Case: Punjab Communications Ltd Vs. Union of India

M. Jagannadha Rao, J. 1. Leave granted. 2. These two appeals have been filed by the Punjab Communications Ltd. (hereinafter called the `PCL), a public sector undertaking of the State of Punjab against the judgment dated 27.2.1998 of the High Court of Punjab and Haryana in CWP No. 124 of 1988 and against the order in the review application dated 19.3.1998 in RA 138 of 1998. The Transfer Petition (C) No. 680 of 1998 is filed by Sri D.P. Srivastava for transfer of a public interest writ petition No. 4112 M/B of 1997 from the Allahabad High Court to this Court as some points are common to the appeals and the writ petition.3. Though the main judgment in the writ petition has been rendered by the High Court on 27.2.1998, the events which have taken place during the pendency of these appeals have changed the complexion of the case and, according to the respondent-Union of India, the writ petition has practically become infructuous and no relief can be granted. We shall narrate the facts which have given rise to the writ petition and shall also refer to the subsequent events.4. In September 1993, the Asian Development Bank (hereinafter called the `ADB) agreed to grant a soft loan of US $ 113 m to the Union of India (Ist respondent) for funding a project meant to provide digital wireless telecom facility to 36,000 identified villages in Eastern U.P. The Department of Tele-comunications (hereinafter called `DOT) floated a tender on 9.10.1996 inviting offers open to Indian and foreign companies. Thee were 14 officers including one from the appellant. The Technical Evaluation Committee (hereinafter called the "TEC") examined the offers and wherever there were deviations in the offers that were made, the TEC sought clarifications on 3.6.1997 from the bidders to be given by 10.6.1997. The appellant replied and resubmitted the "proneness" certificates which were included in the original bid papers at pages 226 to 228. This was a certificate dated 28.2.1997 issued by the Chinese Post and Telecommunication Department where the technology submitted by the appellant was stated to have been implements. After scrutiny, the TEC short-list the appellant (PCL) and BEL on 7.7.1997. It is the appellants case that on account of some pressure brought on respondents S (Member (P) Telecom Commission) DOT and Respondent 6 (Advisor (T) Telecom Commission) DOT, the matter was referred by the 5th respondent to a High Level Committee, with a view to obtain an opinion disqualifying the appellant so that the Department could go in for an outmoded `analog system (rather than the current `digital system) to be provided by some multinational company which was wanting to dump its outmoded `analog system in the India. It is the appellants case that this was done with a view t enable the issue of a fresh notification calling for fresh tenders pertaining to `analog system. It appears that on 23.9.1997, the abovesaid High Level Committee submitted its report stating that there were two `deviations in the tenders submitted by the appellant as noticed by the Technical evaluation Committee in respect of the required specifications. The committee required the department to negotiate orally with the appellant. It is the appellants contention that at an extremely short notice of 2 days, a mock negotiation was held on 29.10.1997, and some oral questions were asked. It is said that the appellant had answered all these questions put by the respondents by means of the appellants documents already on record but these were not accepted. According to the appellant no agreed minutes were recorded. On 19.11.1997 a note signed by the 6th respondent, the conveyor of the High Level Committee, was prepared stating that the further Technical Evaluation of the project was likely to go beyond 27.11.1997 due to complexities of bids offered by manufacturers and also in view of the want of authentication of the "proneness" of the system proposed by the appellant. It then stated that a decision had been taken not to go ahead with the ADB loan. The note stated as follows : "Department should not go in for ADB loan as it would result in heavy commitment charges and Department must go ahead for implementation of rural telecom project through its own resources." According to the appellant, these minutes dated 19.11.1997 were back-dated inasmuch, as even as late as 20.11.1997, the Chairman TCs office diary recorded a note that the Chairman (TC) wanted para 2 to be modified to say that the Department did not have any technically responsive bid and that none of the offered system were proven and therefore department might not go ahead with the loan and the draft might be modified in consultation with ADV(T)/DDA(LPT) and resubmitted. According to the appellant, the convenor of the High Level Committee created these imaginary deficiencies in the appellants bid and prepared backdated minutes nd showed that all the High Level Committee members had singed the minutes on 17.11.1997 itself. These backdated minutes, it is alleged, were prepared as a ground for rejection of the tender, in spite of the fact that 5 years were spent on drafting the specifications and in the evaluation of bids. According to the appellant, the Sr.DDG-TX who is said to have signed these "concreted backdated" minutes had, in reality, not even seen these minutes, let alone signing them. The appellant stated that the said officer disowned signing such minutes dated 17.11.1997. The appellant made a representation on 23.11.1997 to the 2nd respondent and on 16.12.1997, the impugned order was passed, cancelling the tenders.5. The appellant then filed writ petition on 6.1.1998 in the High Court of Punjab and Haryana. The High Court dismissed the writ petition on 27.2.1998. A review application was filed but that was also dismissed on 19.3.1998. Thereafter, the appellant moved this Court in June, 1998. 6. This Court issued notice on 8.6.1998 in the application for leave returnable by 22.6.1998 and stated that till then the Union of India should not return the bid papers to the appellant. 7. We should nor refer to the subsequent events that have taken place after the filing of the SLP in this Court. On 2.9.1998, when the matter came before the Court, a copy of the communication of the Ministry of Finance dated 1.9.1998 received by the DOT was placed before the Court. That letter showed that pursuant to a letter of the DOT dated 29.4.1998, the ADB had come to know about the inability of the DOT to avail of the ADB loan. This Court requested the Additional Solicitor General of India to take appropriate instructions from the concerned department and directed that an intimation be sent to the ADB to keep the letter of cancellation of loan in abeyance, awaiting further orders from this Court. On 22.9.1998, the Additional Solicitor General of India informed this Court that the Union of India had communicated to the ADB about the pendency of the case. Thereafter, this Court permitted the parties to the case, if they thought it fit, to inform the ADB about the order which this Court passed on that day i.e., 22.9.1998. Thereafter, several affidavits came to be filed by the Union of India as directed by the Court. The affidavit dated 4.1.1999 stated that the DOT had conveyed, through the Department of Economic Affairs, to the ADB on 17.9.1998 for keeping the latter of cancellation of ADB, in its letter dated 29.10.1998, had informed the Department of Economic Affairs that it had decided that it was not "practical" to keep the loan offer open and that, in fact, formal steps had been taken to cancel the loan-offer on 6.11.1998. The DOT also stated that the ADB had approved the withdrawal of the loan on 6.11.1998. This Court was informed on 5.1.1999 that, in the meantime, the Government of India was thinking of calling for fresh tenders for installation of telephones under a new scheme for rural areas spread over different States and this Court directed a further affidavit to be filed in this behalf. A fresh affidavit dated 15.1.1999 was filed on behalf of the Union of India to the effect that the ADB loan had a validity period of one year which had automatically lapsed on 27.11.1997, that there was a time constraint in regard to the ADB loan and that remainders were received from the Department of Economic Affairs to avail the loan latest by 27.11.1997, that the DOT had informed the Finance Department that it was not availing the loan and that it had decided. "to fund the Rural Telecom Project through its own resources." It was stated that this decision was taken to avoid heavy commitment charges of ADB loan if the evaluation/decision on the previous tender went beyond 27.11.1997. Thereafter, the previous tenders were cancelled on 16.12.1997, stating that : "no bidder qualified the technical/commercial evaluation" It was also stated that the Department of Economic Affairs had, by their letter dated 26.11.1998, already confirmed that the ADB had approved withdrawal of the loan on 6.11.1998 as already informed to this Court. 8. In regard to the new scheme for rural telephones, it was stated in the affidavit of the respondent that under the scheme of Village Public Telephones (VPT), during 1997-98, 42, 855 VPTs were provided, that for 1998-99, the target was 45,000 VPTs and out of that 10,150 were already provided by December, 1998 through other schemes in progress. It was stated that the Department had already covered 6,100 villages out of 36,000 village in Eastern Uttar Pradesh which were to be covered under the previous tender and that another 5,500 VPTs would be provided by March, 1999. It was further clarified as follows : "All the villages in UP(E) would be provided Telecom facilities during the 9th Plan period along with the rest of the Country. Presently, out of 75,000 villages of UP(E), 32,000 villages have already been provided Telecom facilities." It was stated that during 1997-98, the Department had opened 990 new rural exchanges and had provided 7.16 lakhs new telephone connections in rural areas and had incurred an expenditure of Rs. 1060 crores for rural telephones. So far as 1998-99 was concerned, the Department had allocated 1,485 crores for rural networks to be opened in 1,385 new rural exchanges and `to provide 8.4 lakhs telephone connection. The Department had already installed 295 rural exchanges and provided 2 lakhs telephones between April, 1998 and December, 1998. For 1999-2000, it was planned to allocate Rs. 2000 crores for rural network and to provide 12.5 lakhs telephone connections. It was also stated that, presently, there were 18,500 indigenously developed C-DOT exchanges which were working in rural area having total capacity of 40 lakh lines, landlines, digital MARR etc. 9. So far as remote/inaccessible areas were concerned, it was stated in the affidavit of the respondent that a choice of technology was made by including wireless in local loop (WLL) based on area of application as stated in the affidavit dated 5.11.1998. The Department had already floated a tender for 20,000 lines for Digital Wireless local loop Systems for rural areas - for the entire country, including up. A copy of the Bid document was filed. It was alleged that the appellant, among other manufacturers, had also actively participated in the finalisation of the Technical Specifications of the new tenders. These specifications were slightly different from the earlier ADB tender and were based on latest `Generic Requirement (GR) prepared by the Telecom Engineering Centre (TEC) of the Department, after extensive consultation with the manufacturers. The bid document for this tender was no sale w.e.f. 8.1.1999 and 7 companies had already purchased the same and the tenders were educated to be opened on 4.2.1999. It was stated for the respondents across the Bar that the appellant had also responded to the new advertisement. Again C-DOT TDMA PAMP Technology, field-trial orders were placed on M/s III for 25 systems having capacity for providing 4,000 Village Panchayat Telephones (VPTs). These telephones were expected to be installed by February, 199 in 17 Telecom Circles spread throughout the Country and these systems were more cost-effective that WLL system and were based on indigenous technology developed by M/s C-DOT. Against satellite based technology, notice inviting tenders had been issued on 30.12.1998 for 1,000 terminals and the tender was scheduled to be opened on 9.4.1999. 10. Two tabular statements were filed by the Union of India during the process of hearing of the cases. One showed, District-wise, the number of villages identified for the earlier ADB tender and the villages provided with VPT out of the said villages. It was shown that out of 32,350 villages in UP Telecom Circle in UP Districts, 8524 villages out of the villages identified for ADB tender, (i.e. in Eastern UP) were already provided with telephones. A separate tabular statement was filed showing the progress of telephone installation in the rural sector right from 1992. As on 31.12.1998, the position is stated to be as follows : "Assam and Nagaland - 72.3%; AP - 78.5%; As - 48.2%; Bihar - 24.2%; Gujarat -76.8%; Haryana - 99.4%; Himachal Pradesh -10.4T; J&K -41.75%; Karnatka - 81%; Kerala - 100%; Madhya Pradesh - 55.1%; Maharashtra - 69.5%; NE - 26.7%; Orissa - 41.7%; Punjab - 941%; Rajasthan - 56.3%; Tamil Nadu - 98.4%; UP (Eastern) - 43.9%; UP (Western) - 34.4% Delhi - 100%; Calcutta - 90%. In all, 6,07,491 villages, the average is 51.8%". It will be noticed that the percentage of telephones in Bihar, Himachal Pradesh, J&K, North East and Orissa is less than the percentage is Eastern UP. 11. These are the subsequent events that have taken place during the pendency of these matters in this Court. It will be noticed that these events have substantially changed the very basis of the original writ petition filed in the High Court of Punjab and Haryana. The ADB loan on which the tender was based now stands withdrawn; the tenders for installing 38,000 telephones in Eastern UP stand withdrawn and invitations for new Tenders spread over several rural areas in various States have now been made. In fact, the new tenders have also been submitted. It is stated for the respondents that the appellant is also participating in these new tenders. We have, therefore, to decide this appeal in the light of the above subsequent developments. 12. Learned Senior Counsel Sri D.D.Thakuar and Sri R.F. Nariman for the appellant and Senior Counsel Sri Rajeev Dhawan for the petitioner in the Transfer Petition have submitted that in spite of these developments, the question whether the various officers conspired and played fraud in seeing to it that the ADB loan lapsed or stood withdrawn, has still to be gone into. They contend that when the writ petition was filed on 6.1.1998, the positing was that with a view to allow multi-national companies to dump outmoded analog technology into India, the officers were wanting to float fresh tenders in which such analog technology could be made the basis of the tenders, either wholly or partly, that the said attempt was successfully thwarted by the appellant filing the writ petition in the High Court of Punjab and Haryana and that with a view to spite the appellant, the officers had all conspired and played fraud in having the ADB loan withdrawn and the ADB tender cancelled. This, according to the appellant, amounted to a fraud on the appellant and also on the people of Eastern UP and has to be investigated. The excuse put forward by the officers of DOT that ADB loan would be expensive was absurd inasmuch as there was a 5 years moratorium on interest and the interest rate was something like 4% and there were other very favourable terms. It was argued that there was no point in having such a beneficial loan withdrawn and spending funds of the Government of India. The learned Senior Counsel for appellant and for petitioner in the Transfer Petition contended that the scheme meant for a very backward area like Eastern UP could not be allowed to be frustrated in this manner.13. Alternatively, it was contended by the learned senior counsel for the appellant that the appellant had a legitimate expectation of a substantive nature, that, even if the Government wanted to put its own funds, the original tender notification would be processed for the benefit of Eastern UP. The respondents cannot change the policy to benefit the rural areas in the whole country and abandon the original tender notification for Eastern UP.14. Dr. Rajeev Dhawan for the petitioner in the Transfer Petition contended that fraud in private-law field was different from fraud in the public-law field. This Court should, therefore, decide whether these officials got the High Level Committee appointed only with a view to harm the appellant and whether the Committee was stage-managed by a few officers who had other motives. Learned counsel Sri Dhawan also contended that this was a case of legitimate expectation for the appellant in the civil appeal as also to the 36,000 villages in Eastern UP. The learned senior counsel for the State of Punjab Sri P.C. Jain also supported the case of the appellant on the ground that the appellant was its public sector undertaking. 15. On the other hand, it was contended vehemently for the Union of India by Sri C.S. Vaidyanathan, the learned Additional Solicitor General of India, that there was absolutely no truth in the contention of the appellant that there was a conspiracy or fraud to shelve the ADB loan, or to bring in outmoded technology into India through certain favoured multinationals. According to him, there were two main defeats in the tender submitted by the appellant, one was a technical one and the other was the absence of proof of `proneness. Even though, final opportunity was given, the appellant having agreed to produce fresh certificate from China, (apart from the certificate initially filed) to prove `proveness of the system in that country - the appellant failed to do so. The High Level Committees proceedings, in fact, showed that it wanted to accept the appellants tender and it gave an opportunity to the appellant to make good the defects but the attitude of the appellant was not helpful and it was the inaction of the appellant that was the cause for the delay that led to a situation where the time limit set by the ADB came very close and was expiring. As there was no chance of the appellant curing the defects within the few days that were left, the ADB loan had to be withdraw. Photocopies of the entire departmental proceedings were placed before the Court to show that everything was done bona fide and the allegations of the appellant were wild and unsubstantiated. It was argued that there was no forgery or ante-dating of any minutes. Two files in the respective departments were moving simultaneously and there was absolutely no truth in the allegations of ante-dating the minutes. Now that the ADB loan stood withdrawn and the ADB tender had also fallen through, the writ petition had become totally infructuous. The Government of India decided to go on with its own funds and now a new policy decision was taken to benefit rural areas in the whole country and not merely the 35,000 villages in Eastern UP. This was because there were other rural areas in other States which were more backward then Eastern UP. In those places, the percentage of telephones was far less than in Eastern UP. In fact, fresh tenders have been called for it benefit the backward rural areas in the whole country and the new tenders are no longer confined exclusively to Eastern UP. A Tabular statement relating to the national figures regarding telephones is placed before the Court to show that thee are even more backward rural areas in some States where the percentage of telephone was less than in Eastern UP. The Government has, now plans to cover all backward rural areas in the country in he next few years and monies have also been allocated. All these details have been given in the additional affidavits and statements filed in the Court. There is no question of dumping outdated technology into India. The new tenders and the future schemes are based or on the latest `digital technology and not on the outmoded `analogy technology. The new government policies are wider and cannot be challenged in tis writ petition which had become infructuous. There is no proof of fraud either in private law or public law established. There can be no legitimate expectation in regard to the ADB loan contract and in any event the new policy is based on overriding considerations of public interest and cannot be questioned. The appeals are liable to be dismissed. It is also argued that there is no need to transfer the writ petition filed by Mr. OP Srivastava from the Allahabad High Court to this Court. That has also, it is stated, become infructuous. 16. On these submissions, the following questions arise for consideration : (1) Whether, after the ABD loan for the contract for providing telephones for Eastern UP was withdrawn, it is necessary to give any finding on the question of alleged fraud or to grant any directions regarding the bids offered for the ADB contract ?(2) Whether, if initially the Government decided to fund the proposed contract for Eastern UP from its own resources, it was permissible for the Government to change its policy into one for providing telephones for rural areas in the entire country and whether the `legitimate expectation of the appellant in regard to the earlier notification required, this Court to direct that the notification for Eastern UP should be continued ? 17. Point 1 The disputes between the parties, before the ADB loan was withdrawn, were (i) whether there was a conspiracy or fraud or other manouvre on the part of the DOT-officials to shelve the ADB loan to spite the appellant and bring in outmoded `analog technology through favoured multinationals and (ii) whether the appellant (a) complied with the technical specifications and (b) produced adequate proof of the `proveness of the system offered by the appellant i.e as to its successful implementation in China. A review of the facts and the subsequent events would show that the issues which were live when the writ petition of the appellant was pending in the High Court have ow lost all their relevance. The entire tender was based on the ADB loan. If the ADB loan itself has stood withdrawn, there is now no possibility of the ADB loan project for Eastern UP being started or completed. It will well nigh be impossible to issue any directions to the Union of India to seek a renewal of the lapsed loan or to issue any directions to continue the project for Eastern UP on the on the basis of ADB loan. Even so, learned senior counsel for the appellant and the petitioner in the Transfer petition have argued the case on merits as if the ADB loan were still above. We have been taken through reveal volumes of correspondence between the various departments, and the minutes of various officers and of the High Level Committee to prove arbitrariness in the non-acceptance of the appellants bid on two counts. We have heard these submissions very patiently but the point is whether this Court is to give findings on issues which have become non-issues now after the withdrawal of the ADB loan. We have given our anxious consideration to the various contentions raised on behalf of the appellant and the petitioner in the Transfer Petition and we are of the view that a detailed decision on the said questions is not called for. A question of fraud was also raised. But once the ADB loan is withdrawn the question has also becomes a non-issue. The position is that in respect of the ADB loan project, no fresh tenders based on `analog system have been invited nor has any multinational company been awarded any contract based on outmoded analog system. The said question of fraud is no longer relevant. On all these issues we should not be understood as having expressed any opinion. Further, there cannot be a cause of action on the basis of an "attempt at fraud" which did not materialise. It is true as stated in De Smith Administrative Law (para 13.010(5th Ed.) that it is fundamental to the legitimacy of public decision-making that official decisions should not be infected with motives such as fraud (or dishonesty) malice or personal self interest. Duty to act in good faith is inherent in the process. Learned senior counsel for the petitioner in the Transfer Petition, Sri Rajeev Dhavan referred to Shrisht Dhawan v. Shaw Brothers, 1992(1) SCC 534 where the distinction between fraud in public law and private law has been adverted to. But all these legal principles are not relevant if, the so called or alleged attempt at fraud did not fructify.

Decision reasoning: 0[ds]9. So far as remote/inaccessible areas were concerned, it was stated in the affidavit of the respondent that a choice of technology was made by including wireless in local loop (WLL) based on area of application as stated in the affidavit dated 5.11.1998. The Department had already floated a tender for 20,000 lines for Digital Wireless local loop Systems for rural areas - for the entire country, including up. A copy of the Bid document was filed. It was alleged that the appellant, among other manufacturers, had also actively participated in the finalisation of the Technical Specifications of the new tenders. These specifications were slightly different from the earlier ADB tender and were based on latest `Generic Requirement (GR) prepared by the Telecom Engineering Centre (TEC) of the Department, after extensive consultation with the manufacturers. The bid document for this tender was no sale w.e.f. 8.1.1999 and 7 companies had already purchased the same and the tenders were educated to be opened on 4.2.1999. It was stated for the respondents across the Bar that the appellant had also responded to the new advertisement. Again C-DOT TDMA PAMP Technology, field-trial orders were placed on M/s III for 25 systems having capacity for providing 4,000 Village Panchayat Telephones (VPTs). These telephones were expected to be installed by February, 199 in 17 Telecom Circles spread throughout the Country and these systems were more cost-effective that WLL system and were based on indigenous technology developed by M/s C-DOT. Against satellite based technology, notice inviting tenders had been issued on 30.12.1998 for 1,000 terminals and the tender was scheduled to be opened onso, learned senior counsel for the appellant and the petitioner in the Transfer petition have argued the case on merits as if the ADB loan were still above. We have been taken through reveal volumes of correspondence between the various departments, and the minutes of various officers and of the High Level Committee to prove arbitrariness in the non-acceptance of the appellants bid on two counts. We have heard these submissions very patiently but the point is whether this Court is to give findings on issues which have become non-issues now after the withdrawal of the ADB loan. We have given our anxious consideration to the various contentions raised on behalf of the appellant and the petitioner in the Transfer Petition and we are of the view that a detailed decision on the said questions is not called for. A question of fraud was also raised. But once the ADB loan is withdrawn the question has also becomes a non-issue. The position is that in respect of the ADB loan project, no fresh tenders based on `analog system have been invited nor has any multinational company been awarded any contract based on outmoded analog system. The said question of fraud is no longer relevant. On all these issues we should not be understood as having expressed any opinion. Further, there cannot be a cause of action on the basis of an "attempt at fraud" which did notwas argued that even if the ADB loan was withdrawn, when the State decided to go ahead with its own funds, it should have gone ahead with the same notification calling for tenders for Eastern UP sans ADB loan. The change in the policy to benefits other backward areas in the courts was unwarranted. Reliance was placed on the principles of promissory estoppel and legitimate expectation. It was contended that the project for Eastern UP should still go ahead and it was not open to the Union of India to deprive the appellant company of its reasonable and legitimate expectation regarding the acceptance of the bid offered for the Eastern UP project; It was not open to the State to deprive the expectation of villagers in 36000 villages in Eastern UP and to change over to a new policy of providing telephones to rural areas in all the States. Such is the contention of the appellant. We do not propose to deal with question of promissory estoppel because the parties were still at the stage of the tenders, at the relevant time. We shall, therefore, confine ourselves to the point relating to legitimate expectation of the appellant and the effect of the change ofwill be noticed that at once stage where the ADB loan lapsed, the Government took a decision to go ahead with the project on its own funds. But later it thought that the scheme regarding telephones in rural areas must cover not only the villages in Eastern UP but also in other backward rural areas in other States. The statistics given in the counter-affidavits of the Union of India to which we have already referred, show that there are other Sates in the country where the percentage of telephones is far less than what it is in eastern UP. The said facts are the reasons for the change in the policy of the government and for giving up the notification calling for bids for Eastern UP. Such a change in policy cannot, in our opinion, be said to be irrational or perverse according to Wednesbury principles. In the circumstances, on the basis of the clear principles laid down in ex parte Hargreaves nd ex parte Unilever, the Wednesbury principle, of irrationality or perversity is not attracted and the revised policy cannot be said to be in such gross violation of any substantive legitimate expectation of the appellant which warrants interference in judicial review proceedings. Point 2 is held against the appellant.