Haffkine Bio-Pharmaceutical Corporation Ltd., Government of Maharashtra Undertaking through Manager vs M/S. Nirlac Chemicals through its Manager & Ors.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 9836 OF 2017 [@ SPECIAL LEAVE PETITION (C) NO(S). 34628 OF 2016]

Haffkine Bio-Pharmaceutical Corporation Ltd., a Government of Maharashtra Undertaking Through Manager ... Appellant(s)

Versus

M/s. Nirlac Chemicals Through its Manager & Ors. ... Respondent(s)

CIVIL APPEAL NO(S). 9839 OF 2017 [@ SPECIAL LEAVE PETITION (C) NO(S). 35185 OF 2016]

Bionet-Asia Co. Ltd., a Company Organized And Existing under the Laws of Thailand Through its Authorised Signatory ... Appellant(s)

Versus

M/s. Nirlac Chemicals Through its Signature Not Verified

Manager & Ors. Digitally signed by MEENAKSHI KOHLI ... Respondent(s) Date: 2017.07.28 17:11:30 IST Reason: 2

CIVIL APPEAL NO(S). 9875 OF 2017 [@ SPECIAL LEAVE PETITION (C) NO(S).19489 OF 2017] [@ SPECIAL LEAVE PETITION (C)....CC NO(S).9316 OF 2017]

M/s. Nirlac Chemicals Through its Manager & Anr. ... Appellant(s)

Versus

Haffkine Bio-Pharmaceutical Corporation Ltd., a Government of Maharashtra Undertaking Through Manager & Ors. ... Respondent(s)

JUDGMENT

Deepak Gupta, J.

Delay condoned in Special Leave Petition (C)....CC

No(s).9316 of 2017.

2. Leave granted.

3. All the appeals are being disposed of by this common

judgment.

4. M/s. Haffkine Bio-Pharmaceutical Corporation Ltd.

(hereinafter referred to as “Haffkine”) is a Government of

Maharashtra undertaking. It is engaged in the business of

manufacture of vaccines and other pharmaceuticals and

biological products. One of the main businesses of Haffkine is 3

the manufacture of polio vaccines. It is the admitted case of the

parties that oral polio vaccine is manufactured by formulation of

various bulk drugs including Monovalent Bulk of Poliomyelitis

Type 1 (Oral) Sabin Strain and Monovalent Bulk of Poliomyelitis

Type 3 (Oral) Sabin Strain respectively. These drugs are

combined and formulated along with other materials by Haffkine

and oral polio vaccine is prepared. M/s. Haffkine issued a tender

notice on 20.01.2016, for supply of bulk drugs including

Monovalent Bulk of Poliomyelitis Type 1 (Oral) Sabin Strain and

Monovalent Bulk of Poliomyelitis Type 3 (Oral) Sabin Strain. The

bids were to be submitted in two parts. The first part was the

techno-commercial bid and the second part was price bid. The

techno-commercial bid was to be opened on 10.02.2016 at 4.30

p.m. and the date for opening of the price bid was to be fixed

thereafter. It is pertinent to mention that the tender provided

that the polio bulk drug should be manufactured by M/s. P.T.

Biofarma, Indonesia, a World Health Organisation (WHO)

prequalified bulk manufacturer, for the supply of Bivalent Oral

Polio Vaccine Bulk (bOPV).

5. M/s. Nirlac Chemicals (hereinafter referred to as ‘Nirlac’) is a

registered partnership firm, which is an Indian partner of M/s. 4

Universal Exim FZE, an enterprise organised and existing under

the laws of United Arab Emirates (UAE). This firm had been

supplying the bulk drugs to Haffkine as a distributer of M/s. P.T.

Biofarma, Indonesia for the last 15 years. On 25.01.2016, Nirlac

sent a letter to Haffkine protesting against the issuance of tender.

However, they took part in the tender. The date of opening of

tender was changed to 12.02.2016.

On 12.02.2016, the representatives of Haffkine were present

in the office of Haffkine and according to Nirlac though the bid of

Universal Exim FZE represented by Nirlac was opened, the

meeting was adjourned after lunch without opening the tender of

M/s. Bionet Asia Co. Ltd., Thailand (for short ‘Bionet’). According

to Nirlac, the tender of Bionet was not opened in their presence.

However, later in the evening, they were shown a comparative

chart of analysis wherein it was mentioned that the bid of Nirlac

had not been found to be technically qualified. Nirlac

immediately sent objections on the same day and one of the main

grounds taken was that the bid of Bionet had not been opened in

their presence. It was also complained that the tender

conditions had been tailor-made to suit the requirements of

Bionet. Nirlac also sent two other representations to the Minister 5

of Food, Civil Supplies, Consumer Protection, Food and Drug

Administration, Government of Maharashtra. According to

Nirlac, they were informed about the rejection of their bid only on

22.06.2016 and thereafter they filed writ petition in the High

Court of Bombay challenging the rejection of their bid and the

award of the tender in favour of Bionet.

6. The main ground raised was that the Central Vigilance

Commission (‘CVC’ for short) guidelines had been violated in as

much as the tender of Bionet was not opened in the presence of

the representatives of Nirlac who were present. The High Court

allowed the writ petition. It not only held that Haffkine had

violated the CVC guidelines but also came to the conclusion that

Nirlac complied with all the tender conditions and, therefore, the

tender of Nirlac had been wrongly rejected. The tender dated

20.01.2016 was quashed, letter dated 22.06.2016 was also

quashed and the contract/tender awarded in favour of Bionet was

set aside. However, since the procurement of the bulk drug was

necessary in public interest, the High Court permitted Haffkine to

purchase the bulk drug from Bionet till a fresh tender was

finalised. The State Government, through the Department of 6

Public Health, was directed to float a fresh tender within a period

of eight weeks.

7. Aggrieved by this judgment, Haffkine and Bionet have filed

petitions challenging the setting aside of the tender issued by

Haffkine as also setting aside of the contract entered into by

Haffkine in favour of Bionet. Nirlac has also filed an appeal in

which they have claimed that since they were found eligible, the

tender should have been awarded to Nirlac instead of directing

that a fresh tender be floated.

8. We have heard learned senior counsel/learned counsel for

the parties. At the outset, it may be mentioned that it has not

been disputed before us that the CVC guidelines are applicable.

We may refer to the relevant CVC guidelines referred to by the

High Court which read as follows:

“12.1 In some organisations, the tenders are not opened in the presence of the bidders’ representatives on the plea of maintaining absolute secrecy. Such a practice of not opening tenders in public and of not disclosing the rates quoted by all bidders to other firms is against the sanctity of the tendering system, and is a non-transparent method of handling tenders. The possibility of tampering and interpolation of offers, after opening of tenders, in such cases cannot be ruled out. Some organisations do not even maintain tender opening registers. The rates at times are not quoted both in figures and words, cuttings/overwritings are not attested by bidders.

7 The opening of tenders in presence of the bidders’ representatives needs to be scrupulously followed. While opening the tenders it needs to be ensured that each page of tender, particularly the price and important terms and conditions should be encircled and initialled with the date. Any cutting/overwriting should be encircled and initialled in red ink by the tender opening officer/committee. The tender opening officer/committee should also prepare an ‘on the spot statement’ giving details of the quotations received and other particulars like the prices, taxes/duties, EMD, any rebates etc. as read out during the opening of tenders. A proper tender opening register in a printed format should be maintained containing information viz. date of opening including extensions, if any, names and signatures of all the persons present to witness the tender opening which should include the bidders representatives also.

12.2 In cases involving the two bid system, it has been noticed that after opening of the technical bids, the price bids, which are to be opened subsequently, are kept as loose envelopes. In such cases, the possibility of tampering of bids prior to tender opening cannot be ruled out.

In order to make the system fool-proof, it needs to be ensured that the tender opening officer/committee should sign on the envelope containing the price bids and the due date of opening of price bids should be clearly mentioned on the envelopes and should again be placed in the tender box.”

9. A bare reading of these guidelines clearly shows that the

tender must be opened in the presence of the bidders or

representatives of the bidders who are present at the time when

the bid is opened. Shri Gourab Banerji, learned senior counsel

appearing for Haffkine urged that, in fact, the bid of Bionet was

opened in the presence of the representatives of Nirlac. According 8

to him, the documents attached with the bid were not shown but

only the bid was shown. The High Court, after going through the

entire record, came to the conclusion that the bid of Bionet had

not been opened in the presence of the representatives of Nirlac.

In fact, this was admitted by Haffkine before the High Court. In

the impugned judgment, the High Court has recorded:

“Be that as it may, at about 1.00 p.m. (on 12th February, 2016) the Petitioners’ techno-commercial bid was opened and the Petitioners were informed that they would have to return after the lunch break. What is important to note and which fact is now admitted before us, is that the bid submitted by Respondent No.3 was not opened by Respondent No. 1 in the presence of the Petitioners and the Petitioners were asked to return after the lunch break without opening the tender of Respondent No. 3.”

10. Even before us no record could be produced to show that

the bid of Bionet was opened in the presence of the

representatives of Nirlac. In this view of the matter, we are clearly

of the opinion that the entire tender opening process is vitiated

since the CVC guidelines have not been followed. We may also

add that opening of the tender without showing the documents is

also meaningless. When a technical bid is opened, it is the right

of the rival bidders to see whether the documents attached by a

bidder meet the technical requirements or not. This can only be

done if the documents attached to the bid are shown to the other 9

side. According to us, the violation of CVC guidelines is itself

sufficient to vitiate the entire tender process. We, therefore, find

no merit in the appeals filed by Haffkine and Bionet.

11. Now we come to the appeal of Nirlac. The case of Nirlac is

that till 22.06.2016 they were not aware of the rejection of their

bid. This assertion is patently false. The High Court has, on

perusal of the record, found a comparative chart prepared on

12.02.2016 itself, which is reproduced below: 10

This chart was admittedly shown to the representatives of Nirlac

on the evening of 12.02.2016 itself. This is also apparent from

the facts that on 12.02.2016, Nirlac sent a letter to Haffkine

protesting against the rejection of their bid. In this letter they

have mentioned that at about 5.45 p.m., a comparative analysis

sheet was shown to the representatives of Nirlac. They have

listed out several conditions of the tender bid. With regard to 7

points, they have objected that they had given all the requisite

information and their bid had been wrongly rejected. They have

given detailed reasons for the same. Therefore, it cannot be said

that Nirlac was not aware of the fact that their bid had not been

found to be technically qualified. Nirlac sent letter dated

16.02.2016 to the Minister of Food and Civil Supply, Government

of Maharashtra, followed by another letter dated 24.02.2016.

Thereafter, Nirlac kept silent till letter dated 22.06.2016 was

issued whereby a communication was sent to them that their bid

was found to be technically deficient and then they filed writ

petition. It may be true that Haffkine was remiss in not replying

to the letter dated 12.02.2016 but Nirlac never followed up after 11

24.02.2016. They raised the matter only with the Minister but

did not deem it fit to approach the Court.

12. Mr. Dushyant Dave, learned senior counsel and Mr.

Prashant Bhushan, learned counsel, appearing for Nirlac have

urged that entire process of tender by Haffkine was fraudulent

and Nirlac should be compensated for the loss suffered by it. A

party can only claim restitution when its bid is technically

qualified and wrongly rejected. According to us, the High Court

erred in holding that Nirlac satisfied all the tender conditions. We

need not go into the other aspects in detail but we may refer to

condition ‘j’ of the tender notice. The same is reproduced as

follows:

“j) Should also be able to generate business for the Corporation, minimum 70 million doses.”

13. It has been submitted by Nirlac that clause ‘j’ is meaningless

and this clause does not contemplate any buy back agreement.

As far as this clause is concerned Nirlac in their tender have

mentioned as follows:

12

j) Should also be We can supply bOPV Bulk able to generate quantity 70 million doses as business for the required in the tender Corporation documents, however same minimum 70 can be increased subject to million doses. availability of stocks at the time of receipt of your additional requirements.

14. According to Nirlac, condition ‘j’ could only mean that

sufficient bulk quantity of oral vaccine should be supplied for

manufacture of 70 million doses of oral polio vaccine. The High

Court has accepted this submission. We are clearly of the view

that this is not the correct interpretation of condition ‘j’. This

condition clearly postulates that the bidder should be able to

generate business for Haffkine for sale of minimum 70 million

doses. It may be correct that there is no mention of any buy back

arrangement but it is apparent that Haffkine wanted that the

person supplying the bulk drug should also generate business for

sale of 70 million doses of the finished product. This is the only

interpretation which can be given to condition ‘j’. Here we may

refer to the letter sent by Nirlac on 12.02.2016 itself wherein with

respect to this condition it has mentioned as follows:

“6) Supply of minimum 70 million doses: Please refer to page No. 2 of covering letter point (j) under which we have agreed to supply 70 million doses of bOPV Bulk as per your tender requirement which can be increased at the time of receipt of your additional requirements subject to availability of stocks with us.

13 However, we have not commented on generating business for the corporation of minimum 70 million doses as the same is not related to the supply of bOPV Bulk Type 1 and Type 3 for the current Tender.”

15. It is clear that they understood that the business had to be

generated but according to them, the said condition was not

related to the supply of bulk drug.

16. It has been urged by Mr. Banerji, learned senior counsel

that Haffkine has about 550 employees and at the time of floating

of tender it had virtually no orders. Therefore, it wanted that the

bulk supplier should be able to give some commitment with

regard to repurchase of the finished products, that is, oral polio

vaccine. Therefore, this condition was incorporated and since

Nirlac did not fulfil this condition, its tender was not found to be

technically qualified. We find merit in this submission. It is for

the party issuing a tender to decide what conditions should be

incorporated in the tender. The party floating a tender is the best

judge of its own requirements and there is nothing wrong if

Haffkine wanted that the successful tenderer, who supplied the

raw material, should take responsibility to sell or generate

business for sale of some portion of the finished product. 14

17. We may add that many other allegations and counter

allegations have been made but we do not want to enter into

those because, according to us, the issuance of tender stood

vitiated due to violation of the CVC guidelines and Nirlac was not

qualified because it did not even satisfy condition ‘j’.

18. From the above discussion it is obvious that the tender was

wrongly awarded to Bionet. However, we are clearly of the view

that the tender could not have been awarded to Nirlac and as

such, we find no merit in the appeal of Nirlac.

19. At the same time, we feel that the manner in which the

tender has been awarded by Haffkine in favour of Bionet was not

proper and therefore, we must mould the relief accordingly. Bulk

polio drug is required to manufacture polio vaccine, which is

essential for the health of the children. It is for this reason that

the High Court permitted Haffkine to take supplies from Bionet

till fresh tender is awarded. Before us Haffkine has stated that it

was to procure bulk drug from Bionet to produce 600 million

doses. Supplies have been made for about 540 million doses.

According to the affidavit filed by Haffkine, it has orders for about

53 million doses of finished vaccines. As per the contract entered 15

into between Haffkine and Bionet, Bionet was to buy back 70

million doses out of which 4 million doses have already been

supplied to them. Mr. Harin P. Raval, learned senior counsel

appearing for Bionet stated before us that a confirmed order has

been placed for supply of remaining 66 million doses. Therefore,

the total number of doses for which orders are pending with

Haffkine amount to 119 million doses, which can be rounded off

to 120 million doses.

20. We feel that the interest of justice will be met if the bulk

supply of drugs including Monovalent Bulk of Poliomyelitis Type 1

(Oral) Sabin Strain and Monovalent Bulk of Poliomyelitis Type 3

(Oral) Sabin Strain is made by Nirlac as per the price quoted by

Nirlac for the manufacture of 120 million doses of oral polio

vaccine. Therefore, Haffkine is directed to place sufficient

quantity of order for supply of bulk supply of drugs including

Monovalent Bulk of Poliomyelitis Type 1 (Oral) Sabin Strain and

Monovalent Bulk of Poliomyelitis Type 3 (Oral) Sabin Strain for

manufacture of 120 million doses on the aforesaid terms.

Haffkine is restrained from purchasing any further bulk drug

from Bionet pursuant to the contract in dispute. It is also 16

directed that Haffkine must supply and Bionet must purchase 66

million doses of oral vaccine as per the confirmed order.

21. We are of the view that the High Court erred in directing

that the fresh tender should be floated by the Government of

Maharashtra. Haffkine may be a Government of Maharashtra

undertaking but it is a separate entity. Haffkine is therefore

permitted to float fresh tender for supply of bulk drugs including

Monovalent Bulk of Poliomyelitis Type 1 (Oral) Sabin Strain and

Monovalent Bulk of Poliomyelitis Type 3 (Oral) Sabin Strain.

However, it is made clear that the tender to be now floated,

should be floated as e-tender to avoid any allegations of the type

made in the appeals. We, further direct that the terms of the

tender should be clear and unambiguous setting out the period of

tender and approximate quantities of both drugs required. If

Haffkine wants any buy back or business generation clause, it

must clearly mention the rate at which finished product, i.e. the

oral polio vaccine must be purchased by the successful tenderer

from Haffkine.

17

The appeals are disposed of in the aforesaid terms. Pending

application(s), if any, also stand(s) disposed of.

....................................J. (MADAN B. LOKUR)

....................................J. (DEEPAK GUPTA)

New Delhi July 27, 2017