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V.D. Gyani, S Jha J.
Parenteral Drugs (India) Pvt. ...
vs
State Of Madhya Pradesh And Ors.
DECIDED ON : 5 April, 1990
CONSTITUTIONAL LAW - ARTICLE 14 - EQUALITY BEFORE LAW - ARBITRARY AND DISCRIMINATORY ACTION - GOVERNMENT POLICY - PURCHASE OF INTRAVENOUS FLUIDS (I.V. FLUIDS) - MONOPOLY - PUBLIC INTEREST - QUALITY OF DRUGS - SUPPRESSION OF MATERIAL FACTS - FALSE AFFIDAVIT - PROSECUTION.
Fact of the Case:
The petitioner, a manufacturer of drugs, challenged the governmental order directing purchases of intravenous fluids for hospitals attached to Medical Colleges from respondent No. 4-M/s. Hindusthan Antibiotic Ltd., Pimpri, alone, and the State action in issuing such orders to M/s. Hindusthan Antibiotic Ltd., as wholly arbitrary, discriminatory, grossly violative of the right of equality, guaranteed by Article 14 of the Constitution of India.
Finding of the Court:
The Court held that the State Government's action in creating a monopoly in favor of respondent No. 4 for the supply of I.V. fluids was arbitrary, discriminatory, and violative of Article 14 of the Constitution. The Court found that the State Government had suppressed material facts, sworn false affidavits, and knowingly concealed vital facts. The Court also found that the I.V. fluids supplied by respondent No. 4 were of poor quality and that the State Government had failed to take action against the supplier despite numerous reports of fungus and foreign particles being found in the I.V. fluids.
Issues: 1. Whether the State Government's action in creating a monopoly in favor of respondent No. 4 for the supply of I.V. fluids was arbitrary, discriminatory, and violative of Article 14 of the Constitution? 2. Whether the State Government had suppressed material facts, sworn false affidavits, and knowingly concealed vital facts? 3. Whether the I.V. fluids supplied by respondent No. 4 were of poor quality? 4. Whether the State Government had failed to take action against the supplier despite numerous reports of fungus and foreign particles being found in the I.V. fluids?
Ratio Decidendi: 1. The State Government's action in creating a monopoly in favor of respondent No. 4 for the supply of I.V. fluids was arbitrary, discriminatory, and violative of Article 14 of the Constitution because: a. The State Government had no unfettered absolute discretion in the matter of conferring contractual benefits on a particular individual, firm, or company. b. The State Government had failed to satisfy the test of reasonableness and public interest in awarding the contract to respondent No. 4. c. The State Government had suppressed material facts, sworn false affidavits, and knowingly concealed vital facts. 2. The State Government had suppressed material facts, sworn false affidavits, and knowingly concealed vital facts by: a. Failing to disclose the decisions taken at a meeting called by the Health Minister of the State for the purpose of discussing the purchase of I.V. fluids. b. Failing to disclose that respondent No. 4 was manufacturing I.V. fluids on a loan-license basis, which was in violation of the State Government's policy. c. Failing to disclose that numerous reports of fungus and foreign particles being found in I.V. fluids supplied by respondent No. 4. 3. The I.V. fluids supplied by respondent No. 4 were of poor quality because: a. Numerous reports of fungus and foreign particles being found in I.V. fluids supplied by respondent No. 4. b. The State Government had failed to take action against the supplier despite the numerous reports of poor quality. 4. The State Government had failed to take action against the supplier despite numerous reports of fungus and foreign particles being found in the I.V. fluids because: a. The State Government had directed the return of the I.V. fluids to the supplier for replacement instead of prosecuting the supplier. b. The State Government had extended the time for supply of I.V. fluids to respondent No. 4 despite the numerous reports of poor quality.
Final Decision: The Court allowed the petition and quashed the impugned order. The Court also directed the respondents to follow the Government decisions taken at the meeting held on 22-5-1989 in making purchases of I.V. Fluids. The Court further directed the State to prosecute the respondent No. 4, its agents and/or servants concerned in accordance with law for supplying sub-standard I.V. Fluids. The Court also directed the State to investigate the matter and proceed against all those involved and concerned in accordance with law.
V.D. Gyani, J.
1. By this petition under Article 226 of the Constitution of India, the petitioners-Company engaged in manufacture and supply of intravenous fluids to various hospitals, including hospitals attached to Medical Colleges, challenges the governmental order dated 17-7-1989 [filed by the petitioner as Annexure-R/3(4)], thereby directing purchases of intravenous fluids for hospitals atttached to Medical Colleges from respondent No. 4-M/s. Hindusthan Antibiotic Ltd., Pimpri, alone, and the State action in issuing such orders to M/s. Hindusthan Antibiotic Ltd., as wholly arbitrary, discriminatory, grossly violative of the right of equality, guaranteed by Article 14 of the Constitution of India.
2. Before proceeding any further, it would be desirable to deal with an objection in the nature of a preliminary objection as raised by the respondent No. 4 as regards maintainability of the petition itself for alleged violation of executive instructions, issued by the State Government. In this connection suffice it to note that the objection itself is based on a distorted view of the petition. It is too late in the day for the State, much less for the beneficiary of the largesses conferred, to raise such an objection, more than a decade after the Supreme Court judgments in Ramana v. I. A. Authority of India, AIR 1979 SC 1628 and Kasturilal v. State of J. and K., AIR 1979 SC 1636, which hold that even administrative actions of the State must be infused with reason and fairness. It is significant to note here that it is not the State which is raising the objection, but the beneficiary of the contract for supply of I. V. Fluids. Where violations of fundamental rights guaranteed by Article 14 of the Constitution of India are complained of, as in the present case, it is open to the Court to go into the question. The objection raised by the respondent No. 4 is devoid of any substance and is accordingly rejected.
3. Facts admitted, not disputed and indisputable, leading to the presentation of this petition may now be briefly stated : It is an admitted fact that the petitioners are a regular manufacturer of drugs. The respondents 1 to 3 purchased drugs, medicines and other like materials, including intravenous fluids for consumption in various Government Hospitals, in the State, including hospitals attached to various Medical Colleges in the State. The State Government, in order to give protection to Small Scale Industries in the State, issued a circular dated 9th November 1976 (Annexure-P/2) granting 10% price-preference to S. S. I. Units in the State. It was preceded by another order (Annexure-P/3) dated 12-12-1967. It is also admitted by the respondents 1 to 3 that order dated 13-8-1984 (Annexure-P/4) lays down the policy of the State Government in the matter of purchase of drugs. What is disputed about is the interpretation put by the petitioners. According to the petitioners, by this order, Annexure-4, such drugs as are manufactured by Government of India Undertakings could be purchased if the rates were favourable to the State Government. Annexure-P/4 further lays down that so far as I. V. Fluids were concerned, they were to be purchased from S. S. I. Units in the State of Madhya Pradesh on rate-contract basis.
4. The respondents 1 to 3 on the other hand have submitted that this policy was modified by subsequent order dated 7-5-1989 (Annexure-R-3 IV) under which I. V. Fluids for Medical College Hospitals, were ordered to be purchased from respondent No. 4 only. It is also an admitted fact that prior to the order dated 7-5-1989 (Annexure R-3 IV), the respondents had purchased I. V. Fluids from local manufacturers, including the petitioners.
5. It is the respondents' case that the policy had to be modified and a decision taken to purchase I. V. Fluids from respondent No. 4 only because of certain complaints against I. V. Fluids purchased from local manufacturers. The petitioners on the other hand have contended that the respondents
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