Case: New Horizons Ltd.  Vs. Union Of India

. In thepast the telephone directory used to be printed by the department at its own cost for the purpose of supplying the same to the telephone subscribers. It was an item of expenditure. Today, the telephone directory has become a source of revenue for the State. This has become possible by making it a medium for advertising by industrial and commercial concerns. A section in distinct "yellow pages" devoted exclusively to advertisements is contained in the directory. The person who undertakes the printing of the directory procures the advertisements from private parties and collects the charges for the same. In return, he supplies a prescribed number of directories free of cost to the department and also pays to the department a certain amount by way of royalty. The contract for printing and publishing the telephone directory is normally awarded by inviting tenders and selecting the best offer from among the tenders which are so received. This practice has been in vogue for some time. In Sterling Computers Ltd. v. M and N Publications Ltd. this court has dealt with the award of such a contract for printing and publishing of the telephone directories for Delhi and Bombay. The instant case relates to the telephone directory foran advertisement published in various newspapers on April 22, 1993, the Department of Telecommunications, Telecom District, Hyderabad, invited sealed tenders from competent agencies for printing, binding and supply of specified number of telephone directories in English for three annual issues commencing from 1993. The tenderer was required to supply, free of cost, the telephone directories to the General Manager, Hyderabad Telecommunications, at the specified distribution points. The tenderer was also required to specify the royalty amount for each issue offered by him. It was mentioned that the successful tenderer will be permitted to procure on his own, classified advertisements and cover pageIn the saidadvertisement it was statedThe tenderer should have the experience in compiling, printing and supply of telephone directories to large telephone systems with the capacity of more than 50, 000 lines. The tenderer should substantiate this with documentary proof. He should also furnish credentials in this field. "tenderer was required to remit a sum of Rs. 5, 00, 000 by way of non-refundable earnest money deposit. The terms and conditions and specifications, etc., for the total job were contained in the tender document which was required to be obtained for the purpose of submitting the tender. The last date for submission of tender was May 14, 1993.In the notice containing the requirements to be fulfilled which was attached to the tender documents, it was statedThe successful tenderer will also submit copies of telephone directories printed and supplied by them to the telephone systems of capacity more than 50, 000 lines as credentials of his past experience.The tenderer should intimate while submitting the tender the equipment and the list of machines, etc., along with the locations available with him which he would employ for carrying out this work, if selected. The tenderer also should forward a memorandum furnishing details of out-turn that can be given daily and the actual time required for the completion of the job after the input material is handed over to him. "persons, including appellant No. 1, New Horizons Ltd. (for short "NHL"), and M & N Publications Limited ("respondent No. 4" herein) submitted their tenders. The tenders were opened on May 14, 1993, at 3.30 p.m. The royalty amount offered by the five tenderers was as under :Name of tenderer Agreed amount offered (Rs. in lakhs)1993 issue 1994 issue 1995 issueSesa Seat Information SystemsLtd., Pune-1 41 121 151M & N Publications Ltd., Bangalore-52(respondent No. 4 herein) 20 30 45New Horizons Ltd., New Delhi-1(appellant No. 1 herein) 39 129.30 291.60Hyper Media Information ServicesPvt. Ltd., Bangalore-10 6 45 72Kaljothi Process Pvt. Ltd.Hyderabad-20 102 138offers were considered by the tender evaluation committee. The offer of respondent No. 4 was accepted. The Assistant General Manager (OP), Department of Telecommunications, Telecom District, Hyderabad, by his letter dated August 3, 1993, informed NHL that its offer could not be considered. The said letter did not indicate the reason for non-consideration of the offer of NHL. The appellants filed a writ petition in the Delhi High Court under articles 226 and 227 of the Constitution of India seeking a writ, order or direction in the nature of certiorari for quashing the award of contract by respondent No. 3 to respondent No. 4 for the printing, binding and supply of telephone directories for Hyderabad and also a writ, order or direction in the nature of mandamus directing respondent No. 3 to accept the tender offer of thevit filed in reply to the said writ petition filed on behalf of respondents Nos. 1 to 3, the reason for non-consideration of the offer of NHL was disclosed. It was stated that the offer of NHL was not considered because the appellants did not submit any evidence to show that they have in their name undertaken compiling, printing and supply of telephone directories for large telephone systems with the capacity of more than 50, 000 lines. In this regard, it may be mentioned that in their tender offer NHL had mentioned thatNHL is a joint venture company established by Thomson Press (India) Limited (TPI), Living Media (India) Limited (LMI), World Media Limited (WML) and Integrated Information Pvt. Ltd. (IIPL), a wholly-owned subsidiary of Singapore Telecom wherein 60 per cent. of shares are held by Mr. Aroon Purie, TPI, LMI, WML and other companies in the same group and 40 per cent. of shares are held by IIPL ;(ii) The joint venture has received approval of the Government of India and is currently in operation ;(iii) NHL has been established as an information and database management company with expertise in database processing, publishing, sales/marketing and the dissemination of related information ; and(iv) In addition to its projected strength, NHL has access to the benefit of the complete resources and strength of its parent/owning companies, each of which is a recognised marketoverview of each of the parent companies, namely, TPI, LMI, WML and IIPL, was also given in the tenderthe expertise of TPI it was stated that it had been established as a joint venture with Thomson International Canada in 1964 and is located at Faridabad, Haryana, and has units at Okhla, Noida Export Zone and also has sales/co-ordination offices in Metropolitan towns in India and in London and New York. It was stated that with over 125 managers and 1, 255 skilled technicians/workers the press is equipped to handle the most exacting printing jobs and working with state-of-the-art technology. TPI produces both quality and volume and a detailed list of machines installed for printing, folding, cutting and binding and other equipment was enclosed and it was stated that the said equipment and skill would be available/utilised for all directory production work. It was stated that among the many diverse jobs that have been executed by TPI are printing of editions of India Today (two languages and a total of 1.2 million copies per month), Computers Today, Business Today, Readers Digest, Span Magazine, Scientific Journals, books (both hard and soft bound) for export and telephone directories for UDI, Sterling Computers, Sesa Seat,regard to LMI it was stated that as India Today group it was first set up in 1962 and became LMI in 1988. LMI employs approximately 500 people in various disciplines, viz., editorial, pre-press, production, sales and marketing. Its current activities include publishing (India Today, Business Today, Computers Today, Target, Journal of Applied Medicine, etc.), distribution (both in house magazines, diaries and Time International), Music Today (producing and marketing a wide selection of Indias best music) Newstrack (the leading video news magazine in Hindi and English) and printing (four regional language editions with a print order of one million copies per month). A list of machines and equipment installed at its units at Delhi and at Maraimalainagar in Tamil Nadu was alsoregards WML it was stated that it was established in 1944 in Lahore and moved its registered office to New Delhi in 1969. Its major activity was film financing, finance, marketing and publishing and now it also distributes LMI products and commissions articles/features for Businessregard to IIPL it was mentioned that it is a wholly-owned subsidiary of Singapore Telecom established in 1967 to publish the Singapore telephone directory with yellow pages and a brochure which described the strength and developments achieved by Singapore Telecom and IIPLs position within the group was attached with the tender offer. It was further stated that IIPL serves Singapore which has a tele-network offering subscribers up to date and efficient telecom services and that IIPL has experience in international operations with special focus on the Asian regions and that IIPL experience and expertise would contribute actively to the systems and professional skills of the new joint venture. It was also mentioned that for the past 25 years the directory operation has evolved a continuously updated and responsive system specifically for quality directory management/publishing and many of the managers involved with the joint venture company have been a part of IIPL since inception. With specific reference to the Indian venture, it was stated that IIPL will be providing its unique integrated directory management system along with the expertise of its managers and that the managers will be actively involved in the project both out of Singapore and resident in India. The particulars of various IIPL publications, namely, Singapore Phone Book and Yellow Pages, Singapore Telex and Fax directory and other publications and particulars of the Integrated Directory System for publishing software for medium to large directories operating in a VAX environment wereto itself (NHL), it was stated in the tenderAs a joint venture in the true sense of the phrase, the company will have access to expertise in database management, sales and publishing of its parent group companies. In addition, the equipment, manpower and expertise are available to NHL. Perhaps even more significant, at this point in the directory/yellow page cycle, is the unique reputation of its parent companies as market leaders. This will lend a unique credibility and public recognition to the joint venture, as well as its products.A modern, extremely powerful, computer system is being purchased to install the integrated directory system developed over the past 25 years by IIPL. The IDS will ensure efficiency and accuracy of operations. Training of all personnel is being and will continue to be conducted by experienced managers from IIPL. "with the tender the appellants submitted the directories of Delhi and Bombay 1992 which were printed and bound by Living Media Press init filed on behalf of respondents Nos. 1 to 3 in the High Court it was stated that as per the averments in the writ petition TPI and LMI had printed and bound the telephone directories for respective parties who had been awarded the contract for Delhi and Bombay and that the appellants did not produce any evidence to show that they have in their name undertaken compiling, printing, binding and supply of telephone directories of large telephone systems with a capacity of more than 50, 000 lines and further that the telephone directory of Delhi 1992 issue was published by Sterling Computers Limited on behalf of United Data Base (India) Pvt. Ltd. and it was printed and bound at Navneet Publications (India) Ltd., Gandhinagar, and the telephone directory of Bombay 1992 issue does not indicate any publishers or printers name. It was also stated that NHL was converted into a joint venture company in 1992 and have no experience whatsoever in their own name for compiling, printing, binding and supply of telephone directories of telephone systems of more than 50, 000 lines capacity. It was further stated that the appellants had submitted the directories of Delhi and Bombay only to show the capability of printing facilities of TPI and LMI and it does not substantiate their experience of a full job of compiling, printing and supply of telephone directories as stipulated in the tendervit it was also stated that the royalty and other aspects of the tender were not considered since the appellants did not meet the primary requirement of experience asthe High Court it was urged on behalf of the appellants that NHL was fully eligible and met the criteria as laid down and was competent to compile, print and supply telephone directories as per the invitation of tender and in this connection reliance was placed on the experience of the foreign collaborator/equity-holder and the experience of the major Indian equity shareholders, viz., TPI and LMI who owned the most well-equipped modern printing and binding facilities and had executed the work for the parties who had been awarded contracts earlier for telephone directories for metropolitan cities of Delhi and Bombay. It was also submitted that these facilities were available to NHL to execute the contract in question and that all these facts were clearly brought out in the tender document submitted by it and that the contract was awarded to respondent No. 4 on extraneous considerations which is violative of article 14 of the Constitution. It was further submitted that since the matter involved public revenue the tender of the appellants containing the highest offer could not be rejected on the hyper-technical plea that NHL itself has nosaid contentions have been negatived by the Division Bench of the Delhi High Court in its judgment dated October 15, 1993, whereby the writ petition filed by the appellants was dismissed. The High Court has proceeded on the assumption that the shareholders of NHL have all the experience in compiling and printing the telephone directories but has observed that that it is not at all the job requirement. According to the High Court it is one thing to say that the shareholders of a company have vast experience in the publication of telephone directories with yellow pages and it is entirely another thing if the company itself has that experience. The approach of the High Court is that a company is an independent person distinct from its members and that NHL is carrying on its business independently from that of the shareholders. The High Court has held that the experience of a shareholder cannot be the experience of the company nor is NHL the agent of its shareholders. Referring to the principle of lifting of the corporate veil in modem company law the High Court has observed that so far as NHL is concerned, it cannot invoke the said principle either as a ground of attack or as a ground ofview of the High Court it could not be said that the authorities had failed in their duty to look behind the facade of corporateness of NHL and that it was none of their duty and they rightly examined the experience, etc., of NHL and came to the conclusion that it did not satisfy the eligibility conditions and that there was no error in the said approach of the authorities. Dealing with the contention that NHL is a joint venture the High Court has observed that a joint venture is a one-time grouping of two or more persons in a business undertaking and unlike a partnership, a joint venture does not entail a continuing relationship among the parties and on that view the High Court has held that there is no joint venture as such and there is only a certain amount of equity participation by a foreign company in NHL. The High Court rejected the contention urged on behalf of the appellants regarding the absence of reasons for rejecting the tender of NHL on the ground that the non-communication of reasons is not fatal in all circumstances and that in the present case the reasons existed on the record of the authorities that the tender submitted by NHL was not in conformity with the condition of the tender and NHL was found ineligible for award of the tender and its offer could not have been accepted. The High Court further held that since the bid of the appellants was rejected at the threshold the authorities could not consider the question of the higher amount of royalty offered by NHL and that a higher bid could not be a substitute for eligibility conditions.

Court's reasoning:
Having regard to this large margin in the amount of royalty offered by NHL and that offered by respondent No. 4, it must be held that the decision of the tender evaluation committee to refuse to consider the tender of NHL and to accept the tender of respondent No. 4 suffers from the vice of arbitrariness and irrationality and is liable to behave been informed that while the matter was pending in the High Court and in this court the telephone directory for the year 1993 has been printed and supplied to the department by respondent No. 4 as per terms of the contract. In so far as the directory for the year 1994 is concerned we find that, as per the terms of the contract, the process for preparation of the telephone directory has already commenced. We cannot lose sight of the fact that as a result of quashing of the contract in respect of the directory for 1994 fresh steps will have to be taken to award a fresh contract and the said process would take some time and thereafter the contractor will require time to print and publish the telephone directory. It would, therefore, not be feasible to bring out the directory for 1994 before the close of the year. As a result, the department would suffer loss of revenue which it would otherwise earn by way of royalty from respondent No. 4 for the directory for the year 1994. In so far as the contract in respect of the year 1995 is concerned there is sufficient time for the department to award a fresh contract if the contract awarded to respondent No. 4 is cancelled and the new contractor will have sufficient time at his disposal to print and deliver the directory as per the time schedule. Moreover, in respect of the directory for the year 1995 the amount of royalty that is payable by respondent No. 4 is Rs. 45 lakhs and the amount of royalty offered by NHL for the directory for the said year was Rs. 291.6 lakhs. Keeping in view the circumstances referred to above, the course that commends itself to us is that, while maintaining the contract awarded to respondent No. 4 in respect of the directories for the years 1993 and 1994, the said contract may be set aside insofar as it relates to the directory for the year 1995 and fresh tenders may be invited for award of the contract for the directory for the year 1995. The appeal filed against the judgment and order of the Delhi High Court dismissing the writ petition of the appellants must, therefore, be allowed in the above terms. The other appeal has been filed by the appellants against the order of the Delhi High Court dismissing C. M. No. 6120 of 1993 which was an application for an interim relief during the pendency of the writ petition in the High Court. In view of the final order that is being passed in the writ petition, the application for interim relief has become infructuous and the appeal against the order dismissing C. M. No. 6120 of 1993 must, therefore, be dismissed asthe result, the appeal against the judgment and order of the Delhi High Court dated October 15, 1993, in C. W. P. No. 3837 of 1993 is allowed, the said judgment is set aside and Writ Petition No. 3837 of 1993 filed by the appellant is disposed of with the direction that the award of the contract for printing and publishing the telephone directories for Hyderabad for the years 1993, 1994 and 1995 is set aside to the extent it relates to the directory for the year 1995.