Case: G.D. Zalani  Vs. Union Of India

public property or granting its lease, the normal method is auction or calling for tenders so that all intending purchasers/lessees should have an equal opportunity of submitting their bids/ tenders. Even there, there may be exceptional situations where adopting such a course may not be insisted upon. Be that as it may, the case here is altogether different. H.A.L. was trying to improve not only the quantum of production but also its quality and for that purpose looking for an appropriate partner. They went in for the best. It must be remembered that this technology is not therefor the mere asking of it. All the leading drug companies keep their processes and technology a guarded secret. Being businessmen, they like to derive maximum profit for themselves. It is ultimately a matter of bargain. In such cases, all that need be ensured is that the Government or the authority, as the case may be, has acted fairly and has arrived at the best available arrangement in the circum­stances. 29. It is then submitted that when the Board of Directors had asked the Managing Director not to agree for a lease amount of less than Rs. 31.68 crores and to report back to the Board the lease amount which M.G.B. is prepared to pay, the Managing Director should have reported back to the Board instead of entering into a MoU for a lesser amount. It is submitted that the Managing Director was bound to and ought to have carried out the instructions of the Board. The Managing Director was trying to over-reach the Board of Directors by several means, one of which was his letter dated May 3, 1994, it is submitted. In reply to this, it is pointed out by the learned Counsel for the respondents that Sri Basu did write to M.G.B. on May 10, 1994 as directed by the Board but that the M.G.B. did not agree to the figure stipulated by the Board (vide M.G.B. letter dated May 17, 1994) and that both these letters were placed before the Board. Be that as it may, once the Government directive was issued, all this controversy lost its relevance.30. It is then argued that the power to give directives is vested by Article 117 in the President alone and that no such directive can be given by the Government of India. It is submitted that the Rules of Business framed by the President of India under Article 77 are relevant only in the case of executive power of the Union and that Article 117 of the Articles of Association of H.A.L. is no part of the executive power of the Union. Accordingly, it is submitted, the authentication of the said directive by the Deputy Secretary to the Government of India is equally incompetent. Now, the directive in this case is issued by the Government of India. The letter says that it was being issued with the approval of the Minister for Chemicals and Fertilisers. There is indeed no reference to the President at all. The question, however, is whether the President in Article 117 of the Articles of Association of H. A.L. means refers only to the President of India and whether it is a power to be exercised by the President personally? We do not think that it would be reasonable to construe Article 117 as suggested by the appellants. The President of India like the Queen of England is a Constitutional Head. (See Rai Sahib Ram Jawaya Kapur & Ors.v. The State of Punjab(1955 (2) SCR 225 ) and Shamsher Singh & Anr. v. State of Punjab(1975 (1) SCR 814 ) H.A.L. is a Government Company. It was really an agency, an instrumentality of Government of India though given a corporate shape. Article 117 is one form of control the Government has over these corporate bodies. In the circumstances, it would be reasonable to understand the expression “President” in Article 117 as referring to the Government of India. To say that this power should be exercised by the President himself is neither practicable nor consistent with the dignity of the President. Of course, while the directive must be expressed in the name of the President but that is ultimately a matter of form, and the form has been held to be mandatory. In this view of the matter, it is unnecessary to consider whether it is open to the appellants to raise this contention. We are, therefore, unable to say that the directive issued is not valid in law or that it was not issued by the Competent Authority. It is not disputed that the directive is binding upon H.A.L. and all its authorities. If so, the corporate identity or corporate existence of H.A.L. is in no way violated by the directive given. It cannot also be stipulated that before giving the directive, the appellants should have been heard. Not only giving of directive was in internal matter between H.A.L. and the Government of India, there was no point in giving notice to SPIC and P.B.G. whose offers were already rejected by the Board once and again after re-evaluation directed by the Government. 31. Lastly, it is argued that in the case of Torrent, the Minister of State had asked the H.A.L. to evaluate its proposal on June 15, 1994 and that without any reference to the said order, the MoU was entered into on June 20, 1994. It is, however, explained by the respondents that the said order of the Minister of State was revised by the Minister for Chemicals and Fertilizers even before the issuance of the directive. Moreover, Torrent having entered the picture very late cannot complain of lack of fuller consideration. It is equally evident that since it was already in the process of selling up its own plant and also because its technology too was that of Biotica of Slovakia, which was already rejected in the case of P.B.G., no useful purpose would be served even by asking a reconsideration of its proposals.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]23. It would be evident from the facts narrated above that the Managing Director of H.A.L., Sri A.K. Basu was all out for a technological tie-up with G.B. and with no other. To start with, he sought the permission of the Government of India to go to Holland in August/September, 1993 to discuss and finalise the MoU with M.G.B. While permitting him to go and have discussion there, the Government of India instructed him not to enter into a MoU or to make any commitment since the Government was of the opinion that all the alternative proposals should be examined and a decision taken after examining the merits of each proposal. In the meeting of the Board of Directors of H.A.L. held on September 20, 1993, Sri Basu explained the advantages that will accrue from a tie-up with M.G.B. According to him, it was a lifetime opportunity for H.A.L. which it should not forego. This was his theme throughout in all the Board meetings. (Indeed, in one of the meetings, the Board of Directors found fault with Sri Basu for entering into negotiations with G.B./M.G.B. without its approval. It appears obvious that Sri Basu had taken the permission of only the Government of India for entering into negotiations with G.B./M.G.B. and informed the Board only after his visit to Holland). Finally, when the Board of Directors decided on April 28, 1994 that the lease amount payable by the proposed JVC (to be formed by HAL and M.G.B. with 50% share holding each) should not be less than Rs. 31.68 crores per annum and instructed him accordingly, Sri Basu wrote a letter directly to the Secretary to the Government of India, Ministry of Chemicals and Fertilisers setting out in detail why the Board resolution was not appropriate and why it is not realistic to accept lease amount at that level. It also appears probable that it was at his instance that the Government of India sought the opinion of an expert, viz., Prof. M.M. Sharma. After receiving the opinion of Prof. Sharma, the Government of India gave theto H.A.L., addressed to Shri Basu on June 20, 1994, to enter into a collaboration agreement with M.G.B. in the form of a Joint Venture Company. For the said purpose, the Government of India itself constituted a Committee of three members including the Managing Director, Sri A.K. Basu. On that very day, i.e., 20th June, 1994, negotiations were held and MoU signed between H.A.L. and M.G.B. It does not appear that the Board of Directors of H.A.L. was having any part in the negotiations or in the matter of or entering into the MoU with M.G.B. The MoU was signed by Sri Basu on behalf of the H.A.L. The alacrity with which MoU was signed on the every day on which the Government directive was issued also shows the deep interest the Managing Director had in collaboration with M.G.B. But it is not possible to say beyond this. It is quite likely that Sri Basu was actuated by the best of intentions, that he was of bona fide belief that entering into a technological agreement with M.G.B. (which really meant technical collaboration with G.B. of Holland) was a lifetime opportunity for H.A.L.which it should not forego. It could also be that he was genuinely satisfied that since G.B. is the world leader and has the best technology, it can deliver goods far better than any other foreign company. It is also possible that Sri Basu was for collaboration with M.G.B. for all the wrong reasons. We are not able to say one way or the other. The presumption is that being the Managing Director of H.A.L., he was acting in its best interests. This presumption is not displaced in this case. The fact remains that G.B. is the world leader in Penn-G field. Its technology is one of the best if not the best. It has a 20% share of the world market and has got units all over the world. As against it, the three appellants (we are treating Torrent too on par with SPIC and P.B.G. though as a fact it was not in the picture at the relevant time, as stated hereinbefore) were offering technology either of Cipan or of Biotica of Slovakia and the Brard of Directors of H.A.L. was of the opinion that both of them were not acceptable––Cipan for the reason that its technology was not yet proved at the commercial production level and Biotica of Slovakia on the ground that its technology was no superior to the technology presently employed by H.A.L. Among the seven world leaders mentioned hereinbefore, both Cipan and Biotica of Slovakia are not to be found. Another Indian Company, Ranbaxy (not a writ petitioner or appellant before us) offered to obtain the technology of Hoescht (one of the seven world leaders) but it did not pursue its offer and failed to submit its proposals. This left only M.G.B. in the field, as stated by the Sub-Committee. In other words, there was, unfortunately not much of a choice. In this connection, it must be emphasised that rejection of Cipan and Biotica of Slovakia technology was not by Sri Basu, but by the Board of Directors––and that too not once but twice.24. There is yet another fact. Most of these companies keep their processes and technology a guarded secret. More better the technology, more fervently it is guarded. And HAL needed a technology superior to the one it was already having. Not only it was producing only 55% of its installed capacity, its cost of production was far higher than what it ought to be. It is true, cost of production could have been reduced to some extent by rationalising and streamlining the working methods (as pointed out by the Sub-Committee in its report) but the more important need was to increase the yield from the strains and achieve full capacity production. On account of efforts made over the years, production had increased to some extent but it was still way behind its installed capacity, i.e. fill capacity production. Thus, it was not a case of merely leasing out a Government company but a case where the Government company was trying to obtain the best possible technology. In such matters, sights have to be set far into the future and arrive at a reasonable prognosis keeping in mind the best interests of the company. Floating of tenders may not have been a proper method to adopt in these circumstances. In any event, among the available technologies, not only has the G.B. the best technology, it was the only source available, the other having been rejected as already stated. Probably it is for this reason that the Government of India gave the directive on 20th June, 1994. In the above circumstances and, on the present material, we cannot say that Sri Basu was either actuated by mala fides or that he was acting out of extraneousthat reason it was perceived more as a competitor rather than as a probable partner. Secondly, its technology was as yet unproven at commercial production level, which meant that there was an element of risk involved in adopting that (Cipan) technology. Rejection of its proposals by the Board––and not by the Managing Director, Sri Basu, as emphasised hereinbefore cannot, therefore, he held to be either ‘noor mechanical rejection. No mala fides are attributed to the Board. In thethe complaint of not furnishing full information or not giving inspection of the HAL plant cannot be said to be motivated or arbitrary. We do not also think it necessary to refer to the correspondence that passed between SPIC and Sri A.K. Basu––to which our attention has been drawn by Sri Raval––for the reason that rejection of proposals of SPIC was not by Sri Basu but by the Board of Directors. The board proceedings referred to hereinbefore do establish that Board was acting in its own independent judgment in these matters and was not being led away by the opinion of Sri Basu. So far as P.B.G. is concerned, it appears that it did not disclose the name of its foreign partner in the first instance; it did so only later. Moreover, the letter of Biotica of Slovakia, (P.B.G.foreign partner) was found to be vague. Above all, the Board of Directors of H.A.L. were satisfied that the technology of Biotica of Slovakia is also not one of theseven leading manufactures of Penn-G and, therefore, the Board thought that there was no point in pursuing the proposals of P.B.G. It cannot be said that it was not a fair decision nor can it be insisted that before rejecting the proposals of SPIC and P.B.G., the Board of Directors ought to have obtained technical opinion or the opinion of an expert committee. The representatives of these two companies were heard in person by the Board and their presentation fully noted and considered. More cannot be insisted upon as a matter of law or in the facts of this case. Now coming to Torrent, it entered the picture quite late. Its foreign partner is the very same Biotica of Slovakia. (It needs to be stressed that each of the appellants, as also M.G.B., were offering the technology of their respective foreign partners and hence, the comparative merits of these foreign partners becomes relevant). The Complainant of not affording a proper opportunity to put forward their proposal made by Torrent, cannot, therefore, beopinion of Prof. Sharma must also have weighed with the Government in deciding to go in for JVC with MGB participation. It should be remembered that the Board of Directors of HAL had also decided to have a technological collaboration with MGB. It would have been a different matter if the Board of Directors had agreed with the recommendation of the Sub-Committee that there is tremendous scope of improving and achieving higher level of efficiency and cost reduction in the operations of HAL itself with the existing technology and without obtaining any foreign technology and that the HAL should first try that course. On the other hand, the Board decided in its meeting held on April 28, 1994 that HAL should go in for technological collaboration with M.G.B. in the form of a J.V.C. Yet another fact is that negotiations with M.G.B. were held on June 20, 1994 not by Sri A.K. Basu alone but a Committee of three members of whom one appears to have been a member of the Sub-Committee as well.28. We must reiterate that this was not simple case of granting of lease of a Government company, in which case the Court would have been justified in insisting upon the authorities following a fair method consistent with Article 14, i.e., by calling for tenders. We agree that while selling public property or granting its lease, the normal method is auction or calling for tenders so that all intending purchasers/lessees should have an equal opportunity of submitting their bids/ tenders. Even there, there may be exceptional situations where adopting such a course may not be insisted upon. Be that as it may, the case here is altogether different. H.A.L. was trying to improve not only the quantum of production but also its quality and for that purpose looking for an appropriate partner. They went in for the best. It must be remembered that this technology is not therefor the mere asking of it. All the leading drug companies keep their processes and technology a guarded secret. Being businessmen, they like to derive maximum profit for themselves. It is ultimately a matter of bargain. In such cases, all that need be ensured is that the Government or the authority, as the case may be, has acted fairly and has arrived at the best available arrangement in thedo not think that it would be reasonable to construe Article 117 as suggested by the appellants. The President of India like the Queen of England is a Constitutional Head. (See Rai Sahib Ram Jawaya Kapur & Ors.v. The State of Punjab(1955 (2) SCR 225 ) and Shamsher Singh & Anr. v. State of Punjab(1975 (1) SCR 814 ) H.A.L. is a Government Company. It was really an agency, an instrumentality of Government of India though given a corporate shape. Article 117 is one form of control the Government has over these corporate bodies. In the circumstances, it would be reasonable to understand the expressionin Article 117 as referring to the Government of India. To say that this power should be exercised by the President himself is neither practicable nor consistent with the dignity of the President. Of course, while the directive must be expressed in the name of the President but that is ultimately a matter of form, and the form has been held to be mandatory. In this view of the matter, it is unnecessary to consider whether it is open to the appellants to raise this contention. We are, therefore, unable to say that the directive issued is not valid in law or that it was not issued by the Competent Authority. It is not disputed that the directive is binding upon H.A.L. and all its authorities. If so, the corporate identity or corporate existence of H.A.L. is in no way violated by the directive given. It cannot also be stipulated that before giving the directive, the appellants should have been heard. Not only giving of directive was in internal matter between H.A.L. and the Government of India, there was no point in giving notice to SPIC and P.B.G. whose offers were already rejected by the Board once and again after re-evaluation directed by theTorrent having entered the picture very late cannot complain of lack of fuller consideration. It is equally evident that since it was already in the process of selling up its own plant and also because its technology too was that of Biotica of Slovakia, which was already rejected in the case of P.B.G., no useful purpose would be served even by asking a reconsideration of its proposals.