G.D. ZALANI AND ANR. ETC. versus UNION OF INDIA AND ORS.

Citation: [1995] 1 S.C.R. 794 · Decided: 02-02-1995 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed
cites 2 · see the full citation network in Lexace
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

G.D. ZALANI AND ANR. ETC. ETC. 
v 
UNION OF INDIA AND ORS. 
FEBRUARY 2, 1995 
B 
[B.P. JEEVAN REDDY, SUHAS C. SEN, JJ.] 
Constitution of India-Arts. 298, 299 & 14-Malafides-Acquisition of 
advanced technology by Govt. Company-Held, that in the circumstances of 
the case not feasible to invite tenders-Consideration by Sub-Commit-
C tee-Held, fair and proper consideration-No Malafides made out against 
MD-Administrative Law-Natural Justice 
Article 77..,;._Articles of Association of HAL-.4.rticle 117-Rules of busi-
ness by President-Held, directive can be issued_ by Govt. of India-The 
directive must be expressed in the name of the President and not by the 
D President himself-Fann not mandatory-Directive issued in the present case 
by Govt. of India proper-Held, other companies whose offers are rejected--
Need not be given an opportunity of being heard. 
The three appellants along with Max·GB (Res_pondent No. 4) had 
E offered to collaborate with HAL, for the purpose of improving the quality 
· and quantity of peniclllin-G (Penn.G) and they had also offered to bring 
in foreign technology through their foreign collaborators. 
While there were four offers including that of the Respondent No. 5 
(Max.GB) the Chairman & MD of HAL supported the offer of Mu- GB. 
F The ·Board of Directors considered the offers made by SPIC and PBG aild 
rejected them, as· the technology offered by them was not in any way 
superior to that of HAL. 
A sub-Committee was appointed to evaluate the other proposals in 
Which the offers of SPIC and PBG were considered again, and their 
G rejection was reiterated. ~e Sub-committee suggested that the Max·GB 
· was the only offer left and it can be considered, keeping in view the 
financial parameters suggested by them. The Board of Directors then 
decided that minhnum lease rentals payable by Max-GB should be Rs. 
31~68 Cl'ores. The Chairman, HAL, then approached the Govt. of India 
ff_ stating that the amount of Rs •. 31.68 crQres was not agreeable to Max-GB 
794 
, 
' ' . 
G.D.ZAL~lv. U.0.1. 
795 
and that the Board resolution was not correct. The Govt. of India after A 
~ 
obtaining the expert advice of Prof. M.M. Sharma issued a directive to 
HAL to enter into a MOU with Max-GB and the MOU waS"signed for an 
annual rental of Rs. 17 crores. 
The appellants challenged the MOU by filing three writ petitions 
· contending that the MOU was invalid for the reason that though they had B 
offered to provide equally superior technology on more advantageous 
terms, their offers were rejected due to the bias of the Managing Director 
-....... 
of HAL. It was also contended before the High Court that because of the 
malafides on the part of the Managing Director, HAL had to lease out its 
plant for a very low amount, that the Government/HAL should have called C 
for tenders and that no one knew the terms of the contract since it was 
formed in a hush hush manner and that there was no transparency in their 
dealings. The High Court repelled all the contentions and dismissed the 
writ petitions. 
On appeal, it was contended by the appellants that their offers were D 
rejected due to the malafides on the part of the Managing Director of HAL; 
that there was no fair consideration of the offers made by the appellants; 
that the terms stipulated by Max-GB were not put to the appellants for 
ascertaining their response, that the lower rental accepted in the MOU is 
against the minimum amount stipulated by the Board of Directors of HAL; E 
that the Managing Director was bound to have carried out the instructions 
instead he was trying to over reach them; that the power to give directives 
under Art. 117 of the Articles of Association of HAL is vested in the 
President alone and the Government of India was incompetent to issue 
the directive; and that the case of Torrent was not considered prior to 
entering into the MOU. 
F 
Dismissing the appeals the Court held 
1. 
In the circumstances and on the present material, it cannot 
be said that the Managing Director of HAL was either actuated 
by malafides or that he was acting out of extraneous reasons. G 
[813-F] 
2. 
The complaint that there was no fair consideration of the 
offers made by the appellants cannot be entertained. [813-G] 
3. 
So far as SPIC was concerned even when it was putting H 
796 
A 
B 
4. 
c 
5. 
D 
6. 
E 
SUPREME COURT REPORTS 
[1995) 1 S.C.R. 
forwa.rd it~ proposals it was in the process of setting up a 
plant of its own for manufacture of Penn
Excerpt shown. Read the full judgment & AI analysis in Lexace.