Supreme Court of India
B.S.N.L. LTD. & ANR.versusBHUPENDER MINHAS & ORS.
- Citation
- 2008 INSC 431
- Decided
- 31 March 2008
- Disposal
- Disposed off
- Bench
- ARIJIT PASAYAT
Holding
A disqualification clause aimed at preventing influence by relatives is constitutionally permissible if it is narrowly tailored, as reflected in the Delhi High Court’s methodology, and the High Courts’ striking down of the clause was not justified.
Summary
The dispute concerned a disqualification clause in BSNL’s Notice Inviting Tender (NIT) that barred any contractor whose near‑relative was employed in any BSNL unit from submitting a bid. The petitioners argued that the restriction was arbitrary, especially when the relative held a low‑grade post (Class III or IV), and violated Articles 14 and 19 of the Constitution. The High Courts of Himachal Pradesh and Punjab & Haryana struck down the clause, holding it unreasonable. The Supreme Court held that the legitimate objective of the clause is to prevent influence by relatives in the decision‑making process and that the methodology adopted by the Delhi High Court in S.N. Engineering Works v. MTNL (which limited the restriction to certain grades and required disclosure) is rational. Consequently, the High Courts’ decisions were not sustainable, but the appeals were rendered infructuous because of the lapse of time and were therefore disposed of without costs.
Issues considered
- Whether a disqualification clause in a government tender that bars contractors with near‑relatives employed in any unit of the agency violates Articles 14 and 19(1) of the Constitution.
- Whether the restriction is arbitrary or discriminatory, particularly with respect to relatives in lower grades (Class III/IV).
- To what extent courts may scrutinise the terms of an invitation to tender under the doctrine of judicial review.
Legislation cited
- Constitution of Indias. Article 14, s. Article 19(1)
Subjects
Tender procurementDisqualification clauseNear relativeArticle 14Article 19Judicial reviewArbitrarinessGovernment contract
Judgment
[2008] 5 S.C.R. 831
,, h'-t
B.S.N.L. LTD. & ANR.
V.
A
BHUPENDER MINHAS & ORS.
(Civil Appeal No. 2283 of 2008)
MARCH 31, 2008
.. B
~
(DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.)
Constitution of India, 1950; Articles 14 & 19.·
\
Notice inviting tenders - Restrictions on intending
tenderers whose relatives are in employment of the Office - c
Correctness of - Held: Ultimate object of putting such
restriction on intending tenderers is to avoid influence by the
relatives working in the office in the decision making process
- The conditions as also methodology noted by the Delhi High
Court in the case of S.N. Engineering Work vs. MTNL Ltd. D
need to be followed in future - Since correct principles of Jaw
~
have not been kept in view by the High Court, the impugned
judgment cannot be sustained.
There is a disqualification clause contained in the
Notice inviting tender disentitling an intending tenderer E
to submit tender, whose near relative is working in any of
the units of the appellant-BSNL. Respondents challenged
such a prohibition by filing a writ petition before the High
Court. The writ petitioners submitted that the ultimate
intention of the appellant was to ensure that a person F
~ ·~~ working in the unit would 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 Ill or Class IV. The petition was allowed by
the High Court. Hence the present appeals. G
The appellant contended that the stipulation is
~-,I.
essentially a policy decision that too in a contractual matter
and the High Court should not have interfered.
831 H
832 SUPREME COURT REPORTS [2008] 5 S.C.R.
A Allowing the appeals, the Court ,.
HELD: 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 Ill or Class IV
B 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 a judgment* of the Delhi
C High Court appear to be rational. The authorities can
certainly consider the methodology indicated therein in
future. So far as the present appeals are concerned, the
High Court's decision cannot be sustained as correct
principles have not been kept in view. But in the absence
D of any order of stay, the appeals have become infructuous
by passage of time. (Paras - 11 & 12) [837-H; 838-A-C]
Air India Ltd. vs. Cochin International Airport Ltd. and Ors.,
AIR (2000) SC 801 and Directorate of Education and Ors. vs.
Educomp Datamatics Ltd. and Ors., AIR (2004) SC 1962 -
E referred to.
*S.N. Engineering Works vs. Mahanagar Telephone
Nigam Ltd. 1996 (37) DRJ446 - approved.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
F 2283 of 2008.
From the final Judgment and Order dated 24.05.2003 of
the High Court of Himachal Pradesh at Shimla in Civil Writ
Petition No. 122 of 2003. '
G WITH
Civil Appeal Nos. 2284, 2286 & 2287 of 2008,
Ajit Singh Bawa, Arjun Singh Bawa and S. Thananjayan >- -
for the Appellants.
H '
B.S.N.L. LTD. & ANR. v. BHUPENDER MINHAS & 833
ORS. [DR. ARIJIT PASAYAT, J.]
,...-.,. Madhu Moolchandani, Ashok K. Mahajan and T. Raja for A
the Respondents.
The Judgment of the Court was delivered by
DR. ARIJIT PASAYAT, J. 1. Leave granted.
2. These appeals involved identical issues. While two B
~
~ appeals are against the judgment of the Himacbal 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 c
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
D
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 Ill
E
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 F
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 G
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. H
834 SUPREME COURT REPORTS [2008) 5 S.C.R.
A 4. The appellants' stand is that the stipulation is essentially -r«
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.
B
6. It appears that the Delhi High Court had occasion to ,.. •
deal with a similar issue in S.N. Engineering Works v.
Mahanagar Telephone Nigam Ltd. 1996(37) DRJ446. The
conditions which were under consideration of the Delhi High
c 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
D 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
E be removed from the approved list of contractors of this
department.
(K) The contractor shall give a list of MTNL employees
related to him."
F 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
G 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
Jr-.
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
H
B.S.N.L. LTD. & ANR. v. BHUPENDER MINHAS & 835
ORS. [DR. ARIJIT PASAYAT, J.]
'--, of this condition would result in immediate termination of A
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 B
+ brothers/ sisters/ uncles/ aunts/cousin and their
corresponding in-laws."
Name of The CONTRACTOR
CAPACITY in which signing) c
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 D
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 E
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 F
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 G
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 H
836 SUPREME COURT REPORTS [2008] 5 S.C.R.
T'
A 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
B 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
c
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
D
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 lndia1. After examining the
entire case-law the following principles have been
E
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.
F
(2) The court does not sit as a court of appeal but merely
-16 •
reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the
administrative decision. If a review of the administrative
G 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
H
8.S.N.L. LTD. & ANR. v. BHUPENDER MINHAS & 837
ORS. [DR. ARIJIT PASAYAT, J.]
I• 'T accept the tender or award the contract is reached by A
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 8
+ 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 C
mala fides.
(6) Quashing decisions may impose heavy administrative
burden on the administration and lead to increased and
unbudgeted expenditure." (emphasis supplied)"
D
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 E
the tender. It must have reasonable play in its joints as a
necessary concomitant for an administrative body in an
t 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 F
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 G
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- H
838 SUPREME COURT REPORTS [2008] 5 S.C.R.
A making process. Then the question would be whether a person Y<\.
belonging to Class Ill 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
B 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
c 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.
D S.K.S. Appeals disposed of.
...,..,
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