The Supreme Court on Tuesday directed the Uttar Pradesh government to purchase Ayurvedic medicines by inviting tenders instead of nominating suppliers, saying inviting bids is the “most transparent and non-arbitrary method of allocation”.

Referring to various decisions, the top court said, the government cannot act arbitrarily while dealing with the public, whether it is giving jobs or entering into contracts.

A bench comprising Chief Justice D Y Chandrachud and Justice Hima Kohli dismissed the appeal of public sector undertaking (PSU) M/S Indian Medicines Pharmaceuticals Corporation Ltd challenging the Allahabad High Court verdict which held that the state cannot purchase ‘Ayurvedic’ medicines only from the PSU without inviting tender.

“In the given circumstances, inviting tenders from the entities... is the most transparent and non-arbitrary method of allocation that can be undertaken. Hence, the appellant must henceforth purchase Ayurvedic medicines only through a free and transparent procedure such as tenders.

“The appellant may deviate from this rule and procure medicines by nomination only if exceptional circumstances exist. In such a situation, the appellant must demonstrate the existence of exceptional circumstances on the basis of cogent material,” the verdict said.

This court, the bench said, has consistently held that government contracts must be awarded through a transparent process.

“The process of inviting tenders ensures a level playing field for competing entities. While there may be situations which warrant a departure from the precept of inviting tenders or conducting public auctions, the departure must not be unreasonable or discriminatory,” it said.

The court said 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 Article 14 (right to equality),” the CJI, writing ?the judgment for the bench, said.

The verdict came on an appeal of the state government and the PSU, Indian Medicines Pharmaceuticals Corporation, against the high court verdict.

The state government was purchasing Ayurvedic medicines from the PSU alone under the National AYUSH Mission Programme without inviting tender which was opposed by Kerala Ayurvedic Co-operative Society Limited. The latter had moved the high court against the practice.

The high court had on October 18, 2019 allowed the petition and directed that Uttar Pradesh must purchase Ayurvedic medicines by adopting a transparent process after inviting tenders.

The state and the PSU had taken the stand that the medicine procurement scheme was launched in pursuance of a decision of the central government's department of AYUSH to promote Ayurvedic medical system.

As per the guidelines for the procurement of Ayurvedic medicines, at least 50 per cent of the grant-in-aid must be used for procuring medicines from IMPCL or Public Sector Undertakings, pharmacies under state governments and co-operatives only, they had said.

The top court dismissed the contention that since there was no involvement of "State largesse" and no disposal of state property, it was not bound to grant the contract to IMPCL through tender.