Supreme Court of India
MIHAN INDIA LTD.versusGMR AIRPORTS LTD. & ORS
- Citation
- 2022 INSC 534
- Decided
- 9 May 2022
- Disposal
- Dismissed
Holding
The Court held that the 07.03.2019 letter was a valid Letter of Acceptance creating a concluded contract, and the subsequent annulment of the bidding process was arbitrary, violative of Article 14, and therefore the High Court’s judgment was affirmed.
Summary
Mihan India Ltd (MIL) invited global tenders for the up‑gradation, modernisation, operation and maintenance of Nagpur Airport. GMR Airports Ltd (GAL) emerged as the highest bidder after negotiating a higher revenue‑share and MIL issued a letter dated 07‑03‑2019 accepting the revised proposal, which GAL acknowledged. Despite this, MIL failed to execute the concession agreement and later, on 19‑03‑2020, annulled the bidding process and ordered re‑tendering. GAL and its SPV GNIAL challenged the annulment before the High Court, which held that the 07‑03‑2019 letter was a valid Letter of Acceptance, creating a concluded contract, and that the subsequent annulment was arbitrary, violating Article 14. The Supreme Court affirmed the High Court’s decision, dismissing the appeals and confirming that the authorities could not arbitrarily reject a bid after a LoA had been issued.
Issues considered
- Whether the letter dated 07.03.2019 constitutes a Letter of Acceptance and a concluded contract under the RFP.
- Whether the communication dated 19.03.2020 annulling the bidding process is arbitrary and inconsistent with the terms of the RFP and applicable law.
- Whether GAL is limited to seeking specific performance under the Specific Relief Act, or can invoke the public law remedy under Article 226.
- Whether Union of India and Airports Authority of India were necessary parties to the writ proceedings.
- Whether the exercise of power to annul the bid violates Article 14 of the Constitution and Section 12A of the Airports Authority of India Act, 1994.
Legislation cited
- Airports Authority of India Act, 1994s. 12A
- Constitution of Indias. 136, s. 14, s. 226
- Specific Relief Act, 1963
Subjects
bidding processletter of acceptancecontract formationarbitrarinessArticle 14public procurementPPPconcession agreementspecific performancepublic law remedySection 12ARFPre‑tendering
Judgment
[2022] 19 S.C.R. 523 523
MIHAN INDIA LTD. A
v.
GMR AIRPORTS LTD. & ORS.
(Civil Appeal No. 3699 of 2022)
MAY 09, 2022 B
[VINEET SARAN AND J. K. MAHESHWARI, JJ.]
Tenders: Annulling of bidding process – Justification of – As
per instructions of the Government of India, for upgradation,
modernization, operation and maintenance of the Nagpur
C
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 D
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
E
– 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 F
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
G
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 – H
523
524 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 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
B
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
C 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
D 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
E 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
F 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
G 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-A-
C]
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 525
1.2 As per RFP, it is clear that MIL floated a tender for A
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 up-
B
gradation 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 C
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
D
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 E
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 F
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 G
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 H
526 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 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
B
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
C 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][557-
A-D; 559-B-C, E-F]
D
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
E 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
F 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
G 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
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 527
provisions of RFP and violative of Article 14 of the Constitution A
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 B
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 C
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] D
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 E
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, F
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 G
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
H
528 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 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
B
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 &
C Managing director, City and Industrial Development
Corporation of Maharashtra Ltd. and Another v. Shishir
Realty Private Limited and Ors. Civil Appeal No. 3956-
57 of 2017 – relied on .
Case Law Reference
D
(2001) 8 SCC 491 relied on Para 42
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3699
of 2022.
From the Judgment and Order dated 18.08.2021 of the High Court
E of Judicature at Bombay, Nagpur Bench, Nagpur in Writ Petition No.
1723 of 2020.
With
Civil Appeal Nos. 3701, 3702 and 3700 of 2022
F K. M. Natraj, Ms. Aishwarya Bhati, ASGs, Dushyant Dave,
Shyam Divan, Sr. Advs., Rahul Bhangde, Satyajit A. Desai, Siddharth
Gautam, Himanshu Sharma, Ms. Neha Sangwan, Satya Kam Sharma,
Mrs. Anagha S. Desai, Nikhilesh Ramachandran, Vinayak Sharma,
Shubham Seth, Ms. Mrinal Chaudhry, Vibhu Shanker Mishra, Shailesh
Madiyal, Rajat Nair, Ms. B. L. N. Shivani, Nitin Pavuluri, Ms. Kirti
G Khangarot, Ms. Manisha Chava, Shivika Mehra, Rustam Singh Chauhan,
Raj Bahadur Yadav, Amrish Kumar, Sachin Patil, Rahul Chitnis, Aaditya
A. Pande, Geo Joseph, Ms. Shwetal Shepal, Advs. for the Appellant.
Dr. Abhishek Manu Singhvi, Maninder Singh, Parag P. Tripathi,
Sr. Advs., Mahesh Agarwal, Milanka Chaudhury, M. S. Ananth,
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 529
Ms. Naina Dubey, Nishant Rao, Ms. Harshita Agarwal, Ms. Swet Shikha, A
Srinivasan, Amit Bhandari, E. C. Agrawala, Pranav Saigal, Prabhas Bajaj,
Advs. for the Respondents.
The following Judgment of the Court was passed:
JUDGMENT
B
Leave granted.
2. These four appeals have been filed challenging the judgment
dated 18.08.2021 of the Nagpur Bench of the Bombay High Court
whereby the Writ Petition of the respondent No. 1- GMR Airports Limited
(for short ‘GAL’) and GMR Nagpur International Airport Limited (for C
short ‘GNIAL’) filed against MIHAN India Limited (for short ‘MIL’)
and Government of Maharashtra (for short ‘GoM’) has been allowed.
The High Court set-aside the impugned communication of annulling the
bidding process and directed to take further necessary steps as per prayer
clause (b) of the Writ Petition.
D
3. The appeal arising out of Special Leave Petition (C) No.15556
of 2021 has been filed by MIL (which was the respondent no.1 before
the High Court) and appeal arising out of Special Leave Petition (C)
No.16737 of 2021 has been filed by the GoM (which was the respondent
No.2 before the High Court). The other two appeals arising out of Diary
No.23479 of 2021 and Diary No.23477 of 2021 have been filed by the E
Airports Authority of India (for short ‘AAI’) and Union of India (for
short ‘UoI’) respectively, which were not the party before the High
Court and hence applications for permission to file the special leave
petitions have been filed, which are granted in both the special leave
petitions. F
4. Since, the order under challenge in all the appeals is the same
and the facts in the said appeals are common, however Special Leave
Petition No.15556 of 2021 titled MIHAN India Limited versus GMR
Airports Limited & Ors. is being treated as the lead petition.
5. Briefly, the facts relevant for the purpose of the appeals are G
that the Nagpur International Airport (for short ‘Nagpur Airport’) was
being run by the AAI. On the initiative of GoM to develop a multi-modal
international passenger and cargo hub airport at Nagpur, for brevity sake
referred as ‘MIHAN’, in coordination with Government of India (for
short ‘GoI’), Ministry of Civil Aviation (for short ‘MoCA’), AAI and
H
530 SUPREME COURT REPORTS [2022] 19 S.C.R.
A Indian Air Force through Ministry of Defence has prepared the report
for MIHAN project. On 18.12.2006, GoI through MoCA and AAI on
one side; and GoM and Maharashtra Airport Development Company
(for short ‘MADC’) on the other side, entered into a Memorandum of
Understanding (for short ‘MoU’) for the purpose of establishing a Joint
Venture Company (for short ‘JVC’) and transferring the Airport to the
B
said JVC to develop it into MIHAN. As per the said MoU, MADC shall
have 51% of the equity and AAI 49% equity of the JVC. Pursuant to
the MoU, the AAI and MADC entered into a Joint Venture Agreement
(for short ‘JVA’) on 22.02.2009 for the purpose of incorporating a JVC,
which is known as MIL. As per the terms and conditions of the MoU
C dated 18.12.2006 and the JVA dated 22.02.2009, MIL took over the
Airport from AAI on 07.08.2009.
6. As per the instructions of GoI, it was thereafter, decided that
for the upgradation, modernization, operation and maintenance of the
Airport (subsequently named as Dr. Babasaheb Ambedkar International
D Airport, Nagpur) global tenders were to be called by MIL by inviting
bids from private parties as per the Request for Qualification (for short
‘RFQ’) for selection of private developers, through public private
participation (for short ‘PPP’) on Design, Build, Finance, Operate and
Transfer (DBFOT) basis. On 11.12.2017, GoM constituted a High-
Powered Project Monitoring and Implementation Committee (for short
E ‘PMIC’) consisting of eleven Members, being officers of GoM, GoI,
MADC and AAI and the Chief Secretary of the GoM would be its
Chairman to look after the MIHAN project on behalf of GoM. The
Request for Proposal (for short ‘RFP’) was prepared by MIL and
approved by PMIC in its meeting held on 24.01.2018. In response, six
F bidders were shortlisted, but, only five of them were approved for the
next stage i.e. for issuance of RFP which was sent vide email dated
01.03.2018. On the final date for submission of bids i.e. 28.09.2018,
MIL had received only two bids out of which the bid submitted by GAL
proposing revenue share of 5.76% was found to be the highest.
Thereafter, MIL asked GAL for discussion and negotiations on 05.03.2019
G before PMIC regarding the offered revenue share. During discussion,
GAL agreed for the revised revenue share of 14.49%. The said revised
revenue share was communicated by GAL through letter dated
06.03.2019 with a request to declare it as the selected bidder and to
issue the letter of award (for short “LoA”).
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 531
7. Thereafter MIL issued the letter dated 07.03.2019 accepting A
the revised proposal. GAL accepted the letter dated 07.03.2019 and
acknowledged the same by letter dated 12.03.2019 and communicated
the same through a duly signed duplicate copy of the letter dated
07.03.2019.
8. Even on completing the said formalities, the Concession B
Agreement was not executed for a long time, however on 25.02.2020,
request was made by GAL to MIL for execution of Concession
Agreement so as to enable GAL to implement the MIHAN project. The
said letter was neither responded nor any steps were taken to execute
the Concession Agreement in favour of GAL and GNIAL (being the
SPV incorporated for implementing the MIHAN project). Thus, GAL C
and GNIAL both filed Writ Petition No.1343 of 2020 before the Nagpur
Bench of the Bombay High Court seeking direction to the MIL and
GoM to take all necessary and consequential steps pursuant to the letter
dated 07.03.2019 and to sign the Concession Agreement. On 11.03.2020,
the High Court issued the notice and listed the case on 18.03.2020 for D
hearing. The notices were served on MIL and GoM by GAL on the
same day and, through court bailiff on 16.03.2020. Immediately on
receiving the notice, on the same day i.e. 16.03.2020, GoM issued the
direction to MIL for retendering. Pursuant thereto, MIL annulled the
bidding process vide communication dated 19.03.2020. MIL also informed
GAL to take back the bid security submitted towards bid. Thereafter, E
through email dated 04.05.2020 MIL informed GAL that since the bank
guarantee towards bid security expired on 30.04.2020 and because of
lockdown due to Covid-19, the same may be treated as cancelled and
fully discharged and may be taken back.
9. GAL and GNIAL challenged the communication dated F
19.03.2020 annulling the bidding process after issuance of LoA by filing
another Petition before the Nagpur Bench of the Bombay High Court
being Writ Petition No. 1723 of 2020. In the said Writ Petition, the
respondents have prayed for appropriate directions to quash the letter of
annulment dated 19.03.2020 and enforcement of letter dated 07.03.2019 G
with further directions as per prayer clause (b) reproduced as under:
b. Issue a writ or any other appropriate writ, direction or order
directing the Respondents, to comply with the RFP conditions in
its letter and spirit and undertake necessary and consequential
steps in furtherance thereto and the Letter of Award dated H
532 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 07.03.2019, including but not limited to the execution of the
Concession Agreement in favour of the Petitioner No. 2 and other
ancillary documents;
10. By filing the response, MIL has not disputed the formation of
JVC, execution of MOU, handing over of Nagpur Airport by AAI to
B MIL on behalf of JVC, preparation of RFP by State Government,
completing of tender process including offer made by the GAL of 5.76%
revenue share. It is admitted that in front of PMIC, a meeting was held
on 05.03.2019 at Mumbai for negotiation in which enhancement of the
revenue share to 14.49% in place of 5.76% was offered by GAL and
GAL requested for issuance of LoA through communication dated
C 06.03.2019. The appellant-MIL took stand before the High Court that
the communication dated 07.03.2019 was merely an intimation regarding
acceptance of revised bid subject to the approval of GoI for alienation of
land of AAI in favour of the GAL as per the Concession Agreement and
for formation of SPV. Placing reliance on Clause 3.3.5 it is said that
D LoA is different than communication. It is said in furtherance of the
letter dated 07.03.2019, AAI initiated the process. On the proposal of
AAI, the GoI through MoCA asked some explanations through the letter
dated 20.08.2019. In the meeting held by MoCA on 30.08.2019, MIL
and AAI have not submitted the explanation as asked and prayed for
time to submit the same through PMIC. It was said that those explanations
E were required to prepare the note for Cabinet approval, otherwise for
want of explanations, approval of Cabinet was not possible. It is said
that GoI through MoCA was a necessary party which is not joined in the
Writ Petition. Due to non-joinder of necessary party, the Writ Petition is
not maintainable and may be dismissed. It is also stated that under the
F instructions of GoM, the order of annulling the bidding process was
passed. On acceptance of the refund of the bid security, the GAL is
estopped from challenging the order of annulling the bid process as the
letter dated 07.03.2019 was a conditional and the GoI has not given any
approval, therefore no vested right accrued to GAL to question the order
annulling bidding process. It is also submitted that MIL earned profit of
G Rs. 49 crores during the financial year 2018-19 and has estimated gross
profit of Rs. 64 crores during the financial year 2019-20 and the offer of
gross revenue share made by GAL of Rs. 15 crores is extremely low,
which may not be in public interest and shall cause a huge financial loss
to the public exchequer. Therefore, the action has rightly been taken by
H the authorities.
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 533
11. GoM has filed a separate reply on an affidavit of CS-cum- A
CFO, MIL, not in the capacity of the officer of GoM. In the said reply, it
was urged that GoM is accepting the reply filed by MIL and the stand
and contentions as taken therein. It was urged that MIL for implementation
of MIHAN project is using the resources of respondent No. 2 (GoM)
and AAI. By the outcome of acceptance of subject tender, the land
B
belonging to AAI and MADC was required to be handed over to the
concessionaire. In such circumstances, the active involvement of GoM,
AAI and MoCA is imperative. Emphasising the importance of bid and
its decision having long term impact, it is said that the revenue paid by
the concessionaire shall be distributed amongst shareholders and the
offer was found to be low in comparison to the profit earned in the year C
2018-19. Thus, the bid has rightly been cancelled by annulling the bidding
process. Thus, with the said objections, the Writ Petition filed before the
High Court was resisted by the GoM and MIL.
12. The Nagpur Bench of the Bombay High Court, by impugned
judgment dated 18.08.2021, allowed the Writ Petition and held that: (i) D
the letter dated 07.03.2019 is a LoA; (ii) plea taken by MIL that the
letter dated 07.03.2019 is a mere communication of bid acceptance is
not correct. In fact, it has led to a concluded contract between the parties;
(iii) the action of MIL in annulling the bidding process by letter dated
19.03.2020 is arbitrary, unreasonable and unfair, therefore quashed and
set-aside; (iv) in this case there are no such disputed questions of facts E
as would shut out the writ jurisdiction of the High Court and (v) this case
does not involve a mere enforcement of contractual obligations simplicitor,
but involves an issue of enforcement of public law arising out of
contractual obligations. Resultantly, the High Court gave a direction to
take further step to implement the prayer as made in clause (b) of the F
prayer clause of the Writ Petition.
13. Being aggrieved, the present four Civil Appeals have been
filed, as described above by MIL, GoM, UoI and AAI.
14. We have heard Mr. Dushyant Dave, learned senior counsel
for MIL, Mr. Shyam Divan, learned senior counsel for GoM, Mr. K.M. G
Natraj, learned ASG for AAI, Mr. Shailesh Madiyal, learned counsel for
UoI and Dr. Abhishek Manu Singhvi, Mr. Maninder Singh and Mr. Parag
P. Tripathi, learned senior counsels for the respondents at length and
have perused the record.
H
534 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 15. After hearing the arguments as advanced and on perusal of
the material available on record, the issues which arise for consideration
in these appeals are as follows:
1) Whether the letter dated 07.03.2019 endorsing GAL as a
selected bidder and on communication by GAL on a duplicate
B copy to MIL on 12.03.2019 would amount to LoA in terms of
Clause 3.3.5 of RFP and, would it be treated as a concluded
contract?
2) Whether the communication dated 19.03.2020 for annulment
of bidding process is arbitrary and not in conformity to the
C terms of RFQ/RFP by following the procedure so prescribed?
3) In the facts and circumstances of the case, GAL being a
successful bidder has a limited right only to ask for specific
performance, and being a non-statutory contract, remedy under
Article 226 of Constitution of India cannot be availed ?
D 4) Whether in the facts and circumstances of the case, UoI and
AAI were necessary parties and without joining them, the relief
as granted by the High Court warrants interference in the
special leave petitions under Article 136 of the Constitution of
India?
E 16. All the aforesaid questions are inter-related and the
consequential answer would depend upon the conclusion that right
exercised to annul the bidding process by the authorities is in conformity
to the touchstone of Article 14 of the Constitution of India. Therefore, all
the questions are commonly dealt with in succeeding paragraphs. While
F dealing with all the aforesaid questions, the background and certain facts
which are on record are required to be traced at the cost of repetition.
17. In the present case, it is not in dispute that Nagpur Airport
was being run by the AAI. On the initiative of GoM, MIHAN project
was approved in coordination with GoI, MoCA, AAI and Indian Air
Force through Ministry of Defence. Based on techno-Economic feasibility
G
study (in short “TEFS”) of MIHAN project and report prepared by L&T
Ramboll Consulting Engineer Limited, MoU was signed on 18.12.2006
between GoI through MoCA and AAI on the one side and GoM and
MADC on the other side and decided to form JVC to whom the Nagpur
Airport would be transferred for development maintenance and operation
H as per MIHAN project. After signing the MOU, a note was prepared on
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 535
07.02.2009 by MoCA for the purpose of transfer of Nagpur Airport to A
the joint venture company comprised of AAI and MADC. The said note
was approved by the Cabinet in its meeting held on 11.02.2009. The
note as approved has been placed for ready reference during hearing,
its contents are relevant, therefore reproduced as thus:
“The Cabinet considered the note dated 07.02.2009 from the B
Ministry of Civil Aviation (Nagar Vimanan Mantralaya) and
approved the proposals contained in paragraph 6 with the following
directions:
(i) the valuation of the assets of the respective partners, be carried
out within one month and any dispute in the matter be put to a C
Committee of Secretaries for a final decision;
(ii) irrespective of the assets brought in by the Joint Venture (JV)
partners, the equity structure will be 49:51 between AAI and
MADC;
(iii) assets of the JV partners will not be the assets of the JV and D
would form the basis for determining the revenue share of
respective partner;
(iv) assets placed at the disposal of second JV, as and when it is
formed, will continue to be the assets of the respective partners;
E
(v) the proposal for formation of the second JV be brought up
before the Cabinet at an appropriate time; and
(vi) partners for the second JV be selected through competitive
bidding.”
The said decision of the Cabinet was communicated by MoCA F
vide letter dated 18.2.2009 to the Chairman, AAI with a copy to GoM
including the Ministry of Defence.
18. In terms of the MoU and approval of the Cabinet, JVA was
entered on 22.02.2009 incorporating the first JVC, known as MIL. As
per the MOU and the JVA, MIL took over the Nagpur Airport from G
AAI on 07.08.2009. As per the approval of the Cabinet, the valuation of
assets of the respective partners was to be carried out by a Committee
of Secretaries for final decision. MADC and AAI would be the partners
of 51:49% shares respectively. The assets which belonged to AAI and
MADC would not be the assets of JVC. The bifurcation 51:49% is only
H
536 SUPREME COURT REPORTS [2022] 19 S.C.R.
A for determination of the revenue share of respective partners. Even on
formation of JVC, the assets would continue to be the assets of respective
partners. The partners for the second JVC shall be selected through
competitive bidding and the proposal for formation of second JVC be
brought up before the Cabinet at an appropriate time.
B 19. In view of the said decisions and to act there upon, MIL
prepared RFQ dated 12.05.2016 for upgradation, modernization, operation
and maintenance of the Airport through PPP mode on DBFOT basis
emphasizing the importance of MIHAN project and specifying that the
MIL shall be authority for implementation of the MIHAN project. The
particulars of the Nagpur Airport, details about the project, eligibility for
C the bidders, scope of work, who may participate in bidding process and
also specifying the selected bidder were incorporated in RFQ. On perusal
of the cabinet decision and MoU, it is quite apparent that MIL was the
first JVC incorporated to act on behalf of AAI and MADC who are
banking upon the authority of MoCA and GoM. As explained above,
D PMIC is a high powered committee constituted by GoM and held its
meeting on 24.01.2018. MIL presented the RFP for approval which was
approved with certain changes and published on 01.03.2018 with the
intent to carry out and complete the bidding process.
20. On the basis of the said RFQ and RFP, bids were invited by
E the MIL and the GAL submitted its bid on 28.09.2018. The bid submitted
by the GAL at revenue share payable @ 5.76% was the highest. But
MIL was not satisfied by the said offer, however invited GAL for
negotiation before PMIC on 05.03.2019. During negotiation, the GAL
gave the offer of 14.49% revenue share in place of 5.76%. After such
negotiation, a request was made by GAL to MIL on 06.03.2019 for
F issuance of LoA at the earliest. MIL, vide communications dated
07.03.2019 in reference to the RFP dated 01.03.2018 and the bid submitted
by GAL dated 28.09.2018 and revised financial offer dated 06.03.2019,
accepted the proposal and selected GAL as a highest bidder. In the said
communication MIL informed that the Competent Authority has accepted
G the revised bid with clarification that the said acceptance is subject to
further approval of GoI for alienation of land owned by AAI in favour of
the second party and formation of SPV for the project (‘Approval’)
means second JV. By the said letter, GAL was called upon to submit the
consent for revised bid on the duplicate copy within 7 days, on failure
MIL would have the right to revoke the acceptance, otherwise to follow
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 537
the consequences as stated in the letter. The GAL submitted acceptance A
after signing on the duplicate copy of letter to the MIL on 12.03.2019
within the time so prescribed.
21. As the tenders were invited in pursuance of RFP, however to
understand the procedure for selection of bid and its acceptance or
rejection and to issue LoA to declare the selected bidder as B
concessionaire, relevant clauses are required to be seen. As per Clause
1.2.6 (b) of RFP, it is clear that the bidder, who is offering the highest
revenue share at the time of the evaluation of the bids, would be the
highest bidder subject to the provisions of Clause 2.16.1 of RFP. The
said Clause 2.16 deals with rejection of bids and Clause 3.3 deals with
selection of bidder. All the aforesaid Clauses of RFP are relevant however C
reproduced as thus:
CHAPTER -1:
Highest Bidder:
1.2.6 (a) Bids are invited for the Project on the basis of the D
Revenue Share payable to the Authority in terms of the Concession
Agreement.
(b) In this RFP, the term “Highest Bidder” shall mean the Bidder
who is offering the highest Revenue Share. The concession period
and other terms are pre-determined, as indicated in the draft E
Concession Agreement and the percentage revenue share shall
constitute the sole criteria for evaluation of Bids. Subject to the
provisions of Clause 2.16, the Project will be awarded to the Highest
Bidder.
CHAPTER -2 F
2.16: Rejection of Bids:
2.16.1 Notwithstanding anything contained in this RFP, the
Authority reserves the right to reject any Bid and to annul the
Bidding Process and reject all Bids at any time without any liability
or any obligation for such acceptance, rejection or annulment and G
without assigning any reasons therefor. In the event that the
Authority rejects or annuls all the bids, it may, in its discretion,
invite all eligible Bidders to submit fresh Bids hereunder.
H
538 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 2.16.2: The authority reserves the right not to proceed with the
Bidding Process at any time, without notice or liability, and to
reject any Bid without assigning any reasons.
CHAPTER-3
3.3.1.: Subject to the provisions of Clause 2.16.1, the Bidder whose
B Bid is adjudged as responsive in terms of Clause 3.2.1 and, who
quotes the highest Revenue Share offered to the Authority shall
ordinarily be declared as the selected Bidder (the “Selected
Bidder”). In the event that the Authority rejects or annuls all the
Bids, it may, in its discretion, invite all eligible Bidders to submit
C fresh Bids hereunder.
3.3.5 : After selection, a Letter of Award (the “LOA”) shall be
issued, in duplicate, by the Authority to the Selected Bidder and
the Selected Bidder shall, within 7 (seven) days of the receipt of
the LOA, sign and return the duplicate copy of the LOA in
D acknowledgement thereof. After acknowledgement of the LOA
as aforesaid by the Selected Bidder, the Selected Bidder will be
required to submit the Performance Security within the time period
prescribed in the LOA/Concession Agreement. In the event the
duplicate copy of the LOA duly signed by the Selected Bidder is
not received by the stipulated date or the Selected Bidder fails to
E provide the Performance Security within the stipulated date, the
Authority may, unless it consents to extension of time for submission
thereof, appropriate the Bid Security of such Bidder as damages
on account of failure of the Selected Bidder to acknowledge the
LOA or submission of Performance Security as the case may be,
F and the next eligible Bidder may be considered.
The said Clauses are required to be looked with the intent to know
the scheme of RFP, its applicability and object. Chapter 1, in which the
highest bidder has been defined, deals with the incorporation of the project,
description of bidding process, schedule of bidding process and pre-bid
G conference. As per the definition of highest bidder in Clause 1.2.6, it is
clear that if any bid is invited for a project, it shall be on the basis of the
highest revenue share payable to the Authority in terms of Concession
Agreement and the sole criteria would be percentage revenue share
and, on the said basis highest bidder of the project may be declared,
subject to the rejection of bid as per Clause 2.16.
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 539
20. Chapter 2 of RFP deals with the general terms of bidding, A
change in composition of the Consortium, change in ownership, cost of
bidding, site visit and verification of information, verification and
disqualification, contents of RFP, clarifications, amendment of RFP,
preparation and submission of bids including format and signing of bid,
sealing and marking of bids, due date of bid, late bids, contents of the bid,
B
modifications/substation/withdrawal of bids, rejection of bids, validity of
bids, confidentiality, correspondence with the bidder, bid security etc.
The abovesaid are the instructions to bidders in general. As per Clause
2.16.1, the Authority reserves the right to reject any bid and to annul the
bidding process and reject all bids at any time without any liability or any
obligation for such acceptance, rejection or annulment and without C
assigning any reason therefor. In case the Authority rejects or annuls all
the bids, it has the discretion to invite all eligible bidders to submit fresh
bids hereunder. A literal construction of the said Clause would mean that
the Authority have a right to annul the bidding process, reject all bids
without having any obligation for such acceptance, rejection or annulment,
D
that too without assigning any reason. As per later part of the Clause, on
rejection or annulment of the bids, the Authority may in its discretion
invite all eligible bidders to submit the fresh bids. Thus annulment of
bidding process, rejection of all bids is without any obligation for
acceptance. It clarifies that prior to acceptance, annulment, rejection
may be done without assigning any reason as per Clause 2.16.2. E
22. Chapter 3 deals with evaluation of bids on its opening, test of
responsiveness, selection of bidder, contacts during bid evaluation, bid
parameter. Under Clause 3.3.1, subject to the provision of Clause 2.16.1
means if the bid is not rejected or annulled and whose bid is adjudged as
responsive as per Clause 3.2.1 ({a} to {i}) would be responsive with F
highest revenue share and the said bidder shall ordinarily be declared as
a selected bidder. Thus, in the event, the bid is not rejected, the procedure
for selection of the bidder under Clause 3.3.1 shall be observed. If the
bidder quotes highest revenue share and its bid is adjudged as responsive
shall be declared as the selected bidder under Clause 3.3.1. In absence
of the contingencies as specified in Clauses 3.3.2 to 3.3.4, the procedure G
contemplated on selection of highest bidder as per Clause 3.3.5 is to be
followed. As per said clause, after selection, LoA is required to be issued
in duplicate by the Authority to the selected bidder who shall, within
seven days of the receipt, sign it on duplicate copy and return the same.
Thereafter the highest bidder is required to furnish the performance H
540 SUPREME COURT REPORTS [2022] 19 S.C.R.
A security within the time so prescribed in LoA/Concession Agreement.
In case, acknowledgement of LoA within the time stipulated has not
been made by highest bidder, the next eligible highest bidder may be
called and considered. As per Clause 3.3.6, on receiving the
acknowledgment of the LoA by the selected bidder, it shall cause the
Concessionaire to execute the Concession Agreement within 60 days of
B
award of LoA as prescribed in Clause 1.3 at serial No. 11. It is also
clarified that the selected bidder shall not be invited to cause any default,
modification of amendment in the Concession Agreement, so executed.
Thus, as per the scheme of RFP, if the highest bidder has qualified the
test of responsiveness without any order of rejection or annulment and
C has offered highest revenue share, he be declared as a selected bidder
and in terms of Clause 3.3.5, LoA be issued which shall be acknowledged
and after signing duplicate copy shall be returned within specified time.
Thereafter, the concessionaire is required to execute the Concession
Agreement. In the present case, the GAL has qualified the test of
responsiveness and on making offer of highest revenue, it was declared
D
selected bidder. LoA has been issued vide letter dated 07.03.2019 which
has been acknowledged and signed on duplicate copy and returned to
Authority on 12.03.2019, within the period as specified. The bid security
of Rs. 16.85 crores deposited by the GAL was also extended from time
to time under instructions of MIL. Thus, GAL has become concessionaire
E as per Clause 3.3.6 of RFP and cause the execution of Concession
Agreement as per Clause 1.3.
23. Thereafter, MIL through Shri Kumar Ranjan Thakur sent an
email on 20.03.2019 attaching the draft Concession Agreement. He has
shared the final version of the draft Concession Agreement in MS Word
F format. Thereafter on behalf of MIL, Shri M.A. Abid Ruhi sent a
communication on 29.05.2019 with a request to amend the draft
Concession Agreement in “track change mode” only which would
enable him to identify the changes carried out by GAL. GAL
communicated the draft Concession Agreement after making the
changes. Thereafter, no communication was made on behalf of MIL. In
G the meantime, the GAL requested MIL to provide space in old terminal
building vide communication dated 26.07.2019. The said request was
accepted vide communication dated 16.08.2019 and a space to run the
office was provided. Thereafter GAL on 24.08.2019 requested for
incorporation of a company namely; GNIAL to run the MIHAN project
H on its behalf, which remained unresponded.
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 541
24. As per the above discussion, we do not have any hesitation A
to hold that letter dated 07.03.2019 is a 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 RFP.
The conduct of appellant MIL also indicates that concession agreement
B
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.
25. 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 the Concession Agreement being C
Concessionaire, but no heed was paid. Then Writ Petition No. 1343 of
2020 was filed praying the following reliefs:
a) Issue a writ of mandamus or any other appropriate writ,
direction or order directing the respondents to undertake
necessary and consequential steps in furtherance of the Letter D
of Award dated 07.03.2019 including but not limited to
execution of the Concession Agreement in favour of the
petitioner No. 2 and other ancillary documents;
b) Pass an ex-parte ad interim order directing the respondents
not to undertake any coercive steps that shall be detrimental E
to the interests and rights of the petitioners in the said project
and public at large.”
26. On issuing notice by High Court vide order dated 11.03.2020,
the matter was kept for final disposal on 18.03.2020. The copy of the
said notice was served on MIL and GoM on 11.03.2020 and also through F
Bailiff of the Court on 16.03.2020. On receiving the said notice, GoM on
16.03.2019 directed MIL to carry out the tender process afresh in
reference to the PMIC letter dated 14.10.2019. In pursuance, letter dated
19.03.2020 was issued by MIL for annulling the bidding process in terms
of Clause 2.16.1. It is relevant that fresh tender process as directed by G
PMIC cannot be possible without taking decision after selection of the
bidder and issuing of LoA. Therefore, the MIL issued the order of
annulling the bidding process without any direction for fresh tender
process. The validity of the said letter dated 19.03.2020 was questioned
in Writ Petition No. 1723 of 2020 before the Nagpur Bench of the Bombay
High Court which was allowed by the impugned order. H
542 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 27. Now to justify the reasoning of the High Court, the material
which has been brought by filing the counter affidavit, which formed the
basis of annulling the bidding process is required to be referred. From
the material, it is revealed that after communication of the Concession
Agreement and proposing amendments to be carried in Track Change
Mode, AAI put up a note sheet to the GoI on 26.07.2019 in which the
B
entire background regarding execution of the MoU dated 18.12.2006
between GoI through MoCA and GoM through MADC for development
of MIHAN project is re-stated; formation of JVC; JV agreement dated
27.02.2009; admission of transfer of the airport to MIL; determination
of the shares of the partners of the JVC; steps taken for inviting the bids
C and quoting the details of negotiation to increase the revenue share as
approved by AAI Board, present status of land at Nagpur Airport, were
mentioned. However, in the said note sheet, it was prayed to GoI to
accord approval for long term lease of land to MIL for 30 years from the
effective date of commencement of operation by second JVC/
Concessionaire (i.e. GNIAL for GMR Airport Ltd) and ratification of
D
possession of demised land and operation of Nagpur Airport by MIL
from 06.08.2009 till the date of commencement of operation by the second
JVC/Concessionaire. A request was further made that for formation of
second JV i.e. Special Purpose Vehicle (SPV) (i.e. GNIAL for GMR
Airports Ltd) for upgradation, modernization, operation and maintenance
E of Nagpur Airport, the license of AAI Land admeasuring 897 acres
approx. for a period of 30 years from the date of commencement of
operation by the second JVC/Concessionaire may be sent. The draft of
Cabinet Note was attached for perusal and to seek approval of the GoI.
On the said note, the MoCA sought certain clarifications from the
Chairman, AAI by letter dated 02.08.2019. The said letter is relevant,
F
therefore reproduced as thus:
“AV-21018/2/2019-AAI-MOCA
Government of India
Ministry of Civil Aviation
G
B-Block, Rajiv Gandhi Bhawan,
Safdarjung Airport, New Delhi.
Dated: 2nd August, 2019
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 543
To, A
The Chairman,
Airports Authority of India,
Rajiv Gandhi Bhawan,
Safdarjung Airport, New Delhi. B
Subject: Execution of Lease Deed between AAI and Joint
Venture Company (JVC) MIHAN India Ltd. (MIL) for leasing
of Nagpur Airport Land
AND
C
Approval of formation of the Second JV i.e. “Special Purpose
Vehicle (SPV) for the concession” for upgradation, modernization,
operation and maintenance of Babasaheb Ambedkar International
Airport, Nagpur.
Sir, D
I am directed to refer to AAI’s UO Note No. AV-21012/
63/2003-LM/Vol.IV/369, dated 26.07.2019 on the subject
mentioned above and to say that the following details/clarification
may be provided urgently to this Ministry for processing the matter
further:- E
(a) While granting permission to form JV at Nagpur between
MADC and AAI, Ministry vide letter dated 18.02.2009 had
conveyed that the proposal of formation of the second JV
would be brought up before the Central Government at an
appropriate time. Further, during the PPP process for Delhi F
& Mumbai airports in the first phase and six other airports in
the second phase, AAI had taken prior approval of the Union
Cabinet before initiating bidding process to private
concessionaires. However, in the instant case, it is not clear
as to why AAI did not seek prior approval of the Cabinet
before initiating any bidding process for MIHAN Project. G
(b) Since the Nagpur airport is proposed to be developed through
PPP, it may be clarified as to whether all the guidelines issued
by Department of Economic Affairs and PPPAC (Public
Private Partnership Appraisal Committee) in this regard have
been followed. H
544 SUPREME COURT REPORTS [2022] 19 S.C.R.
A (c) What was the basis for increasing revenue share quoted by
the highest bidder from 5.76% to 14.49% and basis of the
negotiations held between MIL and GMR?
(d) Copies of the bid and transaction documents may be shared
for examination.
B (e) Land ownership at Nagpur Airport is also not clear from the
above proposal. Therefore, AAI may inform the exact
quantum of land in their ownership at present.
(f) There is a land dispute between AAI and IAF w.r.t. 288.74
acres of land at Nagpur Airport which has not been sorted
C out yet. Without concrete details the proposal is difficult to
process for the Cabinet approval. Also, it needs to be clearly
stated that demised land measuring 897 acres proposed to
be licensed to second JV/SPV does not overlap with the
disputed land of 288.74 acres which is in possession of IAF
D at Nagpur Airport.
(g) A coloured map showing clear demarcation of land belonging
to AAI, MIL and the land proposed to be given to GMR at
Nagpur Airport has not been provided.
(h) It is not clear from the proposal as to what the revenue share
E between AAI and MADC is at present and what will be the
share between them after formation of second Joint Venture.
2. AAI is requested to kindly furnish clarifications/information
in respect of the above mentioned observations to this Ministry
at the earliest.
F
Yours faithfully,
Sd/-
(V R Hegde)
Director”
G
28. It appears that some correspondence has been made in response
to the said letter vide letter No. AV/21012/63/2003-LM-Vol 656 dated
08/09.08.2019 to AAI, which is not on record. In continuation, the MoCA,
vide letter dated 20.08.2019, has reported some deficiencies in paragraph
2 of the letter which is reproduced as under:
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 545
“No. AV-21018/2/2019-AAI(AD) A
Government of India
Ministry of Civil Aviation
B-Block, R.G. Bhawan,
Safdarjung Airport, New Delhi. B
Dated 20th August, 2019
To,
The Chairman,
C
Airports Authority of India,
Rajiv Gandhi Bhawan,
New Delhi.
Subject: Execution of Lease Deed between AAI and Joint
Venture (JVC) MIHAN India Ltd. (MIL) for leasing of Nagpur D
Airport Land.
AND
Approval for formation of the Second JV i.e. ‘Special Purpose
Vehicle (SPV) for the concession’ for upgradation modernization,
E
operation and maintenance of Babasaheb Ambedkar International
Airport, Nagpur.
Sir,
I am directed to refer to AAI’s UO Note No. AV-21012/01/2016-
LM/155, dated 26.07.2019 and No. AV-21012/63/2003-LM/ F
Vol.656 dated 08/09.08.2019 on the subject mentioned above.
2. The proposal of AAI has been examined and various
deficiencies have been observed which need to be addressed for
preparing the Note for the Cabinet. Major observations are as
under:- G
(i) While granting the approval in the meeting held on 07.02.2009,
Union Cabinet had decided that the developer will be selected
through competitive bidding for highest revenue share as per
standard methodology for development of airports, using the
standard bidding documents and procedures, including PFQ, RFP H
546 SUPREME COURT REPORTS [2022] 19 S.C.R.
A and concession agreements, approved by the Government of India.
This decision was conveyed to AAI, Government of Maharashtra
and MADC vide letter dated 18.02.2009.
It may be clarified whether the Model documents issued by the
erstwhile Planning Commission (standard document adopted by
B PPPAC) have been adopted in the tendering process of Nagpur
airport. If not, the deviating statement may be furnished.
(ii) Whether there was provision in the Transaction document for
negotiation in the bidding parameter? What were the terms of
negotiation in the Revenue share from 5.14% to 14.49%? Whether
C other bidders also given the option of negotiating the revenue share?
(iii) What are the benefits that will accrue to AAI on transfer of
the Airport land to private developer? What will be the return on
the investment made by AAI for development of airport so far?
(iv) The Equity Ratio between AAI and MADC in MIL is 49.51.
D Whereas the current proposal provides for revenue sharing
between AAI and MADC in the ratio of (45:55) of Gross Revenue
of MIL. AAI may provide the justification for the deviation.
(v) What are the salient features of the bidding process viz. Stages
of bidding, qualification criteria, basis of the deciding the concession
E period, no. of bids received etc.?
3. AAI is requested to kindly furnish clarification/reply on the
above observation to this Ministry urgently.
Yours faithfully,
F Sd/-
Krishna Kr. Singh
Section Officer”
In furtherance, a meeting was held on 30.08.2019 under the
G Chairmanship of the Secretary (Civil Aviation), MoCA wherein in
paragraph 5, the clarifications with regard to the letter dated 20.08.2019
were sought for. The Minutes of the Meeting are reproduced as thus:
“Minutes of the meeting held on 30.08.2019 under the
Chairmanship of Secretary, Civil Aviation in Rajiv Gandhi
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 547
B Bhavan, New Delhi to discuss the issues relating to A
leasing of Nagpur Airport under PPP.
A meeting was held on 30.08.2019 with the officers/
representatives of State Government of Maharashtra to take
forward the issues related to leasing out of Nagpur Airport to a
private concessionaire under Public Private Partnership (PPP). B
2. List of participants attached.
3. Secretary, Civil Aviation welcomed the participants and
requested Principal Secretary, Govt. of Maharashtra to elaborate
the details of the bidding process followed in respect of leasing of
Nagpur airport. A detailed presentation was made by Government C
of Maharashtra (copy enclosed).
4. During the presentation, it was informed that a Joint Venture
Company (JVC) between Airports Authority of India (AAI) and
Maharashtra Airport Development Company Ltd (MADC) was
formed in 2009 to upgrade the Nagpur airport. The JVC so formed D
was named as Multi Modal International Passenger and Cargo
Hub Airport at Nagpur India Limited (MIL) wherein AAI holds
49% equity and MADC hold remaining 51%. It was further
informed that MIL is operating the Nagpur airport since 2009 and
earned a profit of approximately Rs. 49 crores for the year 2018- E
19. Thereafter, the detailed procedure followed for inviting tender
to select concessionaire was explained by officials of Govt. of
Maharashtra.
5. After the presentation, Secretary, Civil Aviation requested
MADC officials to clarify the following specific issues related: F
(i) Clause 2.2.1(c) of RFQ stipulates that the concessionaire
shall be selected based on the sole criteria of highest revenue
share quoted, negotiation with highest bidder on revenue share
(increased from 5.76% to 14.49%). Post bid negotiation needs to
be justified.
G
(ii) There were frequent changes in the eligibility criteria w.r.t.
airport experience from the period of RFQ to bid opening date.
The grounds for the same may be stated with cogent reasons.
(iii) Since the bid document has undergone frequent changes and
there are deviation from the standard documents, a detailed H
548 SUPREME COURT REPORTS [2022] 19 S.C.R.
A deviation statement vis-à-vis approved document along with
justification needs to be provided.
(iv) The airport is presently being operated successfully by the
government undertaking and earning a profit of Rs. 49 cr. for the
2019 and will continue to earn profits with an estimated traffic
B growth of more than 20%. Therefore, the revenue share offered
by the concessionaire will result to a profit of just Rs. 15 crore to
the Government undertaking. Whether it is justified to lease out
the airport, which is earning a profit of Rs. 50 cr. per annum, to
the private concessionaire at a profit of Rs. 15 crores (even if the
potential revenue generation from the land parcel to the
C concessionaire is not considered).
6. Secretary stated that for leasing of assets including land of
AAI to private party, approval of the Union Cabinet is required.
Therefore, he requested the representative of Government of
Maharashtra to send a detailed justification for each of the above
D observations along with the views of the State Government for
placing the same before the Union Cabinet.
5.6 Principal Secretary, Govt. of Maharashtra has informed that
since the bid process was carried out under overall supervision of
PMIC, the replies to above queries will be sent to GoI with the
E approval of the PMIC.
6. Meeting ended with vote of thanks to the Chair.”
29. The counter-affidavit filed before the High Court by MIL or
GoM did not give any explanation to the letters dated 20.08.2019 and
F 30.08.2019, though it was incumbent upon them to submit their explanation.
They have taken a pretext in meeting that the response be sent after
discussion with PMIC. The record further reveals that a meeting of
PMIC was held on 14.10.2019, wherein retendering was directed. The
record note of discussions of the said meeting is reproduced as under:
Project Monitoring and Implementation Committee (PMIC) for Up-
G
gradation and Modernization of Dr. Babasaheb Ambedkar
International Airport, Nagpur on DBFOT basis under PPP (the
“Project”)
14th October 2019
H Record Note of Discussions
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 549
The 9th meeting of the Project Monitoring and Implementation A
Committee (PMIC) on the captioned project, chaired by
Honourable Chief Secretary, Government of Maharashtra was
held on 14th October 2019 at 4:30 p.m. at the Chief Secretary
Office, Mantralaya, Mumbai. The agenda for the meeting was to
discuss the justification/response to MoCA’s observations as per
B
its letter dated 30 August 2019.
The Vice Chairman & Managing Director, MADC / Chairman
and Managing Director, MIHAN India Limited welcomed the
committee members and provided opening remarks. Then he
requested the Transaction Advisors (TA), Ernst & Young LLP, to
present the justification/response to MoCA’s observations. C
TA presented to the committee members the responses to the
following observations raised by MoCA as per its letter dated 30 th
August 2019.
1. Justification on post bid negotiation D
2. Changes in the eligibility criteria at the RFQ and RFP stage
3. Deviations from the standard document
4. Considering the current financials of MIL, justification to lease
out the airport.
E
TA also presented the financial analysis with respect to justification
to lease out the Nagpur airport. Basis the analysis, TA brought to
notice of PMIC that the Net Present Value of the Revenue Share
being offered by the Highest Bidder is not commensurate with
the profit that MIL would earn following the AERA philosophy
F
for tariff determination in the coming 30 years.
Based on the above discussions and deliberations, PMIC directed
to re-tender the bid for the Project.
The meeting ended with a vote of thanks to the Chair and with a
request to CMD, MIL to keep the members informed about the G
developments in this regard, from time to time.
Minutes of the meeting held on 30.08.2019 under the Chairmanship
of Secretary, Civil Aviation in Rajiv Gandhi B Bhavan, New Delhi
to discuss the issues relating to leasing of Nagpur Airport under
PPP. H
550 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 30. In the facts of the case, the objections raised vide letters dated
02.08.2019, 20.08.2019 and in meeting of MoCA dated 30.08.2019 and
in record note of discussion by PMIC in its meeting dated 14.10.2019
are required to be analysed with the intent that while issuing the direction
of re-tendering, the order of annulling the bidding process is how far just,
reasonable and equitable. In fact such letter is against the various clauses
B
of RFP. In this regard as explained above, for the purpose of transfer of
the Nagpur Airport to JVC comprising of AAI and MADC, the Cabinet
note was put on 07.02.2009 by MoCA which was approved with certain
directions. The Cabinet permitted to select the second JV through
competitive bidding and proposal for formation of second JV be brought
C before the Cabinet at an appropriate time. Therefore, on submitting the
bid and on declaring GAL as selected bidder after issuance of LoA, as
per the Cabinet decision, the second Cabinet note is required to be put
up after selection of the partner by the competitive bidding for the
formation of the second JV. It is to be observed that if procedure of
competitive bidding was fair merely on the pretext of the Cabinet approval,
D
interference by the authorities would not be permissible.
31. MoCA held its meeting on 30.08.2019. Admittedly, the said
meeting is on the note of AAI dated 26.07.2019 to which the objection
was submitted vide letter date 02.08.2019 and the response by AAI on
08/09.08.2019 (not available on record but referred to in the letter of
E MoCA dated 20.08.2019) have been considered. How far those
objections may be relevant are required to be considered to test the
action of the authorities for annulling the bidding process and to know
whether the said action was not arbitrary. In the meeting on 30.08.2019,
presentation was made by MADC to which Secretary, MoCA further
F asked for clarifications.
32. The first clarification sought was that the criteria for selection
of the bidder shall be based on the highest revenue share quoted. After
negotiation by PMIC, the revenue share quoted as 5.76% was increased
to 14.49%. However, what was the justification for post-bid negotiation.
G From the material available on record, neither PMIC which represents
GoM nor MIL has filed any material to clarify the same. But, in the non-
controverted facts, it cannot be lost sight that GAL was called by GoM
and MIL for negotiation to fetch more revenue share in public interest.
They were successful to get 14.49% revenue share in place of 5.76%.
Thus, how far such an action is required to be questioned by MoCA. In
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 551
our view, after negotiation if more revenue share has been earned by A
MIL or GoM, such an act is just, fair and reasonable. It cannot be said to
be arbitrary and clarification on para 5(i) of minutes of Meeting dated
30.8.2019 sought by MoCA was unreasonable in terms of RFP. No
material has been brought before the High Court or even before this
Court to justify such objection.
B
33. The second clarification/objection raised was regarding
frequent changes in the eligibility criteria with respect to airport experience
from the period of RFQ to bid opening date for which reasons were
sought by the MoCA. It is to be noted here that RFQ was prepared prior
to the bidding process. After floating the tender, five bidders were
shortlisted, who were issued the RFP dated 01.03.2018. Out of the five C
bidders, two submitted the final bids. So, if any changes were made in
the RFQ prior to floating the tender, it was for all the bidders. How can
it affect the bid submitted by selected bidder in terms of RFQ. There is
no justification either before the High Court or before this Court to say
that such an action would be arbitrary. Nothing is brought on record to D
suggest that MIL or GoM has favoured the GAL for oblique reasons. In
such circumstances, the second objection/clarification as raised in the
meeting dated 30.08.2019 is wholly unjust, particularly after issuance of
the LoA.
34. The third objection/clarification was sought regarding frequent E
changes in the bid document. It is said that there was a deviation from
the standard document (model Request for Qualification for PPP Projects
and model Request for Proposal for PPP Projects). The statement of
justification for deviation was asked from MIL and GoM. The standard
document (Model Request for Qualification for PPP Projects and Model
Request for Proposal for PPP Projects, for short “model RFQ and F
RFP”) is merely a model to be followed. On the basis of said model
RFQ and RFP, the authority inviting the tenders for a particular project
is required to prepare RFQ and RFP. In the present case, the RFQ and
RFP were prepared by MIL and approved by PMIC considering the
nature of the project. Therefore, the clarification sought by MoCA G
regarding deviation from model RFQ and RFP or in a bid document
based on the model RFQ and RFP cannot be said to be justifiable. It
appears the objection has been raised analysing the terms of RFQ and
RFP issued by the department on the basis of which the bidding process
was completed. In our view, the said objection/clarification is suffering
H
552 SUPREME COURT REPORTS [2022] 19 S.C.R.
A from the vice of arbitrariness and without any justification. In view of
the discussion made above regarding objections/clarifications of MoCA
in para 5 (i to iii) in the proceedings 30.8.2019 are arbitrary, unreasonable
and without any justification, submitted by the authorities even before
this Court. Therefore, all these queries are violative of Article 14 of the
Constitution of India.
B
35. The fourth objection/clarification sought was regarding the
profit of Rs. 49 crores earned in the year (2018-19) and the prospective
profit to be earned for the succeeding year i.e. 2019-20 due to estimated
traffic growth of 20%. In this regard justification was sought as to how
the offer made by the concessionaire which will result into lesser profit
C of Rs. 15 crores as against the profit of Rs. 50 crores which the airport
is currently earning is just. PMIC in its meeting held on 14.10.2019
considered this issue along with other three issues as discussed above.
In the said meeting, there is no deliberation regarding the three issues
and the issue of financial viability of MIL on leasing out the Airport. In
D our view, there would be no lease of the airport in favour of GAL. In
fact, the lease would be in favour of MIL by AAI and MADC which is
its first JV formulated to carry out their work. Therefore, it is completely
a mis-statement of fact. It is clarified that after acceptance of the bid,
GAL and GNIAL would be a licensee for implementation of the MIHAN
project.
E
36. For dealing the fourth objection of the meeting dated 30.08.2019
of MoCA and 14.10.2019 of PMIC, the Court knows its limitation and is
reluctant to interfere because they are not expert to analyse the financial
viability, but the Court can see the justification of the issue in a matter
where after following the procedure established by law, LoA was issued
F in favour of GAL. Awaiting long, when the Concession Agreement was
not executed, GAL knocked the door of the Court and thereafter the
order of annulling of the bidding process has been passed, which is quashed
by the High Court. In such circumstances, we have to examine whether
the defence taken by the authorities is just and reasonable or suffers
G from vice of arbitrariness on the pretext of loss to public exchequer.
37. The objection/clarification in para 5(iv) of the letter dated
30.08.2019 has been discussed by PMIC in its meeting dated 14.10.2019,
wherein it perused the analysis of Transaction Advisors Ernst & Young
(for short “E&Y”) and observed that the offer of highest revenue share
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 553
made by the selected bidder is not commensurate with the profit that A
MIL would earn following the AERA philosophy for tariff determination
in the coming 30 years. The PMIC for the said reason directed to re-
tender the bid for the MIHAN project. In the said context, the factual
aspect of the report of E&Y is required to be referred. The report of
E&Y discusses about the financial snapshot in case the development is
B
taken by the private concessionaire, on the basis of which it is clear that
the net present value of cash flows if MIL undertakes investment of Rs.
1683 crores would be Rs. - 473 crores and if revenue share of 14.49%
is given, then its value would go to Rs. + 472 crores. It is clarified that in
case it is privatized, MIL is not required to take any burden of CAPEX
as it would be done by the private sector. It is further put in the note that C
a private player operating will make MIL an asset light organization and
that also it will earn revenue share from the private player which in the
net present value is more and implementation, operational efficiency of
the private sector can be capitalized. Therefore, it is clear that as per the
said report without any investment made by AAI, MIL will get the revenue
D
of Rs. 15 crores per annum.
38. As per RFP, it is clear that MIL floated a tender for up-
gradation, 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 E
does not indicate the investment in up-gradation 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, F
operation and maintenance has to be borne out by the private player and
not by MIL. It is pertinent to note here that 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 G
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.
H
554 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 39. Further, in paragraph 6 of the minutes of the Meeting held on
30.08.2019, the Secretary, MoCA said that for leasing of assets including
leasing of land of AAI to private party, approval of Union Cabinet is
required. On perusal of the record, it is not out of place to mention here
that the lease of the land is not required to be executed in favour of
GAL. It is only the license which is required to be given by Concession
B
Agreement. Prior to executing the agreement, the recourse, as taken, is
not fair and just. As per the terms of Clauses 3.1.1. and 10.2.2 of the
Concession Agreement, it is clear that the GAL would be the licensee.
For ready reference, the relevant Clauses are reproduced as thus:
“3.1.1 Subject to and in accordance with the provisions of this
C Agreement, GoI Approval, Applicable Laws and the Applicable
Permits, the Authority hereby grants to the Concessionaire, the
concession set forth herein including the exclusive right, license
and authority to develop, finance, operate and maintain the Airport
(“Concession”) for an initial period of 30 (thirty) years commencing
D from the COD, and the Concessionaire hereby accepts the
Concession and agrees to implement the Project subject to and in
accordance with the terms and conditions set forth herein.
Provided that in the event the Concessionaire shall have discharged
its obligations under this Agreement without any material breach
E thereof for a period of 27 (twenty seven) years from the COD,
and intimate the Authority about its interest and request for
renewing/extending the term of this Concession by another period
of 30 (thirty) years. While making such request, the Concessionaire
shall submit a confirmation that it is agreeable to participate in the
international competitive bidding process for the determination of
F the Premium for an additional period of 30 (thirty) years, in the
form and manner, as may be prescribed by the Authority, at such
time, and in any such case of international competitive bidding:
(a) the Concessionaire shall have a right to match the highest bid,
if its bid is within 05.00% of the highest bid that may be offered at
G that time in accordance with the terms and conditions of the bidding
documents issued at such time, and (b) the Affiliate (s) of the
Concessionaire shall not be qualified, either directly or indirectly,
participating in any such bidding process. Provided further that, in
the event the Airport is not expanded by the Concessionaire in
accordance with the provisions of this Agreement or the
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 555
Concessionaire has been in default of the provisions of this A
Agreement, then the Authority shall not be under any obligation to
extent the Concession Period under this Clause 3.1.1. Any material
breach shall for the purposes hereof mean Suspension or
cumulative levy of Damages by the Authority exceeding a sum
equivalent to 10% (ten percent) of the Performance Security.
B
Along with the notice for extension of the Concession Period, the
Concessionaire shall submit the following documents:
(a) a certificate confirming that there has been no material
default by the Concessionaire under this Agreement
(including compliance of provisions relating to any of the
Key Performance Indicators), resulting in the accrual of C
a right in favour of the Authority to identify any such
event as Concessionaire’s Default;
(b) a certificate confirming from Airports Council International
or any other equivalent agency of similar international
repute confirming that the Airport has been within top 20 D
(twenty) percentile of all airports in its category in the
world, for a continuous period of preceding 5 (five) years
as on the date of such application; and
(c) an undertaking that the Concessionaire shall continue to
comply with the terms and conditions of the Agreement E
in its full form and effect for the remainder of the
Concession Period.
Provided further that, in the event the Airport is not expanded by
the Concessionaire in accordance with the provisions of this
Agreement or the Concessionaire has been in default of the F
provisions of this Agreement, then, the Authority shall not be under
any obligation to extend the Concession Period under this Clause
3.1.1.
In any event, at all times, any decision concerning the extension
of the Concession Period will solely vest with the Authority. G
10.2.2 In consideration of the Concession Fees, and Revenue
Share, this Agreement and the covenants and warranties on the
part of the Concessionaire herein contained, the Authority, in
accordance with the terms and conditions set forth herein, shall
grant to the Concessionaire commencing from the COD, license H
556 SUPREME COURT REPORTS [2022] 19 S.C.R.
A rights in respect of all the land (along with any buildings,
constructions or immovable assets, if any, thereon) comprising
the Site which is described, delineated and shown in Schedule A
hereto as the Site, free of any Encumbrances, to develop, operate
and maintain the Site, together with all and singular rights, liberties,
privileges, easements and appurtenances whatsoever to the said
B
Site, hereditaments or premises or any part thereof belonging to
or in any way appurtenant thereto or enjoyed therewith, for the
purposes permitted under this Agreement, and for no other purpose
whatsoever, for the Concession Period.”
40. In view of the aforesaid, it is clear that no lease is going to be
C executed in favour of GAL or GNIAL. It is only a license right in respect
of all the lands along with any buildings, constructions or immovable
assets and other movables specified in the schedules of concession
agreement is required to be conferred upon GAL or GNIAL. In the said
context, the argument advanced, relying upon Section 12A of the Airports
D Authority of India Act, 1994 (for short “AAI Act”) requires consideration.
Section 12A is reproduced as thus:
“12A-Lease by the authority (1) Notwithstanding anything
contained in this Act, the Authority may, in the public interest or in
the interest of better management of airports, make a lease of the
E premises of an airport (including buildings and structures thereon
and appertaining thereto) to carry out some of its functions under
section 12 as the Authority may deem fit:
Provided that such lease shall not affect the functions of
the Authority under Section 12 which relates to air traffic service
F or watch and ward at airports and civil enclaves.
(2) No lease under sub-section (1) shall be made without the
previous approval of the Central Government.
(3) Any money, payable by the lessee in terms of the lease made
under sub-section (1) shall form part of the fund of the Authority
G and shall be credited thereto as if such money is the receipt of the
Authority for all purposes of Section 24.
(4) The lessee, who has been assigned any function of the Authority
under sub-section (1) shall have all the powers of the Authority
necessary for the performance of such function in terms of the
H lease.”
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 557
41. On perusal thereto, it is clear that Section 12A applies in the A
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
B
appears to be fallacious.
42. Now, as per the material available and discussed hereinabove,
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 C
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. The said approach is fortified with the view
taken in the judgment of this Court in Union of India and others vs.
Dinesh Engineering Corpn. and another (2001) 8 SCC 491, wherein D
while dealing with the rejection of bid of the respondent therein by
Railways in a tender floated for procurement of certain items of spare
parts for use in GE governors, this Court has held that power to reject
bids cannot be exercised arbitrarily merely because Railways has the
power to do so. Any arbitrary exercise of power to reject bids has been
held violative of Article 14. Paragraphs 15 and 16 of the aforesaid E
judgment are relevant and reproduced thus:
“15. Coming to the second question involved in these appeals,
namely, the rejection of the tender of the writ petitioner, it was
argued on behalf of the appellants that the Railways under clause
16 of the Guidelines was entitled to reject any tender offer without F
assigning any reasons and it also has the power to accept or not
to accept the lowest offer. We do not dispute this power provided
the same is exercised within the realm of the object for which this
clause is incorporated. This does not give an arbitrary power to
the Railways to reject the bid offered by a party merely because G
it has that power. This is a power which can be exercised on the
existence of certain conditions which in the opinion of the Railways
are not in the interest of the Railways to accept the offer. No
such ground has been taken when the writ petitioner’s tender
was rejected. Therefore, we agree with the High Court that it is
H
558 SUPREME COURT REPORTS [2022] 19 S.C.R.
A not open to the Railways to rely upon this clause in the Guidelines
to reject any or every offer that may be made by the writ petitioner
while responding to a tender that may be called for supply of
spare parts by the Railways. Mr. Iyer, learned senior counsel
appearing for the EDC, drew our attention to a judgment of this
Court in Sterling Computers Ltd. etc. v. M/s. M & N Publications
B
Ltd. (1993 1 SCC 445) which has held: (SCC p. 455, para 12)
“Under some special circumstances a discretion has to be
conceded to the authorities who have to enter into contract
giving them liberty to assess the overall situation for purpose
of taking a decision as to whom the contract be awarded and
C at what terms. If the decisions have been taken in bona fide
manner although not strictly following the norms laid down by
the courts, such decisions are upheld on the principle laid down
by Justice Holmes, that courts while judging the constitutional
validity of executive decisions must grant certain measure of
D freedom of “play in the joints” to the executive.”
16. But then as has been held by this Court in the very same
judgment that a public authority even in contractual matters should
not have unfettered discretion and in contracts having commercial
element even though some extra discretion is to be conceded in
E such authorities, they are bound to follow the norms recognised
by courts while dealing with public property. This requirement is
necessary to avoid unreasonable and arbitrary decisions being
taken by public authorities whose actions are amenable to judicial
review. Therefore, merely because the authority has certain elbow
room available for use of discretion in accepting offer in contracts,
F the same will have to be done within the four corners of the
requirements of law especially Article 14 of the Constitution. In
the instant case, we have noticed that apart from rejecting the
offer of the writ petitioner arbitrarily, the writ petitioner has now
been virtually debarred from competing with the EDC in the supply
G of spare parts to be used in the governors by the Railways, ever
since the year 1992, and during all this while we are told the
Railways are making purchases without any tender on a proprietary
basis only from the EDC which, in our opinion, is in flagrant violation
of the constitutional mandate of Article 14. We are also of the
opinion that the so-called policy of the Board creating monopoly
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 559
of EDC suffers from the vice of non- application of mind, hence, A
it has to be quashed as has been done by the High Court.”
43. Bare perusal of the above stated case-law in light of the facts
of the instant case makes it clear that 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 B
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 C
of annulment has been directed applying Clause 2.16.1 arbitrarily.
44. As discussed hereinabove, while explaining the scope of
Chapters 1, 2 and 3 of RFP, it is clear that Chapter 2 deals with the
bidding instructions which are general in nature. Clause 2.16 deals with
the rejection of bid which is a situation prior to acceptance of the bid. D
After Chapter 2, in Chapter 3 evaluation of bid starts. While evaluating
those bids in Clause 3.3.1, if the provision of Clause 2.16.1 has not been
invoked and the bidder whose bid has been adjudged as responsive in
terms of the Clause 3.3.1 and who offered the highest revenue share
would be a selected bidder. In the present case, the selection of the E
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- F
tendering.
45. In this regard, a 3-Judge Bench judgment of this Court in the
case of Vice-Chairman & Managing director, City and Industrial
Development Corporation of Maharashtra Ltd. and Another vs.
Shishir Realty Private Limited and Ors. [Civil Appeal No. 3956-57 G
of 2017] is relevant, paras 67 to 70 are reproduced as thus:
“67. Before we state the conclusions, this Court would like to
reiterate certain well- established tenets of law pertaining to
Government contracts. When we speak of Government contracts,
H
560 SUPREME COURT REPORTS [2022] 19 S.C.R.
A constitutional factors are also in play. Governmental bodies being
public authorities are expected to uphold fairness, equality and
rule of law even while dealing with contractual matters. It is a
settled principle that right to equality under Article 14 abhors
arbitrariness. Public authorities have to ensure that no bias,
favouritism or arbitrariness are shown during the bidding process.
B
A transparent bidding process is much favoured by this Court to
ensure that constitutional requirements are satisfied.
68. Fairness and the good faith standard ingrained in the contracts
entered into by public authorities mandates such public authorities
to conduct themselves in a non--arbitrary manner during the
C performance of their contractual obligations.
69. The constitutional guarantee against arbitrariness as provided
under Article 14, demands the State to act in a fair and reasonable
manner unless public interest demands otherwise. However, the
degree of compromise of any private legitimate interest must
D correspond proportionately to the public interest, so claimed.
70. At this juncture, it is pertinent to remember that, by merely
using grounds of public interest or loss to the treasury, the successor
public authority cannot undo the work undertaken by the previous
authority. Such a claim must be proven using material facts,
E evidence and figures. If it were otherwise, then there will remain
no sanctity in the words and undertaking of the Government.
Businessmen will be hesitant to enter Government contract or
make any investment in furtherance of the same. Such a practice
is counter-productive to the economy and the business environment
F in general.
46. In view of the above, 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.
G 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
H
MIHAN INDIA LTD. v. GMR AIRPORTS LTD. & ORS. 561
public interest. It is specified that using a ground of public interest or A
loss to the treasury cannot undo the work already undertaken by the
authority.
47. Analysing the facts of this case in the light of the judgments in
Dinesh Engineering (Supra) and Shishir Realty (Supra), after issuing
the LoA in terms of Clause 3.3.5 of RFP and declaring GAL as B
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.
C
48. In view of the discussion made hereinabove, we are of the
considered opinion that 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. D
49. In the facts of the present case and the findings so recorded
hereinabove, it is clear that 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 E
by the High Court to entertain the petition in paragraph 95 are just and
proper and we are in full agreement to those findings. In the facts of the
present 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. F
50. Learned counsel on behalf of the UoI and AAI have
vehemently argued that without joining them as a party to the proceedings,
the Writ Petition was not entertainable and the relief as directed, could
not have been allowed.
51. From the above, it is clear that in pursuance to the decision G
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
H
562 SUPREME COURT REPORTS [2022] 19 S.C.R.
A 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 re-tendering 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, if we examine the said
B
relief and direction, as issued by the High Court in terms of the Cabinet
decision dated 11.2.2009, we are satisfied that UoI and AAI are not
adversely affected after issuing the direction to select the second JV by
competitive bidding. More so as discussed, except to produce the first
approval of the Cabinet dated 11.02.2009, letters dated 02.08.2019,
C 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. In absence thereto, we are of the considered opinion
that the objection regarding non-joinder raised by the appellants is bereft
of any merit and the High Court has rightly rejected the same.
D 52. In view of the discussion made hereinabove, we are of the
considered opinion that 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. All these appeals
are hereby dismissed. Parties to bear their own costs.
E
Nidhi Jain Appeals dismissed.
(Assisted by : Bodhi Ramteke, LCRA)
F
G
H
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