YELLA CONSTRUCTIONLTD Vs. EAST COAST RAILWAY

JUDGEMENT

(1.) M/s.Annapurna Rail S&T Construction Limited is a company registered on 11.06.1998 under Indian Companies Act, 1956. It was incorporated with the main object of carrying on business of undertaking contract works especially Signalling and Telecommunications (S&T) works with Indian Railways. On 10.02.2004, the name of the said company was changed as M/s.Yella Construction Limited (the petitioner herein). As per the Memorandum and Articles of Association, there are six shareholders including M/s.Y.Raghavaiah and Y.Venkata Lakshmi. There are four Directors in the Board of Directors of the company including Y.Raghavaiah. The company filed the instant writ petition seeking a writ of Mandamus declaring the order/letter, dated 21.07.2005 issued by the Chief Signal and Telecom Engineer (Projects), East Coast Railway, Bhubaneswar - the third respondent herein. By the said letter, M/s.Annapurna Rail S&T Construction Limited, Visakhapatnam (as the petitioner company was known earlier) was informed that the Ministry of Railways (Railway Board) by letter No.2002/SIG/B/8, dated 12.06.2003, decided that the business dealings with M/s.Annapurna Construction, Vijayawada and also their sister concerns and partners/shareholders should be banned on all Indian Railways and organizations for a period of five years with effect from 28.05.2003 and therefore, the business dealings with the petitioners are banned for a period of five years as "some of the partners of M/s.Annapuma Construction, Vijayawada are appearing in the Memorandum and Articles of Association of the petitioner company". This writ petition is filed mainly contending that the petitioner company being an independent entity has its own identity different from Annapuma Construction, Vijayawada and that it has nothing to do with Annapuma Construction, Vijayawada. BACK GROUND FACTS

(2.) The pleadings on record are aplenty by way of affidavits, counter, reply and rejoinder affidavits. There is, however, not much dispute about the constitution and functioning of three firms/concerns and business they were concentrating on. Therefore, it is necessary to notice this aspect of the matter having regard to the allegation made by the respondents that the firm at Visakhapatnam is sister concern of the firm at Vijayawada. This is necessary because the opposite parties agree that the axe of ban can only fall on the petitioner company if it is indeed the sister concern of Vijayawada firm and not otherwise. If the petitioner or its precursor is not a sister concern of Vijayawada firm, the whole exercise leading to the issue of impugned letter by the third respondent would be irrational, illegal and arbitrary.

(3.) The respondents filed a detailed counter affidavit sworn to by the third respondent asserting that Vijayawada firm and Vizag firm are one and the same, that both were using registration Number, that Yella Raghavaiah was mainly conducting business on behalf of both the firms, and that both the firms are family concern of Yella Raghavaiah. Elaborate reference is made in the counter affidavit to different partnership deeds and other aspects of the matter to bring out that both the firms are one and the same. SUBMISSIONS The learned counsel for the petitioner company Mr.D.V.Sitarama Murthy argued that when the impugned order was issued in July, 2005, by the third respondent based on the decision of the Railway Board in June, 2003, the petitioner company was incorporated entity having its own identity, perpetual succession and nature as a juristic person, and therefore, the same cannot be treated as a sister concern of either Vijayawada firm or Vizag firm. According to the learned counsel, even if negligible number of partners in Vijayawada and Vizag firms as well as the subscribers to Memorandum of Association of petitioner company (on its inception) are same, the same does not lead to any conclusion that the petitioner company and its predecessor firm are sister concerns of Vijayawada firm. A strenuous submission is made that the alleged misconduct of Vijayawada firm in supplying goods to Railways through dubious means, cannot be the basis for banning business dealings with the petitioner company. Such decision is arbitrary and violative of Articles 14 and 19(1)(g) of Constitution of India. Nextly, it is the submission of the learned counsel for the petitioner, after the formation of the company in 1998, with the approval of the Railways, the petitioner company entered into MoU with its predecessor firm, that it has completed all the works to the satisfaction of the employer and was also awarded S&T works continuously, which would mitigate against any allegations of misconduct by the Vizag firm. Learned counsel placed reliance on the decision of this Court in Krishi Foundry Employees Union v Krishi Engines Limited, 2003 (2) ALD 392 in support of the contention that the principle of lifting the veil cannot be applied when a concern is an incorporated company regulated by company law. Learned Senior Counsel for respondents, Sri S.R.Ashok, submits that Vijayawada firm and Vizag firm are not two firms but only one firm, the latter being the branch of the former. He would like this Court to draw an inference from the events that followed the constitution of Vizag firm in 1995 and later converted into a private limited company only to avoid disciplinary action against Vijayawada firm for resorting to dubious means in execution of the works. The enquiry was initiated immediately after the Railways found out the fraud committed by Vijayawada firm and when the action was in the pipeline, the other partners led by Yella Raghavaiah started Vizag firm. According to the learned senior counsel, lifting the veil, one can find that there are business practices scrupulously followed by Vijayawada and Vizag firms to show that both the firms are one and the same though for various purposes, there was different combination of partners in each of the firm. He placed reliance on the correspondence addressed by Raghavaiah showing the registration number of Vijayawada firm and the certificates filed by Vizag firm claiming the experience of Vijayawada firm as its own experience for the purpose of eligibility to tender. Learned senior counsel placed reliance on the decisions of the Supreme Court in Delhi Development Authority v Skipper Construction Company (Private) Limited, AIR 1996 SC 2005 and Kapila Hingorani v State of Bihar., (2003) 6 SCC 1 POINT FOR CONSIDERATION