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Will the inquiry overturn SC order?

The telecom sector was in the thrall of governmental monopolies. Its growth was being throttled by lack of competition, and the exclusion of...

The telecom sector was in the thrall of governmental monopolies. Its growth was being throttled by lack of competition, and the exclusion of vigorous private players. Government announced a new telecom policy. A body calling itself the Delhi Science Forum, another styling itself as the National Federation of Telecom Employees, filed Public Interest writs against the licences that had been granted under the new policy. There was the usual slew of allegations — favouritism, gargantuan largesse to private players at the cost of the national exchequer, licensing conditions contrived to exclude governmental companies — MTNL, for instance — from bidding and thereby steering the licenses in favour of select private players… The matter reached the Supreme Court.

The Supreme Court held that, for reasons we shall soon recall, privatisation was a fundamental concept underlying the new policy of liberalisation and opening of the country to foreign investment; that such questions were policy matters which the courts shall not go into; that all they would examine is whether, in implementing the policies, there had been any patent discrimination or illegality.

Four conclusions of the Court are particularly relevant.

First, the Supreme Court held, price is not the only criterion in granting licences and contracts. ‘‘The question of awarding licences and contracts does not depend merely on the competitive rates offered,’’ it held. ‘‘Several factors have to be taken into consideration by an expert body which is more familiar with the intricacies of that particular trade. While granting licences, a statutory authority or the body so constituted should have latitude to select the best offers on terms and conditions to be prescribed taking into account the economic and social interest of the nation. Unless any aggrieved party satisfies the court that the ultimate decision in respect of the selection has been vitiated, normally the courts should be reluctant to interfere with the same.’’

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And on whom rested the onus of proving that the selection, etc. had been vitiated by extraneous considerations? The Supreme Court was clear as can be:

‘‘Any decision taken by such authority or a body can be questioned primarily on the grounds: (i) decision has been taken in bad faith; (ii) decision is based on irrational or irrelevant considerations; (iii) decision has been taken without following the prescribed procedure which is imperative in nature… It is well settled that the onus to demonstrate that such decision has been vitiated because of adopting a procedure not sanctioned by law, or because of bad faith or taking into consideration factors which are irrelevant, is on the person who questions the validity thereof. This onus is not discharged only by raising a doubt in the mind of the court, but by satisfying the court that the authority or body which had been vested with the power to take the decision has adopted a procedure which does not satisfy the test of Article 14 of the Constitution or which is against the provisions of the statute in question or has acted with oblique motive or has failed in its function to examine each claim on its own merit on relevant considerations…’’

It will be indeed educative to see what the calumners can prove on the anvil of these tests in regard to the privatisation of the hotels — or, indeed, in regard to any other privatisation done during the NDA regime.

The Supreme Court noted that the applications had been assessed against the eligibility conditions that had been prescribed — exactly as every privatisation decision was arrived at. It noted that the applications had been assessed by an Evaluation Committee of officials — in the case of privations, every step of every privatisation decision was examined not by one but by two committees of officials and then thoroughly debated and decided by the Cabinet Committee presided over by the Prime Minister himself. The Court noted that the Evaluation Committee had excluded one party from some circles, as granting it licences for all the circles in which its bid had been the lowest, would have resulted in a virtual monopoly. The Court rejected the charge that, had the higher bid of the company been accepted in all the circles in which it had out-scored the rivals, the Exchequer would not have been put to the loss which it had been made to suffer because of this new decision about ‘‘capping’’. The Court noted in particular that, when excluding this firm from some circles, the Evaluation Committee had decided against beginning the whole process again as this would have taken too long and delayed further the implementation of Government’s policy, and that the Committee had decided to limit itself to a truncated procedure, that of inviting fresh financial bids only. The test the Court used has direct relevance, and indicates what calumners must establish in such cases:


‘‘Unless it is alleged and proved that the Tender Evaluation Committee’s decision in respect of capping was because of any bad faith or due to some irrational consideration, according to us the Central Government cannot be held responsible for that decision. It may be mentioned at the outset that in none of the writ petitions there is any whisper, much less any allegation, of mala fide against the members of the Tender Evaluation Committee stating any of them had a bias in favour of one bidder or the other or that they have acted on the dictates of any higher authority, abdicating their functions entrusted to them.’’

But was the decision to exclude Government companies — MTNL, for instance — from bidding not devised to make it that much easier for selected private parties to acquire the circles at the lowest possible price? Was it not meant to benefit a select few at the expense of the public exchequer? Exactly the sort of allegation that came to be hurled at the decisions regarding petroleum companies when Government decided that IOC, etc. should not bid for them. The Supreme Court repelled the aspersion decisively. It held:

‘‘On behalf of the petitioners, it was also submitted that neither there was any justification nor any rational basis for debarring the government companies from submitting their bids. Although it is not necessary for this Court to express any opinion on that question because according to us that shall amount to a policy matter, but it can be said that the new Telecom policy is based on privatisation with foreign participation. Government undertakings like MTNL were already functioning in Delhi and Bombay and in spite of that it was felt that telecommunication should be handled by non-governmental undertakings with foreign participation to improve the quality of service and to cover larger areas. In this background, there is no question of government undertakings being ignored or discriminated against while awarding the licences in different service circles.’’ (On all this, (1996) 2 Supreme Court Cases 405.)


A heap of decisions can be cited in which these principles have been reiterated. I will recall just one of these as it deals directly with another allegation that has been repeatedly hurled — namely, that some particular decision was ‘‘pushed through in undue haste’’ — and also because it takes us to the next point we must consider: that is, the circumstances in which the courts consider it appropriate to interfere in decisions — specially commercial decisions — taken by the Executive.

‘‘How economic development of a State can be halted by a Public Interest Litigation has received the attention of this Court in some of its decisions,’’ begins the decision of the Supreme Court in Chairman and MD, BPL Ltd. v. SP Gururaj and others. ‘‘The case at hand adds to the said list.’’

The Karnataka Industrial Area Development Board acquired a large chunk of land for allotting to prospective entrepreneurs. It allotted a portion to BPL. Some persons styling themselves as social workers filed a writ against the allotment. The allotment is not in accord with the objectives for which the land had been acquired, they said. The allotment has been done with undue haste, they said. And so on.

The Supreme Court struck down the challenge decisively. It reiterated the criterion by which courts are to interfere in such decisions: ‘‘The application filed by the Company,’’ the Court recorded, ‘‘went through various processes and several meetings of the different committees were held. The High Level Committee also considered the matter in a number of meetings, pursuant whereto and in furtherance whereof the aforementioned decision was taken…’’ The test thus was twofold: the prescribed procedure had been observed, and the bodies which had been authorised in this regard had applied their minds to the matter.

The social workers had been at pains to point out that the allotment had been made under one regulation rather than the one that was to be used normally. The Supreme Court agreed that normally allotments had to be made under the former regulation, but that the statute did not preclude the State from allotting plots under the latter regulation. ‘‘Once the Court finds that the power exercised by the statutory authorities can be traced to a provision of statute,’’ it concluded, ‘‘unless and until violation of mandatory provisions thereof are found out and/ or it is held that a decision is taken for unauthorised or illegal purpose, the Court will not ordinarily interfere either with the policy decision or any decision taken by the executive authorities pursuant to or in furtherance thereof.’’


The Supreme Court cited a number of earlier rulings in which it had held that unless a decision is manifestly ‘‘unjust or improper’’; unless it is ‘‘patently arbitrary’’; unless it is held to be ‘‘per se irrational, arbitrary or capricious’’; unless the decision is ‘‘illegal, arbitrary or mala fide’’, the courts shall not intervene.

The Court recalled and followed, as it has in a host of other cases, the principles and ground rules for intervention by courts that it had laid down in Tata Cellular versus Union of India, to which we shall turn in a moment. The Supreme Court also reiterated that in all such cases, the onus of proving illegality, arbitrariness, mala fides, etc., lies squarely on the one who makes the allegation.


In conclusion, it turned to the allegation that the decision had been taken in ‘‘undue haste’’, and that this showed that collateral considerations had been at play. In the Disinvestment Ministry, and in Telecom, all of us worked with dispatch. Nothing, and no one in the ministries was allowed to lean back and rest. So, we were continually assailed by this charge. Dismissing the allegation, and the inference which was sought to be drawn from it in this case, the Supreme Court laid down the general rule:

‘‘Undue haste also is a matter which by itself would not have been a ground for exercise of power of judicial review unless it is held to be mala fide. What is necessary in such matters is not the time taken for allotment but the manner in which the action had been taken. The Court, it is trite, is not concerned with the merit of the decision but the decision making process. In absence of any finding that any legal malice was committed, the impugned allotment of land could not have been interfered with. What was only necessary to be seen was as to whether there had been a fair play in action.


‘‘The question as to whether any undue haste has been shown in taking an administrative decision is essentially a question of fact. The State had developed a policy of Single Window System with a view to get rid of red-tapism generally prevailing in the bureaucracy. A decision which has been taken after due deliberation and upon due application of mind cannot be held to be suffering from malice in law on the ground that there had been undue haste on the part of the State and the Board.’’

What a comfort!

To be continued

The writer is former union disinvestment Minister



First published on: 24-06-2005 at 12:00:00 am
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