IMPORTANT POINT
In the cases of Government contracts unless the court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the courts to come to the conclusion that such a contract can be prima facie or otherwise hold to be vitiated so as to call for an independent investigation, as prayed for by the appellants.

Headnote:(i) Constitution of India-Article 299-Contracts-Oil wells developed by ONGC-Joint venture contract by Government of India with private contractors-Award of contract after inviting bids-ONGC having 40 share in contract-Public interest litigation for directing criminal investigation into the deal, to take departmental and criminal actions against officials who played corrupt or improper role in award of contract and for cancellation of joint venture contract-Allegations that contract was awarded arbitrarily for collateral consideration and actuated by mala fides-Allegation of failure to make economic study-Not correct-Economic study conducted, result discussed with cabinet Sub-Economic Committee-Decision taken on approval and consent of Cabinet Sub-Economic Committee -Whether oil wells should be developed on stand alone basis by ONGC or not is a matter of policy decision? -Cannot be interfered with by Court-Allegation of bartering away oil wells for meagre sum of Rs.12 crores as signature bonus while in fact oil resource would be Rs.17,000 crores-Not tenable-On facts contract not so unreasonable as to suspect bonafide-Allegation that two top officials of ONGC joined service of Contractor might have played important role in reduction of figure or helped contractor-Not sustainable-Officers in question joined much before award of contract-Allegation of freezing royalty for 25 years without opting for ad valorem basis-Baseless-Profit sharing contract not anchored on basis of single head of payment but it was basket offer-Allegation of payment of premium of 4 per barrel over and above international price-Based on incorrect fact-Under contract Government of India gained a concession of $ 0.10 per barrel-Even otherwise price fixation highly technical and complex-Court cannot decide whether price fixed was fair or reasonable-Allegation of not fixing ceiling on operational expenses (OPEX) made profit of Government illusion-Untenable-Government and ONGC have unassailable role in accepting proposal for increase in OPEX or not-In built budgetary control available-No case made out to direct criminal investigation into deal in question.
       (ii) Constitution of India-Article 299-Contract-Bid offer-Award of contract on basis of-Independent investigation into fairness-When could be ordered by Court.
       It will be very difficult for the courts to visualise the various factors like commercial/technical aspects of the contract, prevailing market conditions both national and international and immediate needs of the country etc. which will have to be taken note of while accepting the bid offer. In such a case, unless the court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the courts to come to the conclusion that such a contract can be prima facie or otherwise hold to be vitiated so as to call for an independent investigation, as prayed for by the appellants. (Para 20)
       (iii) CBI-Contradictory affidavits in Court filed by officials-First stating no such file existed and second trying to explain that file was not traceable -Later explanation that file was destroyed unauthorisedly with ulterior motive by officials of CBI in collusion with senior officer-Statement in first affidavit suggestio falsi and supressio veri-Sad affairs prevailing in organisation reflecting very poorly on integrity of CBI deplored-CBI directed to put its house in order before it is too late. (Paras 27 & 28)

JUDGMENT

Santosh Hegde, J.-Being aggrieved by the judgment of the High Court of Delhi dated 25th January, 1999 made in C.W.P. No. 3020/97, the writ petitioners therein have preferred this appeal by leave of this Court.

2. Respondent No. 1, Government of India (GOI), took a policy decision in the year 1992 to offer some of its discovered oil fields for development on a joint venture basis. Its decision in this regard was that medium sized oil fields will be offered for development under the joint venture with the participation of the Oil and Natural Gas Commission (ONGC)/the Oil India Limited (OIL) while the small sized oil-fields will be offered for development without the participation of the ONGC/OIL. This policy decision was taken on the ground that the country was facing foreign exchange crisis and there was lack of resources to fully develop these oil-fields. The GOI was also of the opinion that the domestic crude production was declining and there was a need to augment its production. With the said policy in mind, the GOI invited bids for 12 medium sized oil fields and 31 small sized oil fields. In response to the invitation of the GOI in regard to the two medium sized oil-fields, namely, Panna and Mukta, as many as 8 consortia offered their bids and after preliminary technical evaluation of those bids, discussions were held with the bidders and based on such discussions, the GOI shortlisted respondent Nos. 4 and 5 and another consortium of Hyundai Heavy Industries. Essar Oil Limited, Dan Offshore and Albion International. Sometime in October 1993, these two consortia were called for further negotiations by the Negotiating Committee to finalise the contract and after such negotiations and evaluation of the bids on the recommendations of the said Committee, the bid of respondent Nos. 4 and 5 was accepted in February 1994 and a Letter of Award (LOA) was issued to the said consortium. As per this award, the oil-fields - Panna and Mukta - were agreed to be given to the said consortium with a participating interest of 30 each to respondent Nos. 4 and 5 in association with the ONGC which was given a share of 40 . The said contract provided that the GOI had the first option to purchase up to 100 of the production of oil from these fields at an international market price to be determined in accordance with the provisions of the contract. It further provided that the international price shall be determined with reference 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.

3. 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 award of the contract for the Panna-Mukta oil fields; and

4. The main ground of attack before the High Court was that the contract in question was awarded arbitrarily for collate

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2000 Supreme(SC) 1674

Cases Referred (2)