# MIS NEW HORIZONS LTD. AND ANOTHER v. UNION OF INDIA AND OTHERS

- **Citation:** [1994] Supp. 5 S.C.R. 310
- **Court:** Supreme Court of India
- **Decided:** 1994-11-09
- **Bench:** S.C. Agra Wal, M.K. Mukherjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-new-horizons-ltd-and-another-v-union-of-india-and-others-12696
- **Pages:** 26

## Headnote

Constitution, of India-Article 14--Tender for compiling, printing and
supplying telephone directories-Tenderer a joint venture with one of its
constituents having the requisite experience-Tenderer offering royalty
with large margin of difference-Tender Evaluation Committee not
considering tender on technical considerations, that tenderer did not have
experience fn their own name and had not substantiated their capacity to
execute the work-Whether arbitrary-Held, a certain measure of 'free
play in the joints' is necessary for an administrative body functioning in an
admistrptive sphere-Jn commercial transaction, requirement of experience
must be construed from standpoint of prudent businessman-It is not the
name of the company, but the background, persons in control and their
capacity to execute the work which is relevant-On facts, held that tenderer
is joint venture with one of its constituents possessing requisite
experience-F!irther, on facts, only successful tenderer to establish
experience-Also, having regard to large margin of royalty offered by
tenderer, Tender Evaluation Committee's refusal to consider the tender,
held, arbitrary and irrational
Company Law-Lifting the corporate veil-On facts, as stated in the
tender, appellant-company, held, is joint venture ..
The Department of Telecommunications, Hyderabad, invited
sealed tenders for printing, binding and supply of diredories in English
for the years 1993, 1994 and 1995. The tenderer was required, inter
alia, to specify the royalty amount for each issue offered by him and to
substantiate his experience with documentary proof. Five tenders were
received and considered by the.Tender Evaluation Committee, and the
contract was awarded to respondent 4. The appellant challenged the
award of contract, and contended that it was eligible, and met the
criteria laid down and was competent to compile, print and supply
telephone directories as per the invitation of tender. The experience of
its foreign collaborator/equity holder was retied upon by the appellant
in support of its claim. It was submitted that the contract was awarded
to respondent 4 on extraneous considerations and was violative of
310
NEW HORIZONS LTD. v. U.0.1
311
Article 14 of the Constitution. It was further contended that since the A
matter involved public revenue, the tender of the appellant containing
the highest offer could not be rejected on the hypertechnical plea that
the appellant itself had no experience. In countering the challenge, it
was contended for the respondents that the offer of the appellant had
not been considered because it had not submitted evidence to demonstrate its experience.
The High Court negatived the challenge holding that the
experience of shareholders was entirely different from the experience
B
of the company itself; that the principle of lifting the corporate veil
could not be invoked by the company; that, in this case, there was no
joint venture as such but only a certain amount of equity participation C
by a foreign company in the appellant's company; that the noncommunication of the reasons was not fatal; the bid of the appellants
having been rejected at the threshold, the authorities could not
consider the question of a higher amount of royalty.
Allowing the appeal, this Court
D
HELD: 1. The refusal of the Tender Evaluation Committee to consider the tender of the appellant-company on the ground that the
condition regarding experience as laid down in the tender notice was
not fulfilled is not sustainable in law or on the facts, and is arbitrary
and irrational. (325-B)
E
2. In the matter of entering into a contract, the State does not stand
on the same footing as a private person. The action of the State in the
matter of award of contract has to satisfy the criterion of Article 14.
Moreover a contract would either involve. expenditure from the state
exchequer or augmentation of public revenues, and consequently the F
discretion in the matter of selection of a person for award

## Text

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MIS NEW HORIZONS LTD. AND ANOTHER
v.
UNION OF INDIA AND OTHERS
NOVEMBER 9, 1994
[S.C. AGRA WAL AND M.K. MUKHERJEE, JJ.]
Constitution, of India-Article 14--Tender for compiling, printing and
supplying telephone directories-Tenderer a joint venture with one of its
constituents having the requisite experience-Tenderer offering royalty
with large margin of difference-Tender Evaluation Committee not
considering tender on technical considerations, that tenderer did not have
experience fn their own name and had not substantiated their capacity to
execute the work-Whether arbitrary-Held, a certain measure of 'free
play in the joints' is necessary for an administrative body functioning in an
admistrptive sphere-Jn commercial transaction, requirement of experience
must be construed from standpoint of prudent businessman-It is not the
name of the company, but the background, persons in control and their
capacity to execute the work which is relevant-On facts, held that tenderer
is joint venture with one of its constituents possessing requisite
experience-F!irther, on facts, only successful tenderer to establish
experience-Also, having regard to large margin of royalty offered by
tenderer, Tender Evaluation Committee's refusal to consider the tender,
held, arbitrary and irrational
Company Law-Lifting the corporate veil-On facts, as stated in the
tender, appellant-company, held, is joint venture ..
The Department of Telecommunications, Hyderabad, invited
sealed tenders for printing, binding and supply of diredories in English
for the years 1993, 1994 and 1995. The tenderer was required, inter
alia, to specify the royalty amount for each issue offered by him and to
substantiate his experience with documentary proof. Five tenders were
received and considered by the.Tender Evaluation Committee, and the
contract was awarded to respondent 4. The appellant challenged the
award of contract, and contended that it was eligible, and met the
criteria laid down and was competent to compile, print and supply
telephone directories as per the invitation of tender. The experience of
its foreign collaborator/equity holder was retied upon by the appellant
in support of its claim. It was submitted that the contract was awarded
to respondent 4 on extraneous considerations and was violative of
310
NEW HORIZONS LTD. v. U.0.1
311
Article 14 of the Constitution. It was further contended that since the A
matter involved public revenue, the tender of the appellant containing
the highest offer could not be rejected on the hypertechnical plea that
the appellant itself had no experience. In countering the challenge, it
was contended for the respondents that the offer of the appellant had
not been considered because it had not submitted evidence to demonstrate its experience.
The High Court negatived the challenge holding that the
experience of shareholders was entirely different from the experience
B
of the company itself; that the principle of lifting the corporate veil
could not be invoked by the company; that, in this case, there was no
joint venture as such but only a certain amount of equity participation C
by a foreign company in the appellant's company; that the noncommunication of the reasons was not fatal; the bid of the appellants
having been rejected at the threshold, the authorities could not
consider the question of a higher amount of royalty.
Allowing the appeal, this Court
D
HELD: 1. The refusal of the Tender Evaluation Committee to consider the tender of the appellant-company on the ground that the
condition regarding experience as laid down in the tender notice was
not fulfilled is not sustainable in law or on the facts, and is arbitrary
and irrational. (325-B)
E
2. In the matter of entering into a contract, the State does not stand
on the same footing as a private person. The action of the State in the
matter of award of contract has to satisfy the criterion of Article 14.
Moreover a contract would either involve. expenditure from the state
exchequer or augmentation of public revenues, and consequently the F
discretion in the matter of selection of a person for award of a contract
has to be exercised keeping in view the public interest involved in such
selection. The government must act in conformity with the standards or
norms which are not arbitrary, irrational or irrelevant.
It is
recognized that a certain measure of "free play in the joints" is
necessary for an administrative body functioning in an administrative G
sphere. (323-B-D)
Cellular, If the weight of facts pointing to one course of action is
overwhelming, then a decision the other way cannot be upheld, and a
decision would be regarded as unreasonable if it is partial and unequal
in its operation as between different classes. (324-H, 325-A)
H
312
SUPREME COURT REPORTS
(1994] SUPP. S S.C.R.
A
Ramana Dayaram Shetty v. International Airports Authority of India,
(1979] 3 SCR 1014, Kasturi Lakshmi Reddy v. State of J and K, (1980] 3
SCR 1338, Fasih Choudhary v. Director General, Doordarslum, [1988]
Supp. 3 SCR 282, Sterling Computers Ltd v. Mand N Publications Ltd,
(1993) 1SCC445, Union of India v. Hindustan Development Corporation,
(1983) 3 SCC 499, Tata Cellular v. Union of India, (1994) Suppl. 2 SCR.
B
122-, Associa!ed Provincial Picture Houses Ltd. v. Wednesbury Corporation, (1948) 1 KB 223, relied on.
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3. The requirement with regard to experience was differently
worded in the advertisement inviting tenders dated 22.4.93 and the
notice attached to the tender documents dated 26.4.93. The latter used
the expression "successful tenderer" indicating that the matter of past
ression experience has to be considered after the tender has otherwise
been found to be suitable for acceptance, and was not liable to be
rejected at the threshold. The decision ·of the Tender Evaluation
Committee to exclude the tender of the appellant was, therefore, not
warranted. (325-E, G, 326-D)
4. In any event, the requirement regarding experience cannot be
construed to mea.n that the said experience should be of the tendered in
his name only. Where the requirement of experience is contained in a
document inviting offers for a commercial transaction, the terms and
conditions of such a document have to be construed from the
standpoint of a prudent businessman. That is, it is not the name of the
company, but the background of the company, the persons in control,
and their capacity to execute the work that would be relevant. The
?~v~rtisement inviting tenders when read with the notice attached to
the tender documents does not preclude this course of action. In this
perspective, the appellant, being a joint venture with 60% of the share
capital being owned by an Indian group of companies and 40% by a
wholly owned subsidiary of Singapore Telecom which has long
experience in this field, and which, the tender specified, would be
providing its expertise and its managers to the project, would have
been found to have the requisite resources and experience. (326-E, 327B-H)
Tata Cellular v, Union of India [1994) Suppl. 2 SCR 122.
S. The finding of the High Court that the appellant is not a joint
venture, and that there is only a certain amount of equity participation
H
in it, is not correct. (328-G)
NEW HORIZONS LTD. v. U.0.1
313
Black's Law Dictionary 6th edn., pp. 839, 342; Words and Phrases A
Permanent Edition, Volume 23, p. 117; Jacques Duhart, Joint Ventures
in East Asia- Legal Issues (1991), referred to
From the statements of the appellant in its tender it would appear
that the appellant is an association of companies, including the Indian
group of companies and the Singapore based Company (IIPL), jointly B
undertaking a commercial enterprise wherein they will all contribute
assets and will share risks and have a community of interest. The
appellant has, therefore, been constituted as a joint venture, and it
would not be correct to say that IIPL which has a substantial stake in
the success of the venture is a mere shareholder in the appellantcompany. (329-C-D)
C
Once it is held that the appellant - company is a joint venture, as
claimed by it in the tender, the experience of its various constituents
had to be taken into consideration if the Tender Evaluation Committee
had adopted the approach of a prudent businessman. (329-E)
D
6. The conclusion would not be any different even from the legal
standpoint. In law, a company is a legal entity distinct from its
members. But there have been inroads in the doctrine of corporate
personality ·by statutory provisions as well as by judicial pronouncements. By 'lifting the veil' the law either goes behind the E
corporate personality to the individual members or ignores the
separate personality of each company in favour of the economic entity
constituted by a group of associated companies. This course is adopted
when it is found that the principle of Corporate personality is too
Oagrantiy opposed to justice, convenience or the interests of the
revenue. (329-F-G)
F
Salomon v. Salomon and Co., (1897) AC 22, Gower's Principles of
Modern Company Law 4th edn., p.112 and 136, U.S. v. Milwaukee
Refrigerator Transit Co., (1905) 142 Fed. 247, Scottish Corporation
Wholesale Society Ltd, v. Meyer, (1959) AC 324, Harold Holdworth and
Co. (Wakefield) Ltd., v. Caddies, (1955) 1 All ER 725, DHN Food G
Distributors Ltd v. London Borough of Tower Hamlets, (1976) 3 All ER
462, Juggilal Kamlapat v. CIT, (1969) 1 SCR 988, State of U.P. v.
Renusagar Power Co., (1988] Supp 1 SCR 627, De Beers Consolidated
Mines Ltd. v. Howe, (1906) AC 455, Daimler Co. Ltd. v. Continental Tyre
and Rubber Co. Ltd., (1916) 2 AC 307, S. Ottolenghi, "From Peeping
Behind the Corporate Veil, to Ignoring it Completely" (1990) 53 Mod. H
314
SUPREME COURT REPORTS
[1994] SUPP. 5 S.C.R.
A
L. Rev. 338 and Central Inland Water Transport Corporation Ltd. v.
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Brojonath Gangu!y, [1986) 2 SCR 278, referred to.
Paharpur Cooling Towers Ltd. v. Banbaigon Refinery and Petrochemicals Ltd, (1994) 28 DRJ 425, distinguished
Seeing through the corporate veil, it will be found that as a result
of reorganisation in 1992 the appellant-company is functioning as a
joint venture wherein the Indian group holds 60% shares and the
Singapore based company holds 40% shares. Both the groups have
contributed towards the resources of the joint venture in the form of
machines, equipment and expertise in the field. The company is in the ·
nature of a partnership, where the constituents have jointly undertaken
this commercial enterprise wherein they will contribute to the assets
and share the risks. In respect of such a joint venture company, the
experience of the company can only mean the experience of the
constituents of the joint venture, i.e., the Indian group of companies
and the Singapore based company. (332-G, H, 333-A)
7. The non-consideration of the tender submitted by the appellantcompany has resulted in acceptance of the tender submitted of the
tender offered by respondent 4. The total amount of royalty offered by
respondent 4 for three y~ars was Rs. 95 lakhs whereas the appellantcompany had offered Rs. 459.90 lakhs, i.e., nearly five times the
amount offered by respondent 4. Having regard to this large margin in
the amount of royalty, it must be held that decision of the Tender
Evaluation Committee to refuse to consider the tender of the appellantcompl!_!_JY and to accept the tender of respondent 4 suffers from the vice
of arbitrariness and irrationality and is liable to be quashed. (333-H,
334-A)
8. In view of the fact.that the telephone directory for the year 1993
has been printed and supplied to the Department by respondent 4 in
terms of the contract, and the process of preparation of the telephone
directory for the year 1994 has already commenced, the contract with
respondent 4 may be set aside insofar as it relates to the directory for
the year 1995. Fresh tenders may be invited for award of the contract
for the directory for the year 1995. (334-C-D)
CIVIL APPELLATE WRISDICTION: Civil Appeal Nos. 7230-31 of
1994.
From the Judgment and Order dated 15.10.93 of the Delhi High Court
H
in C.W.P.No. 3837 and C.M. No. 6120of1993.
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.]
315
Soli J. Sorabjee, Manmohan Sarin and Pramod Dayal for the AppelA
l';mts.
P. Chidabaram and C.S. Vaidyanathan and P.P. Singh for the Respondent No.3
K.K. Venugopal, Atishi Dipanker and Parag Tripathi for the ReB
spondent No.4
N.N. Goswami, Anil Katiyar and T.C. Sharma for the Respondents
Nos.land 2
The Judgment of the Court was delivered by
S.C. AGRAWAL, J. Leave granted.
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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 D
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 E
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 F
Computers Limited v. Mis M&N Publications Limited and Anr., [1993] 1
SCC 445, 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.
By an advertisement published in various newspapers on April 22, G
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 H
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B
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316
SUPREME COURT REPORTS
[1994] SUPP. 5 S.C.R.
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 advertisement. In the said
advertisement it was stated:
"The tenderer· should have the experience in compiling,
printing and supply of telephone directories to the large
telephone 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."
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 May 14, 1993.
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 ntore than 50,000 lines as credentials of his past experience." (para
12)
"The tenderer should intimate while submitting the tender
the equipment and list of machines etc. alongwith 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-tum 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)
Five persons, including appellant no.I, Mis New Horizons Ltd. (for
short 'NHL'), and Mis MandN Publications Limited (respondent No. 4
herein) submitted their tenders. The tenders were opened on May 14, 1993
at 3.30 p.m. The royalty amount offered by the five tenderer was as, under:
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.)
317
Name of
Agreed amount
offered
Tenderer
1993
1994
SESA SEAT INFORMATION
SYSTEMS LTD., Pune-1
M & N PUBLICATIONS
LTD., Bangalore-52
(respondent No~4 herein)
NEW HORIZONS LTD.,
NEW DELHI-1.
(appellantNo-1 herein)
issue
41
20
39
HYPER MEDIA INFORMATION
6
Services Pvt. Ltd., Banglore-10
Kaljothi Process Pvt.
Ltd., Hyderabad-20
102
issue
121
30
129.30
45
138
(in lakhs)
1995
issue
151
45
291.60
72
160
A
B
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The offers were considered by the Tender Evaluation Committee. The
offer of respondent No. 4 was accepted. The Assistant General Manager
(OP), Department of Telecommunications, Telecom District, Hyderabad,
by his latter dated August 3, 1993, informed NHL that its offer could not be F
considered. The said letter did not indicate the reason for non-consideration
of the offer of the NHL. The appellants filed a writ petition in the Delhi
High Court under Articles 226 and 227 Qf the Constitution of India seeking
a writ, order or direction in the nature of certiorari for quashing the award
of contract by respondent No.3 to respondent No.4 for the printing, binding G
and supply of telephone directories for Hyderabad and also a writ, order or
direction in the nature of mandamus dire.:ting respondent No. 3 to accept
the tender offer of the appellants. In the counter affidavit filed in reply to
the said Writ Petition filed on behalf of respondents Nos. 1 to 3 the reason
for non-consideration of the offer of NHL was disclosed. It was stated that
the offer of NHL was not considered because the applicants did submit any H
I
318
SUPREME COURT REPORTS
[1994] SUPP. 5 S.C.R.
A
evidence to show that they have in their name undertaken compiling,
printing and supply of telephone directories for large telephone systems
with. the capacity of more than 50,000 lines. In this regard, it may be
mentioned that in t~eir tender offer NHL had mentioned that:
(i) NHL is a joint venture company established by Thomson Press
B
(India) Limited (TPI), Living Media (India) Limited (LMI),World Media
Limited (WML) and Integrated Information Pvt. Ltd. (IIPL), a wholly
owned subsidiary of Singapore Telecom wherein 60% of shares are held by
Mr. Aroon Purie, TPI, LMI, WML and other companies in the same Groups
and 40% of shares are held by IIPL:
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(ii) the joint venture has received approval of the Government of India
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and is currently in operation;
(iii)
NHL has been established as an information and database
management company with expertise in database processing, publishing,
sales/marketing and the dissemination of related information; and
(iv) in addition to its projected strength, NHL has access to the benefit
of the complete resources and strength of its parent/owning companies,
each of which is a recognized market leader.
An overview of each of the parent companies, namely, TPI, LMI,
wML and IIPL also given in the tender offer.
Regarding the expertise of TPl was stated that it has been established
as a joint venture with Thomson International Canada in · l 964 and is
located at Faridabad, Haryana and has units at Okhla, Noida Export Zone
and also has sales/co-ordinaticin offices in Metropolitan towns in India, and
in London and New York. It was stated that with over' 125 Managers and
1255 skilled technicians/workers the press is equipped to handle the most
exacting printing jobs and working with state of art technology, fPI
produces both quality and volume and a detailed list of 111achines installed
for printing, folding, cutting and binding and other. equipment was enclosed
and it was stated that the said· equipment and skill wou.ld be
available/utilized for all directory production work. It was stated that
among the many diverse jobs that have been executed by TPI are printing
of editions of India Today (Two languages and a total of 1.2 million copies
per. month), Computers Today, Business Today, Readers Digest, Span
Magazine, Scientific Journals, Books (both hard and soft bound) for export
and Telephone Directories for UDI, 'Sterling Computers, Sesa Seat, etc.
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.]
319
With regard to LMI it was stated that as India Today Group it was first A
set up in 1962 and became LMI in 1988. LMI employs approximately 500
people in various disciplines viz., editorial, pre-press, production, sales and
marketing. Its current activities include publishing (India Today, Business
Today, Computer Today, Target, Journal of Applied Medicine, etc.),
distribution (both in house magazines, Diaries and Time International),
Music Today (producing and marketing a wide .selection of India's best B
music} Newstrack (the leading Video news magazine in Hindi and English)
and Printing (four regional language editions with a print order of one
million copies per month). A list of machines and equipment installed at its
units at Delhi and at Maraimalai Nagar in Tamilnadu was also enclosed.
As regards WML it was stated that it was established in 1944 in Lahore C
and moved its registered office to New Delhi in 1969. Its major activity was
film financing, finance, marketing and publishing and now it also
distributes LMI products and commissions articles/features for Business
Today.
With regard to IIPL it was mentioned that it is a wholly owned D
subsidiary of Singapore Telecom established in 1967 to publish the
Singapore Telephone Directory with Yellow Pages and a .brochure which
described the strength and developments achieved by Singapore Telecom
and IIPL's position within the group was attached with tender offer. It was
further stated that IIPL serves Singapore which has a tele•nctwork offering
subscribers up-to-date and efficient Telecom services and that IIPL has E
experience in international operations with special focus on the Asian
regions and that IIPL experience and expertise would contribute actively to
the systems and professional skills of the new joint venture. It. was also
mentioned that for the past 25 years the directory operation has evolved a
continuously updated and responsive system specifically for quality
directory management/publishing and many of the Managers involve~ with F
the joint venture company have been a part of IIPL since inception. With
specific reference to the lndian venture, it was stated that IIPL will be
providing its unique integrated directory management system alongwith the
expertise of its Managers and that the Managers will be actively involved in
the project both out of Singapore and resident in India. The particulars of
various IIPL publications, namely, Singapore Phone Book and Yellow G
Pages, Singapore Telex and Fax directory and other publications and
particulars of the Integrated Directory System for publishing Software for
medium to large directories operating in a VAX environment were
mentioned.
Referring to itself (NHL) it was stated in the tender:
H
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SUPREME COUR'F REPORTS
(1994] SUPP. 5 S.C.R.
"As a joint venture in the true sense of the phrase, the
Company will have access to expertise in
datab~e
management, sales and publishing of its parent group
companies. In addition, the equipment, manpower and
expertise are available to NHL. Perhaps even more
significant, at this point in the directory/ yellow page cycle,
is the unique reputation of its parent companies as market
leaders. This will lend a unique credibility and public
recognition to the joint venture, as well as its products.
A modem extremely powerful, Computer system is being
purchased to install · the integrated directory system
developed over the past 25 years by IIPL. The IDS will
ensure efficiency and accuracy of operations. Training of all
personnel is being and will continue to be conducted by
experienced Managers from IIPL." ·
Alongwith the tender the appellants submitted the directories of Delhi
and Bombay 1992 which were printed and bound by Living Media Press in
Madras.
In the counter affidavit filed on behalf of respondents Nos. l to 3 in the
High Court it was stated that as per the averments in the writ petition TPI
and LMI had printed and bound the telephone directories for respective
parties who had been awarded the contract for Delhi and Bombay and that
the appellants did not produce any evidence to show that they have in their
name undertaken compiling, printing, binding and supply of Telephone
Directories of large telephone systems with a capacity of more than 50,000
lines and further that telephone directory of Delhi 1992 issue was published
by Sterling Co'llputers Limited on behalf of United Data Base (India) Pvt
Ltd., and it was printed ::md bound at Navneet Publications (India) Ltd:,
Gandhinagar, and the telephone directory of Bombay 1992 issue does not
indicate any publisher's or printer's nanie. It was also stated that NHL was
converted in to a joint venture company in 1992 and have no c.wcperience
whatsoever in their own name for compiling, printing, binding and supply
of telephone directories of Telephone Systems of more than 50,000 lines
capacity. It was further stated that the appellants had submitted the
Directories of Delhi and Bombay only to show the capability of printing
facilities of TPI and LMI and it does not substantiate their experience of a
full job of compiling, printing and supply of telephone directories as stipulated in the tender notice/document. In the counter affidavit it was also
stated that th.e royalty and. other aspects of the tender were not considered
-
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.]
321
since the appeliants did not meet the primary requirement of experience as A
abov.e.
Before the High Court it was urged on behalf of the appellants that
NHL was fully eligible and met the criteria as laid down and was competent
to compile, print and supply telephone directories as per the invitation of
tender and in this connection reliance was placed on the experience of the B
forieng collaborator/equity holder and the experience of the major Indian
equity shareholders viz., TPI and LMI who owned the most well equipped
modern printing and binding facilities and had executed the work for the
parties who had been awarded contract earlier for telephone directories for
metropolitan cities of Delhi and Bombay. It was also submitted that these
facilities were available to NHL to execute the contract in question and that C
all these facts were clearly brought out in the tender document submitted by
it and that the contract was awarded to respondent No. 4 on extraneous
considerations which is violative of Article 14 of the Constitution. It was
further submitted that since the matter involved public revenue the tender of
the appellants containing the highest offer could not be rejected on the D
hypertechnical plea that the NHL itself has no experience.
The said contentions have been negatived by the Division Bench of the
Delhi High Court in its judgment dated October 15, 1993 whereby the writ
petition filed by the appellants was dismissed. The High Court was
proceeded on the assumption that the shareholders of NHL have all the
experience in compiling and printing the telephone directories but has E
observed that, that it is not at all job requirement. According to the High
Court it is one thing to say that shareholders of a company have vast
experience in the publication of telephone directories with Yellow Pages
and it is entirely another thing if the company itself has that experience.
The approach to the High Court is that a company is an independent person F
distinct from its members and that NHL is carrying on its business
independently from that of the shareholders. The High Court has held that
the experience of a shareholder cannot be the experience of the company_
nor is NHL the agent of its shareholders. Referring to the principle of listing
of corporate veil in modern company law the High Court has observed that
so far as NHL is concerned, it .cannot invoke the said principle either as a G
ground of attack or as a ground of defence. In the view of the High Court it
could not be said that the authorities had failed in their duty to look behind
the facade of corporateness of NHL arid that it was none of their duty and
they rightly examined the experience, etc. of NHL and came to the
conclusion that it did not satisfy the eligibility conditions and that there was
no error in the said approach of the authorities. Dealing with the connection H
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that NHL is a joint venture the High Court has observed that a joint venture
is a one-time grouping of two or more persons in a business undertaking
and unlike a partnership, a joint venture does not entail a continuing
relationship among the parties and on that view the High Court has held
that there is no joint venture as such and there is only a certain amount of
equity participation by a foreign company in NHL.The High Court rejected
the contention urged on behalf of the appellants regarding the absence of
reasons for rejecting the tender of NHL on the ground that the noncommunication of reasons is not fatal in all circumstances and that in the
present case the reasons existed on the record of the authorities that the
tender submitted by NHL was not in conformity with the condition of the
tender and NHL was found ineligible for award of the tender and its offer
could not have been accepted. The High Court further held that since the
bid of the appellants was rejected at the threshold the authorities could not
consider the question of higher amount of royalty offered by NHL and that
higher bid could not be a substitute for eligibility conditions.
Shri Soli Sorabji, the learned counsel appearing for the appellants, has
submitted that the High Court was in error in considering whether NHL
fulfilled the condition regarding experience contained in the tender notice ·
and that the authorities should have taken into consideration the experience
of the constituents of NHL which is a joint venture company duly approved
by the Government of India in which 40% equity is owned by IIPL (a
wholly owned subsidiary of Singapore Telecom) and the remaining 60%
equity is held by Indian group of companies consisting of TPI, LMJ, WML
and Mr. Aroon Purie, and that the constituents of NHL had expertise and
experience in publishing yellow page directories as well as telephone
directories and had necessary resources for that purpose. Shri Sorabji has
also submitted that it is a fit case in which the authorities should have lifted
the corporate veil and if they had done so they would have seen the reality.
Shri Sorabji has emphasised that there is a difference of more than 3 and a
half crore rupees between the amount of royalty offered by NHL and that
offered by respondent No. 4 to whom the contract has been awarded.
Shri K.K. Venugopal, the learned counsel appearing for respondent
No. 4, has, however, supported the judgment of the High Court ·and has
submitted that the authorities were justified in not considering the tender
submitted . by NHL on the basis that it did not fulfill the conditions
regarding experience contained in the tender notice. Shri Venugopal has
submitted that there is nothing to show that ~he constituents of NHL had the
necessary experience of supplying telephone directories to large telephone
systems of the capacity of more than 50,000 lines and that no document to
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323
prove that NHL had necessary experience was submitted by NHL A
alongwith the tender.
At the outset, we may indicate that in the matter of entering into a
contract, the State does not stand on the same footing as a private person
who is free to enter into a contract with any person he likes. The State, in
exercise of its various functions, is governed by the mandate of Article 14 B
of the Constitution which excludes arbitrariness in State action and requires
the State to act fairly and reasonably. The action of the State in the matter
of award of a contract has to satisfy this criterion. Moreover a contract
would either involve expenditure from the State exchequer or augmentation
of public revenue and consequently the discretion in the matter of selection C
of the person for award of the contract has to be exercised keeping in view
the public interest involved in such selection. The decision of this Court,
therefore, insist that while dealing with the public, whether by way of
giving jobs or entering into contracts or issuing quotas or lincences or
granting other forms of largesse, the Government cannot act arbitrarily at
its sweet will and like a private individual, deal with any person it pleases, D
but its action must be in conformity with the standards or norms which are
not arbitrary, irrational or irrelevant. It is, however, recognized that certain
measure of "free play in the joints" is necessary for an administrative body
functioning in an administrative sphere See : Ramanna Dayaram Shetty v.
The International Airport Authority of India, [1979] 3 SCR 1014, at p.
1034; Kasturi Lal Lakshmi Reddy v. State of J&K, [1980] 3 SCR 1338, at p. E
1355; Fasih Chaudhary v. Director General, Dooradarshan, [1988] Suppl.
3 SCR 282 at p. 286; Sterling Computers Ltd v. Mis M&N Publications
Ltd & Anr. (supra); Union of India v. Hindustan Development
Corporation, 1983 (3) SCC 499, at p. 513.
In the recent decision in Tata Cellular v. Union of India Civil Appeals F
Nos. 4947-50of1994 and connected appeals decided on July 26, 1994 this
Court has examined the scope of judicial review in the field of exercise of
contractual powers by Government bodies and, after noticing the current
mood of judicial restraint in England, the court has laid down the following
principles :
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"(I)
The modem trend points to judicial restraint in
administrative action .
(2) The Court does not sit as a court of appeal but merely
reviews the manner in which the decision was made.
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(3) The Court does riot have the expertise to correct the
administrative decision. If a review of the administrative
decision is permitted it will be substituting its own decision,
without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to
judicial scrutiny because the invitation to tender is in the
realm of contract. Normally speaking, the decision to accept
the tender or award the contract is reached by process of
negotiations through several tiers. More often than not, such
decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In
other words, a fair play in the joints is a necessary
concomitant for an administrative . body functioning in an
~dministrative sphere
or quasi-administrative
sphere.
However, the ·decision must not only be tested by the
application of Wednesbury principle of reasonableness
(including its other facets pointed out above) bu! must be
free from arbitrariness not affected by bias or actuated by
mala tides.
(6) Quashing decisions may impose heavy administrative
burden on the administration and lead to increased and
unbudgeted expenditure."
"Wednesbury Principle of reasonableness" to which reference has been
made in principle (5) aforementioned is contained in.Associated Provincial
Pricture Houses Ltd. v. ·wednesbury Corporation, [1948] l KB 223: In that
case Lord Greene M.R. has held that a decision of a public authority will be
liable to be quashed or otherwise dealt with by an apporiate order in judicial
review proceedings where the Court concludes that the decision is such that
no authority properly directing itself on the relevant law and acting
reasonably could have reached it. In Tata Cellular (supra) this Court, has
mentioned two other.facets of irrationality:
(l) It is open to the court to review the decision-maker's evaluation of
the facts. The Court will intervene where the facts taken as a whole could
not logically warrant the conclusion of the decision-maker. If the weight of
facts pointing to one course of action is overwhelming, then a decision the
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other way, cannot be upheld.
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NEW HORIZONS LTD. v. U.0.I [S.C. AGRAWAL, .T.]
325
(2) A decision would be regarded as unreasonable if it is partial and A
unequal in its operation as between different classes.
The validity of the action of the Tender Evaluation Committee in not
considering the tender submitted by NHL has to be considered in. the light
of the aforementioned principle No. 5 as laid down in Tata Cellular. In
other words, what has to be ~een is whether the refusal by the Tender B
Evaluation Committee to consider the tender of NHL on the ground that the
condition regarding experience as laid down in the tender notice was not
fulfilled can be regarded as arbitrary and unreasonable.
The requirement with regard to experience, as stated in the
advertisement dated April 22, 1993 for inviting tenders, as noticed earlier C
was in the following terms:
"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 D
documentary proof. He should also furnish credentials in
this field."
The requirement of experience was, however, differently worded in the
notice for inviting sealed tenders dated April 26, 1993 which was attached
to the tender documents which prescribes the conditions to be fulfilled for E
submission of tenders and wherein it was stated as under:
"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)
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In the said notice the expressions "tenderer" and "successful tenderer"
have been used. While the expression "tenderer" has been used in
paragraphs 5, 7, 11 and 14, the expression "successful tenderer" is used in
paragraphs 7, 9 (a), 10 and 12. Since paragraph 10 provides for execution
of the agreement by the successful tenderer, the said expression is intended G
to mean the tenderer whose tender has been found suitable for acceptance.
The use of the expression "successful tenderer" instead of the expression
"tenderer" in paragraph 12, therefore, indicates that the documentary proof,
by way of credentials of the past experience, has to be submitted after the
tender has been considered and is found suitable for acceptance by the
concerned authorities. This would mean that the past experience is a matter H
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which is to be considered after the tender has been examined and evaluated
and the tenderer whose tender is found acceptable is required to submit
documentary proof regarding his past experience. In other words, a tender
is not liable to J:>e excluded from consideration on the ground of noneligibility on account of lack of past experience. This inference is
strengthened by paragraph 8 and 11 of the notice dated April 26, 1993. In
paragraph 8 it is provided that a tender is liable for summary rejection if it
. is submitted without the Demand Draft of Rs. 5,00,000. Similarly in
paragraph 11 it is provided that tender is liable to be excluded from
consideration if the income tax clearance certificate is not furnished with
the tender. There is no similar provision for excluding from consideration a
tender on the ground of failure to furnish with the tender the required
material by way of credentials of past experience.