http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 19  

PETITIONER: STERLING COMPUTERS LIMITED ETC.

       Vs.

RESPONDENT: M & N PUBLICATIONS LIMITED AND ORS.

DATE OF JUDGMENT12/01/1993

BENCH: SINGH N.P. (J) BENCH: SINGH N.P. (J) KASLIWAL, N.M. (J)

CITATION:  1996 AIR   51            1993 SCR  (1)  81  1993 SCC  (1) 445        JT 1993 (1)   187  1993 SCALE  (1)36

ACT: Constitution  of India : Articles 12, 14, 19, 32,  136,  226 and 298. Government   contracts--Judicial   review--Court   primarily concerned with infirmity in decision making process--Urgency of disposal by courts of such matters--Necessity for. Telephone   directories--Publication   of--Contract   termed ’supplemental  contract’ granted--Held amounted to grant  of fresh contract in garb of ’supplemental contract’.

HEADNOTE: The  three  appeals arose out of disputes  relating  to  the publication of telephone directories of MTNL a Government of India  Undertaking.   The MTNL introduced a new  concept  of "yellow  pages’ in telephone directories, and  these  yellow pages   were  to  contain  advertisement   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 the white pages of the telephone directory, supply the  same free of cost to the for its subscribers, and pay royalty  to the MTNL in connection with printing of such directories. Tenders  for  publication of the directories for  Delhi  and Bombay were invited.  Tender of UIP  respondent No. 2 in the Writ Petition and appellant in one of the appeals (CA.No. 91 of  1993) was accepted, and an agreement dated  14th  March, 1987  was  executed.   UDI, respondent No.  3  to  the  Writ Petition  and appellant in one of the other appeals (CA  No. 90, of 1993) was 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, pay an amount  of  Rs.  20.16 crores  as royalty to the MTNL, supply the directories  free of cost to subscribers.  UIP also furnished a 82                   ‘ performance  guarantee for a sum of Rs. one crore,  and  was also to supply the same number of supplementary  directories which were to be published six months after the  publication of  the annual issue, to be published  in  November/December every   year.   UIP  was  given  the  exclusive  right   for procurement  of  the advertisements in the yellow  pages  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 19  

well  as strips, bold the extra entries in the white  pages, the  rates  to  be fixed by the UIP for each  issue  of  the directory,  and  such  rates  to  be  printed  for   general information.   It  was  stipulated  that  if  UIP  committed default  or  breach of the agreement or failed  in  the  due performance  thereof, the MTNL shall be entitled to  recover from  the UIP by way of compensation or  liquidated  damages and amount calculated at the rate of Rs.  One lakh for every day  or  part thereof for the delay  beyond  the  stipulated date.   The MTNL without prejudice to other rights could  by notice in writing determine the contract. UIP defaulted and committed breach of the agreement inasmuch as  directories for Delhi were published only for the  years 1987  and 1988 and for Bombay only for the year  1987.   For the  year 1987, Delhi issue was published after a  delay  of seven  months  and Bombay issue after six  months,  and  the Delhi  issue of 1988 was published only in August,  1990,  a delay  of  two  years.   There was  no  publication  of  the directories for Delhi for the years 1989, 1990 and 1991, and in  respect  of Bombay for the years 1988,  1989,  1990  and 1991. A supplemental agreement was entered on 26th September, 1991 between  UIP,  UDI,  MTNL  and  Sterling  Computers  Limited appellant  in  one  of the appeals (CA.  No.  89  of  1993). Sterling  by this agreement was introduced to carry out  the unexecuted  portion  of  the agreement with  UIP.   By  this supplemental agreement Sterling was to print and publish  13 main issues of Delhi and Bombay directories within a  period of  seven  years  including  the year  1991  on  payment  of additional  royalty of only Rs. 10 crores to the  MTNL  over and  above the royalty stipulated in the original  agreement by the UIP. Under the agreement dated 14th March, 1987 the royalty which was  payable  was Rs. 20.16 crores for the  period  1987  to 1991,  but  under the supplemental  agreement  Sterling  was given  the contract to publish 13 main issues of  the  Delhi and  Bombay  directories  upto 1997 and 1998,  but  for  the extended period it had to pay royalty only for an amount  of Rs. 10 83 crores. A  Writ  Petition  was flied questioning  the  validity  and legality of the supplemental agreement on different  grounds including the ground of mala fide.  It was contended by  the petitioners that under the grab of a supplemental  agreement a fresh contract was awarded to Sterling for a fresh  period from  1991 to 1997 on fresh terms and conditions to  publish the  directories  every year for Delhi  and  Bombay  without inviting  tenders or affording an opportunity to others,  to submit tenders so that they may be also considered for award of  the said contract.  It was asserted by  the  petitioners that in the process of entering into the supplemental agree- ment  the MTNL, which is a public undertaking and a  "State’ within  the meaning of Article 12 of the  constitution,  had suffered  a  loss  of more than Rs. 60  crores  without  any corresponding benefit accruing to the MTNL or to the  public in general. MTNL  contested  the  writ  petition,  contending  that  the supplemental   agreement  was  a  result  of  a  bona   fide commercial  decision free from any bias or malice, that  the original  contract  for  the years 1987  to  1991  had  been awarded  to UIP after inviting tenders, but UIP having  gone bankrupt,  no money could have been realised from  it.   The termination of the original contract was no remedy  although repeated  contraventions and breaches had been committed  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 19  

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.   In  order  to salvage Rs. 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/UNI/Sterling   to   publish  the  thirteen   issues   of directories, six main issues for Delhi and seven main issues for  Bombay upto years 1997-98 apart from the  supplementary directories. The  High Court allowed the writ petitions, and came to  the conclusion  that  the  supplemental  agreement  dated   26th September,  1991  cannot be held to be an extension  of  the original  agreement  dated 14th March, 1987,  and  that  the supplemental  agreement was tainted with malice  the  object being to provide unjust enrichment to UIP/UDI/Sterling. In the appeals to this Court, it was contended on behalf  of the 84 appellants that 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 the  supplemental  agreement  also involved  a question of policy, and 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, and that  the real  experiment  was as to how the  directories’  could  be published without incurring any cost by MTNL. On  behalf of the Writ Petitioners it was stated  that  they were prepared to pay to the MTNL an amount of Rs. 60  crores for  the period 1991 to 1997/1998 the period covered by  the supplemental agreement for which the UIP/(JDI/Sterling  have undertaken to pay only Rs. 10 crores as royalty. Dismissing the appeals, this court HELD:1.  Ile publication of directories by the MTNL  is not  just  a commercial venture, the primary  object  is  to provide service to the people. [92F] 2.The  norms and procedures prescribed by Government  and indicated by Courts have to be more strictly followed  while awarding  contracts  which  have  along  with  a  commercial element a public purpose. [92F] 3.The action or the procedure adopted by the  authorities which  can  be held to be a ’State’ within  the  meaning  of Article 12 of the Constitution, while awarding contracts  in respect  of properties belonging to the state can be  judged and tested in the light of Article 14 of the Constitution. Raman Davaram Shelly v. 7he International Airport  Authority of India,’ AIR 1979 SC 1628; M/s.  Kasturi Lal Lakshmi Reddy v.  The  State  of  Jammu and Kashmir,  AIR  1980  SC  1992; Fertilizer  Corporation Kamgar Union (Regd) Sindri v.  Union of India, AIR 1981 SC 344; Ram and Shyam Company v. State of Haryana, AIR 1985 SC 1147; Haji T.M. Hasan Rawther v. Kerala Financial Corporation, AIR 1988 SC 157; Mahabir Auto  Stores v.  Indian  Oil  Corporation, AIR 1990 SC  1031  and  Kumari Shrilekha Vidyarthi v.   State  of  U.P., AIR 1991  SC  537, referred to. [92-H-93-A] 4.  Public  authorities, at times It Is said must  have  the same liberty 85 as  they have in framing the policies, even  while  entering into   contracts   because   many   contracts   amount    to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 19  

implementation or projection of policies of the  Government. But it cannot be overlooked that unlike policies,  contracts are   legally  binding  commitments  and  they  commit   the authority which may be held to be a State within the meaning of  Article 12 of the Constitution In many cases for  years. That  is  why  the  courts  have  impressed  that  even   in contractual  matters  the public authority should  not  have unfettered discretion. [91G-H, 92A] 5.In  contracts  having commercial  elements,  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. [92B] 6.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 purposes of taking a decision its to whom the contract is to be  awarded and at what terms.  If the decisions  have  been taken  in bone fide manner although not  strictly  following the  norms  laid  down by the  Courts,  such  decisions  are upheld. [92C] 7.Public authorities are essentially different from those of private  persons. Even   while  taking  decision   in respect of commercial transactions a publicauthority  must be  guided by relevant considerations and not by  irrelevant ones.    If  such  decision  is  influenced  by   extraneous considerations  which it ought not to have been  taken  into account the ultimate decision is bound to be vitiated,  even if  it  is  established that such decision  had  been  taken without bias. [102H, 103A] 8.While  exercising  the  power of  judicial  review,  in respect  of contracts entered into on behalf of  the  State, the  Court  is concerned primarily as to whether  there  has been any infirmity in the ’decision making process’.  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  scope of any such  enquiry.   But  the Courts  can  certainly   examine  whether  "decision  making process’   was  reasonable,  rational,  not  arbitrary   and violative of Article 14 of the Constitution. [95C-E-F] 86 Chief Constable of the North Wales Police v. Evans, [1982] 3 All ER 141, referred to. 9.In the facts and the circumstances of the instant case, it has to be held that the MTNL has applied the  "irrelevant considerations’ doctrine while granting a fresh contract for a  period of five years through the  supplemental  agreement dated  26th September, 1991, because it had failed  to  take into account considerations which were necessarily  relevant ie.  following the rule of inviting tenders  while  granting the  contract  for a further period of five years  on  fresh terms  and conditions and had taken into account  irrelevant considerations. [101H, 102A] 10.Philanthropy  is  no  part  of  the  management  of  an undertaking, while dealing with a contractor entrusted  with the execution of a contract.’[102F] 11.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 without  inviting  fresh tenders from intending  persons  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 19  

perform the some job for the next five years. [102G] 12.The supplemental agreement is really a fresh  agreement with  fresh terms and, conditions which has been entered  by MTNL without inviting any tender for the same.  It has  been entered to benefit the parties who are admittedly defaulters by not publishing directories for Bombay for the years 1988- 1991,  and for Delhi for the years 1989-1991  although  they had   collected   several   crores   or   Rupees   for   the advertisements  for the directories to be published  in  the aforesaid years. [103D-E] 13.It  is  a  matter of common  experience  that  whenever applications   relating   to  awarding  of   contracts   are entertained  for  judicial  review  of  the   administrative action,  such applications remain pending for months and  in some cases for years.  Because of the interim orders  passed in  such applications, the very execution of the  contracts, are  kept in abeyance.  The cost of different projects  keep on escalating with passage of time apart from the fact  that the  completion  of the project itself  Is  deferred.   This process  not only affects the public exchequer but even  the public In general  87 who are deprived of availing the facilities under  different projects.   As  such, it need not be  impressed  that  while exercising  the power of judicial review in connection  with contractual  obligations, Courts should be conscious of  the urgency of the disposal of such matters, otherwise the power which  is to be exercised in the interest of the public  and for public good in some cases become counter- productive  by causing injury to the public in general. [106AB]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeal Nos.  89-91  of 1993. From  the  Judgment and Order dated 30.9.1992 of  the  Delhi High Court in W.P. No. 1872 of 1992. K  Parsaran,  Kapil Sibal, L.P. Agarwalla,  N.P.  Agarwalla, Anil  Agarwalia, Gopal Subramanium,  Fazal-ul-Quaidir,  P.H. Parekh, Ms. Nina Gupta and Vineet Kumar for the Appellant. K.K.  Venugopal,  P. Chidambaram, Anil P. Diwan,  Harish  N. Salve,  Vijay Narain, P.P. Tripathi and P.P. Singh  for  the Respondents. R.N. Keshwani for the Intervener. The following Judgment of the Court was delivered by N.P. SINGH.  J. Leave granted. Three  appeals have been filed against the same judgment  of the High Court by which the Writ Petition filed on behalf of the petitioners/respondents (hereinafter referred to as "the writ-petitioners") was allowed.  The dispute relates to  the publication  of  the  telephone  directories  of   Mahanagar Telephone  Nigam Limited, a Government of India  Undertaking (hereinafter referred to as "the MTNL"). A  new concept of yellow pages in the telephone  directories was 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 to the MTNL for its 88 subscribers and had to pay royalty to the MTNL in connection

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 19  

with printing of such directories. Tenders  for  publication of the directories for  Delhi  and Bombay were invited.  Tender of the United India Periodicals Pvt.   Ltd.  (hereinafter referred to as ’the UlP,  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 payan amount of Rs. 20.16 crores as royalty to the MTNL  and to  supply the MTNL directories free of cost with  reference to  the  number  of  subscribers.   UIP  also  furnished   a performance  guarantee for a sum of Rs. one crore.  UIP  was also to supply the same number of supplementary  directories which were to be published six months after the  publication of the annual issue.  The annual issue of the directory  was to  be published in November/December every year.   UIP  was given   the   exclusive  right  for   procurement   of   the advertisements  in the yellow pages as well as strips,  bold and  extra  entries in the white pages.  The rates  of  such advertisements were to be fixed by the UIP for each issue of the  directory and such rates had to be printed for  general information.   It was also stipulated that if UIP  committed any  default  or breach of the terms and conditions  of  the agreement  or failed in the due performance  thereof  within the time fixed (which was the essence of the contract),  the MTNL  shall  be entitled to recover from the UIP by  way  of compensation  or liquidated damages an amount calculated  at the  rate of Rs. one lakh for every day or part thereof  for the delay beyond the stipulated date in respect of the  item which was not completed or finished and delivered completely to  the  MTNL  on the stipulated date as  mentioned  in  the contract.   In view of clause 22 of the agreement, the  MTNL without prejudice to other rights could by notice in writing determine the contract. It is an admitted position that UIP defaulted and  committed breach of the terms of the agreement inasmuch as directories for  Delhi were published only for the years 1987  and  1988 and  for Bombay only for the year 1987.  For the year  1987, Delhi issue was published after a delay of  89 seven  months and that of Bombay after six months.   So  far Delhi issue of the directory for the year 1988 is concerned, it  was published only in August, 1990 after a delay of  two years.   Under the agreement UIP was to publish  directories every year for Delhi and Bombay separately during the period of  contract from 1987 to 1991.  They were also required  to publish supplementary directory each year for Delhi as  well as Bombay.  But there was no publication of directories  for Delhi-  for the years 1989, 1990 and 1991.  Similarly  there was  no publication of directories in respect of Bombay  for the years 1988, 1989, 1990 and 1991. On 26th September, 1991 a supplemental agreement was entered between   UIP,  UDI,  MTNL  and  Sterling   Computers   Ltd. (hereinafter  referred to as "Sterline" 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 19  

and  Delhi telephone directories within the stipulated  time frame  and  other stipulations in the agreement  MTNL  shall extend the original contract for 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  and available to and binding on the parties to the  supplemental agreement  as if the same were the part of the  supplemental agreement.   It  was  also  said  that  if  there  was   any inconsistency  or  contradictions  vis-a-vis  the   original agreement,   the  memorandum  of  understanding  read   with supplemental   agreement  shall  prevail  and   would   have overriding  effect.  By the supplemental agreement  Sterling was to print and publish 13 main issues of Delhi and  Bombay directories  within  a period of seven years  including  the year  1991 on payment of additional royalty of only  Rs.  10 crores to the MTNL over and above the royalty stipulated  in the  original agreement by the UIP.  As mentioned above  the original royalty which was payable under the agreement dated 14th March, 1987 was Rs. 20.16 crores for the period 1987 to 1991 but under the supplemental agreement Sterling 90 was  given  the contract to publish 13 main  issues  of  the Delhi and Bombay directories upto 1997 and 1998, but for the extended period it had to pay royalty only for an amount  of Rs.  10 crores.  It was left to the UIP/UDI to  receive  all revenue  earnings  on  account (cast and  future)  from  the advertisements  and MTNL was to be only informed  about  the prices as fixed. The  Writ  Petition  aforesaid  was  filed  questioning  the validity  and  legality  of the  supplemental  agreement  on different   grounds  including  on  ground  of  mala   fide. According  to  the  writ-petitioners under  the  garb  of  a supplemental  agreement  a  fresh contract  was  awarded  to Sterling for a fresh period from 1991 to 1997 on fresh terms and  conditions  to publish the directories every  year  for Delhi  and Bombay without inviting tenders or  affording  an opportunity to others, to submit tenders so that they may be also  considered  for award of the said  contract.   It  was asserted by the petitioners that in the process of  entering into the supplemental agreement the MTNL, which is a  public undertaking and a State within the meaning of Article 12  of the  Constitution, has suffered a loss of more than  Rs.  60 crores  without  any corresponding benefit accruing  to  the MTNL or to the public in general. Before  the  High Court the stand of the MTNL was  that  the supplemental agreement was a result of a bonafide commercial decision  free  from  any  bris  or  malice.   The  original contract  for  years 1987 to 1991 had been  awarded  to  UIP after  inviting  tenders but UIP, having 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 committed 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 the MTNL before the High Court that in order to salvage  Rs. 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 19  

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 upto years 1997-98 apart from the  supplementary directories. The  High  Court came to the  conclusion  that  supplemental agreement  dated 26th September, 1991 cannot be held  to  be the extension of the  91 original agreement dated 14th 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. The  most  interesting part of the controversy is  that  the MTNL  having  fully  supported  the  supplemental  agreement before  the  High Court has filed an affidavit  before  this Court saying that "MTNL has decided to accept the High Court judgment  in so far as that the procedure for the  grant  of contract  dated  26.9.1991 to the  petitioner  M/s  Sterling Computers  Ltd.  Was not in keeping with the requirement  of Article  14  of  the  Constitution and  is  not  filing  any petition  for  Special  Leave  against  the  said  judgment. However,  as far as aspersions are concerned, MTNL does  not accept  the same and the same are matters  of  investigation and enquiry by an independent Central Agency at present." It has  been further stated that subsequent events  have  shown that   the   Sterling  has  collected   Rs.   19.59   crores approximately  for  advertisements in yellow  pages  without delivering the goods.  They have also uncashed the letter of credit issued by the ’MTNL’ prematurely.  This collection is apart  from  the  collection of Rs. 14  crores  against  the yellow  pages advertisements made by UDI and UIP during  the years 1987-1991.  It has been further stated that the  Board of ’MTNL’ had in fact even decided to terminate the contract for  lapse in the performance of the obligations  under  the 26th  September,  1991 agreement but as the High  Court  has quashed the said supplemental agreement no further step  was considered  necessary.  Ultimately it has been said  in  the said  affidavit  that  MTNL’ has  started  the  process  for inviting   fresh  public  tenders  and  for   that   purpose advertisement has already been issued. Mr. Venugopal, appearing for the writ-petitioners before us, stated  on  behalf  of the writ-petitioners  that  they  are prepared to pay to the ’MTNL’ an amount of Rs. 60 crores for the  period  1991  to 1997/1998 the period  covered  by  the supplemental agreement for which the UIP/UDI/ Sterling  have undertaken to pay only Rs. 10 crores as royalty. At  times it is said that public authorities must  have  the same  liberty  as they have in framing  the  policies,  even while entering into contracts because many contracts  amount to   implementation  or  projection  of  policies   of   the Government.   But  it  cannot  be  overlooked  that   unlike policies, contracts are legally binding commitments and they commit the authority which may be held to be a State  within the meaning of Article 12 of the 92 Constitution  in  many  cases for years.  That  is  why  the Courts  have impressed 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 19  

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 decisions  are upheld on the principle laid down by  justice Holmes,   that  Courts  while  judging  the   constitutional validity  of executive decisions must grant certain  measure of freedom of "play in the joints" to the executive. But  in normal course some rules must exist to regulate  the selection  of  persons  for  awarding  contracts.   In  such matters always a defence cannot be entertained that contract has  been awarded without observing the well  settled  norms and rules prescribed, on basis of the doctrine of "executive necessity".    The  norms  and  procedures   prescribed   by Government and indicated by Courts have to be more  strictly followed  while awarding contracts which have along  with  a commercial element a public purpose as in the present  case. The  publication  of directories by the MTNL is not  just  a commercial venture; the primary object is to provide service to the people. The action or the procedure adopted by the authorities which can be held to be State within the meaning of Article 12  of the  Constitution,  while awarding contracts in  respect  of properties  belonging to the State can be judged and  tested in  the light of Article 14 of the Constitution, is  settled by the judgments of this court in the cases of Raman Dayaram Shetty v. The International Airport Authority of India,  AIR 1979 SC 1628; M/s.  Kasturi  93 Lal Lakshmi Reddy v. The State of Jammu & kashmir, AIR  1980 SC 1992; Fertilizer Corporation Kamagar Union (Regd.) Sindri v. Union of India, AIR 1981 SC 344; Ram and Shyam Company v. State of Haryana, AIR 1985 SC 1147; Haji T.M. Hasan  Rawther v.  Kerala Financial Corporation, AIR 1988 SC  157;  Mahabir Auto Stores v. Indian Oil Corporation, AIR 1990 SC 1031  and Kumari  Shrilekha  Vidyarthi v. State of U.P., AIR  1991  SC 537. it has been said by this Court :-               "It must follow as a necessary corollary  from               this  proposition that the  Government  cannot               act in a manner which would benefit a  private               party at the cost of the State: such an action               would  be  both unreasonable and  contrary  to               public  interest.  The Government,  therefore,               cannot for example give a contract or sell  or               lease  out  its property for  a  consideration               less than the highest that can be obtained for               it,   unless   of  course  there   are   other               considerations which render it reasonable  and               in public interest to do so."               [M/s.  Kasturi Lal Lakshmi Reddy v. The  State               of Jammu & Kashmir.] 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 19  

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  MTNL.  It shall appear that the  authorities  ’were concerned that the experiment 94 aforesaid  must succeed.  With that object in view,  another opportunity  was  given  to  UIP/UDI/Sterling  through   the supplemental agreement to publish the directories for  Delhi and  Bombay.  That decision should not be examined  by  this Court like a court of appeal. It  is true that by way of judicial review the Court is  not expected  to  act as a court of appeal  while  examining  an administrative decision and to record a finding whether such decision  could have been taken otherwise in the  facts  and circumstances of the case.  In the book Administrative  Law, Prof.  Wade has said:               "The  doctrine that powers must  be  exercised               reasonably  has to be reconciled with  the  no               less  important doctrine that the  court  must               not   usurp  the  discretion  of  the   public               authority  which parliament appointed to  take               the  decision.   Within the  bounds  of  legal               reasonableness  is  the  area  in  which   the               deciding   authority   has   genuinely    free               discretion.   If  it passes those  bounds,  it               acts  ultra vires.  The court  must  therefore               resist  the temptation to draw the bounds               too  tightly,  merely  according  to  its  own               opinion.  It must strive to apply an objective               standard   which   leaves  to   the   deciding               authority  the  full range  of  choices  which               legislature is presumed to have intended.  The               decisions which are extravagant or  capricious               cannot be legitimate.  But if the decision  is               within  the confines of reasonableness, it  is               no  part  of  the  court’s  function  to  look               further  into its merits.  With  the  question               whether a particular policy is wise or foolish               the  court  is  not  concerned;  it  can  only               interfere if to pursue it is beyond the powers               of the authority."               But  in  the same book Prof.   Wade  has  also               said:-               "The   powers   of  public   authorities   are               therefore ’essentially different from those of               private  persons.  A man making his will  may,               subject  to  any  rights  of  the  dependents,               dispose  of his property just as he may  wish.               He  may  act  out of malice  or  a  spirit  of               revenge,  but in law this does not affect  his               exercise  of  his power.  In the  same  way  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 19  

             private person has an absolute power to  allow               whom  he likes to use his land, to  release  a               debtor, or, where the law permits, to evict  a               tenant,  regardless of his motives.   This  is               unfettered discretion.  But a public                95               authority  may do none of these things  unless               it acts reasonably and in good 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   con-               siderations,   or  to  have  failed  to   take               account.  of relevant considerations, so  that               its action is ultra vires and void."               While exercising the power of judicial review,               in respect of contracts entered into on behalf               of the State, the Court is concerned primarily               as to 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 authorized  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 scope of any such enquiry.   But at  the same time as was said by the House of Lords  in  the aforesaid case, Chief Constable of the North Wales Police v. Evans  (supra),  the Courts can  certainly  examine  whether ’decision  making  process"  was  reasonable,  rational  not arbitrary and violative of Article 14 of the Constitution. If  the contract has been entered into without ignoring  the procedure which can be said to be basic in nature and  after an  objective consideration of different  options  available taking  into  account  the interest of  the  State  and  the public,  then Court cannot act as an appellate authority  by substituting  its opinion in respect of selection  made  for entering  into  such  contract.   But,  once  the  procedure adopted  by  an  authority for purpose of  entering  into  a contract is held to be against the mandate of Article 14  of the  Constitution,  the  Courts cannot  ignore  such  action saying  that  the  authorities  concerned  must  have   some latitude   or  liberty  in  contractual  matters   and   any interference by court amounts to encroachment on the 96 exclusive right of the executive to take such decision. In  support  of the stand that it was open to  the  MTNL  to negotiate   with   the  UIP/UDI/Sterling  for   purpose   of publication of the directories for Delhi and Bombay  without inviting  tenders,  reliance  was placed on  behalf  of  the appellants  on the judgments of this Court in the  cases  of Kasturi  Lal  Lakshmi Reddy v. State of Jammu  and  Kashmir, [1980]  3  SCR  1338; State of  Madhya  Pradesh  v.  Nandlal Jaiswal,  [1987] 1 SCR; Sachidanand Pandey v. State of  West Bengal,  [1987]  2  SCC  295 and  G.B.  Mahajan  v.  Jalgaon

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 19  

Municipal Council, [1991] 3 SCC 91. From  the  facts of the case of Kasturi  Lal  Lakshmi  Reddy (Supra)  it shall appear that every year the State  used  to auction  the  blazes  in different  forests.   Most  of  the contractors  bidding  at  the auction  had  their  factories outside Jammu & Kashmir.  A decision was taken that from the year 1979-80 onwards resin extracted from its forests should not be allowed to be exported outside the territories of the State  and  should  be utilised only by  industries  set  up within the State.  There were certain forests which were out of access on account of their distance from the roads and no contractor could be found for taking tapping contracts  even on  the basis of royalty.  The Chief Conservator of  Forests and other Forest Officers at a meeting took a decision which was  also  confired  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  annu   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  were situated  in inaccessible areas and in spite of  the  offers given no bidders were attracted and as such the State had no option but to allot the said contract on basis of the  offer made by the second respondent.  97 The  case  of  State of Madhya Pradesh  v.  Nandlal  Jaiswal (supra) related to grant of liquor licences.  The  procedure adopted  for  such  grant were  being  challenged  as  being violative of Article 14 of the Constitution.  It was said by this Court:-               "But,  while considering the applicability  of               Article  14  in such a case, we must  bear  in               mind that, having regard to the nature of  the               trade or business, the Court would be slow  to               interfere  with  the policy laid down  by  the               State  Government  for grant of  licences  for               manufacture  and  sale of liquor.   The  Court               would,  in view of the  inherently  pernicious               nature of the cornmodify allow a large measure               of   latitude  to  the  State  Government   in               determining   its   policy   of    regulating,               manufacture   and   sale   of   liquor   would               essentially  be  a matter of  economic  policy               where  the court would hesitate  to  intervene               and strike down what the State Government  has               done,   unless  it  appears  to   be   plainly               arbitrary, irrational or mala fide."               But even in that case it was said:-               No  one  can claim as against  the  state  the               right to carry on trade or business in  liquor               and the State cannot be compelled to part with               its   exclusive   right   or   privilege    or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 19  

             manufacturing  and selling liquor.   But  when               the  State  decides  to grant  such  right  or               privilege  to others the State  cannot  escape               the  rigour  of  Article  14.  It  cannot  act               arbitrarily  or  at its sweet will.   It  must               comply with the equality clause while granting               the   exclusive   right   or   privilege    of               manufacturing or selling liquor." The  execution  of  the  supplemental  agreement  cannot  be considered at par with the grant of a liquor licence,  which related to any economic policy. So  far  the  case of Sachidanand Pandey v.  State  of  West Bengal (supra) is concerned, in a public interest litigation the  grant  of lease in favour of Taj Group  of  Hotels  for establishment  of  a Five Star Hotel at  Calcutta  had  been challenged.  It was said:-               "It is to be seen that in the present case  no               one has come forward alleging that he has been               discriminated against and his               98               fundamental  right  to carry on  business  had               been   affected.   The  very  nature  of   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:-               "On  a  consideration of  the  relevant  cases               cited  at the bar the  following  propositions               may be taken as well established :  Stateowned               or  public-owned property is not to  be  dealt               with   at  the  absolute  discretion  of   the               executive.   Certain precepts  and  principles               have  to be observed.  Public interest is  the               paramount  consideration.  One of the  methods               of  securing the public interest, when  it  is               considered necessary to dispose of a property,               is to sell the property by public action or by                             inviting tenders.  Though that is the  ordinar y               rule, it is not an invariable rule.  There may               be  situations  where  there  are   compelling               reasons necessitating departure from the  rule               but then the reasons for the departure must be               rational  and  should  not  be  suggestive  of               discrimination.  Appearance of public  justice               is  as  important as doing  justice.   Nothing               should  be done which gives an  appearance  of               bias, jobbery or nepotism."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 19  

In  the case of G.B. Mahajan v. Jalgaon  Municipal  Council, (supra),  a  piece  of land had been received  by  the  Town Municipal  Council, Jalgaon, by way of gift.   Initially  it had been put to the use Agricultural Produce  99 Market  Committee,  as  a cotton  and  wholesale  fruit  and vegetable market. in terms of the gift, in order to put  the land  in  a  better and more profitable  use  the  Municipal Council  contemplated  a  project  comprising,  inter  alia, erection  of  a commercial complex They also  persuaded  for change in the terms of the deed of gift subject to condition that  heirs should be given five shops free of cost  in  the commercial complex The scheme contemplated that a  developer would  execute the entire project at his own cost and  would make  allotments  to the shopkeepers to whom  the  Municipal Council had given assurances of alternative accommodation at fixed  rates.   The  developer was also to  provide  the  17 floors  of the administrative building free. of cost to  the municipality.   The  choice  of  the  respondent  No.  6  as developer  for the project aforesaid was  questioned.   This Court arrived at the following conclusion:-               "In regard to the allegation that the  project               scheme was tailored to suit respondent 6 alone               or  that the project as put to tender did  not               admit   of   tenders   on   fixed   comparable               parameters,  we  find  no  merit.   Sri   K.K.               Singhvi submitted that the tender papers  were               prepared by reputed architects and the precise               points  on which comparative  quotations  were               invited were specifically incorporated in  the               tender  papers.   The point again is  that  no               other  tenderer expressed any grievance.   The               tenders  were  such that  the  tenderer  could               identify  the  terms which form the  basis  of               comparative   evaluation.    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. 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 100 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  the special  facts  and  circumstances and  due  to.  compelling reasons  which  must  stand the test on Article  14  of  the Constitution,  departure of the aforesaid rule can be  made. This  Court while upholding the contracts by negotiation  in the  cases referred to above has impressed as to how in  the facts  and circumstances of those cases the decisions  taken by the State and the authorities concerned were  reasonable,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 19  

rational and in the public interest.  The decisions taken in those  cases  by  the  authorities  concerned,  on  judicial scrutiny were held to be free from bias, discrimination  and under  the exigencies of the situation then existing  to  be just and proper.  On the basis of those judgments it  cannot be  urged  that  this court has left to the  option  of  the authorities  concerned  whether  to invite  tenders  or  not according-to  their  own discretion and to  award  contracts ignoring  the procedures which are basic in  nature,  taking into  account  factors  which are not  only  irrelevant  but detrimental to the public interest. From the statements made in the affidavit filed on behalf of the  MTNL  before  that High Court  and  from  the  relevant minutes of the Board of the MTNL which were produced  before the  High Court during the course of the hearing and  copies thereof  have  also been produced by one of  the  appellants before  this  Court, it appears that the Board in  its  28th meeting  held on 28.12.1990 considered the default  made  by UIP  in  not  publishing the directories  in  terms  of  the agreement every year.  The Board took note of the fact  that UIP  had  run  into financial  difficulties  and  cash  flow problem.  The banks who had advanced loans to them have  not yet  received back the payments.  The paper mills  were  not willing  to  supply paper on credit.  The  printing  presses were  also  not prepared to print  the  directories  without getting  advance  payments.  In this  background  the  Board considered  the  three  options (1) to  invoke  the  penalty clause  and print the Directory by the MTNL at the risk  and cost of the UIP. (ii) provide the necessary loan secured  or unsecured  to print the directories, (iii) to terminate  the contract  and award the work to some other contractor.   The matter was again considered in the 29th meeting of the Board held  101 on  29th March, 1991 where a note was put up saying that  if the contract with the UIP was terminated and a decision  was taken to go in for a fresh tender the following 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 stalemate  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  uninterrupted supply of directories  for  the revised period of contract.  The note recorded that proposal had  also been received from Sterling through UDI  to  print and publish the directories of the MTNL with their financial support.   A decision was taken in order to enable the  MTNL to  salvage  the contract and get the job  executed  without further  delay and to avoid consequent inconvenience to  the customers,    to   negotiate   on   revised    terms    with

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 19  

UIP/UDI/Sterling.  There is no dispute that the Board in its 32nd  meeting  held on 19th August, 1991  approved  the  new terms and conditions, and took a decision that an  extension of  the  contract  be  given to  UIP/UDI  and  Sterling  for printing the 13 issues of directories for Delhi and  Bombay. On   basis  of  that  decision  the  impugned   supplemental agreement was executed on 26th September, 1991. In  the facts and the circumstances of the present  case  it has  to  be held that the MTNL has applied  the  "irrelevant considerations" doctrine while granting a fresh contract for a  period of five years through the  supplemental  agreement dated  26th September, 1991, because it has failed  to  take into account considerations which were necessarily  relevant i.e. 102 following  the rule of inviting tenders while  granting  the contract  for a further period of five years on fresh  terms and  conditions  and  has  taken  into  account   irrelevant considerations that (i) if the contract is terminated and  a decision  is taken for a fresh tender, the UIP/UDI  may  put legal  obstacles  in  retendering,  (ii)  the  response  for printing  free  of cost and also paying the royalty  may  be poor (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.  MTNL should  have  been conscious  of  the  fact that  admittedly  the  UIP/UDI  had miserably  failed in performing their part of  the  contract for  a period of five years, inasmuch as they were  required to  publish  between the period 1987-1991 one issue  of  the main  directory every year for Delhi and Bombay  apart  from supplementary.  Instead of that they published for the  year 1987 directories for Delhi and Bombay after a delay of seven months  and  six months respectively.  The  Delhi  issue  of directory  for the year 1988 was published only  in  August, 1990.   So far Bombay is concerned there was no  publication for  the  years 1988, 1989, 1990 and 1991.   The  MTNL  also overlooked the 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  upto  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  Rs. 10 crores whereas for the period 1987-1991 it  was Rs. 20.16 crores. Philanthropy is no 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 to perform the same job for the next  five years.   Public authorities are essentially  different  from those  of  private persons.  Even while taking  decision  in respect of commercial  103 transactions  a public authority must be guided by  relevant considerations and not by irrelevant ones.  If such decision is  influenced by extraneous considerations which  it  ought

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 19  

not  to  have taken into account the  ultimate  decision  is bound  to be vitiated, even if it is established  that  such decision had been taken without bias.  The contract  awarded for  the  publication  of the directories  had  not  only  a commercial object but had a public element at the same  time i.e.  to supply the directories to lakhs of  subscribers  of telephones  in  Delhi  and Bombay,  every  year  within  the stipulated  time  free of cost.  In such  a  situation  MTNL could  not  exercise  an  unfettered  discretion  after  the repeated  breaches committed by UIP/UDI, by entering into  a supplemental agreement with the sterling for a fresh  period of more than five years on terms which were only  beneficial to  UIP/UDI/Sterling with corresponding no benefit to  MTNL, which they have realised only after the High Court went into the matter in detail in its judgment under appeal. The supplemental agreement is really a fresh agreement  with fresh  terms and conditions which has been entered  by  MTNL without inviting any tender for the same.  The  supplemental agreement  has been entered to benefit the parties  who  are admittedly  defaulters  by not  publishing  directories  for Bombay for the years 1988, 1989, 1990 and 1991 and for Delhi for  the  years  1989,  1990  and  1991  although  they  had collected  several crores of rupees for  the  advertisements for the directories to be published in the aforesaid  years. We  fail  to  understand as to how a fresh  contract  for  a period upto 1997/1998 was awarded to UIP/UDI/Sterling in the garb  of  an agreement for extension of the  period  of  the original agreement taking into account irrelevant factors as already enumerated above.  If the supplemental agreement has been  executed  without following the procedures  which  are essential  in  view of the repeated pronouncements  of  this Court and taking into consideration irrelevant factors, then can  it  be said that "decision making process"  before  the supplemental agreement was entered into was consistent  with the requirement of Article 14 of the Constitution?  In  such a  situation  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 avoid. The appellants also took an objection to the maintainability of the 104 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 19th 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.   In the body of the  advertisement  it  was mentioned  that  UDI and Sterling have  made  all  necessary arrangements to ensure that every subscriber receives up-to- date directory in Delhi and Bombay in time.  It was urged on behalf  of the writ-petitioners that under the  supplemental agreement  it was the Sterling who had been given the  right to publish the directories and as such in normal course  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 19  

advertisement should have been given in the paper on  behalf of  the  Sterling  but  only with  an  ulterior  motive  the advertisement  was  published  on behalf of  the  UDI.   Our attention was also drawn to several communications addressed by the Department of Telecommunications, Madras, to the dif- ferent  authorities  of  the MTNL  making  enquiries  as  to whether the Sterling had been entrusted with the printing of directories  for Delhi and Bombay, as tenders  for  printing and  supply of main telephone directories with yellow  pages on  turnkey basis were under consideration at  Madras.   The aforesaid queries were made in the month of December,  1991. The  office  of  the Chief General  Manager,  MTNL,  on  2nd January   replied   to  the  Divisional   Engineer,   Madras Telephones,  saying  "perhaps, MTNL, Corporate  Office  have entrusted  some job of printing of telephone directories  to M/s  Sterling  Computers Ltd.  In this connection,  you  are therefore   requested   to   contact   Chairman-cum-Managing Director, MTNL".  A letter dated 30.12.1991 was addressed by Sterling  to the Divisional Engineer, Madras  Telphones,  in reply to the query whether they had been entrusted with  the printing  and supply of telephone directories, saying  "Much as  we  would  like to provide you a copy of  the  order  of Mahanagar Telephone Nigam Ltd. we are unable to do so due to certain  circumstances  beyond our control."  Reference  was made to yet another communication dated 30.12.1991 addressed  105 by MTNL to Deputy General Manager, Madras Telephones, saying that so far the Sterling Computers were concerned "they have been  allowed  a sub-contract by M/s UDI  for  printing  the directories  for  Delhi  and  Bombay",  without  giving  the details of any such contract.  It was pointed out on  behalf of the the writ-petitioners that an affidavit, was filed  on behalf  of  the Sterling, before the Madras  High  Court  in connection with another Writ Petition on 19.4.1992, in which the details of the supplement agreement were disclosed.  The Writ  Petition  in  the  Delhi  High  Court  was  filed   on 19.5.1992.  Under  the circumstances mentioned above  it  is difficult to reject the Writ Petition on the ground of delay and laches. As  already  mentioned  above, Mr.  Venugopal,  the  learned counsel  appearing  for  the  writ-petitioners,  offered  an amount of Rs. 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  Rs. 10 crores as  additional  royalty.   This Court  could have considered the desirability  of  directing the  MTNL  to consider the said offer of Rs.  60  crores  on behalf  of the writ-petitioners by 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 while affirming the judgement  of  the High Court, we direct that all steps should be taken by MTNL as  early  as possible for publishing  the  directories  for Delhi and Bombay so that public in general should not suffer any more.  The appeals are accordingly dismissed but in  the facts and circumstances of the case there shall be no  order as to costs. Before  we part with the judgment we shall like to strike  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 19  

note  of caution.  It is a matter of common experience  that whenever applications relating to awarding of contracts  are entertained  for  judicial  review  of  the   administrative action,  such applications remain pending for months and  in some cases for years.  Because of the interim orders  passed in  such applications, the very execution of the  contracts, are kept in abeyance.  The cost 106 of  different  projects keep on escalating with  passage  of time apart from the fact that the completion of the  project itself  is  deferred.   This process not  only  affects  the public  exchequer  but even the public in  general  who  are deprived   of  availing  the  facilities   under   different projects.   As  such  it need not be  impressed  that  while exercising  the power of judicial review in connection  with contractual obligations.  Courts should be conscious of  the urgency of the disposal of such matters, otherwise the power which  is to be exercised in the interest of the public  and for public good in some cases becomes counter-productive  by causing injury to the public in general. N.V.K.                   Appeals dismissed. 107