The State Government's policy decisions and orders directing purchase of drugs/pharmaceuticals from specific approved sources, excluding private manufacturers, were violative of Article 14 of the Constitution, as they created a monopoly in favor of the approved sources and discriminated against private manufacturers.

SUKHDEV SINGH KANG, J.

1. An issue in this writ petition under Arts.226 and 227 of the Constitution of India is the legality and validity of the policy decisions of the Punjab Government dt. Oct. 29, 1984 and Feb. 12, 1987 and the consequential orders dated Aug. 5, 1985 and Mar. 2, 1987, issued by the Director, Health and Family Welfare, Punjab (respondent 21 to the Civil Surgeons/Medical superintendents and Principals of Medical Colleges in the State of Punjab, directing them to purchase drugs/ pharmaceuticals from respondents 4 to 9. A broad brush factual backdrop will help delineate the contours of the forensic controversy.

2. Punjab Drugs Manufacturers Association (the petitioner in this case) is an association of drugs manufacturers of Punjab Members of the petitioner Association used to supply drugs/medicines to Punjab Government at rates approved after inviting tenders from time to time.

3. The Punjab Government, on Oct. 29, 1984, took a policy decision (Copy Annexure- R-I to the written statement of respondents 1 and 2) that :

"(i) All the six approved sources, namely, (a) I.D.P.L., (b) H. A.L., (c) Smith Stanistreet, (d) Bengal Chemicals and Pharmaceutical Ltd., (e) Bengal Immunity Co. Ltd. and (f) M. S.D., must be treated equally, and those medicines, which are manufactured by them must be purchased.

(ii) Purchases shall be made from the cheapest firm and orders must be placed direct with the approved sources:

(iii) So long as a medicine is available with the approved sources, it should be purchased from them only and not from firms on rate contract and vice versa;

(iv) Rate contract should not be arranged/entertained in respect of medicines, which are available from approved sources."

Indenting Officers were requested to make purchases strictly in accordance with the store purchase rules and the policy framed by the Government, Any lapse would be viewed strictly.

4 In pursuance of this decision of the Government, the Director of Health and Family Welfare, Punjab, respondent 2, vide his order dt. Aug. 5, 1985 (Copy Annexure-P2 to the writ petition) directed the Indenting Officers to ensure that medicines on the price list of any of the approved sources be not purchased from rate contract firms.

5. In supersession of the orders dt. Oct. 29, 1984 (Annexure-R-I), the Punjab Government vide orders dt. Feb. 12, 1987 (Annexure-R-III) laid down the following policy for purchase of drugs/medicines for the State of Punjab :-

"(i) Limited tenders will be invited from all the approved sources for the supply of drugs/formulations to the State of Punjab;

(ii) xx xx xx xx

(iii) If one approved source cannot meet with the total requirements, then the orders are placed at the same price with the other sources or at the rates quoted by them, whichever is lower.

(iv) The policy will apply only in respect of drugs/formulations manufactured by the concerned approved source and that no trading will be allowed. It will also be ensured that the approved sources do not merely supply the drugs/formulations but actually manufacture the same."

A copy of this policy decision (Annexure-R III) was forwarded by the Secretary to Government, Punjab, Department of Health and Family Welfare, to the Director, Health Services, Punjab, with a direction that he would invite limited tenders for drugs/ formulations required by the Department from all the approved sources, and that the purchases were to be made strictly in accordance with the abovesaid policy. Copies of the aforesaid policy decision of the Government were also addressed to all the approved sources, namely.

(i) Hotels;

(ii) Restaurants;

(iii) Shops;

(iv) Road Motor Transport establishment;

(v) Cinemas including preview theatres; and

(vi) Newspaper establishments as defined in S.2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955).

The aforesaid undertakings had been declared by the State Government as approved sources for supp