M/S INDIAN MEDICINES PHARMACEUTICALS CORPORATION LTD versus KERALA AYURVEDIC CO OPERATIVE SOCIETY LTD. & ORS. on 3 January 2023

[2023] 1 S.C.R. 473

M/S INDIAN MEDICINES PHARMACEUTICALSCORPORATION LTD

v.

KERALA AYURVEDIC CO OPERATIVE SOCIETY LTD.& ORS.

(Civil Appeal No 6693 of 2022)

JANUARY 03, 2023

[DR. DHANANJAYA Y CHANDRACHUD ANDHIMA KOHLI, JJ.]

Constitution of India: Art.14 – Government Contracts –Transparent and non-arbitrary method to be adopted by theGovernment – Decision of the government regarding purchase ofthe Ayurvedic Drugs only from the IMPCL (the appellant) –Challenged on the ground that selection of IMPCL by thegovernment is arbitrary and illegal by virtue of Art. 14 – HighCourt held that by virtue of Para 4(vi)(b) of the OperationalGuidelines, the government was to invite supply of the drugs fromvarious pharmacies and PSU listed therein so as to fostercompetition and quality of medicines and the practice adopted bythe government to purchase Ayurvedic drugs only from IMPCL isillegal – Aggrieved IMPCL filed instant appeal – Held: GovernmentContracts involve expenditure out of the public exchequer, therefore,the moneys expended must not be spent arbitrarily – The State doesnot have absolute discretion while spending public money and,therefore, all government actions including government contractsawarded by the State must be tested on the touchstone of Art.14 –The government can deviate from the route of tenders or publicauction for the grant of contracts, but such deviation must not bediscriminatory or arbitrary – Deviation from the tender route hasto be justified and such a justification must comply with therequirements of Art. 14 – Administrative Law.

Constitution of India: “Social Welfare” – State Largesse –Largesse is term used to describe a “generous donation” – WelfareState aims at realising socio-economic rights which are recognised

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Aby the Constitution – Social Welfare Benefits provided by the State,which is a constitutional mandate is commonly understood in thelanguage of largesse and therefore terming all actions of governmentas government largesse results in doctrinal misconception –Therefore government action targeted for the well-being of citizensBcannot be termed as largesse as use of such terminology belittlesthe sanctity of the social contract that the ‘people of India’ enteredinto with the State to protect and safeguard their interests.

Constitution of India: Government Contracts – JudicialReview – Extent and Ambit – The scope of judicial review in mattersCof government contract is limited – But the government does nothave unlimited discretion in granting the State Largesse and it mustact in fairness – It is a settled proposition of law under Constitutionthat the government cannot act arbitrarily while dealing with thepublic, whether it is while giving jobs or entering into contracts.D

Constitution of India: Tender – Constitutional Requirement –Inviting tenders and conducting public auctions are considered tobe preferred methods of allocation for two reasons – Firstlyprocurement can be made at the best price and secondly, allocationis through a transparent process – However, if the purpose ofEallocation by the State is not revenue maximization, the State couldaward contracts through other methods, provided it is non-arbitraryand meets the requirements of Art.14.

Dismissing the appeals, the CourtF

HELD: 1. The welfare State plays a crucial role in aidingthe realisation of the socio-economic rights which are recognisedby the Constitution. Social welfare benefits provided by the Stateunder the rubric of its constitutional obligations are commonlyunderstood in the language of ‘largesse’, a term used to describeGa generous donation. Terming all actions of government, rangingfrom social security benefits, jobs, occupational licenses, contractsand use of public resources – as government largesse results indoctrinal misconceptions. The reason is that this conflates theState’s power with duty. The Constitution recognises the pursuit H

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of the well-being of citizens as a desirable goal. In doing this theConstitution entrusts the State with a duty to ensure the well-being of citizens. Government actions aimed at ensuring the well-being of citizens cannot be perceived through the lens of a‘largess’. The use of such terminology belittles the sanctity ofthe social contract that the ‘people of India’ entered into with theState to protect and safeguard their interests. [Para 11][485-G- H; 486-A-C]

Ramana Dayaram Shetty v. International AirportAuthority of India 1979 (3) SCC 489 : [1979] 3 SCR1014; Sterling Computers Ltd. v M/s M & PublicationsLimited, (1993) 1 SCC 445 : [1993] 1 SCR 81; JesperI. Slong v. State of Meghalaya (2004) 11 SCC 485;Association of Registration Plates v. Union of India(2005) 1 SCC 679:[2004] 6 Suppl. SCR 496; NewHorizons Limited v. Union of India (1995) 1 SCC 478 :[1994] 5 Suppl. SCR 310; Food Corporation of Indiav. M/s Kamdhenu Cattle Feed Industries (1993) 1 SCC71 : [1992] 2 Suppl. SCR 322 – relied on.

C.K Achuthan v. State of Kerala AIR 1959 SC 490 :[1959] 1 Suppl. SCR 787 – referred to.

2. Inviting tenders and conducting public auctions areconsidered to be preferred methods of allocation for two reasons:firstly procurement can be made at the best price; and secondly,allocation is through a transparent process. However, if thepurpose of allocation by the State is not revenue maximization,the State could award contracts through other methods, providedit is non-arbitrary and meets the requirements of Article 14.Government contracts involve expenditure out of the publicexchequer. Since they involve payment out of the publicexchequer, the moneys expended must not be spent arbitrarily.The State does not have absolute discretion while spending publicmoney. All government actions including government contractsawarded by the State must be tested on the touchstone of Article14. The following principles emerge from the discussion : (i)

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AGovernment action must be just, fair and reasonable and inaccordance with the principles of Article 14; and (ii) Whilegovernment can deviate from the route of tenders or publicauctions for the grant of contracts, the deviation must not bediscriminatory or arbitrary. The deviation from the tender routeBhas to be justified and such a justification must comply with therequirements of Article 14. [Paras 20, 21, 22][492-G-H; 493-A-C-E]

M/s Kasturi Lal Lakshmi Reddy v. State of Jammu andKashmir, (1980) 4 SCC 1:[1980] 3 SCR 1338;CSachidanand Pandey v. State of West Bengal 1987 (2)SCC 295 : [1987] 2 SCR 223; Haji T.M HassamRawther v. Kerala Financial Corporation (1988) 1 SCC166 : [1988] 1 SCR 1079; Centre for Public InterestLitigation v. Union of India (2012) 3 SCC 1 : [2012] 3DSCR 147;Natural Resources Allocation, in re SpecialReference No. 1 of 2012 (2012) 10 SCC 1 : [2012] 9SCR 311; Vallianur Iyarkkai Padukappu Maiyam v.Union of India (2009) 7 SCC 561 : [2009] 9 SCR 225;Nagar Nigam v. Al Farheem Meat Exporters (P) Ltd.E(2006) 13 SCC 382 : [2006] 10 Suppl. SCR 354 – reliedon.

3. There is no material on record to support the submissionthat IMPCL is the only establishment among the establishmentsmentioned in paragraph 4(vi)(a) that manufacture good qualityFAyurvedic drugs. In fact, paragraph 4(vi)(b) states that 50 percentof the grant-in-aid shall be used to purchase medicines from theunits mentioned in the paragraph “keeping in view the need forensuring quality of AYUSH drugs and medicines.” This wouldindicate that the need for ensuring quality is subserved by all theGsources mentioned there. Besides IMPCL, which is anestablishment 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 haveany commercial interest because it is an establishment developedHby the Government of India is then equally applicable to other

establishments prescribed in paragraph 4(vi)(b). The argumentthat the procurement of Ayurvedic drugs from IMPCL would fallwithin the exceptional circumstances (assurance of qualitymedicines) is erroneous. The submission of the appellant thatIMPCL is the sole producer of quality Ayurvedic medicines isbased on surmises and conjectures without any cogent materialto support the claim. In fact, the notification of 2 January 2019issued by the Ministry of AYUSH stipulates that 50 percent ofthe grant-in-aid has to be used to procure medicines from IMPCLor other Central/State PSUs’ or pharmacies under the State-Governments and co-operatives. It is open to the appellant toprocure medicines using any method other than tender, so longas it is not arbitrary. The claim of the appellant is that it deviatedfrom the rule of tender because IMPCL is the only establishmentthat produces quality medicines. However, there is no materialto substantiate the claim that IMPCL is the only establishmentwhich manufactures ‘quality’ medicines to the exclusion of otherestablishments mentioned in paragraph 4(vi)(b). The appellanthas been unable to discharge the burden placed on it by producingcogent material demonstrating that the procurement of medicinesthrough nomination is warranted because of the existence ofexceptional circumstances bearing on need for quality. The actionof the appellants of procuring medicines only from IMPCL to theexclusion of the other establishments mentioned in paragraph4(vi)(c) is arbitrary and violative of Article 14 of the Constitution.[Para 30][498-D-H; 499-A]

State of Tamil Nadu v. National South Indian RiverInterlinking Agriculturist Association Civil Appeal 6764of 2021; Caterpillar India Pvt. Ltd. v. Western CoalFields (2007) 11 SCC 32 : [2007] 7 SCR 251 – reliedon.

Case Law Reference

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ECIVIL APPELLATE JURISDICTION : Civil Appeal No.6693of 2022.

From the Judgment and Order dated 18.10.2019 of the High Courtof Judicature at Allahabad, Lucknow Bench at Lucknow in Writ PetitionNo.1364 of 2019.F

With

Civil Appeal No. 6694 of 2022.

Ms. Garima Prasad, AAG, Siddharth Bhatnagar, Sr. Adv., NareshGKaushik, Vardhman Kaushik , Manoj Joshi, Yogesh Yadav, VishnuShankar Jain, Kaleeswaram Raj, Ms. Thulasi K. Raj, Mrs. Anu K. Joy,Alim Anvar, Nishe Rajen Shonker, Siddhant Kohli, Ms. Suhasini Sen,Ms. Swarupama Chaturvedi, Udai Khanna, Anmol Chandan, GurmeetSingh Makker, Ms. Pallavi Pratap, Ms. Pracheta Kar, Nadeem Afroz,HAditya Sidhra, Advs. for the appearing parties.

M/S IMPCL v. KERALA AYURVEDIC CO OPERATIVE SOCIETY LTD.& ORS.

The Judgment of the Court was delivered byDR. DHANANJAYA Y CHANDRACHUD, CJI

This judgment has been divided into the following sectionsto facilitate analysis:

1. The first respondent, Kerala Ayurvedic Co-operative SocietyLimited, instituted proceedings before the Lucknow Bench of the HighCourt of Judicature at Allahabad under Article 226 of the Constitution tochallenge an order for the purchase of Ayurvedic medicines issued bythe State of Uttar Pradesh in favour of Indian Medicines PharmaceuticalCorporation Limited[1]. By a judgment dated 18 October 2019, a DivisionBench of the High Court allowed the petition and directed that the Stateof Uttar Pradesh must purchase Ayurvedic medicines by adopting atransparent process after inviting tenders.The State of Uttar Pradeshand IMPCL instituted proceedings under Article 136 of the Constitutionagainst the judgment of the High Court. The principle issue is whether,inview of paragraph 4(vi)(b) of the Operating Guidelines of the NationalAYSUH Mission[2], the appellant could have procured Ayurvedic drugssolely from IMPCL without inviting tenders.

1.0 Facts

2. In September 2014, the Department of AYUSH, Ministry ofHealth and Family Welfare, Government of India launched NAM,interalia,to promote the AYUSH medical system and provide cost-effective1"IMPCL”2"NAM”

*Ed. Note: Pagination is as per the original judgment.

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AAYUSH Services. Paragraph 3(ii) of the Operational Guidelines of NAMprovides that 75 percent of the admissible assistance will be provided asgrant-in-aid by the Central Government while the remaining 25 percentmust be met by the States, except in the North-Eastern States wherethe assistance by the Centre and the States shall be in the ratio of 90:10.

B3. Paragraph 4(vi) provides guidelines for the procurement ofAyurvedic medicines. Paragraph 4(vi)(b) states that ‘atleast’ 50 percentof the grant-in-aid must be used for procuring medicines from IMPCLor Public Sector Undertakings[3], pharmacies under State Governmentsand co-operatives. Paragraph 4(vi) of the Operational Guidelinesisextracted below:C“(vi) (a) Essential drugs and medicines required for implementationof the Mission will have to be procured from Essential Drugs List(EDL) for Ayurveda, Unani, Siddha and Homeopathy publishedby Department of AYUSH, Government of India.

(b) At least 50% of the Grant-in-aid provided should be used forDprocuring medicines from M/s Indian Medicine PharmaceuticalCorporation Limited (a Central Public Sector Undertaking) or fromPublic Sector undertaking, pharmacies under State Governmentsand Co-operatives manufacturing units and having GoodManufacturing Practices (GMP) compliance, keeping in view theEneed for ensuring quality of AYUSH drugs and medicines.(c ) The remaining Grant-in-aid provided under the Mission forpurchase of medicines may be use for procuring medicines asper Essential Drugs List (EDL) of Ayurveda, Unani, Siddha andHomeopathy published by Department of AYUSH, Governmentof India, from other Good Manufacturing Practices (GMP)Fcompliant units having valid manufacturing licenses.

(d) Essential non drug items like dressing items for first aid etc.may be provided out of the amount sanctioned for medicine/essential drugs under different components required for achievingthe desired objectives subject to a ceiling of five percent of theGtotal amount sanctioned for the purpose.”

4. The Uttar Pradesh State AYUSH Society has been purchasingAyurvedic medicines from a single vendor, namely IMPCL who is theappellant. The purchase order was given to IMPCL on a nomination H3"PSU”

basis without conducting a tendering process. The first respondent is aregistered co-operative society under the Kerala Co-operative SocietiesAct 1969. On 2 March 1985, the first respondent was granted a licenceto manufacture Ayurvedic and Unani drugs for sale under the provisionsof the Drugs and Cosmetics Rules 1945. On 31 August 2016, the firstrespondent was also certified as a Good Manufacturing Practice[4] unit.

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5. On 30 October 2017, the first respondent made a representationto the Principal Secretary to either place direct purchase orders for thesupply of Ayurvedic medicines to it according to the existing governmentpolicy or to initiate a tender process for the purchase. The first respondentstated that it is eligible to supply Ayurvedic medicines under NAM andthat as an MSME registered unit, it is eligible under the policy frameworkfor preferential purchase.A similar representation was made on 21December 2018 to the Mission Director.

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6. The first respondent instituted a petition under Article 226 ofthe Constitution apprehending thata purchase order for 2019-20 wasgoing to be issued to IMPCL. The first respondent challenged the purchaseorder in favour of IMPCL and sought a direction for the procurement ofAyurvedic medicines under the National AYUSH Mission Programmeby a tender process.

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7. The High Court held that the ‘practice adopted by therespondents, to purchase Ayurvedic drugs, only from IMPCL’ is illegal.The High Court held that under paragraph 4 of the Operational Guidelines,the appellant must invite tenders from prescribed establishments topurchase Ayurvedic medicines. The appellant was allowed to purchasedrugs from IMPCL to the extent of the payment already made since forthe year 2019-20,the purchase order for medicines to the extent of 50percent had already been given to IMPCL and a full payment of Rupees11 crores was made. The appellant was directed to invite tenders forcompetitive rates and quality of drugs for the remaining supplies. TheHigh Court held that:

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(i) Paragraph 4 of the Operational Guidelines provides the‘sources’ for the procurement of Ayurvedic drugs andGmedicines;

(ii) Paragraph 4(vi)(b) provides that 50 percent of the grant-in-aid shall be used to purchase Ayurvedic medicines from H

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IMPCL or other PSUs and pharmacies under the StateGovernments and cooperative societies;

(iii) Invitation from pharmacies and PSUs under the StateGovernments or cooperative societies will foster competitionon rates and quality of medicines; B

(iv) The Memorandum issued by the Government of India on 8May 2008 stipulates that in the absence of “fully developedPharmaceutical standards for Ayurvedic and Unanimedicines in the country, the Central Government HealthScheme Research Councils is/are not fully equipped toCensure that the purchased medicines are of right quality.”Paragraph 4(vi)(b) emphasises the quality of medicines.There is nothing on the record to show that IMPCL is theonly entity producing quality drugs;

(v) No comparison on the quality ofmedicines can be madeunless tenders are invited from IMPCL and other PSUDPharmacies under the State Governments and co-operativesocieties;and

(vi) Atleast 50 percent of the grant-in-aid forthe procurementof Ayurvedic medicines must be used only after tendersareEinvited amongst the establishments referred to in paragraph4(vi)(b) of the OperationalGuidelines. The remaining grant-in-aid, if any, shall be used to procure drugs in the mannerspecified in paragraph 4(vi)(c).

2.0 Submissions

F8. Mr Naresh Kaushik, counsel appearing for IMPCL urged thefollowing submissions:

(i) The Government of India holds 98.11 percent of the sharesof IMPCL and 1.89 percent of the shares are held by theGovernmentof Uttarakhand through Kumaon Mandal VikasGNigam Limited. IMPCL has been established to cater tothe needs of the Central Government Health Programs andfor ensuring the quality of AYUSH medicines;

(ii) Due to the unique organizational set-up of IMPCL, it ismost suited to supply quality medicines at an affordableHprice. The prices of the medicines manufactured by IMPCL

are vetted by the Union Ministry of Finance from time totime. The procurement of medicines from otherorganizations is alsoat the rates of IMPCL as these ratesare considered the best possible rates. Further, IMPCL isthe only government manufacturing company for Ayurvedicmedicines with its own certified drug testing laboratory;

(iii) On 16 July 1994, the Government of India issued an orderwhere it had resolved that Ayurvedic medicines cannot bepurchased through tenders because (a) there is a widevariation in the prices of raw materials required for makingdrugs and the cost of the drug will vary based on the qualityof the raw material used; and (b) it is not possible to testthe exact composition of drugs in terms of the raw materialsand their quality;

(iv) The Ministry of AYUSH, Government of India has onvarious occasions recommended purchasing Ayurvedicmedicines directly from IMPCL;

(v) Procurement may be through tender only where the stateproposes to dispose of property. Since in this case, there isno disposal of state property, the High Court should haveonly looked at the relevant material to determine whetheran oblique motive is involved in purchasing medicines fromIMPCL;

(vi) IMPCL is not a private enterprise. There is no scope formonopoly when the sale is not in an open market, wherethe prices of the medicines are vetted by the Departmentof Expenditure, Ministry of Finance, and the establishmentis managed by the officials of the Ministry of AYUSH;

(vii) Paragraph 4(vi)(b) of the Operational Guidelinesdistinguishes IMPCL from other PSUs, pharmacies underthe State Government, and cooperative societies by the useof the term “or”. Paragraph 4(vi)(b) emphasises ensuringthe quality of AYUSH drugs and medicines. The phrase‘atleast’ in paragraph 4(vi)(b) only provides a minimumbenchmark for procurement and does not prescribe an upperlimit; and A

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A(viii) A combined reading of paragraphs 4(vi)(b) and 4(vi)(c)elucidates that the states have the discretion to procuremedicines from IMPCL or any other PSUs, and pharmaciesunder the State Government and cooperatives. The budget,if any, that is remaining after purchasing medicines fromthe establishments mentioned in paragraph 4(vi)(b) may beButilized for purchasing medicines from other GMP-compliantestablishments.

9. Mr Kaleeswaram Raj, counsel appearing for the first respondenturged the following submissions:

C(i)Paragraph 4(vi) only depicts the establishments from whichthe medicines can be procured- i.e the whom question andnot the how question:

(a) Paragraph 4(vi)(b) of the Operational Guidelinesstipulates the establishments from whichat least 50percent of the medicines must be procured. Theusage of the term ‘or’ indicates that allestablishments mentioned in the paragraph are equallyeligible to supply medicines as much as IMPCL; and D

(b) While paragraph 4(vi)(b) does not stipulate that theEprocurement must be through a tender process, itdoes not mean that the process of tender cannot beread into the provision. If paragraph 4(vi)(b) isinterpreted to allow procurement from any of theestablishments mentioned without a tenderingprocess, the same interpretation would also beFapplicable to paragraph 4(vi)(c). Also, this would meanthat even for procurement from private entities, thereis no requirement of conducting a tender process.

(ii) The State of UP cannot arbitrarily prefer one of the eligibleentities for the procurement of medicines. All theGestablishments mentioned in paragraph 4(vi)(b) arerecognised to be on an equal footing. Therefore,procurement must be by a fair process in which all theeligible establishments are granted an opportunity to securethe procurement order; H

(iii) It is an established principle that state largesse must bedistributed by public auction save in exceptional situationshaving regard to the nature of thetrade or where noreasonable substitute exists. There are no exceptionalcircumstances in the instant case that warrant theprocurement of medicines only from IMPCL;and A

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(iv) The price of medicines procured from IMPCL is vetted bythe Department od Expenditure, Ministry of Financefor thelimited purpose of undertaking an audit. It is the NationalPharmaceutical Pricing Authority that approves the pricesof medicines. The Ministry of Finance does not have theCpower or the expertise to determine the prices of Ayurvedicmedicines.

3.0 Analysis

10. Paragraph 4(vi)(b) of the Operational Guidelines prescribesthat at least 50 percent of the grant-in-aid shall be used to procuremedicines from (i) IMPCL,or (ii) PSUs and pharmacies under the StateGovernments and cooperatives. The provision further indicatesthat toensure the quality of AYUSH drugs and medicines, the medicines mustbe manufactured in their manufacturing units which comply with GoodManufacturing Practices (GMP). Paragraph 4(vi)(c) states that theremaining grant-in-aid may be used for procuring medicines from otherGood Manufacturing Practices (GMP) compliant units having validmanufacturing licenses. The appellant had granted the contract for thepurchase of Ayurvedic medicines to IMPCL under paragraph 4(vi)(b)of the Operational Guidelines through nomination, thereby eliminatingthe other units mentioned in the paragraph. This action of the appellantis challenged as arbitrary and violative of Article 14. Before interpretingparagraph 4(vi)(b) to determine if the action of the appellant is permissibleunder the law, the law relating to the extent of judicial review ofgovernment contracts must be discussed.

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3.1 State Largesse: conflation of power and duty G

11. The welfare State plays a crucial role in aiding the realisationof the socio-economic rightswhich are recognised by the Constitution.Social welfare benefitsprovided by the State under the rubric of itsconstitutional obligations are commonly understood in the language of‘largesse’, a term used to describe a generous donation.Terming all actions H

Aof government, ranging from social security benefits, jobs, occupationallicenses, contracts and use of public resources – as government largesseresults in doctrinal misconceptions. The reason is that this conflates theState’s power with duty. The Constitution recognises the pursuit of thewell-being of citizens as a desirable goal. In doing this the Constitutionentrusts the State with a duty to ensure the well-being of citizens.BGovernment actions aimed at ensuring the well-being of citizens cannotbe perceived through the lens of a ‘largess’. The use of such terminologybe littles the sanctity of the social contract that the ‘people of India’entered into with the State to protect and safeguard their interests.

3.2 Judicial review of government contracts: extent andCambit

12. Paragraph 4(vi)(b) prescribes entities from which Ayurvedicmedicines may be procured. The paragraph does not prescribe the methodthrough which they may be procured. The appellant contends that thesince the method of procurement is not prescribed, it has the discretionDto purchase drugs through ‘nomination’. On the other hand, therespondent contends that merely because the Operational Guidelines donot prescribe the method of procurement, unbridled discretion cannot begiven to the executive to procuredrugs through ‘nomination’.

13. In the early 1950s’, judicial review of the process of concludingEcontracts by government was limited. The courts allowed the State duedeference on the ground of governmental policy. In C.K Achuthan v.State of Kerala[5], a Constitution Bench of this Court held that it is opento the Government ‘to choose a person to their liking, to fulfil contractswhich they wish to be performed.’ The Court observed that when oneFparty is chosen over another, the aggrieved party cannot claim theprotection of Article 14 since the government has the discretion to choosewith whom it will contract.

14. Over the years, this Court has applied the non-arbitrarinessstandard under Article 14 to test the validity of government action. InGRamana Dayaram Shetty v. International Airport Authority ofIndia[6], a three-Judge Bench of this Court observed that the governmentdoes not have unlimited discretion in granting State largesse and it must 5 AIR 1959 SC 490

61979( 3 )SCC 489; Also see Sterling Computers Ltd. v M/s M& Publications Limited,(1993) 1 SCC 445; Jesper I. Slong v. State of Meghalaya, (2004) 11 SCC 485; Also seeHAssociation of Registration Plates v. Union of India, (2005) 1 SCC 679

act in fairness.In New Horizons Limited v. Union of India[7], theDepartment of Telecommunications, invited sealed tenders for printing,binding, and supply of telephone directories. While determining the validityof the eligibility criteria prescribed for tenderers, the Court observedthat the State when entering into a contract does not stand on the samefooting as a private person. The Court held that the government cannotact arbitrarily while dealing with the public, whether it is while givingjobs or entering into contracts. The relevant observations are extractedbelow:

17. At the outset, we may indicate that in the matter of enteringinto a contract, the State does not stand on the same footing asa private person who is free to enter into a contract with anyperson he likes. The State, in exercise of its variousfunctions, is governed by the mandate of Article 14 ofthe Constitution which excludes arbitrariness in Stateaction and requires the State to act fairly and reasonably.The action of the State in the matter of award of a contracthas to satisfy this criterion. Moreover a contract wouldeither involve expenditure from the State exchequer oraugmentation of public revenue and consequently thediscretion in the matter of selection of the person foraward of the contract has to be exercised keeping inview the public interest involved in such selection. Thedecisions of this Court, therefore, insist that while dealing withthe public, whether by way of giving jobs or entering intocontracts or issuing quotas or licences or granting other formsof largesse, the Government cannot act arbitrarily at its sweetwill and like a private individual, deal with any person it pleases,but its action must be in conformity with the standards or normswhich are not arbitrary, irrational or irrelevant. It is, however,recognised that certain measure of “free play in the joints” isnecessary for an administrative body functioning in anadministrative sphere.”

(emphasis supplied)

15. In Food Corporation of India v. M/s Kamdhenu CattleFeed Industries[8], this Courtheld that ‘in the contractual sphere […]

7 (1995) 1 SCC 478

8 (1993) 1 SCC 71

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Athe State and all its instrumentalities have to conform to Article 14 of theConstitution.’ The respondent filed a writ petition before the High Courtchallenging the appellant’s refusal to accept the highest tender submittedby it for a stock of damaged rice. This Court held:

“7. In contractual sphere as in all other State actions, the StateBand all its instrumentalities have to conform to Article 14 of theConstitution of which non-arbitrariness is a significant facet. Thereis no unfettered discretion in public law: A public authoritypossesses powers only to use them for public good. This imposesthe duty to act fairly and to adopt a procedure which is ‘fairplay inaction’. Due observance of this obligation as a part of goodCadministration raises a reasonable or legitimate expectation in everycitizen to be treated fairly in his interaction with the State and itsinstrumentalities, with this element forming a necessary componentof the decision-making process in all State actions. To satisfy thisrequirement of non-arbitrariness in a State action, it is, therefore,Dnecessary to consider and give due weight to the reasonable orlegitimate expectations of the persons likely to be affected by thedecision or else that unfairness in the exercise of the power mayamount to an abuse or excess of power apart from affecting thebona fides of the decision in a given case. The decision so madewould be exposed to challenge on the ground of arbitrariness.ERule of law does not completely eliminate discretion in the exerciseof power, as it is unrealistic, but provides for control of its exerciseby judicial review.”

3.2.1 Tender: a constitutional requirement?

F16. This Court has consistently held that government contractsmust be awarded by a transparent process. The process of inviting tendersensures a level playing field for competing entities. While there may besituations which warrant a departure from the precept of inviting tendersor conducting public auctions,the departure must not be unreasonable ordiscriminatory.[9 ]In Centre for Public Interest Litigation v. Union ofGIndia[10] the ‘first-cum-first serve’ policy was held to be arbitrary whilealienating natural resources. However, the Court observed that though 9M/s Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir, (1980) 4 SCC 1;Sachidanand Pandey v. State of West Bengal, (1980) 4 SCC 1; Haji T.M HassamRawther v. Kerala Financial Corporation (1988) 1 SCC 166H10 (2012) 3 SCC 1

auction is a ‘preferred’ method of allocation, it cannot be construed tobe aconstitutional requirement.

17. In Natural Resources Allocation, in re Special ReferenceNo. 1 of 2012[11], a Presidential Reference was made in the backdrop ofthe decision in Centre for Public Interest Litigation (supra) wherethis Court had held that the method of first-cum-first serve used to allocate2G radio spectrum was arbitrary and illegal. The reference was onwhether the ‘only permissible method for disposal of all natural resourcesacross all sectors and in all circumstances is by the conduct of auctions’.Justice Khehar in his concurring opinion in Natural ResourcesAllocation (supra) held that while there is no constitutional mandate infavour of auction under Article 14, deviation from the rule of allocationthrough auction must be tested on grounds of arbitrariness and fairness.In this context, it was observed as follows:

“148. In our opinion, auction despite being a more preferablemethod of alienation/allotment of natural resources, cannot be heldto be a constitutional requirement or limitation for alienation of allnatural resources and therefore, every method other than auctioncannot be struck down as ultra vires the constitutional mandate.

149. Regard being had to the aforesaid precepts, we have opinedthat auction as a mode cannot be conferred the status of aconstitutional principle. Alienation of natural resources is a policydecision, and the means adopted for the same are thus, executiveprerogatives. However, when such a policy decision is not backedby a social or welfare purpose, and precious and scarce naturalresources are alienated for commercial pursuits of profitmaximising private entrepreneurs, adoption of means other thanthose that are competitive and maximise revenue may be arbitraryand face the wrath of Article 14 of the Constitution. Hence, ratherthan prescribing or proscribing a method, we believe, a judicialscrutiny of methods of disposal of natural resources should dependon the facts and circumstances of each case, in consonance withthe principles which we have culled out above. Failing which, theCourt, in exercise of power of judicial review, shall term theexecutive action as arbitrary, unfair, unreasonable and capriciousdue to its antimony with Article 14 of the Constitution.”

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A18. In Vallianur Iyarkkai Padukappu Maiyam v. Union ofIndia[12], a three-judge Bench of this Court held that the State is notbound to allot resources such as water, power, and raw materials throughtender and is free to negotiate with a private entrepreneur. In that case,the Government of Pondicherry entered into an agreement for thedevelopment of Pondicherry Port without issuing an advertisement orBinviting tenders. This Court held that the action of the Government ofPondicherry was justified because on account of historical, political andother reasons, the Union Territory is not yet industrially developed andthus, entrepreneurs have to be offered attractive terms to persuade themto set up industries. The relevant observations are extracted below:C

“171. In a case like this where the State is allocating resourcessuch as water, power, raw materials, etc. for the purpose ofencouraging development of the port, this Court does not thinkthat the State is bound to advertise and tell the people that it wantsdevelopment of the port in a particular manner and invite thoseDinterested to come up with proposals for the purpose. The Statemay choose to do so if it thinks fit and in a given situation it mayturn out to be advantageous for the State to do so, but if anyprivate party comes before the State and offers to develop theport, the State would not be committing breach of any constitutionalobligation if it negotiates with such a party and agrees to provideEresources and other facilities for the purpose of development ofthe port.

172. The State is not obliged to tell Respondent 11 “please wait Iwill first advertise, see whether any other offers are forthcomingand then after considering all offers, decide whether I should getFthe Port developed through you”. It would be most unrealistic toinsist on such a procedure, particularly, in an area like Pondicherry,which on account of historical, political and other reasons, is notyet industrially developed and where entrepreneurs have to beoffered attractive terms in order to persuade them to set upGindustries. The State must be free in such a case to negotiate witha private entrepreneur with a view to inducing him to develop thePort and if the State enters into a contract with such anentrepreneur for providing resources and other facilities fordeveloping the Port, the contract cannot be assailed as invalid because the State has acted bona fide, reasonably and in publicinterest.”

because the State has acted bona fide, reasonably and in publicinterest.”

19. In Nagar Nigam v. Al Farheem Meat Exporters (P) Ltd.[13],the respondent was granted a license fora year to run a slaughter houseowned by the appellant-corporation. On the completion of the term ofthe license, the appellant issued an advertisement inviting applicationsfor granting a fresh contract. The respondent challenged theadvertisement.The Courtobserved that it is the requirement of theprinciple of non-arbitrariness postulated in Article 14 that contracts bythe State, its corporations, instrumentalities, and agencies should as ageneral rule be granted through public tender. Noting that it is necessaryto maintain transparency in the grant of public contracts, the Court ruledthat the State must give contracts only by tender and not through privatenegotiations. This Court held that a contract can be granted by privatenegotiation only in exceptional circumstances having regard to the ‘natureof the trade or largesse or for some other good reason’. Some of theexceptional circumstances that were listed were: (a) award of contractsin the event of natural calamities and emergencies; (b) situations wherethe supplier has exclusive rights over goods and there is no reasonablealternative;and (c) there are no bidders or where the bid offered is toolow. The Court has upheld the award of contracts without holding apublic auction in situations where conducting a public auction is impossiblegiven the surrounding circumstances. When the government deviatesfrom the general rule of allotting a contract without following a transparentprocess such as inviting tenders, it has to justify its actions on thetouchstone of the principles postulated in Article 14 :

13. This Court time and again has emphasised the need to maintaintransparency in grant of public contracts. Ordinarily, maintenanceof transparency as also compliance with Article 14 of theConstitution would inter alia be ensured by holding public auctionupon issuance of advertisement in the well-known newspapers.That has not been done in this case. Although the Nagar Nigamhad advertised the contract, the High Court has directed that itshould be given for 10 years to a particular party (Respondent 1).This was clearly illegal.

14. It is well settled that ordinarily the State or its instrumentalitiesshould not give contracts byprivate negotiation but by open public AB

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auction/tender after wide publicity. In this case the contract hasnot only been given by way of private negotiation, but the negotiationhas been carried out by the High Court itself, which isimpermissible.

15. We have no doubt that in rare and exceptional cases, havingregard to the nature of the trade or largesse or for some othergood reason, a contract may have to be granted by privatenegotiation, but normally that should not be done as it shakes thepublic confidence.

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16. The law is well settled that contracts by the State, itsCcorporations, instrumentalities and agencies must be normallygranted through public auction/public tender by inviting tendersfrom eligible persons and the notification of the public auction orinviting tenders should be advertised in well-known dailies havingwide circulation in the locality with all relevant details such asdate, time and place of auction, subject-matter of auction, technicalDspecifications, estimated cost, earnest money deposit, etc. Theaward of government contracts through public auction/publictender is to ensure transparency in the public procurement, tomaximise economy and efficiency in government procurement,to promote healthy competition among the tenderers, to provideEfor fair and equitable treatment of all tenderers, and to eliminateirregularities, interference and corrupt practices by the authoritiesconcerned. This is required by Article 14 of the Constitution.However, in rare and exceptional cases, for instance during naturalcalamities and emergencies declared by the Government; wherethe procurement is possible from a single source only; where theFsupplier or contractor has exclusive rights in respect of the goodsor services and no reasonable alternative or substitute exists; wherethe auction was held on several dates but there were no biddersor the bids offered were too low, etc., this normal rule may bedeparted from and such contracts may be awarded throughG“private negotiations”. (See Ram and Shyam Co. v. State ofHaryana [(1985) 3 SCC 267 : AIR 1985 SC 1147] .”

20. Inviting tenders and conducting public auctions are consideredto be preferred methods of allocation for two reasons: firstly procurementcan be made at the best price; and secondly, allocation is through aHtransparent process. However, if the purpose of allocation by the State is not revenue maximization, the State could award contracts throughother methods, provided it is non-arbitrary and meets the requirementsof Article 14.

21. The appellant-State contends that since in the present case,there is no involvement of ‘State largesse’ and no disposal of Stateproperty, it was not bound to grant the contract to IMPCL through tender.It is argued that in such a situation, the High Court on a perusal of therelevant material, ought to have only scrutinised if there was an obliquemotive involved in purchasing medicines from IMPCL. Governmentcontracts involve expenditure out of the public exchequer. Since theyinvolve payment out of the public exchequer, the moneys expended mustnot be spent arbitrarily. The State does not have absolute discretion whilespending public money. All government actions includinggovernmentcontracts awarded by the State must be tested on the touchstone ofArticle 14.

22. The following principles emerge from the discussion above:

(i) Government action must be just, fair and reasonable and inaccordance with the principles of Article 14; and

(ii) While government can deviate from the route of tenders orpublic auctions for the grant of contracts, the deviation mustnot be discriminatory or arbitrary. The deviation from thetender route has to be justifiedand such a justification mustcomply with the requirements of Article 14.

3.3 Interpretation of paragraph 4(vi)(b) of the OperationalGuidelines

23. Before interpreting paragraph 4(vi)(b) of the OperationalGuidelines, it is necessary that we refer to the circulars on theprocurement of Ayurvedic drugs. In 1994, the Ministry of Health andFamily Welfare issued a communication stating that Ayurvedic medicinesare to be procured only from IMPCL because it is the only entity whichmanufactures quality medicines. On 8 May 2008, the Government ofIndia issued another memorandum on similar lines. On 9 August 2016,the Ministry of AYUSH issued a circular responding to the clarificationsought by the States on the procurement of AYUSH medicines fromIMPCL. The circular stipulates that the States ‘may’ procure Ayurvedicand Unani Medicines from IMPCL. On 7 December 2016, the Ministryof AYUSH issued a circular stating that the procurement guidelines under A

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ANAM also allow for the purchase of medicines from PSUs andpharmacies of the State Governments and co-operatives that have theirown manufacturing units and are GMP compliant. It was thus statedthat the States may also procure Essential Ayurvedic Medicines directlyfrom Oushadhi (A Kerala Government owned Ayurvedic medicinemanufacturing unit) subject to the condition that medicines have to beBprovided within the rates of IMPCL.

24. On 2 January 2019, the Ministry of AYUSH issued anotification[14] in supersession of the notification dated 7 December 2016.While stipulating that the procurement of medicines is the ‘prerogative’of the State Government, the notification stated that the followingCguidelines have to be observed:

(i) Essential drugs have to be procured from the Essential DrugsList (EDL) published by the Ministry of AYUSH;

(ii) At least 50 percent of the grant-in-aid has to be used toDprocure medicines from IMPCL or other Central/StatePSUs’ or pharmacies under the State-Governments and Co-operatives;

(iii) The remaining grant-in-aid may be used for procuring themedicines from other units that have valid manufacturingElicenses; and

(iv) The medicines have to be manufactured in their ownmanufacturing units and must be GMP compliant.

25. Thus, the letter which was issued by the Union Ministry ofHealth and Family Welfare in 1994 stating that Ayurvedic medicinesFmust be procured only from IMPCL is superseded by the latest notificationissued by the Ministry of AYUSH in 2019 which stipulates thatparagraph4(vi)(b) of the Operational Guidelines does not differentiate betweenthe units mentioned in the provision. Paragraph 4(vi)(b) does not stipulatethat IMPCLwill have a higher standing as compared to othermanufacturing units of the State Governments and cooperativesGmentioned in the paragraph. The position of the Ministry of AYUSH asevidenced by the 2019 notification is that 50 percent of the grant-in-aidshall be used to procure medicines from any of the establishmentsspecified 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 aplain reading of paragraph 4(vi)(b), it is evident that all the units mentionedin the paragraph are placed at an equal footing. The provision does notcreate a gradation amongst the manufacturing units mentioned in theparagraph. Nor does it evince an intent to create a monopoly.

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3.4 Validity of award of government contract to IMPCL

26. The appellant flags the insurmountable difficulties in awardingcontracts for the purchase of Ayurvedic drugs because of peculiarproblems in the process of manufacture. Reference was made to theletter dated 16 July 1994 issued by the Ministry of Health and FamilyWelfare stating that purchase through tender would be ‘inadequate’ forthe procurement of Ayurveda, Siddha, and Unani medicines because (i)there is a wide variation in the prices of the raw materials as a result ofwhich the cost of the same drug using the ‘best raw materials’ maybeten times the cost if the ‘poorest’ quality of raw materials is used;and (ii)it is impossible to test the composition and the quality of raw materialsused in the drugs. The letter of the Ministry of Health and Family Welfaredated 16 July 1994 is extracted below:

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“You may perhaps be aware that Government of India hasset up in collaboration with Government of Uttar Pradesh,Indian Medicines Pharmaceutical Corporation ltd. formanufacture of high quality drugs of the Indian Systems ofMedicine. The drugs are prepared strictly in accordance withthe classical texts and genuine raw materials are used toprepare these drugs.

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2. It is our experience that the ordinary financial proceduressuch as tendering are inadequate in relation to the purchaseof Ayurveda, Siddha and Unani medicines. This is because:- F

1. Of the very wide variation in prices of raw materials requiredfor making the drugs. The cost of the same drug using thebest raw materials may be 10 times the cost if the poorestGquality raw materials are used.

2. The impossibility of testing the exact composition of drugs ofits raw materials and their quality.

3. Pharmacopeial work in these systems of medicines is at avery initial stages. Tests presently available can reveal the H

Apresence of harmful ingredients/adulterants and could indicatethe presence of certain compounds at best. However,since the basic components of ISM medicines are herbswhich are themselves composed of many organiccompounds, its well nigh impossible with the presentstate of technology to test and check whether theBingredients claimed are actually present in theproportion claimed and whether they are of the rightquality and whether the proper process prescribed intheclassical texts have been used to prepare themedicines. Thus purchases purely on the basis of tenderingCare likely to lead to purchase medicines which areinefficacious.

4. The only alternative available at present to ensure qualitydrugs is to have inspectors at the manufacturing site whenthe manufacturing process is going on. This also is not aDpractical alternative since drug control organisations do nothave the man power for close supervision. This situation isresponsible for the reported malpractices with regard to suchmedicines. It is under these circumstances that a decisionhas been taken in the Ministry of Health and Family Welfareto purchase the requirements of the CGHS only from IMPCLEat process which are been [] as fair and have been scrutinisedby a representative of the Cost Accounts Branch of theFinance Ministry.

5. Despite ensuring preparation of drugs strictly according tothe classical texts, the prices charged by IMPCL compareFfavourably with competing brands in most cases, for a fewcases the process may be a little higher but as already pointedout there is more reliability in terms of quality assurancebecause IMPCL does not allow commercial interests overthe mandate for preparing medicines strictly according to theGclassical texts using genuine raw materials. For instanceIMPCL does not use extra sugar or other taste enhancersmainly to make its medicines more popular.

6. In view of the above, you may like to consider meeting therequirements of State Government Dispensaries and HospitalsHfor medicines manufactured by IMPCL at the rates fixed for CGHS supplies but subject to the local variation in transportcosts. In that case you may like to contact Chairman cumManaging Director, Indian Medicines PharmaceuticalCorporation ltd., (IMPCL), Mohan Distt, Almora, U.P”

(emphasis supplied)

27. On 8 May 2008, the Government of India issued anothermemorandum stipulating that the medicines produced by IMPCL areaccording to classical texts and of assured quality. The memorandummentioned that there is an absence of fully developed pharmaceuticalstandards to test the quality of Ayurvedic and Unani medicines. Therelevant paragraph of the memorandum indicates that:

“(i) The medicines produced by IMPCL are strictly as per classicaltexts and hence prove quality.

(ii) The rates of the medicines produced by the company arereasonable as the same are fixed by the Cost Accounts Branchof the Ministry of Finance;

(iii) In the absence of fully developed pharmaceutical standardsfor Ayurvedic and Unani Medicines in the country, the CGHSResearch Councils is/are not fully equipped to ensure that thepurchased medicines are of right quality.”

28. The letter indicates that there is no methodto determine theingredients and quality of Ayurvedic drugs. This would mean that therewas no method to determine the quality of the medicines produced byIMPCL as well. The Ministry of Health and Family Welfare noted thatit has decided to purchase Ayurvedic drugs only from IMPCL becausethe process is fair and is scrutinised by a representative of the Ministryof Finance. However, the first respondent contends that the medicinesprocured from IMPCL are vetted by the Ministry of Finance for thelimited purpose of undertaking an audit. At this juncture, it is necessaryto note that IMPCL has been set up by the Government of India incollaboration with the Government of Uttarakhand. The Government ofIndia holds 98.11 percent of the shares of IMPCL and 1.89 percent ofthe shares are held by the State Government. The letter issued by theMinistry of Health and Family Welfare indicates that merely becauseIMPCL is an establishment in which the Central Government has a majorstake, it is assumed thatthere is no ‘commercial interference’ and the A

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Amedicines are prepared according to classical texts using ‘genuine rawmaterials’.

29. There is no material on record to support the submission thatIMPCL is the only establishment among the establishments mentionedin paragraph 4(vi)(a) that manufacture good quality Ayurvedic drugs. InBfact, paragraph 4(vi)(b) states that 50 percent of the grant-in-aid shallbe used to purchase medicines from the units mentioned in the paragraph“keeping in view the need for ensuring quality of AYUSH drugs andmedicines.” This would indicate that the need for ensuring quality issubserved by all the sources mentioned there. Besides IMPCL, which isan establishment of the Government of India, paragraph 4(vi)(b) includesCother establishments of the State Governments or co-operative societies.The contention that IMPCL does not have any commercial interestbecause it is an establishment developed by the Government of India isthen equally applicable to other establishments prescribed in paragraph4(vi)(b).D

30. The argument that the procurement of Ayurvedic drugs fromIMPCL would fall within the exceptional circumstances (assurance ofquality medicines) is erroneous. The submission of the appellant thatIMPCL is the sole producer of quality Ayurvedic medicines is based onsurmises and conjectures without any cogent material to support theEclaim.[15 ]In fact, the notification of 2 January 2019 issued by the Ministryof AYUSH stipulates that 50 percent of the grant-in-aid has to be usedto procure medicines from IMPCL or other Central/State PSUs’ orpharmacies under the State-Governments and co-operatives.It is opento the appellant to procure medicines using any method other than tender,so long as it is not arbitrary. The claim of the appellant is that it deviatedFfrom the rule of tender because IMPCL is the only establishment thatproduces quality medicines. However, there is no material to substantiatethe claim that IMPCL is the only establishment which manufactures‘quality’ medicines to the exclusion of other establishments mentioned inparagraph 4(vi)(b). The appellant has been unable to discharge the burdenGplaced on it by producing cogent material demonstrating that theprocurement of medicines through nomination is warranted because ofthe existence of exceptional circumstances bearing on need for quality.The action of the appellants of procuring medicines only from IMPCL to 15 See State of Tamil Nadu v. National South Indian River Interlinking AgriculturistHAssociation, Civil Appeal 6764 of 2021.

the exclusion of the other establishments mentioned in paragraph 4(vi)(c)is arbitrary and violative of Article 14 of the Constitution.

31. In the given circumstances, inviting tenders from the entitiesmentioned in paragraph 4(vi)(b) is the most transparent and non-arbitrarymethod of allocation that can be undertaken. Hence, the appellant musthenceforth purchase Ayurvedic medicines only through a free andtransparent procedure such as tenders. The appellant may deviate fromthis rule and procure medicines by nomination only if exceptionalcircumstances exist. In such a situation, the appellant must demonstratethe existence of exceptional circumstances on the basisof cogent material.

32. For the reasons indicated above, the appeals against thejudgment of the Lucknow Bench of the High Court of Judicature atAllahabad dated 18 October 2019 are dismissed.

33. Applications for intervention[16 ]were filed by the Federation ofAYUSH drugs Manufacturers[17], the President and Secretary of theFederation, the investor of “S-compound”[18], and a small-scalemanufacturing unit engaged in the production of Ayurvedic Medicines.The Federation consists of nine members who are registered under theMicro, Small and Medium Enterprises Development Act 2006 and areengaged in the manufacture and sale of Ayurvedic drugs. The followingarguments were made in the application:

(i) This Court in Caterpillar India Pvt. Ltd. v. Western CoalFields[19 ]observed that purchase preference creates amonopoly. In view of the judgment in Caterpillar India(supra), the Union Cabinet by an order dated 21 November2007 adopted a policy whereby purchase preference toCentral Public Sector Enterprises was terminated from 31March 2008; and

(ii) The Director, Central Vigilance Commission issued a circularon 9 November 2009[20] to review the Purchase PreferencePolicy for the products and services of Central Public SectorEnterprises in view of the judgment in Caterpillar India 16 IA 9631 of 2020; IA No. 46786 of 2022

17"Federation”18 S-Compound is a recognised herbal ayurvedic drug used in the treatment of ‘rheumatoidarthritis’ and ‘osteo arthritis’.

19(2007) 11 SCC 32

20 Circular No. 31/10/09

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APvt. Ltd. (supra). On 23 March 2012, the Ministry ofMSME framed a policy titled “Public Procurement Policyfor Micro and Small Enterprises (MSEs) Order 2012” whichstipulates that every Central Ministry or Department of PSUshall procure a minimum of 20 percent of the total annualpurchases from micro and small enterprises.B

34. The intervention applicant submitted as follows:

(i) Policies of the Central and State government stipulate that25 percent of the medicines shall be procured from MSMEs.Thus, the term ‘atleast 50%’ in paragraph 4(vi)(b) of theOperational Guidelines must be read as limiting theCprocurement from establishments in paragraph 4(vi)(b) to50 percent and giving other manufacturers a level playingfield under paragraph 4(vi)(c);

(ii) The Central and the State Governments have notifiedprocurement policies directing that a certain percent of theDprocurement must be from the MSMEs’. The procurementof medicines from IMPCL on nomination is contrary to theprocurement policies notified by the Government;

(iii) IMPCL also sells products in the open market. Thus, theargument that IMPCL is established solely to supplymedicines to the Government is misleading; and E

(iv) IMPCL has not submitted records to show that the othermanufacturers cannot supply equivalent or better-qualitydrugs.

35. The intervention applications seek to enlarge the scope of theSpecial Leave Petition. The issue before this Court falls squarely on theFinterpretation of paragraph 4(vi)(b). However, the intervention applicanthas prayed that in accordance with the policies of the State and theCentral Government, a minimum percent of Ayurvedic drugs must beprocured from MSMEs under paragraph 4(vi)(c). This is beyond thescope of the instant Special Leave Petition.

G36. For the reasons indicated above, IA 9631 of 2020 and IA No.46786 of 2022 are dismissed. The interveners would have to follow theirown independent remedies in accordance with law.

37. Pending application(s), if any, stand disposed of.

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Devika Gujral

(Assisted by : Mahendra Yadav, LCRA)