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2010 Supreme(Ori) 681
IN THE HIGH COURT OF ORISSA
B.P. Das, B.N. Mahapatra, JJ.
UTKAL PHARMACEUTICALS MANUFACTURERS ASSOCIATION AND ANOTHER - APPELLANT
Versus
STATE OF ORISSA AND OTHERS - RESPONDENT
Writ Petition (C ) No. 18496 of 2009
Decided On : 20-12-2010
The main legal point established in the judgment is the importance of fairness and non-arbitrariness in government actions, emphasizing constitutional principles and legal certainty.
Headnote:
Tender Conditions - Pharmaceutical Industry - Societies Registration Act, 1860 - Industrial Policy Resolution, 2007 - Orissa Micro, Small and Medium Enterprise Development Policy, 2009 - Clause 2.1 of the Tender Conditions - Societies Registration Act, 1860, Industrial Policy Resolution, 2007, Orissa Micro, Small and Medium Enterprise Development Policy, 2009
Fact of the Case:
The Utkal Pharmaceuticals Manufacturers Association challenged the eligibility criteria in a tender notice, arguing that the minimum annual turnover requirement of Rs. 10 crores for pharmaceutical products was illegal, arbitrary, and discriminatory. They sought to relax the turnover requirement to Rs. 10 lakhs to allow local small scale industries to participate in the tender.
Finding of the Court:
The court found that the eligibility criteria were unreasonable and contrary to the Public Policy declared by the State Govt. to ensure the survival of small scale industries and MSMEs. The court also noted that the benefits intended to be given by the government policies were being denied to the Petitioner association. The court concluded that the action of keeping the SSI units/MSMEs out of the tender process was done with an intention to keep away the units of the Petitioner-Association from availing the benefits of the relevant policies.
Issues: The main issue was whether the eligibility criteria in the tender notice were arbitrary and contrary to the Public Policy declared by the State Govt. to ensure the survival of small scale industries and MSMEs.
Ratio Decidendi: The court held that the eligibility criteria were unreasonable and intended to snatch away the incentives given under the relevant policies. The court also emphasized the importance of fairness and non-arbitrariness in government actions, citing constitutional principles and legal certainty.
Final Decision: The court allowed the writ petition and quashed the impugned eligibility condition, directing the State Govt. to accept the recommendations made by the Industries Department to relax the minimum annual turnover to Rs. 10 lakhs for the SSI units and MSMEs.
JUDGMENT :
B.P. Das, J. - This writ petition has been filed by Utkal Pharmaceuticals Manufacturers Association, Petitioner No. 1, which is an association of twenty small scale pharmaceutical industries and registered under the Societies Registration Act, 1860, and its Joint Secretary (Executive), Petitioner No. 2, assailing Clause 2.1 of the Tender Conditions in respect of Tender Call Notice No. SDMU/2009-2010-DMC-11-009 issued by O. P. No. 2-the Director of Health Services, State Drug Management Unit, Orissa, vide letter No. 11128 dated 29.10.2009 under Annexure-9, fixing Rs. 10 crores or more as the annual turnover of the principal manufacturing units/the tendering firms for pharmaceutical products of each year of last three financial years, as being illegal, arbitrary, discriminatory and contrary to the Industrial Policy Resolution, 2007 (IPR, 2007) as well as the Orissa Micro, Small and Medium Enterprise Development Policy, 2009 (shortly called 'the MSME Policy 2009'), which has been declared under the notification dated 17.2.2009 published in the Orissa Gazette on 9.3.2009, vide Annexure-6. The Petitioners have prayed to relax/reduce/modify the minimum annual turnover fixed in Clause 2.1 of the Tender Conditions to Rs. 10 lakhs with a direction to the opposite parties to allow the local SSI units/MSME units to participate in the tender pursuant to the Tender Call Notice, Annexure-9.
2. O.P. No. 2-the Director of Health Services, State Drug Management Unit, (DHS in short), by the aforesaid Tender Call Notice, Annexure-9, invited tenders in sealed cover from reputed manufacturing firms having valid manufacturing licence and GMP (Good Manufacturing Practice) as per a revised schedule, i.e. Schedule-M, for supply of drugs and medical consumables for a period of one year from the date of approval of tender on rate contract basis.
According to the Petitioners, the State Govt. in order to ensure that store items for Government Departments and agencies under its control are procured from industries located within the State and further those local units get price preference for the aforesaid purpose and simultaneously to ensure that local products are cost-effective meeting overall quality requirement for competitiveness, efforts are to be made to distribute purchase orders equitably among the participating industries. It is stated that to prevent monopoly, the rate contract system in Orissa was introduced at the behest of the erstwhile Health Department of the Govt. of Orissa. The rate contract system for drugs of Small Scale Pharmaceutical Industries has been in force since last twenty years. The rate contract system is now within the domain of the Directorate of Export Promotion and Marketing (DEPM). Keeping in view the above objectives, certain items of drugs and medical consumables are earmarked by the State Govt. for purchase from approved local Small Scale Industrial Units (S.S.I. Units) and those products to be purchased only from the DEPM approved SSI Units taking their past performance and capacity of production into consideration. For this, the local SSI units were to have (a) valid drug manufacturing licence and (b) valid Export Promotion and Marketing (EPM) rate contract. The basic features of rate contract system for drugs and medicines formulated by the State Govt. are: (i) The prices of the drugs and medicines under the rate contract are to be finalized by the Drugs Committee of EPM in which the Health Secretary shall be the Chairman on cost plus basis and the rates so finalized by the DEPM Drugs Committee shall be subject to audit by the Comptroller and Auditor General (CAG); (ii) The rate contract system is a unique system which shall provide market support to MSMEs (Mirco, Small and Medium Enterprises) as per the provisions of the Industrial Policy Resolution (IPR) and (iii) The rate contract in respect of specific store items not in the exclusive list and manufactured by the local small scale industrial units is t
