Procuring medicines only from one establishment to exclusion of others, by not adopting transparent procedures such as tenders, is discouraged.

The State of Uttar Pradesh had issued the order of purchase of Ayurvedic medicines in favour of Indian Medicines Pharmaceutical Corporation Limited (IMPCL). The contract was granted to IMPCL through nomination, thus eliminating all the other establishments. This move was challenged by the Kerala Ayurvedic Co-operative Society Limited. The Operational Guidelines prescribed that medicines should be procured from IMPCL or PSUs and pharmacies under the State. All the units mentioned in the Guidelines were placed on an equal footing. The Claim of the State that it deviated from the rule of tender because the IMPCL was the only establishment that produces quality medicines, cannot be accepted. There was no evidence to prove that IMPCL was the only establishment which manufactured ‘quality’ medicines to the exclusion of other establishments. In the given circumstances, inviting tenders was the most transparent and non-arbitrary method of allocation that could be undertaken. The Supreme Court has held that the procurement of Ayurvedic medicines only from IMPCL to the exclusion of other establishments without inviting tender, was not only arbitrary but also illegal. The State was directed to purchase Ayurvedic medicines only through a free and transparent procedure such as tenders in future.