M J Antony: Number plate logjam

Last Updated: Tue, Jun 08, 2010 19:41 hrs

Suspect government policies followed by lawsuits can stall reforms even in sensitive areas. The case of high security registration plates for motor vehicles, which landed twice in the Supreme Court in nine years, is the latest instance.

The new number plate regime should have been in place from the 1st of this month. But there is no sign of it anywhere in the country. Even the Capital city, which is dressing up for the Commonwealth Games, has not introduced it. So much for security vigilance.

In view of terrorist threats, the central government issued the Motor Vehicles (New High Security Registration Plates) Order 2001, specifying certain standards for the number plates. The Centre then put out certain guidelines for the states, which were allowed to use their own discretion in the matter.

That was the beginning of the first round of litigation, starting from the high courts. The states had imposed stringent conditions in their tender invitations. For example, the bidders with their foreign collaborators should have experience in at least five countries; their annual turnover from this business should be a minimum of Rs 30 crore and at least 25 per cent of it must be from the licence plate business. The contract would be for 15 years.

These terms were challenged in the high courts by an association of Indian manufacturers, alleging that these conditions were cut out for a few foreign companies that alone qualified for the bid. The batch of cases was transferred to the Supreme Court which decided against the Indian manufacturers in 2004 (Association of Registration Plates vs Union of India). The Supreme Court rejected the association’s charges of arbitrariness and discrimination.

Some states went back and invited new tenders. Since the prices quoted by the few eligible bidders were high, the conditions were lowered. The West Bengal and Orissa governments, for instance, dropped the conditions regarding foreign experience and minimum turnover. The period of contract was also reduced from 15 years to 10 years. Now the foreign bidders moved the high courts questioning the change in the government policy. They argued that the change was meant to favour some of their rivals, and, in any case, it was against the earlier judgment of the Supreme Court. The high courts dismissed their petitions, leading to the appeal.

In this second round of litigation, which ended last month, the Supreme Court’s interpretation of "public interest" changed conspicuously. This switch in view shows how even judicial mind cannot bridle the unruly horse called public interest.

This time, the Supreme Court found that the change in the conditions was as much in public interest as the earlier rigorous ones which were upheld in 2004. It pointed out one telling effect: The lowest bid under the new terms plunged from Rs 1,200 quoted by a foreign firm to Rs 469 per unit for a vehicle.

"Such a huge difference shows that the action of the state government in doing away with the conditions of experience in foreign countries and prescribed turnover from such business has been in larger public interest without compromising on safety, security and quality or sustainable capacity," the judgment said while dismissing the foreign companies’ appeals (Shimnit Utsch Ltd vs West Bengal Transport Development Corporation). The government is free to change policies and lay down new ones so long as its action is "not actuated by ulterior motive or is otherwise not vitiated by any vice of arbitrariness or irrationality or in violation of statutory provisions".

In this case, the dilution of the conditions led to increase in the area of competition and reduced the cost to the consumers. Thus it served greater public interest, the court said.

The court also discussed larger issues of judicial review of administrative policies. The government plays a double role in financial matters. It lays down policy and then enters into commercial contracts. As state, it has a constitutional duty to act fairly and without arbitrariness. Even in contractual matters, the public authorities do not have unfettered discretion.

However, the courts have granted a great measure of "play in the joints" to the executive. In several judgments, the Supreme Court has declared that "the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract". In the case of Educomp Datamatics Ltd (2004), the court stated that it would interfere with administrative policy only if it was arbitrary, discriminatory, mala fide or actuated by bias.

All these principles have been reiterated a number of times. But at the ground level, what people get is a decade of litigation as in this case, and urgent reforms caught in doldrums.

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