Maheshwari Pharmaceuticals (India) Limited v. Government of NCT of Delhi

1. The present petitions have been placed before this Bench on being received on transfer from another Bench. With the consent of the parties, the matters are taken up for final disposal today itself on account of the urgency expressed by the learned counsel for the parties.

2. Except for specific facts relating to the number of medicines for which each of the petitioners have stated that they were declared as L[1], the remaining facts of the cases being more or less similar and the grievance raised being common, the facts of W.P.(C) 11547/2019 are being noticed for deciding all the three petitions.

3. The petitioner, Multani Pharmaceuticals Ltd. has prayed for quashing/setting aside of an office order dated 15.10.2019, passed by the respondent/Directorate of Ayush, GNCTD (for short, „Ayush‟) whereunder, the Earnest Money Deposit (for short, „EMD‟) to the tune of Rs.40 lakhs deposited by it, at the time of submitting the bid, has been forfeited on the ground of violating the terms and conditions of the tender document and for submitting a false declaration. The petitioner has also prayed for directions to be issued to the respondent/Ayush to take the tender dated 10.05.2019, to its logical conclusion by permitting it to supply the items in which it has been declared as L[1] on 28.06.2019. In the alternate, the petitioner has prayed for refund of the bank guarantee for a sum of Rs.40 lakhs, deposited at the time of participating in the tender dated 10.05.2019 and for quashing of the subsequent tender dated 22.10.2019.

4. The factual matrix first. On 20.09.2018, the respondent/Ayush had floated a tender for a total value purchase of Rs.33 crores for procurement of Ayurvedic and Unani Medicine (Classical and Proprietary) from various Ayurvedic and Unani drug manufacturers, for making supplies to its dispensaries. The EMD was fixed at Rs.66 lakhs. Aggrieved by the fact that the online bids submitted by some bidders could not be retrieved by the respondent/Ayush from its website, a writ petition was filed by M/s. AIMIL Pharmaceutical India Limited (W.P.(C)11277/2018), which was allowed by the Division Bench vide order dated 22.10.2018 and the respondent/Ayush was directed to process the bid of the petitioner therein after taking the assistance of the NIT to extract the documents that were lodged in its website. The order dated 22.10.2018, was impugned by the respondent/Ayush before the Supreme Court in an SLP, which was dismissed. Thereafter, the respondent/Ayush approached the High Court by filing a miscellaneous application in W.P.(C) 11277/2018, seeking leave to withdraw/cancel the entire tender process and proceed to re-tender, in accordance with law. The said application was allowed vide order dated 11.04.2019.

5. Pursuant thereto, the respondent/Ayush issued a fresh tender on 10.05.2019, the total value whereof was reduced from Rs.33 crores to Rs.20 crores, for Ayurvedic (Classical and Proprietary) forms of medicine. This time, the EMD was reduced from Rs.66 lakhs to Rs.40 lakhs.

6. We are informed that the respondent/Ayush received 44 bids in response to the tender dated 10.05.2019, including those of the three petitioners herein. After opening the technical bids on 26.06.2019 and conducting an evaluation, the respondent/Ayush published an Item-wise Comparative Statement and declared the petitioner in W.P.(C) 11547/2019 as L[1] for 47 items.

7. Mr. Ramesh Singh, learned counsel for the respondent/Ayush states that in July, 2019, a complaint was received by the Department regarding some misrepresentations made by the petitioner on the prices quoted. After verifying the facts, the respondent/Ayush issued a Memorandum dated 08.08.2019 to the petitioner directing it to submit its valid rate contract with other government/semi-government/autonomous institutions, including approved rates of Ayurvedic medicines that had been quoted by it in the subject tender and the validity of the rate contract. In response to the said Memorandum, the petitioner submitted a reply on 12.08.2019, stating inter alia that it was the approved vendors of ESIC, J&K and it enclosed with the said letter, the rate contracts in respect of the aforesaid Departments. This was followed by issuance of a Show-cause Notice dated 23.08.2019 by the respondent/Ayush, which is reproduced hereinbelow for ready reference:- “SHOW CAUSE NOTICE WHEREAS, M/s Multani Pharmaceuticals Ltd. submitted its bid for the e-tender ID No. 2019 DAYUS 172253 1 of Directorate of AYUSH, GNCTD for procurement of Ayurvedic medicines. WHEREAS, M/s Multani Pharmaceuticals Ltd. had submitted a declaration along with tender documents to the effect that “The rates quoted are not higher than quoted for any other Government Institution” in Annexure B(on Rs.100/- nonjudicial stamp paper) WHEREAS, on scrutiny of Rate Contract of “Employee’s State Insurance Corporation (ESIC)”, it has been found that M/s Multani Pharmaceuticals Ltd., has quoted higher rates than ESIC for some items, in the above said tender of Directorate of AYUSH, which is a violation of above mentioned condition. Now, therefore, M/s Multani Pharmaceuticals Ltd. is directed to explain the reason for such violation and as to why a punitive action should not be initiated against it. The reply should reach this office within seven days of receipt of this notice failing which appropriate action, as per rules/guidelines, shall be initiated against the firm.”

8. The petitioner replied to the afore-said Show-cause Notice dated 23.08.2019, vide letter dated 29.08.2019, stating inter alia that it had quoted for over 100 medicines and there is only one medicine of the same pack (Punchguna Taila) in which the quoted rate was higher than the rate contract of ESIC, which was sought to be explained as a „typographical error‟. It was also stated by the petitioner that it was willing to supply the captioned medicine at the same rate as was mentioned in the rate contract of the ESIC.

9. Not satisfied by the aforesaid reply, the respondent issued the impugned order dated 15.10.2019, stating as follows: - “OFFICE ORDER M/s Multani Pharmaceuticals Ltd. submitted its bid for the etender ID No. 2019_DAYUS_172253_1 of Directorate of AYUSH, GNCTD, for the procurement of Ayurvedic medicines. The said firm had submitted a declaration along with tender documents to the effect that “That rate quoted are not higher than quoted for any other Government Institution” in Annexure-

10. The impugned order is assailed by Mr. Arvind Nigam, learned Senior Advocate on the ground that a mere error on the part of the petitioner in quoting a higher price for one item in the entire list of 100 medicines, wherein it has been declared as L[1], cannot be a ground to forfeit the EMD, which even otherwise, as per the terms and conditions of the tender documents, could not have been forfeited by the respondent/Ayush except in specific circumstances spelt out in para- 2 of the said tender. Learned senior counsel further states that the action of the respondent/Ayush of cancelling the tender dated 10.05.2019 and floating a new tender for the same items, is against public policy and an attempt to award the contract to a selective handful.

11. Lastly, it is argued that there has been no concealment/ misrepresentation on the part of the petitioner as sought to be claimed by the respondent/Ayush since the rates quoted by it for the ESIC was for medicines that were to be supplied in the year 2016, whereas para 24 of the tender document containing the “Fall Clause” stipulates that “the rate quoted by the bidders should not be higher than the rate quoted by him to other Government Institutions/agencies within the Government during the contract period”. It is contended that since no contract has been awarded by the respondent/Ayush to the petitioner, there is no question of any misrepresentation. It is further submitted on behalf of the petitioner that the rates quoted by it to the respondent/Ayush were in any case not higher than the rates quoted by it to the ESIC for the reason that the rates quoted to the ESIC were in the year 2016, whereas the contract was awarded to the petitioner only in the year 2018, which is valid from 10.05.2018 to 09.05.2020. Therefore, the said rates quoted in the year 2016, cannot be considered as the current rates which can bind down the petitioner during the contract period, as contemplated under para 24 of the present tender.

12. The aforesaid submissions are however strongly refuted by Mr. Ramesh Singh, learned Standing Counsel (Civil), GNCTD and Mr. Narayan, learned Additional Standing Counsel, both of whom assert that the respondent/Ayush was entitled to forfeit the EMD of the petitioner as it had violated the Code of Integrity, declared in para-26 of the tender document, particularly, Clause-(h) thereof, which states as follows: “Making false declaration or providing false information for participation in a tender process or to secure a contract.”

13. It is submitted that the format of the undertaking required to be furnished by the bidders in terms of para 5(iv)4 of the tender document specifically required them to declare that the rates quoted by them were not higher than those quoted for any other government institution. Learned counsel state that what the petitioner has now sought to explain regarding the year in which it had quoted the rates to ESIC, ought to have been furnished in the undertaking filed by it but, for reasons best known to it, that was not done. Instead, an ambiguous statement was made by the petitioner in the undertaking dated 30.05.2019, “that the rates quoted are not higher than quoted for any other government institution”. Learned counsel for the respondent/Ayush further state that the petitioner has tried to improve upon its case in the writ petition inasmuch as no such plea was taken by it in the reply dated 29.08.2019, submitted in response to the Show Cause Notice dated 23.08.2019 wherein, the error in the rate of Panchaguna Taila was sought to be described as a typographical error. Insofar as the other medicine mentioned in the Item-wise Comparative Statement is concerned i.e., Smritisagar Ras, that was quoted at a much higher rate, it is submitted that the petitioner has not even sought to explain why such a high rate was quoted by it.

14. There is weight in the submission made by learned counsel for the respondent/Ayush that the petitioner should have been candid enough to state in the undertaking, that the rates quoted by it were not higher than the rates quoted for any other government institution in the year in question, more so, when it was well aware of the fact that it may have submitted quotations to ESIC in 2016 but the contract was executed with the ESIC in May, 2018. This would have obviated the scope of any doubt or suspicion. It is also a matter of record that in its reply to this Show Cause Notice, the petitioner had sought to explain that the rate quoted by it for Punchguna Taila was an error, but it remained dead silent on the rate that it had quoted for Smritisagar Ras, which is more than double of what it had quoted to the ESIC.