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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

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

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

Versus

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

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

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

Versus

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

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

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

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

Versus

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

J U D G M E N T

Deepak Gupta, J.

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

No(s).9316 of 2017.

2. Leave granted.

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

judgment.

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

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

Maharashtra  undertaking.   It  is  engaged  in  the  business  of

manufacture  of  vaccines  and  other  pharmaceuticals  and

biological products.  One of the main businesses of Haffkine is

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

parties that oral polio vaccine is manufactured by formulation of

various  bulk  drugs  including  Monovalent  Bulk  of  Poliomyelitis

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

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

combined and formulated along with other materials by Haffkine

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

notice  on  20.01.2016,  for  supply  of  bulk  drugs  including

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

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

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

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

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

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

thereafter.   It  is  pertinent to mention that the tender provided

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

Biofarma,  Indonesia,  a  World  Health  Organisation  (WHO)

prequalified bulk manufacturer, for the supply of Bivalent Oral

Polio Vaccine Bulk (bOPV).  

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

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

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Universal Exim FZE, an enterprise organised and existing under

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

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

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

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

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

tender was changed to 12.02.2016.   

On 12.02.2016, the representatives of Haffkine were present

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

Universal  Exim  FZE  represented  by  Nirlac  was  opened,  the

meeting was adjourned after lunch without opening the tender of

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

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

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

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

had  not  been  found  to  be  technically  qualified.   Nirlac

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

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

their  presence.    It  was  also  complained  that  the  tender

conditions  had  been  tailor-made  to  suit  the  requirements  of

Bionet.  Nirlac also sent two other representations to the Minister

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

Administration,   Government  of  Maharashtra.   According  to

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

22.06.2016  and  thereafter  they  filed  writ  petition  in  the  High

Court of Bombay challenging the rejection of their bid and the

award of the tender in favour of Bionet.  

6. The  main  ground  raised  was  that  the  Central  Vigilance

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

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

the representatives of Nirlac who were present.  The High Court

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

violated the CVC guidelines but also came to the conclusion that

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

tender  of  Nirlac had been wrongly  rejected.   The tender  dated

20.01.2016  was  quashed,  letter  dated  22.06.2016  was  also

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

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

necessary in public interest, the High Court permitted Haffkine to

purchase  the  bulk  drug  from  Bionet  till  a  fresh  tender  was

finalised.   The  State  Government,  through  the  Department  of

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

of eight weeks.   

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

petitions  challenging  the  setting  aside  of  the  tender  issued  by

Haffkine  as  also  setting  aside  of  the  contract  entered  into  by

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

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

tender should have been awarded to Nirlac instead of directing

that a fresh tender be floated.   

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

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

been disputed before us that the CVC guidelines are applicable.

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

High Court which read as follows:

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

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

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

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

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

tender  must  be  opened  in  the  presence  of  the  bidders  or

representatives of the bidders who are present at the time when

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

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

opened in the presence of the representatives of Nirlac.  According

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

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

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

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

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

the impugned judgment, the High Court has recorded:

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

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

the  bid  of  Bionet  was  opened  in  the  presence  of  the

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

of the opinion that the entire tender opening process is vitiated

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

add that opening of the tender without showing the documents is

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

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

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

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

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

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

no merit in the appeals filed by Haffkine and Bionet.   

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

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

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

perusal  of  the  record,  found a  comparative  chart  prepared  on

12.02.2016 itself, which is reproduced below:

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This chart was admittedly shown to the representatives of Nirlac

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

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

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

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

sheet  was  shown to  the  representatives  of  Nirlac.   They  have

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

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

information and their bid had been wrongly rejected.  They have

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

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

found  to  be  technically  qualified.   Nirlac  sent  letter  dated

16.02.2016 to the Minister of Food and Civil Supply, Government

of  Maharashtra,  followed  by  another  letter  dated  24.02.2016.

Thereafter,  Nirlac  kept  silent  till  letter  dated  22.06.2016  was

issued whereby a communication was sent to them that their bid

was  found  to  be  technically  deficient  and  then  they  filed  writ

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

to the letter dated 12.02.2016 but Nirlac never followed up after

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24.02.2016.  They raised the matter only with the Minister but

did not deem it fit to approach the Court.   

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

Prashant  Bhushan,  learned counsel,  appearing  for  Nirlac  have

urged that entire process of  tender by Haffkine was fraudulent

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

party  can  only  claim  restitution  when  its  bid  is  technically

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

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

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

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

follows:

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

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

and this clause does not contemplate any buy back agreement.

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

mentioned as follows:

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

We  can  supply  bOPV  Bulk quantity 70 million doses as required  in  the  tender documents,  however  same can  be  increased  subject  to availability  of  stocks  at  the time  of  receipt  of  your additional requirements.

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

sufficient  bulk  quantity  of  oral  vaccine  should  be  supplied  for

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

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

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

condition  clearly  postulates  that  the  bidder  should  be  able  to

generate  business for  Haffkine for  sale of  minimum 70 million

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

arrangement  but  it  is  apparent  that  Haffkine  wanted  that  the

person supplying the bulk drug should also generate business for

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

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

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

respect to this condition it has mentioned as follows:

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

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

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

generated  but  according  to  them,  the  said  condition  was  not

related to the supply of bulk drug.  

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

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

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

bulk  supplier  should  be  able  to  give  some  commitment  with

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

vaccine.   Therefore,  this  condition  was incorporated and since

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

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

the party issuing a tender to decide what conditions should be

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

judge  of  its  own  requirements  and  there  is  nothing  wrong  if

Haffkine wanted that the successful tenderer, who supplied the

raw  material,  should  take  responsibility  to  sell  or  generate

business for sale of some portion of the finished product.  

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17. We  may  add  that  many  other  allegations  and  counter

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

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

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

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

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

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

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

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

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

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

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

polio  drug  is  required  to  manufacture  polio  vaccine,  which  is

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

the High Court permitted Haffkine to take supplies from Bionet

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

was to  procure  bulk  drug from Bionet  to  produce 600 million

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

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

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

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

million  doses  out  of  which 4  million  doses  have  already  been

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

appearing for Bionet stated before us that a confirmed order has

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

the  total  number  of  doses  for  which  orders  are  pending  with

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

to 120 million doses.

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

supply of drugs including Monovalent Bulk of Poliomyelitis Type 1

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

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

Nirlac  for  the  manufacture  of  120  million  doses  of  oral  polio

vaccine.   Therefore,  Haffkine  is  directed  to  place  sufficient

quantity  of  order for  supply of  bulk supply  of  drugs including

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

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

manufacture  of  120  million  doses  on  the  aforesaid  terms.

Haffkine  is  restrained  from purchasing  any  further  bulk  drug

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

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directed that Haffkine must supply and Bionet must purchase 66

million doses of oral vaccine as per the confirmed order.

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

that  the  fresh tender  should  be  floated by  the  Government  of

Maharashtra.   Haffkine  may be  a  Government  of  Maharashtra

undertaking  but  it  is  a  separate  entity.   Haffkine  is  therefore

permitted to float fresh tender for supply of bulk drugs including

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

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

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

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

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

tender should be clear and unambiguous setting out the period of

tender  and  approximate  quantities  of  both  drugs  required.   If

Haffkine wants any buy back or business generation clause, it

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

oral polio vaccine must be purchased by the successful tenderer

from Haffkine.

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The appeals are disposed of in the aforesaid terms.  Pending

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

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

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

New Delhi July 27, 2017