Supreme Court of India
M/S NEW HORIZONS LTD. AND ANOTHERversusUNION OF INDIA AND OTHERS
- Citation
- 1994 INSC 505
- Decided
- 9 November 1994
Holding
The Court held that the Tender Evaluation Committee's rejection of New Horizons Ltd.'s tender was arbitrary and irrational, as the experience of its joint‑venture constituents could be considered, and therefore set aside the award of the contract for the 1995 directory.
Summary
The Department of Telecommunications invited tenders for printing telephone directories in Hyderabad. New Horizons Ltd. (NHL), a joint venture of Indian firms and a Singaporean company, submitted a tender offering a substantially higher royalty but was rejected on the ground that it lacked experience in its own name. The Delhi High Court upheld the rejection, holding that experience of shareholders could not be counted and that NHL was not a joint venture. The Supreme Court reversed, holding that the experience of the joint‑venture’s constituents could be considered and that the tender notice allowed assessment of experience after a tender was deemed suitable, making the rejection arbitrary and violative of Article 14. The Court also clarified that the State’s discretion in public procurement must satisfy the Wednesbury standard of reasonableness. Consequently, the contract award was set aside only for the 1995 directory, while the 1993‑94 awards were left untouched.
Issues considered
- Whether the Tender Evaluation Committee's refusal to consider NHL's tender on the basis of lack of experience violated Article 14 of the Constitution.
- Whether the experience requirement can be satisfied by the experience of the constituents of a joint venture, permitting lifting of the corporate veil.
- Whether the term "successful tenderer" in the tender notice precludes exclusion of a tender at the threshold for lack of experience.
- Whether the State's discretion in awarding public contracts is subject to the Wednesbury principle of reasonableness.
- Whether the contract award can be partially set aside, preserving the award for 1993‑94 while cancelling it for 1995.
Legislation cited
- Companies Act, 1948s. 210
Subjects
Article 14Public procurementTender evaluationExperience requirementJoint ventureCorporate veilArbitrarinessWednesbury principleAdministrative law
Judgment
A MIS NEW HORIZONS LTD. AND ANOTHER
v.
UNION OF INDIA AND OTHERS
NOVEMBER 9, 1994
B [S.C. AGRA WAL AND M.K. MUKHERJEE, JJ.]
Constitution, of India-Article 14--Tender for compiling, printing and
supplying telephone directories-Tenderer a joint venture with one of its
constituents having the requisite experience-Tenderer offering royalty
with large margin of difference-Tender Evaluation Committee not
c considering tender on technical considerations, that tenderer did not have
experience fn their own name and had not substantiated their capacity to
execute the work-Whether arbitrary-Held, a certain measure of 'free
play in the joints' is necessary for an administrative body functioning in an
admistrptive sphere-Jn commercial transaction, requirement ofexperience
must be construed from standpoint of prudent businessman-It is not the
D name of the company, but the background, persons in control and their
capacity to execute the work which is relevant-On facts, held that tenderer
is joint venture with one of its constituents possessing requisite
experience-F!irther, on facts, only successful tenderer to establish
experience-Also, having regard to large margin of royalty offered by
tenderer, Tender Evaluation Committee's refusal to consider the tender,
E held, arbitrary and irrational
Company Law-Lifting the corporate veil-On facts, as stated in the
tender, appellant-company, held, is joint venture. .
The Department of Telecommunications, Hyderabad, invited
F sealed tenders for printing, binding and supply of diredories in English
for the years 1993, 1994 and 1995. The tenderer was required, inter
alia, to specify the royalty amount for each issue offered by him and to
substantiate his experience with documentary proof. Five tenders were
received and considered by the.Tender Evaluation Committee, and the
G contract was awarded to respondent 4. The appellant challenged the
award of contract, and contended that it was eligible, and met the
criteria laid down and was competent to compile, print and supply
telephone directories as per the invitation of tender. The experience of
its foreign collaborator/equity holder was retied upon by the appellant
in support of its claim. It was submitted that the contract was awarded
H to respondent 4 on extraneous considerations and was violative of
310
NEW HORIZONS LTD. v. U.0.1 311
Article 14 of the Constitution. It was further contended that since the A
matter involved public revenue, the tender of the appellant containing
the highest offer could not be rejected on the hypertechnical plea that
the appellant itself had no experience. In countering the challenge, it
was contended for the respondents that the offer of the appellant had
not been considered because it had not submitted evidence to de-
monstrate its experience. B
The High Court negatived the challenge holding that the
experience of shareholders was entirely different from the experience
of the company itself; that the principle of lifting the corporate veil
could not be invoked by the company; that, in this case, there was no
joint venture as such but only a certain amount of equity participation C
by a foreign company in the appellant's company; that the non-
communication of the reasons was not fatal; the bid of the appellants
having been rejected at the threshold, the authorities could not
consider the question of a higher amount of royalty.
Allowing the appeal, this Court D
HELD: 1. The refusal of the Tender Evaluation Committee to con-
sider the tender of the appellant-company on the ground that the
condition regarding experience as laid down in the tender notice was
not fulfilled is not sustainable in law or on the facts, and is arbitrary
and irrational. (325-B) E
2. In the matter of entering into a contract, the State does not stand
on the same footing as a private person. The action of the State in the
matter of award of contract has to satisfy the criterion of Article 14.
Moreover a contract would either involve. expenditure from the state
exchequer or augmentation of public revenues, and consequently the F
discretion in the matter of selection of a person for award of a contract
has to be exercised keeping in view the public interest involved in such
selection. The government must act in conformity with the standards or
norms which are not arbitrary, irrational or irrelevant. It is
recognized that a certain measure of "free play in the joints" is
necessary for an administrative body functioning in an administrative G
sphere. (323-B-D)
Cellular, If the weight of facts pointing to one course of action is
overwhelming, then a decision the other way cannot be upheld, and a
decision would be regarded as unreasonable if it is partial and unequal
in its operation as between different classes. (324-H, 325-A) H
312 SUPREME COURT REPORTS (1994] SUPP. S S.C.R.
A Ramana Dayaram Shetty v. International Airports Authority of India,
(1979] 3 SCR 1014, Kasturi Lakshmi Reddy v. State of J and K, (1980] 3
SCR 1338, Fasih Choudhary v. Director General, Doordarslum, [1988]
Supp. 3 SCR 282, Sterling Computers Ltd v. Mand N Publications Ltd,
(1993) 1SCC445, Union ofIndia v. Hindustan Development Corporation,
(1983) 3 SCC 499, Tata Cellular v. Union of India, (1994) Suppl. 2 SCR.
B 122-, Associa!ed Provincial Picture Houses Ltd. v. Wednesbury Corpora-
tion, (1948) 1 KB 223, relied on.
3. The requirement with regard to experience was differently
worded in the advertisement inviting tenders dated 22.4.93 and the
notice attached to the tender documents dated 26.4.93. The latter used
c the expression "successful tenderer" indicating that the matter of past
ression experience has to be considered after the tender has otherwise
been found to be suitable for acceptance, and was not liable to be
rejected at the threshold. The decision ·of the Tender Evaluation
Committee to exclude the tender of the appellant was, therefore, not
warranted. (325-E, G, 326-D)
D
4. In any event, the requirement regarding experience cannot be
construed to mea.n that the said experience should be of the tendered in
his name only. Where the requirement of experience is contained in a
document inviting offers for a commercial transaction, the terms and
conditions of such a document have to be construed from the
E standpoint of a prudent businessman. That is, it is not the name of the
company, but the background of the company, the persons in control,
and their capacity to execute the work that would be relevant. The
?~v~rtisement inviting tenders when read with the notice attached to
the tender documents does not preclude this course of action. In this
F perspective, the appellant, being a joint venture with 60% of the share
capital being owned by an Indian group of companies and 40% by a
wholly owned subsidiary of Singapore Telecom which has long
experience in this field, and which, the tender specified, would be
providing its expertise and its managers to the project, would have
been found to have the requisite resources and experience. (326-E, 327-
G B-H)
Tata Cellular v, Union ofIndia [1994) Suppl. 2 SCR 122.
S. The finding of the High Court that the appellant is not a joint
venture, and that there is only a certain amount of equity participation
H in it, is not correct. (328-G)
NEW HORIZONS LTD. v. U.0.1 313
Black's Law Dictionary 6th edn., pp. 839, 342; Words and Phrases A
Permanent Edition, Volume 23, p. 117; Jacques Duhart, Joint Ventures
in East Asia- Legal Issues (1991), referred to
From the statements of the appellant in its tender it would appear
that the appellant is an association of companies, including the Indian
group of companies and the Singapore based Company (IIPL), jointly B
undertaking a commercial enterprise wherein they will all contribute
assets and will share risks and have a community of interest. The
appellant has, therefore, been constituted as a joint venture, and it
would not be correct to say that IIPL which has a substantial stake in
the success of the venture is a mere shareholder in the appellant-
company. (329-C-D) C
Once it is held that the appellant - company is a joint venture, as
claimed by it in the tender, the experience of its various constituents
had to be taken into consideration if the Tender Evaluation Committee
had adopted the approach of a prudent businessman. (329-E)
D
6. The conclusion would not be any different even from the legal
standpoint. In law, a company is a legal entity distinct from its
members. But there have been inroads in the doctrine of corporate
personality ·by statutory provisions as well as by judicial pro-
nouncements. By 'lifting the veil' the law either goes behind the E
corporate personality to the individual members or ignores the
separate personality of each company in favour of the economic entity
constituted by a group of associated companies. This course is adopted
when it is found that the principle of Corporate personality is too
Oagrantiy opposed to justice, convenience or the interests of the
revenue. (329-F-G) F
Salomon v. Salomon and Co., (1897) AC 22, Gower's Principles of
Modern Company Law 4th edn., p.112 and 136, U.S. v. Milwaukee
Refrigerator Transit Co., (1905) 142 Fed. 247, Scottish Corporation
Wholesale Society Ltd, v. Meyer, (1959) AC 324, Harold Holdworth and
Co. (Wakefield) Ltd., v. Caddies, (1955) 1 All ER 725, DHN Food G
Distributors Ltd v. London Borough of Tower Hamlets, (1976) 3 All ER
462, Juggilal Kamlapat v. CIT, (1969) 1 SCR 988, State of U.P. v.
Renusagar Power Co., (1988] Supp 1 SCR 627, De Beers Consolidated
Mines Ltd. v. Howe, (1906) AC 455, Daimler Co. Ltd. v. Continental Tyre
and Rubber Co. Ltd., (1916) 2 AC 307, S. Ottolenghi, "From Peeping
Behind the Corporate Veil, to Ignoring it Completely" (1990) 53 Mod. H
314 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.
A L. Rev. 338 and Central Inland Water Transport Corporation Ltd. v.
Brojonath Gangu!y, [1986) 2 SCR 278, referred to.
Paharpur Cooling Towers Ltd. v. Banbaigon Refinery and Petrochem-
icals Ltd, (1994) 28 DRJ 425, distinguished
Seeing through the corporate veil, it will be found that as a result
B of reorganisation in 1992 the appellant-company is functioning as a
joint venture wherein the Indian group holds 60% shares and the
Singapore based company holds 40% shares. Both the groups have
contributed towards the resources of the joint venture in the form of
machines, equipment and expertise in the field. The company is in the ·
nature of a partnership, where the constituents have jointly undertaken
c this commercial enterprise wherein they will contribute to the assets
and share the risks. In respect of such a joint venture company, the
experience of the company can only mean the experience of the
constituents of the joint venture, i.e., the Indian group of companies
and the Singapore based company. (332-G, H, 333-A)
D 7. The non-consideration of the tender submitted by the appellant-
company has resulted in acceptance of the tender submitted of the
tender offered by respondent 4. The total amount of royalty offered by
respondent 4 for three y~ars was Rs. 95 lakhs whereas the appellant-
company had offered Rs. 459.90 lakhs, i.e., nearly five times the
. E amount offered by respondent 4. Having regard to this large margin in
the amount of royalty, it must be held that decision of the Tender
Evaluation Committee to refuse to consider the tender of the appellant-
compl!_!_JY and to accept the tender of respondent 4 suffers from the vice
of arbitrariness and irrationality and is liable to be quashed. (333-H,
334-A)
F 8. In view of the fact.that the telephone directory for the year 1993
has been printed and supplied to the Department by respondent 4 in
terms of the contract, and the process of preparation of the telephone
directory for the year 1994 has already commenced, the contract with
respondent 4 may be set aside insofar as it relates to the directory for
the year 1995. Fresh tenders may be invited for award of the contract
G for the directory for the year 1995. (334-C-D)
CIVIL APPELLATE WRISDICTION: Civil Appeal Nos. 7230-31 of
1994.
From the Judgment and Order dated 15.10.93 of the Delhi High Court
H in C.W.P.No. 3837 and C.M. No. 6120of1993.
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 315
Soli J. Sorabjee, Manmohan Sarin and Pramod Dayal for the Appel- A
l';mts.
P. Chidabaram and C.S. Vaidyanathan and P.P. Singh for the Re-
spondent No.3
K.K. Venugopal, Atishi Dipanker and Parag Tripathi for the Re- B
spondent No.4
N.N. Goswami, Anil Katiyar and T.C. Sharma for the Respondents
Nos.land 2
The Judgment of the Court was delivered by c
S.C. AGRAWAL, J. Leave granted.
In the past the telephone directory used to be printed by the
Department at its own cost for the purpose of supplying the same to the
telephone subscribers. It was an item of expenditure. Today, the telephone D
directory has become a source of revenue for the State. This has become
possible by making it a medium for advertising by industrial and
commercial concerns. A section in distinct 'Yellow Pages' devoted
exclusively to advertisements is contained in the directory. The person who
undertakes the printing of the directory procures the advertisements from
private parties and collects the charges for the same. In return, he supplies a E
prescribed number of directories free of cost to the department and also
pays to the department a certain amount by way of royalty. The contract for
printing and publishing the telephone directory is normally awarded by
inviting tenders and selecting the best offer from among the tenders which
are so received. This practice has been in vogue for some time. In Sterling F
Computers Limited v. Mis M&N Publications Limited and Anr., [1993] 1
SCC 445, this court has dealt with the award of such a contract for printing
and publishing of the telephone directories for Delhi and Bombay. The
instant case relates to the telephone directory for Hyderabad.
By an advertisement published in various newspapers on April 22, G
1993 the Department of Telecommunications, Telecom District, Hyderabad
invited sealed tenders from competent agencies for printing, binding and
supply of specified number of telephone directories in English for three
annual issues commencing from 1993. The tenderer was required to supply,
free of cost, the telephone directories to General Manager, Hyderabad H
316 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.
A Telecommunications at the specified distribution points. The tenderer was
also required to specify the royalty amount for each issue offered by him. It •
was mentioned that the successful tenderer will be permitted to. procure on
his own classified advertisements and cover page advertisement. In the said
advertisement it was stated:
B "The tenderer· should have the experience in compiling,
printing and supply of telephone directories to the large
telephone systems with the capacity of more than 50,000
lines. The tenderer should substantiate this with
documentary proof. He should also furnish credentials in
c this field."
The tenderer was required to remit a sum of Rs. 5,00,000 by way of
non-refundable earnest money deposit. The terms and conditions and
specifications etc., for the total job were contained in the tender document
which was required to be obtained for the purpose of submitting the tender.
D The last date for submission of tender was May 14, 1993.
In the notice containing the requirements to be fulfilled which was
attached to the tender documents, it was stated :
"The successful tenderer will also submit copies of telephone
E directories printed and supplied by them to the telephone systems of
capacity ntore than 50,000 lines as credentials of his past experience." (para
12)
"The tenderer should intimate while submitting the tender
the equipment and list of machines etc. alongwith the
F
locations available with him which he would employ for
carrying out this work, if selected. The tenderer also should
forward a memorandum furnishing details of out-tum that
can be given daily and the actual time· required for the
completion of the job after the input material is handed over
G to him." (Para 14)
Five persons, including appellant no.I, Mis New Horizons Ltd. (for
short 'NHL'), and Mis MandN Publications Limited (respondent No. 4
herein) submitted their tenders. The tenders were opened on May 14, 1993
H at 3.30 p.m. The royalty amount offered by the five tenderer was as, under:
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.) 317
A
Name of Agreed amount offered (in lakhs)
Tenderer 1993 1994 1995
issue issue issue
B
I
SESA SEAT INFORMATION 41 121 151
SYSTEMS LTD., Pune-1
M & N PUBLICATIONS 20 30 45
LTD., Bangalore-52
c
(respondent No~4 herein)
NEW HORIZONS LTD., 39 129.30 291.60
NEW DELHI-1.
(appellantNo-1 herein) D
HYPER MEDIA INFORMATION 6 45 72
Services Pvt. Ltd., Banglore-10
Kaljothi Process Pvt. 102 138 160
Ltd., Hyderabad-20 E
The offers were considered by the Tender Evaluation Committee. The
offer of respondent No. 4 was accepted. The Assistant General Manager
(OP), Department of Telecommunications, Telecom District, Hyderabad,
by his latter dated August 3, 1993, informed NHL that its offer could not be F
considered. The said letter did not indicate the reason for non-consideration
of the offer of the NHL. The appellants filed a writ petition in the Delhi
High Court under Articles 226 and 227 Qf the Constitution of India seeking
a writ, order or direction in the nature of certiorari for quashing the award
of contract by respondent No.3 to respondent No.4 for the printing, binding G
and supply of telephone directories for Hyderabad and also a writ, order or
direction in the nature of mandamus dire.:ting respondent No. 3 to accept
the tender offer of the appellants. In the counter affidavit filed in reply to
the said Writ Petition filed on behalf of respondents Nos. 1 to 3 the reason
for non-consideration of the offer of NHL was disclosed. It was stated that
the offer of NHL was not considered because the applicants did submit any H
318 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.
A evidence to show that they have in their name undertaken compiling,
printing and supply of telephone directories for large telephone systems
with. the capacity of more than 50,000 lines. In this regard, it may be
mentioned that in t~eir tender offer NHL had mentioned that:
(i) NHL is a joint venture company established by Thomson Press
B (India) Limited (TPI), Living Media (India) Limited (LMI),World Media
Limited (WML) and Integrated Information Pvt. Ltd. (IIPL), a wholly
owned subsidiary of Singapore Telecom wherein 60% of shares are held by
Mr. Aroon Purie, TPI, LMI, WML and other companies in the same Groups
and 40% of shares are held by IIPL:
C (ii) the joint venture has received approval of the Government of India
and is currently in operation;
(iii) NHL has been established as an information and database
management company with expertise in database processing, publishing,
sales/marketing and the dissemination of related information; and
D
(iv) in addition to its projected strength, NHL has access to the benefit
of the complete resources and strength of its parent/owning companies,
each of which is a recognized market leader.
An overview of each of the parent companies, namely, TPI, LMI,
E wML and IIPL also given in the tender offer.
Regarding the expertise of TPl was stated that it has been established
as a joint venture with Thomson International Canada in · l 964 and is
located at Faridabad, Haryana and has units at Okhla, Noida Export Zone
and also has sales/co-ordinaticin offices in Metropolitan towns in India, and
F in London and New York. It was stated that with over' 125 Managers and
1255 skilled technicians/workers the press is equipped to handle the most
exacting printing jobs and working with state of art technology, fPI
produces both quality and volume and a detailed list of 111achines installed
for printing, folding, cutting and binding and other. equipment was enclosed
and it was stated that the said· equipment and skill wou.ld be
G available/utilized for all directory production work. It was stated that
among the many diverse jobs that have been executed by TPI are printing
of editions of India Today (Two languages and a total of 1.2 million copies
per. month), Computers Today, Business Today, Readers Digest, Span
Magazine, Scientific Journals, Books (both hard and soft bound) for export
H and Telephone Directories for UDI, 'Sterling Computers, Sesa Seat, etc.
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 319
With regard to LMI it was stated that as India Today Group it was first A
set up in 1962 and became LMI in 1988. LMI employs approximately 500
people in various disciplines viz., editorial, pre-press, production, sales and
marketing. Its current activities include publishing (India Today, Business
Today, Computer Today, Target, Journal of Applied Medicine, etc.),
distribution (both in house magazines, Diaries and Time International),
Music Today (producing and marketing a wide .selection of India's best B
music} Newstrack (the leading Video news magazine in Hindi and English)
and Printing (four regional language editions with a print order of one
million copies per month). A list of machines and equipment installed at its
units at Delhi and at Maraimalai Nagar in Tamilnadu was also enclosed.
As regards WML it was stated that it was established in 1944 in Lahore C
and moved its registered office to New Delhi in 1969. Its major activity was
film financing, finance, marketing and publishing and now it also
distributes LMI products and commissions articles/features for Business
Today.
With regard to IIPL it was mentioned that it is a wholly owned D
subsidiary of Singapore Telecom established in 1967 to publish the
Singapore Telephone Directory with Yellow Pages and a .brochure which
described the strength and developments achieved by Singapore Telecom
and IIPL's position within the group was attached with tender offer. It was
further stated that IIPL serves Singapore which has a tele•nctwork offering
subscribers up-to-date and efficient Telecom services and that IIPL has E
experience in international operations with special focus on the Asian
regions and that IIPL experience and expertise would contribute actively to
the systems and professional skills of the new joint venture. It. was also
mentioned that for the past 25 years the directory operation has evolved a
continuously updated and responsive system specifically for quality
directory management/publishing and many of the Managers involve~ with F
the joint venture company have been a part of IIPL since inception. With
specific reference to the lndian venture, it was stated that IIPL will be
providing its unique integrated directory management system alongwith the
expertise of its Managers and that the Managers will be actively involved in
the project both out of Singapore and resident in India. The particulars of
various IIPL publications, namely, Singapore Phone Book and Yellow G
Pages, Singapore Telex and Fax directory and other publications and
particulars of the Integrated Directory System for publishing Software for
medium to large directories operating in a VAX environment were
mentioned.
Referring to itself (NHL) it was stated in the tender: H
·-
320 SUPREME COUR'F REPORTS (1994] SUPP. 5 S.C.R.
A "As a joint venture in the true sense of the phrase, the
Company will have access to expertise in datab~e
management, sales and publishing of its parent group
companies. In addition, the equipment, manpower and
expertise are available to NHL. Perhaps even more
significant, at this point in the directory/ yellow page cycle,
B is the unique reputation of its parent companies as market
leaders. This will lend a unique credibility and public
recognition to the joint venture, as well as its products.
A modem extremely powerful, Computer system is being
purchased to install · the integrated directory system
c developed over the past 25 years by IIPL. The IDS will
ensure efficiency and accuracy of operations. Training of all
personnel is being and will continue to be conducted by
experienced Managers from IIPL." ·
Alongwith the tender the appellants submitted the directories of Delhi
D
and Bombay 1992 which were printed and bound by Living Media Press in
Madras.
In the counter affidavit filed on behalf of respondents Nos. l to 3 in the
High Court it was stated that as per the averments in the writ petition TPI
and LMI had printed and bound the telephone directories for respective
E parties who had been awarded the contract for Delhi and Bombay and that
the appellants did not produce any evidence to show that they have in their
name undertaken compiling, printing, binding and supply of Telephone
Directories of large telephone systems with a capacity of more than 50,000
lines and further that telephone directory of Delhi 1992 issue was published
~p by Sterling Co'llputers Limited on behalf of United Data Base (India) Pvt
Ltd., and it was printed ::md bound at Navneet Publications (India) Ltd:,
Gandhinagar, and the telephone directory of Bombay 1992 issue does not
indicate any publisher's or printer's nanie. It was also stated that NHL was
converted in to a joint venture company in 1992 and have no c.wcperience
whatsoever in their own name for compiling, printing, binding and supply
'G of telephone directories of Telephone Systems of more than 50,000 lines
capacity. It was further stated that the appellants had submitted the
Directories of Delhi and Bombay only to show the capability of printing
facilities of TPI and LMI and it does not substantiate their experience of a
full job of compiling, printing and supply of telephone directories as stipu-
lated in the tender notice/document. In the counter affidavit it was also
H stated that th.e royalty and. other aspects of the tender were not considered
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 321
since the appeliants did not meet the primary requirement of experience as A
abov.e.
Before the High Court it was urged on behalf of the appellants that
NHL was fully eligible and met the criteria as laid down and was competent
to compile, print and supply telephone directories as per the invitation of
tender and in this connection reliance was placed on the experience of the B
forieng collaborator/equity holder and the experience of the major Indian
equity shareholders viz., TPI and LMI who owned the most well equipped
modern printing and binding facilities and had executed the work for the
parties who had been awarded contract earlier for telephone directories for
metropolitan cities of Delhi and Bombay. It was also submitted that these
facilities were available to NHL to execute the contract in question and that C
all these facts were clearly brought out in the tender document submitted by
it and that the contract was awarded to respondent No. 4 on extraneous
considerations which is violative of Article 14 of the Constitution. It was
further submitted that since the matter involved public revenue the tender of
the appellants containing the highest offer could not be rejected on the D
hypertechnical plea that the NHL itself has no experience.
The said contentions have been negatived by the Division Bench of the
Delhi High Court in its judgment dated October 15, 1993 whereby the writ
petition filed by the appellants was dismissed. The High Court was
proceeded on the assumption that the shareholders of NHL have all the
experience in compiling and printing the telephone directories but has E
observed that, that it is not at all job requirement. According to the High
Court it is one thing to say that shareholders of a company have vast
experience in the publication of telephone directories with Yellow Pages
and it is entirely another thing if the company itself has that experience.
The approach to the High Court is that a company is an independent person F
distinct from its members and that NHL is carrying on its business
independently from that of the shareholders. The High Court has held that
- the experience of a shareholder cannot be the experience of the company_
nor is NHL the agent of its shareholders. Referring to the principle of listing
of corporate veil in modern company law the High Court has observed that
so far as NHL is concerned, it .cannot invoke the said principle either as a G
ground of attack or as a ground of defence. In the view of the High Court it
could not be said that the authorities had failed in their duty to look behind
the facade of corporateness of NHL arid that it was none of their duty and
they rightly examined the experience, etc. of NHL and came to the
conclusion that it did not satisfy the eligibility conditions and that there was
no error in the said approach of the authorities. Dealing with the connection H
322 SUPREME COURT REPORTS (1994) SUPP. 5 S.C.R.
A that NHL is a joint venture the High Court has observed that a joint venture
is a one-time grouping of two or more persons in a business undertaking
and unlike a partnership, a joint venture does not entail a continuing
relationship among the parties and on that view the High Court has held
that there is no joint venture as such and there is only a certain amount of
equity participation by a foreign company in NHL.The High Court rejected
B the contention urged on behalf of the appellants regarding the absence of
reasons for rejecting the tender of NHL on the ground that the non-
communication of reasons is not fatal in all circumstances and that in the
present case the reasons existed on the record of the authorities that the
tender submitted by NHL was not in conformity with the condition of the
tender and NHL was found ineligible for award of the tender and its offer
c could not have been accepted. The High Court further held that since the
bid of the appellants was rejected at the threshold the authorities could not
consider the question of higher amount of royalty offered by NHL and that
higher bid could not be a substitute for eligibility conditions.
Shri Soli Sorabji, the learned counsel appearing for the appellants, has
D submitted that the High Court was in error in considering whether NHL
fulfilled the condition regarding experience contained in the tender notice ·
and that the authorities should have taken into consideration the experience
of the constituents of NHL which is a joint venture company duly approved
by the Government of India in which 40% equity is owned by IIPL (a
wholly owned subsidiary of Singapore Telecom) and the remaining 60%
E equity is held by Indian group of companies consisting of TPI, LMJ, WML
and Mr. Aroon Purie, and that the constituents of NHL had expertise and
experience in publishing yellow page directories as well as telephone
directories and had necessary resources for that purpose. Shri Sorabji has
also submitted that it is a fit case in which the authorities should have lifted
the corporate veil and if they had done so they would have seen the reality.
F Shri Sorabji has emphasised that there is a difference of more than 3 and a
half crore rupees between the amount of royalty offered by NHL and that
offered by respondent No. 4 to whom the contract has been awarded.
G
Shri K.K. Venugopal, the learned counsel appearing for respondent
No. 4, has, however, supported the judgment of the High Court ·and has
submitted that the authorities were justified in not considering the tender
submitted . by NHL on the basis that it did not fulfill the conditions
regarding experience contained in the tender notice. Shri Venugopal has
,
submitted that there is nothing to show that ~he constituents of NHL had the
necessary experience of supplying telephone directories to large telephone
H systems of the capacity of more than 50,000 lines and that no document to
NEW HORIZONS LTD. v. U.0.1 (S.C. AGRAWAL, J.] 323
prove that NHL had necessary experience was submitted by NHL A
alongwith the tender.
At the outset, we may indicate that in the matter of entering into a
contract, the State does not stand on the same footing as a private person
who is free to enter into a contract with any person he likes. The State, in
exercise of its various functions, is governed by the mandate of Article 14 B
of the Constitution which excludes arbitrariness in State action and requires
the State to act fairly and reasonably. The action of the State in the matter
of award of a contract has to satisfy this criterion. Moreover a contract
would either involve expenditure from the State exchequer or augmentation
of public revenue and consequently the discretion in the matter of selection C
of the person for award of the contract has to be exercised keeping in view
the public interest involved in such selection. The decision of this Court,
therefore, insist that while dealing with the public, whether by way of
giving jobs or entering into contracts or issuing quotas or lincences or
granting other forms of largesse, the Government cannot act arbitrarily at
its sweet will and like a private individual, deal with any person it pleases, D
but its action must be in conformity with the standards or norms which are
not arbitrary, irrational or irrelevant. It is, however, recognized that certain
measure of "free play in the joints" is necessary for an administrative body
functioning in an administrative sphere See : Ramanna Dayaram Shetty v.
The International Airport Authority of India, [1979] 3 SCR 1014, at p.
1034; Kasturi Lal Lakshmi Reddy v. State ofJ&K, [1980] 3 SCR 1338, at p. E
1355; Fasih Chaudhary v. Director General, Dooradarshan, [1988] Suppl.
3 SCR 282 at p. 286; Sterling Computers Ltd v. Mis M&N Publications
Ltd & Anr. (supra); Union of India v. Hindustan Development
Corporation, 1983 (3) SCC 499, at p. 513.
In the recent decision in Tata Cellular v. Union of India Civil Appeals F
Nos. 4947-50of1994 and connected appeals decided on July 26, 1994 this
Court has examined the scope of judicial review in the field of exercise of
contractual powers by Government bodies and, after noticing the current
mood of judicial restraint in England, the court has laid down the following
principles : G
"(I) The modem trend points to judicial restraint in
administrative action .
(2) The Court does not sit as a court of appeal but merely
reviews the manner in which the decision was made. H
324 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.
A (3) The Court does riot have the expertise to correct the
administrative decision. If a review of the administrative
decision is permitted it will be substituting its own decision,
without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to
B 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.
c (5) The Government must have freedom of contract. In
other words, a fair play in the joints is a necessary
concomitant for an administrative .body functioning in an
~dministrative sphere or quasi-administrative sphere.
However, the ·decision must not only be tested by the
D application of Wednesbury principle of reasonableness
(including its other facets pointed out above) bu! must be
free from arbitrariness not affected by bias or actuated by
mala tides.
(6) Quashing decisions may impose heavy administrative
E burden on the administration and lead to increased and
unbudgeted expenditure."
"Wednesbury Principle of reasonableness" to which reference has been
made in principle (5) aforementioned is contained in.Associated Provincial
Pricture Houses Ltd. v. ·wednesbury Corporation, [1948] l KB 223: In that
F case Lord Greene M.R. has held that a decision of a public authority will be
liable to be quashed or otherwise dealt with by an apporiate order in judicial
review proceedings where the Court concludes that the decision is such that .•
no authority properly directing itself on the relevant law and acting
reasonably could have reached it. In Tata Cellular (supra) this Court, has
mentioned two other.facets of irrationality:
G
(l) It is open to the court to review the decision-maker's evaluation of
the facts. The Court will intervene where the facts taken as a whole could
not logically warrant the conclusion of the decision-maker. If the weight of
facts pointing to one course of action is overwhelming, then a decision the
H other way, cannot be upheld.
NEW HORIZONS LTD. v. U.0.I [S.C. AGRAWAL, .T.] 325
(2) A decision would be regarded as unreasonable if it is partial and A
unequal in its operation as between different classes.
The validity of the action of the Tender Evaluation Committee in not
considering the tender submitted by NHL has to be considered in. the light
of the aforementioned principle No. 5 as laid down in Tata Cellular. In
other words, what has to be ~een is whether the refusal by the Tender B
Evaluation Committee to consider the tender of NHL on the ground that the
condition regarding experience as laid down in the tender notice was not
fulfilled can be regarded as arbitrary and unreasonable.
The requirement with regard to experience, as stated in the
advertisement dated April 22, 1993 for inviting tenders, as noticed earlier C
was in the following terms:
"The tenderer should have the experience in compiling,
printing and supply of telephone directories to the large
telephones systems with the capacity of more than 50,000
lines. The tenderer should substantiate this with D
documentary proof. He should also furnish credentials in
this field."
The requirement of experience was, however, differently worded in the
notice for inviting sealed tenders dated April 26, 1993 which was attached
to the tender documents which prescribes the conditions to be fulfilled for E
submission of tenders and wherein it was stated as under:
"The successful tenderer will also submit copies of
telephone directories printed and supplied by them to the
telephone systems of capacity more than 50,000 lines as
credentials of his past experience." (Para 12) F
In the said notice the expressions "tenderer" and "successful tenderer"
have been used. While the expression "tenderer" has been used in
paragraphs 5, 7, 11 and 14, the expression "successful tenderer" is used in
paragraphs 7, 9 (a), 10 and 12. Since paragraph 10 provides for execution
of the agreement by the successful tenderer, the said expression is intended G
to mean the tenderer whose tender has been found suitable for acceptance.
The use of the expression "successful tenderer" instead of the expression
"tenderer" in paragraph 12, therefore, indicates that the documentary proof,
by way of credentials of the past experience, has to be submitted after the
tender has been considered and is found suitable for acceptance by the
concerned authorities. This would mean that the past experience is a matter H
326 SUP~ME COURT REPORTS [1994] SUPP. 5 S.C.R.
A which is to be considered after the tender has been examined and evaluated
and the tenderer whose tender is found acceptable is required to submit
documentary proof regarding his past experience. In other words, a tender
is not liable to J:>e excluded from consideration on the ground of non-
eligibility on account of lack of past experience. This inference is
strengthened by paragraph 8 and 11 of the notice dated April 26, 1993. In
B paragraph 8 it is provided that a tender is liable for summary rejection if it
. is submitted without the Demand Draft of Rs. 5,00,000. Similarly in
paragraph 11 it is provided that tender is liable to be excluded from
consideration if the income tax clearance certificate is not furnished with
the tender. There is no similar provision for excluding from consideration a
tender on the ground of failure to furnish with the tender the required
c material by way of credentials of past experience. It means that the matter
of past experience has to be considered after the tender has otherwise been
found to be suitable for acceptance and a tender is not liable to be rejected
at the threshold without consideration on the ground that the tenderer lacks
experience. The decision of the Tender Evaluation Committee to exclude
the tender of NHL from consideration was, therefore, not warranted by the
D terms and conditions for submission of tender as contained in the notice for
inviting sealed tenders dated April 26, 1993.
Even if it be assumed that the requirement regarding experience as set
out in the advertisement dated April 22, 1993 inviting tenders is a condition
about eligibility for consideration of the tender, though we find no basis for
E the same, the said requirement regarding experience cannot be construed to
mean that the said experience should be of the tenderer in his name only. It
is possible to visualize a situation where a person having past· experience
has entered into a partnership and the tender has been submitted in the
name of the partnership firm which may not have any past experience in its
own name. That does not mean that the earlier experience of one of the
F partners of the firm cannot be taken into consideration. Similarly, a
company incorporated under the Companies Act having past expe~ience
may undergo reorganisation as a result of merger or amalgamation with
another company which may have no such past experience and the tender is
submitted in the name of the reorganized company. It could not be the
G purport of the requirement about experience that the experience of the
company which has merged into the reorganised company cannot be taken
into consideration because the tender has not been submitted in its name
and has been submitted in the name of the reorganised company which does
not have experience in its name. Conversely there may be a split in a
company and persons looking after a particular field of the business of the
H company form a new company after leaving it. The new company, though
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.) 327
having persons with experience in the field, has no experience in its name A
while the original company having experience in its name lacks persons
with experience. The requirement regarding experience does not mean that
the offer of the original company must be considered because it has
experience in its name though it does not have experienced persons with it
and ignore the offer of the new company because it does not have
experience in its name though it has persons having experience in the field. B
While considering the requirement regarding experience it has to be borrie
in mind that the said requirement is contained in a document inviting offers
for a commercial transaction. The terms and conditions of such a document
have to be construed from the standpoint of a prudent businessman. When a
businessman enters into a contract where under some work is to be
performed he seeks to assure himself about the credentials of the person C
.who is to be entrusted with the performance of the work. Such credentials
are to be examined. from a commercial point of view which means that if
the contract is to be entered with a company he will look into the .,
background of the company and the persons who are in control of the same
and their capacity to execute the work. He would go not by the name of the D
company but by the persons behind the company. While keeping in view·
the past experience he would also take note of the present state of affairs
and the equipment and resources at the disposal of the company. The same
has to be the approach of the authorities while considering a tender received
in response of the advertisement issued on April 22, 1993. This would
require that the first terms of the offer must be examined and if they are
found satisfactory the next step would be to consider the credentials of the E
tenderer and his ability to perform the work to be entrusted. For judging the
credentials past experience will have to be considered along with the
present state of equipment and resources available with the tenderer. Past
experience may not be of much help if the machinery and equipment is
outdated. Coriversely lack of experience may be made good by improved F
technology and better equipment. The advertisement dated April 22, 1993
when read with the notice for inviting tenders dated April 26, 1993 does not
preclude adoption of this course of action. If the Tender Evaluation
Committee had adopted this approach and had examined the tender of NHL
in this perspective it would have found that NHL, being a joint venture, has
access to the benefit of the resources and strength of its parent/owning G
companies as well as to the experience in database management, sales and
publishing of its parent group companies because after reorganisation of the
company in 1992 60% of the share capital of NHL is owned by indian
group of companies namely, TPI, LMI, WML, etc. and Mr. Aroon Purie
and 40% of the share capital .is owned by IIPL .a wholly owned subsidiary
of Singapore Telecom which was established in 1967 and is having long H
328 SUPREME COURT REPORTS [1994] SUPP. 5 S.C.R.
A experience in publishing the Singapore telephone directory with yellow
pages and other directories. Moreover in the tender it was specifically stated
that IIPL will be providing its unique integrated directory management
system alcng with the expertise of its managers and that the managers will
be actively involved in the project both out of Sjngapore and resident in
India.
B
The expressioQ "joint venture"' is more frequently used in the United
States. It connotes a legal entity· in the nature of a partnership engaged in
the joint undertaking of a particular transaction for mutual. profit or an
association of persons or companies jointly undertaking some commercial
enterprise wherein all contribute assets and share risks. It requires a
c community·of interest in the performance of the subject matter, a right to
direct and groven the policy in connection therewith, and duty, which may
be altered by agreement, to share both in profit and losses. [Black's Law
Dictionary; Sixth Edition, p. 839). According to Words and Phrases,
Permanent Edition, a joint venture is an association of two or more persons
to carry out a single business enterprise for profit [P.117, Vol. 23). A joint
D venture can take the form of a corporation wherein two or more persons or
companies may join together. A joint venture corporation has been defined
as a corporativn which has joined with other individuals or corporations
within the corporate framework in some specific undertaking commonly
found in oil, chemicals, electronic, atomic fields. [Black's Law Directory;
Sixth Edition, p. 342) joint venture companies are now being increasingly
E formed in relation to projects requiring inflow of foreign capital or
technical expertise in the fast developing countries in East Asia, viz., Japan,
South Korea, Taiwan, China, etc. (See: Jacques Buhart: Joint Ventures in
East Asia - Legal Issues (1991)). There has been similar growth of joint
ventures in our country wherein foreign companies join with Indian counter
parts and contribute towards capital and technical knowhow for the success
F of the venture. The High Court has taken note of this connotation of the
expression "joint venture". But the High Court has held that NHL is not a
joint venture and that there is only a certain amount of equity participation
by a foreign company in it. We are unable to agree with the.said view of the
High Court.
G
As noticed earlier, in its tender NHL had stated that it is a joint venture
company established by TPI, LMI and WML and IIPL wherein TPI, LMI
and WML and other companies in the same group as well as Mr. Aroon
Purie own 60% shares and IIPL owns 40% shares. It was also stated that the
joint venture has received approval of the Government of India and is
H currently in operation and that the Promoter will increase their
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 329
capital/contribution to commensurate with the project need and that the A
company has been established as an information and database management
company with expertise in database processing, publishing, sales/marketing
and the ~mination of related information. In the tender it is also stated
that as11Joint venture in the true sense of the phrase, the company will have
access to expertise in database management, sales and publishing of its
parent group companies. It ;,;ould thus appear that the Indian group of B
companies (TPI, LMI and WML) and the Singapore based company (IIPL)
have pooled together their resources in the sense that TPI, LMI and WML
have made a•1ailable their equipment and organisation at various places in
tht: country while IIPL has made available its wide experience in the field
as well as the expertise of its managerial staff. All the constituents of NHL
have thus contributed to the resources of the company (NHL). This shows C
that NHL is an association of companies jointly undertaking a commercial
· enterprise wherein they will all contribute assets and will share risks and
have a community of interest. We are, therefore, of the view that NHL has
been constituted as a joint venture by the group of Indian companies and
IIPL, the Singapore based company and it would not be correct to say that
HPL which has a substantial stake in the success of the venture, having 40% D
of share holding, is a mere shareholder in NHL.
Once it· is held that NHL is a joint venture, as claimed by it in the
tender, the experience of its various constituents namely, TPI, LMI and
WML as well as IIPL had to be taken into consideration if the Tender
Evaluation Committee had adopted the approach of a prudent businessman. E
The conclusion would not be different even if the matter is approached
purely from the legal standpoint. It cannot be disputed that, in law, a
company is a legal entity distinct from its members. It was so laid down by
the House of Lords in 1897 in the leading case of Salomon v. Salomon &
Co., (1897) A.C. 22. Ever since this decision has been followed by the F
Courts in England as well as in this country. But there have been in-roads in
the doctrine of corporate personality propounded in the said decision by
-- statutory provisions as well as by judicial pronouncement. By the process,
commonly described as "lifting the veil", the law either goes behind the
corporate personality to the individual members or ignores the separate G
personality of each company in favour of the economic entity constituted
by a group of associated companies. This course is adopted when it is found
that the principle of corporate personality il! too fragrantly opposed to
justice, convenience or the interest of the revenue. [See : Gower's
Principles of Modem Company Law, 4th Edn., p.112]. This concept, which
is described as "piercing the veil" in the United States, has been thus put by H
330 SUPREME COURT REPORTS
. (1994) SUPP. S S.C.R.
A Sanborn J. in U.S. v. Milwaukee Refrigerator Transit Co., (1905) 142 Fed.
247. at p.255 .: "when the notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law wilJ
regard the corporation as an association of persons".
In a number of decisions, departing from the narrow l;galistic view,
B courts have taken note of the realities of the situation.
In Scottish Corporation Wholesale Society ltd v. Meyer, (1959) A.C.
324, a case under Section 210 of the Companies Act, 1948, Viscount
Simonds has quoted with approval the following observations of Lord
President Cooper :
c "In my view, the Section warrants the court in looking at
tlie business realities of a situation and does not confine
them to a narrow legalistic view" (p. 343)
Similarly in Harold Holdworth & Co. (Wakefield) ltd v. Caddies,
D (1955) I All.E.R. 725, it was argued that the subsidiary companies were
separate legal entities each under the control of its own board of directors,
that in law the board of appellant company could not assign any duties to .
anyone in relation to the management of the subsidiary companies, and that,
therefore, the agreement cannot be construed as entitling them to assign any
such duties to the respondent. The argument was rejected by Lord Reid
E with the observation "this is too technical an argument". The learned law
Lord went to the hold : "This is an argument in re mercotaria, and it must
be construed in the light of the facts and realities of the situation" (pp.737-
38).
In DHN Food Distributors Ltd & Ors. v. London Borough of Tower
F Hamlets, (1976) 3 All.E.R. 462, the Court of Appeal was dealing with three
companies, out of which one was the holding company and the other two
were its subsidiaries. After quoting the views of Prof. Gower that "there is
evidence of a general tendency to ignore the separate legal entities of
various companies within a group, and to look instead at the economic
entity of the whole group" Lord Denning M.R. has observed : "This group
G is virtually the same as a partnership in which all the three companies are
partners. They should not be treated separately so as to be defeated on a
technical point". (p. 467) In the same case, Goff LJ has said : " ....this is a
case in which one is entitled to look at the realities of the situation and to
pierce the corporate veil". (p.468) The observations of Shaw LJ were to the
H following effect:
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.) 331
"Why then should this relationship be ignored in a situation A
in which to do so does not prevent abuse but would on the
contrary result in what appears to be a denial of justice?"
(p.473)
In this case the holding company was held entitled to compensation for
disturbance from premises in its occupation on account of compulsory B
purchase of the property which belonged to one of the subsidiaries and in
which the holding company had no interest. This was a case in which the
court lifted the corp1Jrate veil so as to confer a benefit on the company.
It may, however, be stated that the existing state of the law in England
in this field is not very satisfactory. According to Professor Gower the C
development "has been essentially haphazard and irrational" (See: Gower's ·
Principles of Modem Company Law, 4th Edn. p. 138).
This court in Juggilal Kamlapat v. Commissioner of Income Tax,
[1969) 1 SCR 988, has laid down that "in certain exceptional cases the
court is entitled to lift the veil of corporate entity and to pay regard to the D
economic realities behind the legal facade" (p.995).
In State of U.P. v. Renusagar Power Co., [1988) Supp. 1 SCR 627 this
Court lifted the veil to hold that Hindalco, the holding company, and
Renusagar Power Co., its subsidiary, should be treated as one concern and
the power plant of Renusagar must be treated as the own source of E
generation of Hindalco and Hindalco would be liable to payment of
electricity duty on that basis. It was observed:
"It is high time to reiterate that in the expanding of horizon
of modem. jurisprudence, lifting of corporate veil is
permissible. Its frontiers are unlimited. It must, however, F
depend primarily on the realities of the situation. .... The
..
horizon of the doctrine of lifting of corporate veil is
expanding". (p. 667)
There are cases where the court has looked behind the facade of the
company and its place of registration in order to determine its residence and G
for this purpose the test laid down is the place of the central management
and control. (See: De Beers Consolidated Mines Ltd v. Howe, (1906) A.C.
455. Similarly the court has looked at the corporators in order to determine
the character of the corporation as a enemy alien or as a British resident
(See: Daimler Company Ltd v. Continental Tyre & Rubber Company Ltd,
(1916) 2 A.C. 307. According to Professor Gower this does not involve H
332 SUPREME COURT REPORTS (1994) SUPP. 5 S.C.R.
A breach of the principle laid down in Salomeon 's case (supra). (See
Gower's Principles ofModern Company Law, 4th Edn. p. J3fi).
After making a special study of this branch of the law, a learned
scholar has discerned four different attitudes towards the company in
judicial pronouncements. According to him these categories, in progressive
B order, are (i) peeping behind the veil; and (ii) Penetrating the veil; (iii)
Extending the veil; and (iv) Ignoring the veil. The decisions relating to
determination of residence or enemy status of a company have been placed
by him in the category of "Peeping behind the veil" where the court peeps
behind the veil and concludes from the shareholders or from the people in
control of the company, something about the nature of the company. (See:
C S. Ottolenghi, From Peeping Behind the Corporate Veil, to Ignoring it
Completely, (1990) 53 Mod L.Rev. 338 at p. 340).
This Court has adopted a similar approach and in some cases it has
seen through the corporate veil. In Central Inland Water Transport
Corporation Ltd, v. Brojonath Ganguly, (1986] 2 SCR 278 the court was
D considering the question whether the appellant company was an agency or
instrumentality of the State for the pui-pose of Article 12 of the
Constitution. It was said :
"For the purpose of Article 12 one must necessarily see
through the corporate veil to ascertain whether behind that
E veil is the face of an instrumentality or agency of the State."
(p. 349)
So also in State of UP. v. Renusagar Power Co., (supra) it has been
observed:
F ·"The veil on corporate personality even though not lifted
sometimes, is becoming more and more transparent in
modem company jurisprudence" (p. 668)
Seeing through the veil covering the face of NHL it will be found that
as a result of reorganisation in 1992 the company is functioning as a joint
G venture wherein the Indian Group (TPI, LMI and WML) and Mr. Aroon
Purie hold 60% shares and the Singapore based. company (IIPL) holds 40%
shares. Both the groups have contributed towards the resources of the joint
venture in the form of machines, equipment and expertise in the field. The
company is in the nature of a partnership between the Indian group of
companies and the Singapore based company who have jointly undertaken
H · this commercial enterprise wherein they will contribute to the assets and
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 333
share the risks. In respect of such a joint venture company the experience of A
the company can only mean the experience of the constituents of the joint
venture, i.e., the Indian group of Companies (TPI, LMI and WML) and the
Singapore based company (IIPL ).
On behalf of the respondents reliance has been placed on the decision
of the Delhi High Court in Paharpur Cooling Towers Ltd., v. Banbaiqon B
R<::jinery and Petrochemicals Ltd, (1994) 28 DRJ 425, wherein it has been
held that the expression "tenderer should possess such experience" would
mean the experience of the tenderer itself and not that of its collaborator. It
has been pointed out that SLP (C) No. 1484 of 1994 filed against the said
judgment has been dismissed by this Court by order dated January 28,
1994. It has been urged that on the same logic the experience of a C
shareliolder would not be included within the expression "experience of the
tenderer". We fail to appreciate the relevance of this judgment. There can
be no comparison between a collaborator who has no stake in the business
of the company and a constituent of a company, such as NHL, constituted
as a joint venture, wherein the constituents in the joint venture have a D
substantial stake in the success of the venture.
Thus the approach from the legal standpoint also leads to the
conclusion that for the purpose of considering whether NHL has the
experience as contemplated by the advertisement for inviting tenders dated
April 22, 1993, the experience of the constituents of NHL, i.e., the Indian E
group of companies (TPI, LMI and WML) and the Singapore based
company, (IIPL) has to be taken into consideration. As per the tender of
NHL, one of its Indian constituents (LMI) had printed and bound the
telephone directories of Delhi and Bombay for the years 1992 and its
Singapore based constituent (IIPL) has 25 years experience in printing the
..
telephone directories with 'yellow pages' in Singapore. The said experience F
has been ignored by the Tender Evaluation Committee on an erroneous
view that the said experience was not in the name of NHL and that NHL
did not fulfil the conditions about eligibility for the award of the contract.
In proceeding on that basis the Tender Evaluation Committee has
misguided itself about the true legal position as well as the terms and G
conditions prescribed for submission of tenders contained in the notice for
inviting tenders dated April 26, 1993. The non-consideration of the tender
submitted by NHL has resulted in acceptance of the tender of respondent
No. 4. The total amount of royalty offered by respondent No. 4 for three
years was Rs. 95 lakhs whereas NHL had offered Rs. 459.90 lakhs, i.e.,
nearly five times the amount offered by respondent No. 4. Having regard to H
334 SUPREME COURT REPORTS (1994] SUPP. S S.C.R.
A this large margin in the amount of royalty offered by NHL and that offered
by respondent No. 4, it must be held that decision of the Tender Evaluation
Committee to refuse to consider the tender of NHL and to accept the tender
of respondent No., 4 suffers from the vice of arbitrariness and irrationality
and is liable to be quashed.
B We have been informed that while the matter was pending in the High
Court and in this Court the telephone direct<"ry for the year 1993 has been
printed and supplied to the Department by respondent No. 4 as per terms of
the contract. Insofar as the directory for the year 1994 is concerned we find
that, as per the terms of the contract, the process for preparation of the tele-
phone directory has already commenced. We cannot loose sight of the fact
c that as a result of quashing of the contract in respect of the directory for
1994 fresh steps will have to be taken award a fresh contr~ct and the said
process would take some time and thereafter the contractor will require
time to print and publish the telephone directory. It would therefore, not to
feasible to bring out the directory for 1994 before the close of the year. As a
D result, the Department would suffer loss of revenue which it would
otherwise earn by way of royalty from respondent No. 4 for the directory
for the year 1994. Insofar as the contract in respect of the year 1995 is
concerned there is sufficient time for the Department to award a fresh
contract if the contract awarded to respondent No.4 is cancelled and the
new contractor will have sufficient time at his disposal to print and deliver
E the directory as per the time schedule. Moreover, in respect of the directory
for the year 1995 the amount ofroyalty that is payable by respondent No. 4
is Rs. 45 lakhs and the amount of royalty offered by NHL for directory for
the said year was Rs. 291.6 lakhs. Keeping in view the circumstances
referred to above, the course that commands us is that, while maintaing the
contract awarded to respondent No. 4 in respect of the directories for the
F year 1993 and 1994, the sa.id contract may be set aside insofar as it relates
to the directory for the year 1995 and fresh tenders may be invited for
award of the contract for the directory for the year 1995. The appeal ·med
against the judgment and order of the Delhi High Court dismissing the writ
petition of the appellants must therefore, be allowed in the above terms.
The other appeal has been filed by the appellants against the order of Delhi
-
G
High Court dismissing C.M.No. 6120of1993 which was an application for
an interim relief duririg the pendency of the writ petition in the High Court.
In view of the final order that is being passed in the writ petition the
application for interim.relief has become infructuous and the appeal against
the order dismissing C.M.No.6120of1993 must, therefore, be dismissed as
H infructuous. ·
NEW HORIZONS LTD. v. U.0.1 [S.C. AGRAWAL, J.] 335
In the result, the appeal against the judgment and order of the Delhi A
High Court dated October 15,1993 in C.W.P.No. 3837 of 1993 is allowed,
the said judgment is set aside and writ petition No. 3837 of 1993 filed by
the appellants is disposed of with the direction that the award of the
contract for printing and publishing the telephone directories for Hydrabad
for the years 1993, 1994 and 1995 is set aside to the extent it relates to the
directory for the year 1995. The appeal filed against the order of the Delhi B
High Court dated October 15, 1993 dismissing C.M.No. 6120 of 1993 for
interim relief is dismissed as infructuous. No order as to costs.
U.R. Appeal allowed.
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