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1995 I COM. L.J. 100 (SC)
Main facts of the case:
Advertisement dated 22nd April, 1993, Department of Telecommunications, Telecom District
Hyderabad, invited sealed tenders from competent agencies for printing, binding and supply of
specified no. of telephone directories in English for three annual issues i.e. 1993, 1994, 1995.
Tenders to supply free of cost these telephone directories at specified distribution points. Tenders
also to specify the royalty offered by him for each issue. Tenders could procure advertisements
on cover paper and classified advertisements on his own. Tenders supplier to deposit Rs. 5 lac as
non refundable earnest, money.

Conditions for eligibility were:

a. Tender supplier should have experience in compiling printing, supply and telephone
directories to large telephone systems with more than 50,000 lines.
b. To submit documentary proof of same. Also to submit copies of telephone, directories printed
and supplied previously as credential of part experience.
c. Tender supplier to enclose lost of equipments and machinery installed with details of
locations, man power and capacity. Assistance general manager, DOT, Hyderabad vide letter
dated 3rd August, 1993 in firmed NHL that its offer could not be considered. NFL filed writ
petition in Delhi in High Court under Article 226/227. In High Court, respondents stated that
offer NHL was not considered because appellants didn’t submit any evidence, of having
undertakes compiling, printing and supply of telephone directories for large telephone systems
with capacity more than 50,000 lines. As per documents submitted by NHL the directories of
Delhi & Bombay were printed by Thomson Press (India) ltd. living Media (India) ltd etc and not
by NHL which was formed only in 1992.
NHL questioned that equity holders in it viz. Thomson Press India, Living Media India and
Singapore Telecom had all the necessary experience and infrastructure to carry out the task. With
formation of NHL, the facilities-and experience of TPI, LMT and ST were automatically
available to NHL.
Decision of the High Court:
High Court rejected the contention of NHL. It stated that though all the shareholders of NHL had
the experience yet the company itself didn’t have any experience. It further held that a company
is an independent person distinct from its members and thus experience of shareholders can’t be
experience of company.

Law points involved in the case:

1. Can the refusal of tender evaluation committee to consider tender of NHL be regarded as
arbitrary and unreasonable?
2. Is it open for the court to review the decision maker’s evaluation of facts?
3. Is the court in certain exceptional circumstances entitled to lift the veil of corporate entity and
keep behind the veil to know a about the real nature of the company?

Decision of the Supreme Court:

The Supreme Court stated that the state is governed by mandate of Article 14 of the constitution
which excludes arbitrariness in state action and requires the state to act in state action and
requires the state to act fairly and reasonably. The action of the state must be in conformity with
the standards or norms which are not arbitrary, irrational or irrelevant. The court referred to
wednesbury’s principle of reasonableness and held that it is open to the court to review the
decision maker’s evaluation of facts. The court should intervene where facts taken as a whole
could not logically warrant the conclusion of the decision maker. The requirement of experience,
as per the advertisement dated 22nd April, 1993 for inviting tenders were different from those
mentioned in notice dated 26th April, 1993. In notice dated 26th April, 1993, the condition states
that successful tender shall submit copies of directories earlier printed. This use of ‘successful’
means that any such documentary proof has to be submitted after tender has been considered and
found suitable. As such; a tender is not liable to be excluded from consideration on this ground.
The court further held that the all the promoters of NHL have proved together their resource in
this joint venture and experience of Various constituents viz TPI, LMI and ST & WML had to be
taken into consideration by tender evaluation commission. Whenever principle of corporate
personality is opposed to justice, the law by the process of lifting the veil goes behind the
corporation personality to ascertain the true picture. The court reformed to the case of Juggi lal
also. The court held that the decision of tender evaluation committee to refuse to consider tender
of NHL and to accept tender of respondent no. 4 suffers from vice of arbitrariness and
irrationality and to liable to be quashed.
Further it was held that the royalty offered by NHL to 5 times more than that offered by
respondent no. 4. Since, the directories for 1993 & 1994 had already been published. The court
set aside the Delhi High Court order to the extent it related to 1995, appeal was partially allowed.

Appeal allowed.