Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1994 Supreme(SC) 1112

SUPREME COURT OF INDIA
BEFORE S.C. AGRAWAL AND M.K. MUKHERJEE, JJ.
NEW HORIZONS LIMITED AND ANOTHER
Versus
UNION OF INDIA AND OTHERS.
Civil Appeals Nos. 7230-31 of 1994 {From the Judgment and Order dated 15-10-1993 of the Delhi High Court in C.W.P. No. 3837 and C.M. No. 6120 of 1993}
Decided on 9-11-1994
Advocates appeared:
Soli J. Sorabjee, Senior Advocate (Manmohan Sarin and Pramod Dayal, Advocates, with him) for the Appellants; P. Chidambaram and C.S. Vaidyanathan, Senior Advocates (P.P. Singh, Advocate, with them) for Respondent 3. K.K. Venugopal, Senior Advocate (Atishi Dipankar and Parag Tripathi, Advocates, with him) for Respondent 4. N.N. Goswami, Senior Advocate (Anil Katiyar and T.C. Sharma, Advocates, with him) for Respondents 1 and 2.

Advocates:
ANIL KATIYAR, ATISHI DIPANKAR, C.S.VAIDYANATHAN, K.K.VENUGOPAL, MAN MOHAN SINGH, N.N.GOSWAMY, P.CHAUDHARY, P.P.SINGH, PARAG P.TRIPATHI, PRAMOD DAYAL, SOLI J.SORABJI, T.C.SHARMA

Headnote:
Constitution of India, 1950 - Article 14 - Department of Telecommunications - Contract for printing and publishing telephone directory - Award of Contract - Non-Refundable Earnest Money Deposit - Telephone directory used to be printed by Department at its own cost for purpose of supplying same to telephone subscribers - It was an item of expenditure. Today, telephone directory has become a source of revenue for the State - This has become possible by making it a medium for advertising by industrial and commercial concerns. A section in distinct "yellow pages" devoted exclusively to advertisements is contained in the directory, person who undertakes the printing of the directory procures the advertisements from private parties and collects charges for same - In return, he supplies a prescribed number of directories free of cost to Department and also pays to the Department a certain amount by way of royalty - Contract for printing and publishing the telephone directory is normally awarded by inviting tenders and selecting the best offer from among the tenders which are so received - This practice has been in vogue for some time In Sterling Computers - Court has dealt with the award of such contract for printing and publishing of telephone directories for Delhi and Bombay instant case relates to telephone directory for Hyderabad – Held, Course that commends us is that, while maintaining contract awarded to Respondent 4 in respect of the directories said contract may be set aside insofar as it relates to directory for the year 1995 and fresh tenders may be invited for award of the contract for directory for the year 1995 - Appeal filed against the judgment and order of Delhi High Court dismissing the writ petition of the appellants must therefore, be allowed in terms - Other appeal has been filed by appellants against order of the Delhi High Court dismissing which was an application for an interim relief during pendency of writ petition in the High Court - In view of the final order that is being passed in the writ petition the application for interim relief has become infructuous and the appeal against order dismissing – Appeal Allowed

Judgement Key Points

Key Points: - The Court analyzes whether NHL’s joint-venture structure allows its constituents’ experience to count for eligibility (!) (!) (!) (!) . - It assesses whether excluding NHL on the grounds of experience was arbitrary or irrational under Tata Cellular and Wednesbury principles (!) (!) (!) . - It discusses whether "experience" can be considered from the constituents of NHL (TPI, LMI, WML, IIPL) and whether lifting the corporate veil is appropriate to determine eligibility (!) (!) (!) (!) (!) (!) (!) (!) . - It contrasts the tender notice wording about "experience" with the actual eligibility interpretation and the role of the joint venture in fulfilling those criteria (!) (!) (!) (!) (!) . - It concludes that non-consideration of NHL due to lack of in-name experience, when NHL is a joint venture with constituents having relevant experience, results in arbitrariness and irrationality, justifying quashing the award to Respondent 4 for 1995 and reopening tender for that year (!) (!) (!) . - The judgment emphasizes the government’s obligation to act fairly and reasonably in contract awards and to consider the economic realities of a joint venture in evaluating credentials (!) (!) (!) .

How to determine whether NHL's experience should be considered for tender eligibility when NHL is a joint venture with constituents having relevant experience?

How to assess whether the Tender Evaluation Committee acted arbitrarily or irrationally in excluding NHL’s tender on the ground of experience, considering the advertisement and notice terms?

What is the appropriate standard for lifting the corporate veil or considering the economic realities of a joint venture in evaluating tender qualifications for public contracts?

The Judgment of the Court was delivered by S.C. AGRAWAL, J.- Leave granted.

2. In the past the telephone directory used to be printed by the Department at its own cost for the purpose of supplying the same to the telephone subscribers. It was an item of expenditure. Today, the telephone directory has become a source of revenue for the State. This has become possible by making it a medium for advertising by industrial and commercial concerns. A section in distinct "yellow pages" devoted exclusively to advertisements is contained in the directory. The person who undertakes the printing of the directory procures the advertisements from private parties and collects the charges for the same. In return, he supplies a prescribed number of directories free of cost to the Department and also pays to the Department a certain amount by way of royalty. The contract for printing and publishing the telephone directory is normally awarded by inviting tenders and selecting the best offer from among the tenders which are so received. This practice has been in vogue for some time. In Sterling Computers Ltd. \. M & N Publications Ltd. this Court has dealt with the award of such a contract for printing and publishing of the telephone directories for Delhi and Bombay. The instant case relates to the telephone directory for Hyderabad.

3. By an advertisement published in various newspapers on 22-4-1993 the Department of Telecommunications, Telecom District, Hyderabad invited sealed tenders from competent agencies for printing, binding and supply of specified number of telephone directories in English for three annual issues commencing from 1993. The tenderer was required to supply, free of cost, the telephone directories to General Manager, Hyderabad Telecommunications at the specified distribution points. The tenderer was also required to specify the royalty amount for each issue offered by him. It was mentioned that the successful tenderer will be permitted to procure on his own classified advertisements and cover page advertisements. In the said advertisement it was stated :

"The tenderer should have the experience in compiling, printing and supply of telephone directories to the large telephones systems with the capacity of more than 50,000 lines. The tenderer should substantiate this with documentary proof. He should also furnish credentials in this field."

4. The tenderer was required to remit a sum of Rs 5,00,000 by way of non-refundable earnest money deposit. The terms and conditions and specifications etc., for the total job were contained in the tender document which was required to be obtained for the purpose of submitting the tender. The last date for submission of tender was 14-5-1993.

5. In the notice containing the requirements to be fulfilled which was attached to the tender documents, it was stated:

"The successful tenderer will also submit copies of telephone directories printed and supplied by them to the telephone systems of capacity more than 50,000 lines as credentials of his past experience.

(para 12)

The tenderer should intimate while submitting the tender the equipment and the list of machines etc. along with the locations available with him which he would employ for carrying out this work, if selected. The tenderer also should forward a memorandum furnishing details of out-turn that can be given daily and the actual time required for the completion of the job after the input material is handed over to him."

(para 14)

6. Five persons, including appellant 1, M/s New Horizons Ltd. (for short NHL), and M/s M&N Publications Limited (Respondent 4 herein) submitted their tenders. The tenders were opened on 14-5-1993 at 3.30 p.m. The royalty amount offered by the five tenderers was as under :

Name of Tenderer

Agreed amount 1993 issue

offered 1994 issue

(in lakhs) 1995 issue

SESA SEAT INFORMATION SYSTEMS LTD.,

PUNE-1.

121

151

M & N PUBLICATIONS LTD., BANGALORE-52

(Respondent 4 herein)

NEW HORIZONS LTD., NEW DELHI- 1.

(Appellant 1 herein)

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1994 Supreme(SC) 1112

How to determine whether NHL's experience should be considered for tender eligibility when NHL is a joint venture with constituents having relevant experience?

How to assess whether the Tender Evaluation Committee acted arbitrarily or irrationally in excluding NHL’s tender on the ground of experience, considering the advertisement and notice terms?

What is the appropriate standard for lifting the corporate veil or considering the economic realities of a joint venture in evaluating tender qualifications for public contracts?

Cases Referred (8)