Case: Air India Ltd Vs. Cochin International Airport Ltd

Cambatta had protested against giving of an opportunity to Air India to make a presentation by its letters dated 12.11.1998 and 23.11.1998 on the ground that what was being done by CIAL was improper and in violation of global competitive bidding norms. In spite of the protest of Cambatta the Board of Directors of CIAL permitted Air India to make a presentation for outlining in detail its ground handling capabilities, packages of services which it wished to offer and other relevant advantages including financial. Air India by its letter dated 1.12.1998 recapitulated the details of the offer which it had already made, and the subsequent presentation and discussion on 27.11.1998. The said letter discloses that some changes were made by Air India in its original offer to make it more acceptable to CIAL. In that letter it was also indicated that it would try to enhance Air India and other Airlines domestic and international operations through CIAL and pointed out that only through maximisation of operations this new venture can be a profitable one at an early date. Cambatta again by its letter dated 7.12.1998 reiterated that its offer was the highest (most favourable to CIAL) and that it would be unfair to accept the revised bid of Air India. In spite of the protests of Cambatta, CIAL, by its letter dated 12.`12.1998, informed Air India that the Board of Directors had decided to accept the revised offer of Air India.11. This narration of facts makes it clear that all along, after the High Level Committee had recommended Cambatta for awarding the contract, what Cambatta was contending was that CIAL having accepted the limited global competitive bidding norms and having decided 28.7.1998 as the last date for inviting final offer, it was not open to it thereafter to negotiate with Air India behind the back of Cambatta and permit Air India to revise its offer. Even though Cambatta had written protest letters, it had not requested CIAL to give it any opportunity to negotiate or to improve upon its offer. The decision of the High Level Committee was obviously not the final decision and certainly it was not binding on the Board of Directors who were the final authority to take the decision. The Board of Directors, at the meeting held on 7.11.1998, considered the proposals of Air India and Cambatta and appears to have taken a tentative decision to award the contract to Air India and, therefore, called it for negotiations with a view to have better terms and take the final decision. The Board of Directors did take the final decision on 27.11.1998 as Air India agreed to make its offer more beneficial to CIAL. That becomes apparent from Air Indias letter dated 1.12.1998. The Board of Directors having taken tentative decision on 7.1.1998 there was no point in calling Cambatta thereafter for any negotiation. It may be recalled that Cambatta was recommended over Air India by the High Level Committee only because Cambattas financial rating was found higher. What is significant to note is that even the High Level Committee had in its minutes noted that financial rating cannot be the sole criterion for taking the final decision. Moreover, in a commercial transaction of such a complex nature a lot of balancing work has to be done while weighing all the relevant factors and the final decision has to be taken after taking an overall view of the transaction. It is true that even though Cambatta had called upon CIAL to produce the minutes of the meeting of the Board of Directors held on 27.11.1998 the same was not made available to Cambatta. But that did not entitle the High Court to draw any adverse inference. The High Court had not called upon CIAL to produce those minutes.12. As regards the merits of Cambattas proposal, it was contended by Mr. Andhyarujina that all the three offers of Cambatta were superior in terms of parameters laid down by CIAL than Air Indias offer. He submitted that even after CIAL unilaterally raised the license fee of Air India from 17 per cent to 20 per cent in the 10th year to match Cambattas offer and imposed a condition that Air India would not sub-contract, it did not become comparable with the offer of Cambatta as Air India did not offer to pay 2 per cent bonus in license fee. It was also submitted that Air Indias representation that it would be able to bring more traffic was illusory and for that reason also Air Indias proposal cannot be regarded as superior or even comparable with the proposal of Cambatta. We do not think that CIAL did any wrong in taking into consideration the fact that Air India is an airline and being a national carrier would be in a position to bring more traffic of Air India and other domestic lines if it was awarded the contract. As regards the merits of the rival offers, we do not think it proper to look at only the financial aspect and hold that CIAL did not accept Cambattas offer, even though it was better, because it wanted to favour Air India or that it had acted under the influence of Air India and the Ministry of Civil Aviation. In a commercial transaction of a complex nature what may appear to be better, on the face of it, may not be considered so when an overall view is taken. In such matters the Court cannot substitute its decision for the decision of the party awarding the contract. On the basis of the material placed on record we find that CIAL bona fide believed that involving a public sector undertaking and a national carrier would, in the long run, prove to be more beneficial to CIAL. For all these reasons it is not possible to agree with the finding of the High Court that CIAL had acted arbitrarily and unreasonably and was also influenced by extraneous considerations during its decision making process. 13.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]s necessary toaccept the highestgood reasoner tenders likety ofty ofcan bes. Allss andan opportunity toer tois nod at the time ofes havecannot beon the basis ofcannot beThe only point that really falls for consideration is whether CIAL had acted fairly after it had invited fresh offers by its letter dated 13.7.1998.It was forcefully submitted by Mr. Andhyarujina that after the High Level Committee had evaluated the proposals and recommended Air India for the job it was unfair on the part of CIAL to have permitted Air India to make a fresh presentation and revise its terms. Even while conceding that CIAL had a right to enter into negotiations even at that stage, it was submitted that Cambatta also should have been invited for negotiations and informed about the revised terms of Air India. It was submitted that like Air India, Cambatta should have been givenan opportunity tomatch the offer made by Air India. From the letter written by CIAL to Cambatta on 13.7.1998 and similar letters written to others also, it appears that the Board of Directors had, in its meeting held on 29.6.1998, taken certain decisions and felt that in fairness all eligible agencies should be requested to give their best offers. Air India had submitted its offer on 20.7.1998 and stated therein that its offer was open for negotiations. Cambatta had submitted its offer on 28.7.1998. It was madeon the basis ofcertain assumptions. CIAL had in all received five offers. The High Level Committee constituted for evaluation of offers did not consider the offer of M/s P.S.M. Aviation Pvt. Ltd. as it had not submitted the required bank guarantee. The other four agencies, namely, Cambatta, DNATA, Air India and Ogden, were found on par as far as technical competence, organisational capacity and past experience was concerned. It, however, short listed Cambatta and Air India on the ground that they are Indian organisations, operate mainly in India and have better proven adaptability for operating in Indian conditions. It then recommended Cambatta for undertaking the ground handling services without giving any reason for its preference for Cambatta. While making the decision the Committee observed that it would be for the Board of Directors to consider whether any negotiation should be held with qualified agencies. The Board of Directors had then met on 7.11.1998 and after taking note of the minutes of the high level committee and taking note of the fact that Air India is a public sector undertaking and a national carrier, decided to have a detailed discussion with Air India before taking a final decision. It, therefore, invited the Managing Director of Air India for giving a presentation before the Board on 27.11.1998. It was also felt necessary to take a final decision in its next meeting to be held on 27.11.1998 as the matter was pending since long and itlve the financial crunch of CIAL. Cambatta had protested against giving ofan opportunity toAir India to make a presentation by its letters dated 12.11.1998 and 23.11.1998 on the ground that what was being done by CIAL was improper and in violation of global competitive bidding norms. In spite of the protest of Cambatta the Board of Directors of CIAL permitted Air India to make a presentation for outlining in detail its ground handling capabilities, packages of services which it wished to offer and other relevant advantages including financial. Air India by its letter dated 1.12.1998 recapitulated the details of the offer which it had already made, and the subsequent presentation and discussion on 27.11.1998. The said letter discloses that some changes were made by Air India in its originalto make itmore acceptable to CIAL. In that letter it was also indicated that it would try to enhance Air India and other Airlines domestic and international operations through CIAL and pointed out that only through maximisation of operations this new venturea profitable one at an early date. Cambatta again by its letter dated 7.12.1998 reiterated that its offer was the highest (most favourable to CIAL) and that it would be unfair to accept the revised bid of Air India. In spite of the protests of Cambatta, CIAL, by its letter dated 12.`12.1998, informed Air India that the Board of Directors had decided to accept the revised offer of Air India.11. This narration of facts makes it clear that all along, after the High Level Committee had recommended Cambatta for awarding the contract, what Cambatta was contending was that CIAL having accepted the limited global competitive bidding norms and having decided 28.7.1998 as the last date for inviting final offer, it was not open to itte with Air India behind the back of Cambatta and permit Air India to revise its offer. Even though Cambatta had written protest letters, it had not requested CIAL to give it any opportunity to negotiate or to improve upon its offer. The decision of the High Level Committee was obviously not the final decision and certainly it was not binding on the Board of Directors who were the final authority to take the decision. The Board of Directors, at the meeting held on 7.11.1998, considered the proposals of Air India and Cambatta and appears to have taken a tentative decision to award the contract to Air India and, therefore, called it for negotiations with a view to have better terms and take the final decision. The Board of Directors did take the final decision on 27.11.1998 as Air India agreeds offer more beneficial to CIAL. That becomes apparent from Air Indias letter dated 1.12.1998. The Board of Directors having taken tentative decision on 7.1.1998 there was no point in calling Cambatta thereafter for any negotiation. It may be recalled that Cambatta was recommended over Air India by the High Level Committee only because Cambattas financial rating was found higher. What is significant to note is that even the High Level Committee had in its minutes noted that financial ratingbe the sole criterion fortaking the final decision. Moreover, in a commercial transaction of such a complex nature a lot of balancing work has to be done while weighing all the relevant factors and the final decision has to be taken after taking an overall view of the transaction. It is true that even though Cambatta had called upon CIAL to produce the minutes of the meeting of the Board of Directors held on 27.11.1998 the same was not made available to Cambatta. But that did not entitle the High Court to draw any adverse inference. The High Court had not called upon CIAL to produce those minutes.12. As regards the merits of Cambattas proposal, it was contended by Mr. Andhyarujina that all the three offers of Cambatta were superior in terms of parameters laid down by CIAL than Air Indias offer. He submitted that even after CIAL unilaterally raised the license fee of Air India from 17 per cent to 20 per cent in the 10th year to match Cambattas offer and imposed a condition that Air India would notit did not become comparable with the offer of Cambatta as Air India did notay 2 per cent bonus in license fee. It was also submitted that Air Indias representation that it would be able to bring more traffic was illusory and for that reason also Air Indias proposaled as superior or even comparable with the proposal of Cambatta. We do not think that CIAL did any wrong in taking into consideration the fact that Air India is an airline and being a national carrier would be in a position to bring more traffic of Air India and other domestic lines if it was awarded the contract. As regards the merits of the rival offers, we do not think itok at only the financial aspect and hold that CIAL did not accept Cambattas offer, even though it was better, because it wanted to favour Air India or that it had acted under the influence of Air India and the Ministry of Civil Aviation. In a commercial transaction of a complex nature what may appear to be better, on the face of it, may not be considered so when an overall view is taken. In such matters the Court cannot substitute its decision for the decision of the party awarding the contract. On the basis of the material placed on record we find that CIAL bona fide believed that involving a public sector undertaking and a national carrier would, in the long run, prove to be more beneficial to CIAL. For all these reasons itt possible to agree with the finding of the High Court that CIAL had acted arbitrarily and unreasonably and was also influenced by extraneous considerations during its decision making process.