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2023 (1) TMI 685 - SC - Indian LawsInterpretation of statute - paragraph 4(vi)(b) of the Operating Guidelines of the National AYSUH Mission (NAM) - Constitutional Validity of proceedings under Article 136 of the Constitution - purchase of Ayurvedic drugs solely from IMPCL without inviting tenders - requirement in view of paragraph 4(vi)(b) of the Operating Guidelines of the National AYSUH Mission, that the State of Uttar Pradesh must purchase Ayurvedic medicines by adopting a transparent process after inviting tenders - violation of the operating guidelines - no involvement of State largesse and no disposal of State property. HELD THAT - Paragraph 4(vi)(b) does not stipulate that IMPCL will have a higher standing as compared to other manufacturing units of the State Governments and cooperatives mentioned in the paragraph. The position of the Ministry of AYUSH as evidenced by the 2019 notification is that 50 percent of the grant-in-aid shall be used to procure medicines from any of the establishments specified in the paragraph. This conclusion is substantiated by the use of the phrase or in paragraph 4(vi)(b) - IMPCL or from PSUs , pharmacies under State Governments and co-operatives. Thus, on a plain reading of paragraph 4(vi)(b), it is evident that all the units mentioned in the paragraph are placed at an equal footing. The provision does not create a gradation amongst the manufacturing units mentioned in the paragraph. Nor does it evince an intent to create a monopoly. Validity of award of government contract to IMPCL - HELD THAT - There is no material on record to support the submission that IMPCL is the only establishment among the establishments mentioned in paragraph 4(vi)(a) that manufacture good quality Ayurvedic drugs. In fact, paragraph 4(vi)(b) states that 50 percent of the grant-in-aid shall be used to purchase medicines from the units mentioned in the paragraph keeping in view the need for ensuring quality of AYUSH drugs and medicines. This would indicate that the need for ensuring quality is subserved by all the sources mentioned there. Besides IMPCL, which is an establishment of the Government of India, paragraph 4(vi)(b) includes other establishments of the State Governments or co-operative societies - The contention that IMPCL does not have any commercial interest because it is an establishment developed by the Government of India is then equally applicable to other establishments prescribed in paragraph 4(vi)(b). Inviting tenders from the entities mentioned in paragraph 4(vi)(b) is the most transparent and non-arbitrary method of allocation that can be undertaken. Hence, the appellant must henceforth purchase Ayurvedic medicines only through a free and transparent procedure such as tenders. The appellant may deviate from this rule and procure medicines by nomination only if exceptional circumstances exist. In such a situation, the appellant must demonstrate the existence of exceptional circumstances on the basis of cogent material. The intervention applications seek to enlarge the scope of the Special Leave Petition. The issue before this Court falls squarely on the interpretation of paragraph 4(vi)(b). However, the intervention applicant has prayed that in accordance with the policies of the State and the Central Government, a minimum percent of Ayurvedic drugs must be procured from MSMEs under paragraph 4(vi)(c). This is beyond the scope of the instant Special Leave Petition. SLP dismissed.
Issues Involved:
1. State Largesse: conflation of power and duty 2. Judicial review of government contracts: extent and ambit 3. Tender: a constitutional requirement? 4. Interpretation of Paragraph 4(vi)(b) of the Operational Guidelines 5. Validity of award of Government contract to IMPCL Detailed Analysis: 1. State Largesse: conflation of power and duty The judgment discusses the role of the welfare State in aiding the realization of socio-economic rights recognized by the Constitution. It emphasizes that government actions aimed at ensuring the well-being of citizens should not be perceived as 'largesse' but rather as a duty entrusted by the Constitution to ensure the well-being of citizens. The use of the term 'largesse' belittles the sanctity of the social contract between the people and the State. 2. Judicial review of government contracts: extent and ambit The judgment reviews the extent of judicial scrutiny in government contracts. It notes that while the government has discretion in awarding contracts, this discretion is not unfettered and must conform to Article 14 of the Constitution, ensuring fairness and non-arbitrariness. The judgment cites various precedents where the Supreme Court has held that government contracts must be awarded through a transparent process, typically involving public tenders, unless exceptional circumstances justify deviation. 3. Tender: a constitutional requirement? The judgment elaborates that while inviting tenders is a preferred method for awarding government contracts to ensure transparency and fairness, it is not a constitutional requirement. However, any deviation from this method must be justified on grounds of non-arbitrariness and fairness. The judgment cites previous cases where the Supreme Court has upheld the necessity of transparency in government contracts and the limited circumstances under which private negotiations may be permissible. 4. Interpretation of Paragraph 4(vi)(b) of the Operational Guidelines The judgment interprets Paragraph 4(vi)(b) of the Operational Guidelines, which stipulates that at least 50% of the grant-in-aid must be used to procure medicines from IMPCL or other PSUs, State Government pharmacies, and cooperatives. The judgment clarifies that the use of the term 'or' places all these entities on an equal footing, and there is no gradation or preference for IMPCL over other entities. The judgment also notes that previous circulars and notifications have evolved to allow procurement from multiple sources, not just IMPCL. 5. Validity of award of Government contract to IMPCL The judgment examines the validity of awarding the contract to IMPCL without inviting tenders. It notes that the justification provided by the appellant, citing the unique challenges in the procurement of Ayurvedic medicines, is not substantiated by cogent material. The judgment concludes that the action of awarding the contract solely to IMPCL is arbitrary and violative of Article 14. It mandates that henceforth, the procurement of Ayurvedic medicines must be through a transparent process such as tenders, unless exceptional circumstances justify deviation. Conclusion: The appeals against the judgment of the High Court are dismissed. The procurement of Ayurvedic medicines must be conducted through a transparent and non-arbitrary process, typically involving tenders. The applications for intervention are also dismissed as they seek to enlarge the scope of the Special Leave Petition beyond the interpretation of Paragraph 4(vi)(b).
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