Ltd. & ANR Vs. Bhupender Minhas & Ors  INSC 534 (31 March 2008)
Dr. ARIJIT PASAYAT & P. SATHASIVAM 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 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
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,
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 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
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:
The modern trend points to judicial
restraint in administrative action.
The court does not sit as a court of
appeal but merely reviews the manner in which the decision was made.
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.
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.
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.
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 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.