WP(C)1643/2008 Page 1 of 27 * IN THE HIGH COURT OF DELHI AT NEW DELHI + WP(C)1643/2008 & CM 3177/2008 # ZODIAC.COM SOLUTIONS PVT. LTD. ..... Petitioner Through: Mr. Puneet Bali with Mr. Vibhav Jain, Advs. versus $ UNION OF INDIA ..... Respondent ^ Through: Ms. Madhu Tewatia with Ms. Sidhi Arora, Advs. Date of Hearing : December 17, 2008 % Date of Decision : December 19, 2008 CORAM: * HON'BLE MR. JUSTICE VIKRAMAJIT SEN HON'BLE MR. JUSTICE S.L. BHAYANA 1. Whether reporters of local papers may be allowed to see the Judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the Judgment should be reported Yes in the Digest? VIKRAMAJIT SEN, J. 1. This Petition challenges the vires of Notification No.SO 883(E) dated 12.6.2006 inserting Clause (xa) in the existing Clause 4 of the Motor Vehicles (New High Security Registration Plates) Order, 2001 (2001 Order for short). It is contended that the inserted provision contravenes Article 14 and 19(1)(g) of the Constitution of India as also Section 109(3) of the Motor Vehicles Act, 1988 (‗MV Act‘ for short) and also runs counter to the 2001Order. Clause (xa) of Order 4 is reproduced below in WP(C)1643/2008 Page 2 of 27 toto, although we are concerned only with sub-clause (d) thereof: (xa) The State Government or Union Territory Administration shall ensure that any person who has been, -- (a) convicted of a cognizable offence by any court of law with imprisonment for a term exceeding one year; or (b) imposed a penalty of rupees one crore or more for violation of the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) (since repealed) or the Foreign Exchange Management Act, 1999 (42 of 1999); or (c) detained under the National Security Act, 1980 (65 of 1980) or the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or (d) adjudged guilty by the Stock Exchange Board of India or any other such Financial Regulatory Boards or Tribunals or Agencies; or (e) found to be associated in any manner with an organized crime syndicate or its associate or with any Association declared unlawful under the Unlawful Activities (Prevention) Act, 1967 (37 of 1967) or any other law for the time being in force; or (f) found to be connected with activities prejudicial to the National Security, is not considered for selection as manufacturer or vendor for supply of High Security Registration Plates. WP(C)1643/2008 Page 3 of 27 2. Reliance has been placed by learned counsel for the Respondent on Association of Registration Plates -vs- Union of India, (2005) 1 SCC 679, where the questions for determination were substantially different to what we have been called upon to decide. In the earlier litigation the grievance was that the Notices Inviting Tenders (NITs) have the effect of eliminating the participation of Indian businesses because (a) the pre-qualifications required international experience; (b) previous experience in number-plate manufacture was essential; (c) indigenous manufacturers capable of complying with the requirements of Rule 50 of the Central Motor Vehicles Rules, 1989 (‗1989 Rules‘ for short) were ineligible thus allegedly violating their Fundamental Rights under Article 19(1)(g) of the Constitution of India; (d) granting the contract to one party for the relatively long period of fifteen years would inevitably create a monopoly, and was thus against public interest; and (e) that since a number-plate of a vehicle was not an integral part of the latter‘s manufacture, the former was beyond the purview of the MV Act, the 1989 Rules as well as 2001 Order. It was these arguments that came to be rejected by their Lordships. The ratio of this precedent is that manufacturers of registration plates can be subjected to certain standards by a statutory order, duly published, in exercise of the coextensive executive WP(C)1643/2008 Page 4 of 27 and legislative powers of the Central Government. The precise and specific challenge before us is that the stipulation rendering ineligible those parties on whom penalties have been imposed under the sundry specified statutes, falls foul of the law, inter alia, because of the vice of unreasonable exercise of rule-making powers. 3. The delegation of powers to the Central Government to frame Rules can be traced to Section 109 of the MV Act and, in particular, to sub-section (3) thereof. For ease of reference this provision is reproduced below:- 109. General provision regarding construction and maintenance of vehicles.—(1) Every motor vehicle shall be so constructed and so maintained as to be at all times under the effective control of the person driving the vehicle. (2) Every motor vehicle shall be so constructed as to have right hand steering control unless it is equipped with a mechanical or electrical signalling device of a prescribed nature. (3) If the Central Government is of the opinion that it is necessary or expedient so to do in public interest, it may by order published in the Official Gazette, notify that any article or process used by a manufacturer shall conform to such standard as may be specified in that order. 4. It had been argued in the alternative by Ms. Tewatia, learned counsel for the Union of India, that Section 64 of the WP(C)1643/2008 Page 5 of 27 MV Act in any case enables the Central Government to make Rules to provide for all the sixteen situations and contingencies mentioned in that provision. Ms. Madhu Tewatia has drawn our attention to P. Balakotaiah –vs- Union of India, AIR 1985 SC 232, wherein it has been enunciated by their Lordships that ―no exception could be taken to the proposition that when an authority passes an order which is within its competence, it cannot fail merely because it purports to be made under a wrong provision if it can be shown to be within its powers under any other rule, and that the validity of an order should be judged on a consideration of its substance and not its form. ....‖ This reliance is intended to buttress the argument that even though reference had been made by the Respondent to Section 109(3) of the MV Act, failure to mention Section 64 of the same statute should not be fatal. We need not dwell on this argument since it is our considered opinion that Section 64 has no application in the circumstances of the present case. Section 109(3) stipulates that the Central Government ―may by order published in the Official Gazette notify that any article or process used by a manufacturer shall conform to such standard as may be specified in that order.‖ This is in stark contrast to the next following provision, Section 110, which speaks of the Central Government ―making rules regulating the construction, WP(C)1643/2008 Page 6 of 27 equipment and maintenance of motor vehicles .......‖ It is this Section and not Section 64 which is relevant for the present purposes. The format and contents of the MV Act have been analysed in succeeding paragraphs. 5. Mr. Bali, learned counsel for the Petitioner, has sought support for this proposition from several judgments of the Supreme Court of India, including Kerala Samsthana Chethu Thozhilali Union –vs- State of Kerala, (2006) 4 SCC 327, Bombay Dyeing & Mfg. Co. Ltd.(3) –vs- Bombay Environmental Action Group, (2006) 3 SCC 434, Ashok Lanka –vs- Rishi Dixit, (2005) 5 SCC 598, Sarbananda Sonowal (II) –vs- Union of India, (2007) 1 SCC 174 and Life Insurance Corporation of India –vs- Retired LIC Officers Association, (2008) 3 SCC 321, all of which have been authored by his Lordship, S.B. Sinha, J. speaking for the respective Benches. The following paragraph from Bombay Dyeing requires reproduction since it succinctly and perspicuously sets out the law on the subject:- 104. A policy decision, as is well known, should not be lightly interfered with but it is difficult to accept the submissions made on behalf of the learned counsel appearing on behalf of the appellants that the courts cannot exercise their power of judicial review at all. By reason of any legislation, whether enacted by the legislature or by way of subordinate legislation, the State gives effect to its legislative policy. Such WP(C)1643/2008 Page 7 of 27 legislation, however, must not be ultra vires the Constitution. A subordinate legislation apart from being intra vires the Constitution should not also be ultra vires the parent Act under which it has been made. A subordinate legislation, it is trite, must be reasonable and in consonance with the legislative policy as also give effect to the purport and object of the Act and in good faith. 6. The Constitution Bench had earlier enunciated the law in this regard in Lohia Machines Ltd. –vs- Union of India, (1985) 2 SCC 197. One of the grounds on which Section 80-J of the Income Tax Act, 1961, as it stood amended by Finance Act of 1980, was that if this provision was construed as leaving it to the Central Board of Revenue to prescribe what items shall be included in or excluded from the computation of the term ―capital employed‖, it would be vulnerable to attack on the ground of excessive delegation of legislative power and would consequently be void. Their Lordships observed that Parliament had adequately articulated its policy of giving relief to an assessee who has started a new industrial undertaking and it would be expedient to leave it to the Central Board of Revenue to determine what should be the amount of capital employed and what other factors should be taken into account for the purpose of quantum of relief liable under the Section, from year to year. The then prevailing precedents were duly discussed. WP(C)1643/2008 Page 8 of 27 7. In Delhi Science Forum –vs- Union of India, AIR 1996 SC 1356 : (1996) 2 SCC 405 : JT 1996 (2) SC 295 it has been held that the policies adopted by Parliament cannot be tested in a Court of law. 8. The MV Act comprises several Chapters which are essentially pandects dealing with distinct subjects or fields, each of which bestow and delegate rule-making powers on the Central Government and/or State Governments. In these circumstances, if a particular Chapter is relied upon by a party the ambit of delegated powers must be located from within that very Chapter which partake the peculiarity of pandects. Section 64 of the MV Act is placed in Chapter IV thereof regulating the ‗Registration of Vehicles‘. However, Section 109 is to be found in Chapter VII relating to ‗Construction, Equipment and Maintenance of Motor Vehicles‘ and it is Sections 110 and 111 which reserve and delegate rule- making powers to the Central and State Government respectively. A perusal of Section 110 adumbrates the absence of rule-making powers on the subject with which we are concerned; whereas Section 111(e) empowers the State Government to make rules covering the said subject. Obviously it is for this reason that Ms. Tewatia has endeavoured to garner support from Section 50 and consequently Section 64. We are not convinced that the WP(C)1643/2008 Page 9 of 27 rationale behind the introduction of high security number-plates has any bearing on ‗Transfer of Ownership‘ of motor vehicles. Moreover, if the Rules, 1989 are relevant, it would lead to the position that the decision in Association of Registration Plates would be rendered irrelevant. 9. It is our opinion that the assailed provision, that is, 4 (xa) (d) of 2001 Order does not partake the character of subordinate or delegated legislation bringing either Section 110 or 111 into play. As its Preamble declares, the 2001 Order is ―in exercise of the powers conferred by the sub-section(3) of Section 109 of the Motor Vehicles Act, 1988.‖ This Section does not envisage the existence of Rules or Regulations nor does the 2001 Order purport to be subordinate legislation either in the form of Rules or of Regulations. There is no doubt considerable commonality between Rules and Orders, as has been explained in Mysore University –vs- Gopal, AIR 1965 SC 1932. It is also trite that Orders, whether administrative or legislative in character, must not travel beyond the frontiers of the statute which enables or enjoins its creation. In the case in hand, however, Rule 109 adequately empowers the Central Government to notify that any article or process used by a manufacturer must conform to specified standards. WP(C)1643/2008 Page 10 of 27 10. In any event, this argument formulated on behalf of the Petitioner is not well-founded for the reason that the question whether number-plates are an inalienable part of the manufacture of motor vehicle is no longer res integra. It stands conclusively decided by the Association of Registration Plates. The argument raised on behalf of the Petitioner was that a number-plate could not be construed as a part of the process or article of the manufacture of motor vehicle; that it comes into play only after the vehicle, as it has been manufactured, is sold. That argument was resoundingly rejected. Therefore, the number-plates, as postulated in the 2001 Order, must be held to be an integral part of manufacture of the vehicle. 11. Learned counsel for the Petitioner has contended that whilst conditions, specifications, quality stipulations etc. can be prescribed, there is no justification for imposing further criteria on the party or manufacturer concerned. We are not convinced that the several criteria, including ineligibility in respect of parties who have suffered imposition of penalties, unnecessarily visit the person and not the product. Assuming that there is an incompromisable need for maintaining security in manufacturing number-plates, it becomes an imperative to stringently regulate the person as it is for the product. It would be worthless to have a pilfer-proof number-plate if illegal ones WP(C)1643/2008 Page 11 of 27 are available in the underground market. The entire project is jeopardised and rendered ineffectual. 12. The conundrum which remains to be considered is whether the 2001 Order suffers from the vice of perverse unreasonableness or whether it violates the equality principle. Judicial Review on the first aspect of what now falls under the realm of Wednesubry unreasonableness is permissible in a very narrow field as has been explained in Tata Cellular –vs- Union of India, AIR 1996 SC 11 in these words:- ―The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision/making authority exceeded its powers? 2. Committed an error of law. 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: WP(C)1643/2008 Page 12 of 27 (i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. vs. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, ―consider whether something has gone wrong of a nature and degree which requires its intervention‖. Wednesbury reasonableness derives its origin in Associated Provincial Picture Homes Limited vs. Wednesbury Corporation, (1947) 2 All E.R. 680 and has been explained to require that the ―person entrusted with discretion must, so to speak, direct himself properly in law. He must call his attention to matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules he may truly be said to be acting unreasonably. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority‖. WP(C)1643/2008 Page 13 of 27 13. The scope of Judicial Review in the context of policy matters has also been explained by the Apex Court in Balco Employees' Union (Regd.) –vs- Union of India, (2002) 2 SCC 333 it has been held that -- 45. In Narmada Bachao Andolan v. Union of India there was a challenge to the validity of the establishment of a large dam. It was held by the majority at p. 762 as follows : (SCC para 229) ―229. It is now well settled that the courts, in the exercise of their jurisdiction, will not transgress into the field of policy decision. Whether to have an infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy-making process and the courts are ill-equipped to adjudicate on a policy decision so undertaken. The court, no doubt, has a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights are not transgressed upon except to the extent permissible under the Constitution‖. 46. It is evident from the above that is neither within the domain of the courts nor the scope of the judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are our courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. WP(C)1643/2008 Page 14 of 27 47. Process of disinvestment is a policy decision involving complex economic factors. The courts have consistently refrained from interfering with economic decisions as it has been recognised that economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the courts would decline to interfere. In matters relating to economic issues, the Government has, while taking a decision, right to ―trial and error‖ as long as both trial and error are bona fide and within limits of authority. There is no case made out by the petitioner that the decision to disinvest in BALCO is in any way capricious, arbitrary, illegal or uninformed. Even though the workers may have interest in the manner in which the Company is conducting its business, inasmuch as its policy decision may have an impact on the workers' rights, nevertheless it is an incidence of service for an employee to accept a decision of the employer which has been honestly taken and which is not contrary to law. Even a government servant, having the protection of not only Articles 14 and 16 of the constitution but also of Article 311, has no absolute right to remain in service. For example, apart from cases of disciplinary action, the services of government servants can be terminated if posts are abolished. If such employee cannot make a grievance based on Part III of the Constitution or Article 311 then it can not stand to reason that like the petitioners, non- government employees working in a company which by WP(C)1643/2008 Page 15 of 27 reason of judicial pronouncement may be regarded as a State for the purpose of Part III of the Constitution can claim a superior or a better right than a government servant and impugn its change of status. In taking of a policy decision in economic matters at length, the principles of natural justice have no role to play. While it is expected of a responsible employer to take all aspects into consideration including welfare of the labour before taking any policy decision that, by itself, will not entitle the employees to demand a right of hearing or consultation prior to the taking of the decision. ..... 92. In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the court. 93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. Here the policy was WP(C)1643/2008 Page 16 of 27 tested and the motion defeated in the Lok Sabha on 1- 3-2001. 14. The policy decision of the Central Government to introduce high security number-plates for motor vehicles has to be exercised within the parameters drawn by the Supreme Court. When so done, we see no flaws in the policy as its implementation will indubitably achieve the purposes envisaged in Section 109(3) of the MV Act. We are not traversing into virgin territory as all these questions were considered threadbare and answered in favour of the Government in Association of Registration Plates. 15. Therefore, the final question is whether the condition disabling the Petitioner from participating in the Tender by virtue of the fact that a penalty of Rupees one crore was imposed by Securities and Exchange Board of India (SEBI) is unconstitutional. Learned counsel for the Petitioner argues that this condition has been prescribed only with the intention of rendering the Petitioner ineligible from the subject tender process. In S.P. Mittal –vs- Union of India, AIR 1983 SC 1 one of the arguments raised was that the impugned statutes dealt only with a single institution viz. Auroville and, therefore, there was a violation of the equality mandates. Their Lordships summarily rejected the argument on the premise that ―it has not been WP(C)1643/2008 Page 17 of 27 pointed out which were the other institutions where similar situations were prevailing. Besides, there is a uniqueness with this institution inasmuch as the Government is also involved. Even a single institution may be taken as a class‖. The following passage from Ram Krishna Dalmia –vs- Justice S.R. Tendolkar, AIR 1958 SC 538 immediately comes to mind in this context: 11. The principal ground urged in support of the contention as to the invalidity of the Act and/or the notification is founded on Art. 14 of the Constitution. In Budhan Choudhry v. The State of Bihar, 1955-1 SCR 1045 : AIR 1955 SC 191 a Constitution Bench of seven Judges of this Court at pages 1048-49 (of SCR) : (at p.193 of AIR) explained the true meaning and scope of Art. 14 as follows : "The provisions of Article 14 of the Constitution have come up for discussion before this court in a number of cases, namely, Chiranjit Lal Choudhuri v. The Union of India, 1950 SCR 869 : AIR 1951 SC 41, State of Bombay v. F. N. Balsara, 1951 SCR 682 : AIR 1951 SC 318, State of West Bengal v. Anwar Ali Sarkar, 1952 SCR 284 : AIR 1952 SC 75, Kathi Raning Rawat v. State of Saurashtra, 1952 SCR 435 : AIR 1952 SC 123, Lachmandas Kewalaram v. State of Bombay, 1952 SCR 710: AIR 1952 SC 235, Qasim Razvi v. State of Hyderabad, 1953 SCR 589 : AIR