TMI Blog1993 (1) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... as introduced by the MTNL Department of Telecommunications. The yellow pages were to contain advertisements under different headings. The contractor who was to be awarded the contract for printing such directories was to collect the revenue from the advertisements in the yellow pages as well as in white pages of the telephone directory. The contractor was to print the directories and supply the same free of cost of the MTNL for its subscribers and had to pay royalty to the MTNL in connection with printing of such directories. 4. Tenders of publication of the directories for Delhi and Bombay were invited. Tender of the United India Periodicals Pvt. Ltd. (hereinafter referred to as the UIP , the 2nd respondent to the Writ Petition and appellant in one of the appeals) was accepted and an agreement dated 14th March 1987, was executed. United Database (India) Pvt. Ltd. (hereinafter referred to as the UDI . the 3rd respondent to the Writ Petition and appellant in one of the appeals) is a subsidiary of UIP. Under the original agreement UIP was to publish directories every year for a period of five years from 1987 to 1991 for Delhi and Bombay separately and was to pay an amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, a supplemental agreement was entered between UIP, UDI, MTNL and Sterling Computers Ltd. (hereinafter referred to as Sterling , appellant in one of the appeals). Sterling by this agreement was introduced to carry out the unexecuted portion of the agreement with UIP. It may be mentioned that by this date the period of the original agreement dated 14th March 1987 between the MTNL and the UIP had expired, still the supplemental agreement states that subject to UIP/UDI and Sterling successfully completing the unexecuted job relating to printing of Bombay and Delhi telephone directories within the stipulated time frame and other stipulations in the agreement MTNL shall extend the original contract or three more issues each for Delhi and Bombay, i.e., seven main issues of Bombay and six main issues of Delhi of the said directories to be brought out hereafter . The agreement further stipulated that all terms and conditions contained in the original agreement and the memorandum of understanding would be the integral part of the supplemental agreement and all obligations of UIP/UDI and rights and privileges and powers provided for MTNL thereunder and under the law shall be applicable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving gone bankrupt, no money could have been realised from it. The termination of original contract was no remedy although repeated contraventions and breaches had been committedly by the UIP inasmuch as there was no publication of directory for Bombay for the years 1988, 1989, 1990 and 1991 and for Delhi for the years 1989, 1990 and 1991. It was stated on behalf of MTNL before the High Court that in order to salvage ₹ 20.16 crores which was payable to the MTNL under the original agreement dated 14th March 1987 by the UIP and which had not been paid, a decision was taken by the MTNL to enter into a supplemental agreement and to allow the UIP/UDI/Sterling to publish the thirteen issues of directories, six main issues for Delhi and seven main issues for Bombay up to years 1997 -1998 apart from the supplemental directories. 9. The High Court came to the conclusion that supplemental agreement dated 26th September 1991 cannot be held to be the extension of the original agreement dated 14 March 1987. According to the High Court the supplemental agreement was tainted with malice - the object being to provide unjust enrichment to UIP/UDI/Sterling. 10. The most interesting part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognised by Courts while dealing with public property. It is not possible for Courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi -judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the Courts, such decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. There is nothing paradoxical in imposing legal limits on such authorities by Courts even in contractual matters because the whole conception of unfettered discretion is inappropriate to a public authority, who is expected to exercise such powers only for public good. 16. According to the appellants, the supplemental agreement was entered into by the MTNL taking into consideration the circumstances then existing which had been examined at the highest level and as such a Court should not examine the discretion exercised by the public authority as a Court of appeal because the decision to enter into supplemental agreement also involved a question of policy. It was pointed out that the contract had been awarded in the year 1987 to UIP on an experimental basis on such terms and conditions on which in past directories had not ever been published. The real experiment was as to how the directories could be published without incurring any cost by the MTNL. The publisher being given the right not only to reimburse itself from the advertisements published in the yellow and white pages but was also to pay royalty to the MTNL It was further pointed out that from the resolutions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood faith and upon lawful and relevant grounds of public interest. There are many cases in which a public authority has been held to have acted from improper motives or upon irrelevant considerations, or to have failed to take account of relevant considerations, so that its action is ultra vires and void. 19. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as do whether there has been any infirmity in the decision making process . In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans. (1982) 3 All ER 141, where it was said that The purpose of judicial review, - ...is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the Court. By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts even on the basis of royalty. The Chief Conservator of Forests and other Forest Officers at a meeting took a decision which was also confirmed at a subsequent meeting, between the Forest Minister, the Forest Secretary and the Chief Conservator of Forests, that the blazes for such inaccessible areas should be allotted to some private party. In view of that decision the second respondent who had earlier addressed a letter to the State Government offering to set up a factory for manufacture of resin turpentine oil and other derivatives in the State and had sought for allotment of 10,000 metric tonnes of resin annually was sanctioned the allotment of 11.85 lacs blazes in the inaccessible areas for a period of 10 years on the terms and conditions set out in the order. This was challenged in the aforesaid case. This Court said that whatever be its activity, the Government is still the Government and is, subject to restraints inherent in its position and as such every activity of the Government which has a public element in it must be reasonable and not arbitrary. However, the allotment of the contract in favour of the second respondent was upheld. It was pointed out that the blazes we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction and establishment of a Five Star Hotel is indicative of a requirement of expertise and sound financial position on the part of those who might offer to construct and establish them. The decision taken by the All India Tourism Council was an open decision well known to everyone in the hotel business. Yet no one except the ITDC and the Taj Group of Hotels had come forward with any proposal. We have it in the record that the Oberoi Group of Hotels already had a Five Star Hotel in Calcutta while the Welcome Group of Hotels were making their own private negotiations and arrangements for establishing a Five Star Hotel. In the circumstances, particularly in the absence of any leading hoteliers coming forward, the Government of West Bengal was perfectly justified in entering into negotiation with the ITDC and the Taj Group of Hotels instead of inviting tenders. But at the same time it was said (Para 39): On a consideration of the relevant cases cited at the bar the following proposition may be taken as well extablished: State -owned or public -owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation. The charge of arbitrariness cannot be upheld Tests to be applied in a given case may be influenced by the extent to which a decision is supported by a democratic unanimity which evidences the decision - granted, of course, the power. From the facts of the aforesaid case it shall appear that Municipal Council had invited competitive proposals as to the ways in which the potentiality of the land could commercially be exploited and had also competitive plans and designs and ultimately respondent No. 6 was entrusted with the execution of the said scheme. 26. The cases aforesaid on which reliance was placed on behalf of the appellants, have also reiterated that once the State decides to grant any right or privilege to others, then there is no escape from the rigour of Article 14; the executive does not have an absolute discretion, certain precepts and principles have to be followed, the public interest being the paramount consideration. It has also been pointed out that for securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner. However, there may be cases where in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... problems may arise: (i) UIP/UDI may put legal obstacles in retendering, (ii) the response for printing and delivering the directories free of cost and also paying royalty may be poor from the parties, considering the failure of the present experiment and prohibitive increase in the cost of paper and printing, (iii) the concept of the yellow pages may suffer a big set back and may make it unattractive to the advertisers because of the loss of confidence. The Board in its 29th meeting discussed the aforesaid agenda and took a decision that MTNL has no option but to grant loan to UIP/UDI to help them to print out the directories. The Board also felt that grant of the loan to UIP/UDI was quite risky but the said distress measure had to be taken to avoid any statement and was in the large interest of the MTNL. The matter was further discussed in the 31st meeting of the Board held on 6th August 1991. The agenda note for this meeting after stating the aforesaid circumstances said that UIP had approached MTNL once again with a package of proposals in supersession of their all requests/proposals made earlier, so that they may be bailed out of their financial problems and assuring uninterrup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the period of contract had already expired and as such the MTNL was in error in treating the supplemental agreement as only an extension of the original agreement. Learned Counsel appearing for the appellants did not dispute and contest that by the supplemental agreement the period of contract which had expired in 1991 was extended up to 1997/1998 for printing the directories for Delhi and Bombay, and that the terms and conditions were different. For the period 1991 -1997 additional royalty which had been agreed to be paid by the UDI/UIP/Sterling was only ₹ 10 crores whereas for the period 1987 -1991 it was ₹ 20.16 crores. 29. Philanthropy is not part of the management of an undertaking, while dealing with a contractor entrusted with the execution of a contract. The supply of the directories to public in time, was a public service which was being affected by the liberal attitude of the MTNL and due to the condonation of delay on the part of the UIP/UDI. There was no justification on the part of the MTNL to become benevolent by entering into the supplemental agreement with no apparent benefit to the MTNL, without inviting fresh tenders from intending persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no scope for argument that any interference by Court shall amount to an intervention like a Court of appeal. Once the process through which the supplemental agreement was executed is held to be against the mandate of Article 14 of the Constitution, the supplemental agreement shall be deemed to be void. 31. The appellants also took an objection to the maintainability of the writ application, on the ground of delay and laches. It was pointed out that supplemental agreement was entered into on 26th September 1991, whereas the Writ Petition was filed before the High Court on 9th May 1992, although during this period the petitioners had full knowledge about the supplemental agreement. According to the petitioners, the supplemental agreement was kept as a guarded secret by the MTNL as well as UIP/UDI/Sterling and it is only in April 1992 the petitioners could know some details of the supplemental agreement. In this connection our attention was drawn to an advertisement published on 27th September 1991, saying that official Bombay directory was being released in December 1991 and Delhi telephone directory in January 1992. That advertisement was given on behalf of the UDI only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the circumstances mentioned above it is difficult to reject the Writ Petition on the ground of delay and laches. 32. As already mentioned above, Mr. Venugopal, the learned Counsel appearing for the writ petitioners, offered an amount of ₹ 60 crores on behalf of the writ petitioners as royalty to the MTNL for printing the directories for Delhi and Bombay for the period of the supplemental agreement, if the said job is entrusted to them on the same terms and conditions. For that period the UIP/UDI/Sterling have offered only ₹ 10 crores as additional royalty. This Court could have considered the desirability of directing the MTNL to consider the said offer of ₹ 60 crores on behalf of the writ petitioners but according to us, if any such direction is given and on basis of such direction the job of printing the directories for the period in question is given to the writ petitioners, the procedure so adopted shall suffer from the same vice. The MTNL will enter into an agreement with the writ petitioners without inviting tenders and without offering opportunities to others who may be interested in the printing of the directories for Delhi and Bombay. As such whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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