ASSOCIATION OF REGISTRATION PLATES v. UNION OF INDIA AND ORS (2)

Citation: [2004] SUPP. 6 S.C.R. 496

Court: Supreme Court of India

Bench: Y.K. SABHARWAL, D.M. DHARMADHIKARI, TARUN CHATTERJEE

Case summary

ASSOCIATION OF REGISTRATION PLATES v. UNION OF INDIA AND ORS (2).pdf

Judgment text

ASSOCIATION OF REGISTRATION PLATES v. UNION OF INDIA AND ORS. NOVEMBER 30, 2004 [Y. K. SABHARWAL, D. M. DHARMADHIKARI AND TARUN CHATTERJEE, JJ. ] Motor Vehicles Act, 1988/Motor Vehicle Rules, 1989/Motor Vehicles (New High Security Registration Plates) Order 2001-Section 109(3)/Rule 50/Para4(x)--Constitution ofIndia, 1950-Artic/es 14and19(J)(g)-Scheme ofHigh Security Registration Plates-Amen been highlighted as sub-serving the public interest :- I. That it would not be possible to implement the scheme since the scheme provides that the approved manufacturer would use the premises of the State RTO and lay down V-Sat links so that the entire state is networked on a common platform. 2. It would be impossible for the State to provide all the TAC ;. holders space and infrastructure in the RTO premises. ,. , -'· It would be difficult for the state to identify the source ofany counterfeiting in case there are multiple manufacturers.

This would severely compromise the security considerations involved in the scheme. 4. Different manufacturers would lead to variations in price between different manufacturers. ( 5. The State is at disadvantage since all the manufacturers would prefer to concentrate on supplying only in Kolkata and would 1 not go to the other far flung RTOs where he would recover the returns on his investment. 6. In case more that one manufacturer operate within the state, it will lead to discrepancy and non-uniformity in price structure prevailing in different regions. 7. Difficulty in assimilation of data from more than one manufacturer thus leading to disaggregated and confusing database signals. Such sensitive and security related b_usiness must be governed by uniform database management processes ' and unified standardized coding practices. 8. Different manufacturers would mean that there would be variation in quality ofthe material and in terms ofworkmanship. .... 9.

Possible duplication ofRegistration Plates due to competition between manufacturer of different regions and lack of aggregated security controlled database management systems. 10. Non-conformity of data of different manufacturers would lead to confusion and integration ofdata from the State RTOs. 11. Difficulty in fixing up the answerability on any one manufacturer for not following the prescribed procedure. 12. Confidentiality of the public database would be severely compromised. 13. Provision ofTraining ofRTO personnel by each manufacturer would be a logistic nightmare and would lead to confusion and further lead to the system being compromised severely. 14. It is also important to note that each registration plate has a unique number, and consequently, all the RTOs are required to be electronically connected to each other, ifthe vendors are allowed to proliferate, this connection would not be possible, and would lead to complete chaos.

By highlighting the above factors, it is submitted that if multiple manufacturers are involved in implementation of the policy, it is not likely to work satisfactorily. It is submitted that a single selected manufacturer would not just be marketing, servicing and providing a new product but would engage in assisting the State in fulfillment of statutory obligations to grant the high security registrations to the owners of motor-vehicles in accordance with the provisions ofthe Act and the Rules. It is submitted that ASSON. OF REGISTRATION PLATES v. U. 0. 1. [DHARMADHIKARI, J. ] 519 tender conditions are suitably formulated for performance guarantee, experience and understanding of business, financial strength, and capacity of creating and installing the entire infrastructure and networking.

Finally, it is submitted that the eligibility criteria prescribed by the State is commensurate not only with the scale of operation and size of network to be created by the operator but also with statutory requirement of States' continued delivery of its obligations to vehicle owners without any interruption. It is contended that through open tender, identifying and selecting an approved manufacturer to discharge statutory duty of RTO is not an act of the State creating any monopoly in favour of any private party. The grievance of infringement of fundamental rights under Article 19( 1)(g) of the Constitution of India is misconceived. Reliance is placed on Air India v. Cochin International Airport Ltd. , [2000] 2 SCC 617 and Asia Foundation & Construction Ltd. V. Trafalgar House Construction Ltd. , [1997] 1 sec 738. The learned senior counsel appearing for the respondent no.

5, has supported the submissions made on behalf of the Union of India and the State of West Bengal by advancing separate arguments with additional reasons. We shall separately deal with the submissions made on behalf of the petitioners on the interpretation ofthe provisions ofrule 50 and the statutory order of 2001 issued under the provisions of the Act. Taking up first the challenge to the impugned conditions in the Notices Inviting Tenders issued by various State authorities, we find sufficient force in submissions advanced on behalf of the Union and the State authorities and the contesting manufacturers. The State as the implementing authority has to ensure that scheme of high security plates is effectively implemented. Keeping in view the enormous work involved in switching over to new plates within two years for existing vehicles of such large numbers in each State, resort to 'trial and error' method would prove hazardous.

Its concern to get the right and most competent person cannot be questioned. It has to eliminate manufacturers who have developed recently just to enter into the new field. The insistence of the State to search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. The relevant terms and conditions quoted above are so .. formulated to enable the State to adjudge the capability of a particular tenderer who can provide a fail-safe and sustainable delivery capacity. Only such tenderer has to be selected who can take responsibility for marketing, servicing and providing continuously the specified plates for vehicles in large number firstly in initial two years and annually in the next 13 years. The manufacturer chosen would, in fact, be a sort of an agent or medium of the RTOs concerned for fulfillment of the statutory obligations on them of providing high security plates to vehicles in accordance with rule 50.

Capacity and capability are two most relevant criteria for framing suitable conditions ofany Notices Inviting Tenders. The impugned clauses by which it is stipulated that the tenderer individually or as a member ofjoint-venture must have an experience in the field of registration plates in at least three countries, a common minimum net worth of Rs. 40 crores and either jointventure partner having a minimum annual turnover of at least Rs. 50 crores and a minimum of 15% turnover of registration plates business have been, as stated, incorporated as essential conditions to ensure that the manufacturer selected would be technically and financially competent to fulfil the contractual obligations which looking to the magnitude of the job requires huge investment qualitatively and quantitively. In the course of hearing, it could not be seriously disputed by the parties that technical know-how for the high security registration plates is outside the country.

It is true that many indigenous manufacturers are in a position to supply the plates on the basis of technical assistance available in and outside the country. There are many tenderer who possess Type Approval Certificates [TACs] but to ensure major quantity of supply in initial two years and periodical supply for new vehicles for a long period, only a manufacturer who is sound both technically and financially, is required. Learned Brother G. P. Mathur J. , in his elaborate opinion expressed by him [See 2004(5) SCC 364] found a serious vice in the tender conditions that they necessarily intend to promote such companies which have foreign collaborations and exclude indigenous manufacturers. It is not controverted that the technical 'know-how' for the manufacture of high security registration plates presently is available outside India.

Technically and financially, competent indigenous manufacturers are mostly those who are in collaborntions with foreign companies engaged in such manufacturing activities. The scheme contemplated under rule 50 of registration plates is a new experiment for India. In the initial stages of its implementation, tender conditions encouraging such manufacturers who are ASSON. OF REGISTRATION PLATES v. U. 0. 1. [DHARMADHIKARI, J. ] 521 in foreign collaborations cannot be held to be discriminatory to indigenous manufacturers. Keeping in view the mrture of the contract and job involved particularly its magnitude and the huge investment for infrastructure required, attempt to select such manufacturer - may be having collaboration with ~ foreign c8°mpanies and experience in foreign countries cannot be held to be a deliberate attempt on the part ofthe State authorities to eliminate indigenous manufacturers.

In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action oftendering Authority is found to be malicious ·and misuse of its statutory powers, tender conditions are unassailable. On intensive examination oftender conditions, we do not find that they violate -' the equality clause under Article 14 or encroach on fundamental rights of a class of intending tenderer under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms ofthe impugned tender conditions, we do not find that the clauses requiring experience in the field ofsupplying registration plates in foreign countries and the quantum ofbusiness turnover are intended only to keep out of field indigenous manufacturers.

It is explained that on the date of formulation of scheme in rule 50 and issuance of guidelines thereunder by Central Government, there were not many indigenous manufacturers in India with technical and fiaancial capability to undertake the job of supply of such high dimension, on a long term basis and in a manner to ensure safety and security which is the prime object to oe achieved by the introduction of new sophisticated registration plates. The notice inviting tender is open to response by all and even if one single manufacture is ultimately selected for a region or State, it cannot be said that the State has created monopoly of business in favour of a private party. Rule 50 permits, the RTOs concerned themselves to implement the policy or to get it implemented through a selected approved manufacturer. .

Selecting one manufacturer through a process of open competition is not creation ofany monopoly, as contended, in violation ofArticle 19(l)(g) of the Constitution read with clause (6) of the said Article. As is sought to be pointed out, the implementation involves large network of operations of highly sophisticated materials. The manufacturer has to have embossing stations within the premises of the RTO. He has to maintain a data of each plate which he would be getting from his main unit. h has to be crosschecked by the RTO data. There has to be a server in the RTO's office which is linked with all RTOs' in each State and thereon linked to the whole nation. Maintenance ofrecord by one and supervision over its activity would be simpler for the State if there is one manufacturer instead of multimanufacturers as suppliers. The actual operation of the scheme through the RTOs in their premises would get complicated and confused if multimanufacturers are involved.

That would also seriously impair the high security concept in affixation of new plates on the vehicles. If there is a single manufacturer he can be forced to go and serve rural areas with thin vehicular population and less volume of business. Multi-manufacturers might concentrate only on urban areas with higher vehicular population. The fifteen years contract period has also been supported by Union of Indian and State authorities. We find great substance in the submissions made on the data supplied as a justification for awarding contract for long period of 15 years. There would be a huge investment required towards the infrastructure by the selected manufacturer and the major return would be expected in initial period of two years although he would be bound down to render his services for future vehicles on periodically for a long period.

Looking to the huge investment required and the nature of the job which is most sophisticated requiring network and infrastructure, a long term contract, if thought viable and feasible, cannot be faulted by the court. If there are two alternatives available of giving a short-term or a long-term contract, it is not for the court to suggest that the short-term contract should be given. On the subject ofbusiness management, expertise is available with the State authorities. The policy has been chalked out and the tender conditions have l5een foFiimlated after joint deliberations ofauthorities of the State and the intending manufacturers.

Contract providing technical expertise, financial capability and experience qualifications with a long term of 15 years would serve a dual purpose of attracting sound parties to stake their money in undertaking the job ofsupply and safeguard public interest by ensuring that for a long period the work of affixation of security plates would continue uninterrupted in fulfillment of the object of the scheme contained in rule - 50. · Our considered opinion, therefore, is that none of the impugned clauses in the tender conditions can be held to be arbitrary or discriminatory deserving its striking down as prayed for on behalf of the petitioners. ASSON. OF REGISTRATION PLATES v. U. O. l. [DHARMADHIKARI, J. ] 523 .... There is no material on record to infer any malafide design on the part of the tendering authority to favour parties having foreign collaborations and keep out of fray indigenous manufacturers. The high security plates is a sophisticated article - new for manufacturer in India.

It is being introduced for the first time under the scheme contained in rule 50 of the Rules and the Act. At the time of issuance of Notices of Tender, technical know-how for manufacture of plates and its further development was undoubtedly outside the country. Only a few concerns in India having collaboration with foreign parties possessed the expertise and were available in the market. The terms of the notice inviting tender were formulated after joint deliberations ofCentral and State Authorities and the available manufacturers in the field. The terms of the tender prescribing quantum of turnover of its business and business in plates with fixation of long term period of the contract are said to have been incorporated to ensure uninterrupted supply of plates to a large number of existing vehicles within a period of two years and new vehicles for a long period in the coming years.

It is easy to allege but difficult to accept that terms ofthe Notices Inviting Tenders which were fixed after joint deliberations between State authorities and intending tenderers were so tailored as to benefit only a certain identified manufacturers having foreign collaboration. Merely because few manufacturers like the petitioners do not qualify to submit tender, being not in a position to satisfy the terms and conditions laid down, the tender conditions cannot be held to be discriminatory. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work, Article 14 of the Constitution prohibits the government from arbitrarily choosing a contractor at its will and pleasure. It has to act . reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim fundamental right to carry on business with the government.

All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions ofthis Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on government in its dealings with tenderers and contractors. The grievance that the terms of notice inviting tender in the present cases virtually creates a monopoly in favour of parties having foreign · collaborations, is without substance. Selection ofa competent contractor for assigning job of supply of a sophisticated article through an open tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioners.

What has been argued is that the terms of the Notices Inviting Tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufacturers, judicial interference is uncalled for. Challenge to the tender conditions on Paragraph 2 of Rule 50(J)(v). On behalf of the petitioners, paragraph 2 of r:. ile 50(1)(v), which is reproduced below, has been interpreted. The contention is that it does not contemplate selection of sole manufacturer for a State or a Region. The . D relevant paragraph 2 of rule 50(1)(v) reads thus :- "Rule 50(1)(v). Form and manner of display of registration marks on the motor vehicles. - (I) ............................ . (i) to (iv) (v) The licence plates with all the above specifications and.

the specified registrations for a vehicle shall be issued by the registering authority or approved licence plates manufacturers or their dealers. The Central Road Research Institute, New Delhi or any of the agency authorized by the Central Government shall approve the license plates manufacturers to above specification. [Emphasis supplied} Learned counsel for the petitioners argues that the use of the word "approved" in para 2 of clause (v) of rule 50(1) has to be given its natural meaning and cannot be read to mean "selected" through notice inviting ASSON. OF REGISTRATION PLATES v. U. O. I. [DHARMADHIKARI, J. ] 525 tender. In this respect, it is further submitted that the rule making authority has used the word 'approved' and 'approve' twice in the same paragraph. The rule read harmoniously rules out selection ofsole manufacturer through a tender process.

The argument in substance is that every approved licence plate manufacturer can be entrusted with the job ofsupplying the registration plates and selection ofone manufacturer for the job is against the intendment of the rule. The above argument seems attractive but on closer scrutiny is unacceptable. The rule is interpreted to mean that the registration plates can either be issued by RTO to the exclusion of all others or all type approval certificate holders must be allowed to do business ofsupply in open market. In other words, according to the petitioners, the rule contemplates that ifthe registering authority does not supply the plates itself, it allows all TAC holders to do the business without any restriction. In interpreting the rule, the object ofthe scheme providing for affixation of high security plates has to be kept in view. Where the RTO himself is not making the supply ofplates, an approved registration plate manufacturer can be selected for supply.

The legal obligation on the registering authority under rule 50(l)(v) to issue specified kinds of registration plates implies issuance of such registration plates through a selected approved plate manufacturer. Paragraph 2 ofclause (v) ofrule 50(l), ifreasonably construed, does not indicate any prohibition of selection of an approved plate manufacturer for assisting the registering authority to implement the scheme of affixation high security registration plates to existing vehicles and new vehicles. Such an interpretation fulfils the object of the scheme. The interpretation sought to be placed by the petitioners on the said para of the rule would result in frustrating the high security aspect and object of the scheme of affixation of high security registration plates on vehicles. Challenge to Para 4(x) ofthe Motor-Vehice/s [New High Security Registration Plates] Order, 2001 issued in purported exercise ofpowers under section 109(3) of the Act.

Para 4(x) of the statutory Order, 2001 mentioned above, reads as under:- "The manufacturer or the vendors selected by the State Transport Department for supply of such registration plates may be for the State as a whole or for any region of the State. " On behalf of the petitioners, it is submitted that para 4(x) of the ~. tatutory Ord;r, 2001 is ultra vires section 109 (3) of the Act under which 'it is purported to have been issued. Section 109 with its heading and the relevant sub-section (3) reads as under :- "Section 109. General provision regarding construction and maintenance of vehicles. (I) Every motor vehicle shall be so constructed and so maintained as to be at all times under the effective control of the person driving the vehicle. (2) Every motor vehicle shall be so constructed as to have right hand steering control unless it is equipped with a mechanical or electrical signaling device of a prescribed nature.

(3) If the Central Government is of the opinion that it is necessary or expedient so to do in public interest, it may by order published in the Official Gazette, notify that any article or process used by a manufacturer shall conform to such standard as may be specified in that order. [High. fighted for interpretation}. It is contended that section 109(3) falls under Chapter VII which deals with construction, equipment and maintenance ofmotor vehicles. Registration of motor-vehicles falls under Chapter IV of the Act. Under section 109(3), a direction or order can be issued only to a 'manufacturer' defined in section 2(21 A) to mean manufacturer ofmotor vehicles. It is submitted that a motorvehicle manufactured by a manufacturer is sold to a dealer without a registration plate. Thereafter, the dealer sells the motor vehicle to a customer without registration plate. Chapter IV containing section 39 to 65 deal with registration of motor vehicles of different types.

The proviso to section 39 of the Act says : 'nothing in this section shall apply to motor vehicle in possession of a dealer subject to such conditions as may be prescribed by the Central Government'. Section 41 also points to the same position. It casts an obligation on the owner of a motor vehicle to obtain registration. The question of issuing a certificate of registration and assigning to a motor ASSON. OF REGISTRATION PLATES v. U. 0. 1. [DHARMADHIKARI, J. ] 527 vehicle a registration mark arises only after sale ofmotor vehicle. Therefore, until the motor vehicle has been sold to a person by a dealer, the registering authority would not come into the picture and there is no occasion for assigning it a registration mark. A manufacturer of motor vehicle is not at all concerned with registration thereof by the registering authority.

9n the basis of above interpretation of provisions of the Act, the submissiorr made is that under section 109(3), the Central Government can only prescribe standards for any article or process used by the manufacturer in the manufacturing of the vehicle and not for selecting any manufacturer of registration plates to the exclusion ofothers. It is submitted that reading subsection (3) with sub-section (I) & (2) of section I09 ofthe Act, the position is that the provisions have nothing to do with registration plates of the vehicles. It is further submitted that power to issue directions as contained in para 4(x) of the statutory order of200l, cannot be traced to any provision in chapter IV of the Act dealing with registration ofmotor vehicles or to the rule making power under section 64(d). It is submitted that any provision regarding registration plates can only be made by rule framed by Central Government in accordance with provisions of the Act.

Sub-section (4) of section 212 ofthe Act, prescribes a mandatory requirement offirst publishing draft rule before making a final rule on any subject. Since in promulgating para 4(x) of the statutory order of2001, mandatory requirement of section 212(4) has not been complied with, the impugned para of the said statutory order of 2001 cannot be supported even as a statutory rule. The other submission made on the subject is that provisions for selecting only one manufacturer for registration plates in a region or a State is not a subject of 'prescribing manner and form in which the registration mark' would be displayed on the motor vehicles. On the above ground, it is submitted that para 4(x) of the statutory order of2001 deserves to be struck down as ultra vires the Act. It is violative of the Article 19(1 )(g) of the Constitution.

The above argument based on section 109(3) and the other provisions in Chapter IV ofthe Act have been suitably replied by the counsel appearing for the respondents. The reasoning advanced on behalf of the respondents is worthy of acceptance. The statutory order of 2001 is expressly issued under section 109 (3) of the Act which no doubt is concerned with construction, equipment and maintenance ofmotor vehicles. Sub-section (3) of section 109 permits Central Government to "notify that any article or process used by a manufacturer shall conform to such standard as prescribed". The word "manufacturer" is defined in section 2(2 lA) of the Act to mean a person engaged in the manufacture ofthe motor vehicles but the definition clause is prefixed by the words "unless the context otherwise requires".

In the context of sub-section (3) of section 109, an article to be affixed to the motor vehicle like a high security registration plates is covered by the use of expression "any article or process used by a manufacturer". 'In the context' if the provision contained in sub-section 3 is read reasonably, an article' which is adjunct or necessarily attachable to a motor vehicle, would also be covered in the said expression. The statutory order of 2001 is published in the official gazette. It does not fall outside the scope of subsection (3) of section 109 of the Act. The expression 'any article or process used by a manufacturer' has to be construed 'in the context' as not to restrict the expression 'manufacturer' to only manufacturer of motor vehicles as defined under section 2 (21A) of the Act.

The definition in the Act has to be construed according to the 'context' and if the 'context' otherwise indicates a meaningful interpretation is to be given to the words 'any article or process used by any manufacturer' as used in sub-section 3 of section I09 ofthe Act. Registration plates are not manufactured by the manufacturer . of motor vehicles but for maintenance and operations of motor vehicles, registration plates are necessary. Therefore, manufacturer of registration plates can be subjected to certain standards by a statutory order to be notified and published in accordance with sub-section (3) of section 109 of the Act. Any restrictive interpretation of the said sub-section is neither called for from the language ofthe sub-section nor the object ofthe provision. Reference is made to the opinion ofleamed Brother G. P. Mathur J. , in these cases.

For the reasons mentioned by us above, in our opinion, the statutory order of 2001 and clause 4(x) thereof cannot be held to be beyond the purview of sub-section 3 of section I09 of the Act. Clause 4(x) of the statutory order of 200I, could be issued under section 109(3), as an aid to the fulfillment of provisions of high security registration plates contained in rule 50. Such power ofthe State to issue order containing clause 4(x) is not only supported by sub-section 3 of section I09 but by rule 50 itself. Clause 4(x) of the statutory order of 2001 is merely enabling one and re-states what rule 50 contemplates. We also find force in the alternative submission made on behalf of the respondents that the statutory order including clause 4(x) can be supported as having been issued in exercise of executive power of the ASSON. OF REGISTRATION PLATES v. U. O. I. [DHARMADHIKARI, J. ) 529 Central Government which is co-extensive with its legislative power.

A For the above reasons, all the challenges made to the provisions ofthe rule, statutory order or the tender conditions fail. All the petitions directly filed in this Court and transferred to this Court from High Courts are, hereby, dismissed. B In the circumstances, we direct that the parties shall bear their own.. costs in all these cases. K. K. T. Petition dissmised.