Parenteral Drugs (India) Pvt. Ltd. v. State Of Madhya Pradesh And Others

1. By this petition under Article 226 of the Constitution of India, the petitioners-Company engaged in manufacture and supply of intravenous fluids to various hospitals, including hospitals attached to Medical Colleges, challenges the governmental order dated 17-7-1989 [filed by the petitioner as Annexure-R/3(4)], thereby directing purchases of intravenous fluids for hospitals atttached to Medical Colleges from respondent No. 4-M/s. Hindusthan Antibiotic Ltd., Pimpri, alone, and the State action in issuing such orders to M/s. Hindusthan Antibiotic Ltd., as wholly arbitrary, discriminatory, grossly violative of the right of equality, guaranteed by Article 14 of the Constitution of India.

2. Before proceeding any further, it would be desirable to deal with an objection in the nature of a preliminary objection as raised by the respondent No. 4 as regards maintainability of the petition itself for alleged violation of executive instructions, issued by the State Government. In this connection suffice it to note that the objection itself is based on a distorted view of the petition. It is too late in the day for the State, much less for the beneficiary of the largesses conferred, to raise such an objection, more than a decade after the Supreme Court judgments in Ramana v. I. A. Authority of India, AIR 1979 SC 1628 and Kasturilal v. State of J. and K., AIR 1979 SC 1636, which hold that even administrative actions of the State must be infused with reason and fairness. It is significant to note here that it is not the State which is raising the objection, but the beneficiary of the contract for supply of I. V. Fluids. Where violations of fundamental rights guaranteed by Article 14 of the Constitution of India are complained of, as in the present case, it is open to the Court to go into the question. The objection raised by the respondent No. 4 is devoid of any substance and is accordingly rejected.

3. Facts admitted, not disputed and indisputable, leading to the presentation of this petition may now be briefly stated : It is an admitted fact that the petitioners are a regular manufacturer of drugs. The respondents 1 to 3 purchased drugs, medicines and other like materials, including intravenous fluids for consumption in various Government Hospitals, in the State, including hospitals attached to various Medical Colleges in the State. The State Government, in order to give protection to Small Scale Industries in the State, issued a circular dated 9th November 1976 (Annexure-P/2) granting 10% price-preference to S. S. I. Units in the State. It was preceded by another order (Annexure-P/3) dated 12-12-1967. It is also admitted by the respondents 1 to 3 that order dated 13-8-1984 (Annexure-P/4) lays down the policy of the State Government in the matter of purchase of drugs. What is disputed about is the interpretation put by the petitioners. According to the petitioners, by this order, Annexure-4, such drugs as are manufactured by Government of India Undertakings could be purchased if the rates were favourable to the State Government. Annexure-P/4 further lays down that so far as I. V. Fluids were concerned, they were to be purchased from S. S. I. Units in the State of Madhya Pradesh on rate-contract basis.

4. The respondents 1 to 3 on the other hand have submitted that this policy was modified by subsequent order dated 7-5-1989 (Annexure-R-3 IV) under which I. V. Fluids for Medical College Hospitals, were ordered to be purchased from respondent No. 4 only. It is also an admitted fact that prior to the order dated 7-5-1989 (Annexure R-3 IV), the respondents had purchased I. V. Fluids from local manufacturers, including the petitioners.

5. It is the respondents' case that the policy had to be modified and a decision taken to purchase I. V. Fluids from respondent No. 4 only because of certain complaints against I. V. Fluids purchased from local manufacturers. The petitioners on the other hand have contended that the respondents have not carried out any test, investigation or analysis in order to judge or determine the comparative merits quality. The petitioners have been supplying drugs, including I. V. Fluids to hospitals under respondent No. 1, but not a word of complaint had ever been communicated to them during all these years. Apart from the hospitals in the State, they have also been suppliers of I. V. Fluids to Medical Colleges not only in Madhya Pradesh, but also Armed Force Medical College hospitals, Poona and Calcutta, K. E. M. Hospital, Breach Candy Hospital and Bombay Hospital, Bombay, Apollo Hospital, Madras, Gangaram Hospital Delhi, Sanjay Gandhi Post-Graduate Medical College Hospital, Lucknow, Indira Gandhi Medical Institute Hospital, Patna, Government of Gujarat Hospitals, including all Medical College hospitals and many other prestigious hospitals in India. They have test reports from the Central Drug Laboratories, Calcutta, M. P. Government Drug Laboratory, Bhopal, Halfkins Institute, Bombay, Gujarat Govt. Drug Laboratory, Ahmedabad etc. and copies of all these reports are filed and collectively marked as Annexure-P/11. Their basic contention is that the so-called policy is no policy at all. It has absolutely no legal basis. It does not even remotely suggest or indicate reasons for preferential treatment given to respondent No. 4. In nutshell their contention is that while the State may be free to enter into any contract, it cannot act arbitrarily or impulsively without purpose, object or reason in conferring largesses on a favoured one or a few.

6. There is no dispute about the fact that there has been a sudden shift in the State policy in the matter of purchase of I. V. fluids exclusively from respondent No. 4 ostracising other manufacturing units in the State. In fact it is the respondents' case "that the State had no option but to take a drastic decision." The justification from such drastic action would be examined later, presently I am at the legal aspects, implications of such an action, conferring largesses on respondent No. 4. The petitioner complains of violation of Article 14 of the Constitution, and denounces it as wholly arbitrary and capricious; while the respondents seek shelter behind their professed concern for public-health.

7. The crucial question that arises for consideration whether the Government possess absolute discretion to confer any benefit on anyone it likes or should it be regulated by some norms? It was precisely the question raised in Ramana Shetty v. International Air Port Authority, AIR 1979 SC 1628. The Supreme Court in this case has unequivocally held that the Government cannot exercise its discretion in an arbitrary manner and withhold, grant or revoke a contract at its pleasure.

8. Another trend-setting judgment in this sphere is that of Kasturilal v. State of J. and K., AIR 1979 SC 1636. Realising the need for structuring and restricting the power of the exclusive with a view to prevent its arbitrary exercise, the Supreme Court said :

"It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norm, which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts, quotas, licences etc. must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory."

9. Even administrative actions, must be informed with reason and fairness, a principle accepted and approved in International Airport's case (supra) has been reiterated in Kasturilal's case (supra). The touchstone to be applied in the matter of award of governmental contract, is 'reasonableness' and 'public interest'. The Supreme Court further held, that if it fails to satisfy either test, the contract awarded would be unconstitutional and invalid. In the light of these principles as laid down by the Supreme Court, it must be held that the State has no unfettered absolute discretion in the matter of conferring contractual benefits on a particular individual, firm or company. The plea that contract being based on executive instructions, not enforceable at law, must also fail. Such a contract, must stand the test of reasonableness, fairness and public interest.

10. Shri Chaphekar, appearing with Shri Bagdi, learned counsel for the petitioner, referring to Annexure, P.5, P.6 and P.6B (orders dated 30-5-1989, 9-6-1989 for supply of I. V. fluids placed by the respondents' hospital), argued that all of a sudden, without any reason or rhyme, respondents issued order Annexure P.7, in favour of respondent No. 4, to the exclusion of all order the State units manufacturing I. V. fluids. This order Annexure-P.7 in fact refers to an order dated 16-6-1989 issued by the State Government the respondents have not chosen to file this order but they have placed on record a letter dated 12th June, 1989 addressed to the Director, Medical Education, Government of M. P., Bhopal, by respondent No. 4. This letter shows that even before a direction was issued on 16-6-1987 by the State Govt.(as referred to in Annex. P.7) the Director Medical Education, had already written to Respondent No. 4, on 1-6-1989 as acknowledged by respondent No. 4, in its letter dated 12-6-1989 for supplying of I. V. Fluids and the respondent No. 4 had started manufacturing I. V. Fluids in huge quantities in anticipation of order to meet their requirement. The direction dated 16-6-1989 issued by the State Government has not been filed by the respondents.

11. It does not stand to reason how could the Director, Medical Education write to respondent No. 4 even before the State Government had issued any order and how could the respondent No. 4 start manufacturing huge quantities of I. V. fluids in anticipation of such an order. The letter dated 12-6-1989 Annexure R/3 concludes with a request that the respondent No. 4 would be grateful, if the order was released in that very month. This explains the haste and anxiety of the respondents in issuing the order directing purchase of I. V. fluids from respondent No. 4 only that too at rates quoted by it. This has been specifically objected to, by the petitioner on the ground that respondent No. 4 was not manufacturer of I. V. fluids, respondents 1, 2, 3 knew it fully well yet, they issued the impugned order. This fact has been very specifically averred in paras 10-A-B of the petition that the respondent No. 4 did not manufacture I. V. Fluids, but got them manufactured by M/s. Core Parenterals Ltd., Ahmedabad a Pvt. firm and the respondent No. 4 was marketing the products of M/s. Core Parenterals in its own name and label, claiming privilege of being a overnment of India undertaking while illegally transferring the same to unit in Private Sector. The respondents have no answer to these specific allegations made by the petitioner. They rest content by saying that the allegations have been made with a view to prjudice the court and fall back on letter dated 12-6-1989 Annexure-R/3 (referred to above) which explains, (as believed by the respondents) the circumstances in which the H.A.C. had to hire manufacturing facilities on lease.

12. One thing which prominently emerges from the above letter Annexure-R/3, that the H.A.L. was not even having machinery to manufacture I. V. fluids, and was not even having machinery to manufacture I. V. fluids, and was required to hire the same from Core Parenteral Ltd. at Ahmedabad; a promise was held out that the machinery would be received (by respondent No. 4) within 4 to 6 months. Yet an order, creating monopoly in supply of I. V. fludis in favour of H.A.L. was made by the respondents. It needs to be noted at this stage that this M/s. Core Parenteral Ltd., Ahmedabad, had itself submitted tender Annexure-P.9 for supply of I. V. fluids to Medical College Hospitals in the State. A concern having no manufacturing machines, is conferred with a largess, of supplying I. V. fluids simply because it could manage to hire such machines on loan licence basis from another tenderer, judged by minimal standards of fairness, does this act of the respondents, though farthest exterior line of fairness, let alone stand its test?

13. I. V. fluids for transfusion are generally used in emergencies. They require critical production control and rigid quality control. H.A.L. factory is located at Pimpri, Pune while M/s. Core Parenteral Ltd. is situated in Ahmedabad. Did the respondents even think of rigid quality control which can't be by remote control, as in electronics, while creating such a monopoly in favour of respondent No. 4. It is for this reason that the Drug Controller of India directed all State Drug Controllers that it would not be desirable to grant licence for manufacturer of transfusion solutions (see Annexure-7/14). The respondents 2 and 3 must be presumed to know these instructions issued by the Drug Controller of India, at any rate, as a matter of sound policy and principle they ought to know the hazards involved in such manufacture of I. V. fluids on loan-licence basis. 'Public interest' is the key note of their return but it does not depend mere on incantation or repetition of the term but on the live concern and regard shown for it. There is absolutely nothing on record to suggest as to how the respondents satisfy themselves about this extremely sensitive and important aspect of the matter, while according preferential treatment to the respondent No. 4, as they did. The petitioner has placed on record the instructions (Annexure-P. 14) issued by the Drug Controller of India. He has also placed on record a copy of order dated 5-8-1989 for supply of all kinds injections. It is respondents own order issued in favour of Respondent No. 4. It contains a specific condition that the medicines supplied should be manufactured by the firm itself and not on loan licence. But in the instant case all these well established norms appear to have been very conveniently ignored, for reasons best known to the respondents, the Regional Manager. Why this unusual way of dealing with respondent No. 4?

14. The respodents have not come out with clean hands. They have not chosen to place before the Court, the decisions taken at a meeting called by the Health Minister of the State for the purpose, which was attended by representatives of manufacturing units; such as I.D.P.L. Bengal Immunity, Bengal Chemicals and H.A.L. etc. One of the specific decisions taken at the meeting was that drugs manufactured on loan-licence basis would not be accepted. It was in face of this decision that a monopoly for supply of I. V. injections was created in favour of respondent No. 4. This meeting was attended by the Chief Secretary, the Director, Health Services, the Joint Secretary, Public Health, the Director, Medical Education. It was none else that the Joint Secretary, Public Health who on 31-5-1989 called upon the Directors of Health Services and Medical Education to ascertain/verify if H.A.L. respondent No. 4 was manufacturing I. V. fluids on loan-licence basis, on arrangement with M/s. Core Parenteral Ltd., Ahmedabad who had submitted its quotations, comparatively for less than quoted by H.A.L.

15. It was in response to this letter that the Director of Medical Education, on 1-6-1989 wrote to the Regional Manager of respondent No. 4 at Bhopal, to supply the required information. It is this letter dated 1-6-1989 which has been acknowledged by the respondent No. 4 in its reply dated 12-6-1989 (filed by the respondent as Annexure-R/3).

16. It is not that the respondents were not aware of the condition against loan-licence. Bengal Immunity whose representative had attended the meeting held on 22-5-1989, sent a telegram dated 27-5-1989 to the Chief Secretary and the Directors of Health and Medical Education which reads as follows :

"REF. OUR QUOTATION OF RATES AGAINST YOUR CENTRAL PURCHASE SCHEME AAA ALL OUR PRODUCTS QUOTED ARE IN OUR OWN FACTORY INCLUDING IN FLUIDS AAA NONE ARE UNDER LOAN LICENCE AAA THIS REFERS DRUG CONTROLLER'S REMARKS/CAUTION DURING MEETING ON 22ND MAY"

.

A letter dated 30-5-1989 was also received by the respondents from Bengal Immunity Ltd. It was again addressed to all the three named above. The letter reads as follows : -

"Dear Sirs, Ref. : Remarks by Drug Controller during Meeting with P.S.U. on 22nd May 1989.

Ref. : Loan License Products of SSI sold as products of Public Sector; I. V. Fluids."

With reference to above Meeting on 22-5-1989 called by Hon'ble Health Minister at Ballabh Bhawan, we draw your attention to the cautionary remarks of Drug Controller, who expressed deep concern at the back door entry of Loan Licence products from private sector (S. S. I. units) being sold under the banner of respectable Public Sector Units, which is a questionable practice as quality and purity of the products remain in serious-doubt. It is more so in the case of I. V. Fluids - a life saving item, as you are well aware. There are several reported cases where death was caused by substandard quality of I. V. Fluids injected in hospitals (vide Paper Cutting from English as well as language Press).

N. B. In this context please consider favourably B. I. I. V. fluids (our own products) now freely available @ Rs. 11.50 p. per bottle, as already quoted by us. We have increased our capacity drastically.

Awaiting your valued indents.

Thanking you, Yours truly, Sd/- Regional Manager. "Encl. As above."

17. The respondents have not merely suppressed all this material from the Court, but also very conveniently ignored diem and persisted in placing ordres with respondent No. 4. Needless to add that Bengal Immunity is also a Government of India undertaking; actually engaged in manufacturing I. V. Fluids. The concern shown by the respondents for Public Sector undertaking, stands exploded. It was not so such a concern for the Public Sector Undertaking but for something else.

18. By what standard of fairness can such a conduct in creating a monopoly in favour of a particular concern, to the total exclusion of others in disregard of its own decision, as regards loan license, be called fair? What public interest does it go to serve?

19. Shri Bhargava, learned Government Advocate, argued that the Government could not afford to compromise with quality in matters relating to public health. In fact, it is their pleaded case. To quote "the State Government has not only a right but a duty also to act in the best public interest particularly where questions of public health arise". So far as pleading and argument are concerned it is fine, it is noble but what about the reality? This return was filed by the respondents on 7-9-1989. The verification appended to the affidavit sworn by the Joint Director, Medical Education, reads "Nothing stated is false and nothing has been concealed." Is it a mere legal formality or does it carry some sanctity as well?

20. There is a letter dated 2nd September, 1989 addressed to the Director, Medical Education by the Joint Director-cum-Supdt., G. M. Hospital, Rewa. This letter and many more that followed is a living testimony of the quality product that was supplied by H.A.L. It is quoted below :

"To The Director, Medical Education, M. P., Bhopal.

Dated 2nd Sept. 1989 Subject: Floating bodies probably fungus in Dextrose 5% Reference : Your order No. II029/2/47/89 dated 17-7-1989.

On the subject, it is submitted that floating bodies probably fungus are observed in glucose 5% Batch No. C-09-2534 Two Sealed Bottles procured from H.O.D. Surgery along with copy of their letter are enclosed.

The product has been supplied by M/s. Hindusthan Antibiotics Ltd. vide their bill No. IC-I/0068 dated 9-8-1989. All the bottles of the said batch i.e. 1190-bottles used are being withdrawn from the wards which will not be used. These bottles are made of Prapolyme.

Rest of the consignment is being scrutinised. Thereafter the verified bills will be sent for further action.

Sd/-

Jt. Director-Cum-Supdt.

G. M. Hospital, Rewa (M.P.) Encl. : One bottle.

Two sealed bottles.

P. S. This letter along with two sealed bottles are being sent through Mr. Kumavanji, peon, D.M.E. Office Sd/-Jt. Director-Cum-Supdt.

G. M. Hospital, Rewa."

21. This letter alon gwith sealed bottles was sent through a peon, the same day i.e. 2-9-1989 as can be seen from the P.S. It would not be unsafe to presume that it must have been received the next day or by 4th at the latest. In face of this complaint about fungii being observed in glucose, how do the respondents justify their concern for public interest and quality? That too by concealing the fact what weighed with the respondents to conceal this fact from the Court? While there is not a word in their return filed on 7-9-1989. How could they swallow such a fact which was of utmost importance.

22. Such complaints, not only from Rewa but other Medical College Hospitals at Raipur, Jablapur, Bhopal, Indore and Gwalior continued pouring in, but at no stage did the respondents bring it to the notice of the Court. Their so called concern for public health and quality of drugs, is merely a matter of pleadings and not reality. Respondents are guilty of both suppressio veri but also/suggestio falsi. They concealed a vital fact and misguided the Court. The situation had worsened to such an extent that the College and Hospital Council of G. M. College, Bhopal in its meeting held on 16-10-1989 decided that stocks of I. V. fluids supplied by H.A.L. be frozen. The reports dated 16-10-1989 and 17-10-1989 made by the Supdt., Hospital, Bhopal are extracted as under :

"To, Bhopal, dated 16-10-1989 The Director of Medical Education, Madhya Pradesh Bhopal.

Subject : Supply of I. V. fluids by M/s. Hindusthan Antibiotics Ltd.

Fungus had been detected in the following I. V. fluids supplied/manufactured by M/s. Hindusthan Antibiotics Limited.

24. It is not at one place nor an isolated case, that fungus suspended particles were noticed in I. V. fluids supplied by H. A. L. Throughout the State, right from Raipur to Gwalior and Indore to Rewa, and Jabalpur to Bhopal. There were similar complaints of fungii and suspended particles being found in I. V. fluids. As against these grim realities Annexure R/3 the letter dated 12-6-1989, which is being relied upon by the respondents as a justification for their acts readily, provides a study in contrast, the tall claim of quality advanced, and projected by respondent No. 4 reads as follows :

"Being a Government of India undertaking we do not make any commercial compromise over the quality which may be done by unscrupulous manufacturers for reducing the cost, for instance use of non-birgit material, use of indigenous alternatives instead of Lupolen, non-adherence to G. M. P. etc. Therefore, when you buy from us you are 100% sure of the best quality I. V. fluids, which is the main objective of any purchaser. Our own machines will be under operation within 4 to 6 months at Pune and then our capacity to supply IV Fluids will be substantially increased."

What a cruel irony? What the purchaser/consumeor finds is suspended particles and fungii in life saving drugs. The I. V. fluids, yet the respondents profess and preach "Public interest" to justify their grossly discriminatory action conferring undue benefits on respondent No. 4, by suppressing the true state of affairs. State is regarded as a virtuous litigant. It is the duty of the State to place all facts, a full fair and candid disclosure of facts, that is what is expected of the State. We are constrained to observe, that in the present case every possible effort has been made by the respondents to suppress true facts and present a distorted version.

25. A writ of certiorari is not merely meant for granting the relief claimed by the petitioner, it is also certification of record hence the necessity for production thereof as propounded by the Supreme Court in Ghiomal and Sons v. State of Delhi, AIR 1959 SC 65, whenever the Court issues a rule on a petition for a writ of certirari, it is the duty of the respondents to whom the rule is addressed, to produce the entire record along with its return, which unfortunately in this case was done only on demand at the time of writing this judgment. And the record, to say the least, reveals a very sordid state of affairs.

26. The respondents in their reply to the show cause notice, filed on 7-8-1989, have averred

"the petitioners are regular manufacturer of drugs, have designedly suppressed subsequent policy instructions issued by the State Government a copy whereof is hereto annexed and marked as Annexure-R/s-II"

. It is nothing but a case of pot causing the kettle black. The respondents do not even hint about the decisions taken in the meeting held on 22-5-1989 referred to above. Nor petitioner can be expected to have access to the State's record in possession of the respondents. It was their duty to make a candid disclosure of facts more so when they came out with a plea 'public interest.'

27. The respondents have further pleaded

"the petitioners knowing this modified and amended policy, have suppressed it from this Hon'ble Court. This by itself is a good reason for summary dismissal of the petition"

. We do not for a moment suggest that a petitioner, approaching this Court invoking Article 226 of the Constitution, can indulge in suppression of facts. But facts of this case reveal an altogether different position.

28. We have seen by now what 'public interest' means to the respondents, and their concept and concern for quality, only thing that still remains to be considered is the rates vis-a-vis public interest. Admittedly the rates quoted by respondent No. 4 were far higher than others. The Government Advocate had argued that rates could not be the only consideration, in so far as the vital and essential drugs are concerned. According to him, the overwhelming and determining consideration, that the respondents had, and should be, in the purchase of such life saving drugs, should be their comparative quality. We have seen that 'quality' was offered by the respondent No. 4, it shatters to the ground, the stand taken by the State Government. No amount of legalism and argument can salvage the situation.

29. The petitioner has placed on record Annexures-P.7, P.8, P.9 and P. 12, a comparative chart of rates. It is specifically averred in para 10-C of the petition that the rates quoted by respondents No. 4 were about 30% higher. The respondents have no answer to it, except a vague circumvention of facts.

30. Efficiency and economy are the two well recognised salient characteristics of monopolised service. Although Economists maintain that all markets are imperfect and medicine market is no exception, but the traditional economic assumptions can be excepted in the field of health services and medical care only on the ground of quality, which as seen above, does not at all justify the higher rates offered to the respondents No. 4. Cost effectiveness in face of other available alternatives cannot be so lightly sacrificed, that too for such poor quality goods as supplied by respondent No. 4.

31. As a justification for their shift in policy, the respondents have come out with a copy of analysis report dated 1-6-1985, Annexure-R. 3V, which does not relate to petitioner, certain foreign particles were seen in the sample 10% Dextrose Injection I. B. manufactured by Safex India Pvt. Ltd., Ratlam. It was argued by the Government Advocate that it was this and similar other reports (none produced), which led to the change in purchase policy, filed as Annexure-R-3-2, dated 9-8-1987, while not suggesting for a while, any leniency towards the manufacturer, who manufactured the above sample. The argument does impress us. The report is dated 1-6-1985, the policy was changed on 9-8-1987. For full twenty six months nothing of the sort was done in the matter. This lethargy on the part of the respondents cannot be appreciated. Secondly, now can the petitioner or for that matter even other undertakings in the private sector be penalised for a wrong committed by M/s. Safex India Pvt. Ltd. The petitioner has come out with a categorical case that there had not been even a single instance of petitioner's drugs being found sub-standard or of poor quality in hundred of tests carried out all these years throughout the country. He has filed reports and recommendations Annexures-P/11 and 12, in support. In answer to this the respondents filed Annexure-R/3-V, which relates to some other manufacturer and not the petitioner. If Annexure-R-3E was the analysis report relating to Safex India Ratlam, was the cause of shift in policy in August, 1987, then why place orders for supply of I. V. Fluids to the petitioner as late as 9-6-1989, as evidenced by Annexure-P/5, P/6 and P/6-B.

32. What is respondents' own stand as regards this policy, Annexure-R/3-II, is to be found in paragraph 8 of their return, which is reproduced below :

"The answering respondents also wish to make it clear that policy regarding purchase of drugs is being revised as per Annexure-R-3-II filed with reply to the show-cause notice, but a final decision on the same is still to be taken. Even as per the revised policy, I. V. Fluids would have to be purchased from Government undertakings only"

.

So to say, there was no fixed policy even while filing the return. Annexure-R/3-II was to be changed and has in fact been changed. By the time the petition came to be filed the respondents, however, did not choose to place it on record. This policy decision was taken on 22-5-1989, which prohibited purchase of drugs and I. V. Fluids from such manufacturers, who manufactured the same on loan-licence basis. The respondents 2 and 3 have been held to be guilty of suppression of material facts, as discussed above.

33. It was also contended by the Government Advocate that the petitioner was putting a self-service interpretation on clause 8 of the Government policy and instructions as contained in Annexure-R/3-II, in disregard of clause 6 thereof. Having quoted this clause 6 in their reply the respondent No. 3 has stated :

"It will be obvious from a bare reading of the aforesaid clause that the petitioners are designatedly giving a distorted interpretation to the purchase policy of the Government. The policy leaves the scope for the exercise of the powers by the Government."

34. Taking the argument on its face value, the power claimed by the Government cannot be exercised in an arbitrary/discriminatory manner. As held by the Supreme Court in Kasturilal's case (supra), in the matter of award of Government contract, it must stand the test of reasonableness and public interest and if it fails on either count, the contract awarded would be unconstitutional. There is no unfettered absolute discretion vesting in the State in such matters. The foregoing discussion very clearly brings out that the action of the respondents does not stand the test as laid down by the Supreme Court.

35. Shri Chhazed, learned counsel appearing for the respondent No. 4 elaborated the strength of employees of respondent No. 4, its quality control, staff, Laboratory, Research Centre etc. But all these facilities and equipments would be no substitute for the reports received from various Medical College Hospitals of the State, which belie the respondents' claim. Admittedly, the respondent No. 4 was manufacturing I. V. Fluids on loan-licence basis, on arrangement with M/s. Parenteral India Pvt. Ltd. at Ahmedabad. As per decision taken by the State Government at the meeting held on 22-5-1989, the respondent No. 4 could not have been granted the contract in question, as alreay noted above.

36. The main thrust of Shri Chhazed's argument was that the executive instructions issued by the State Government cannot be challenged in a petition under Article 226 of the Constitution. This argument has already been dealt with. But there is another aspect of the matter. The order dated 17-7-1989, issued by the Joint Director, Medical Education is not even stated or claimed to have been issued under any of the Allocation of Business Rules, framed by the State Government under Article 166 of the Constitution of India. It was vehemently argued by the petitioner that the whole action of shifting the policy and conferring largesses on respondent No. 4, by issuing orders for supply of I. V. Fluids, was nothing but a bureaucratic, bungling. It was denounced as an unauthorised act on the part of the respondents 2 and 3,

37. It is not the form, but substance of the order, which matters. The law on the point is well-settled by several decisions of the Supreme Court. Admittedly it is an executive order. In complying with the provisions of the Article 166 of the Constitution, it would be sufficient, if the requirement of Article 166 is complied with in substance, as has been pointed out by the Supreme Court in State of Bombay v. Purshottam Jog, AIR 1952 SC 317. In later decisions rendered by the Supreme Court, in Ghisalal and Sons v. State of Delhi, AIR 1959 SC 65, and Fonseca Pvt. Ltd. v. L. C. Gupta, AIR 1973 SC 563, the Apex Court reiterated the principle that the provision regarding form of an order is directory and not mandatory. An order not substantially conforming with the required form, would not be prima facie invalid, although it can be certainly challenged as such, but it is possible to uphold its validity, if it is shown by placing extraneous evidence that the decision was taken by a competent authority. In such a case the Court will not disturb an order if it is made in accordance with the business rules. But the Apex Court further held that Courts would have no hesitation, in quashing an order if it is not so. The burden lies on the party, the Government who invokes such an order, in his/its favour, to affirmatively establish that the order was in face made by the proper authority in accordance with the rules framed under Article 166 of the Constitution. (See L. G. Choudhary v. Secy., L.S.G. Deptt., AIR 1980 SC 383).

38. In the instant case, the proponents of the order, despite having opportunities, to place on record such material so as to bring the impugned order within the compass of 'substantial-compliance of rules have not chosen to place any such material on record with the inevitable result that even on this Court the impugned order is liable to be quashed and is accordingly quashed.

39. Shri Chhazed's argument suffers from an apparent fallacy. It is not the petitioner, who is seeking enforcement of Executive/Administrative Directions, it is his prayer for quashing of such administrative directions and administrative directions cannot be allowed to violate fundamental rights. If an authority acts in an arbitrary manner, its action would be bad in law and liable to be quashed.

40. For the foregoing reasons, this petition deserves to be allowed. It is accordingly allowed with costs. Counsel's fee shall be Rs. 3,000/- (Rupees three thousand), if certified. The order dated 17-7-1989, filed as Annexure-P/7, issued by the Joint Director, stands quashed. Respondents' action in placing orders for supply of I. V. Fluds to the respondent No. 4, to the exclusion of others is held to be grossly arbitrary and discriminatory and violative of Article 14 of the Constitution of India. The respondents 1, 2 and 3 are directed to follow the Government decisions taken at the meeting held on 22-5-1989 in making purchases of I. V. Fluids.

The petitioner having succeeded in the petition, does not by itself put an end to the petition, which raised certain fundamental issues of immense public importance. As noted above, reports of fungii and suspended foreign particles, being found in I. V. Fluids, supplied by the respondent No. 4, were pouring in, from different parts of the State. What did the respondents do? They directed return of such bottles to the respondent No. 4 for replacement. The Fluids were to be supplied by 28th August. The date of supply was extended in face of such reports. There was no place to stock. The material was simply dumped in the corridors and verandahs of the Hospitals and rats were eating away the medicines and damaging the containers. When this problem was brought to the notice of the Director at Bhopal, instead of directing stoppage of postponement of supply to respondent No. 4, the period was extended beyond the date as orignally fixed. As for rats, use of pesticides was suggested and some reputed pesticide manufacturer was proposed to be approached. Why extend time for supply, when there was no room for stocking the medicines. How fair the respondents were? What was their concern and commitment for public interest?

41. The petitioner had in his affidavit dated 16-9-1989 come out with a very specific allegation against the respondents 1, 2 and 3 :

"That the respondents Nos. 1, 2 and 3 to fortify their illegalities and to render the present petition infructuous, have purchased the I. V. Fluids in bulk and in far larger quantity than their current requirements. In the past there have been no instances of such huge and bulk single purchase and receipt of I. V. Fluids. The respondents even have no proper and adequate storage facilities for the same. Annexure-P/17 is photograph of one of the Hospitals where the supplied I. V. Fluids are stored in verandahs and passages, in an unsafe and unhygienic conditions."

Which has not been contradicted by the respondents. Is this the 'public interest', which the respondents prefer in their pleadings?

Why conceal the decisions taken at the meeting called by the Health Minister of the State on 22-5-1989? What prompted the respondents 1, 2 and 3 to suppress such a vital and material fact that the State Government had decided not to purchase medicines from a manufacturer who manufactured the same on loan-licence basis. What 'public interest' was going to be served by such wilful suppression on the part of the respondents. Why no action was taken against the supplier in face of numerous reports of fungus and foreign particles being found in I. V. Fluids. Instead of directing prosecution, why the bottles were asked to be returned to the supplier? just in exchange of replacement. Why go in for a contract, admittedly higher in rate, in utter disregard of the decision taken at the meeting dated 22-5-1989. All these issues raised call for a though probe. It has implications not only of drug offences, but economic offences as well. Keeping aside the two aspects for a while, case for wilful suppression of material facts, and knowingly swearing a false affidavit, concealing vital facts, is made out against the respondents 1, 2, 3 and 4. Let notices be issued calling upon each one of them to show cause as to why they should not be ordered to be prosecuted for knowingly swearing false affidavits. Notices be made returnable within three weeks.

42. As for drug offences, the State is directed to prosecute the respondent No. 4, its agents and/or servants concerned in accordance with law for supplying sub-standard I. V. Fluids.

43. Uncertainty as to the quality of the product is perhaps more intense in medicine than any other commodity and added to it is the consumers the patients lack of information. One of the most significant aspects of monopolised health services and medical care unlike other services, are its expensive components, controlled by the physician's decision making process, where the patient or consumer has no role, yet to have a very high level of trust, in, and acceptance of physician's role. It is this trust of the patient, which has been preached with impunity by the respondents, who created a monopoly in supply of poor quality drugs at premium rates, that too in the name of public-interest, little realising that human life has no spare, who has benefited by such conduct, is a matter of investigation, but it was certainly a case exposing the poor patient, to all sorts of risks and hazards of medication, as well as the unhygienic conditions in which the I. V. Fluids supplied by the H. A. L. were stocked. What is worst is that all this goes on in the name of 'public-interest'. It is time that the respondents, the Directors of Health Services and Medical Education learn a bit of grammar of public-interest and welfare economics of medical care rather than in indulging pure mathematics thereof. It calls for a thorough investigation and respondent-State is directed to get the matter investigated and proceed against all those involved and concerned in accordance with law.

The Additional Registrar of this Bench Registery is directed to keep the Record File submitted by the Government Advocate, pertaining to this matter, in safe custody only to be delivered to a responsible officer of the State after obtaining suitable orders from the Court in that behalf.