TMI Blog2000 (10) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial of the CBI in collusion with a senior officer of the same Organisation which fact, if true, reflects very poorly on the integrity of the CBI. We note herein with concern that courts including this Court have very often relied on this Organisation for assistance by conducting special investigations. This reliance of the courts on the CBI is based on the confidence that the courts have reposed in it and the instances like the one with which we are now confronted with, are likely to shake our confidence in this Organisation. Therefore, we feel it is high time that this Organisation puts its house in order before it is too late. Leaving apart the above observations of ours in regard to the CBI, having considered all the materials placed before us and the arguments addressed, we are satisfied that on the facts and the circumstances of this case, the prayer of the appellants to direct a criminal investigation into the deal in question by an appropriate agency, as prayed for in the appeal, cannot be granted. - Appeal (civil) 2485 of 1999 - - - Dated:- 19-10-2000 - BHARUCHA S.P., QUADRI, S.S.M. AND HEGDE, N. SANTOSH, JJ. JUDGMENT S. N. Hegde: Being aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to one or more freely traded international market prices which bear resemblance to the produce crude in terms of standard parameters such as gravity, sulphur content, yield etc. which are critical to the market value of the crude. The contract price to be paid to the contractor had to be the price of Brent (DTD) crude with a discount of $ 0.10 cents per barrel. Brent is said to be a similar sweet crude which is freely traded in the international market. The actual contract termed as Profit Sharing Contract (PSC) was signed by the GOI and the consortium of respondent Nos. 3, 4 and 5 in regard to Panna and Mukta oil-fields on 22.12.1994. The appellants herein challenged the awarding of this contract before the High Court of Delhi on 26th July, 1997 seeking the following reliefs :- (a) direct a thorough criminal investigation into this deal by an appropriate agency to be supervised by a senior independent person such as a retired Judge of a High Court or the Supreme Court; and (b) direct the Respondents No.1 and 2 to take further follow up action by way of criminal prosecution and departmental proceedings against officials who have played a corrupt or improper role in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in awarding of this contract in favour of respondent Nos. 4 and 5 had joined the services of respondent No.4 or 5 which fact, according to the petitioners, clearly indicated that these officers during their tenure with ONGC had colluded with respondent Nos. 4 and 5. It was further alleged that the contract in question lacked transparency in the invitation of the bids as well as in the evaluation of bids which has led to the grant of a very valuable contract on unconscionable terms, leading to plundering of national resources. The appellants also relied on a statement purported to have been made by the Private Secretary to the then Minister of Petroleum, who had averred in the said statement to the investigating agency, to the effect that large sums of monies were paid to the said Minister. The petition was opposed by all the respondents on almost similar grounds contending that the contract in question was awarded after a careful consideration of all the commercial/ technical aspects of the contract bearing in mind the policy of the GOI in this regard and the contract in question was to the best advantage of the GOI and the ONGC. The respondents have asserted that there has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude and flexibility and the courts would be slow to interfere in such matters. Dealing with the allegation pertaining to abnormality in fixing of royalty and cess amounts payable by the joint venture, the High Court came to the conclusion that the liability to pay royalty is upon the oil produced and sold, irrespective of the price payable by the GOI which could vary depending on the international market. On this foundation, it came to the conclusion that there was no basic fallacy in the methodology adopted by the GOI as to the payment of royalty and cess. It also held that in regard to the evaluation of bids, more than one view was possible, hence it could not come to the conclusion that the view taken by the GOI was actuated by mala fides. In regard to the price payable by the GOI for the crude oil to be purchased from the joint venture, the High Court came to the conclusion that the price payable was actually less than the international price for oil of similar proof and the High Court concluded that the Governments take in the contract would not be less than 80% of the total value of the contract. In regard to the complaint made against the CBI, the High Court refrained from e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the two oil fields Panna and Mukta were not fully developed and the ONGC inspite of spending huge sums of money on development of these wells, was not able to exploit these oil wells to the maximum possible extent and in the wake of the then prevailing financial crunch and the foreign exchange crisis and the imminent need of the country for extra oil production, it was considered that offering these wells on a joint venture basis was more beneficial and less burdensome in the interest of the country. It was also pointed out that at that point of time the World Bank had offered financial assistance provided a time-bound programme was chalked out by the GOI for development of these wells. For all these reasons the GOI contended that it was thought economically prudent to go for joint venture development of the oil fields. They also contended that though, as a matter of fact, the particulars of the result of the comparative economics prepared by the Ministry and the ONGC were not submitted to the GOI, these materials were considered by the concerned Ministry along with the Cabinet Sub-Committee on Economic Affairs and on their approval and with the knowledge and consent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istry to offer these oil wells on a joint venture basis cannot be faulted. The material available on record and the circumstances prevailing at the time of the decision of the GOI show that though the materials of the comparative study were not placed before the GOI, the recommending authority had based its recommendations on such study which was accepted by the GOI. Therefore, by the mere absence of placing the materials constituting the comparative economic study, while in effect it was actually taken note of, we are unable to accept the argument of the appellant that there has been non-application of mind by the GOI while awarding the contract. That apart, whether the oil wells should be developed on a stand alone basis by the ONGC or not, is a matter of policy with which we are not inclined to interfere solely on the ground that there is no reference to such study in the decision of the GOI. Therefore, the allegation of non-application of mind must fail. It was next contended by the appellants that the GOI has bartered away the two oil wells already developed by the ONGC containing large deposits of oil to the joint venture for a meagre sum of Rs.12 crores paid to the GOI as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economically recoverable oil from these wells at 20 MMT while the other joint venture consortium which was short-listed along with the consortium of respondent Nos.3 to 5, had estimated it at 12 MMT, and the respective bids of the parties were evaluated on the basis of their self-evaluation of the reserve oil in the wells concerned. Therefore, we think it is possible that out of 34.4 MMT of the oil estimated originally as being the reserve, as a matter of fact, the recoverable oil could be only 20 MMT or near about that quantity, as evaluated by respondent Nos.4 and 5 because we could reasonably draw an inference that it may not be possible to economically exploit all the oil that may be existing in an identified oil well. At any rate, it would be hazardous for the courts to venture on a guesswork as compared to the technical assessment that is made, correctness of which is not disproved by cogent materials. Therefore, we are unable to accept the contention of the appellants that, as a matter of fact, the recoverable oil reserve in Panna-Mukta oil fields was either 54.4 MMT or even 31.4 MMT. That apart, it is very important to note that the GOI has made provisions in the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come a small portion of the total earnings when international oil prices increase in future. By this, according to the appellants, the GOI has conceded a large benefit in favour of the contractors in the long run. The CAG has also taken note of this freezing of royalty and cess in its final report wherein it has observed that the Ministry had not informed the GOI before agreeing to freeze the rate of royalty and cess in the contract. It had also observed that the royalty ought to have been at an ad valorem basis. The GOI has contended that the freezing of royalty and cess is not a concession given to the joint venture and the same was to provide for fiscal stability so that the economics of the project is not adversely affected. It was contended that the decision to freeze the royalty and cess during the period of contract was taken to enable the investors to work out their economics of the project without undue uncertainty arising from the future behaviour of the Government with regard to such levies. The other respondents have sought to rely on similar international practice in regard to the fixed levy of royalty and cess in similar contracts. They argued that if royalty and cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a decision was arrived at either arbitrarily or unreasonably. We think it as not safe to come to the conclusion that freezing of royalty and cess during the period of contract was done in the instant case with the sole intention of granting undue benefits to the joint venture. In regard to the observations of the CAG that the Ministry did not inform the Government in advance as to the decision to fix the royalty and cess on a frozen basis, it was pointed out to us by the respondents that in January, 1994 itself the Government was informed of the decision of the Committee of Secretaries that the bidders will be asked to pay the royalty and cess at the current rate because of the prevailing international practice. For these reasons, we are of the opinion that the appellants objection as to the fixed royalty and cess payable to the GOI under the contract cannot be sustained. The next challenge of the appellants is to the agreed price under the contract at which the GOI has agreed to The appellants contend that before awarding the contract, the ONGC was selling oil from Panna Mukta to the GOI at the rate of Rs.1,741/- per ton ($ 8 per barrel). They contend that after the signing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the GOI is paying a premium of $ 4 per barrel over and over the international price of crude either on the ground that the quality of crude is superior or on the ground of its locational advantage. It reiterates and contends that it has the first option to purchase the crude produced from these oil-fields at an international market price to be paid to the contractor on the basis of an internationally accepted standard called price of Brent crude with a discount to the advantage of the GOI of 10 cents per barrel. Therefore, it is argued that as a matter of fact, instead of paying $ 4 per barrel as premium over and above the international price, the GOI is actually paying $ 0.10 cent less than the international price of crude of similar quality. They also deny that the purchase of crude from the contractors would be costlier than the price the GOI would have paid for purchase of similar crude from the ONGC as contended by the appellants. According to this respondent, for the month of June, 1997, as per the price fixation formula in the contract, the purchase price that the GOI paid to the contractors came to US $ 18.969 per barrel only and this payment was inclusive of cess and roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was next contended that under the contract no ceiling is put on the operating expenditure (OPEX) and no disincentives have been built into the contract for exceeding OPEX, absence of which might lead to the escalation of OPEX, thereby reducing the take of the Government in the PSC. In support of this contention, the appellants have relied on the observations of the CAG who in his report has noted moreover in absence of a clear enunciation of principles of computing cost escalation and control in the respective contract, the Management Committee cannot exercise cost control to any meaningful extent as such Government take and the ultimate benefit of the PSC is unduly flexible and uncertain. Based on this observation, the appellants contend that by leaving open the OPEX without a ceiling, the GOI has permitted the JV to charge practically any amount as they would like under this head thereby making the profit of the GOI only an illusion. As an example they point out that while ONGC incurred the OPEX of $2 per barrel, the OPEX incurred by the JV at the time of the filing of the petition was more than $6 per barrel. On behalf of the respondents, it is contended that it is practi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already increased the OPEX from $2 to $6 is also satisfactorily rebutted by the respondents who have established that the increase in the operating expenses during the initial stage of the contract has since been reversed and as at present the operational cost is only $2.49. We are satisfied that even though there is no ceiling on the operational expenses to be incurred by the JV and no undue advantage of such absence of ceiling can be taken by the JV because of the in built budgetary control in the contract. Therefore, we are of the opinion, that there is no substance in this allegation of the appellant. The next ground of attack by the appellant is that large sums of money spent by the ONGC in development of oil wells, which have accrued to its value, were not given credit in the contract while the sums of money spent by respondent Nos.4 and 5 just prior to the signing of the contract were taken note of and a provision was made in the contract for reimbursement of these expenses to respondent Nos.4 and 5. The appellants contend that this type of concession given to the said respondents exposes the extent to which the GOI has sacrificed the nations interest in entering into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased oil production and consequential benefit of receiving their take from such exploitation of oil, we do not think we can accept the argument of the appellants that these terms were agreed to by the GOI with a mala fide intentiion of granting undue advantage to respondent Nos.4 and 5. As observed earlier, we will also have to bear in mind the fact that the contract in question involves the payment of consideration under different heads in one basket. The contents of this basket cannot be assessed individually nor can the court say that the receipt from a particular item in the basket is arbitrarily low, because the take of the GOI in the contract is as a whole from the total receipt from the basket. At this juncture, we would like to notice the observations of this Court found in Kasturi Lal Lakshmi Reddy v. State of J. and K. (1980 3 SCR 1338 at 1357) wherein this Court had held : We have referred to these considerations only illustratively, for there may be an infinite variety of considerations which may have to be taken into account by the Government in formulating its policies and it is on a total evaluation of various considerations which have weighed with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an unfairness is set right by judicial review.The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of the courts ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. It is thus different from an appeal. When hearing an appeal, the court is concerned with the merits of the decision under appeal. Since the power of judicial review is not an appeal from the decision, the Court cannot substitute its own decision. Apart from the fact that the Court is hardly equipped to do so, it would not be desirable either. Where the selection or rejection is arbitrary, certainly the Court would interfere. It is not the function of a judge to act as a superboard, or with the zeal of a pedantic schoolmaster substituting its judgment for that of the administrator. The duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minister a sum of Rs.4 crores between June, 1993 and December, 1993 which fact, according to the appellants, is sufficient to come to the conclusion that awarding of the contract to respondents 4 and 5 was influenced by some collateral consideration. It is to be noted here that the said statement of the Private Secretary to the Minister which was made to the CBI, was subsequently retracted by the said Private Secretary. Therefore, it will not be safe to rely upon a retracted statement to come to the conclusion that the contract in question is actuated by collateral consideration. At this stage, it may not be out of place to mention the fact that though there were a number of parties who have offered their bids pursuant to the invitation of the GOI in regard to various oil fields, and in regard to Panna-Mukta oil fields, there were as many as 8 other bidders; none of them has come forward to question the validity of this contract. It is also to be noted that another similar petition (PIL) was filed before the Bombay High Court which came to be dismissed and the petitioners therein did not pursue the matter further; and one more writ petition filed before the Delhi High Court also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Raghuvanshi who instructed Mr. Nair to swear to the first affidavit of the CBI. Still when the CBI filed the first affidavit before the High Court on 19.8.1997, Mr. Raghuvanshi instructed the deponent of the said affidavit to state before the court that no such file is not in existence in ACB Mumbai Branch. When the rejoinder affidavit was filed, it seems the CBI was caught on the wrong foot and it tried to wriggle out of the situation by filing another affidavit this time sworn to by Mr. Raghuvanshi himself wherein an ingenuous stand was taken that the intention of the CBI in informing the court in the first affidavit by using the words no such file is in existence in ACB Mumbai Branch was to intimate the court that no such file was available at the time of filing of the first affidavit. While examining this belated explanation of the CBI we have to bear in mind that the first affidavit of the CBI was, among other facts, in reply to the specific allegations of the writ petitioners as to the opening of and the contents of Part II file which, according to the writ petitioners, was being suppressed by the CBI from the Court. As a matter of fact, in para 18 of the writ petition, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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