l Appeal Nos
89 91 of 1993
From the Judgment and Order dated 3091992 of the Delhi High Court in WP No 1872 of 1992
K Parsaran Kapil Sibal LP Agarwalla NP Agarwalla Anil Agarwalia Gopal Subramanium Fazal ul Quaidir PH Parekh Ms Nina Gupta and Vineet Kumar for the Appellant
KK Venugopal P Chidambaram Anil P Diwan Harish N Salve Vijay Narain PP Tripathi and PP Singh for the Respondents
RN Keshwani for the Intervener
The following Judgment of the Court was delivered by NP SINGH
J Leave granted
Three appeals have been filed against the same judgment of the High Court by which the Writ Petition filed on behalf of the petitionersrespondents hereinafter referred to as the writ petitioners was allowed
The dispute relates to the publication of the telephone directories of Mahanagar Telephone Nigam Limited a Government of India Undertaking hereinafter referred to as the MTNL
A new concept of yellow pages in the telephone directories was introduced by the MTNLDepartment of Telecommunications
The yellow pages were to contain advertisements under different headings
The contractor who was to be awarded the contract for printing such directories was to collect the revenue from the advertisements in the yellow pages as well as in white pages of the telephone directory
The contractor was to print the directories and supply the same free of cost to the MTNL for its 88 subscribers and had to pay royalty to the MTNL in connection with printing of such directories
Tenders for publication of the directories for Delhi and Bombay were invited
Tender of the United India Periodicals Pvt
Ltd hereinafter referred to as the UlP the 2nd respondent to the Writ Petition and appellant in one of the appeals was accepted and an agreement dated 14th March 1987 was executed
United Database India Pvt Ltd hereinafter referred to as the UDI  the 3rd respondent to the Writ Petition and appellant in one of the appeals is a subsidiary of UIP
Under the original agreement UIP was to publish directories every year for a period of five years from 1987 to 1991 for Delhi and Bombay separately and was to payan amount of Rs 2016 crores as royalty to the MTNL and to supply the MTNL directories free of cost with reference to the number of subscribers
UIP also furnished a performance guarantee for a sum of Rs one crore
UIP was also to supply the same number of supplementary directories which were to be published six months after the publication of the annual issue
The annual issue of the directory was to be published in NovemberDecember every year
UIP was given the exclusive right for procurement of the advertisements in the yellow pages as well as strips bold and extra entries in the white pages
The rates of such advertisements were to be fixed by the UIP for each issue of the directory and such rates had to be printed for general information
It was also stipulated that if UIP committed any default or breach of the terms and conditions of the agreement or failed in the due performance thereof within the time fixed which was the essence of the contract the MTNL shall be entitled to recover from the UIP by way of compensation or liquidated damages an amount calculated at the rate of Rs one lakh for every day or part thereof for the delay beyond the stipulated date in respect of the item which was not completed or finished and delivered completely to the MTNL on the stipulated date as mentioned in the contract
In view of clause 22 of the agreement the MTNL without prejudice to other rights could by notice in writing determine the contract
It is an admitted position that UIP defaulted and committed breach of the terms of the agreement inasmuch as directories for Delhi were published only for the years 1987 and 1988 and for Bombay only for the year 1987
For the year 1987 Delhi issue was published after a delay of 89 seven months and that of Bombay after six months
So far Delhi issue of the directory for the year 1988 is concerned it was published only in August 1990 after a delay of two years
Under the agreement UIP was to publish directories every year for Delhi and Bombay separately during the period of contract from 1987 to 1991
They were also required to publish supplementary directory each year for Delhi as well as Bombay
But there was no publication of directories for Delhi for the years 1989 1990 and 1991
Similarly there was no publication of directories in respect of Bombay for the years 1988 1989 1990 and 1991
On 26th September 1991 a supplemental agreement was entered between UIP UDI MTNL and Sterling Computers Ltd hereinafter referred to as Sterline appellant in one of the appeals
Sterling by this agreement was introduced to carry out the unexecuted portion of the agreement with UIP
It may be mentioned that by this date the period of the original agreement dated 14th March 1987 between the MTNL and the UIP had expired still the supplemental agreement states that subject to UIPUDI and Sterling successfully completing the unexecuted job relating to printing of Bombay and Delhi telephone directories within the stipulated time frame and other stipulations in the agreement MTNL shall extend the original contract for three more issues each for Delhi and Bombay ie seven main issues of Bombay and six main issues of Delhi of the said directories to be brought out hereafter
The agreement further stipulated that all terms and conditions contained in the original agreement and the memorandum of understanding would be the integral part of the supplemental agreement and all obligations of UIPUDI and rights and privileges and powers provided for MTNL thereunder and under the law shall be applicable and available to and binding on the parties to the supplemental agreement as if the same were the part of the supplemental agreement
It was also said that if there was any inconsistency or contradictions vis a vis the original agreement the memorandum of understanding read with supplemental agreement shall prevail and would have overriding effect
By the supplemental agreement Sterling was to print and publish 13 main issues of Delhi and Bombay directories within a period of seven years including the year 1991 on payment of additional royalty of only Rs 10 crores to the MTNL over and above the royalty stipulated in the original agreement by the UIP
As mentioned above the original royalty which was payable under the agreement dated 14th March 1987 was Rs 2016 crores for the period 1987 to 1991 but under the supplemental agreement Sterling 90 was given the contract to publish 13 main issues of the Delhi and Bombay directories upto 1997 and 1998 but for the extended period it had to pay royalty only for an amount of Rs 10 crores
It was left to the UIPUDI to receive all revenue earnings on account cast and future from the advertisements and MTNL was to be only informed about the prices as fixed
The Writ Petition aforesaid was filed questioning the validity and legality of the supplemental agreement on different grounds including on ground of mala fide
According to the writ petitioners under the garb of a supplemental agreement a fresh contract was awarded to Sterling for a fresh period from 1991 to 1997 on fresh terms and conditions to publish the directories every year for Delhi and Bombay without inviting tenders or affording an opportunity to others to submit tenders so that they may be also considered for award of the said contract
It was asserted by the petitioners that in the process of entering into the supplemental agreement the MTNL which is a public undertaking and a State within the meaning of Article 12 of the Constitution has suffered a loss of more than Rs 60 crores without any corresponding benefit accruing to the MTNL or to the public in general
Before the High Court the stand of the MTNL was that the supplemental agreement was a result of a bonafide commercial decision free from any bris or malice
The original contract for years 1987 to 1991 had been awarded to UIP after inviting tenders but UIP having gone bankrupt no money could have been realised from it
The termination of original contract was no remedy although repeated contraventions and breaches had been committed by the UIP inasmuch as there was no publication of directory for Bombay for the years 1988 1989 1990 and 1991 and for Delhi for the years 1989 1990 and 1991
It was stated on behalf of the MTNL before the High Court that in order to salvage Rs 2016 crores which was payable to the MTNL under the original agreement dated 14th March 1987 by the UIP and which had not been paid a decision was taken by the MTNL to enter into a supplemental agreement and to allow the UIPUDISterling to publish the thirteen issues of directories six main issues for Delhi and seven main issues for Bombay upto years 1997 98 apart from the supplementary directories
The High Court came to the conclusion that supplemental agreement dated 26th September 1991 cannot be held to be the extension of the 91 original agreement dated 14th March 1987
According to the High Court the supplemental agreement was tainted with malice the object being to provide unjust enrichment to UIPUDISterling
The most interesting part of the controversy is that the MTNL having fully supported the supplemental agreement before the High Court has filed an affidavit before this Court saying that MTNL has decided to accept the High Court judgment in so far as that the procedure for the grant of contract dated 2691991 to the petitioner Ms Sterling Computers Ltd
Was not in keeping with the requirement of Article 14 of the Constitution and is not filing any petition for Special Leave against the said judgment
However as far as aspersions are concerned MTNL does not accept the same and the same are matters of investigation and enquiry by an independent Central Agency at present
 It has been further stated that subsequent events have shown that the Sterling has collected Rs 1959 crores approximately for advertisements in yellow pages without delivering the goods
They have also uncashed the letter of credit issued by the MTNL  prematurely
This collection is apart from the collection of Rs 14 crores against the yellow pages advertisements made by UDI and UIP during the years 1987 1991
It has been further stated that the Board of MTNL  had in fact even decided to terminate the contract for lapse in the performance of the obligations under the 26th September 1991 agreement but as the High Court has quashed the said supplemental agreement no further step was considered necessary
Ultimately it has been said in the said affidavit that MTNL  has started the process for inviting fresh public tenders and for that purpose advertisement has already been issued
Mr Venugopal appearing for the writ petitioners before us stated on behalf of the writ petitioners that they are prepared to pay to the MTNL  an amount of Rs 60 crores for the period 1991 to 19971998 the period covered by the supplemental agreement for which the UIPUDI Sterling have undertaken to pay only Rs 10 crores as royalty
At times it is said that public authorities must have the same liberty as they have in framing the policies even while entering into contracts because many contracts amount to implementation or projection of policies of the Government
But it cannot be overlooked that unlike policies contracts are legally binding commitments and they commit the authority which may be held to be a State within the meaning of Article 12 of the 92 Constitution in many cases for years
That is why the Courts have impressed that even in contractual matters the public authority should not have unfettered discretion
In contracts having commercial element some more discretion has to be conceded to the authorities so that they may enter into contracts with persons keeping an eye on the augmentation of the revenue
But even in such matters they have to follow the norms recognised by Courts while dealing with public property
It is not possible for Courts to question and adjudicate every decision taken by an authority because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts
Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms
If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts such decisions are upheld on the principle laid down by justice Holmes that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of play in the joints to the executive
But in normal course some rules must exist to regulate the selection of persons for awarding contracts
In such matters always a defence cannot be entertained that contract has been awarded without observing the well settled norms and rules prescribed on basis of the doctrine of executive necessity
The norms and procedures prescribed by Government and indicated by Courts have to be more strictly followed while awarding contracts which have along with a commercial element a public purpose as in the present case
The publication of directories by the MTNL is not just a commercial venture the primary object is to provide service to the people
The action or the procedure adopted by the authorities which can be held to be State within the meaning of Article 12 of the Constitution while awarding contracts in respect of properties belonging to the State can be judged and tested in the light of Article 14 of the Constitution is settled by the judgments of this court in the cases of Raman Dayaram Shetty vs The International Airport Authority of India   Ms Kasturi 93 Lal Lakshmi Reddy vs The State of Jammu  kashmir   Fertilizer Corporation Kamagar Union Regd Sindri vs Union of India   Ram and Shyam Company vs State of Haryana   Haji TM Hasan Rawther vs Kerala Financial Corporation AIR 1988 SC 157 Mahabir Auto Stores vs Indian Oil Corporation  and Kumari Shrilekha Vidyarthi vs State of UP it has been said by this Court  It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State such an action would be both unreasonable and contrary to public interest
The Government therefore cannot for example give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it unless of course there are other considerations which render it reasonable and in public interest to do so Ms Kasturi Lal Lakshmi Reddy vs The State of Jammu  Kashmir There is nothing paradoxical in imposing legal limits on such authorities by Courts even in contractual matters because the whole conception of unfettered discretion is inappropriate to a public authority who is expected to exercise such powers only for public good
According to the appellants the supplemental agreement was entered into by the MTNL taking into consideration the circumstances then existing which had been examined at the highest level and as such a Court should not examine the discretion exercised by the public authority as a court of appeal because the decision to enter into supplemental agreement also involved a question of policy
It was pointed out that the contract had been awarded in the year 1987 to UIP on an experimental basis on such terms and conditions on which in past directories had not ever been published
The real experiment was as to how the directories could be published without incurring any cost by the MTNL
The publisher being given the right not only to reimburse itself from the advertisements published in the yellow and white pages but was also to pay royalty to the MTNL
It was further pointed out that from the resolutions of the MTNL
It shall appear that the authorities were concerned that the experiment 94 aforesaid must succeed
With that object in view another opportunity was given to UIPUDISterling through the supplemental agreement to publish the directories for Delhi and Bombay
That decision should not be examined by this Court like a court of appeal
It is true that by way of judicial review the Court is not expected to act as a court of appeal while examining an administrative decision and to record a finding whether such decision could have been taken otherwise in the facts and circumstances of the case
In the book Administrative Law Prof Wade has said The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the court must not usurp the discretion of the public authority which parliament appointed to take the decision
Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion
If it passes those bounds it acts ultra vires
The court must therefore resist the temptation to draw the bounds too tightly merely according to its own opinion
It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which legislature is presumed to have intended
The decisions which are extravagant or capricious cannot be legitimate
But if the decision is within the confines of reasonableness it is no part of the court s function to look further into its merits
With the question whether a particular policy is wise or foolish the court is not concerned it can only interfere if to pursue it is beyond the powers of the authority
 But in the same book Prof Wade has also said The powers of public authorities are therefore essentially different from those of private persons
A man making his will may subject to any rights of the dependents dispose of his property just as he may wish
He may act out of malice or a spirit of revenge but in law this does not affect his exercise of his power
In the same way a private person has an absolute power to allow whom he likes to use his land to release a debtor or where the law permits to evict a tenant regardless of his motives
This is unfettered discretion
But a public 95 authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest
There are many cases in which a public authority has been held to have acted from improper motives or upon irrelevant con siderations or to have failed to take account
of relevant considerations so that its action is ultra vires and void
 While exercising the power of judicial review in respect of contracts entered into on behalf of the State the Court is concerned primarily as to whether there has been any infirmity in the decision making process
In this connection reference may be made to the case of Chief Constable of the North Wales Police vs Evans   where it was said that The purpose of judicial review  is to ensure that the individual receives fair treatment and not to ensure that the authority after according fair treatment reaches on a matter which it is authorized or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court
 By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the state
Courts have inherent limitations on the scope of any such enquiry
But at the same time as was said by the House of Lords in the aforesaid case Chief Constable of the North Wales Police vs Evans supra the Courts can certainly examine whether decision making process was reasonable rational not arbitrary and violative of Article 14 of the Constitution
If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract
But once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution the Courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by court amounts to encroachment on the 96 exclusive right of the executive to take such decision
In support of the stand that it was open to the MTNL to negotiate with the UIPUDISterling for purpose of publication of the directories for Delhi and Bombay without inviting tenders reliance was placed on behalf of the appellants on the judgments of this Court in the cases of Kasturi Lal Lakshmi Reddy vs State of Jammu and Kashmir   State of Madhya Pradesh vs Nandlal Jaiswal 1987 1 SCR Sachidanand Pandey vs State of West Bengal  and GB Mahajan vs Jalgaon Municipal Council  From the facts of the case of Kasturi Lal Lakshmi Reddy Supra it shall appear that every year the State used to auction the blazes in different forests
Most of the contractors bidding at the auction had their factories outside Jammu  Kashmir
A decision was taken that from the year 1979 80 onwards resin extracted from its forests should not be allowed to be exported outside the territories of the State and should be utilised only by industries set up within the State
There were certain forests which were out of access on account of their distance from the roads and no contractor could be found for taking tapping contracts even on the basis of royalty
The Chief Conservator of Forests and other Forest Officers at a meeting took a decision which was also confired at a subsequent meeting between the Forest Minister the Forest Secretary and the Chief Conservator of Forests that the blazes for such inaccessible areas should be allotted to some private party
In view of that decision the second respondent who had earlier addressed a letter to the State Government offering to set up a factory for manufacture of resin turpentine oil and other derivatives in the State and had sought for allotment of 10000 metric tonnes of resin annu was sanctioned the allotment of 1185 lacs blazes in the inaccessible areas for a period of 10 years on the terms and conditions set out in the order
This was challenged in the aforesaid case
This Court said that whatever be its activity the Government is still the Government and is subject to restraints inherent in its position and as such every activity of the Government which has a public element in it must be reasonable and not arbitrary
However the allotment of the contract in favour of the second respondent was upheld
It was pointed out that the blazes were situated in inaccessible areas and in spite of the offers given no bidders were attracted and as such the State had no option but to allot the said contract on basis of the offer made by the second respondent
97 The case of State of Madhya Pradesh vs Nandlal Jaiswal supra related to grant of liquor licences
The procedure adopted for such grant were being challenged as being violative of Article 14 of the Constitution
It was said by this Court But while considering the applicability of Article 14 in such a case we must bear in mind that having regard to the nature of the trade or business the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale of liquor
The Court would in view of the inherently pernicious nature of the cornmodify allow a large measure of latitude to the State Government in determining its policy of regulating manufacture and sale of liquor would essentially be a matter of economic policy where the court would hesitate to intervene and strike down what the State Government has done unless it appears to be plainly arbitrary irrational or mala fide
 But even in that case it was said No one can claim as against the state the right to carry on trade or business in liquor and the State cannot be compelled to part with its exclusive right or privilege or manufacturing and selling liquor
But when the State decides to grant such right or privilege to others the State cannot escape the rigour of Article 14
It cannot act arbitrarily or at its sweet will
It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor
 The execution of the supplemental agreement cannot be considered at par with the grant of a liquor licence which related to any economic policy
So far the case of Sachidanand Pandey vs State of West Bengal supra is concerned in a public interest litigation the grant of lease in favour of Taj Group of Hotels for establishment of a Five Star Hotel at Calcutta had been challenged
It was said It is to be seen that in the present case no one has come forward alleging that he has been discriminated against and his 98 fundamental right to carry on business had been affected
The very nature of the construction and establishment of a Five Star Hotel is indicative of a requirement of expertise and sound financial position on the part of those who might offer to construct and establish them
The decision taken by the All India Tourism Council was an open decision well known to everyone in the hotel business
Yet no one except the ITDC and the Taj Group of Hotels had come forward with any proposal
We have it in the record that the Oberoi Group of Hotels already had a Five Star Hotel in Calcutta while the Welcome Group of Hotels were making their own private negotiations and arrangements for establishing a Five Star Hotel
In the circumstances particularly in the absence of any leading hoteliers coming forward the Government of West Bengal was perfectly justified in entering into negotiation with the ITDC and the Taj Group of Hotels instead of inviting tenders
 But at the same time it was said On a consideration of the relevant cases cited at the bar the following propositions may be taken as well established  Stateowned or public owned property is not to be dealt with at the absolute discretion of the executive
Certain precepts and principles have to be observed
Public interest is the paramount consideration
One of the methods of securing the public interest when it is considered necessary to dispose of a property is to sell the property by public action or by inviting tenders
Though that is the ordinar y rule it is not an invariable rule
There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination
Appearance of public justice is as important as doing justice
Nothing should be done which gives an appearance of bias jobbery or nepotism
 In the case of GB Mahajan vs Jalgaon Municipal Council supra a piece of land had been received by the Town Municipal Council Jalgaon by way of gift
Initially it had been put to the use Agricultural Produce 99 Market Committee as a cotton and wholesale fruit and vegetable market
in terms of the gift in order to put the land in a better and more profitable use the Municipal Council contemplated a project comprising inter alia erection of a commercial complex They also persuaded for change in the terms of the deed of gift subject to condition that heirs should be given five shops free of cost in the commercial complex The scheme contemplated that a developer would execute the entire project at his own cost and would make allotments to the shopkeepers to whom the Municipal Council had given assurances of alternative accommodation at fixed rates
The developer was also to provide the 17 floors of the administrative building free
of cost to the municipality
The choice of the respondent No 6 as developer for the project aforesaid was questioned
This Court arrived at the following conclusion In regard to the allegation that the project scheme was tailored to suit respondent 6 alone or that the project as put to tender did not admit of tenders on fixed comparable parameters we find no merit
Sri KK Singhvi submitted that the tender papers were prepared by reputed architects and the precise points on which comparative quotations were invited were specifically incorporated in the tender papers
The point again is that no other tenderer expressed any grievance
The tenders were such that the tenderer could identify the terms which form the basis of comparative evaluation
The charge of arbitrariness cannot be upheld
Tests to be applied in a given case may be influenced by the extent to which a decision is supported by a democratic unanimity which evidences the decision granted of course the power  From the facts of the aforesaid case it shall appear that Municipal Council had invited competitive proposals as to the ways in which the potentiality of the land could commercially be exploited and had also competitive plans and designs and ultimately respondent No 6 was entrusted with the execution of the said scheme
The cases aforesaid on which reliance was placed on behalf of the appellants have also reiterated that once the State decides to grant any right or privilege to others then there is no escape from the rigour of Article 14 the executive does not have an absolute discretion certain 100 precepts and principles have to be followed the public interest being the paramount consideration
It has also been pointed out that for securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner
However there may be cases where in the special facts and circumstances and due to
compelling reasons which must stand the test on Article 14 of the Constitution departure of the aforesaid rule can be made
This Court while upholding the contracts by negotiation in the cases referred to above has impressed as to how in the facts and circumstances of those cases the decisions taken by the State and the authorities concerned were reasonable rational and in the public interest
The decisions taken in those cases by the authorities concerned on judicial scrutiny were held to be free from bias discrimination and under the exigencies of the situation then existing to be just and proper
On the basis of those judgments it cannot be urged that this court has left to the option of the authorities concerned whether to invite tenders or not according to their own discretion and to award contracts ignoring the procedures which are basic in nature taking into account factors which are not only irrelevant but detrimental to the public interest
From the statements made in the affidavit filed on behalf of the MTNL before that High Court and from the relevant minutes of the Board of the MTNL which were produced before the High Court during the course of the hearing and copies thereof have also been produced by one of the appellants before this Court it appears that the Board in its 28th meeting held on 28121990 considered the default made by UIP in not publishing the directories in terms of the agreement every year
The Board took note of the fact that UIP had run into financial difficulties and cash flow problem
The banks who had advanced loans to them have not yet received back the payments
The paper mills were not willing to supply paper on credit
The printing presses were also not prepared to print the directories without getting advance payments
In this background the Board considered the three options 1 to invoke the penalty clause and print the Directory by the MTNL at the risk and cost of the UIP
ii provide the necessary loan secured or unsecured to print the directories iii to terminate the contract and award the work to some other contractor
The matter was again considered in the 29th meeting of the Board held 101 on 29th March 1991 where a note was put up saying that if the contract with the UIP was terminated and a decision was taken to go in for a fresh tender the following problems may arise i UIPUDI may put legal obstacles in retendering ii the response for printing and delivering the directories free of cost and also paying royalty may be poor from the parties considering the failure of the present experiment and prohibitive increase in the cost of paper and printing iii the concept of the yellow pages may suffer a big set back and may make it unattractive to the advertisers because of the loss of confidence
The Board in its 29th meeting discussed the aforesaid agenda and took a decision that MTNL has no option but to grant loan to UIPUDI to help them to print out the directories
The Board also felt that grant of the loan to UIPUDI was quite risky but the said distress measure had to be taken to avoid any stalemate and was in the large interest of the MTNL
The matter was further discussed in the 31st meeting of the Board held on 6th August 1991
The agenda note for this meeting after stating the aforesaid circumstances said that UIP had approached MTNL once again with a package of proposals in supersession of their all requestsproposals made earlier so that they may be bailed out of their financial problems and assuring uninterrupted supply of directories for the revised period of contract
The note recorded that proposal had also been received from Sterling through UDI to print and publish the directories of the MTNL with their financial support
A decision was taken in order to enable the MTNL to salvage the contract and get the job executed without further delay and to avoid consequent inconvenience to the customers to negotiate on revised terms with UIPUDISterling
There is no dispute that the Board in its 32nd meeting held on 19th August 1991 approved the new terms and conditions and took a decision that an extension of the contract be given to UIPUDI and Sterling for printing the 13 issues of directories for Delhi and Bombay
On basis of that decision the impugned supplemental agreement was executed on 26th September 1991
In the facts and the circumstances of the present case it has to be held that the MTNL has applied the irrelevant considerations doctrine while granting a fresh contract for a period of five years through the supplemental agreement dated 26th September 1991 because it has failed to take into account considerations which were necessarily relevant ie 102 following the rule of inviting tenders while granting the contract for a further period of five years on fresh terms and conditions and has taken into account irrelevant considerations that i if the contract is terminated and a decision is taken for a fresh tender the UIPUDI may put legal obstacles in retendering ii the response for printing free of cost and also paying the royalty may be poor iii the concept of the yellow pages may suffer a big set back and may make it unattractive to the advertisers because of the loss of confidence
MTNL should have been conscious of the fact that admittedly the UIPUDI had miserably failed in performing their part of the contract for a period of five years inasmuch as they were required to publish between the period 1987 1991 one issue of the main directory every year for Delhi and Bombay apart from supplementary
Instead of that they published for the year 1987 directories for Delhi and Bombay after a delay of seven months and six months respectively
The Delhi issue of directory for the year 1988 was published only in August 1990
So far Bombay is concerned there was no publication for the years 1988 1989 1990 and 1991
The MTNL also overlooked the fact that the period of contract had already expired and as such the MTNL was in error in treating the supplemental agreement as only an extension of the original agreement
Learned counsel appearing for the appellants did not dispute and contest that by the supplemental agreement the period of contract which had expired in 1991 was extended upto 19971998 for printing the directories for Delhi and Bombay and that the terms and conditions were different
For the period 1991 1997 additional royalty which had been agreed to be paid by the UDIUIPSterling was only Rs 10 crores whereas for the period 1987 1991 it was Rs 2016 crores
Philanthropy is no part of the management of an undertaking while dealing with a contractor entrusted with the execution of a contract
The supply of the directories to public in time was a public service which was being affected by the liberal attitude of the MTNL and due to the condonation of delay on the part of the UIPUDI
There was no justification on the part of the MTNL to become benevolent by entering into the supplemental agreement with no apparent benefit to the MTNL without inviting fresh tenders from intending persons to perform the same job for the next five years
Public authorities are essentially different from those of private persons
Even while taking decision in respect of commercial 103 transactions a public authority must be guided by relevant considerations and not by irrelevant ones
If such decision is influenced by extraneous considerations which it ought not to have taken into account the ultimate decision is bound to be vitiated even if it is established that such decision had been taken without bias
The contract awarded for the publication of the directories had not only a commercial object but had a public element at the same time ie to supply the directories to lakhs of subscribers of telephones in Delhi and Bombay every year within the stipulated time free of cost
In such a situation MTNL could not exercise an unfettered discretion after the repeated breaches committed by UIPUDI by entering into a supplemental agreement with the sterling for a fresh period of more than five years on terms which were only beneficial to UIPUDISterling with corresponding no benefit to MTNL which they have realised only after the High Court went into the matter in detail in its judgment under appeal
The supplemental agreement is really a fresh agreement with fresh terms and conditions which has been entered by MTNL without inviting any tender for the same
The supplemental agreement has been entered to benefit the parties who are admittedly defaulters by not publishing directories for Bombay for the years 1988 1989 1990 and 1991 and for Delhi for the years 1989 1990 and 1991 although they had collected several crores of rupees for the advertisements for the directories to be published in the aforesaid years
We fail to understand as to how a fresh contract for a period upto 19971998 was awarded to UIPUDISterling in the garb of an agreement for extension of the period of the original agreement taking into account irrelevant factors as already enumerated above
If the supplemental agreement has been executed without following the procedures which are essential in view of the repeated pronouncements of this Court and taking into consideration irrelevant factors then can it be said that decision making process before the supplemental agreement was entered into was consistent with the requirement of Article 14 of the Constitution In such a situation there is no scope for argument that any interference by Court shall amount to an intervention like a court of appeal
Once the process through which the supplemental agreement was executed is held to be against the mandate of Article 14 of the  Constitution the supplemental agreement shall be deemed to be avoid
The appellants also took an objection to the maintainability of the 104 writ application on the ground of delay and laches
It was pointed out that supplemental agreement was entered into on 26th September 1991 whereas the Writ Petition was filed before the High Court on 19th May 1992 although during this period the petitioners had full knowledge about the supplemental agreement
According to the petitioners the supplemental agreement was kept as a guarded secret by the MTNL as well as UIPUDISterling and it is only in April 1992 the petitioners could know some details of the supplemental agreement
In this connection our attention was drawn to an advertisement published on 27th September 1991 saying that official Bombay directory was being released in December 1991 and Delhi telephone directory in January 1992
That advertisement was given on behalf of the UDI only
In the body of the advertisement it was mentioned that UDI and Sterling have made all necessary arrangements to ensure that every subscriber receives up to date directory in Delhi and Bombay in time
It was urged on behalf of the writ petitioners that under the supplemental agreement it was the Sterling who had been given the right to publish the directories and as such in normal course the advertisement should have been given in the paper on behalf of the Sterling but only with an ulterior motive the advertisement was published on behalf of the UDI
Our attention was also drawn to several communications addressed by the Department of Telecommunications Madras to the dif ferent authorities of the MTNL making enquiries as to whether the Sterling had been entrusted with the printing of directories for Delhi and Bombay as tenders for printing and supply of main telephone directories with yellow pages on turnkey basis were under consideration at Madras
The aforesaid queries were made in the month of December 1991
The office of the Chief General Manager MTNL on 2nd January replied to the Divisional Engineer Madras Telephones saying perhaps MTNL Corporate Office have entrusted some job of printing of telephone directories to Ms Sterling Computers Ltd In this connection you are therefore requested to contact Chairman cum Managing Director MTNL
A letter dated 30121991 was addressed by Sterling to the Divisional Engineer Madras Telphones in reply to the query whether they had been entrusted with the printing and supply of telephone directories saying Much as we would like to provide you a copy of the order of Mahanagar Telephone Nigam Ltd we are unable to do so due to certain circumstances beyond our control
 Reference was made to yet another communication dated 30121991 addressed 105 by MTNL to Deputy General Manager Madras Telephones saying that so far the Sterling Computers were concerned they have been allowed a sub contract by Ms UDI for printing the directories for Delhi and Bombay without giving the details of any such contract
It was pointed out on behalf of the the writ petitioners that an affidavit was filed on behalf of the Sterling before the Madras High Court in connection with another Writ Petition on 1941992 in which the details of the supplement agreement were disclosed
The Writ Petition in the Delhi High Court was filed on 1951992
Under the circumstances mentioned above it is difficult to reject the Writ Petition on the ground of delay and laches
As already mentioned above Mr Venugopal the learned counsel appearing for the writ petitioners offered an amount of Rs 60 crores on behalf of the writ petitioners as royalty to the MTNL for printing the directories for Delhi and Bombay for the period of the supplemental agreement if the said job is entrusted to them on the same terms and conditions
For that period the UIPUDISterling have offered only Rs 10 crores as additional royalty
This Court could have considered the desirability of directing the MTNL to consider the said offer of Rs 60 crores on behalf of the writ petitioners by according to us if any such direction is given and on basis of such direction the job of printing the directories for the period in question is given to the writ petitioners the procedure so adopted shall suffer from the same vice
The MTNL will enter into an agreement with the writ petitioners without inviting tenders and without offering opportunities to others who may be interested in the printing of the directories for Delhi and Bombay
As such while affirming the judgement of the High Court we direct that all steps should be taken by MTNL as early as possible for publishing the directories for Delhi and Bombay so that public in general should not suffer any more
The appeals are accordingly dismissed but in the facts and circumstances of the case there shall be no order as to costs
Before we part with the judgment we shall like to strike a note of caution
It is a matter of common experience that whenever applications relating to awarding of contracts are entertained for judicial review of the administrative action such applications remain pending for months and in some cases for years
Because of the interim orders passed in such applications the very execution of the contracts are kept in abeyance
The cost 106 of different projects keep on escalating with passage of time apart from the fact that the completion of the project itself is deferred
This process not only affects the public exchequer but even the public in general who are deprived of availing the facilities under different projects
As such it need not be impressed that while exercising the power of judicial review in connection with contractual obligations
Courts should be conscious of the urgency of the disposal of such matters otherwise the power which is to be exercised in the interest of the public and for public good in some cases becomes counter productive by causing injury to the public in general
NVK Appeals dismissed


Summary:
The appellant took the suit premises situate in Ludhiana on a monthly rent of Rs 800 from respondent 1
Both the respondents are medical practitioners
The respondent riled a petition for eviction of the appellant tenant on three grounds their personal need under Section 133aia change of user under Section 132iib and impairment of the value and utility of the rented building under Section 132 iii of the East Punjab Urban Rent Restriction Act 1948
The Rent Controller dismissed the petition
The appellate authority held that the personal need of the respondents and the ground of change of user was proved
Since the building though let out to the tenant for a residential purpose was used partly for his profession and had become a scheduled building  under Section 2h he could not be evicted on the ground of personal need
The order of eviction was however made on the ground of change of user of the building
Ile High Court on revision affirmed the finding and order of eviction made by the appellate authority
150 In the Supreme Court it was argued for the appellant that there was no change of user to justify the order of eviction on that ground and that the finding on the question of personal need was erroneous
Relying on legislative intent evidenced in amendments to the Act it was further contended that no order of eviction can be made on the ground of personal need contained in Section 133aia in respect of a scheduled building  since that ground is available for eviction only from a residential building
The omission of the words or a scheduled  after the word residential  in Section 13 3 a i a in 1956 and their addition in Section 13A in 1985 were referred to advance the argument The respondents submitted that there was no ground to interfere with the order of eviction that scheduled building  In section 2h continues to be a residential building  in section 2g and that personal need in section 133 a i a is available as a ground for eviction and that the finding of fact relating to personal need of the landlord in not open to challenge
In the alternative if a scheduled building  is not a residential building then the ground of change of user unilaterally was available
Dismissing the appeal this Court HELD 1
The finding of fact of personal need is unassailable
That respondent 2 is carrying on his profession at some distance from Ludhiana is not sufficient to negative the landlords  need
155B Non examination of respondent 2 is immaterial when respondent 1 has examined himself and proved the need of the landlord it Is at best a matter relating to appreciation of evidence on which ground this finding of fact cannot be assailed particularly when it was not seriously challenged in the High Court
pp67 155C 2
All buildings are divided into two categories non residential and residential
Building  used for the purpose of business or trade are  non residential and the remaining buildings are all residential 
This is clear from the definitions in section 2a d and g
pp2324 167D 3 Scheduled building as defined in section 2h is merely a kind of residential building as defined in section 2g its characteristic being its part user for a scheduled purpose
p24 167E 151 4 The Act makes a distinction between a residential building which is being partly used for a scheduled purpose ie a scheduled building for the purpose of determination of fair rent
A separate definition of scheduled building  in clause h while making it clear therein that it means a residential building used partly for a specific purpose does not therefore indicate that a scheduled building ceases to be a residential building or is a category of building separate from a residential building for the purpose of eviction of tenants in the scheme of section 13 of the Act This is the only manner in which a harmonious construction can be made of these provisions
pp2425 167H 168A 5
The object of the 1956 amendment was to equate the Punjab tenants with the Delhi tenants and exclude the ground of landlord s personal need for eviction of tenants of non residential property
Obviously the definition of scheduled building  in section 2h clearly indicating that scheduled building is residential building the words or a Scheduled after residential were considered superfluous
The use of the word scheduled after residential  in section 13A inserted in 1985 may have been used to avoid any controversy like the present raised on the basis of the 1956 Amendment
p26 168D E 6
Section 13A which provides for an expeditious remedy is not a separate distinct provision but has to be read along with section 13 of the principal Act forming a part of the general scheme contained in section 13 for eviction of tenants on the ground of personal need from buildings which are not non residential
p27 168H 7
This construction of section 133 a i as it stood after the 1956 amendment is the only construction which can be made to harmonise with the definitions in section 2
p27 169C 8
The question of change of user is not necessary to be considered
However the general principle is that if the express terms of lease restrict the user solely for purpose of residence then use of any part thereof for even a scheduled purpose without the written consent of the landlord may amount to use of the building for a purpose other than that for which it was leased
That however is a question of fact in each case
In that case while the ground of eviction in section 13 3 a i a would remain available to the landlord for eviction of the tenant in view of the express 152 covenant against user of any part of the residential building even for a scheduled purpose it may make available also the ground of change of user under section 132 ii b of the Act
pp2829 169G 170A Bishamber Dass Kohli dead by Lrs
vs Smt
Satya Bhalla referred to