Case: Delhi Development Authority  Vs. M/S Uee Electricals Engg. P. Ltd.

Background facts as projected by the appellant DDA which need to be noticed are as follows:In March, 2001, tenders were invited by the appellant for the supply and installation of Clear Water Boosting Pumping Station at Command Tank No. 1 atClause 10 of the Tender Notice indicated that the final decision, with respect to acceptance of the tender, rests with the Chief Engineer (Electrical) and there was no compulsion to accept the lowest tender. On 21.5.2001 Ashok Sehgal — a Director of the respondent No. 1 — company went to the Division Office of the Authority, where one Mr. V.K. Kapoor was acting as the Assistant Engineer (Electrical), for clearance of his earlier dues. Aforesaid Mr. Ashok Sehgal insisted that the files should be handed over to him which was not done by Mr. V.K. Kapoor. Since the files were not handed over, Mr. Ashok Sehgal physically assaulted Mr. V.K. Kapoor with a sharp weapon which caused an injury near the right eye. At about 3.45 p.m. an FIR was lodged by Mr. V.K. Kapoor for alleged commission of offences punishable under Sections 186, 353 and 332 of the Indian Penal Code, 1860 (in short thebefore the Dabri Police Station, Delhi. The matter was also referred for inquiry to the Executive Engineer (Headquarter) of DDA. Mr. Ashok Sehgal submitted a letter to the Commissioner of Police at about 8 p.m. on the same date making allegations against officials of DDA. On 19.6.2001 Enquiry Officer submitted a report inter alia observing that Mr. V.K.version was correct and that the allegations made by Mr. Ashok Sehgal appear to be in retaliation. It was found that Mr. Ashok Sehgal had tried to support his case by producing a medical certificate issued by a Private Poly Clinic which was not valid for acase. The further allegation that Mr. V.K. Kapoor demanded bribe from Mr. Ashok Sehgal was found to be incorrect. The allegation that Mr. Ashok Sehgal was physically beaten up by Mr. V.K. Kapoor was also found to be not correct in view of the statements given by someIt was, therefore, recommended that necessary action should be taken by the Competent Authority.On 23.7.2001 the price bid, so far as the tender in question, was opened and the respondent No. 1 was declared to be a successful bidder. However, on 28.8.2001 the Project Manager (Electrical) wrote to the Secretary, Contractor Registration Board requesting for appropriate action against the respondent No. 1company in the light of the Enquiry Report referred to above. It appears that subsequently action was taken by the Contractor Registration Board in terms of the Rule 22.3(k) of the Enlistment Rules of DDA.On 25.10.2001 the Works Advisory Board decided that the tender of respondent No. 1 should not be considered since show cause notice was being issued to it. Therefore, other tenderers were called for negotiations to lower the rates offered. It was also decided that in case the rates were not lowered, fresh tender was to be issued.On 8.11.2001, after consideration of the lowered rates offered the work was awarded to respondent No. 2 (respondent No. 3 in the writ petition before the High Court).Show cause notice was issued to respondent No. 1 on 5.12.2001 requiring it to show cause why it should not be blacklisted by theReply to the show cause notice was submitted on 13.12.2001. A writ petition was filed by the respondent No. 1 questioning award of the contract to respondent No. 2. By the impugned judgment, the High Court, inter alia, held that the Director of the Company and the company itself are two separate legal entities and even if any unbecoming act was done by the Director, that should not stand in the way of the contract being awarded to the respondent No. 1company. Therefore the writ application was disposed of with the directions as noted above.It appears that subsequently on 14.8.2002 the Contractor Registration Board debarred the respondent No. 1company and its Director for a period of five years. A writ petition was filed before the Delhi High Court challenging the order passed by the Contractor Registration Board. Learned Single Judge quashed the order of the Contractor Registration Board keeping in view of the impugned judgment dated 12.7.2002. However, liberty was given to theto issue a detailed and reasoned order. It appears that subsequently on 3.1.2003 a fresh order, debarring the respondent No. 1company and its Director for a period of five years, has been passed. That is the subject matter of challenge in WP(C) 156 of 2003.

Court's reasoning:
Courts are slow to interfere in matters relating to administrative functions unless decision is tainted by any vulnerability such as, lack of fairness in procedure, illegality and irrationality. Whether action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient.Doubtless, he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. While the indirect motive or purpose, or bad faith or personalis not to be held established except on clear proof thereof, it is obviously difficult to establish the state of amind, for that is what the employee has to establish in this case, though this may sometimes be done. The difficulty is not lessened when one has to establish that a person apparently acting on the legitimate exercise of power has, in fact, been acting mala fide in the sense of pursuing an illegitimate aim. It is not the law that mala fide in the sense of improper motive should be established only by direct evidence. But it must be discernible from the order impugned or must be shown from the established surrounding factors which preceded the order. If bad faith would vitiate the order, the same can, in our opinion, be deduced as a reasonable and inescapable inference from proved facts.Though in a legalistic sense an incorporated body like a company and its Directors are separate entities for certain purposes, in many companies they act as alter ego. For the acts of the Director, the concept of vicarious and constructive liabilities operates so far as the company is concerned. The acts of the company are done primarily through the Directors or the employees. In a case like the one at hand, the stand of respondent No. 1company that even if one of its Directors has assaulted an employee of theyet it is of no consequence when deciding the tender application. The strained relationship between a contractor and the contractee can have its implications in working out the contract.This is not a case where thecan be said to have acted in a mala fide manner or with oblique motives. If the authority felt that in view of the background facts, it would be undesirable to accept the tender, the same is not open to judicial review in the absence of any proved mala fide orwe have separately dealt with the SLP, we do not think it to be a fit case where the writ petition can be entertained directly in this Court.