{"id":234236,"date":"2000-10-19T00:00:00","date_gmt":"2000-10-18T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/centre-for-public-interest-vs-union-of-india-ors-on-19-october-2000"},"modified":"2015-07-10T02:08:01","modified_gmt":"2015-07-09T20:38:01","slug":"centre-for-public-interest-vs-union-of-india-ors-on-19-october-2000","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/centre-for-public-interest-vs-union-of-india-ors-on-19-october-2000","title":{"rendered":"Centre For Public Interest … vs Union Of India & Ors on 19 October, 2000"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Centre For Public Interest … vs Union Of India & Ors on 19 October, 2000<\/div>\n
Bench: S.N.Hegde, S.S.M.Quadri, S.P.Bharucha<\/div>\n
           CASE NO.:\nAppeal (civil) 2485  of  1999\n\n\n\nPETITIONER:\nCENTRE FOR PUBLIC INTEREST LITIGATION & ANR.\n\n\tVs.\n\nRESPONDENT:\nUNION OF INDIA & ORS.\n\nDATE OF JUDGMENT:\t19\/10\/2000\n\nBENCH:\nS.N.Hegde, S.S.M.Quadri, S.P.Bharucha\n\n\n\n\nJUDGMENT:\n<\/pre>\n
S.N.Hegde<\/p>\n
      Being  aggrieved by the judgment of the High Court  of
\nDelhi dated 25th January, 1999 made in C.W.P.No.3020\/97, the
\nwrit petitioners therein have preferred this appeal by leave
\nof  this Court.\t Respondent No.1, Government of India (GOI),
\ntook a policy decision in the year 1992 to offer some of its
\ndiscovered  oil\t fields for development on a  joint  venture
\nbasis.\t Its  decision in this regard was that medium  sized
\noil  fields will be offered for development under the  joint
\nventure\t with  the participation of the Oil and Natural\t Gas
\nCommission  (ONGC)\/the\tOil  India Limited (OIL)  while\t the
\nsmall  sized  oil-fields  will be  offered  for\t development
\nwithout\t the  participation  of the ONGC\/OIL.\tThis  policy
\ndecision was taken on the ground that the country was facing
\nforeign\t exchange crisis and there was lack of resources  to
\nfully  develop\tthese oil-fields.  The GOI was also  of\t the
\nopinion that the domestic crude production was declining and
\nthere  was a need to augment its production.  With the\tsaid
\npolicy in mind, the GOI invited bids for 12 medium sized oil
\nfields\tand  31 small sized oil fields.\t In response to\t the
\ninvitation  of\tthe  GOI in regard to the two  medium  sized
\noil-fields,  namely, Panna and Mukta, as many as 8 consortia
\noffered\t  their\t bids  and   after   preliminary   technical
\nevaluation  of\tthose bids, discussions were held  with\t the
\nbidders\t and based on such discussions, the GOI\t shortlisted
\nrespondent  Nos.  4 and 5 and another consortium of  Hyundai
\nHeavy Industries, Essar Oil Limited, Dan Offshore and Albion
\nInternational.\t  Sometime  in\tOctober\t  1993,\t these\t two
\nconsortia  were\t called\t for  further  negotiations  by\t the
\nNegotiating  Committee\tto finalise the contract  and  after
\nsuch  negotiations  and\t evaluation  of\t  the  bids  on\t the
\nrecommendations of the said Committee, the bid of respondent
\nNos.   4 and 5 was accepted in February 1994 and a Letter of
\nAward  (LOA) was issued to the said consortium.\t As per this
\naward,\tthe oil-fields – Panna and Mukta – were agreed to be
\ngiven  to the said consortium with a participating  interest
\nof  30%\t each to respondent Nos.4 and 5 in association\twith
\nthe  ONGC which was given a share of 40%.  The said contract
\nprovided that the GOI had the first option to purchase up to
\n100%  of  the  production  of oil from these  fields  at  an
\ninternational  market  price to be determined in  accordance
\nwith  the  provisions of the contract.\tIt further  provided
\nthat  the  international  price\t shall\tbe  determined\twith
\nreference  to one or more freely traded international market
\nprices\twhich bear resemblance to the produce crude in terms
\nof  standard  parameters such as gravity,  sulphur  content,
\nyield  etc.   which are critical to the market value of\t the
\ncrude.\t The contract price to be paid to the contractor had
\nto  be\tthe price of Brent (DTD) crude with a discount of  $
\n0.10  cents per barrel.\t Brent is said to be a similar sweet
\ncrude  which  is freely traded in the international  market.
\nThe  actual  contract  termed as Profit\t Sharing  Contract
\n(PSC) was signed by the GOI and the consortium of respondent
\nNos.   3, 4 and 5 in regard to Panna and Mukta oil-fields on
\n22.12.1994.   The appellants herein challenged the  awarding
\nof  this  contract  before the High Court of Delhi  on\t26th
\nJuly, 1997 seeking the following reliefs :-\n<\/p>\n
      (a) direct a thorough criminal investigation into this
\ndeal  by an appropriate agency to be supervised by a  senior
\nindependent  person such as a retired Judge of a High  Court
\nor  the Supreme Court;\tand (b) direct the Respondents\tNo.1
\nand  2\tto take further follow up action by way of  criminal
\nprosecution  and departmental proceedings against  officials
\nwho  have played a corrupt or improper role in the award  of
\nthe  contract  for  the Panna  Mukta oil fields;   and\t(c)
\norder the cancellation of the contract for the Panna  Mukta
\noil fields to the joint venture led by RIL  Enron.\n<\/p>\n
      The  main\t ground of attack before the High Court\t was
\nthat  the  contract in question was awarded arbitrarily\t for
\ncollateral  consideration and is actuated by malafides.\t  It
\nwas  contended\tbefore\tthe High Court that the\t oil  fields
\nwhich were developed by a public sector company, namely, the
\nONGC  at  an expenditure of Rs.800 crores and which had\t the
\nreserve\t oil capacity worth more than Rs.20,000\/-crores\t was
\ngiven  on a 25 years lease to a private joint venture for  a
\npaltry\tsum  of Rs.12 crores.  It was also alleged that\t the
\nquantum\t of  oil  and  gas  reserves  which  was  originally
\nestimated  at 54.25 MMT was subsequently brought down to  14
\nMMT  in order to justify the award of this contract.  It was
\nalso contended before the High Court that the GOI agreed for
\na  fixed royalty and cess payment from the consortium  which
\nwould mean that the GOI has tied its income from the royalty
\nand  cess from these oil-fields to a fixed rate for a period
\nof  25\tyears  which was opposed to all known  standards  of
\nbusiness  prudence.   They also contended that the price  at
\nwhich the GOI agreed to purchase the oil from the JV was far
\nin excess of the market price and over and above that excess
\nmarket\tprice, the GOI also agreed to pay a further sum of $
\n4  per barrel of oil as a premium on an ostensible ground of
\nthe quality and locational advantage of the oil so purchased
\n.\n<\/p>\n
      The  appellants  who were the petitioners\t before\t the
\nHigh  Court strongly relied on the observations made by\t the
\nComptroller  and  Auditor General of India (CAG) who in\t its
\nreport\t submitted  to\tthe   Parliament,  had\traised\tmany
\nobjections  in\tregard to this contract.  They\talso  relied
\nupon  a recommendation made by the Superintendent of Police,
\nAnti Corruption Unit of CBI, Bombay, who had recommended the
\nfiling\tof  a First Information Report pointing out  various
\nirregularities\tcommitted in the awarding of this  contract.
\nAccording  to  the  appellants, this recommendation  of\t the
\nSuperintendent\tof Police, CBI, Bombay, was scuttled by some
\nhigher officers of the CBI with a view to favour the persons
\ninvolved  in awarding of this contract.\t It was also alleged
\nin the said petition that some of the senior officers of the
\nONGC  who  actively participated in the\t negotiations  which
\nculminated  in\tawarding  of  this  contract  in  favour  of
\nrespondent  Nos.   4  and  5  had  joined  the\tservices  of
\nrespondent   No.4  or  5  which\t  fact,\t according  to\t the
\npetitioners,  clearly  indicated that these officers  during
\ntheir  tenure with ONGC had colluded with respondent Nos.  4
\nand 5.\tIt was further alleged that the contract in question
\nlacked transparency in the invitation of the bids as well as
\nin  the\t evaluation of bids which has led to the grant of  a
\nvery  valuable contract on unconscionable terms, leading  to
\nplundering  of\tnational  resources.   The  appellants\talso
\nrelied\ton  a statement purported to have been made  by\t the
\nPrivate Secretary to the then Minister of Petroleum, who had
\naverred\t in the said statement to the investigating  agency,
\nto  the\t effect that large sums of monies were paid  to\t the
\nsaid  Minister.\t  The  petition\t was   opposed\tby  all\t the
\nrespondents  on\t almost similar grounds contending that\t the
\ncontract   in\tquestion  was\tawarded\t after\t a   careful
\nconsideration  of  all the commercial\/ technical aspects  of
\nthe  contract bearing in mind the policy of the GOI in\tthis
\nregard\tand  the  contract  in\tquestion  was  to  the\tbest
\nadvantage  of  the GOI and the ONGC.  The  respondents\thave
\nasserted  that there has been no collateral consideration or
\nmala  fides involved in awarding of the contract;  and\tthat
\neach  of the terms of the contract was carefully  considered
\nkeeping\t in  mind the interest of the GOI and the ONGC.\t  It
\nwas  further  argued that the figures mentioned in the\twrit
\npetition are wholly imaginary and exaggerated both in regard
\nto  the oil reserves as also in regard to potential  returns
\nfrom  the  oil fields and as a matter of fact the  estimated
\ntake  of  the  GOI and the ONGC in this contract  is  to  an
\nextent\tof  80\tto 82 per cent of the total net\t revenue  or
\ntechnical  profits from the contract.  The respondents\talso
\ndenied\tthe fact that under the contract the GOI had  agreed
\nto  purchase the crude oil from the joint venture consortium
\nat a highly inflated price of $ 24 per barrel which included
\na  premium of $ 4 per barrel.  According to the respondents,
\nthis  figure  was deliberately inflated by the\tpetitioners,
\nand  there  was\t no such agreement to pay $4 per  barrel  as
\npremium.   On  the  contrary,  the  price  fixed  under\t the
\ncontract  for  purchase of the crude oil by the GOI was\t the
\ninternational  market  price prevailing on the date of\tsuch
\npurchase  minus a rebate of $ 0.10 cents per barrel on\tsuch
\nprice  which  meant that the price paid by the GOI was\tless
\nthan  the  international price prevailing.  The\t respondents
\nalso  questioned  the correctness of the petitioners  claim
\nthat  the quantity of oil reserves in these wells were to an
\nextent\tof  54.4 MMT and also contended that at no point  of
\ntime  the reserve oil figure was deflated, as alleged in the
\npetition.   They  also contended that re-employment  of\t the
\nofficials  named  in  the  petition had\t no  effect  on\t the
\ncontract.   In regard to the statement of Mr.  Safaya,\tthey
\ncontended   that  the  alleged\t statement  of\tthe  Private
\nSecretary  to  the Minister was false and, at any rate,\t the
\nsame  was  subsequently withdrawn before the court  and\t the
\nsaid  bribery  case  is\t the  subject-matter  of  a  pending
\ncriminal trial.\t The CBI has also denied the allegation made
\nagainst\t it.  The High Court as per its judgment dated\t25th
\nJanuary,  1999\trejected  the preliminary objection  of\t the
\nrespondents in regard to the maintainability of the petition
\nand  proceeded to deal with the petition on its merits.\t  It
\ncame  to  the  conclusion that the questions raised  by\t the
\nappellants\/petitioners in their petition involved matters of
\neconomic  policy  in  respect of which the GOI\thad  greater
\nlatitude  and  flexibility and the courts would be  slow  to
\ninterfere  in  such  matters.  Dealing with  the  allegation
\npertaining  to\tabnormality  in fixing of royalty  and\tcess
\namounts payable by the joint venture, the High Court came to
\nthe conclusion that the liability to pay royalty is upon the
\noil  produced and sold, irrespective of the price payable by
\nthe  GOI  which\t could vary depending on  the  international
\nmarket.\t  On this foundation, it came to the conclusion that
\nthere was no basic fallacy in the methodology adopted by the
\nGOI  as\t to the payment of royalty and cess.  It  also\theld
\nthat in regard to the evaluation of bids, more than one view
\nwas possible, hence it could not come to the conclusion that
\nthe  view  taken by the GOI was actuated by mala fides.\t  In
\nregard\tto the price payable by the GOI for the crude oil to
\nbe  purchased from the joint venture, the High Court came to
\nthe conclusion that the price payable was actually less than
\nthe  international  price for oil of similar proof  and\t the
\nHigh  Court  concluded\tthat the Governments  take  in\tthe
\ncontract  would\t not be less than 80% of the total value  of
\nthe  contract.\tIn regard to the complaint made against\t the
\nCBI,  the High Court refrained from expressing any  opinion.
\nOn  this  basis, the High Court came to the conclusion\tthat
\nthe  allegations  of  the  petitioners before  it  that\t the
\ncontract  in  question was unconscionable as to call for  an
\nindependent  probe,  were not established and,\taccordingly,
\ndismissed  the\tpetition.   Lengthy   arguments\t have\tbeen
\nadvanced  before  us by Mr.  Shanti Bhushan, learned  senior
\ncounsel appearing for the appellants, and learned Additional
\nSolicitor  General  Mr.\t Kirit Rawal, Mr.  Ashok Desai,\t Mr.
\nAtul  Setalvad,\t Mr.  B.  Sen and Mr.  K.N.   Bhat,  learned
\nsenior\tadvocates,  on behalf of the respondents.  To  avoid
\nrepetition,  we\t will refer to the gist of  their  arguments
\nduring\tthe  course  of our judgment.  Mr.   Shanti  Bhushan
\ninitiated  his attack on the impugned contract by contending
\nthat  the  GOI\thad  earlier   instructed  the\tMinistry  of
\nPetroleum  to  make  a\tstudy of  comparative  economics  of
\noperating  the oil wells on a stand alone basis by the\tONGC
\nor the OIL vis-a-vis offering these wells on a joint venture
\nbasis.\tHe contended that the Ministry of Petroleum, however
\nwithout\t any  such  comparative economis, in  August,  1992,
\ninvited\t bids  for  development of  the\t discovered  oil\/gas
\nfields\tincluding  the\toil fields of Panna and Mukta  on  a
\njoint\tventure\t  basis\t without   first   considering\t the
\nfeasibility  of\t operating them on stand alone basis by\t the
\nONGC\/OIL.   The\t appellants  contend that these\t oil  fields
\nwhich  were with the ONGC on a long term lease and on  which
\nthe ONGC had already spent more than Rs.800 crores from 1976
\nto 1993;  and from which the ONGC had been producing oil and
\nselling\t it  to the Government of India at  an\tadministered
\nprice  of  $ 8 per barrel need not have been given on  joint
\nventure\t basis;\t and if a comparative study were to be made,
\nit  would  have been crystal clear that the  development  of
\nthese wells on a stand alone basis would have been much more
\nprofitable  to the GOI than by giving these wells on a joint
\nventure.\n<\/p>\n
      On  behalf  of the first respondent in regard to\tthis
\ncontention  of the appellants, it is stated that even though
\nin  the notes submitted to the GOI, no comparative economics
\nwas  indicated, as a matter of fact such a comparative study
\nwas  taken  up\tand it is only based on the result  of\tsuch
\nstudies\t that the two oil fields i.e.  Panna and Mukta\twere
\nrecommended  to\t the GOI to be offered for development on  a
\njoint  venture basis.  They also contended that as per\tthis
\nstudy it was noticed that the two oil fields Panna and Mukta
\nwere  not  fully developed and the ONGC inspite of  spending
\nhuge  sums  of money on development of these wells, was\t not
\nable  to  exploit  these oil wells to the  maximum  possible
\nextent\tand  in\t the wake of the then  prevailing  financial
\ncrunch and the foreign exchange crisis and the imminent need
\nof  the country for extra oil production, it was  considered
\nthat  offering these wells on a joint venture basis was more
\nbeneficial  and\t less  burdensome  in the  interest  of\t the
\ncountry.  It was also pointed out that at that point of time
\nthe  World Bank had offered financial assistance provided  a
\ntime-bound  programme  was  chalked  out   by  the  GOI\t for
\ndevelopment  of these wells.  For all these reasons the\t GOI
\ncontended that it was thought economically prudent to go for
\njoint  venture\tdevelopment  of the oil fields.\t  They\talso
\ncontended  that though, as a matter of fact, the particulars
\nof  the result of the comparative economics prepared by\t the
\nMinistry  and the ONGC were not submitted to the GOI,  these
\nmaterials  were\t considered by the concerned Ministry  along
\nwith  the  Cabinet Sub-Committee on Economic Affairs and  on
\ntheir  approval\t and with the knowledge and consent  of\t the
\nCabinet,  a  decision  was taken to give the oil  wells\t for
\ndevelopment  on a joint venture basis.\tThe High Court after
\nconsidering  the  material available on record came  to\t the
\nconclusion  that  non-placing of the report  on\t comparative
\neconomics  before the GOI is only an irregularity and in the
\nabsence\t of  any prejudice to public interest being  pointed
\nout,  the prayer of the appellants before it for directing a
\nprobe  was not justified.  We have carefully considered\t the
\narguments and the material that was placed before us, and we
\nnote  that  so\tfar as the allegation of failure to  make  a
\ncomparative  economic study is concerned, from the  material
\non  record we find that the said allegation is not factually
\ncorrect because it is seen that, as a matter of fact, such a
\ncomparative  study  was\t made by the Ministry and  when\t the
\nparticulars  thereof  were sought for by the CAG,  the\tsame
\nwere  also  placed  before  the CAG, and the  CAG  has\talso
\naccepted  this\tfact  but commented in its report  that\t the
\nstudy  conducted  by  the  Ministry   has  not\ttaken\tinto
\nconsideration  the ONGCs current cost of development of the
\nwell  platforms vis-\u00e0-vis the cost of similar facilities  to
\nbe provided by the joint venture contractors.  Be that as it
\nmay,  the  fact\t remains  that\t a  comparative\t study\t was
\nconducted;   but the same was not placed before the GOI when
\nthe  latter  accepted the proposal of the Ministry  to\tgive
\nthese  wells  on  a  joint  venture  basis.   The  question,
\ntherefore,  for our consideration is:  does the\t non-placing
\nof  the\t materials pertaining to the  comparative  economics
\nvitiate\t the  contract\timpugned in this appeal.   As  noted
\nabove,\tthe  GOI in its counter has stated that\t though\t the
\nresult\tof  the\t comparative  economics\t conducted  was\t not
\nsubmitted  to  the Cabinet, the same was discussed with\t the
\nCabinet\t Sub-Committee\ton  Economic Affairs  and  on  their
\napproval  and  with knowledge and consent of the Cabinet,  a
\ndecision  was taken to give the oil wells for development on
\na  joint  venture basis.  This submission when taken in\t the
\nbackground  of\tthe fact that at the relevant point of\ttime
\nthe  ONGC was not in a position to exploit the oil wells  in
\nquestion  to  the  best advantage of the oil  needs  of\t the
\ncountry\t and there was overall financial crunch and  foreign
\nexchange crisis, and there was also a possibility of the GOI
\nlosing\tthe  financial assistance from the World  Bank,\t the
\nGOIs  decision to accept the suggestion of the Ministry\t to
\noffer  these  oil wells on a joint venture basis  cannot  be
\nfaulted.    The\t material  available  on  record   and\t the
\ncircumstances  prevailing at the time of the decision of the
\nGOI  show that though the materials of the comparative study
\nwere  not placed before the GOI, the recommending  authority
\nhad  based  its\t recommendations  on such  study  which\t was
\naccepted  by  the  GOI.\t Therefore, by the mere\t absence  of
\nplacing\t the materials constituting the comparative economic
\nstudy, while in effect it was actually taken note of, we are
\nunable\tto  accept the argument of the appellant that  there
\nhas  been non-application of mind by the GOI while  awarding
\nthe  contract.\tThat apart, whether the oil wells should  be
\ndeveloped  on  a stand alone basis by the ONGC or not, is  a
\nmatter of policy with which we are not inclined to interfere
\nsolely\ton  the\t ground that there is no reference  to\tsuch
\nstudy in the decision of the GOI.  Therefore, the allegation
\nof non-application of mind must fail.\n<\/p>\n
      It  was next contended by the appellants that the\t GOI
\nhas bartered away the two oil wells already developed by the
\nONGC  containing large deposits of oil to the joint  venture
\nfor  a\tmeagre\tsum  of\t Rs.12 crores paid  to\tthe  GOI  as
\nsignature  bonus.   According to the appellants,  the  oil
\nreserve\t in the said two oil wells was in the range of\t54.4
\nMMT which, on the basis of the then prevailing market price,
\nwould  be  of the value of Rs.17,000 crores.  The  appellant
\nalso  contends that with a view to benefit respondent  Nos.4
\nand  5, the oil reserves were under-estimated at 14 MMT with
\nthe connivance of Mr.  RB Mehrotra, Member (Exploration) and
\nMr.   Khosla,  Chairman\t & Managing Director,  ONGC  at\t the
\nrelevant   time.   In  support\tof  this   contention,\t the
\nappellants  also rely on the observations of the CAG who, in
\nhis  report  at\t para 2.11, has observed that  The  reserve
\nestimates  on the basis of which the Government should\thave
\nproceeded  in the matter, kept varying at different stages .
\n.  .  In the absence of a reasonable assessment of reserves,
\nit  would  be  difficult  for\tthe  Government\t to   anchor
\nnegotiations  properly for obtaining higher Government\ttake
\nin  the\t form  of  past\t cost  compensation,  signature\t and
\nproduction  bonuses  to ONGC and increased share  in  profit
\npetroleum. The GOI and the ONGC in their statements as well
\nas  in their submissions had given their own explanation  in
\nregard\tto  the varying figures found in the records.\tThey
\ncontended  that the figure of 51.4 MMT originally noted\t was
\nnot  an\t estimate  of  oil reserve only but  was  the  total
\nestimate  of reserve of oil and gas found in these wells out
\nof  which  the\tONGC had estimated oil reserve at  34.4\t MMT
\nonly;\tthe balance being gas reserve.\tIt is also contended
\nthat in the year 1990 the ONGC undertook a 3D seismic survey
\nwhich\trevealed   that\t the   actual  oil   available\t for
\ncommercially  viable extraction from these wells was to\t the
\nextent\tof  14 MMT only.  They contend that this figure,  as
\nobtained from the 3D seismic survey, was not conveyed to any
\nof the bidders.\t On the contrary, the intending bidders were
\nasked  to  conduct  their  own survey  for  the\t purpose  of
\noffering  their\t bids.\tThey also contend that 34.4  MMT  of
\nreserve\t oil  was not actually the quantity of\teconomically
\nrecoverable  oil but was the estimate of a possible  reserve
\nof  oil in these wells.\t Even according to the ONGC,  before
\nthe  3D\t seismic survey, the planned recovery  estimate\t was
\nonly  24.9 MMT out of 34.4 MMT estimated reserve.  From\t the
\nmaterial  on record, it is seen that the bidders made  their
\nown survey of these wells and so far as respondent Nos.4 and
\n5 are concerned, they estimated the economically recoverable
\noil from these wells at 20 MMT while the other joint venture
\nconsortium  which was short-listed along with the consortium
\nof  respondent\tNos.3 to 5, had estimated it at 12 MMT,\t and
\nthe  respective\t bids of the parties were evaluated  on\t the
\nbasis  of  their self-evaluation of the reserve oil  in\t the
\nwells  concerned.   Therefore, we think it is possible\tthat
\nout of 34.4 MMT of the oil estimated originally as being the
\nreserve,  as a matter of fact, the recoverable oil could  be
\nonly  20  MMT or near about that quantity, as  evaluated  by
\nrespondent  Nos.4 and 5 because we could reasonably draw  an
\ninference  that\t it  may  not be  possible  to\teconomically
\nexploit\t all  the oil that may be existing in an  identified
\noil well.  At any rate, it would be hazardous for the courts
\nto  venture  on\t a guesswork as compared  to  the  technical
\nassessment  that  is  made,  correctness  of  which  is\t not
\ndisproved  by cogent materials.\t Therefore, we are unable to
\naccept the contention of the appellants that, as a matter of
\nfact,  the recoverable oil reserve in Panna-Mukta oil fields
\nwas  either  54.4 MMT or even 31.4 MMT.\t That apart,  it  is
\nvery  important to note that the GOI has made provisions  in
\nthe  contract  itself to increase its take in the  event  of
\nthere  being an increase in the quantity of recoverable\t oil
\nby  providing for progressive fiscal regime in the contract.
\nAs  a  matter of fact, this aspect of the contract was\talso
\ntaken  note  of by the CAG in Para 2.12 of the\treport.\t  In
\nview  of  this\tsafeguard  coupled with the  fact  that\t the
\neconomically  recoverable  oil\tfrom these wells is  in\t the
\nregion\tof  20\tMMT, we do not think that  the\tcontract  in
\nquestion  is so unreasonable as to suspect the bona fides of
\nthe  same  on this ground.  At this stage, we will  have  to
\ntake  note  of\tthe  argument of  the  appellants  that\t Mr.
\nMehrotra  and Mr.  Khosla, who were at the relevant point of
\ntime  holding important posts in the ONGC, had\tsubsequently
\njoined\tthe  services  of  respondent  Nos.4  and  5  which,
\naccording  to  the  appellants, shows that  that  these\t two
\nofficers could have played an important role in reduction of
\nthe  figures mentioned by the ONGC.  It is true that in\t the
\nyear  1992,  Mr.  Mehrotra was the Member (Exploration)\t and
\nMr.   Khosla  was the Managing Director of the ONGC.   Among
\nthese  two officers, Mr.  Khosla retired as an M.D.  in\t the
\nmonth of September, 1992 and Mr.  Mehrotra retired as Member
\n(Exploration)  on 31.12.1993, while the contract in question
\nwas  approved by the GOI on 23.2.1994 and a Letter of  Award
\nwas  issued  to\t the consortium on 16.3.1994 by\t which\ttime
\nthese two officers had left the services of the ONGC, and it
\nis to be noted that they had no part to play in the approval
\nof the award of contract to the consortium which was done by
\nthe   GOI  on  the  recommendations   of  a   Committee\t  of
\nSecretaries.   Therefore,  it  is difficult  to\t accept\t the
\nargument that these two officials connived to reduce the oil
\nreserves so as to help their future employers.\n<\/p>\n
      We  will\tnow consider the argument of the  appellants
\nthat  the GOI had deliberately agreed to peg down its income
\nfrom  the royalty and cess payable to it to a fixed rate for
\na  period of 25 years which, according to the appellant,  is
\nopposed\t to all known standards of business prudence.\tThey
\ncontend\t that by such freezing of royalty and cess, the\t GOI
\nhas  denied itself the benefit it would have obtained if the
\nroyalties were to be fixed at an ad valorem rate, correlated
\nwith  the increase in future international oil prices.\t The
\nappellants contend that by freezing of royalty and cess, the
\ntake  of the GOI in the contract would increasingly become a
\nsmall  portion of the total earnings when international\t oil
\nprices\tincrease  in  future.\tBy this,  according  to\t the
\nappellants,  the GOI has conceded a large benefit in  favour
\nof  the contractors in the long run.  The CAG has also taken
\nnote  of  this\tfreezing of royalty and cess  in  its  final
\nreport\twherein\t it has observed that the Ministry  had\t not
\ninformed  the  GOI  before agreeing to freeze  the  rate  of
\nroyalty and cess in the contract.  It had also observed that
\nthe  royalty ought to have been at an ad valorem basis.\t The
\nGOI  has contended that the freezing of royalty and cess  is
\nnot a concession given to the joint venture and the same was
\nto provide for fiscal stability so that the economics of the
\nproject\t is  not adversely affected.  It was contended\tthat
\nthe  decision  to  freeze the royalty and  cess\t during\t the
\nperiod of contract was taken to enable the investors to work
\nout their economics of the project without undue uncertainty
\narising\t from  the future behaviour of the  Government\twith
\nregard to such levies.\tThe other respondents have sought to
\nrely  on  similar  international practice in regard  to\t the
\nfixed  levy of royalty and cess in similar contracts.\tThey
\nargued that if royalty and cess were not to be on an assured
\nbasis during the period of contract, it was most likely that
\nthe  bidding  parties  would  not  have\t come  forward\twith
\nattractive  bids, as has been done in the present case under
\nother  heads.\tThey  also contend that there  is  always  a
\npossibility  that if an open-ended royalty and cess were  to
\nbe  insisted  upon,  the  bidding  parties  might  not\thave
\naccepted  the  figures\twhich are now agreed to be  paid  as
\nroyalty\t and  cess.   As could be seen\tfrom  the  arguments
\naddressed  on behalf of the appellant, neither the appellant
\nnor the CAG has taken any exception in regard to the quantum
\nof royalty and cess as fixed in praesenti.  But the argument
\nseems  to be that it should not have been a fixed figure for
\nthe entire period of the contract rather it should have been
\nat  an\tad  valorem  rate.  This argument  proceeds  on\t the
\nfooting\t that  if  international prices of oil\twere  to  be
\nincreased  in  future,\tthere\twould  be  no  corresponding
\nincrease  in royalty and cess, hence, the GOI would stand to
\nlose,  but then this argument does not take within its sweep
\nthe   repercussions  consequent\t to  a\treduction   in\t the
\ninternational  oil  prices, however rare it might be, if  it
\nwere  to  happen, the corresponding share of the  GOI  under
\nthis  head  would also get reduced.  Then again, one  should
\nnot  be\t oblivious  of\tthe fact  that\tthe  Profit  Sharing
\nContract in the present case is not anchored on the basis of
\na single head of payment as we could see it is an offer of a
\nbasket\tcontaining  payments  under   various  heads.\t The
\noffering  party and the accepting party in such cases,\twill
\nassess\tthe  total  value of the basket and  decide  on\t the
\nacceptance or otherwise of the offer.  In such a case, it is
\nnot  possible  to  evaluate the profit from  a\tcontract  by
\nassessing the value under each head of receipt individually.
\nThat  can be done only by taking into account all the  heads
\nof  receipt  cumulatively.   Therefore, it is  difficult  to
\naccept\tthe  argument of the appellants that by pegging\t the
\nrate  of  royalty  and\tcess to a fixed\t sum,  the  GOI\t has
\narbitrarily bartered away a major portion of its take in the
\ncontract.   At\tany  rate, when two options  were  available
\nbefore the GOI to have a fixed royalty and cess or a varying
\nrate based on an ad valorem rate of oil, and if after taking
\ninto consideration the entire value of the contract, the GOI
\nhas  opted  to\tgo in for a fixed royalty  rate,  we  cannot
\nconclude  that\tsuch  a\t decision   was\t arrived  at  either
\narbitrarily  or\t unreasonably.\tWe think it as not  safe  to
\ncome  to  the conclusion that freezing of royalty  and\tcess
\nduring\tthe period of contract was done in the instant\tcase
\nwith  the  sole intention of granting undue benefits to\t the
\njoint  venture.\t  In regard to the observations of  the\t CAG
\nthat  the Ministry did not inform the Government in  advance
\nas  to the decision to fix the royalty and cess on a  frozen
\nbasis,\tit was pointed out to us by the respondents that  in
\nJanuary,  1994\titself\tthe Government was informed  of\t the
\ndecision  of  the Committee of Secretaries that the  bidders
\nwill  be  asked to pay the royalty and cess at\tthe  current
\nrate  because of the prevailing international practice.\t For
\nthese  reasons,\t we are of the opinion that the\t appellants
\nobjection  as  to the fixed royalty and cess payable to\t the
\nGOI under the contract cannot be sustained.\n<\/p>\n
      The  next challenge of the appellants is to the agreed
\nprice  under  the  contract at which the GOI has  agreed  to
\npurchase  the  oil exploited by the JVs under the  contract.
\nThe  appellants\t contend that before awarding the  contract,
\nthe  ONGC  was selling oil from Panna  Mukta to the GOI\t at
\nthe  rate  of  Rs.1,741\/- per ton ($ 8\tper  barrel).\tThey
\ncontend\t that  after the signing of the contract the GOI  is
\nbuying\tthe  oil from the JVs at the cost of $24 per  barrel
\n(i.e.\t$  20  being  the international price plus  $  4  as
\npremium).   It was also contended that the share of the\t GOI
\nin  the crude oil produced was fixed on a fraudulent formula
\nbeneficial  to respondents 4 and 5.  They also contend\tthat
\nas  per the calculations of the appellants, the share of the
\nGOI  in\t the crude oil produced under the contract  will  be
\nmerely\t5  to  10  per cent;  whereas  normally\t in  similar
\ncontracts,  the take of the Government should have been\t 80%
\nto  90%.  The appellants also assail the alleged  additional
\ncost  of $ 4 as premium per barrel which, according to them,
\nis  being  paid to the JVs because of the fact that the\t oil
\nproduced  from\tPanna  and  Mukta   costs  less\t by  way  of
\ntransportation charges and the crude is of superior quality.
\nThis  agreement to pay a premium of $ 4 on the above  count,
\naccording  to  the  appellants, is an atrocious\t deal  which
\nalone  would cause a loss to the GOI to the tune of Rs.3,000
\ncrores.\t  They contend that there is no logic of paying $  4
\nper  barrel  for the oil produced from Panna and  Mukta\t oil
\nfields\ton  the ground of superior quality of oil or on\t the
\nground\tof locational advantage.  In reply, on behalf of the
\nGOI,  it was contended that sharing of the profit  petroleum
\nbetween\t the  Government and the contractor was\t a  biddable
\nitem  and  the same was fixed with reference to the take  of
\nthe  GOI in the entire contract.  They contend that this was
\nthe  best  offer  that the GOI got from\t amongst  the  final
\nbidders.   They\t further  contend that the  bid\t for  profit
\npetroleum  was invited by two alternatives, namely, on slabs
\nof  investment\tmultiple  (IM) or on the post  tax  rate  of
\nreturn\tachieved  by the companies.  According to this,\t the
\nprofit\tpetroleum  share of the GOI ranges from 5 to 50\t per
\ncent depending on the level of IM reached.  It also contends
\nthat  this share of profit petroleum with the Government  is
\nover  and  above the payment of statutory duties  and  other
\ntakes  like  royalty, signature and production bonuses,\t tax
\netc.   It  was also contended that this element\t of  sharing
\nprofit\tpetroleum  is  a new element and there was  no\tsuch
\nearlier arrangement with the ONGC to have a profit petroleum
\nsharing.  They also deny that the Government is committed to
\npay  a\tcost of $ 24 per barrel for the crude produced\tfrom
\nthese  oil-fields, and, according to it, the said allegation
\nof  the appellants is purely a figment of imagination.\t The
\nGOI  specifically  denies the allegation of  the  appellants
\nthat  the GOI is paying a premium of $ 4 per barrel over and
\nover  the international price of crude either on the  ground
\nthat  the  quality of crude is superior or on the ground  of
\nits  locational advantage.  It reiterates and contends\tthat
\nit  has the first option to purchase the crude produced from
\nthese oil-fields at an international market price to be paid
\nto  the\t contractor  on\t the  basis  of\t an  internationally
\naccepted  standard  called  price of Brent  crude  with\t a
\ndiscount to the advantage of the GOI of 10 cents per barrel.
\nTherefore, it is argued that as a matter of fact, instead of
\npaying\t$  4  per  barrel  as premium  over  and  above\t the
\ninternational  price, the GOI is actually paying $ 0.10 cent
\nless  than  the\t international\tprice of  crude\t of  similar
\nquality.  They also deny that the purchase of crude from the
\ncontractors  would be costlier than the price the GOI  would
\nhave  paid  for purchase of similar crude from the  ONGC  as
\ncontended  by the appellants.  According to this respondent,
\nfor  the  month\t of June, 1997, as per\tthe  price  fixation
\nformula\t in  the contract, the purchase price that  the\t GOI
\npaid  to the contractors came to US $ 18.969 per barrel only
\nand  this  payment was inclusive of cess and  royalty  which
\nitself\twould  amount  to  about  $  5\tper  barrel  as\t the
\ncalculation  based  on the conversion factors  and  exchange
\nrate  of the day.  They also contend that the price paid  by
\nthe  GOI to the ONGC cannot be compared with the price\tthat
\nthe  GOI  has agreed to pay under the contract\tbecause\t the
\nprice  payable\tby  ONGC was an\t administered  price.\tThey
\nfurther\t contend that the take of the GOI as a whole in\t the
\ncontract  is  over  80% of the project surplus\tand  not  as
\ncontended  by the appellants.  Respondent Nos.4 and 5 in the
\nstatements filed before the court and also during the course
\nof their arguments, denied the allegation of undue advantage
\nshown  to them in fixation of price of crude oil.  They have
\nalso  specifically denied that under the contract the GOI is
\nobliged\t to  pay  $ 4 per barrel extra as premium  over\t and
\nabove  the  international market price for the\tpurchase  of
\ncrude  oil  from  them.\t  They also  contend  that,  on\t the
\ncontrary,  the agreement provides for a concession of $ 0.10
\nper  barrel  from  the international price fixed  under\t the
\ncontract.\n<\/p>\n
      The  price  fixation in a contract of the nature\twith
\nwhich  we  are concerned, is a highly technical and  complex
\nprocedure.   It\t will be extremely difficult for a court  to
\ndecide\twhether\t a particular price agreed to be paid  under
\nthe  contract is fair and reasonable or not in a contract of
\nthis  nature.\tMore so, because the fixation of  price\t for
\ncrude  to  be  purchased  by the GOI  depends  upon  various
\nvariable factors.  We are not satisfied with the argument of
\nthe appellants that the nation has suffered a huge financial
\nloss  by  virtue of this arbitrary fixation of crude  price.
\nAs  a matter of fact, the figure mentioned by the appellants
\nof  Rs.3,000 crores as a loss under this head of pricing  is
\nbased  on incorrect fact that the consortium is charging $ 4
\nper  barrel as premium.\t It is because of this factual error
\nthat  the  appellants came to the conclusion that under\t the
\ncontract  the GOI had agreed to purchase the crude from\t the
\nconsortium  at an inflated price.  We also take note of\t the
\nfact  that under the agreement the respondents are bound  to
\ngive  a\t discount of $ 0.10 per barrel on the price  of\t the
\ncrude  fixed  on the basis of the international market\trate
\nwhich,\tprima  facie  shows that the fixation  of  price  is
\nreasonable  since  under  all given circumstances  the\tsaid
\nprice  will be less than the international market price\t for
\nBrent crude.\n<\/p>\n
      It  was  next  contended that under  the\tcontract  no
\nceiling\t is  put on the operating expenditure (OPEX) and  no
\ndisincentives\thave  been  built   into  the  contract\t for
\nexceeding  OPEX,  absence  of  which   might  lead  to\t the
\nescalation  of\tOPEX,  thereby\treducing  the  take  of\t the
\nGovernment  in the PSC.\t In support of this contention,\t the
\nappellants have relied on the observations of the CAG who in
\nhis  report  has  noted\t moreover in  absence  of  a  clear
\nenunciation  of principles of computing cost escalation\t and
\ncontrol\t  in  the  respective\tcontract,  the\t Management
\nCommittee  cannot  exercise cost control to any\t meaningful
\nextent\tas such Government take and the ultimate benefit  of
\nthe  PSC  is unduly flexible and uncertain.  Based on  this
\nobservation, the appellants contend that by leaving open the
\nOPEX  without  a  ceiling, the GOI has permitted the  JV  to
\ncharge\tpractically any amount as they would like under this
\nhead  thereby making the profit of the GOI only an illusion.
\nAs  an\texample they point out that while ONGC incurred\t the
\nOPEX  of  $2 per barrel, the OPEX incurred by the JV at\t the
\ntime  of  the  filing of the petition was more than  $6\t per
\nbarrel.\t  On behalf of the respondents, it is contended that
\nit  is\tpractically impossible to put a ceiling\/cap  on\t the
\nOPEX  because of the market conditions and other  unforeseen
\nfactors, they deny that it is open to the JV to increase the
\nOPEX  unreasonably  because  the  contract  provides  for  a
\nbudgetary  control  by the Operating  Committee\t (Management
\nCommittee)  to which budgetary estimates of production\tcost
\nor  operating  cost have to be submitted.  According to\t the
\nterms  of  the\tcontract, this Committee has  the  power  of
\nreview\tor revise any such work programs, costs and budgets.
\nThey  point out that this Committee among others consist  of
\nthe  representatives  of the GOI and ONGC and  the  Director
\nGeneral\t of Hydrocarbons is the monitoring authority of this
\nCommittee.   They  also point out that the decision of\tthis
\nCommittee has to be unanimous and because of the very nature
\nof  the\t constitution  of the Committee,  any  arbitrary  or
\nunreasonable  increase effecting the take of the  Government
\nin  the\t PSC is impossible.  Respondents 4 and 5  have\talso
\nsubmitted that though it is a fact that in the initial stage
\nof the working of the contract the operating expenses was in
\nthe  range of $6 per barrel which was as expected because of
\nthe heavy expenditure they had to incur at the initial stage
\nto  make  improvements on the wining of the oil, they  point
\nout  that over the years the said expenditure has come\tdown
\nto $2.49 per barrel which almost equals to what was promised
\nin  the\t bid offer.  From the arguments referred  to  herein
\nabove, it is clear that though under the contract no ceiling
\nlimit  as such has been imposed on the OPEX, in our opinion,
\nthe  apprehension of the appellants cannot be accepted as  a
\nlikely happening because of the in built safety of budgetary
\ncontrol by the Committee constituted under the said contract
\nwherein\t the representatives of the GOI and the ONGC have an
\nunassailable  role in accepting in the proposal for increase
\nin the OPEX or not.  Therefore, there can be no apprehension
\nthat  Respondents  4  &\t 5   can  bulldoze  their  way\tinto
\nincreasing  the OPEX to the detriment of the interest of the
\nGOI.\tWe  also  accept  the\texplanation  given  by\t the
\nrespondents  that  in  a  contract like the  one  under\t our
\nconsideration  which is for a period of 25 years and  taking
\ninto  consideration the nature of the contract, it would  be
\nwell  nigh  impossible\tto prefix or put a  ceiling  on\t the
\noperational  expenses.\t The argument of the appellant\tthat
\nrespondent  Nos.4 and 5 have already increased the OPEX from
\n$2  to $6 is also satisfactorily rebutted by the respondents
\nwho  have  established\tthat the increase in  the  operating
\nexpenses  during the initial stage of the contract has since
\nbeen reversed and as at present the operational cost is only
\n$2.49.\t We  are  satisfied  that even though  there  is  no
\nceiling on the operational expenses to be incurred by the JV
\nand  no\t undue advantage of such absence of ceiling  can  be
\ntaken by the JV because of the in built budgetary control in
\nthe  contract.\tTherefore, we are of the opinion, that there
\nis  no\tsubstance in this allegation of the appellant.\t The
\nnext ground of attack by the appellant is that large sums of
\nmoney  spent by the ONGC in development of oil wells,  which
\nhave  accrued  to  its value, were not given credit  in\t the
\ncontract  while the sums of money spent by respondent  Nos.4
\nand  5 just prior to the signing of the contract were  taken
\nnote  of  and  a  provision was made  in  the  contract\t for
\nreimbursement  of these expenses to respondent Nos.4 and  5.
\nThe appellants contend that this type of concession given to
\nthe said respondents exposes the extent to which the GOI has
\nsacrificed  the\t nations  interest  in\tentering  into\tthe
\nimpugned   contract.   The  appellants\t also  rely  on\t the
\nobservations  of the CAG in this regard in its report.\t The
\nrespondents  have  denied these allegations.   They  contend
\nthat  while  the  amount spent by the ONGC  was\t during\t the
\nperiod when the ONGC was still exploiting and extracting oil
\nfrom  the wells and, consequently, it was deriving  monetary
\nbenefits  from such investment made by it.  Respondent Nos.4
\nand  5 have specifically stated that during the negotiations
\nthis  question of reimbursing the ONGC for its past expenses
\non  development\t of  the wells was discussed and  when\tsuch
\nrepayment  of the past costs was insisted upon, they made  a
\ncounter\t offer\tto the GOI that if the said expenses of\t the
\nONGC are to be reimbursed then they are willing to agree for
\nthe  same  with reduction in the royalty and cess and  other
\namounts\t payable  by  it.   This   modified  offer  was\t not
\nacceptable  to\tthe  GOI,  hence the same  was\tnot  further
\npursued.   In  regard  to the costs incurred  by  respondent
\nNos.4\tand  5\tas  to\t which\tthe  contract  provided\t for
\nreimbursement,\tit  was pointed out that this investment  by
\nrespondent  Nos.4 and 5 had gone into the development of the
\noil  wells  when it was still being exploited by  the  ONGC.
\nConsequently,  the ONGC derived financial benefits from this
\ninvestment  while  respondent  Nos.4  and  5,  who  actually
\ninvested  this amount, had no benefit whatsoever.  This fact
\nwas  also discussed at the time of the negotiations and\t the
\nGOI  considered it prudent to agree to the present terms  in
\nthe  PSC.  It was averred that the amount spent on the wells
\nby  the\t ONGC  for its development and\tthe  possibility  of
\nrepayment  of the amount spent by respondent Nos.4 and 5 was
\ntaken  into  account by the said respondents while  offering
\ntheir bids.  We have considered the arguments of the parties
\nin  this regard and we agree with the respondents that\tfrom
\nthe investments made by the ONGC as also by respondent Nos.4
\nand  5\ton these oil wells, the production of oil  in  these
\nwells  had  increased and the benefit of this  increase\t had
\ngone  exclusively  to the ONGC and the GOI;  and  respondent
\nNos.4  and 5 had no share of benefit from such developmental
\nactivities;   be it the investment by the ONGC or their\t own
\ninvestment  on these wells.  Furthermore, these are  matters
\nof  commercial\tprudence and in the background of  the\tfact
\nthat  the ONGC and the GOI both together had the benefit  of
\nthese  investments  in the form of increased oil  production
\nand  consequential benefit of receiving their take from such
\nexploitation  of  oil,\twe do not think we  can\t accept\t the
\nargument  of the appellants that these terms were agreed  to
\nby  the\t GOI with a mala fide intentiion of  granting  undue
\nadvantage  to respondent Nos.4 and 5.  As observed  earlier,
\nwe will also have to bear in mind the fact that the contract
\nin  question  involves\tthe payment of\tconsideration  under
\ndifferent  heads in one basket.\t The contents of this basket
\ncannot\tbe assessed individually nor can the court say\tthat
\nthe  receipt  from  a  particular  item\t in  the  basket  is
\narbitrarily low, because the take of the GOI in the contract
\nis  as\ta whole from the total receipt from the basket.\t  At
\nthis  juncture, we would like to notice the observations  of
\nthis  Court found in Kasturi Lal Lakshmi Reddy v.  State  of
\nJ.  and K.  (1980 3 SCR 1338 at 1357) wherein this Court had
\nheld :\n<\/p>\n
\tWe  have  referred to  these  considerations  only
\nillustratively,\t for  there  may be an infinite\t variety  of
\nconsiderations\twhich  may have to be taken into account  by
\nthe  Government\t in formulating its policies and it is on  a
\ntotal  evaluation  of  various\t considerations\t which\thave
\nweighed\t with the Government in taking a particular  action,
\nthat  the  Court would have to decide whether the action  of
\nthe Government is reasonable and in public interest.\n<\/p>\n
      It  is clear from the above observations of this Court
\nthat  it will be very difficult for the courts to  visualise
\nthe various factors like commercial\/technical aspects of the
\ncontract,  prevailing  market conditions both  national\t and
\ninternational and immediate needs of the country etc.  which
\nwill have to be taken note of while accepting the bid offer.
\nIn  such  a  case, unless the court is\tsatisfied  that\t the
\nallegations  levelled are unassailable and there could be no
\ndoubt  as  to  the unreasonableness, mala  fide,  collateral
\nconsiderations\talleged,  it  will not be possible  for\t the
\ncourts to come to the conclusion that such a contract can be
\nprima  facie or otherwise held to be vitiated so as to\tcall
\nfor  an\t independent  investigation, as prayed\tfor  by\t the
\nappellants.    Therefore,  the\tabove\tcontention  of\t the
\nappellants  also  fails.  While considering the\t allegations
\nlevelled against the acceptance of the impugned contract, we
\nmay  usefully refer to the observations of this Court in the
\ncase  of  Tata Cellular v.  Union of India<\/a> (1994 6 SCC\t651)
\nwhich are as follows :\n<\/p>\n
      The  principles of judicial review would apply to the
\nexercise of contractual powers by Government bodies in order
\nto prevent arbitrariness or favouritism.  However, there are
\ninherent  limitations in exercise of that power of  judicial
\nreview.\t  Government is the guardian of the finances of\t the
\nState.\t It is expected to protect the financial interest of
\nthe  State.   The  right to refuse the lowest or  any  other
\ntender\tis  always  available to the Government.   But,\t the
\nprinciples  laid down in Article 14 of the Constitution have
\nto  be\tkept in view while accepting or refusing  a  tender.
\nThere  can  be no question of infringement of Article 14  if
\nthe  Government\t tries\tto get the best person or  the\tbest
\nquotation.   The right to choose cannot be considered to  be
\nan  arbitrary  power.\tOf  course, if\tthe  said  power  is
\nexercised  for\tany collateral purpose the exercise of\tthat
\npower will be struck down.\n<\/p>\n
      Judicial\tquest in administrative matters has been  to
\nfind the right balance between the administrative discretion
\nto decide matters whether contractual or political in nature
\nor  issues of social policy;  thus they are not\t essentially
\njusticiable  and the need to remedy any unfairness.  Such an
\nunfairness is set right by judicial review.\n<\/p>\n
      The  judicial power of review is exercised to rein  in
\nany  unbridled executive functioning.  The restraint has two
\ncontemporary  manifestations.  One is the ambit of  judicial
\nintervention;\tthe  other covers the scope of\tthe  courts
\nability\t to quash an administrative decision on its  merits.
\nThese restraints bear the hallmarks of judicial control over
\nadministrative action.\n<\/p>\n
      Judicial\treview\tis concerned with reviewing not\t the
\nmerits\tof the decision in support of which the\t application
\nfor judicial review is made, but the decision-making process
\nitself.\t  It is thus different from an appeal.\tWhen hearing
\nan  appeal,  the court is concerned with the merits  of\t the
\ndecision  under appeal.\t Since the power of judicial  review
\nis  not\t an  appeal  from the  decision,  the  Court  cannot
\nsubstitute  its own decision.  Apart from the fact that\t the
\nCourt is hardly equipped to do so, it would not be desirable
\neither.\t  Where\t the  selection or rejection  is  arbitrary,
\ncertainly the Court would interfere.  It is not the function
\nof  a  judge to act as a superboard, or with the zeal  of  a
\npedantic  schoolmaster substituting its judgment for that of
\nthe administrator.\n<\/p>\n
      The duty of the court is thus to confine itself to the
\nquestion  of legality.\tIts concern should be (1) whether  a
\ndecision-making\t authority  exceeded  its   powers  ?\t (2)
\ncommitted  an  error of law;  (3) committed a breach of\t the
\nrules  of  natural justice, (4) reached a decision which  no
\nreasonable  tribunal  would have reached or, (5) abused\t its
\npowers.\n<\/p>\n
      Therefore,  it  is  not  for the\tcourt  to  determine
\nwhether\t a particular policy or particular decision taken in
\nthe fulfilment of that policy is fair.\tIt is only concerned
\nwith  the  manner in which those decisions have been  taken.
\nThe  extent of the duty to act fairly will vary from case to
\ncase.  Shortly put, the grounds upon which an administrative
\naction\tis  subect  to\tcontrol by judicial  review  can  be
\nclassified as under:\n<\/p>\n
      (i)  Illegality :\t This means the decision-maker\tmust
\nunderstand   correctly\t the   law    that   regulates\t his
\ndecision-making\t power\tand  must give effect to  it.\t(ii)
\nIrrationality,\tnamely,\t Wednesbury   unreasonableness.\t  It
\napplies to a decision which is so outrageous in its defiance
\nof  logic  or of accepted moral standards that\tno  sensible
\nperson\twho  had  applied  his mind to the  question  to  be
\ndecided could have arrived at.\tThe decision is such that no
\nauthority  properly directing itself on the relevant law and
\nacting\treasonably could have reached it.  (iii)  Procedural
\nimpropriety.  Applying\tthe  above principle,  we  find\t it
\ndifficult to come to the conclusion that the decision of the
\nGOI  in\t accepting the bid of respondent Nos.4 and 5 on\t the
\nadvice of the Committee of Secretaries is so unreasonable as
\nto  accept the prayer of the appellants to grant the reliefs
\nsought\tfor  in this appeal.  Appellants rely  upon  another
\nfactual\t circumstance which is outside the terms of the\t PSC
\nto  establish their contention that the contract in question
\nwas  awarded  to respondent Nos.4 and 5 because\t of  certain
\ncollateral  considerations.   In this behalf,  they  contend
\nthat  there  is a clear and specific evidence to  show\tthat
\nrespondent  No.4 had paid certain sums of money to the\tthen
\nMinister of Petroleum at or about the time when the offer of
\nrespondents  4\tand 5 was being considered by the  GOI.\t  In
\nsupport\t of  this  contention,\tthe  appellants\t rely  on  a
\nstatement  purported  to  have\tbeen  made  by\tthe  Private
\nSecretary  to the said Minister to the CBI while the  latter
\nwas  investigating  a  case  of bribery.  As  per  the\tsaid
\nstatement,  respondent No.4 paid to the said Minister a\t sum
\nof  Rs.4 crores between June, 1993 and December, 1993  which
\nfact,  according to the appellants, is sufficient to come to
\nthe  conclusion that awarding of the contract to respondents
\n4 and 5 was influenced by some collateral consideration.  It
\nis  to be noted here that the said statement of the  Private
\nSecretary  to  the Minister which was made to the  CBI,\t was
\nsubsequently  retracted\t by  the   said\t Private  Secretary.
\nTherefore,  it\twill  not be safe to rely upon\ta  retracted
\nstatement  to  come to the conclusion that the\tcontract  in
\nquestion  is actuated by collateral consideration.  At\tthis
\nstage,\tit may not be out of place to mention the fact\tthat
\nthough there were a number of parties who have offered their
\nbids  pursuant\tto  the invitation of the GOI in  regard  to
\nvarious oil fields, and in regard to Panna-Mukta oil fields,
\nthere  were  as many as 8 other bidders;  none of  them\t has
\ncome  forward to question the validity of this contract.  It
\nis  also to be noted that another similar petition (PIL) was
\nfiled  before  the  Bombay  High  Court\t which\tcame  to  be
\ndismissed  and\tthe petitioners therein did not\t pursue\t the
\nmatter further;\t and one more writ petition filed before the
\nDelhi High Court also met with the same fate by the impugned
\ncommon\tjudgment, the said writ petitioner has not chosen to
\nassail the judgment of the Delhi High Court.  This leaves us
\nto  consider the argument of the appellants in regard to the
\nconduct\t of the CBI before the High Court as respondent No.2
\nin  the writ petition.\tThough the appellants have made many
\nallegations  against the investigation conducted by the\t CBI
\nin  this case, we do not think it is necessary for us to  go
\ninto   all   these   allegations    except   confining\t our
\nconsideration  to the stand taken by the CBI before the High
\nCourt\tas   to\t  the\t existence    of   Part-   II\tFile
\nNo.1\/636\/D\/95\/AC\/BOM  said  to have been opened by the\tthen
\nSuperintendent\tof  Police, CBI, Mumbai.  According  to\t the
\nappellants,  the said file is in continuation of Part I file
\nwhich was meant to be sent to the headquarters.\t In the writ
\npetition, it was specifically alleged that this Part II file
\nwas  opened  in\t the Anti Corruption Branch-II\tCBI,  Mumbai
\nsometime  in March, 1996 itself and the same was  segregated
\nfrom  the original file and withheld by some officers of the
\nCBI with ulterior motives.  In reply to the said allegation,
\nthe  CBI  filed\t a counter affidavit before the\t High  Court
\nverified   by\tone    Shri    K.Surenderan   Nair,   Deputy
\nSuperintendent of Police, CBI Special Task Force, New Delhi,
\nwherein\t in  paragraph 4 of the said affidavit it is  stated
\nthus  :\t So far as Part-II of File No.1\/636\/D\/95\/AC\/BOM\t in
\nwhich  Shri Y.P.Singh, the then Superintendent of Police-II,
\nACB,  Mumbai  Branch  allegedly recommended that  a  FIR  be
\nregistered and a Regular Case started, it was got checked up
\nwith  Dy.Inspector  General  of Police, ACB Mumbai  who\t has
\nintimated  that\t no such file is in existence in ACB  Mumbai
\nBranch. ( emphasis supplied).\n<\/p>\n
      It  is based on the use of the words no such file\t is
\nin  existence which made the appellants contend before\tthe
\nHigh Court that a deliberate incorrect statement was made by
\nthe  CBI in its affidavit filed before the High Court with a
\nview  to deny the allegation made by the writ petitioners as
\nto  the\t motive\t of  the superior officers  of\tthe  CBI  to
\nsuppress  the  contents of Part-II file opened by  said\t Mr.
\nY.P.  Singh, Superintendent of Police.\tThe writ petitioners
\nbefore\t the  High  Court  in  their   rejoinder   affidavit
\nreproduced  certain portions of the said Part-II file  which
\ncontained  the\tnotings\t of the senior officers of  the\t CBI
\nincluding  the\tone dated 11.4.1996 of Mr.  Raghuvanshi\t who
\ninstructed  Mr.\t Nair to swear to the first affidavit of the
\nCBI.   Still  when the CBI filed the first affidavit  before
\nthe High Court on 19.8.1997, Mr.  Raghuvanshi instructed the
\ndeponent  of  the said affidavit to state before  the  court
\nthat  no  such\tfile  is not in\t existence  in\tACB  Mumbai
\nBranch.\t  When the rejoinder affidavit was filed, it  seems
\nthe CBI was caught on the wrong foot and it tried to wriggle
\nout of the situation by filing another affidavit  this time
\nsworn  to  by Mr.  Raghuvanshi himself wherein an  ingenuous
\nstand  was taken that the intention of the CBI in  informing
\nthe court in the first affidavit by using the words no such
\nfile  is in existence in ACB Mumbai Branch was to  intimate
\nthe  court  that no such file was available at the  time  of
\nfiling of the first affidavit.\tWhile examining this belated
\nexplanation  of\t the  CBI we have to bear in mind  that\t the
\nfirst  affidavit of the CBI was, among other facts, in reply
\nto  the\t specific allegations of the writ petitioners as  to
\nthe  opening  of  and the contents of Part  II\tfile  which,
\naccording  to the writ petitioners, was being suppressed  by
\nthe  CBI from the Court.  As a matter of fact, in para 18 of
\nthe  writ  petition,  it was stated thus  :-  Part-II  file
\ncontaining  recommendation of registering a regular case  in
\nthe matter was withheld by the then Joint Director, CBI Shri
\nMahendra Kumawat and was not sent to the head quarters.\n<\/p>\n
      While  the  CBI had to explain this averment  made  in
\npara  18 of the writ petition, if really it wanted to convey
\nto  the Court as to the non-availability of Part II file  to
\ncomment on the above allegation, one would have expected the
\nCBI  to\t come forward with a simple explanation that  it  is
\nunable\tto  respond to the above allegation in view  of\t the
\nfact  that  the\t said  file was\t not  traceable\t instead  of
\naverring in the affidavit that no such file is in existence.
\nThe  use of the words no such file clearly indicates  that
\nwhat  the  CBI intended to convey to the Court in the  first
\naffidavit was to tell the Court that such file never existed
\nand  it\t is  only when the reply to the said  affidavit\t was
\nfiled  by  the writ petitioners with a view to get over\t the
\nearlier\t statement,  the second affidavit was filed  by\t Mr.
\nRaghuvanshi  interpreting the word existence to mean  not
\ntraceable.   In the circumstances mentioned hereinabove, we
\nare  unable  to accept this explanation of the CBI  and\t are
\nconstrained  to observe that the statement made in the first
\naffidavit  as to the existence of Part-II file can aptly  be
\ndescribed  as  suggestio  falsi and suppressio\tveri.\tThat
\napart,\tthe explanation given in the second affidavit of the
\nCBI  also discloses a sad state of affairs prevailing in the
\nOrganisation.\tIn that affidavit, the CBI has stated before
\nthe  Court  that  Part\tII file with  which  the  Court\t was
\nconcerned,  was\t destroyed unauthorisedly with\tan  ulterior
\nmotive\tby  none  other\t than  an official  of\tthe  CBI  in
\ncollusion  with\t a senior officer of the  same\tOrganisation
\nwhich  fact, if true, reflects very poorly on the  integrity
\nof  the\t CBI.\tWe  note herein\t with  concern\tthat  courts
\nincluding  this\t Court\thave  very   often  relied  on\tthis
\nOrganisation   for   assistance\t   by\tconducting   special
\ninvestigations.\t  This reliance of the courts on the CBI  is
\nbased  on the confidence that the courts have reposed in  it
\nand  the  instances  like  the one with\t which\twe  are\t now
\nconfronted  with, are likely to shake our confidence in this
\nOrganisation.\tTherefore, we feel it is high time that this
\nOrganisation puts its house in order before it is too late.\n<\/p>\n
      Leaving apart the above observations of ours in regard
\nto  the\t CBI,  having considered all  the  materials  placed
\nbefore us and the arguments addressed, we are satisfied that
\non  the facts and the circumstances of this case, the prayer
\nof  the\t appellants to direct a criminal investigation\tinto
\nthe deal in question by an appropriate agency, as prayed for
\nin the appeal, cannot be granted.\n<\/p>\n
      For the reasons stated above, the appeal fails and the
\nsame is hereby dismissed.\n<\/p>\n
      J.  (S P Bharucha)<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Centre For Public Interest … vs Union Of India & Ors on 19 October, 2000 Bench: S.N.Hegde, S.S.M.Quadri, S.P.Bharucha CASE NO.: Appeal (civil) 2485 of 1999 PETITIONER: CENTRE FOR PUBLIC INTEREST LITIGATION & ANR. Vs. RESPONDENT: UNION OF INDIA & ORS. DATE OF JUDGMENT: 19\/10\/2000 BENCH: S.N.Hegde, S.S.M.Quadri, S.P.Bharucha JUDGMENT: S.N.Hegde […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-234236","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCentre For Public Interest ... vs Union Of India & Ors on 19 October, 2000 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/centre-for-public-interest-vs-union-of-india-ors-on-19-october-2000\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Centre For Public Interest ... vs Union Of India & Ors on 19 October, 2000 - 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