.6%- 20 CGHS Netaji nagar (D21) H[6] H[5] H3(30;6%- 21 CGHS Pushp Vihar (D78) 22 CGHS RKP-I(D43) H[6] H[5] H3(30.6%ampaaeled) 23 CGHS RKP-H(D46) H[6] H[5] H3(3016%- 24 CGHS RKP-HI(D50) H[6] H[5] H3(30.6%- ^ 25 CGHS RKP-IV(D52) H[6] H[5] H3(30.6%eimpaneled) 26 CGHS RKP-V(D57) H[6] H[5] H3(30.6%einpaneled) 27 CGHS RKP-Vl(D69) H[6] H[5] H3(30.6%empahieled) 28 CGHS Sadiq Nagar (D63) H[6] H[5] H3(30.6%- - 29 CGHS Sarita Vihar (D90) 3« CGHS Sriniwaspuri (D37) ' 31 CGHS Vasant Kunj (D91): H[6] H[5] H3(30i6%einpaiieled) 32 CGHS Vasant Vihar (D96) H[6] H3(30.6%- 3: CGHSZila Sainik Board(D104) H[4] H3(30.6%einpaneled) 3^ M&G Hospital H[6] H[5] Hi(33.03%-..s.'-:::-:• CGHS North Zone. Name of bidder BATRA MEDICOS (28.8%) KUNAL MEDICOS (27.27%) DINESH MEDICOS (27.37%) POSITION OF CURRENT Total Number of CGHS Weilness Centres bid for Bid for by Batra,Kunaland Dinesb Medicos 1 0 0 SJVo. Schedule Title 1 Ashok Vihar(D62) 2 Delhi Cantt(D[3]) 3 Dev Nagar(D19) mo 4 Dwarka -9(D36A) 5 Dwarka-23(DlOO) 6 Hari Nagar(D48) 7 Inder Puri(j)55) 8 Janak Puri-1(D61) 9 Janak Puri-2(D74)
28 Vikaspuri(D17A) ' ■ ''' CGHS*East Zone' ' ' BATRA MEDICOS (28.8%) KUNAL MEDICOS (27.27%) DINESH MEDICOS (2737%) POSITION OF CURRENT BIDDER Total Number ofCGHS Wellness Centres bid for Bid for by Batra,Kunal and Dinesh Medicos 6 0 0 S.N
0. Scheduie Title 1 GAG Building(028)
21 Yamuna Vibar(D84) mo approved as HI) > • CGHS Central Zone -. ~ ~ BATRA MEDICOS (28.8%) KUNAL MEDICOS (27.27%) DINESH MEDICOS (27.37%) POSITION OF CURRENT BIDDER Total Number ofCGHS Wellness Centres bid for Bid for by Batra,Kunal and Dinesb Medicos 1 4 0 S.No. Schedule Title Aliganj(D[9]) mo H[3] (33.03%-'■empaneled),• Lodbi Road(D-10) mo H[3] (35;!%empaneled) - Pragati Vibar(D-83) H[4] H3(30.6i%empaneled) - ■ 4 Dr. Z.H Road(D-44)