Delhi District Court
8/102 vs Managing Director on 11 October, 2018
In the Court of Shri V.K. Gautam : JSCC-ASCJ-G. Judge, Central District
at Tis Hazari Courts, Delhi
MCA No.26/2018
In the matter of:-
ITL Labs Pvt. Ltd.,
Having its Registered Office at
B-283-84, Mangolpuri Industrial Area,
Phase-I, Delhi-110083
Through its Director,
Shri Sunil Mehandiratta
Corporate Office at :
18/1021, Arya Samaj Road,
Karol Bagh, Delhi
......Appellant
VERSUS
1. Managing Director, Rajasthan Medical Services
Corporation, Gandhi Block, Swasthya Bhawan,
Tilak Marg, Jaipur-302005
2. Executive Director (QC), Rajasthan Medical Services
Corporation, Gandhi Block, Swasthya Bhawan,
Tilak Marg, Jaipur-302005
......Respondents
Date of Institution : 03.05.2018
Reserved for Judgment : : 09.10.2018
Date of Decision : 11.10.2018
JUDGMENT
1. This is an appeal arising out of order dated 20.04.2018 passed by the learned Trial Court dismissing the second interim injunction application of the plaintiff under Order 39 Rules 1 & 2 CPC. Earlier MCA No.26/18 Page No. 1 of 15 injunction application under Order 39 Rules 1 & 2 CPC filed on behalf of the plaintiff was dismissed vide order dated 20.12.2017 and the appeal preferred by the plaintiff against the said order was also dismissed by the learned Appellate Court, however, liberty was granted to the plaintiff to move appropriate application on the submissions of the plaintiff that it be granted the relief to enter into other bids floated by other agencies during the trial of the suit in hand. The appellant herein is the plaintiff in the main suit and the respondents herein are the defendants therein. For the sake of convenience, the parties shall be referred to by the nomenclature in the main suit.
2. The plaintiff has filed a suit for declaration and permanent injunction for restraining defendants from the operation of the order dated 04.01.2017 passed by the defendant no.2 and also from taking any action against the plaintiff to disqualified the plaintiff by virtue of the letter/order dated 04.01.2017. It is also prayed that a decree of declaration be passed thereby declaring the letter/order dated 04.01.2017 as null and void.
3. The brief facts of the case are that the plaintiff company is one of the leading analytical and Drug Testing Laboratory established in the year 1994 and having its registered office at B-283-84, Mangolpuri Industrial Area, Phase-I, Delhi-110083 and branch office at 1089/12, Arya Samaj Road, Karol Bagh, New Delhi. It is stated that the plaintiff company had submitted an e-bid alongwith the prescribed bid fees for a Tender/E-Bid contract (Ref. No.:F.02(63)/RMSCL/ED (P) EMPLANELMENT/DTL/NIB-10/2013/1170) dated 01.11.2013 which was floated by Rajasthan Medical Service Corporation Ltd. (RMSCL), Ministry of Health and Welfare, Governemnt of Rajasthan for the empanelment of analytical testing laboratories for the test and analysis MCA No.26/18 Page No. 2 of 15 of drugs, ending on 31.12.2015 and had submitted its bid for the above tender on 10.12.2013 along with the prescribed fees. It is further stated that the plaintiff being L1, the said tender was allotted to it and in pursuance thereto, an agreement dated 22.05.2014 (valid upto 31.12.2015 extended further for one year) was executed between the plaintiff and the defendants. Subsequent to execution of agreement dated 22.05.2014 between both the parties, the plaintiff on various occasions was directed to carry out tests on the samples so supplied by the defendants. All the tests were duly performed by the plaintiff as per tender conditions and the reports for the same were also timely submitted to the defendants. On 21.01.2016, the defendant no.2 issued a notice no.FS/RMSC/QC/Test/2015-16/1510 dated 21.01.2016 to the plaintiff and in the said notice, the defendant no.2 has alleged the discrepancy on the part of the plaintiff in conducting the test and issuing reports.
4. In the said notice, it has been stated that in view of the alleged discrepancy and variation in both the test reports, the plaintiff has contravened clause 11 (b) of bid document as also provisions of Drugs & Cosmetic Act, 1940 and GLP practices. The plaintiff was, therefore, served with the said notice and asked to furnish explanation. On receiving the above said notice, the plaintiff clarified to the defendant no.2 that the allegations raised against it in the above said notice dated 21.01.2016 are wholly misconceived and frivolous. It is further stated that the defendant no.2 was duly explained that since Vitamin D3 is a thermo labile drug and is not stable medicament particularly in liquid dosage form and that the effect of BRONOPOL preservative on the stability of Vitamin D3 suspensions is quite well documented. When the said sample was first tested on 02.01.2016, the assay of Vitamin D3 was found as 124.24% and, therefore, the said sample was passed.
MCA No.26/18 Page No. 3 of 15However, when the said sample was again retested by the plaintiff on the request of defendants on 07.01.2016, then the same failed as the assay of Vitamin D3 was found nil. It is averred that it does not mean that there was discrepancy in conducting tests or issuing reports.
5. It is further averred in the plaint that the defendant no.2 issued another Notice No.FS/RMSC/QC/Test/2016-17/220 dated 30.05.2016 to the plaintiff regarding "inconsistency in test report of Foley Ballon Catheter". The plaintiff immediately sent a letter/reply dated 06.06.2016 to the defendant giving clarifications. The plaintiff had conducted the test on the basis of specifications provided to it by the defendants and, therefore, the defendants at the later stage cannot allege any inconsistency on the part of the plaintiff for conducting the test on the basis of specifications provided by the defendants. Thus, the defendants are totally unjustified in rejecting or alleging inconsistency in other test reports which have been tested as per STP specifications only. The defendant no.2 once again issued a similar notice F5/RMSC/QC/Test/2016-17/427 dated 28.06.2016 regarding "inconsistency in Test Report of Foley Ballon Catheter" wherein the defendant has reiterated that the plaintiff has not only ignored the rules of Gazettee notification dated 25.09.2014 but has also contravened the instructions given by the defendant. It is further stated that the plaintiff was compelled/forced to retest the said sample as per the specifications IS:11497. Thereafter, the plaintiff instantly vide its letter dated 05.07.2016 replied to the notice dated 28.06.2016 stating that as per the requests made by the defendants, it is issuing new amended test reports no.G201605300036 and G201605300038 dated 30.06.2016 for the said samples as per IS:11497 and previous reports shall stand cancelled. The defendant no.2 vide notice dated 02.09.2016 yet again raised all the above said allegations/issues MCA No.26/18 Page No. 4 of 15 against the plaintiff. The defendant no.2 without even waiting for reply of the plaintiff tot he said allegations, straightaway marked copy of the said notice dated 02.09.2016 to Drug Controller General (India) as also to Drug Controller Department, Delhi for needful action to be taken against the plaintiff. This shows that the defendant no.2 has issued the said notice with premeditated mind and it has already assumed the plaintiff guilty for violation of tender conditions. The plaintiff learnt from a local newspaper that RMSCL got the said sample detected for the third time by a Drug Inspector and the said laboratory declared it as of standard quality. However, the defendants intentionally did not apprise the plaintiff of the said finding and the same was also not cited in the show cause notice dated 02.09.2016. The plaintiff further informed the defendants that there were some default in detector and lamp energy of one of HPCL at the time when the testing of the above said sample was conducted by it and as a result it informed the defendants that the results of the said sample are put on hold for certain period of time. Thereafter, when the above said defaults were rectified, the plaintiff demanded additional quantity of the said sample from the defendants to conduct the test again, however, the defendants stoutly refused to prove the additional quantity of the said sample to the plaintiff and instead supplied to it t other labs for retesting. It is further stated that the plaintiff could not have been forced to do reporting against the specification or beyond its jurisdiction. The very same queries were appropriately and adequately responded to by the plaintiff vide its replies dated 06.06.2016, 05.07.2016 and 12.09.2016. The defendant issued yet another show cause notice no.F5/RMSC/DISP./Test/2016-17/1439 dated 20.12.2016 to the plaintiff alleging the same discrepancies and inconsistencies as were mentioned in previous letters and sought an explanation from the plaintiff as to why the proposed action of disqualifying the firm under MCA No.26/18 Page No. 5 of 15 clause 13(2) of Tender conditions be not initiated and directed the plaintiff to be present for personal hearing with relevant documents/evidence on 27.12.2016. It is further stated that the plaintiff sent a detailed reply to the above said show cause notice dated 20.12.2016 reiterating its earlier submissions. No 'adverse' inspection report of the inspection dated 19.09.2016 was ever provided to the plaintiff. Despite having adequately responded to all the queries/issues sought to be raised by the defendants, the defendant no.2 arbitrarily and unjustifiably passed an order dated 04.01.2017 disqualifying the plaintiff company under clause 13 (2) of the Tender Conditions from participating in the tender for the period of two years. Therefore, aggrieved by the said impugned order dated 04.01.2017 and show cause dated 20.12.2016, the plaintiff filed a first appeal assailing the said order and notice under Clause 15 of the Tender condition as also Section 38 of the Rajasthan Transparency in Public Procurement Act, 2012. However, the said appeal was dismissed by the First learned Appellate Authority i.e. Secretary, Medical, Health & Family Welfare, Govt. of Rajasthan vide order dated 27.01.2017 stating therein that since the dispute in the instant case has arisen after the plaintiff was declared L-1 and contract was awarded to it, therefore, an appeal under clause 15 of the Tender condition as also Section 38 of the Rajasthan Transparency in Public Procurement Act, 2012 (hereinafter referred to as 'the Act') is not maintainable. It is further stated that first learned Appellate authority vide the said order further held that clause 15 of the Tender condition as also Section 38 of RTTP Act is applicable only up to the stage of pre-award of Tender and not thereafter. Hence, the present suit.
MCA No.26/18 Page No. 6 of 156. Along with the suit, the plaintiff filed an application under Order 39 Rules 1 & 2 CPC seeking similar relief of injunction till the disposal of the suit.
7. The defendants no. 1 and 2 (respondents in the present appeal) filed their written statement contending therein that the suit of the plaintiff is liable to be dismissed on the ground of jurisdiction of the Delhi Courts. It is clearly written in the Clause no.18 of the advertisement issued by the defendants for E-Bid for the empanelment of analytical testing laboratories for the test and analysis of drugs that "in the event of any legal dispute arising out of BID such dispute would be subject to the jurisdiction of civil courts within the city of Jaipur only". It is also written in the clause no. 15 of the above said advertisement that Grievance Redressal during Empanelment Process would be before the First Appellate Authority is the Secretary, Medical, Health & Family Welfare, Government of Rajasthan and the Second Appellate Authority would be the Principal Secretary, Medical, Health & Family Welfare, Government of Rajasthan and Chairman, RMSCL. It is further stated that proper opportunity of being heard was given to the plaintiff. The show cause notices were issued to the plaintiff on 02.09.2016 and 20.12.2016 to submit his explanation as to why the action should not be initiated against him. It is further stated that the plaintiff is a drug testing laboratory and has been disqualified for discrepancies in tests conducted by it. The health of the public at large cannot be compromised or compensated and kept at risk. Therefore, the non-allowance of the plaintiff to float any further tenders is absolutely valid. It is further stated that the plaintiff reiterated that Vitamin D3 is one of the thermo labile drug and it was not stable medicament particularly in liquid dosage form, but this not acceptable because drug was tested in the month of January which was winter MCA No.26/18 Page No. 7 of 15 season and there was no possibility of such a degradation of product up to 0% from 124% due to rise of temperature, which is a contravention of clause 11(b) of bid documents which requires that the tests mentioned in IP/BP/USP/Drugs & Cosmetics Act etc. should be carried out for each and every sample meticulously and with great attention but the plaintiff is failed to meet out the conditions of bid documents and standards of Drugs & Cosmetics Act, 1940.
8. It is further contended in the written statement that the plaintiff has breached the terms and conditions of the contract which says that "in case the service provider fails or neglects or refuse to faithfully perform any of the convenants on his part herein contained, it shall be lawful for the purchaser to forfeit the amount deposited by the service provider as Performance Security and cancel the contract". The plaintiff had already availed the remedy which was provided under Section 38 of the Rajasthan Transparency in Public Procurement Act, 2012. The plaintiff went in 1 st appeal followed by a second appeal and the plaintiff has lost before the courts below. The plaintiff has concealed the material fact about the filing of the second appeal and its consequent dismissal. It is further stated that in test reports of Foley Ballon Catheter, Item Code No.S-9(c) & S-9(d) that the plaintiff was requested to carry out the test reports, it was observed that all tests are not conducted according to IS:11497 and some tests i.e. Overall Length, Shaft Length, Outer Diameter of Catheter, Flow rate, Capacity of Ballon and Eye Size were performed and complied with In-house specification of supplier, which cannot be considered because RMSC has already mentioned the IS number by which the testing should be performed. It is further stated that the plaintiff had not only flouted the instructions of RMSC but also flouted the rules of Gazettee notification of India No.GSR 690(E) dated 25.09.2014. It is further stated that batch MCA No.26/18 Page No. 8 of 15 No.CPG-005 of Pegabalin Capsule IP 75mg (634) was also sent to Government Laboratory for consideration of test result and this batch was supplied at Kota Mcdw only. When the second sample was sent to the Government Drugs Testing Laboratory, Jaipur, Rajasthan on Form no.14-A and the same has also been declared as not of Standard Quality with respect to Identification Test (by HPLC) and Assay of Pregabalin 75 mg which was found Nil on form No.14B as defined under Drugs and Cosmetic Act, 1940. It is further stated that in view of test results of two different laboratory, it is established that test report of Pregabalin Capsule IP 75 mg (634), Batch No.CPG-005 has been released by the plaintiff without getting the sample tested. It is further stated that without giving any notice to the plaintiff from the defendant, Director of the plaintiff vide email dated 29.06.2016 was informed that due to some technical problem in HPLC section test report no.G201606010014 of Pregabalin Capsule should be ignored. In fact, as soon as he perceived the fact of the situation above test result, he declared his own report as defective. This act of the plaintiff clearly shows that the plaintiff is playing with the lives of poor people and public at large. It is further stated that on the basis of news item published in Dainik Bhaskar, Kota on 25.08.2016 and in view of the serious issues regarding replacement of spurious drugs with standard quality drugs an investigation has been started by the drug control organization, Rajasthan as per instructions of Hon'ble Health Minister of Medical Health. The plaintiff's lab was visited on 13.09.2016 by Shri Rajmakal Chippa, Assistant Drug Controllr, Head Quarter Jaipur, Shri Hari Parkash Soni, Dy. Director, Drug Testing Laboratory Rajasthan, Jaipur and Shri Rakesh Verma, Assistant Drug Controller (QC), RMSCL, Jaipur in reference to office order No.F-02(190)/RMSCL/ED/ (P)/Empanelment/DTL/NIB-09/1144 dated 01.09.2016 and it was observed by them that Chromatogram relation to testing to Pregabalin, MCA No.26/18 Page No. 9 of 15 Bath No.CPG/005 and testing of calcium and Vitamin D3 suspension bath No.CDS-004 were checked in HPLC system in which test was carried out by Chromatogram record was not found available in system, person in charge informed that due to software problem the date have been deleted, however they have recovered from the hard disk which was found kept stored at desktop. These observations show that the plaintiff has not actually carried out test for Assay by HPLC and on the basis of these observations, the plaintiff has been disqualified on 04.01.2017 for discrepancies in tests conducted by it. The plaintiff went in 1st appeal where his appeal was dismissed on 27.01.2017. Thereafter, the plaintiff went in second Appeal No.7/2017 and the plaintiff has lost before the court below. The defendants no.1 & 2 have denied the other allegations of the plaint and have prayed for the dismissal of suit.
9. After hearing the arguments of both the parties, the learned Trial Court vide impugned order dated 20.04.2018 dismissed the second injunction application of the plaintiff.
10. The appellant has challenged the impugned order on the ground that the learned Trial Court failed to appreciate that the impugned actions of the respondents are patently arbitrary, unjust, unfair, violative of principles of natural justice and amount to colorable exercise of power. The learned Trial Court failed to appreciate that the impugned order dated 04.01.2017 is wholly untenable and misleading. The same is substantiated from the fact that the respondents in order to deceit the appellant has deliberately withheld the test report dated 02.08.2016 of government analyst pertaining to sample of Pregabalin which has given concurrent findings as that of the appellant vide report no.G2016016010014 dated 06.06.2016. The said report was neither MCA No.26/18 Page No. 10 of 15 mentioned in the show cause notices issued nor the results of the said report was considered before passing of the impugned order. This evidents the mischief sought to be placed by the respondents so as to wrongly frame appellant for violation of tender conditions and thus the impugned order being wholly perverse is liable to be set aside. The learned Trial Court failed to consider that the impugned order has been passed by the respondents in complete disregard to the submissions made by the appellant in its reply dated 12.09.2016. When the appellant has already complied with the directions of the respondents to issue test reports as per IS:11497 and in pursuance of which amended test reports have already been issued then in such case the respondents were unjustified and unfair to hold the appellant liable for discrepancies in the testing of Foley Ballon Catheter, item code no.S-9c & S-9(d). The learned Trial Court has failed to appreciate that the findings of the respondents in the impugned order with regard to inconsistent reports of Calcium and Vitamin D3 Suspension (441) are totally false and erroneous and the same have been given in total disregard to the replies given by the appellant. The respondents while passing the impugned order has failed to consider that when Calcium and Vitamin D3 Suspension (441) sample was first tested on 02.01.2016, the assay of Vitamin D3 was found as 124.24% and, therefore, the said sample was passed. However, when the said sample was again retested on 07.01.2016 by the appellant on the request of the respondents, then the same failed as the assay of vitamin D3 was found NIL. This is so because Vitamin D3 is a volatile drug (Unstable Compound) and thus on every testing result may differ and as such the appellant cannot be held responsible for poor stability of any formulation. Whenever the referred bath number was tested by the appellant, whatever contest of Vitamin D3 found on that day was reported. The learned Trial Court failed to consider that the new MCA No.26/18 Page No. 11 of 15 allegation wsa sought to be raised against the appellant vide show cause notice dated 20.12.2016 by virtue of which it was alleged that on conducting an inspection of the appellant's lab on 13.09.2016, it was proved that the appellant has in fact not carried out the test for Assay by HPCL for the drug Pregabalin 75 mg and Calcium & Vitamin D3 Suspension. The respondent while passing the impugned order has upheld the above said allegation which is wholly false and baseless. Had the alleged findings were made against the appellant on the date of inspection, then during the course of inspection the appellant's lab would not have been declared as qualified for subsequent tenders by the respondents and for the nex tender E-BID REF. NO.
F.02(190)/RMSCL/ED (P) Empanelment/DTL/NIB-09/2016/809 dated 23.06.2016 with the respondents. The learned Trial Court failed to appreciate the issuance of the series of the show cause notices as also the impugned order cannot be said to have complied with the principles of natural justice because in the instant case the respondents have merely undertaken an empty formality of issuing show cause notice and not objectively considering the explanations afforded by the appellant. The appellant vide its reply dated 12.09.2016 has sought for certain information and documents from the respondents so as to effectively rebut all allegations made against it, however, the respondents without providing such documents have straightaway passed the impugned order and the same, therefore, wholly illegal and is liable to be set aside. The decision of disqualifying the appellant company from participating in tenders for a period of two years is wholly disproportionate to the severity of the alleged offence, even if proven, and thus th same is liable to be set aside. The appellant has been doing business and performing test for the respondents for over 7 years now and in the past no such complaints/incidents/ discrepancies were ever reported against the appellant in the past and MCA No.26/18 Page No. 12 of 15 it enjoys a clean track record. The appellant has been doing testing for more than ten corporations and no such complaint has ever been reported against it.
11. Per contra, it has been argued on behalf of respondents/defendants no. 1 and 2 that impugned order is a well reasoned order passed on the basis of material available on record. It suffers from no illegality or infirmity and accordingly, does not deserve any interference by this Court.
12. I have heard ld. counsel for the parties and have gone through the trial court record.
13. It is a settled law that before granting interim injunction in favour of a plaintiff, the Court has to satisfy itself that a prima facie case exist in favour of the plaintiff, the balance of convenience lies in his favour and the plaintiff is likely to suffer an irreparable loss which cannot be compensated in terms of money in case the injunction is not granted.
14. It is also settled law that the grant of injunction which is a discretionary relief should not be interfered by appellate court unless the discretion exercised by the learned Trial Court appears to be prima facie wrong or against the material on record.
15. The plaintiff in the subsequent application under Order 39 Rules 1 & 2 CPC filed before the learned Trial Court besides the relief for restraining the defendants and other agencies from passing any adverse order or taking any further coercive action against the plaintiff on the basis of the letter dated 04.01.2017 has also prayed for the relief of allowing the plaintiff to participate in the bids floated by the MCA No.26/18 Page No. 13 of 15 other agencies. The other agencies are not a party in the present suit and there is no pleading with regard to whether the plaintiff has been denied from entering into bids floated by the other agencies. The plaintiff in order to be entitled for a specific relief as an interim measure has also to plead the necessary averments in this regard in the plaint. There is no averment in the plaint with regard to the plaintiff being denied from participating in the bids floated by the other agencies on the basis of the letter dated 04.01.2017 passed by the defendant no.2.
16. The learned Trial Court has rightly observed that even after the liberty was granted by the learned Appellate Court vide order dated 22.02.2018 to the plaintiff for filing necessary amendment application before the learned Trial Court, no such amendment application was filed by the plaintiff. The earlier application of the plaintiff under Order 39 Rules 1 & 2 CPC was dismissed by the learned Trial Court on the ground that the interest of health of the public at large is to be seen vis-a-vis the monetary loss incurred by the plaintiff. The said order of the learned Trial Court was also upheld in the appeal by the learned Appellate Court vide order dated 22.02.2018. The effect of the relief which has been sought by the subsequent injunction application is also in respect of the monetary loss likely to be suffered by the plaintiff if it is not allowed to participate in the other bids. The answer to this question also lies in the determination of the validity of the letter dated 04.01.2017 which is to be decided after the trial.
MCA No.26/18 Page No. 14 of 1517. In view of the reasons given above, I have no hesitation in holding that no infirmity or illegality is found in the impugned order warranting any interference by this Court. The said order is accordingly upheld and appeal stands dismissed.
18. The appeal file after due compliance be consigned to the Record Room. Trial Court Record be sent back along with a copy of the judgment.
Digitally signed by VINOD VINOD KUMAR
KUMAR GAUTAM
Date: 2018.10.11
Announced in the Open Court GAUTAM 15:42:09 +0530
on 11.10.2018
(V.K. Gautam)
JSCC-ASCJ-G. Judge,
Central District: Tis Hazari Courts: Delhi
MCA No.26/18 Page No. 15 of 15