Supreme Court Directs Fresh Tender in Disputed Polio Vaccine Procurement Case

The case of Haffkine Bio-Pharmaceutical Corporation Ltd. vs. M/s. Nirlac Chemicals revolves around a legal dispute concerning the award of a government tender for bulk polio vaccine manufacturing. The Supreme Court ruled that the Central Vigilance Commission (CVC) guidelines were violated during the tender process, leading to a flawed selection. The Court set aside the awarded contract and directed a fresh tendering process.

Background of the Case

Haffkine Bio-Pharmaceutical Corporation Ltd. (Haffkine), a Government of Maharashtra undertaking, is engaged in the manufacture of vaccines and pharmaceutical products. It issued a tender on January 20, 2016, for the supply of Monovalent Bulk of Poliomyelitis Type 1 (Oral) Sabin Strain and Monovalent Bulk of Poliomyelitis Type 3 (Oral) Sabin Strain, both essential for the formulation of polio vaccines.

M/s. Nirlac Chemicals (Nirlac), a registered partnership firm in India, had been supplying bulk polio vaccine materials to Haffkine for over 15 years. Upon learning about the new tender requirements, Nirlac protested against the terms but still participated in the bidding process.

Key Events in the Tendering Process

• The techno-commercial bids were initially scheduled to be opened on February 10, 2016, but were later rescheduled to February 12, 2016.
• Nirlac submitted its bid as a distributor of M/s. P.T. Biofarma, Indonesia, a WHO-prequalified manufacturer.
• Another bidder, Bionet Asia Co. Ltd., Thailand (Bionet), also submitted a bid.
• During the tender opening process, Nirlac alleged that the bid submitted by Bionet was not opened in their presence.
• Haffkine subsequently awarded the contract to Bionet, rejecting Nirlac’s bid as technically deficient.

Legal Dispute and High Court Ruling

Nirlac challenged the tender decision before the Bombay High Court, arguing that the process lacked transparency and violated CVC guidelines. The High Court ruled in favor of Nirlac, holding:

• The bid submitted by Bionet was not opened in the presence of rival bidders, violating CVC guidelines.
• Nirlac’s bid met all tender conditions and was wrongly rejected.
• The awarded contract in favor of Bionet was set aside.
• The Government of Maharashtra was directed to issue a fresh tender within eight weeks.

Supreme Court’s Analysis and Judgment

Haffkine and Bionet appealed the High Court’s decision before the Supreme Court, while Nirlac sought a ruling that the tender should have been awarded to them instead of being canceled.

1. Violation of CVC Guidelines

The Supreme Court examined the CVC guidelines on tendering and found that they require bids to be opened in the presence of competing bidders. The Court noted:

“The tender opening process must be transparent and adhere to fairness in competition. Failure to open a bid in the presence of competitors vitiates the entire process.”

The Court held that Haffkine violated the CVC guidelines by not ensuring transparency in the tender opening process.

2. Rejection of Nirlac’s Bid Was Justified

Despite ruling in favor of setting aside the awarded contract, the Supreme Court did not agree with the High Court’s finding that Nirlac’s bid should have been accepted. The Court examined a specific tender condition:

• The tender required the selected bidder to generate business for Haffkine for a minimum of 70 million doses.
• Nirlac’s bid did not include any commitment to generating business for Haffkine.

The Court concluded that Nirlac’s bid was technically deficient and was rightly rejected on this ground.

3. Fresh Tender Directed

Recognizing the public interest in procuring bulk polio vaccine materials without delay, the Court permitted Haffkine to continue purchasing from Bionet temporarily. However, it directed that a new tender be floated, ensuring adherence to proper procedures.

4. Buy-Back Requirement Clarified

The Court clarified that if Haffkine wanted a business generation clause in future tenders, it must specify clear terms on the buy-back price of the final polio vaccine.

Final Orders

The Supreme Court ruled:

• The High Court’s order canceling the awarded contract to Bionet was upheld.
• The direction to award the contract to Nirlac was set aside.
• Haffkine was permitted to purchase from Bionet until a fresh tender was issued.
• The fresh tender must be e-tendered to ensure transparency.

Legal Implications

1. Transparency in Government Tenders

The ruling reinforces the need for transparency in tendering processes and strict adherence to CVC guidelines.

2. No Automatic Award of Contracts

The judgment clarifies that even if an awarded contract is canceled, the petitioner (Nirlac) does not automatically become entitled to the contract.

3. Need for Clear Business Commitments

The ruling highlights the importance of business generation clauses in government tenders, requiring clear commitments from bidders.

Conclusion

The Supreme Court’s ruling in Haffkine Bio-Pharmaceutical Corporation Ltd. vs. M/s. Nirlac Chemicals is a landmark judgment ensuring fairness and transparency in government tenders. By directing a fresh tender while maintaining temporary supply continuity, the Court struck a balance between public interest and due process.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: Haffkine Bio-Pharmac vs Ms. Nirlac Chemical Supreme Court of India Judgment Dated 27-07-2017.pdf

Direct Downlaod Judgment: Direct downlaod this Judgment

See all petitions in Company Law
See all petitions in Corporate Governance
See all petitions in Commercial Arbitration
See all petitions in Judgment by Madan B. Lokur
See all petitions in Judgment by Deepak Gupta
See all petitions in partially allowed
See all petitions in Remanded
See all petitions in supreme court of India judgments July 2017
See all petitions in 2017 judgments

See all posts in Corporate and Commercial Cases Category
See all allowed petitions in Corporate and Commercial Cases Category
See all Dismissed petitions in Corporate and Commercial Cases Category
See all partially allowed petitions in Corporate and Commercial Cases Category