RAJASTHAN HIGH COURT

           Tej Singh Sarupriya

           Vs.

           Rajasthan State Mines and Minerals Ltd.

           Civil Special Appeal (Writ) No. 430 of 2000
                 (N.N. Mathur and D.N. Joshi, JJ.)

           21.07.2000

           JUDGEMENT

Mathur J.

1. This Special Appeal under Section 18 of the Rajasthan High Court Ordinance is
directed against the judgment of the learned Single Judge dated 25th April, 2000,
dismissing the writ petition.

2. The appellant - writ petitioner filed a writ petition under Article 226 of the
Constitution of India seeking direction to quash the Memo of Understanding (in short
'MOU') dated 22-1-2000 (Annex.2) entered between the first respondent - Rajasthan
State Mines and Minerals Ltd. (in short ('RSMML') and fourth respondent - M/s
American International Health Management Ltd. (in short AIHML) to set up a
hospital in joint venture by leasing out a plot of land measuring 18,432 square feet and
contributing Rs. one crore (being 10%) to the equity of the hospital project). The
petitioner has also sought a direction to quash the approval granted to the said MOU in
the 320 the meeting of the Board of the RSMML, held on 30th March, 2000
(Annex.4). A further prayer was made to direct the first respondent and its officers to
invite bids from all interested persons before awarding contract for establishing a
multi-super-specialty hospital in joint venture with the first respondent.

3. It appears from the pleadings of the parties that the first respondent - RSMML is a
company, owned and controlled by the State of Rajasthan. In the year 1997, the first
respondent decided to establish a multi-super-specialty hospital for twin purposes.
Firstly, for providing medical facilities to its past and present employees and their
family members on no profit - no loss basis and other purpose was to provide medical
facilities to the citizens of Udaipur including free medical treatment to poor and needy.
In search of competent partner, initially the first respondent approached to the Apollo
Group of Hospitals. The Apollo Group of Hospitals submitted a project report. They
were neither agreeable to provide medical facilities to the employees of the first
respondent at no profit - no loss basis nor to provide free medical services to the poor.
At this juncture, a company in the name of American International Health
Management Ltd. came into existence in the city of Udaipur. Its Chairman and
Managing Director Dr. Kirit Kumar Jain approached to the first respondent and agreed
with the terms and conditions of providing medical services to its past and present
employees and their family members at no profit-no loss basis. It is stated that the
entire project is to cost around Rs. 20 croroes. The first respondent is to provide the
land and to contribute to the share capital of the respondent No.4 to the tune of Rs. one
crore only and the remaining amount is to be managed by the fourth respondent. On
29th December, 1999, in the 319th meeting of the Board, the proposal for RSMML's
participation in the project of fourth respondent of setting up a super specialty hospital
at Udaipur was considered and approved. Accordingly, on 22nd January, 2000, a
Memo of Understanding was entered between the RSMML and AIHML for setting up
a joint venture multi super specialty project at Udaipur. The terms and conditions have
been set out in the MOU. On 26th March, 2000, petitioner Tej Singh Sarupriya, first
time sent a proposal dated 26th March, 2000, as a Director of Udipur Hospital and
Medical Research Centre Private Limited expressing desire to be a partner in
establishing of multi super specialty hospital in the city of Udaipur. He also gave a
package for consideration of respondent No.1. It appears from the averments made in
the writ petition and Annex.3 that petitioner Tej Singh Sarupriya is a person dealing in
jewellery business. He has 25% share in Udaipur Hospital and Medical Research
Center Private Limited. Having found no reaction on his offer, he approached to this
Court by way of a writ petition.

4. It was contended before the learned Single Judge on behalf of the petitioner that the
first respondent has acted arbitrarily in entering into agreement with the fourth
respondent without giving any publicity and ignoring the public interest. Reliance was
placed on various decisions viz; (i) M.I. Builders Pvt. Ltd. v. Radhey Shyam Sahu
reported in1 (Para 7), (ii) T.V.L.Sundaram Granites v. Imperial Granites Ltd. reported
in2 and (iii) Style (Dress Land) v. Union Territory of Chandigarh reported in 3 The
learned Single Judge observed that there was no quarrel to the proposition that the
Court must keep in mind the public interest and if there is any arbitrariness, the Court
must interfere in such type of cases and they are always subject to judicial review. The
learned Single Judge, however, distinguished the said cases on the ground that in all
the three cases, either it was the State Government or the Municipality, who were the
litigants. The learned Single Judge also observed that it was doubtful if the first
respondent RSMML is State or its instrumentality within the meaning of Article 12 of
the Constitution of India. The learned Single Judge further observed that merely
because it is under the control of the State, that itself would not make the respondent
No.1 the instrumentality of the State. However, the learned Single Judge did not go
into the question in absence of any reply affidavit filed by the respondents and
proceeded on the assumption that the RSMML is a State. The learned Judge also
disapproved the conduct of the petitioner in not serving the notices on respondent with
memo and annexure after obtaining the exparte stay order. The learned Single Judge
also rejected the petition on the conduct of the petitioner. The learned Single Judge
found that the petitioner was one of the Directors of Udaipur Hospital and Medical
Research Centre Private Ltd. with 25% share holding of the company. He wanted to
strengthen his monopoly in the hospitals at Udaipur and, therefore, anyhow he
managed to get the information about the MOU arrived at between the first and fourth
respondents. The learned Single Judge also found that nothing was shown, how the
action of the respondent No. 1 was arbitrary or discriminatory. The learned Single
Judge refused to interfere with the matter in exercise of powers under Article 226 of
the Constitution of India for the reason that the object of the agreement was in public
interest. In the opinion of the learned Single Judge, if somebody else is coming
forward in the city like Udaipur for starting multi super specialty hospital then ther
shall be healthy competition with other hospitals and poor and downtrodden people of
Udaipur district, which is mainly of tribals, will get better facilities and better
treatment. On overall consideration, the learned single Judge expressed that he was
convinced that there was no arbitrariness on the part of the first respondent in entering
into contract with the respondent No.4 for construction of multi super specialty
hospital. Thus, the learned single Judge rejected the writ petition for more than one
reason.

5. It is contended by Mr. D.S. Shishodia, Senior Advocate, that the learned Single
Judge has committed error in holding without any basis that the first respondent -
RSMML is not a State within the meaning of Article 12 of the Constitution of India.
We aree not inclined to go into question since the learned Single Judge himself has not
gone into the question in absence of any reply affidavit filed on behalf of the first
respondent. We simply say that the observation of the learned Single Judge "merely
because it is under the control of the State Government, that itself would not make the
respondent No.1 an instrumentality of the State", is not a decision on the point. This
question is left open.

6. It is next contended that learned Judge has committed error in rejecting the writ
petition on the conduct of the petitioner in not serving the notices along with paper
book on the respondent after obtaining exparte interim order. The learned Single Judge
having experience the prevailing practice of not serving the notices with paper book,
felt that to discourage such sort of practice in the Court, the writ petition should be
dismissed on this ground alone. We are in agreement with the learned Single Judge
that the prevailing practice of not serving the respondents after obtaining the exparte
stay order for long time for one or the other excuse, is not good for the health of the
judicial system. This deserves to be discouraged. However, the learned Single Judge
has not dismissed the writ petition on this ground alone. It appears from the record that
though the notices sent by the registered post, were not accompanied by the memo of
petition and annexures thereto and as such there was no proper service, but apart from
the notices sent by thee registered post, notices along with the paper book were also
served through process server before the returnable date.

7. It is also contended by Mr. D. S. Shishodia, learned Senior Advocate, appearing for
the appellant that the first respondent has acted arbitrarily in entering into agreement
with the fourth respondent by giving most valuable land on a lease of Re. 1/- per year
without affording an opportunity to all interested persons to participate in the project.
Learned counsel has also read the other conditions set out in the M.O.U. and
submitted that the offer given by the petitioner was more attractive than that of
respondent No.4 It is submitted by Mr. Shishodia that the Managing Director of the
first respondent even did not place his proposal Annex.3 before the Board of
Directors. The appellant was atlest entitled to consideration of his offer. Learned
counsel has heavily placed reliance on the decision of the Apex Court in M.I. Builders
Private Ltd.'s case (supra).

8. On the other hand, Mr. M.R. Singhvi, learned counsel appearing for the first
respondent, has reiterated the contentions raised before the learned Single Judge and
also placed reliance on the same authorities viz ; (i) Air India Limited v. Cochin
International Air Port Ltd. reported in4 (ii) The Nagar Rice and Flour Mills v. D.N.
Teekappa Gowda and Bros. reported in 5 and (iii) Jasbhai Motibhai Desai v. Roshan
Kumar Haji Bashir Ahmed reported in 6 and (iv) Mithilesh Garg v. Union of India
reported in 7

9. Mr. M.S. Singhvi, learned counsel appearing for the fourth respondent, submitted
that a perusal of Annex.3 shows that the petitioner Tej Singh Sarupriya made on offer
for participation in the project to set up a multi super specialty hospital in Udaipur in
his capacity as a Director of Udaipur Hospital and Medical Research Center Private
Limited. Learned counsel has invited our attention to page 36 of the paper book,
which shows that the petitioner Tej Singh Sarupriya has signed as Director of the
Udaipur Hospital and Medical Research Centre Private Limited. It is further submitted
that in fact, there was no offer of the said Research Center. Learned counsel has also
invited our attention to Annex.10, which has been filed before us wherein the
Managing Director of the Udaipur Hospital and Medical Research Center Dr. Anju
Sharma along with the Director Sri B.R. Choudhary and Dr. Dinesh Sharma,
Chairman, has addressed a letter dated April 5, 2000, to the Managing Director,
RSMM Ltd, Udaipur, informing that the Udaipur Hospital is not interested in the
proposal as submitted by Mr. T.S. Saropariya. The letter dated April 5, 2000, reads as
follows :

       UDAIPUR HOSPITAL AND MEDICAL
       RESEARCH CENTRE Pvt. Ltd.
       Gulab Bagh Road, UDAIPUR-313001(Raj.)
       Ref No.
Date:
April 5, 2000
       To
       The Managing Director
       RSMM Ltd,
       Udaipur
       Sub: Proposal submitted by Mr. T.S. Saropariya
       Dear Sir,
       This is for your kind information that the proposal submitted by Mr. Tej Singh
       Saropariya, who is one of the directors in Udapur Hospital and holds 25% of
       equity shares, to construct a charitable hospital in collaboration with RSMM is
       given by him in an individual capacity. As the Board does not approve the
       proposal hence the Udapur Hospital is not interested in the abovesaid proposal.
       For any further information please contact the undersingn.
       Sd/-
       Dr. Dinesh Sharma
       Chairman
Sd/-
Dr. Anuj sharma
Managing Director

               Sd/-
               Dr. B.R. Choudhary
               Director A.R.
10. It is submitted by Mr. M.S. Singhvi that as the offer was made on behalf of the
Udaipur Hopital, the writ petition could not have been submitted by the petitioner in
his individual capacity. Learned counsel has also relied upon a decision of the Apex
Court in Himachal Pradesh v. Raja Mahendra Pal reported in 8

11. We have considered the rival contentions.

12. It is to be borne in mind that instant case is not of distribution of largesse or
granting of licenses or quotas, but of joint venture, where the State or its
instrumentality enters into signing a partnership or a joint undertaking for a particular
transaction or project for mutual service or profit. In such joint venture, the State or
the Association of persons or Companies jointly engage in some commercial
enterprises wherein all contribute assets and share risks. The trend of joint venture
companies is on increase. Now a days, the expression "joint ventrure" is very
frequently used. The Black's Law Distionary has defined joint venture "a community
of interest in the performance of the subject-matter, a right to direct and govern the
policy in connection therewith, and duty, which may be altered by agreement, to share
both in profit and lossees". There has been a growth of joint ventures in our Country
wherein foreign companies join with Indian counterparts and contribute towards
capital and technical know-how for the success of the venture.

13. In the case of G.D. Zalani v. Union of India reported in 9 the Supreme Court held
that the normal method of auction or inviting tenders is not feasible when technolgical
tie-up in joint venture was to be formed. In para 34 of SCC : Para 33 of AIR, the
Supreme Court has observed as under :

       "34. We must reiterate that this was not a case of granting of lease of a
       government compnay, in which case the Court would have been justified in
       insisting upon the authorities following a fair method consistent with Article 14,
       i.e., by calling for tenders. We agree that while selling public property or
       granting its lease, the normal method is auction or calling for tenders so that all
       intending purchasers/ lesses should have an equal opportunity of submitting
       their bids/tenders. Even there, there may be exceptional situations where
       adopting such a course may not be insisted upon. Be that as it may, the case
       here is altogether different. HAL was trying to improve not only the quantum of
       production but also its quality and for that purpose looking for an appropriate
       partner. They went in for the best. It must be remembered that this technology is
       not there for the mere asking of it. All the leading drug companies keep their
       processes and technology a guarded secret. Being businessmen, they like to
       derive maximum profit for themselves. It is ultimately a matter of bargain. In
       such cases, all that need be ensured is that the Goverment or the authority, as
       the case may be, has acted fairly and has arrived at the best available
       arrangement in the circumstances."

14. In the case of New Horizons Ltd. v. Union of India reported in 10 the Apex Court
held that even in cases where the Government action must be in consonance with the
standards or norms, which should not be arbitrary, irrational, or irrelevant, it is entitled
to have certain measure of "free play in the joints". It will be profitable to extract para
17 of SCC form the said judgment as follows (para 19 of SCW):

       "The decision of this Court, therefore, insist that while dealing with the public,
       whether by way of giving jobs or entering into contracts or issuing quotas or
       licenses or granting other forms of largesse, the Government cannot act
       arbitrarily at its sweet will and like a private individual, deal with any person it
       pleases, but its action must be in conformity with the standards or norms which
       are not arbitrary, irrational or irrelevant. It is, however, recognized that certain
       measure of "free play in the joints" is necessary for an administrative body
       functioning in an administrative sphere."

15. In Tata Cellular v. Union of India reported in 11 the Apex Court has examined the
scope of judicial review in the matter of contract and laid down the following
principles (Para 113) :

       "(1) The modern trend points to judicial restraint in administrative action.
       (2) The Court does not sit as a Court of appeal but merely reviews the manner
       in which the decision was made.
       (3) The Court does not have the expertise to correct the administrative decision.
       If a review of the administrative decision is permitted it will be substituting its
       own decision, without the necessary expertise which itself may be fallible.
       (4) The terms of the invitation to tender cannot be open to judicial scrutiny
       because the invitation to tender is in the realm of contract. Normally speaking,
       the decision to accept the tender or award the contract is reached by process of
       negtiations through several tiers. More often than not, such decisions are made
       qualitatively by experts.
       (5) The Government must have freedom of contract. In other words, a fair play
       in the joints is a necessary concomitant for an administrative body functioning
       in an administrative sphere or quasi-administrative sphere. However, the
       decision must not only be tested by the application of Wednesbury principle of
       reasonableness (including its other facets pointed out above) but must be free
       from arbitrariness not affected by bias or actuated by maladies.
       (6) Quashing decisions may impose heavy administrative burden on the
       administration and lead to increased and unbudgeted expenditure."

16. The case of M.I. Builders Private Ltd. ( AIR 1999 Supreme Court 2468) on which
learned counsel has heavily placed reliance, was not a case of joint venture but a case
of contract for construction of underground commercial complex in the city of
Lucknow. In the said case, on facts, it was found that the whole process of awarding
contract to M.I. Builders was in flagrant violation of law with the sole purpose of
conferring benefit on it. The allegations of malafide were firmly established. In fact in
the said case, subsequently, Maha Nagar Palika itself withdrew the grant of project to
M.I. Builders. In the facts of the case, the Apex Court found that the dictum contained
in the case of M/s Kasturi Lal Lakshmi Reddy v. The State of Jammu and Kashmir
reported in 12 was inapplicable.

17. In Kasturi Lal's case ( AIR 1980 Supreme Court 1992) ( supra), their lordships of
the Supreme court in para 22 observed as follows (para 22) :
       "The State may choose to do so, if it thinks fit and in a given situation, it may
       even turn out to be advantageous for the State to do so, but if any private party
       comes before the State and offers to set up an industry, the State would not be
       committing breach of any constitutional or legal obligation if it negotiates with
       such party and agrees to provide resources and other facilities for the purpose of
       setting up the industry. The State is not obliged to tell such party; "Please wait, I
       will first advertise, see whether any other offers are forthcoming and then after
       considering all offers, decide whether I should let you set up the industry". It
       would be most unrealistic to insist on such a procedure, particularly in an area
       like Jammu and Kashmir which on account of historical, political and other
       reasons, is not yet industrially developed and where entrepreneurs have to be
       offered attractive terms in order to persuade them to set up an industry. The
       State must be free in such a case to negotiate with a private entrepreneur with a
       view to inducing him to set up an industry within the State and if the State
       enters into a contract with such entrepreneur for providing resources and other
       facilities for setting up an industry, the contract cannot be assailed as invalid as
       long as the State had acted bonafide, reasonable and in public interest."

18. From the above observations, it becomes clear that the isuance of public
advertisement inviting people at large to offer their prices or to apply for entrustment
of contract, is not an absolute or invariable rule. A joint venture project is always
based on mutual trust and confidence and after examining the investment capactity,
experience and capability and human resources available with the partner and other
material, such a decision of the Government or its instrumentality cannot be assailed
as invalid except in a case where the decision of the State or its instrumentality is not
bonafide, reasonable and in public interest. If the terms and conditions of the contract
and surrounding circumstances show that the State has acted malafide or out of
improper or corrupt motive or in order to promote private interest of someone at the
cost of the State, the Court will undoubtedly interfer but so long as the State action is
bona fide and reasonable, the Court will not interfere merely on the ground that no
advertisement was given or publictiy made or tenders invited.

19. In the instant case, there is nothing to show that the decision of the first respondent
is malafide or unreasonable or against the public interest. On the contrary, the bona
fide of the petitioner appears to be doubtful. At the first instance, he has entered in the
picture quite late. The Board of Directors approved the proposal in the month of
December,1999 and then the MOU was also entered in the month of January, 2000,
Thus, there was no question of placing the proposal received in the month of march
before the Board. Otherwise also, there was no proposal from the Udaipur Hospitals
duly approved by the Board. The petitioner, who deals in jewellery business, may be
wealthy person but he has not been able to carry his proposal even with the Udaipur
Hospitals, wherein he claims to have 25% of shares.

20. The object of instant consortium is to provide medical services for the past and
present employees and the family members of the first respondent on no profit-no loss
basis and further for the benefit of the poor and downtrodden people of the Udaipur
region. While the first respondent was in search of a partner for establishing a multi
superspeciality hospital with twin purpose as referred-to above since 1997 and they
failed with the Apollo Group, at that time, it received an offer from the respondednt
No.4, which is headed by Dr. Kirit Kumar Jain, Chariman cum Managing Director.
Dr. Kirit Kumar Jain is said to have vast experience in the medical field and has been
in U.S.A. for last 22 years. He is a Cancer Specialist and has done specialisation in
Sloan Kettering Kancer Centre, U.S.A. which is said to be a renowned World's best
hospital for Cancer. He is also a M.B.A. qualified from U.S.A. for hospital
management. He belongs to Udaipur and wants to set up a multi super specialty
hospital at Udaipur to provide free medical care to poor. for this purpose, he floated
the company with an authorized capital of Rs. ten crore. He has agreed with the terms
and conditions of the first respondent providing medical services to its past and
present employees and their family members at no profit and no loss basis. The entire
project will cost around Rs. 20 crore and so far as the first respondent is concerned, it
will be providing land and contributing to the share capital of respondent No.4 to the
time of Rs. one crore only and the remaining amount is to be managed by the fourth
respondent. It is also stated that in addition to Dr. Kirit Kumar Jain, two other
prominent doctors are expected to join the project viz; Dr. Ramesh Gupta and Dr.
Vinod Kumar. when such offer was with the first respondent, it was not at all
expedient [as the Supreme Court observed in Kasturi Lal's case (supra) ]to tell him "
Please wait, I will have to first advertise see whether any other offers are forthcoming
and after considering all offers, decide whether I should set up the super specialty
hospital with you. Such an approach cannot be appreciated either from the service or
business point of view, particularly in globalizing Indian Economy. A bona fide and
prudent decision depends on various factors. No straightjacket formula can be tailored
in that regard. We only say that High Court is not expected to be readily available for
interference simply on the ground that MOU for joint venture is entered without
publicity.
21. Recently, the Apex Court in Air India Limited's case (supra) has observed that the
High Court should exercise discretionary power under Article 226 with great caution
and should exercise it only in furtherance of public interest and not merely in making
out a legal point. The Court should always keep larger public interest in mind in order
to decide whether its intervention is called-for or not. The Court further observed that
the Court should intervene only when it comes to the conclusion that the
overwhelming public interest requires interference. Dealing with the commercial
transaction, the Court observed thus (para 12) :

       "In a commercial transaction of a complex nature what may appear to be better,
       on the face of it, may not be considered so when an overall view is taken. In
       such matters, the Court cannot substitute its decision for the decision of the
       party awarding the contract."

22. Thus, on the basis of material on record, we find that the first respondent bona fide
believed that the fourth respondent can be the best partner for setting up a hospital in
joint venture on the terms as set out in MOU. There is nothing on record to vitiate the
said belief. We do not find any arbitrariness or unreasonableness in the decision of the
first respondent. We do not find any good and valid reasons to interfere with the
decision of the first respondent.
23. Consequently, we find no merit in the Special Appeal and the same is hereby
dismissed.

Appeal dismissed

Cases Referred.

1. (1999) 6 SCC 464
2. (1999) 8 SCC 150
3. (1999) 7 SCC 89
4. 2000 AIR SCW 351
5. AIR 1971 SC 246
6. AIR 1976 SC 578
7. AIR 1992 SC 443
8. AIR 1999 SC 1786.
9. 1995 Supp (2) SCC 512
10. (1995) 1 SCC 478
11. (AIR 1996 SC 11)
12. AIR 1980 SC 1992