Tenders: Annulling of bidding process – Justification of – As per instructions of the Government of India, for upgradation, modernization, operation and maintenance of the Nagpur International Airport, appellant company-MIL invited tenders from private parties – Respondents-GAL was the highest bidder – During negotiations regarding the offered revenue share, GAL agreed for the revised revenue share – Thereafter, MIL, accepted the proposal and selected GAL as a highest bidder – However, even on completion of formalities, the Concession Agreement was not executed so as to enable GAL to implement the project – Request made by GAL to MIL but the said letter was neither responded nor any steps were taken to execute the Concession Agreement – MIL then annulled the bidding process and also informed GAL to take back the bid security submitted towards bid and thereafter, re-tendering the bid – Challenged to, by GAL and GNAIL – High Court quashed and set-aside the action of MIL in annulling the bidding as arbitrary, unreasonable and unfair – On appeal, held: Letter dated 07.03.2019 endorsing GAL as a selected bidder would amount to Letter of Acceptance-LoA in terms of the Request for Proposal-RFP and, would be treated as a concluded contract – GAL has qualified the test of responsiveness and on making offer of highest revenue, it was declared selected bidder – LoA has been acknowledged and signed on duplicate copy and returned to Authority within the period as specified – GAL being selected as a highest bidder, acquired the status of concessionaire – It was only the Concession Agreement required to be executed and there was no fault on the part of the GAL in complying with the provisions of RFP – Thus, after proposal of highest revenue share, on issuing the letter of acceptance and also as reflected by conduct, it has become a concluded contract – Letter for annulment of binding process is arbitrary and not in conformity to the terms of RFQ/RFP by following the procedure – Merely having the power of rejection of bids doesn’t entitle authorities to exercise the said power arbitrarily – Public law remedy has rightly been availed, invoking the jurisdiction of the High Court u/Art. 226 – It cannot be said that GAL has limited right only to ask for specific performance – Furthermore, UoI and AAI were not necessary parties and without joining them, the relief as granted by the High Court does not warrants interference – Necessary parties – Public law remedy – Constitution of India – Art. 14, 226 –Airports Authority of India Act, 1994 – S. 12A.
Government contracts – Tenets of law – Explanation of – Held: In government contracts, if granted by the government bodies, it is expected to uphold fairness, equality and rule of law while dealing with contractual matters - Right to equality u/Art.14 abhors arbitrariness - Transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied - State to act in a fair and reasonable manner unless public interest demands otherwise – It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest – Using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority. Dismissing the appeals, the Court
HELD: 1.1 Letter dated 07.03.2019 is a Letter of Acceptance-LoA after selecting the GAL as a highest bidder and it acquired the status of concessionaire. It was only the Concession Agreement required to be executed and there was no fault on the part of the GAL in complying with the provisions of Request for Proposal-RFP. The conduct of appellant MIL also indicates that concession agreement is required to be executed by concessionaire (GAL). Thus, after proposal of highest revenue share on issuing the letter of acceptance and also as reflected by conduct, it has become a concluded contract. When the steps for execution of the Concession Agreement had not been taken after LoA for quite sometime, a request was made by GAL on 25.02.2020 for execution of 26 the Concession Agreement being Concessionaire, but no heed was paid. [Para 24 and 25][541-AC]
1.2 As per RFP, it is clear that MIL floated a tender for upgradation, modernization, operation and maintenance of Nagpur Airport. Apparently, the primary impression which can be gathered from the objection raised in the meeting held on 30.08.2019 and the meeting of PMIC dated 14.10.2019 indicates the prospective revenue gain but it does not indicate the investment in upgradation and modernization of the Nagpur Airport for which planning and designing of a world class international airport, not only for the passengers but also for the cargo transport in the name of MIHAN is required. As per the RFP and the Concession Agreement, all the investment for design, up-gradation, operation and maintenance has to be borne out by the private player and not by MIL. After issuance of LoA by the internal correspondence of MoCA and GoM on the note of AAI, the financial viability relying upon the report of E&Y has been considered. If there was any issue regarding financial viability, it was the duty of the GoM, AAI or MoCA to call GAL, to whom the right has accrued and has to pay the revenue share as proposed and agreed to by MIL, for justification. Otherwise, taking a decision on the said basis behind the back of GAL was violative of Article 14 of the Constitution of India and also against the principles of natural justice. [Para 38][553-E-H]
1.3 It is clear that Section 12A applies in the case of lease by the authority and no such lease under sub-section (1) shall be made without previous approval of the Central Government. In the present case, no lease is required to be executed in favour of GAL or GNIAL. The pretext taken on the basis of Section 12A of AAI Act in a case of annulment of bidding process by the AAI and the GoI primarily appears to be fallacious. On the basis of the material on record, it is clear that the appellants were aware of the procedure which is being adopted. After completion of the bidding process, GAL was declared as a selected bidder on offering highest revenue share and on issuance of LoA, it has been declared as a concessionaire and at the stage of execution of Concession Agreement, all these formalities are not relevant and it amounts to arbitrary exercise of the power by the authorities which is not permissible under law. Merely having the power of rejection of bids does not entitle authorities to exercise the said power arbitrarily. While discussing the applicability of Clauses 2.16.1, 3.3.1 and 3.3.5, it is made clear that in pre-bid procedure prior to acceptance, the bidding process may be annulled otherwise after issuance of LoA, the annulment cannot be done. The authorities further acted arbitrarily relying upon the GoM’s letter dated 16.03.2020 in reference to PMIC’s meeting dated 14.10.2019 in which re-tendering was directed. Re-tendering was not possible without ignoring the bid already accepted. Therefore, the order of annulment has been directed applying Clause 2.16.1 arbitrarily. In the present case, the selection of the bidder was complete. Thereafter, LoA was issued as per Clause 3.3.5 and by issuance of draft of Concession Agreement, it has been declared as a concessionaire. At that stage, Clause 2.16.1 for annulment of the bidding process would not apply. It appears to us that as per the objections raised in the Meeting dated 30.08.2019 held by MoCA, clause (iv) in paragraph 5 persuaded the MIL and GoM to pass the order of re-tendering. [Para 41, 42, 43, 44][557A-D; 559-B-C, E-F]
1.4 It is apparent that in government contracts, if granted by the government bodies, it is expected to uphold fairness, equality and rule of law while dealing with contractual matters. Right to equality under Article 14 of the Constitution of India abhors arbitrariness. The transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied. It is said that the constitutional guarantee as provided under Article 14 of the Constitution of India demands the State to act in a fair and reasonable manner unless public interest demands otherwise. It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest. It is specified that using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority. [Para 46][560-F-H; 561-A]
1.5 After issuing the LoA in terms of Clause 3.3.5 of RFP and declaring GAL as concessionaire as per Clause 3.3.6, issuing letter of annulment of bidding process on the basis of the meeting of PMIC on 14.10.2019, which directed for re-tendering of the bid, is completely an arbitrary exercise of power, contrary to the provisions of RFP and violative of Article 14 of the Constitution of India. [Para 47][561-B]
1.6 The findings as recorded by the High Court in the impugned judgment are in consonance with the above reasonings. The impugned judgment passed by the High Court is based on the sound reasonings and true analysis of facts, which do not warrant interreference by this Court. [Para 48][561-C-D]
1.7 The authorities have acted arbitrarily in violation of Article 14 of the Constitution of India. In such a situation, the public law remedy has rightly been availed, invoking the jurisdiction of the High Court under Article 226 of the Constitution of India. The findings recorded by the High Court to entertain the petition are just and proper and those findings are accepted. In the facts of the instant case, the argument advanced by the appellants to compel GAL to take the remedy of specific performance under the provisions of Specific Relief Act is hereby repelled. [Para 49][561-D-F]
1.8 In pursuance to the decision taken by the Cabinet, the second JV is required to be selected through competitive bidding. In the present case, global tenders were invited and competitive bidding process was followed. The procedure of issuance of LoA is completely a fair procedure as prescribed in RFP. As per the decision taken by MoCA, AAI and MADC, MIL is the authority to complete the bidding process and PMIC, acting on behalf of GoM was supervising the entire process. The annulment has been directed in reference to the letter dated 16.3.2020 for retendering of bid. Therefore, in issuing the annulment letter, there is no role of UoI and AAI. The serious objection has been raised regarding the grant of relief as prayed in Clause (b) by the High Court. In this regard, the court examined the said relief and direction, as issued by the High Court in terms of the Cabinet decision dated 11.2.2009, the Court is satisfied that UoI and AAI are not adversely affected after issuing the direction to select the second JV by competitive bidding. Except to produce the first approval of the Cabinet dated 11.02.2009, letters dated 02.08.2019, 20.08.2019 and 30.08.2019, nothing new has been brought before us to show what serious prejudice has been caused to them due to non-joinder by the Writ Court. The objection regarding non-joinder raised by the appellants is bereft of any merit and the High Court has rightly rejected the same. The findings recorded by the High Court allowing the Writ Petition are in accordance to law. Those findings do not suffer from any illegality, warranting interreference by this Court in exercise of the power under Article 136 of the Constitution of India. [Para
51 and 52][561-G-H; 562-A-D]
Union of India and Others v. Dinesh Engineering Corpn. and Another (2001) 8 SCC 491; Vice-Chairman &
Managing director, City and Industrial Development Corporation of Maharashtra Ltd. and Another v. Shishir Realty Private Limited and Ors. Civil Appeal No. 395657 of 2017 – relied on .
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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