Indian Drugs & Pharmaceutical Ltd vs Famy Care & Ors

Indian Drugs & Pharmaceutical Ltd. ... Appellant

Versus

Famy Care & Ors. ... Respondents

JUDGMENT

V.S. SIRPURKAR, J.

1. Leave granted.

2. In this appeal, the appellant Indian Drugs & Pharmaceutical Ltd. (IDPL)

challenges the judgment of Delhi High Court whereby the Writ Petition filed by

respondent, Famy Care and another was allowed. The High Court passed the

following operative order while allowing the writ petition:

"We quash the Rate Contract No. S-140013/4/2008-OP/100 dated 2nd December, 2008 awarded by respondent No.1 in favour of IDPL, respondent No.2 herein, to the extent that it awards 175 lakhs cycles of other OCP brands apart from Mala-D in the abovestated quantity of 25 lakhs cycles. The writ petition is partly allowed in the aforesaid terms."

3. The respondent, Famy Care Company is engaged in the business of

manufacture and supply of family planning products including Oral Contraceptives

Pills (hereinafter "OCPs"). They have been supplying these OCPs to the Union of

India. Respondent Nos. 1 and 2 distribute these OCPs under the family welfare programmes by Union of India (respondent No.3) free of cost and/or at

substantially subsidized rates. It was claimed in the petition that for OCPs in India,

almost 85-90% of the market is only through family welfare programmes of

respondent No.3. Respondent No.3 used to procure the OCPs through open

tender where all companies who fulfilled the eligibility criteria were permitted to

participate. Tender was invited for the supply of OCPs on 14.03.2005 and a rate

contract was awarded to various parties including Famy Care Ltd. on 18.10.2005,

initially for the period of two years which was subsequently extended for another

year, till 17.10.2008.

4. One open tender was floated on 18.09.2008 by the Union of India

(respondent No.3) and for that, notice inviting tender was published in various

newspapers. Following were the requirements:

S. No. Items Unit Tentative Quantify required during 2008-2009 1. Condoms Million Pcs. 663 2. Oral Contraceptive Lakh Cycles 275 Pills 3. IUD Cu-T 380 A Lakh Pcs. 25 4. Emergency Lakh Packs of 5.5 Contraceptive Pills 2 Pills

5. The date of sale of tender inquiry document was from 24.09.2008 to

05.11.2008. The respondent companies herein were desirous of participating in

the tender. On being unable to download the tender inquiry document, respondent

Nos.1 and 2 wrote letters to the Union of India (respondent No.3 herein) on

29.09.2008 requesting respondent No. 3 to issue the tender inquiry documents.

However, it is claimed in the Writ Petition that the Union of India refused to accept

the pay orders and instead stated that the tender documents had not been issued by the Department and the same were likely to be issued shortly.

6. Again, letters were written on 22.10.2008 and 23.10.2008 by respondent

Nos.1 and 2, respectively, requesting the Union of India to issue tender documents

to enable them to participate in the tender for the OCPs. The original writ

petitioners, respondent companies herein also contacted the concerned officers of

the Union of India and were informed that the date of sale of tender inquiry

documents had been extended and they would be informed of the finalization of

the date. In the meantime, M/s. IDPL (appellant herein) pointed out to the Union of

India and claimed that the Government had introduced a Purchase Preference

Policy for 102 medicines exclusively from Pharma Central Public Sector

Enterprises (CPSEs) and their subsidiaries. Reliance was made on letter dated

07.08.2006 issued by the Ministry of Chemicals & Fertilizers, Department of

Chemicals & Petrochemicals, bearing No. 50013/1/2006-SO(PI-IV). It was pointed

out that the OCPs were listed at serial No. 51 of that list under the said Purchase

Preference Policy and, therefore, the purchases should be made exclusively from

Pharma CPSEs. On this, corrigendum dated 04.11.2008 came to be effected by

the Union of India to the tender notice for OCPs to the effect that the tender

enquiry documents for OCPs would not be opened on 05.11.2008 as was

promised. The respondent companies herein contacted the Union of India again

on 03.12.2008, when they were informed that the rate contract of the entire

quantity of 275 lakh cycles of OCPs had already been placed by the respondent

No. 3 on appellant IDPL. In short, the whole contract went in favour of the

appellant. This was challenged before the High Court by way of a Writ Petition

filed by Famy Care Ltd. and Phaarmasia Ltd., the respondents herein. It was

urged before the High Court that the impugned rate contract dated 02.12.2008 was awarded in flagrant violation of the tender notice dated 18.09.2008 and was also

contrary to the Purchase Preference Policy. The High Court, by its impugned

judgment, has allowed the Writ Petition and quashed the said rate contract dated

02.12.2008 insofar as it awards 175 lakh cycles of the other brands of OCPs apart

from Mala D to the extent of 25 lakh cycles.

7. In its judgment, the High Court quoted the order dated 26.08.2005 passed

by the Joint Secretary to the Government of India as also the Office Memorandum

dated 07.08.2006. In the first referred order, the Government of India had made a

proposal to make M/s Hindustan Latex Ltd. (HLL) the captive unit of the Ministry of

Health and Family Welfare and expressed that the Department would utilizes 75

per cent installed capacity of HLL or 75 per cent of the annual procurement of the

Ministry from HLL, whichever is lower for condoms. In so far as the OCPs are

concerned, the reservation for HLL was fixed at 55 per cent. It had also been

decided that the order for the private sector could be realized only after the

finalization of the rate contract through tendering process.

8. In the second referred office Memorandum dated 07.08.2006, a policy

was formulated that the Government had decided to grant purchase preference

exclusively to Pharma CPSEs and their subsidiaries in respect of 102 medicines

manufactured by them as per the list. Thus, in all, 102 products were covered in

the Purchase Preference Policy. This list was eventually to be reviewed or revised

by the Department of Chemicals and Petro-Chemicals as and when required,

taking care not to include any item reserved for SSI units. The entry at serial

No.51 in this list is as under:

"51) Oral Contraceptive Pills (Mala `D' and Mala `N')"

(Emphasis supplied by us)

9. The High Court noted that in case of contraceptives other than

reservation in favour of HLL was required to be 55 per cent and the balance of 45

per cent was to be opened for private sector and could be released only after

finalization of the rate contract through tendering process. The High Court further

noted that the Purchase Preference Policy was to be applicable to the purchases

of maximum 102 medicines, which was to be valid for a period of five years up to

06.08.2011. The High Court also noted that, before it, the original

petitioners/present respondents did not challenge the validity of the Purchase

Preference Policy. The only contention raised was that in so far as the OCPs were

concerned, the Purchase Preference Policy set out only specifically Mala D and

Mala N in the category of OCPs as the medicines covered under the said Policy.

In other words, the other branded contraceptive pills apart from Mala D and Mala N

were not covered under the purchase preference policy in favour of Pharma

CPSEs and their subsidiaries and as such the Union of India could not have placed

an order for all other branded OCPs on the appellant herein, IDPL under the said

Purchase Preference Policy. The High Court also noted the defence raised by the

Union of India that the entry at serial No.51 was only illustrative and not exhaustive

and in fact the said Purchase Preference Policy in favour of CPSEs extended to all

the OCPs. The High Court further noted the stand taken by the Union of India that

the Purchase Preference Policy ousted all private players from selling medicines

therein to the Union of India. The High Court rejected the stand taken by the Union

of India. It went on the plain language of entry at serial No.51 in the list and held

that it was clear from the language of entry that it was only in respect of Mala D

and Mala N that the Purchase Preference Policy was applicable and in fact the Policy was formulated by the Government only in respect of these two brands in

mind in respect of OCPs and it was not possible to countenance the submission

that the specific mention of Mala D and Mala N was only illustrative. It was on this

basis that the High Court came to the conclusion that the entry related only to Mala

D and Mala N and it did not cover the other brands of OCPs, the purchase of which

was bound to be effected by the Union of India through tendering process which

was the earlier policy.

10. In that view, the High Court further approved of the Purchase Preference

Policy and held that the orders could be placed on private sector, once the

preference in favour of Pharma CPSEs had been exhausted.

11. This judgment was severely commented upon by Shri L.N. Rao, Learned

Senior Counsel appearing on behalf of the appellant herein. We were taken

through the whole facts including the initial orders and the Purchase Preference

Policy. The basic contention raised was that it was for the Union of India to decide

as to from whom it would purchase the OCPs and it made quite clear in the list of

102 items that those 102 items would be purchased directly without any tendering

process. Therefore, the High Court should not have interfered with the policy

making exercise of the Union of India.

12. When we see the impugned judgment, it is clear that the policy of the

Union of India was not in question in any manner before the High Court. In fact,

even the writ petitioners before the High Court i.e. the respondents herein had

relied upon that policy and their only contention was that the policy should be

implemented in its true spirit. In that, the contention was that the bare reading of

entry at serial No.51 was clear that the Government had decided to purchase these products directly without any tendering process and had decided so only in case of

Mala D and Mala N. There will be no question of finding fault with the policy nor

can it be argued that the policy was being tinkered with. The argument raised by

Shri Rao, Learned Senior Counsel and Shri Prag Tripathi, Learned ASG has to be

rejected. The basic question that fell for consideration was the interpretation of the

entry at serial No.51 and that is correctly decided.

13. The contention raised on behalf of Shri Rao as well as Shri Tripathi was

that the entry was only illustrative. To buttress this argument, it was tried to be

contended that the chemical formulation of Mala D and Mala N was identical with

the other brands and, therefore, mere mention of Mala D and Mala N did not make

any difference and the entry related to all the Oral Contraceptive Pills. The

argument is quite attractive, however, it lacks substance.

14. A simple question was asked during the debate as to whether if a

customer went to a medical shop and demanded some other brand of Oral

Contraceptive Pills, could Mala D and Mala N, as the case may be, given to that

customer legitimately. This is obviously answered in the negative. It was also

found that even the price of Mala D and Mala N differed from the other Oral

Contraceptive Pills. But even more than that, the basic argument on behalf of the

appellant is that the entry was only illustrative. We do not see any merit in this

argument. The whole world knows and presumably the Union of India also knew

what an Oral Contraceptive Pill is. The Union of India, therefore, in branding the

particular entry at serial No. 51 could have simply stated Oral Contraceptive Pills.

That would have been the end of the matter and that would have been the

complete answer to the original writ petitioner's claim before the High Court.

However, if the list specifically mentions Mala D and Mala N, there was no question of jumping back and explaining that it was only an illustrative entry.

15. We have scanned the whole list very carefully and we do not find any

such illustrations which would lead to some other meaning to the entry. Wherever

an illustration is required, it has been specifically given. The explanations are also

to be found in that list. The entries at serial No.12, fluconazole and at serial No.2,

Ampicillin IP so also the entries at serial Nos. 13, 72 and 78 are clear enough to

suggest that wherever the authorities wanted to be specific, they have been very

specific. However, in so far as the present entry is concerned, it is specific and

tends to be restrictive to Mala D and Mala N. In short, the controversy here is quite

simple and that is the true and correct meaning of entry at serial No.51. In our

opinion, the High Court has committed no mistake in giving the correct explanation

of the entry. We are not prepared to accept the argument that the entry in the

bracket was illustrative, as, in our opinion, there was no necessity to give any

illustrations for the general and commonly well understood words `Oral

Contraceptive Pills'.

16. Learned Counsel, in support of their argument, further argued that entry

at serial No. 50 was relating to a generic medicine and did not refer to any branded

product. We were also taken to the position prior to the introduction of this entry.

The entry then read was Nishchint Emergency Contraceptive Pills Livonorgestrel.

It was argued that Nishchint was an Oral Contraceptive Pill. However, it was a pill

to be taken after the sexual intercourse, as opposed to the type of Oral

Contraceptive Pills in categories similar to Mala D and Mala N, which are to be

used in one complete cycle for efficacy.

17. This argument does not impress us. There was no necessity on the part of the Union of India to explain or make illustration of OCPs because the whole

world knows what an OCP is. Once a specific brand name was included, it was

obvious that it would be only the Mala D and Mala N which would be covered under

the entry.

18. It was further tried to be suggested that where two views are possible, the

view of the policy maker should be adopted. For this purpose, reliance was made

on Secretary, Ministry of Chemicals & Fertilizers Government of India v.

M/s. Cipla Ltd. & Ors. [2003 (7) SCC 1]. We have absolutely no quarrel with the

proposition laid down by this Court in the aforementioned judgment. However, in

this case, we do not think that two views could be possible. The mention of Mala D

and Mala N in the bracket was specific, and, therefore, the Oral Contraceptive Pills

only of that brand were obviously included in the list.

19. It was further suggested that the argument based on the notings on the

file on behalf of the present respondent cannot be accepted. We do not want to go

into that question, since we have already held that on merits the entry cannot mean

anything else and it has to be restricted only to Mala D and Mala N.

20. In view of what we have held above, we do not find any merits in the

appeal. We, therefore, confirm the judgment of the High Court. The appeal is,

thus, dismissed but with no order as to costs.

..............................................J. (V.S. SIRPURKAR)

.............................................J. (DEEPAK VERMA)

New Delhi;

April 30, 2010