KLIPOON ASSOCIATES v. UNION OF INDIA — 1995 DIGILAW 632 (ALL)

In this writ petition, the petitioners have prayed for a writ of mandamus in the nature of a direction to the respondents not to accept deliveries and not to proceed with procurement of 12000 Telecommunication towers on the basis of private treaties from respondents 5 to 7 and not to give effect to the work orders issued to respondents 5 to 7 under Annexure 6. 2. The petitioner is an approved supplier of telecommunication towers, poles etc. and is an approved empanelled supplier of respondent No. 2, the Indian Telephone Industries Limited, in short, ITI. In the whole country, there are twenty-three approved suppliers whose prototype of towers stands approved by the telecommunication Department. The. petitioners claimed to have the necessary infra-structure to supply the goods in issue and writing to supply the goods in question even at a lower price than the one at which the contract in issue has been negotiated in favour of the contesting respondents No. 5 to 7. Petitioner No. 1 is a registered partnership firm and all partners of the petitioner No. 1 are citizens of India and petitioner No. 2 is a partner of petitioner No. 1. The petitioner No. 1 carries on business of manufactur ing various engineering products required by the department of telecommunication. The factory of the petitioner is solely depending on the requirement of engineering products by the Department of telecommunication. Any supplier who intends to supply towers to telecommunication Department is required to have his design approved by Structural Engineering Research Cen tre, Madras, which is a Council of Scientific and Industrial Research Centre. The telecommunication towers are used and procured by the Department of telecommunication, Government of India for installing telecommunication Centre in rural areas. The telecommunication tower is a highly technical product. 3. The respondent No. 2, Indian Telephone Industries Limited, (ITI) is a fully Government owned company incorporated under the provisions of Companies Act and carries on business at Mirzapur Road, Naini, Allahabad U. P. The respondent No. 2 has been engaged by the Department of Tele communication, Government of India, for procurement of telecommunication towers for it. On or about 15th January, 1995, as it is alleged by the peti tioner No. 1, they came to know that respondents No. 5 to 7 have procured orders for telecommunication towers from respondent No, 2. On or about 15th January, 1995, as it is alleged by the peti tioner No. 1, they came to know that respondents No. 5 to 7 have procured orders for telecommunication towers from respondent No, 2. They came to know from the reliable sources that procurement is being made for 1200 pieces of telecommunication towers worth Rs. 12 crores on the basis of private treaties negotiated by the respondents with selected three parties, respondents 5 to 7. It is alleged that the petitioners representative approached the office of United Commercial and Industrial Company Private Ltd. to know the details of enquiry No NTH 4q 448 and they received a copy of the enquiry and the correspondence regarding the said enquiry from the said company. 4. It was submitted on behalf of the petitioners that the respondent No. 2 Indian Telephone Industries Limited being the authority within the meaning of Article 12 of the Constitution of India could not have any absolute discretion to place orders or consider selected suppliers, which is violative of Article 14 of the Constitution, The petitioners have a right to participate in the enquiry quoted by the respondents. The respondent No. 2 being a fully owned Govern ment company could not pick and choose a few persons to the exclusion of others. All actions of the authorities within the meaning of Article 12 of the Constitution must specify the test of reasonablenes and public interest and must be within the norms laid down for procurement of goods. A Govern ment owned company doing business is still a Government company and it is not open for it to make discretionary favouritism to the selected persons. In the present case, the respondents allowing only four persons to participate in the treaty have favoured them in violation of Article 14 of the constitution and placement of order of 12000 pieces to respondents 5 to 7 is illegal and violative of Article 14 of the constitution. It was stated that the placement of work order of 4500 pieces to each of the respondents 5 and 7 and 300 pieces to respondent No, 6 was done without floating any tender of notice or without advertisement of notice or enquiry in any newspaper and it was mandatory on the part of a Government owned company to float a tender and enquiry was required to be advertised in the newspaper. Thus, the action of respondents 2 to 4 has been challenged as violative of Articles 14, 19 (i) (g) and 3000-A of the Constitution of India. 5. Respondents 5 to 7 have filed separate counter affidavits but have adopted a common stands. They have disputed and denied that respondent No. 2 settled the contract either secretly or collusively. According to them, the tender enquiry made by the respondent No. 2 was opened in public. The negotiation was made by respondent No 2 with these respondents because the other tenderers did not turn up. The tender enquiry was, in fact, issued to respondents 5 to 7 and two others in order to avoid prolixity and in the facts and circumstances of the case the newspaper publication was not necessary. The respondent No. 2 the Indian Telephone Industries Limited was under an obligation to supply the towers to the department of telecommunication within a stipulated period of time and respondent No. 2, while issuing the order in favour of respondents 5 to 7 followed the norms set down for the pur chasing the goods. The Department of telecommunication floated a tender by publication in newspaper which was opened on 27th September, 1994 and the rate quoted pursuant to the said tender by the petitioner was Rs. 10,530 for self supporting 15 meters tower which is the self-same item in the present case. 6. Respondent No. 5 has alleged that on or about 3rd September 1993, the respondent No. 2 issued an enquiry bearing No. DGN (MM) T. 022 with regard to supply of 40 metres self-supporting towers. In pursuance of the said tender enquiry he duly quoted its rates. Subsequent to the submission of quotation, the respondent No. 2 inspected the factory or respondent No. 5. By letter dated 12th August, 1994 respondent No. 2 requested him to attend a meeting to be held on 26th August, 1994 for discussions with regard to supply of 40 and 15 meters self-supporting towers. In August, 1994, the respondent No. 2 issued a tender enquiry bearing No. NTC 4 Q 425 for supply of 40 meters self- supporting towers. In pursuance of the said enquiry, the respon dent No. 5 submitted its quotation to respondent No. 2 for supply of 40 meters self-supporting towers. In August, 1994, the respondent No. 2 issued a tender enquiry bearing No. NTC 4 Q 425 for supply of 40 meters self- supporting towers. In pursuance of the said enquiry, the respon dent No. 5 submitted its quotation to respondent No. 2 for supply of 40 meters self-supporting towers. After negotiation on 29th September, 1994, the respondent No. 2 requested him to submit a revised offer which was duly submitted on 29th September, 1994 and on 10th October, 1994 a letter of intent was issued to respondent No. 5 for supply of 75 pieces of 40 meters self-supporting towers. 7. By a tender enquiry dated 27th August, 1994 bearing No. NTH 4 Q 448 the respondent No. 2 requested the respondent No. 5 amongst others to quote rates for supply of 15 metres self-supporting towers and in pursuance of the said tender enquiry dated 27th of August, 1994 respondent No. 5 duly submitted its offer. Similar tender enquiry was issued to respondent No. 6 and 7 as also to one M/s. United Commercial and Industries Company Private Limited and shekhar Tubes and Sections Limited of Ghaziabad by respondent No. 2 and each one of them submitted their respective quotations. By letter dated 25th November, 1994, the respondent No. 2 requested these respondents 5 to 7 and United Commercial Industrial Company Private Limited and also Sekhar Tubes and Sections Limited for price negotiation. On 2-12-1994 M/s. United Commercial and Industrial Company Private Ltd. and Sekhar Tubes and Section Limited did not turn up. The respondent No. 2 expected arrival of those two companies and, therefore, the meeting was started much beyond the scheduled time. In the meeting for price negotiation, the respondent No. 2 disclosed that it had got an order from the Department of telecommunication for supply of 24000 pieces of 15 meters self-supporting towers at a provi sionally fixed rate. It was further disclosed that the respondent No. 2 was not in a position to agree to any particular rate because its own rate with the ultimate consumer, the Department of telecommunication, were yet to be finalised. It was further disclosed that the respondent No. 2 was not in a position to agree to any particular rate because its own rate with the ultimate consumer, the Department of telecommunication, were yet to be finalised. The respondents could gather from the representation made on behalf of the respondent No. 2 in the said meeting that it wanted them to agree to supply 15 meters self-supporting towers at the rate which would ultimately be finalised by the Department of telecommunication minus a margins of 5 to 10 per cent for respondent No. 2. These respondents were hesitent to accept such terms with regard to rates and they took time to con sider the matter and ultimately on 3rd December, 1994 the parties again met and agreed to supply towers to respondent No, 2 at an agreeable rates which would appear from the purchase orders issued to them. 8. The respondent No, 5 has alleged that in pursuance of the order dated 6th December, 1994, he duly took up the work of manufacturing towers according to the specification and the work of manufacturing the tower has nearly been completed investing approximately a sum of Rs. 2 crores and offers have also been made to respondent No. 2 for inspection of the towers so that the same may be despatched. It is stated that as a matter of fact a total quantity of 3600 numbers of 15 meters towers have already been offered to M/s. Indian Telephone Industries Limited, (respondent No. 2) against their order. 9. It has been submitted on behalf of the respondents 5 to 7 that this writ petition has been filed with an ulterior motive and the writ petitioner is interested in seeing that the respondent No. 2 becomes unable to execute the order placed by the Department of telecommunication with a view to lower the credibility of the respondent No. 2 in the eyes of Department of Tele communication. The writ petitioner has been set up by the United Commercial and Industrial Company Private Limited. The respondent No. 2 is one of the suppliers of towers to the Department of telecommunication and as such a competitor of the writ petitioner. The writ petition has not been filed bona fidely. The writ petitioner has been set up by the United Commercial and Industrial Company Private Limited. The respondent No. 2 is one of the suppliers of towers to the Department of telecommunication and as such a competitor of the writ petitioner. The writ petition has not been filed bona fidely. The petitioner has been set up by the United Commercial and Indus trial Company Private Limited, who was aware of every steps taken by the respondent No. 2 which culminated in placement of the order dated 6th December, 1994. 10. On the basis of the order issued by the respondent No. 2, the res pondent No. 5 has taken up the work in right earnest and has invested about a sum of Rs. 1. 75 crores in purchasing the raw materials and a sum of Rs. 25 lakhs approximately in manufacturing the towers. The entire raw materials for the targeted materials has been purchased and as a matter of fact 3600 number of towers have already been offered for inspection. The respondent No. 5 acted upon the order and altered its position by investing nearly an aggregate sum of Rs. 2 crores. 11. The same stand has been taken by the respondent No. 6, who has stated that in pursuance of the order dated 6th December, 1994 issued by the respondent No. 2, he duly took up the work of manufacturing towers according to the specification of respondent No. 2. The work of manufacturing the towers has nearly been completed investing a sum of Rs. 1. 5 crores approxi mately and offers have also been made to respondent No. 2 for inspection of the towers so that the same may be despatched. The respondent No. 6 has already manufactured and offered for inspection 2500 pieces of 15 meters towers. The respondent No. 6 has taken up the work in right earnest and invested about a sum of Rs. 1. 25 crores approximately in manufacturing the towers. The entire raw materials foe the targeted materials has been purchas ed and as a matter of fact 2500 number of towers have already been offered for inspection. The respondent No. 6 acted upon the order and altered its position by investing nearly an aggregate sum of 1. 50 crores. 12. 1. 25 crores approximately in manufacturing the towers. The entire raw materials foe the targeted materials has been purchas ed and as a matter of fact 2500 number of towers have already been offered for inspection. The respondent No. 6 acted upon the order and altered its position by investing nearly an aggregate sum of 1. 50 crores. 12. Similar is the stand taken by the respondent No. 7 who has stated that on 6th December, 1994 he received an order from respondent No. 2 for supply of 4500 self-supporting 15 meters towers within February, 1995. Time was made as essence of the contract for implementation of programme of making available of telecommunication facility in rural India. In pursuance of the said order dated 6th December, 1944, the respondent No. 7 has com pleted manufacturing of 3800 numbers of towers out of 4500 towers investing a sum of approximately Rs. 2,60 crores. Out of the said 3800 towers already manufactured by the respondent No. 7, the inspection has been offered to respondent No. 2 for 2350 numbers of towers. 13. Sri K. N. Tripathi, the learned counsel appearing on behalf of respondent No. 2 raised a preliminary objection regarding the maintainability of the writ petition on the ground that the Indian Telephone Industries Limited (respondent No. 2) is not an instrumentality of the State of authority or a State within the meaning of Article 12 of the Constitution and none of the ingredients are present in the case to make this company an instrumentality of State. According to him, the Indian Telephone Industries Limited became a deemed public company under Section 43-A of the Companies Act w. e. f. 1-7-1976. Thereafter, in the year 1994, the name of company changed to ITI limited and the memorandum of Association and Articles of Association of the said company were also amended in various respects. According to him, the Indian Telephone Industries Limited became a deemed public company under Section 43-A of the Companies Act w. e. f. 1-7-1976. Thereafter, in the year 1994, the name of company changed to ITI limited and the memorandum of Association and Articles of Association of the said company were also amended in various respects. It was stated that though the President of India has power to fix the number of Directors and appoint full time Chairman, Managing Director and other full time Direc tors, non-official Directors in consultation with the Chairman under Article 25 of the Articles of Association and also the Directors representing the Govern ment of India and in State Government, all these have been made on the basis of Articles of Association of the company as they stood before the amendment of the year 1974, Articles 70,71, 77 and 85 of the Articles of Association of the company which deal with the number of Directors, appointment of Direc tors, Managing Director and Chairman, have been amended before 29-9-1994. Under Article 70 (a) of Articles of Association, so long as the President of India hold not less than 51% of the paid up capital of the company, he shall appoint l/3rd of the Directors of the Board of Directors (including Chairman cum Managing Director, whole time Directors, official/non-official Directors ). Under Article 71 the remaining Directors are to be appointed by election by the equity shareholders in general meeting. The right to increase or decrease the number of Directors vests in the company under Article 70 (c) of the Arti cles of Association. Under Article 77, the Managing Director of the company is to be appointed by the President of India so long he holds not less than 77% of the total paid up capital of the company, but the Managing Director is to conduct the management of the business of the company subject to con trol and supervision of the Board of Directors. Article 85 confers powers on the President of India, so long as he holds not lass than 51% of the total paid up capital to appoint Chairman or the Board of Directors of the company, The President has also the power to appoint his representative in an or any meetings of the company. Article 85 confers powers on the President of India, so long as he holds not lass than 51% of the total paid up capital to appoint Chairman or the Board of Directors of the company, The President has also the power to appoint his representative in an or any meetings of the company. The general power of the company vests in the Board of Directors under Article 73 of the Articles of Association. Thus, a perusal of the subjects of the ITI Limited as disclosed in the Memorandum of Association will show that the company is a commercial and business adminis tration. There is no control of the President of India, Government of India or the State Government of Karnataka over the affairs of the business of the said company. The shares of the said company are sold in the share market. The Government of India or the Government of Karnataka do not hold the entire share capital of the company. Further, the company is not dependent on the Government of India or the Karnataka Government for its expenditure. The company does not enjoy any monopoly status in the business carried on by it or the object for which it had been formed. The Government of India or the Government of Karnataka State have no control over the business and other affairs of the company except the very limited powers of the President of India as disclosed in the Articles of Association. The company does not perform any functions which are governmental or closely related Government functions. It neither was not is a Department of Government. It was further stated that the orders placed by the ITI Limited in favour of respondents 5 to 7 were bona fide. The time available to it was short and the rates are lower than the one offered by the petitioner. In fact, the Govern ment of India has stood to gain by placing orders with the ITI Limited. 14. Mr. Subhir Chandra, the learned counsel appearing on behalf of the petitioner stated that the respondent No. 2 being an instrumentality of State could not give contracts privately except by open tender. Respondent No. 2 is an instrumentality of State within the meaning of Article 12 of the Constitution of India. It could not pick and choose a few persons to the ex clusion of others. Respondent No. 2 is an instrumentality of State within the meaning of Article 12 of the Constitution of India. It could not pick and choose a few persons to the ex clusion of others. It cannot have any absolute discretion to place orders or consider selected suppliers about the enquiry. It was mandatory on the part of a Government owned company to float a tender for procurement of a sub ject goods and the enquiry was required to be advertised in newspaper. It could have been made by a notice inviting tender. It cannot have any absolute discretion to place order or consider selected suppliers, which is violative of Article 14 of the Constitution. All actions of the authorities within the mean ing of Article 12 of the Constitution must satisfy the test of reasonableness and public Interest. A Government owned company doing business is still a Government company. No opportunity was given to the petitioner or public at large to participate in the settlement of contract. 15. All actions of the authorities within the mean ing of Article 12 of the Constitution must satisfy the test of reasonableness and public Interest. A Government owned company doing business is still a Government company. No opportunity was given to the petitioner or public at large to participate in the settlement of contract. 15. In this context it would be relevant to refer to the relevant clauses of the Memorandum of Association and the Articles of Association: Clause III (1) (a) of the Memorandum of Association of the Company lists the main objects of the company : "to carry on in India or in any part of the world all kinds of business relating to the manufacture, assembly, fitting up, repairing, con verting, overhauling, maintaining, rendering services of all and every kind and description, buying, selling, exchanging, altering, hiring, letting on hire, improving, repairing and dealing in tele phone, telegraph, radio and railway signalling and facsimile equipment of all kinds and descriptions and in particular switch ing systems and apparatus including all equipment within central offices, private branch exchanges or other similar switching centres for establishing, maintaining and releasing telephone circuits including all related signalling, supervisory and controlling equip ment, traffic control, remote control and regulating appliances together with instrumentalities for testing, observing and main taining such equipment, equipment for registering, recording, controlling, computing or accounting of monetary charges or other factors pertaining to telephone, telegraph, radio and railway signalling and facsimile communications, all instrumentalities of the types used on subscribers or other users stations for furnish ing telephone, telegraph, radio, railway signalling and facsimile services and for use by personnel engaged in the construction, maintenance or operation of the plant employed in giving such service equipment for transmitting signals and currents represent ing speech over a landline, a cable conductor or a radio link including carrier current equipment for producing modulated waves and transmitting such waves over a landline, a cable con ductor or radio link and demodulating such waves and includes repeaters, echo suppressors accessories, loading coils, filters and other instrumentalities for improving or controlling the transmis sion ot signals or currents involved in telephone, telegraphs, radio and railway signalling and facsimile communications ; and also to manufacture, sell, buy, repair, alter, and exchange, let on hire, export, import, and deal in all kinds of articles and things which may be required for the purposes of the business or which may seem capable of being profitably dealt with in connection with any of the business of the company ; and also to act as agents for Government or public authorities or for any manufacturers, merchants and others and to carry on agency business of any description connected with the company. Clause 8 : "to construct, execute, carry out, improve, work, develop, administer, manage, or control in India and elsewhere, works and convenien ces of all kinds which expression in this memorandum includes railways, tramways, improvement, sewage, drainage, sanitary, water, gas, electric lights, telephonic, telegraphic, and power supply works, warehouses, building and all other works on con venience whatsoever. " Clause 41 : "to plan, finance, establish, develop, provide, operate and maintain all types of telecommunication services including but not restrict ed to telephone, telex, wireless, data communication, telematic and other value added services, long distance trunk services, satellite based services with or without hiring transponders under licence and/or delegated powers under Indian Telegraph Act from the telegraph authority and/or the Central Government in India and abroad. " Clause 43 : "to provide service telecommunication facilities of all types to the Telecom Commission, and its units functioning in the areas managed by the company and to work in close liaison with the Telecom Commission and Department of telecommunications in the matters of : - (a) Overall development of telecommunication services in India and in the field of Overseas Communications. (b) Technical specifications, standards and norms of services in the local and long distance communication. (c) Inter connection of the local networks services, long distance transmission systems and Overseas Communication systems managed by the Department of telecommunications or any other organisation/company. (d) Implementation of any order and/or directive issued from time to time under the Indian Telegraph Act or Rules framed thereunder by the Telegraph authority or any office duly authorised by the Telegraph Authority or the Act. (e) Introduction of new services. (f) Sharing of revenues collected by the company for various services with the Department of telecommunications or any other agency for the usage of the facilities provided by them and vice-versa. (g) Utilisation of the infra-structure facilities of the Department of telecommunications like Quality Assurance and Inspection, Training, telecommunications Engineering Centre, Stores and Factory Organisation, etc. by the company on mutually " agreed terms till such time as required by the company. Clause 44 : "to raise necessary financial resources for development needs for Telecommunication Services in the areas managed by the company and also for the other parts of the telecommunication network in India and abroad. Clause 44 (V): "the authorised share capital of the company is rupees one hundred crores divided into 10,00,00,000 shares of Rs. Clause 44 : "to raise necessary financial resources for development needs for Telecommunication Services in the areas managed by the company and also for the other parts of the telecommunication network in India and abroad. Clause 44 (V): "the authorised share capital of the company is rupees one hundred crores divided into 10,00,00,000 shares of Rs. 10 each with the rights, privileges and conditions attaching thereto as may be provided by the Articles of Association of the company for the time being with power to the company to increase or reduce the capital and to issue in parts of its capital original or increased with or without any preference, priority or special privileges or subject to postponement of rights or to any conditions or restric tions and with power to vary any rights in accordance with the provisions of the Companies Act, 1956 and the Articles of Asso ciation of the company. We, the sevaral persons, whose names and addresses are subscribed, are desirous of being formed into a company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital of the company set opposite our respective names. Name Address Number of shares Signature of of witness Governor General of India by V. K. R. Menon, I. C. S. Secretary, Ministry of Communications Secretariat, New Delhi 10,000 K. V. Venkatachalam A. F. Bennett, M. I. E. E. Jt. General Manager, For and on behalf of the Automatic Telephone and Electric Co. Ltd. Strowger House, 8, Arundel Street, London W. C. 2 England. 6667 Chas. E. Hay. V. K. R. Menon Secretary, Ministry of Communications Secretariat (North Block), New Delhi. 100 K. V. Venkatachalam R. Narayanaswami Joint Secretary to the Government of India, Ministry of Finance (c), New Delhi. 100 N. C. Bose. 16. Ltd. Strowger House, 8, Arundel Street, London W. C. 2 England. 6667 Chas. E. Hay. V. K. R. Menon Secretary, Ministry of Communications Secretariat (North Block), New Delhi. 100 K. V. Venkatachalam R. Narayanaswami Joint Secretary to the Government of India, Ministry of Finance (c), New Delhi. 100 N. C. Bose. 16. Articles 33 to 36 of Association of the company deals with the financial control and reads as follows : Article 33 : "subject to the provisions of Sections 100 to 104 of the Act and to such directions as may be issued by the President in this behalf the company may, from time to time, by special resolution reduce its capital by paying off capital or cancelling capital which has been lost or is unrepresented by available assets, or is superfluous or by reducing the liability on the shares or otherwise as may seem expedient, and capital may be paid off upon the footing that it may be called up again or otherwise ; and the Director may, sub ject to the provisions of the Act, accept surrenders of shares. Article 34: "subject to the approval of the President, the company in general meeting may, from time to time, subdivide or consolidate its shares or any of them and exercise any of the other powers con ferred by Section 94 of the Act and shall file with the Registrar such notice of exercise of any such power as may be required by the Act. Article 35 : "if at any time, the capital, by reason of the issue of preference shares or otherwise, is divided into different classes of shares, all or any of the rights and privileges attached to each class may, subject to the provisions of Sections 106 and 107 of the Act and further subject to the approval of the President be modified, abrogated or dealt with by agreement between the company and any person pur-porporting to contract on behalf of that class, provided such agreement is (a) ratified in writing by the holders of at least three-fourths of the nominal value of the issued shares of that class, or (b) confirmed by a resolution passed at a separate General Meet ing and supported by the votes of at least three-fourths of the holders of shares of that class and all the provisions hereinafter contained as to General Meeting shall mutatis mutandis apply to every such meeting, except that the quorum thereof shall be members holding or representing by proxy one-fifth of the nominal amount of the issued shares of that class". Article 36 : "subject to the approval of the President and the provisions of Sec tions 292 and 293 (1 ) (d) of the Companies Act, 1956, the Board may from time to time, by means of a resolution passed at a meeting of the Board, borrow and/or secure the payment of any sum or sums of money for the purposes of the company, provided that no approval of the President would be necessary for borrow ing within authorised limits from the banks or public sector under takings or Government financial Institutions, provided rate of interest is not more than corresponding banks rate, for the purposes of meeting the working capital requirements of the company on the hypothecation of the companys current assets". Article 48 : " (1) The President, so long as ho is share holder of the company, may from time to time appoint one or more persons ^who need not be a member of members of the company) to represent him at all or any meetings of the company. Article 48 : " (1) The President, so long as ho is share holder of the company, may from time to time appoint one or more persons ^who need not be a member of members of the company) to represent him at all or any meetings of the company. (2) Any of the persons appointed under sub-clause (1) of this article who is personally present at the meeting shall be deemed to be a member entitled to vote and be present in person and shall be entitled to represent the President at all or any such meetings and to vote on his behalf whether on a show of hands or on a poll. (3) The President may, from time to time, cancel any appointment made under sub-clause (1) of the article and make fresh appointments. (4) The production at the meeting of an order of the President evi denced as provided in the Constitution of India shall be accepted by the company as sufficient evidence of any such appointment or cancellation as aforesaid. (5) Any person appointed by the President under this article may, if so authorised by such order, appoint a proxy, whether specially or generally" Article 70: " (a) The company shall not less than three and not more than fifteen Directors. The Directors are not required to hold any qualification shares. So long as the President of India holds not less than 51% of the paid up capital of the company, the President shall subject to Section 255 of the Companies Act, 1956, appoint one-third of the Directors on the Board (including Chairman-cum-Managing Director, whole- time Directors, Official/non-Official Directors) for such term and on such remuneration as determined by him from time to time. Any Director so appointed shall not be liable to retire at every Annual General Meeting. (b) 1/3rd of the Directors of the company other than the Directors appointed by the President under Article 70 (a) above shall retire at every Annual General Meeting as per the provisions of the Act. Any Director so appointed shall not be liable to retire at every Annual General Meeting. (b) 1/3rd of the Directors of the company other than the Directors appointed by the President under Article 70 (a) above shall retire at every Annual General Meeting as per the provisions of the Act. (c) Right of the company to increase or decrease the number of Directors without prejudice to the Provisions of Article 70 (a) and (b) above, the company may from time to time in the General Meeting increase or reduce the number of Directors, and also to determine in what rotation such increased or reduced member is to go out of office" Article 71 : " (a) Apart from the Directors appointed by the President under the preceding article, the remaining Directors shall be appointed by election by the holders of equity shares in General Meeting and the said Directors shall be subject to retirement as per the provi sions of the Act. The terms of appointment including remunera tion, perks, etc. of such Directors shall be as may be determined by the Board of Directors from time to time and subject to the approval of the share-holders in the General Meeting. (b) The Directors appointed by the President under Article 70 (a) shall hold office until removed by him, provided that the Chairman shall be consulted before removing any such Director, In the event of any vacancy in the office of the Director so appointed by resignation, death, expiry of the term of office of otherwise, the President shall have the power to appoint others in their places as above. (c) Retiring Director shall be eligible for re-election. At the Annual General Meeting at which a Director retires as aforesaid, the company may fill-up the vacancy by appointing a retiring Direc tor or some other persons thereto". Article 74: "notwithstanding any of the provisions contained in the other articles prior approval of the Central Government shall be obtained in respect of: (a) Appointment, which term will include initial appointment, extension in service and re-employment, of personnel who have attained the age of 58 years on a pay (including pension and pensionary equivalent of retirement benefits) exceeding Rs. 2,500 per mensem ; (b) Appointment of any foreign national to any poit in the company ; (c) Implementation of schemes involving capital expenditure ex ceeding Rs. 2,500 per mensem ; (b) Appointment of any foreign national to any poit in the company ; (c) Implementation of schemes involving capital expenditure ex ceeding Rs. 2,000 lakhs in each case ; (d) Issue of Debentures; (e) Winding up of the company ; (f) Sale, lease or disposal of any land and/or building having an original book value of Rs. 10 lakhs and above ; (g) The formation of a subsidiary company ; (h) Companys Five Year and Annual Plans for Development and Capital Budgets. (i) Revenue Budget of the Company in case there is an element of deficit which is proposed to be met by obtaining funds from Central Government; (j) Agreement involving foreign collaboration proposed to be entered into by the Company ; and (k) Purchases and contracts of a major nature involving sub stantial capital outlay which are in excess of the powers vested in the company". Article 77 : "so long as the President of India holds not less than 51% of the total paid up capital of the Company, the President may appoint the Managing Director for the conduct of management of the business of the company subject to the control and supervision of the Board of Directors. Any Managing Director so appointed may be authorised by the Board to exercise such powers and discretions in relation to the affairs of the company as are specifically delegat ed to him by the Board and are not required to be done by the Board of Directors or the Company at the General Meeting under she Act. The Managing Director so appointed will be paid such remuneration as may be fixed by the President". Article 85 : "so long as the President of India holds not lass than 51% of the total paid up capital of the company, the President shall have powers to appoint the Chairman of the Board of Directors of the company and to determine the period for which he is to hold office. If no such Chairman is appointed or if at any meeting the Chairman is not present within five minutes after the time for holding the same, the Directors present may choose one of their members to be the Chairman of the Meeting". If no such Chairman is appointed or if at any meeting the Chairman is not present within five minutes after the time for holding the same, the Directors present may choose one of their members to be the Chairman of the Meeting". Article 86: "the Chairman shall reserve for the decision of the Central Govern ment any proposals or decisions of the Board of Directors or any matter brought before the Board which raises, in the opinion of the Chairman, an important issue and which is on that account fit to be reserved for the decision of the Central Government and no decision on such an important issue shall be taken in the absence of the Chairman appointed by the President. In respect of matters reserved by the Chairman for decision of the Central Government, if the Central Governments views be not received within a period of two months, the Directors shall be entitled to act in accordance with the proposal or decision without further reference to the Central Government". Article 121: "so long as the President of India holds not less than 51% of the paid up capital of the company, and notwithstanding anything con tained in any of these articles the President may as and when he thinks fit, from time to time, issue such directives as he may con sider necessary, to the company or Directors thereof, in regard to conduct of business or affairs of the company or iii regard to the exercise or performance of the companys functions in matters involving national security or of substantial public interest and in like manner vary and annul any such directive. The Directors shall give immediate effect to directives so issued. The President may also call for such returns, accounts and other information with respect to the property and activities of the company as may be required from time to time. The President may also at any time by issuing a notice to the company convene a Central Meeting of the company. Provided that all directives by the President shall be in writing addres sed to the Chairman. The Board shall except where the President considers that the interest of the National Security requires other wise incorporate the contents of the directives issued by the Presi dent in the annual report of the company and also indicate its impact on the financial position of the company". 17. Mr. The Board shall except where the President considers that the interest of the National Security requires other wise incorporate the contents of the directives issued by the Presi dent in the annual report of the company and also indicate its impact on the financial position of the company". 17. Mr. Tripathi, the learned counsel appearing for the respondent No. 2 to 4 while contending that the respondent No. 2 is not a state within the meaning of Article 12 of the Constitution, relied on the decisions of the Supreme Court in the cases i. e. AIR 1975 SC 1329 and 1331 ; AIR 1969 SC 1306 , 1986 SC 1571, 1988 SC 469 and 1992 SC 76. 18. On proper consideration of the various clauses of the Memorandum of Association and the Articles of Association the preliminary objection raised by Mr. Tripathi, the learned counsel appearing on behalf of respondents 2 to 4, the Indian Telephone Industries Ltd. has to be rejected. 19. All these provisions as referred to earlier in paragraphs 15 and 16 clearly indicates and establishes the fact that the creation and composition of Membership, the functions and powers, the financial powers, the audit of accounts, the returns, the capital, the borrowing powers, the dissolution of the company, are all authority and agency of the Central Government. The structure of the ITI (respondent No. 2) indicates that the company is an agency of the Government and each and every provision shows m no uncertain terms that the voice is that of the Central Government and the hands are also of the Central Government. These various provisions of the company show that it is In effect managed and controlled by the Central Government. Thus, the respondent No. 2, ITI Ltd. is an authority within the meaning of Article 12 of the Constitution. 20. There are tests formulated by several cases of the Supreme Court to find out whether an Institution is state. There cannot be a strait jacket formula. It is not necessary that all the tests should be satisfied for reaching the conclusion either for or against holding an Institution to be a state. In a given case some of the factors may emerge as boldly and prominently though second view must be possible. There cannot be a strait jacket formula. It is not necessary that all the tests should be satisfied for reaching the conclusion either for or against holding an Institution to be a state. In a given case some of the factors may emerge as boldly and prominently though second view must be possible. There may of other cases where the matter would be on border line and it is difficult to take one view or the other on the line. 21. For the purposes of Article 12, Court must necessarily see through the corporate veil to ascertain as to whether behind that veil is the fate of an agency and instrumentality of the State. If there is an instrumentality and agency of the State which is assumed under the garb of a Government com pany as defined in Section 617 of the Company Act, it does not follow that it thereby ceases to be an instrumentality or agency of the State. Applying the above test to the present case, it is clear that respondent No. 2, ITI is the state within the meaning of Article 12. It is nothing but the Government operating behind a corporate veil carry tag out a governmental activity and governmental functions of vital public importance through the instrumentality of a Government company. 22. A large number of authorities were cited before us to show as to how the Court has interpreted the expression state in Article 12 of the Constitution. The Supreme Court in the case of Rajasthan State Electricity Board, Jaipur v. Mohan Lal, AIR 1967 SC 1857 said that: "an "authority" is a public administrative agency or corporation having quasi-governmental powers and authorised to administer as a revenue producing public enterprise. The expression" other authorities in Article 12 has been held by this Court in the Rajas than Electricity Board case to be wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India. This court further said referring to earlier decisions that the expression "other authorities" in Article 12 will include all constitutional or statutory authorities on whom powers are conferred by law. The State itself is envisaged under Article 298 as having the right to carry on trade and business. This court further said referring to earlier decisions that the expression "other authorities" in Article 12 will include all constitutional or statutory authorities on whom powers are conferred by law. The State itself is envisaged under Article 298 as having the right to carry on trade and business. The State as defined in Article 12 is comprehended to include bodies created for the purpose of promoting economic interest of the people. The circumstance that the statutory body is required to carry on some activities of the nature of trade or commerce does not indicate that the Board must be excluded from the scope of the word "state". The Electricity Supply Act showed that the Board had power to give directions, the disobedience of which is punishable as a criminal offence. The power to issue directions and to enforce compliance is an important aspect. " 23. Various aspects of this question raised were exhaustively considered of the Supreme Court in the case of Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 SC 1628 ) and at page 1636 the Court observed: "today the Government as a welfare State, is the regulator and dis penser of special services and provider of a large number of benefits, including jobs, contracts, licences, quotas, mineral rights etc. " The question In that case was whether the International Airport Authority constituted under the International Airport Authority Act, 1971, came within the meaning of the expression "the State" in Article 12. Under the said Act, the authority was a body corporate having perpetual succession and a common seal and was to consist of a Chairman and certain other members appointed by the Central Government. The Central Government had the power to terminate the appointment of or remove any member from the Board. Although the authority bad no share capital of its own, capital needed by it for carrying out its func tions was to be provided only by the Central Government, While considering the question whether such a body corporate was included within the expression "the State," this Court said (at page 1036 of SCR): at pp. 1638-39 of AIR ). A corporation may be created in one of two ways. 1638-39 of AIR ). A corporation may be created in one of two ways. It may be of either established by statute or incorporated under a law such as the Companies Act, 1956 or the Societies Registration Act, 1860, Where a corporation is wholly controlled by Government not only in its policy making but also in carrying out the functions entrusted to it by the law establishing it or by tae Charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government But ordinarily where a corporation is established by Statute, it is autonomus in its working, subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is managed by a Board of directors or committee of management in accordance with the provisions of the statute under which it is incorporated. When such a corporation become an instrumentality or agency of Government ?" (Emphasis supplied ). After considering various factors and the case factors which may have to be considered in determining whether a corporation is an agency or instrumentality of Government. We have referred to some of these factors and they may be summarised as under: Whether there is any financial assistance given by the State, and if so what is the magnitude of such assistance whether there is any other form of assistance, given by the State, and if so, whether it is of the usual kind or it is extraordinary, whether there is any control of the management and policies of the corporation by the State and what is the nature and extent of such control, whether the corporation enjoys State conferred or State protected monopoly status and whether the functions carried out by the corporation are public fuuctions closely related to governmental functions. This particularisation of relevant factors is, however, not exhaus tive and by its very nature it cannot be, because with increasing assumption of new tasks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the corporation and Government calling for flexibility adaptability, and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invari ably and in all cases provide an unfailing answer to the question whether a corporation is governmental instrumentality or agency. Moreover even amongst those factors which have described, no one single factor will yield a satisfactory answer to the question and the Court will have to consider the cumulative effect of these various factors and arrive at its decision on the basis of a parti cularised inquiry into the facts and circumstances of each case. 24. The ultimate question which is relevant, for our purpose is, whether such a company is an agency or instrumentality of the Government for carry ing on the business for the benefit of public. In other words, the question is, for whose benefit was the company carrying on the business. Merely because the company has legal personality of its own, it does not follow that it cannot be an agent or instrumentality of State, if it is subject to control of the Government in all other matters of policy, no doubt there might be some dis tinction between the nature of control exercised by member over agent and the control exercised by Government over public company. But that is only a distinction in degree. 25. The next contention raised on behalf of the petitioner was that the procurement of telecommunication towers by the respondents No. 1 to 3 without floating any tender or notice or without advertisement of notice or enquiry in any newspaper was illegal, arbitrary and against the norms of the Government owned company and/or any Government authority. Such an en quiry was required to be advertised in the newspaper. It should have been made by a notice inviting tender and it was mandatory on the part of the Government owned company to float a tender. It was not open for the Government com pany to make discretionary favouritism to the selected persons. Such an en quiry was required to be advertised in the newspaper. It should have been made by a notice inviting tender and it was mandatory on the part of the Government owned company to float a tender. It was not open for the Government com pany to make discretionary favouritism to the selected persons. In the present case, the respondents No. 2 to 4 by allowing four persons respondent No. 5, 6, 7 and another to participate in the treaty have favoured them in violation of Article 14 of the Constitution of India and thus placement of order for supply of 12000 pieces to respondents No. 5. 6 and 1 was illegal and violative of Article 14 of the Constitution. 26. In the counter-affidavit filed on behalf of the respondent No. 2 (ITI Limited) the stand was that it is the department of telecommunication (Government of India) which has placed orders with the second respondent (ITI) for supply of 24000 towers of the height of 15 metres. The respondent No. 2 in turn was free to enter into a contract with anyone for supply/pur chase of the aforesaid items in connection with its business activities. The contract between the respondent No. 2 and respondents No. 5 to 7 was entered into after making tender enquiries from five suppliers which included respon dents 5 to 7 and M/ s United Commercial and Industrial Company Private Limited as also M/s Secher Tubes and Sections Limited. New Delhi (all of them being approved suppliers of the Department of Tele-Communication) and after receipt of their offers by open negotiations between these present. The last two firms did not turn up for negotiation. It was, however, stated that tenders were not invited through newspapers in view of the fact that the supply orders were to be executed by respondents 5 to 7 before 28-2-1995. 27. Now the principle has been settled beyond doubt that a Demo cratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal, In the case of Erusion Equipment and Chemicals Ltd. v. State of West Bengal, AIR 1975 SC 266 the question arose whether black-listing of a person without giving him an opportunity to be heard was bad ? Ray, C. J. , speaking on behalf of himself and his colleagues on the Bench pointed out that black-listing of a person not only affects his reputation which is in paundian terms an interest both of personali ty and substance, but also denies him equality in the matter of entering into contract with the Government and it cannot, therefore, be supported without fair hearing. It was argued for the Government that no person has a right to enter into contractual relationship with the Government and the Govern ment, like any other private individual, has the absolute right to enter into contract with any one it pleases. But the court, speaking through the learned Chief Justice, responded that the Government is not like a private individual who can pick and choose the person with whom it will deal, but the Govern ment is still a Government when it enters into contract or when it is adminis tering largess and it cannot, without adequate reason, exclude any person from dealing with it or take away largess arbitrarily. The learned Chief Justice said that when the Government is trading with the public" the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. . . . The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one, but if it does so, it must do so fairly without discrimination and without unfair procedure. 28. This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Govern ment is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweet will and, like a private indivi dual, deal with any person it pleases, but its action must be in conformity with standard or norm which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts quotas, licences etc. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts quotas, licences etc. , must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case, the action of the Government would bs liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. 29. In the facts of the present case, the action of the second respondent (ITI) in accepting the tender of the respondents 5 to 7, was thus clearly dis criminatory, since it excluded the petitioner and other persons similarly situated from tendering for the contract, The acceptance of the tender of respondents 5 to 7 was, in the circumstances invalid as being violative of the equality clause of the Constitution, as also of the rule of the Administrative Law inhibiting arbitrary action. 30. Now, on this view we should have ordinarily set aside the decision of the second respondent accepting the tenders of respondents 5 to 7 and the contract resulting from such acceptance but in view of the peculiar facts and circumstances of the case, we do not think that it would be a sound exercise o- discretion on our part to upset that decision and void the contract. 31. It has been alleged on behalf of the respondent that the writ peti tion was not tiled bona fide nor the petitioners own interest is at stake. The petition has been filed with the sinister motive of prejudicing the respondents 2 and 5 to 7 who are and each of them are competitor to the writ petitioner, has been set up by the United Commercial and Industrial Co. Private Limit ed, who did not turn up in the meeting for price negotiation along with another M/s Secher Tubes and Sections Limited on 2nd December, 1994. The petitioner was aware of every steps taken by the respondent No. 2 which culmi nated in placement of order dated 6th December, 1994. It is difficult to under stand why the petitioner should have awaited until 24th January. The petitioner was aware of every steps taken by the respondent No. 2 which culmi nated in placement of order dated 6th December, 1994. It is difficult to under stand why the petitioner should have awaited until 24th January. 1995 to file this writ petition when the tender of the respondents 5 to 7 had been accepted as far back as on 6th December, 1994, The explanation given by the petitioners is that they were not aware of the acceptance, of the tender of respondents 5 to 7 but that is rather native explanation which cannot be easily accepted. It is not possible to believe that the petitioner who was so well connected and is an approved supplier of telecommunication towers and he is one of the approved suppliers amongst 23 such approved suppliers in the whole country and has in the past been given orders for supply of such towers and has actually supplied the materials to the respondents and whose factory being an order based Indus try and solely dependent on the requirement of Engineering products by the De partment of telecommunication, would have had no knowledge of the orders given to the respondents and came to know about such orders for the tele communication towers to respondents 5 to 7 only on 15th January, 1995. The petitioners have themselves stated that they came to know from reliable sources that the procurement is being made for 12000 pieces of telecommunication towers on the basis of private treaties negotiated by the respondents with the selected three parties (respondents 5 to 7 ). They have further stated that their representative approached the office of "united Commercial and Industrial Company Private Ltd. " to know the details of enquiry No. NTH 4q 448 and received a copy of the Enquiry and the correspondence regarding the said enquiry by the said company and still how it can be believed when they say so that they had no connection with the said "united Commercial and Industrial Company Private Limited". The petitioners have themselves stated that from the said "united Commercial and Industrial Company Private Limited", they knew about the details and the terms on the basis of which order for 12000 towers was placed to respondents 5 to 7. The petitioners have themselves stated that from the said "united Commercial and Industrial Company Private Limited", they knew about the details and the terms on the basis of which order for 12000 towers was placed to respondents 5 to 7. In the meeting of 2nd December, 1994 "m/s. United Commercial and Industrial Private Limited" as also "m/s Secher Tubes and Sections Limited did not turn up in the meeting for price negotiation. In the teeth of these facts it has been alleged by the respondents that the writ petition was set up by M/s United Commercial and Industrial Company Private Limited and the petitioner was aware oi every steps taken by the second respondent which culminated in placement of the order dated 6th December, 1994 with respondents 5 to 7. 32. However, on the basis of the order dated 6th December, 1994 issued by the respondent No. 2 ITI, respondent No. 5 has taken up the work and invested about a sum of Rs. 1,75 crores in purchasing raw materials and a sum of Rs. 25 lakhs approximately in manufacturing the towers. The entire raw materials for the targeted materials has been purchased and as a matter of fact 3600 number of towers out of 45000 have already been offered for inspection. Thus, the respondent no. 5 has acted upon the said order and altered its position by investing nearly an aggregate sum of amount of Rs. 2 crores. 33. The respondent No. 6 has likewise taken up the work of manu facturing towers and has nearly completed by investing a sum of Rs. 1. 50 crores approximately and offers have been made to respondent No. 2 (ITI) for inspection of the towers so that the same may be despatched. The respondent No. 6 has already manufactured about 2500 pieces of 15 metres towers and have offered it for inspection. Respondent No. 6 has invested about a sum of Rs. 1. 25 crores in purchasing raw materials and a sum of Rs. 0. 25 crore approximately in manufacturing the towers. The entire raw materials for the targeted materials have been purchased and 2500 pieces of towers out of total number 8000 have already been manufactured and offered for inspection. 34. Respondent No. 6 has invested about a sum of Rs. 1. 25 crores in purchasing raw materials and a sum of Rs. 0. 25 crore approximately in manufacturing the towers. The entire raw materials for the targeted materials have been purchased and 2500 pieces of towers out of total number 8000 have already been manufactured and offered for inspection. 34. Respondent No. 7, likewise got the order for supply of 4500 self-supporting 15 metre towers within a time bound period and in pursuance of the order dated 6th December, 1994 he duly offered 600 pieces of towers by 29th December, 1994, further 1750 pieces by 12-1-1995 and 2150 pieces are in the process of manufacturing and were likely to be offered by 25th February, 1995. The order dated 6th December, 1994 had stipulated in clear and categorial terms that the supply should be completed by 28th February, 1994 and 11th February, 1995, the respondent No. 7 has completed manufacturing of 3800 numbers of towers out of 4500 towers investing approximately a sum of Rs. 2. 60 crores, and the respondent No. 7 has manufactured 1300 towers out of 4500 offered to him and has offered an inspection for 2350 number of towers to respondent No. 2. 35. In view of the facts enumerated above, it would now be most in-equitous to set aside the contract of respondents 5 to 7 at the instance of the petitioners. The position would have been different if the petitioner had filed the writ petition immediately after the acceptance of the tender of respondents 5 to 7 but the petitioner allowed a period of nearly two months to elapse during which the respondents 5 to 7 altered their position by investing such a heavy amount and since the goods were to be supplied by 28th February, 1995 for supply of 12000 telecommunication towers and these respondents 5 to 7 have manufactured nearly 10000 towers out of 12000 to be supplied in totality and have invested nearly 6. 10 crores and have offered the goods for inspection to respondents No. 2 M/s IT1, we do not consider it a fit case in which. we should interfere and grant relief to the petitioners in exercise of our discretion under Article 226 of the Constitution. 36. We accordingly dismissed the petition but without any order as to costs. The stay order stands vacated. Petition dismissed. .