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CASE NO.: Appeal (civil)  2283 of 2008

PETITIONER: B.S.N.L. Ltd. &  Anr

RESPONDENT: Bhupender Minhas & Ors

DATE OF JUDGMENT: 31/03/2008

BENCH: Dr. ARIJIT PASAYAT & P. SATHASIVAM

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO.   2283             OF 2008 (Arising out of S.L.P. (C) No.4778 of 2004) With  CIVIL APPEAL NO. 2284 OF 2008 (Arising out of S.L.P. (C) No.3232 of 2004) CIVIL APPEAL NO. 2287 OF 2008 (Arising out of S.L.P. (C) No.6225 of 2004) CIVIL APPEAL NO. 2286 OF 2008 (Arising out of S.L.P. (C) No.6307 of 2004)

Dr. ARIJIT PASAYAT, J.  

1.      Leave granted.          2.      These appeals involved identical issues. While two  appeals are against the judgment of the Himachal Pradesh  High Court, the other two are against the judgments of the  Punjab and Haryana High Court.            3.      The controversy lies in a very narrow compass. Writ  petitions were filed by the respondents in each case  questioning correctness of a stipulation in the "Notice Inviting  Tender" (in short ’NIT’) containing a disqualification clause  which disentitled an intending tenderer to submit tender  whose near relative is working in any of the units of the  appellant-BSNL. According to the writ-petitioners such a  prohibition was impermissible.  It was submitted that if the  ultimate intention was to ensure that a person working in the  unit will not be able to influence the decision-making process  in respect of the tender, the same is irrelevant if the person  concerned is holding a post of Class III or Class IV.  The  Himachal Pradesh High Court referred to an earlier order  passed by a Division Bench of the High Court in Narinder  Kumar v. Union of India and Anr. (C.W.P. No.33 of 1995),  where a similar stipulation was struck down. Accordingly, the  High Court held that the stand of the respondents in the writ  petition with reference to the communication issued by the  Bharat Sanchar Nigam Limited bearing no.151-08/2002  O&M/38 dated 11.9.2002 cannot be sustained. It was  observed that Rule 4 of Government of India’s CCS (Conduct)  Rules, 1964 had no relevance. Accordingly, the writ petition  was allowed by order dated 24.5.2003 in Civil Writ Petition  no.122/2003. The said decision was followed in Civil Writ  Petition no.269(M/B) of 2003 by order dated 13.8.2003.  The

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Punjab and Haryana High Court has expressed a similar view  in Civil Writ Petition no.12799 of 2003 by order dated  4.11.2003 and Civil Writ Petition no.18439 of 2003 by order  dated 9.1.2004.  

4.      The appellants’ stand is that the stipulation is essentially  a policy decision that too in a contractual matter and the High  Court should not have interfered.

5.      Respondents submitted that in view of the irrationality,  the High Court in each case was justified in its view.  

6.      It appears that the Delhi High Court had occasion to deal  with a similar issued in S.N. Engineering Works v. Mahanagar  Telephone Nigam Ltd. 1996(37) DRJ446.  The conditions  which were under consideration of the Delhi High Court were  clauses (J) and (K) of NIT providing as follows:

"(J) The contractor shall not be permitted to  tender for works in MTNL (responsible for  award and execution of contracts) in which his  near relative is posted as JAO/AAO/AO or an  officer in any capacity between the grades of  S.E. and A.E. both inclusive.  He shall also  intimate the names of the persons, who are  working with him in any capacity or are  subsequently employed by him, and who are  near relatives to any officer in MTNL.  Any  breach of this condition by the Contractor  would render him liable to be removed from  the approved list of contractors of this  department. (K) The contractor shall give a list of MTNL  employees related to him." 9.2     Every tender has to be accompanied by a  declaration to be signed by the contractor in  the following proforma which has a footnote  defining the term "near-relative":-

APPENDIX-V(DECLARATION) APPENDIX-V

I/WE hereby declare that none of my/our  relatives are employed in any capacity in any  of the units of M.T.N.L./D.O.T. I/We shall also  intimate the names of persons who are  working with us in any capacity or are  subsequently employed by us and who are  near relatives to any officer in the  M.T.N.L./D.O.T. I/We am/are aware that any  breach of this condition would result in  immediate termination of  contract/cancellation of the existing  contract/cancellation of the existing  contract/contracts and also forfeiting of  my/our security deposit held by Mtnl, Delhi.

NOTE: "The term ’near relatives’ means  wife/husband/parents and grand  parents/children/ grant children brothers/  sisters/ uncles/ aunts/cousin and their  corresponding in-laws."

Name of The CONTRACTOR  CAPACITY in which signing) Station

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Date"

7.      It is to be noted that the aforesaid conditions specified  the category of the employees to whom the restrictions  applied. Two conditions were stipulated. One is a ban on the  category of officers, while there was a necessity of intimation  so far relatives in respect of other posts. Para 9.2 deals with  an undertaking which refers to "any capacity".  In para 18 of  the judgment it was noted as follows:

"It is pertinent to note that the petitioners are  not prohibited from carrying on business  activity of the nature involved in the contracts  which they wish to enter with the MTNL. All  that has been said is that Mtnl would not deal  with such contractors as have their relations of  a defined category serving in the MTNL. The  fundamental right to trade or business of the  petitioners is not at all affected.  The validity of  the restriction so imposed has to be tested not  reference to clause (6) of Article 19 of the  Constitution but on the anvil of Article 14 of  the Constitution.  Since entering into the  contract is not an employment the applicability  of Article 16 of the Constitution is also not  attracted."                          The stress was on a defined category.

8.      The judgment of the Delhi High Court did not relate to  BSNL and related to department of telecommunication.  The  concerned officials were Junior telecom officers.       

9.      In Air India Ltd. v. Cochin International Airport Ltd. and  Ors. (AIR 2000 SC 801) it was observed at para 7 as follows:

"There can be no compulsion or the authority  to award the contract in favour of the private  party."

10.     In Directorate of Education and Ors. v. Educomp  Datamatics Ltd. and Ors. (AIR 2004 SC 1962) after referring to  the decision in Tata Cellular v. Union of India (1994 (6) SCC  651), it was observed as follows:           "9. It is well settled now that the courts can  scrutinise the award of the contracts by the  Government or its agencies in exercise of their  powers of judicial review to prevent  arbitrariness or favouritism. However, there  are inherent limitations in the exercise of the  power of judicial review in such matters. The  point as to the extent of judicial review  permissible in contractual matters while  inviting bids by issuing tenders has been  examined in depth by this Court in Tata  Cellular v. Union of India1. After examining the  entire case-law the following principles have  been deduced: (SCC pp. 687-88, para 94) "94. The principles deducible from the  above are: (1) The modern 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

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which the decision was made. (3) The court does not 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  administrative sphere or quasi- administrative sphere. However, the  decision must not only be tested by the  application of Wednesbury principle of  reasonableness (including its other facts  pointed out above) but must be free from  arbitrariness not affected by bias or  actuated by mala fides. (6) Quashing decisions may impose heavy  administrative burden on the  administration and lead to increased and  unbudgeted expenditure."        (emphasis  supplied)"

       xxx                     xxx                     xxx

12.     It has clearly been held in these decisions  that the terms of the invitation to tender are  not open to judicial scrutiny, the same being in  the realm of contract. That the Government  must have a free hand in setting the terms of  the tender. It must have reasonable play in its  joints as a necessary concomitant for an  administrative body in an administrative  sphere. The courts would interfere with the  administrative policy decision only if it is  arbitrary, discriminatory, mala fide or actuated  by bias. It is entitled to pragmatic adjustments  which may be called for by the particular  circumstances. The courts cannot strike down  the terms of the tender prescribed by the  Government because it feels that some other  terms in the tender would have been fair, wiser  or logical. The courts can interfere only if the  policy decision is arbitrary, discriminatory or  mala fide."

11.     The ultimate objective appears to be that the official  concerned should not be in a position to influence the  decision-making process. Then the question would be whether  a person belonging to Class III or Class IV can be in a position  to do so.  It can certainly be provided that other things being  equal, preference will be given to those whose relatives are not  in employment in any unit.  In the instant case the period for

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contract is stated to be over.  The conditions as noted in the  Delhi High Court judgment appear to be rational.  

12.     The authorities can certainly consider the methodology  indicated above in future.   So far as the present appeals are  concerned, the High Courts decisions cannot be sustained as  correct principles have not been kept in view.  But in the  absence of any order of stay, the appeals have become  infructuous by passage of time.                   13.     The appeals are accordingly disposed of. No costs.