2010 (5) TMI 944 - SC - Income Tax

Summary

Issues Involved:
1. Whether the State Governments are required to continue with the conditions of experience in the field of registration plates in foreign countries and a minimum annual turnover from such business as upheld in the Association of Registration Plates v. Union of India case.
2. Whether the State Governments can modify or do away with these conditions in their Notices Inviting Tenders (NIT) for the award of contracts for High Security Registration Plates (HSRP).
3. Whether the cancellation of the first NIT and the issuance of a second NIT by the State Governments was justified and in public interest.
4. Whether the actions of the State Governments in modifying the NIT conditions were arbitrary, discriminatory, or mala fide.

Detailed Analysis:

1. Continuation of Conditions Upheld in Association of Registration Plates v. Union of India:
The Supreme Court had previously upheld the conditions requiring experience in foreign countries and a minimum annual turnover for the award of contracts for HSRP in the Association of Registration Plates v. Union of India case. These conditions were considered essential to ensure that the selected manufacturer would be technically and financially competent to fulfill the contractual obligations. However, the Court did not prescribe these conditions as mandatory for all future NITs.

2. Modification or Removal of Conditions in NIT:
The Court examined whether the State Governments could modify or remove the conditions upheld in the Association of Registration Plates case. It was noted that the State Governments have the discretion to change their policies and conditions in the NIT, especially when circumstances change. The Court emphasized that government policies can evolve with changing circumstances and that such changes are permissible as long as they conform to Wednesbury reasonableness and are free from arbitrariness, irrationality, bias, and malice.

3. Justification for Cancellation and Issuance of New NIT:
The State of West Bengal canceled its first NIT and issued a second NIT, removing the conditions of foreign experience and minimum turnover, citing increased competition and public interest. The Court found this action justified, noting that the circumstances had changed with more manufacturers obtaining the requisite Type Approval Certificates (TAC). The decision to broaden the base of competitive bidding was seen as serving greater public interest without compromising on safety, security, and quality.

Similarly, the State of Orissa issued a fresh NIT without the conditions of foreign experience and minimum turnover. The Court found no fault with this action, as it was in line with the principles of Wednesbury reasonableness and public interest.

4. Allegations of Arbitrariness, Discrimination, and Mala Fides:
The appellants argued that the actions of the State Governments were arbitrary and discriminatory. However, the Court found no substantial material to support these allegations. It was noted that the decision to cancel the first NIT and issue a second one was made in public interest and not to favor any particular bidder. The Court also rejected the claim of mala fides, stating that the actions of the State Governments were justified and in accordance with the law.

Conclusion:
The Supreme Court dismissed the appeals, upholding the decisions of the State Governments to modify the NIT conditions. The Court emphasized that government policies can change with circumstances and that such changes are permissible as long as they conform to principles of reasonableness and public interest. The actions of the State Governments in issuing new NITs without the previously upheld conditions were found to be justified and in larger public interest.