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

Citation: [2023] 1 S.C.R. 473 · Decided: 03-01-2023 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Dismissed

Cited by 1 judgment(s) · cites 9 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
473
   [2023] 1 S.C.R. 473
473
M/S INDIAN MEDICINES PHARMACEUTICALS
CORPORATION LTD
v.
KERALA AYURVEDIC CO OPERATIVE SOCIETY LTD.
& ORS.
(Civil Appeal No 6693 of 2022)
JANUARY 03, 2023
[DR. DHANANJAYA Y CHANDRACHUD AND
HIMA KOHLI, JJ.]
Constitution of India: Art.14 – Government Contracts –
Transparent and non-arbitrary method to be adopted by the
Government – Decision of the government  regarding purchase of
the Ayurvedic Drugs only from the IMPCL (the appellant) –
Challenged on the ground that selection of IMPCL by the
government is arbitrary and illegal by virtue of  Art. 14 – High
Court held that by virtue of Para 4(vi)(b) of the Operational
Guidelines, the government was to invite supply of the drugs from
various pharmacies and PSU listed therein so as to foster
competition and quality of medicines and the practice adopted by
the government to purchase Ayurvedic drugs only from IMPCL is
illegal – Aggrieved IMPCL filed instant appeal – Held: Government
Contracts involve expenditure out of the public exchequer, therefore,
the moneys expended must not be spent arbitrarily – The State does
not have absolute discretion while spending public money and,
therefore, all government actions including government contracts
awarded by the State must be tested on the touchstone of Art.14 –
The government can deviate from the route of tenders or public
auction for the grant of contracts, but such deviation must not be
discriminatory or arbitrary – Deviation from the tender route has
to be justified and such a justification must comply with the
requirements of Art. 14 – Administrative Law.
Constitution of India: “Social Welfare” – State Largesse –
Largesse is term used to describe a “generous donation” – Welfare
State aims at realising  socio-economic rights which are recognised
A
B
C
D
E
F
G
H
474
SUPREME COURT REPORTS
[2023] 1 S.C.R.
by the Constitution – Social Welfare Benefits provided by the State,
which is a constitutional mandate is commonly understood in the
language of largesse and therefore terming all actions of government
as government largesse results in doctrinal misconception –
Therefore government action targeted for the well-being of citizens
cannot be termed as largesse as use of such terminology belittles
the sanctity of the social contract that the ‘people of India’ entered
into with the State to protect and safeguard their interests.
Constitution of India: Government Contracts – Judicial
Review – Extent and Ambit – The scope of judicial review in matters
of government contract is limited – But the government does not
have unlimited discretion in granting the State Largesse and it must
act in fairness – It is a settled proposition of law under Constitution
that the government cannot act arbitrarily while dealing with the
public, whether it is while giving jobs or entering into contracts.
Constitution of India: Tender – Constitutional Requirement –
Inviting tenders and conducting public auctions are considered 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 the purpose of
allocation by the State is not revenue maximization, the State could
award contracts through other methods, provided it is non-arbitrary
and meets the requirements of Art.14.
Dismissing the appeals, the Court
HELD: 1. The welfare State plays a crucial role in aiding
the realisation of the socio-economic rights which are recognised
by the Constitution. Social welfare benefits provided by the State
under the rubric of its constitutional obligations are commonly
understood in the language of ‘largesse’, a term used to describe
a generous donation. Terming all actions of government, ranging
from social security benefits, jobs, occupational licenses, contracts
and use of public resources – as government largesse results in
doctrinal misconceptions. The reason is that this conflates the
State’s power with duty. The Constitution recognises the pursuit
A
B
C
D
E
F
G
H
475
of the well-being of citizens as a desirable goal. In doing this the
Constitution 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 of
the social contract that the ‘people of India’ entered into with the
State to protect and safeguard their interests. [Pa

Excerpt shown. Read the full judgment & AI analysis in Lexace.