Case: MIHAN INDIA LTD. &amp; ORS Vs. GMR AIRPORTS LTD. &amp; ORS

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, 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. 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 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 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, 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 counterproductive to the economy and the business environment 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. The transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied. It is said that the constitutional guarantee as provided under Article 14 of the Constitution of India demands the State to act in a fair and reasonable manner unless public interest demands otherwise. It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest. It is specified that using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority. 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 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. 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. 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 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. 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 taken by the Cabinet, the second JV is required to be selected through competitive bidding. In the present case, global tenders were invited and competitive bidding process was followed. The procedure of issuance of LoA is completely a fair procedure as prescribed in RFP. As per the decision taken by MoCA, AAI and MADC, MIL is the authority to complete the bidding process and PMIC, acting on behalf of GoM was supervising the entire process. The annulment has been directed in reference to the letter dated 16.3.2020 for 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 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, 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]24. As per the above discussion, we do not have any hesitation 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 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.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 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 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, 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 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 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. 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 our view, after negotiation if more revenue share has been earned by 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.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 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 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 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 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 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 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.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 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 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.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 made by the selected bidder is not commensurate with the profit that 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 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 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 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 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, 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 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.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 Agreement. Prior to executing the agreement, the recourse, as taken, is not fair and just.40. In view of the aforesaid, it is clear that no lease is going to be 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.41. On perusal thereto, it is clear that Section 12A applies in the case of lease by the authority and no such lease under sub-section (1) shall be made without previous approval of the Central Government. In the present case, no lease is required to be executed in favour of GAL or GNIAL. The pretext taken on the basis of Section 12A of AAI Act in a case of annulment of bidding process by the AAI and the GoI primarily appears to be fallacious.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 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 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 14.43. 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 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 GoMs letter dated 16.03.2020 in reference to PMICs meeting dated 14.10.2019 in which re-tendering was directed. Re-tendering was not possible without ignoring the bid already accepted. Therefore, the order of annulment has been directed applying Clause 2.16.1 arbitrarily.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. 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 bidder was complete. Thereafter, LoA was issued as per Clause 3.3.5 and by issuance of draft of Concession Agreement, it has been declared as a concessionaire. At that stage, Clause 2.16.1 for annulment of the bidding process would not apply. It appears to us that as per the objections raised in the Meeting dated 30.08.2019 held by MoCA, clause (iv) in paragraph 5 persuaded the MIL and GoM to pass the order of re-tendering.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 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, 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. 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 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 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, 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 counterproductive to the economy and the business environment 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. The transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied. It is said that the constitutional guarantee as provided under Article 14 of the Constitution of India demands the State to act in a fair and reasonable manner unless public interest demands otherwise. It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest. It is specified that using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority.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 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.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.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 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.51. From the above, it is clear that in pursuance to the decision taken by the Cabinet, the second JV is required to be selected through competitive bidding. In the present case, global tenders were invited and competitive bidding process was followed. The procedure of issuance of LoA is completely a fair procedure as prescribed in RFP. As per the decision taken by MoCA, AAI and MADC, MIL is the authority to complete the bidding process and PMIC, acting on behalf of GoM was supervising the entire process. The annulment has been directed in reference to the letter dated 16.3.2020 for 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 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, 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.