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SANTOSH HEGDE, J.

L.....I.........T.......T.......T.......T.......T.......T..J Being aggrieved by the judgment of the High Court of Delhi dated 25th January, 1999 made in C.W.P.No.3020/97, the writ petitioners therein have preferred this appeal by leave of this Court. Respondent No.1, Government of India (GOI), took a policy decision in the year 1992 to offer some of its discovered oil fields for development on a joint venture basis. Its decision in this regard was that medium sized oil fields will be offered for development under the joint venture with the participation of the Oil and Natural Gas Commission (ONGC)/the Oil India Limited (OIL) while the small sized oil-fields will be offered for development without the participation of the ONGC/OIL. This policy decision was taken on the ground that the country was facing foreign exchange crisis and there was lack of resources to fully develop these oil-fields. The GOI was also of the opinion that the domestic crude production was declining and there was a need to augment its production. With the said policy in mind, the GOI invited bids for 12 medium sized oil fields and 31 small sized oil fields. In response to the invitation of the GOI in regard to the two medium sized oil-fields, namely, Panna and Mukta, as many as 8 consortia offered their bids and after preliminary technical evaluation of those bids, discussions were held with the bidders and based on such discussions, the GOI shortlisted respondent Nos. 4 and 5 and another consortium of Hyundai Heavy Industries, Essar Oil Limited, Dan Offshore and Albion International. Sometime in October 1993, these two consortia were called for further negotiations by the Negotiating Committee to finalise the contract and after such negotiations and evaluation of the bids on the recommendations of the said Committee, the bid of respondent Nos. 4 and 5 was accepted in February 1994 and a Letter of Award (LOA) was issued to the said consortium. As per this award, the oil-fields - Panna and Mukta - were agreed to be given to the said consortium with a participating interest of 30% each to respondent Nos.4 and 5 in association with the ONGC which was given a share of 40%. The said contract provided that the GOI had the first option to purchase up to 100% of the production of oil from these fields at an international market price to be determined in accordance with the provisions of the contract. It further provided that the international price shall be determined with reference to one or more freely traded international market prices which bear resemblance to the produce crude in terms of standard parameters such as gravity, sulphur content, yield etc. which are critical to the market value of the crude. The contract price to be paid to the contractor had to be the price of Brent (DTD) crude with a discount of $ 0.10 cents per barrel. Brent is said to be a similar sweet crude which is freely traded in the international market. The actual contract termed as Profit Sharing Contract (PSC) was signed by the GOI and the consortium of respondent Nos. 3, 4 and 5 in regard to Panna and Mukta oil-fields on 22.12.1994. The appellants herein challenged the awarding of this contract before the High Court of Delhi on 26th July, 1997 seeking the following reliefs :-

The appellants who were the petitioners before the High Court strongly relied on the observations made by the Comptroller and Auditor General of India (CAG) who in its report submitted to the Parliament, had raised many objections in regard to this contract. They also relied upon a recommendation made by the Superintendent of Police, Anti Corruption Unit of CBI, Bombay, who had recommended the filing of a First Information Report pointing out various irregularities committed in the awarding of this contract. According to the appellants, this recommendation of the Superintendent of Police, CBI, Bombay, was scuttled by some higher officers of the CBI with a view to favour the persons involved in awarding of this contract. It was also alleged in the said petition that some of the senior officers of the ONGC who actively participated in the negotiations which culminated in awarding of this contract in favour of respondent Nos. 4 and 5 had joined the services of respondent No.4 or 5 which fact, according to the petitioners, clearly indicated that these officers during their tenure with ONGC had colluded with respondent Nos. 4 and 5. It was further alleged that the contract in question lacked transparency in the invitation of the bids as well as in the evaluation of bids which has led to the grant of a very valuable contract on unconscionable terms, leading to plundering of national resources. The appellants also relied on a statement purported to have been made by the Private Secretary to the then Minister of Petroleum, who had averred in the said statement to the investigating agency, to the effect that large sums of monies were paid to the said Minister. The petition was opposed by all the respondents on almost similar grounds contending that the contract in question was awarded after a careful consideration of all the commercial/ technical aspects of the contract bearing in mind the policy of the GOI in this regard and the contract in question was to the best advantage of the GOI and the ONGC. The respondents have asserted that there has been no collateral consideration or mala fides involved in awarding of the contract; and that each of the terms of the contract was carefully considered keeping in mind the interest of the GOI and the ONGC. It was further argued that the figures mentioned in the writ petition are wholly imaginary and exaggerated both in regard to the oil reserves as also in regard to potential returns from the oil fields and as a matter of fact the estimated take of the GOI and the ONGC in this contract is to an extent of 80 to 82 per cent of the total net revenue or technical profits from the contract. The respondents also denied the fact that under the contract the GOI had agreed to purchase the crude oil from the joint venture consortium at a highly inflated price of $ 24 per barrel which included a premium of $ 4 per barrel. According to the respondents, this figure was deliberately inflated by the petitioners, and there was no such agreement to pay $4 per barrel as premium. On the contrary, the price fixed under the contract for purchase of the crude oil by the GOI was the international market price prevailing on the date of such purchase minus a rebate of $ 0.10 cents per barrel on such price which meant that the price paid by the GOI was less than the international price prevailing. The respondents also questioned the correctness of the petitioners claim that the quantity of oil reserves in these wells were to an extent of 54.4 MMT and also contended that at no point of time the reserve oil figure was deflated, as alleged in the petition. They also contended that re-employment of the officials named in the petition had no effect on the contract. In regard to the statement of Mr. Safaya, they contended that the alleged statement of the Private Secretary to the Minister was false and, at any rate, the same was subsequently withdrawn before the court and the said bribery case is the subject-matter of a pending criminal trial. The CBI has also denied the allegation made against it. The High Court as per its judgment dated 25th January, 1999 rejected the preliminary objection of the respondents in regard to the maintainability of the petition and proceeded to deal with the petition on its merits. It came to the conclusion that the questions raised by the appellants/petitioners in their petition involved matters of economic policy in respect of which the GOI had greater latitude and flexibility and the courts would be slow to interfere in such matters. Dealing with the allegation pertaining to abnormality in fixing of royalty and cess amounts payable by the joint venture, the High Court came to the conclusion that the liability to pay royalty is upon the oil produced and sold, irrespective of the price payable by the GOI which could vary depending on the international market. On this foundation, it came to the conclusion that there was no basic fallacy in the methodology adopted by the GOI as to the payment of royalty and cess. It also held that in regard to the evaluation of bids, more than one view was possible, hence it could not come to the conclusion that the view taken by the GOI was actuated by mala fides. In regard to the price payable by the GOI for the crude oil to be purchased from the joint venture, the High Court came to the conclusion that the price payable was actually less than the international price for oil of similar proof and the High Court concluded that the Governments take in the contract would not be less than 80% of the total value of the contract. In regard to the complaint made against the CBI, the High Court refrained from expressing any opinion. On this basis, the High Court came to the conclusion that the allegations of the petitioners before it that the contract in question was unconscionable as to call for an independent probe, were not established and, accordingly, dismissed the petition. Lengthy arguments have been advanced before us by Mr. Shanti Bhushan, learned senior counsel appearing for the appellants, and learned Additional Solicitor General Mr. Kirit Rawal, Mr. Ashok Desai, Mr. Atul Setalvad, Mr. B. Sen and Mr. K.N. Bhat, learned senior advocates, on behalf of the respondents. To avoid repetition, we will refer to the gist of their arguments during the course of our judgment. Mr. Shanti Bhushan initiated his attack on the impugned contract by contending that the GOI had earlier instructed the Ministry of Petroleum to make a study of comparative economics of operating the oil wells on a stand alone basis by the ONGC or the OIL vis-a-vis offering these wells on a joint venture basis. He contended that the Ministry of Petroleum, however without any such comparative economis, in August, 1992, invited bids for development of the discovered oil/gas fields including the oil fields of Panna and Mukta on a joint venture basis without first considering the feasibility of operating them on stand alone basis by the ONGC/OIL. The appellants contend that these oil fields which were with the ONGC on a long term lease and on which the ONGC had already spent more than Rs.800 crores from 1976 to 1993; and from which the ONGC had been producing oil and selling it to the Government of India at an administered price of $ 8 per barrel need not have been given on joint venture basis; and if a comparative study were to be made, it would have been crystal clear that the development of these wells on a stand alone basis would have been much more profitable to the GOI than by giving these wells on a joint venture.

On behalf of the first respondent in regard to this contention of the appellants, it is stated that even though in the notes submitted to the GOI, no comparative economics was indicated, as a matter of fact such a comparative study was taken up and it is only based on the result of such studies that the two oil fields i.e. Panna and Mukta were recommended to the GOI to be offered for development on a joint venture basis. They also contended that as per this study it was noticed that the two oil fields Panna and Mukta were not fully developed and the ONGC inspite of spending huge sums of money on development of these wells, was not able to exploit these oil wells to the maximum possible extent and in the wake of the then prevailing financial crunch and the foreign exchange crisis and the imminent need of the country for extra oil production, it was considered that offering these wells on a joint venture basis was more beneficial and less burdensome in the interest of the country. It was also pointed out that at that point of time the World Bank had offered financial assistance provided a time-bound programme was chalked out by the GOI for development of these wells. For all these reasons the GOI contended that it was thought economically prudent to go for joint venture development of the oil fields. They also contended that though, as a matter of fact, the particulars of the result of the comparative economics prepared by the Ministry and the ONGC were not submitted to the GOI, these materials were considered by the concerned Ministry along with the Cabinet Sub-Committee on Economic Affairs and on their approval and with the knowledge and consent of the Cabinet, a decision was taken to give the oil wells for development on a joint venture basis. The High Court after considering the material available on record came to the conclusion that non-placing of the report on comparative economics before the GOI is only an irregularity and in the absence of any prejudice to public interest being pointed out, the prayer of the appellants before it for directing a probe was not justified. We have carefully considered the arguments and the material that was placed before us, and we note that so far as the allegation of failure to make a comparative economic study is concerned, from the material on record we find that the said allegation is not factually correct because it is seen that, as a matter of fact, such a comparative study was made by the Ministry and when the particulars thereof were sought for by the CAG, the same were also placed before the CAG, and the CAG has also accepted this fact but commented in its report that the study conducted by the Ministry has not taken into consideration the ONGCs current cost of development of the well platforms vis-à-vis the cost of similar facilities to be provided by the joint venture contractors. Be that as it may, the fact remains that a comparative study was conducted; but the same was not placed before the GOI when the latter accepted the proposal of the Ministry to give these wells on a joint venture basis. The question, therefore, for our consideration is: does the non-placing of the materials pertaining to the comparative economics vitiate the contract impugned in this appeal. As noted above, the GOI in its counter has stated that though the result of the comparative economics conducted was not submitted to the Cabinet, the same was discussed with the Cabinet Sub-Committee on Economic Affairs and on their approval and with knowledge and consent of the Cabinet, a decision was taken to give the oil wells for development on a joint venture basis. This submission when taken in the background of the fact that at the relevant point of time the ONGC was not in a position to exploit the oil wells in question to the best advantage of the oil needs of the country and there was overall financial crunch and foreign exchange crisis, and there was also a possibility of the GOI losing the financial assistance from the World Bank, the GOIs decision to accept the suggestion of the Ministry to offer these oil wells on a joint venture basis cannot be faulted. The material available on record and the circumstances prevailing at the time of the decision of the GOI show that though the materials of the comparative study were not placed before the GOI, the recommending authority had based its recommendations on such study which was accepted by the GOI. Therefore, by the mere absence of placing the materials constituting the comparative economic study, while in effect it was actually taken note of, we are unable to accept the argument of the appellant that there has been non-application of mind by the GOI while awarding the contract. That apart, whether the oil wells should be developed on a stand alone basis by the ONGC or not, is a matter of policy with which we are not inclined to interfere solely on the ground that there is no reference to such study in the decision of the GOI. Therefore, the allegation of non-application of mind must fail.

It was next contended by the appellants that the GOI has bartered away the two oil wells already developed by the ONGC containing large deposits of oil to the joint venture for a meagre sum of Rs.12 crores paid to the GOI as signature bonus. According to the appellants, the oil reserve in the said two oil wells was in the range of 54.4 MMT which, on the basis of the then prevailing market price, would be of the value of Rs.17,000 crores. The appellant also contends that with a view to benefit respondent Nos.4 and 5, the oil reserves were under-estimated at 14 MMT with the connivance of Mr. RB Mehrotra, Member (Exploration) and Mr. Khosla, Chairman & Managing Director, ONGC at the relevant time. In support of this contention, the appellants also rely on the observations of the CAG who, in his report at para 2.11, has observed that The reserve estimates on the basis of which the Government should have proceeded in the matter, kept varying at different stages . . . In the absence of a reasonable assessment of reserves, it would be difficult for the Government to anchor negotiations properly for obtaining higher Government take in the form of past cost compensation, signature and production bonuses to ONGC and increased share in profit petroleum. The GOI and the ONGC in their statements as well as in their submissions had given their own explanation in regard to the varying figures found in the records. They contended that the figure of 51.4 MMT originally noted was not an estimate of oil reserve only but was the total estimate of reserve of oil and gas found in these wells out of which the ONGC had estimated oil reserve at 34.4 MMT only; the balance being gas reserve. It is also contended that in the year 1990 the ONGC undertook a 3D seismic survey which revealed that the actual oil available for commercially viable extraction from these wells was to the extent of 14 MMT only. They contend that this figure, as obtained from the 3D seismic survey, was not conveyed to any of the bidders. On the contrary, the intending bidders were asked to conduct their own survey for the purpose of offering their bids. They also contend that 34.4 MMT of reserve oil was not actually the quantity of economically recoverable oil but was the estimate of a possible reserve of oil in these wells. Even according to the ONGC, before the 3D seismic survey, the planned recovery estimate was only 24.9 MMT out of 34.4 MMT estimated reserve. From the material on record, it is seen that the bidders made their own survey of these wells and so far as respondent Nos.4 and 5 are concerned, they estimated the economically recoverable oil from these wells at 20 MMT while the other joint venture consortium which was short-listed along with the consortium of respondent Nos.3 to 5, had estimated it at 12 MMT, and the respective bids of the parties were evaluated on the basis of their self-evaluation of the reserve oil in the wells concerned. Therefore, we think it is possible that out of 34.4 MMT of the oil estimated originally as being the reserve, as a matter of fact, the recoverable oil could be only 20 MMT or near about that quantity, as evaluated by respondent Nos.4 and 5 because we could reasonably draw an inference that it may not be possible to economically exploit all the oil that may be existing in an identified oil well. At any rate, it would be hazardous for the courts to venture on a guesswork as compared to the technical assessment that is made, correctness of which is not disproved by cogent materials. Therefore, we are unable to accept the contention of the appellants that, as a matter of fact, the recoverable oil reserve in Panna-Mukta oil fields was either 54.4 MMT or even 31.4 MMT. That apart, it is very important to note that the GOI has made provisions in the contract itself to increase its take in the event of there being an increase in the quantity of recoverable oil by providing for progressive fiscal regime in the contract. As a matter of fact, this aspect of the contract was also taken note of by the CAG in Para 2.12 of the report. In view of this safeguard coupled with the fact that the economically recoverable oil from these wells is in the region of 20 MMT, we do not think that the contract in question is so unreasonable as to suspect the bona fides of the same on this ground. At this stage, we will have to take note of the argument of the appellants that Mr. Mehrotra and Mr. Khosla, who were at the relevant point of time holding important posts in the ONGC, had subsequently joined the services of respondent Nos.4 and 5 which, according to the appellants, shows that that these two officers could have played an important role in reduction of the figures mentioned by the ONGC. It is true that in the year 1992, Mr. Mehrotra was the Member (Exploration) and Mr. Khosla was the Managing Director of the ONGC. Among these two officers, Mr. Khosla retired as an M.D. in the month of September, 1992 and Mr. Mehrotra retired as Member (Exploration) on 31.12.1993, while the contract in question was approved by the GOI on 23.2.1994 and a Letter of Award was issued to the consortium on 16.3.1994 by which time these two officers had left the services of the ONGC, and it is to be noted that they had no part to play in the approval of the award of contract to the consortium which was done by the GOI on the recommendations of a Committee of Secretaries. Therefore, it is difficult to accept the argument that these two officials connived to reduce the oil reserves so as to help their future employers.