Bombay High Court
Gmr Airports Ltd. Through ... vs Mihan India Ltd. Thr. Chairman And ... on 18 August, 2021
Bench: S.B. Shukre, Anil S. Kilor
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR
WRIT PETITION NO. 1723 OF 2020
1.GMR Airports Ltd.
A Company incorporated under the
Companies Act, 1956, having its
Registered Office at 25/1, Skip
House, Museum Road, Bangalore-
560025, through Authorised
Representative T.V. Ganesan,
Aged about 54 years, r/o. 366D,
Mayur Vihar Phase II, Delhi 110091.
2.GMR Nagpur International Airport Ltd.
A Company incorporated under the
Companies Act, 1956, having its
Registered Office at 1st Floor, Terminal
Building, Dr.Babasaheb Ambedkar
International Airport, Nagpur-440005,
Maharashtra through Authorised
Representative T.V. Ganesan,
Aged about 54 years, r/o. 366D,
Mayur Vihar Phase II,
Delhi 110091. ...... PETITIONERS.
// VERSUS //
1.MIHAN India Ltd.,
through Chairman and Managing
Director, having its Registered Office
at 1st Floor, Old Terminal Building,
Dr.Babasaheb Ambedkar International
Airport, Nagpur-440005, Maharashtra.
::: Uploaded on - 19/08/2021 ::: Downloaded on - 19/08/2021 15:11:47 :::
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2.Government of Maharashtra,
Through its Secretary,
Administration Reforms and Special
Projects, General Administration
Department, Mantralaya, Madam Cama
Road, Hutatma Rajguru Square,
Nariman Point, Mumbai 400032. ........ RESPONDENTS
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Mr.A.M.Singhvi, Senior Advocate assisted by Mr.C.B.Dharmadhikari,
Advocate for petitioners.
Mr.M.G.Bhangde, Senior Advocate with Mr.R.M.Bhangde, Advocate
for respondent no.1.
Ms N.P.Mehta, A.G.P. for respondent no.2/State.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
********
Date of reserving the Judgment : 12.7.2021.
Date of pronouncement of the Judgment : 18.8.2021.
********
CORAM : SUNIL B. SHUKRE &
ANIL S. KILOR, JJ.
ORAL JUDGMENT (Per Sunil B. Shukre, J) :
1. Rule. Rule made returnable forthwith. Heard finally with
the consent of learned Counsel for the respective parties.
Introduction
2. Petitioner no.1, a public limited Company. It claims to be
an Airport developer and operator across the globe. Petitioner no.2 is
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a wholly owned subsidiary company of petitioner no.1 and it is a
Special Purpose Vehicle (for short "SPV ") incorporated by petitioner
no.1 for the purpose of implementation of the project for up-
gradation, modernization, operation and management of
Dr.Babasaheb Ambedkar International Airport, Nagpur (for short
"Nagpur Airport"), for which bids were invited from qualified bidders
through a tender floated by respondent no.1.
3. Petitioner no.1 submitted its bid for the said project on
28.9.2018 and on completion of bid evaluation process by respondent
no.1, petitioner no.1's bid was adjudged to be the highest in terms of
the bidding documents. There were some negotiations between
petitioner no.1 and respondent no.1 regarding possibility of petitioner
no.1 increasing it's offer of revenue share, which petitioner no.1 did
in-fact. Petitioner no.1 raised it's offer of revenue share from 5.76 %
to 14.49 %. Petitioner no.1 in doing so stated that although any
upward revision in the offer may adversely impact the financial
position considered by petitioner no.1, it agreed to increase it's offer,
in view of request made by the Project Monitoring and
Implementation Committee (for short "PMIC"), importance of the
project and larger interest of the people of Maharashtra and Nagpur.
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4. It is the case of the petitioners that, in response to the
revised offer given by petitioner no.1, respondent no.1 issued a letter
of acceptance dated 7.3.2019, which petitioner no.1 says was a Letter
of Award accepting the revised bid of the petitioner no.1 subject to
further approval of GOI for (a) alienation of land owned by Airport
Authority of India (for short "AAI") in favour of petitioner no.1 and
(b) formation of SPV for the project. The petitioners further submit
that petitioner no.1 was also called upon to return duplicate copy of
the letter dated 7.3.2019 duly signed by it, to respondent no.1 within
seven days thereby indicating its acceptance by petitioner no.1. The
petitioners further submit that by letter of petitioner no.1 dated
12.3.2019, petitioner no.1 informed respondent no.1 its acceptance of
the letter dated 7.3.2019 and returned a duly signed duplicate copy
of the letter dated 7.3.2019 along with it.
5. Petitioners submit that petitioner no.1 took various steps
for implementation of the project as required under the letter dated
7.3.2019 and respondent no.1 also acted in the direction of
implementation of the project. Petitioners submit that letter of
acceptance dated 7.3.2019 is a Letter of Award and it's acceptance by
petitioner no.1 has resulted into a concluded contract between the
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parties. Petitioners submit that execution of Concession Agreement
was the next step, as per letter dated 7.3.2019, towards
implementation of the project. But, respondent no.1 delayed
execution of the Concession Agreement compelling the petitioners to
file a petition being Writ Petition No.1343 of 2020 seeking directions
to respondent no.1 to complete its formal obligation of executing
Concession Agreement for the project. The petitioners submit that
notice was issued by this Court in the said Writ Petition vide its order
dated 11.3.2020 and according to the petitioners, copy of the notice
was served by them upon respondent no.1 on 11.3.2020 itself. The
petitioners submit that the notice that was issued in the Writ Petition
was for final disposal of the petition at the admission stage and
considering urgency of the matter, this Court had listed the petition
for final disposal on 18.3.2020. Meanwhile, as submitted by the
petitioners, respondent no.1 was also served with notice of Writ
Petition through Court bailiff on 16.3.2020 and when this case was
sub-judice, the petitioner no.1 received a letter dated 19.3.2020
informing it that pursuant to the directives received from the
Government of Maharashtra vide communication dated 16.3.2020
and in accordance with clause 2.16 of RFP, respondent no.1 annulled
the bidding process without award of contract. Being aggrieved by it,
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the petitioners are before this Court through this petition.
6. According to respondent no.1, this is not a case of any
concluded contract and no right whatsoever was vested in the
petitioners by issuance of letter dated 7.3.2019. Respondent no.1
submits that, by this letter, it only communicated its acceptance of the
revised bid for 14.49 % share in the gross revenue for the purpose of
further consideration of the revised offer submitted by the petitioner
no.1. It is further submitted by respondent no.1 that such acceptance
of bid was subject to approval of Government of India regarding
alienation of land owned by AAI in favour of petitioner no.1 and
formation of SPV between the petitioner no.1 and the answering
respondent. Respondent no.1 asserts that the letter dated 7.3.2019 is
only a bid acceptance communication and not a Letter of Award and
places its reliance upon clause 3.3.6 of the Request for Proposal.
7. The respondent no.1 further submits that copy of letter
dated 7.3.2019 was sent by it to the AAI for processing of approvals
stated therein. Ministry of Civil Aviation (for short "MoCA"),
Government of India (for short "GoI") vide its communication dated
20.8.2019, raised certain queries regarding present tender process
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following which a meeting was convened under the Chairmanship of
Secretary, MoCA, GoI at New Delhi on 30.8.2019. Respondent no.1
further submits that, in this meeting the Secretary, MOCA, GOI,
expressed dissatisfaction on the revenue share offered by petitioner
no.1 and questioned financial viability of the project considering the
present revenue being generated by the Nagpur Airport and thus, the
MoCA sought a detailed justification in the matter.
8. Respondent no.1 further submits that the observations of
MoCA were considered by the PMIC in its meeting held on
14.10.2019 and finding them to be correct, the PMIC decided to
cancel the tender process and re-tender the project. Respondent no.1
also submits that the MoCA, Government of India is a necessary party.
Respondent no.1 submits that the decision of the PMIC was
communicated to it by letter dated 16.3.2020. Respondent no.1 also
submits that even the audit report raised concerns about the financial
viability of the bid submitted by the petitioner. Respondent no.1
further submits that the bank guarantee which was issued by
petitioner no.1 towards the bid security was valid only till 30.4.2020
and the bank guarantee was not renewed thereafter by petitioner
no.1 thereby indicating that petitioner no.1 also accepted the decision
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to annul the tender process taken by respondent no.1 on the directive
of respondent no.2 and communicated to petitioner no.1 on
19.3.2020.
9. Respondent no.1 further submits that it has earned gross
profit of 49 Crores during the financial year 2018-19 and has
estimated gross profit of Rs.64 Crores (unaudited) during the
financial year 2019-20 and in its opinion, the offer of respondent no.1
at 14.49 % of gross revenue share is extremely low and financially
unviable, which would cause great loss to the public exchequer.
Respondent no.1 states that any up-gradation and modernization of
Airport should lead to increase in revenue for the Government from
the project or in other words the project should be financially viable
and that being not the case here, it has annulled the tender process
well within its rights and well in terms of the bidding documents and
that now it has opted for the fresh tender process in public interest,
wherein the financial model will be different from that of the present
tender process. It, thus, prays for dismissal of the petition.
10. Respondent no.2 submits that the facts and circumstances
leading to the impugned decision have already been pointed out by
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the respondent no.1 and in view of them, respondent no.2 as well as
the AAI, one of the stake holders in respondent no.1, which only
implements on behalf of the State of Maharashtra a comprehensive
project for development of Nagpur Airport to world class standards
which goes by the acronym 'the MIHAN project', using the resources
of respondent no.2 and the AAI, do not wish to go ahead with the
present tender as their own financial bid received in the tender
process is extremely low. It further submits that the respondents and
the AAI have, therefore, decided to call for fresh tenders, possibly
with a different financial model which will generate better revenue
for the public exchequer.
Rival Submissions
11. Mr.A.M.Singhvi, learned Senior Advocate submits that the
letter of acceptance dated 7.3.2019 is actually a Letter of Award, if
one goes by it's tenor and terms and conditions of the RFP. He
further submits that the Letter of Award has been accepted by
petitioner in accordance with what is mentioned therein and the
bidding documents and therefore, what is now there between the
parties is a concluded contract which must lead to execution of
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Concession Agreement(for short "CA"). Learned Senior Advocate
further submits that the conditions mentioned in the Letter of Award
dated 7.3.2019 are the post bid conditions as they are neither stated
in the bidding documents nor are contemplated under the bidding
documents. He submits that these conditions are for respondent no.1
to fulfill. In any case, he further submits, they are only a formality as
the transfer of the Airport and its assets together with the land to
respondent no.1 has already taken place with the approval of GoI. He
further submits that the directive of respondent no.2 as mentioned in
the impugned letter, is misplaced as respondent no.2 has no role to
play in the matter. He further submits that the impugned
communication does not show that there is any decision as such by
respondent no.1 as the decision is taken by respondent no.2, which
has no role to play in the bidding process.
12. Mr.Singhvi, learned Senior Advocate further submits that
invocation of clause 2.16 for annulment of bidding process by
respondent no.1 is wrong as it could be resorted to only when
bidding process is on and not after it is over. He submits that with
the issuance of Letter of Award dated 7.3.2013 by respondent no.1,
and its acceptance by the petitioner no.1, marked completion of
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bidding process. He further submits that as there was a concluded
contract between the parties, what had remained to be done was only
a ministerial act of execution of CA. He further submits that
respondent no.2, by issuing a directive to the respondent no.1 in
annulling the bidding process, has gone against the decision of Union
Cabinet to subsequently transfer the Airport for further
"development". He further submits that subsequent conduct of parties
would show that letter dated 7.3.2019 was a Letter of Award infact
and in law. He further submits that now contractual obligations have
come into play, which could not be nullified by the acts of the parties
with just exceptions arising from compelling circumstances such as
threat to security or sovereignty of India or statutory provisions newly
made, which circumstances are admittedly absent here. He also
submits that principle of promissory estoppel would prevent the
respondent no.1 from back-tracking on it's promise.
13. Learned Senior Advocate for petitioners submits that the
justification now being given, which is based on so called audit report
and which harps on the string of financial viability, is factually
incorrect and misleading. He submits that this justification was not
part of impugned communication. He submits that as vested rights
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had been created in favour of petitioners, respondent no.1 should
have atleast called for response of petitioner no.1 regarding it's so-
called concerns over the profitability issue, but it did not, which was
against the principles of good governance and transparency.
14. Thus, Mr.Singhvi, learned Senior Advocate submits that
the whole action on the part of respondent in cancelling the
annulment process through the impugned communication is
arbitrary, unreasonable and violative of principles of natural justice
and it smacks of legal malice deserving it to be quashed and set aside
while issuing consequential directions.
15. Mr.M.G.Bhangde, learned Senior Advocate appearing for
respondent no.1 disagrees. He asserts that there was never any
concluded contract which came into being. He submits that the letter
dated 7.3.2019 is not a Letter of Award but only a letter which
indicated that bid was accepted subject to conditions, namely
approval of GoI for alienation of land to the petitioners no.1 and for
formation of SPV. He submits, by relying upon the bidding
documents, that the bidding process had not been completed and it
would have been completed only upon execution of the Concession
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Agreement and, therefore, there is nothing wrong in cancellation of
bidding process.
16. Mr.Bhangde, learned Senior Advocate for respondent no.1
further submits that circumstances of the case showed that efforts
were made by respondent no.1 to seek necessary approval from the
Government of India, but since certain queries were raised and some
observations were made by the Secretary, MoCA, the PMIC held a
meeting and on financial analysis, found that those observations were
right and therefore, it decided to cancel the bidding process and re-
tender the project and rightly so. He further submits that in the
whole process, the Transaction Advisor was consulted, the Audit
report was also considered and it was found that the revenue share
offered by petitioner no.1 was inadequate and any acceptance of it
would have led to loss to public exchequer and so the impugned
decision was taken. He submits that such a decision taken by
respondent no.1 was in the public interest inasmuch as there was
unanimity amongst members of PMIC about it. He further submits
that when the Nagpur Airport was earning good profit, existing model
of revenue share, in which the revenue share offered by petitioner
no.1 was not to the satisfaction of the Authorities, could not have
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been a profit making proposition.
17. Learned Senior Advocate for respondent no.1 further
submits that pre-requisites of a concluded contract is that it's
acceptance must be absolute and not conditional in accordance with
Section 7 of the Indian Contract Act and in the present case, letter
dated 7.3.2019 only informs to the petitioner no.1 decision of
respondent no.1 regarding acceptance of the bid in a conditional
manner and subject to the approvals regarding land transfer and
formation of SPV from the Government of India. He, therefore,
submits that the letter of acceptance dated 7.3.2019 is not a Letter of
Award, that it is subject to afore-said two conditions and further
conditions like execution of Concession Agreement and furnishing of
performance security within the time prescribed in the Concession
Agreement. He submits all these conditions were never fulfilled, no
Concession Agreement was executed within the stipulated time of
sixty days of the receipt of letter dated 7.3.2019 and there was no
furnishing of the performance security within the prescribed time and
as such, no vested rights are created in petitioner no.1. He submits
that there is neither any promise given nor any position altering as a
result of any promise, and so principle of promissory estoppel has no
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application here.
18. Mr.Bhangde, learned Senior Advocate further submits that
this case involves disputed questions of facts and also enforcement of
contractual obligations, if any. He further submits that there is also
no involvement of any public law element and there is no question of
legal malice. He maintains that appropriate remedy for the
petitioners would be to approach the Civil Court. He further submits
that the petitioner has accepted the conditions of the letter of
acceptance dated 7.3.2019, and so now cannot say that approvals of
GoI are not necessary, and if it says so, it would mean that petitioner
no.1 desires to accept only a part of it and wishes against rest of its
parts, which is not permissible in law, as acceptance must be absolute
and unqualified. Mr.Bhangde, learned Senior Advocate further
submits that there has been a long gap of about five years from the
initiation of the bidding process and now the situation has
substantially changed warranting annulment of the bidding process.
19. Mr.Bhangde, learned Senior Advocate further submits that
Bank guarantee towards bid security has not been extended after
30.4.2020 which itself shows that petitioners have accepted the
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impugned decision. He further submits that subsequent conduct of
the parties is not relevant, there being no Letter of Award issued. He
submits that SPV that is petitioner no.2, was not constituted in
accordance with bidding documents. He submits that there is no
arbitrariness and unreasonableness. On all these grounds, the
learned Senior Advocate urges that the petition be dismissed.
20. Ms Nivedita Mehta, learned A.G.P. supports the decision of
annulment of the bidding process as reflected in the impugned letter
dated 19.3.2020 and adopts the argument of Mr.M.G.Bhangde,
learned Senior Advocate.
Historical Facts
21. For effectively dealing with rival submissions, it would be
necessary to consider the historical facts from which has evolved the
present bidding process for development of the Airport at Nagpur.
These facts, about which there is no dispute, are summarised thus :
a) Nagpur Airport was established in the year
1917-18 and saw its being managed since then by different
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Authorities at different times starting with Royal Military
Force, then Indian Air Force and National Airport
Authority and finally AAI till the year 2009. Respondent
no.2 took the initiative to develop a "Multi Modal
International Passenger and Cargo Hub Airport" at Nagpur
("MIHAN Project") in co-ordination with MoCA, AAI and
Ministry of Defence and appointed Maharashtra Airport
Development Company (for short "MADC") as a nodal
agency for taking further steps to implement the MIHAN
project. Accordingly, a Memorandum of Understanding
(for short 'MoU'), dated 18.12.2006 was entered into
between the MoCA and AAI of one part and GoM
(respondent no.2) and MADC of the other part. By this
MoU, it was agreed between the parties that a Joint
Venture Company (for short "JVC") consisting of MADC
and AAI would be incorporated. It was agreed that MADC
would have 51% shareholding and AAI would have 49%
shareholding. The purpose of establishing a JVC was to
develop and run the Nagpur Airport. It was agreed that
Nagpur Airport would be transferred to the said JVC. It
was agreed between the parties that MoCA and AAI would
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take all necessary steps for expediting the transfer of
Airport to the JVC to be formed including transfer of land
and other assets. The relevant clauses of said MoU are re-
produced as below :
"8. The JVC should be formed expeditiously and best
efforts should be made to transfer the Airport to be the
JVC within 3 months from the date of the signing of the
MoU at an annual lease rent of Rs.1/- for a period of 30
years. This period can be extended on mutually agreed
terms and conditions."
"14.MoCA/AAI shall take necessary steps to transfer the
Nagpur Airport along with all its land and other assets to
the JVC within a period of 180 days from the date of
signing of this MOU."
b) Subsequently, the Union Cabinet gave its "in-
principle" approval for transfer of the Nagpur Airport to
the proposed JVC on 17.1.2008. It also permitted the
proposed JVC to involve a strategic partner on build,
operate and transfer basis for development of Nagpur
Airport to world-class standards. The Union Cabinet, in
the said approval, noted the fact that transfer of Nagpur
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Airport would bring about much needed development in
the Vidarbha region, which had been a long and cherished
demand of the people of the region.
c) In pursuance of the said MoU, a Joint Venture
Agreement ("JVA" for short) dated 22.2.2009, was
executed between the MADC and AAI. Clause 3.1 of the
JVA noted the fact that GoI had accepted approval of
transfer of Nagpur Airport to the JVC, proposed to be
formed for its development as MIHAN. The JVA led to
formation of the JVC, the MIL, the respondent no.1.
Respondent no.1, MIL was thus established with the
primary object of maintaining, operating and developing
Nagpur Airport as a part of MIHAN project. Respondent
no.1 took over the Nagpur Airport for its operation,
maintenance and further developments w.e.f. 7.8.2009.
d) Under the JVA, MADC and AAI agreed that
development of Nagpur Airport shall be undertaken after
the transfer of assets to the MIL. It was agreed, amongst
others, that AAI would contribute its existing land and
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MADC would bring in additional land. It was further
agreed that the first JVC would enter into a Concession
Agreement with the developer who would 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 the Request for Qualification ( for short "RFQ")
and Request for Proposal (for short "RFP") and
Concession Agreement already approved by the
Government of India. Relevant extract of clause (G) is
reproduced as below :
"G. Further development of the Nagpur airport will be
undertaken by the JVC after transfer of the assets (as
defined in the Annexures to this JVA) to the JVC
comprising MADC having 51% equity and AAI having 49%
equity. Both the partners will bring in their respective
assets to the JVC, with AAI contributing the existing land,
building and structure and MADC bringing in additional
land for development of the airport irrespective of the
non-cash assets brought in by the JV Partners, the equity
structure of the JVC will continue to be 49:51 of the
Partners to the JVC. The first JVC will enter into a
Concession Agreement with Developers who will be
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selected through competitive bidding for highest revenue
share as per standard methodology for development of
airports, using the standard bidding documents and
procedures, including RFQ, RFP and Concession
Agreements, already approved by the Government of
India. "
It was, thus, agreed that after transfer of assets to
respondent no.1, respondent no.1 would undertake further
development of Nagpur Airport, which would be done by it by
entering into a Concession Agreement (CA) with Developers, who will
be selected through competitive bidding for highest revenue share as
per standard methodology for development of Airports, using the
standard documents including RFQ, RFP and CA, already approved by
GoI.
Backdrop Facts of the Dispute
22. The above referred facts and circumstances indicate the
history of evolution of Airport at Nagpur to it's present stage and
aspirations of the Government and people of Maharashtra to develop
the Airport to world class standard. There are still a few more facts
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which are relevant, undisputed and helpful in our endeavour to
resolve the dispute. We have chosen to call them backdrop facts of
the dispute. They are recapitulated in the ensuing sub-paragraphs.
a) In pursuance of the MoU and JVA, AAI handed over its
assets pertaining to Nagpur Airport to MIL on 6.8.2009 and these
assets included the land belonging to AAI. Completion of handing
over of the assets was recorded in handing over agreement entitled
"Handing over of AAI's assets of Dr.Babasaheb Ambedkar
International Airport, Nagpur to MIHAN India, Joint Venture
Company" executed between the AAI and MIL on 6.8.2009. This
document recorded the fact of handing over of Nagpur Airport to MIL
for the purpose of its operation and management w.e.f. 7.8.2009.
b) In order to achieve the object of maintenance and
development of Nagpur Airport and as contemplated by MoU, JVA
and also the in-principle approval given by Union Cabinet and steps
taken for handing over of assets of Nagpur Airport to respondent
no.1, respondent no.1 decided to invite International competitive bids
for receipt of the highest revenue share in the award to be made of
the project for up-gradation, modernisation, operation and
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management of Nagpur Airport through public private partnership on
Design, Build, Finance, Operate and Transfer ("DBFOT" for short)
basis which was to be given to the selected bidder. Accordingly,
respondent no.1 initiated an open competitive two stage bidding
process for the said project. The first part was of qualification stage
and the second was of bid stage. The first part had the object of
shortlisting the bidders while the second part had the object of
selecting the bidder for the project. So, applications for the project
were invited by issuance of RFQ, dated 12.5.2016, as amended from
time to time. Through the RFQ, respondent no.1 informed all
interested parties that AAI had transferred all the assets including
existing and additional land, buildings and structures at the Airport to
the Authority i.e. MIL, respondent no.1. This fact was noted in clause
1.1.1 (a)(4.) of the RFQ. Relevant portion of this clause is extracted
as below :
"1.1.1 (a) Brief particulars on Nagpur Airport :
1.........
2.........
3..........
4.MIHAN India Limited (the "Authority") a joint venture
company formed by Maharashtra Airport Development
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Authority (MADC) and Airport Authority of India (AAI),
was formed in 2009. As per the joint venture agreement,
AAI had transferred all assets including existing and
additional land, buildings and structures to the Authority.
The current terminal facility include the building over an
area of 22,500 square metres and has a capacity to handle
400 arriving and 400 departing domestic passengers and
150 arriving and 150 departing international passengers
during peak hours, two conveyor belts each in departure,
the domestic arrival hall and in the international arrival
hall, two aerobridges, eighteen parking bays and a car park
to accommodate 600 vehicles. "
c) In response to RFQ, petitioner no.1 submitted its
application and was eventually shortlisted as a qualified bidder. A
qualified bidder, as per the structure of the bidding process, would
get the RFP, if it deposited stipulated amount. Petitioner no.1 on
being called upon by respondent no.1, deposited an amount of Rs.8
lacs (Rupees Eight Lacs only) towards procurement of the RFP
documents and same were issued to it. The RFP contained necessary
information, terms and conditions required to be followed by the
prospective bidders and various clauses governing the bidding
process. The RFP also included the bidding documents including
draft concession agreement, master plan and so on. It required the
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prospective bidders to submit bid security of Rs.16.85 Crores along
with their respective bids. The bid security was refundable within 60
days of the last date of submission of the bid, except in the case of a
successive bidder, whose bid security would be retained till the
selected bidder had provided a performance security in terms of the
Concession Agreement. The RFP contained a schedule of bidding
process and it stated that the Authority i.e. respondent no.1 would
endeavour to adhere to it, though in the present case, it was not
followed in it's letter and spirit.
d) In the background of the above referred facts and
circumstances, the present bidding process for up-gradation,
development, operations, maintenance of Nagpur Airport (the
project) as envisaged in the JVA (clause G) was initiated on DBFOT
basis and the bids were invited with a view to selecting a Developer
through competitive bidding for highest revenue share as per
standard methodology for development of Airports using standard
bidding documents and procedure including RFQ, RFP and
Concession Agreement already approved by the GoI.
e) The bidding process was thus initiated. It went on
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substantially as per the terms of RFQ and RFP. At the qualification
stage, scrutiny of the bidders was made and after due evaluation, six
bidders were shortlisted for participation in the second stage of
bidding process. Details from these bidders were called for, but only
five of the shortlisted bidders submitted those details which included
the petitioner no.1. Security clearance of these five shortlisted
bidders was obtained from the Ministry of Home Affairs and
thereafter the Government of Maharashtra granted approval for
issuance of RFP to all the five Companies which were found to be
qualified bidders.
f) The Government of Maharashtra, on 11.12.2017,
constituted an eleven member Project Monitoring and
Implementation Committee (PMIC) under the Chairmanship of
Chief Secretary, Government of Maharashtra for the purpose of
finalising the RFP documents consisting of RFQ, Concession
Agreement (CA) and schedules thereto. The PMIC approved these
documents and thereafter, they were issued to all the five qualified
bidders for submitting their quotations regarding the percentage of
revenue shares they intended to offer to respondent no.1, with date
of 28.9.2018 being the revised final due date for submission of the
27 wp1723.20.odt
quotation bids, which was the last extended date for submission of
such bids.
g) On 28.9.2018, the respondent no.1 received two bids.
One bidder offered 3.08% share of gross revenue while the other
bidder, which was petitioner no.1, offered 5.76 % share of gross
revenue and thus, petitioner no.1 emerged to be the highest bidder.
However, this offer of petitioner no.1 was considered to be
financially low and therefore, the issue was discussed in the Board
meeting of respondent no.1 held on 14.2.2019 which ultimately
decided to approach the PMIC for the possibility of negotiations
with petitioner no.1. Petitioner no.1 was called to the meeting
convened by PMIC on 5.3.2019 for negotiations. The PMIC
requested the petitioner no.1 to revise the offer in line with the
assumptions presented by the PMIC during the course of meeting.
Petitioner no.1 accepted the request and revised the offer by
enhancing the revenue share percentage from 5.76 % to 14.49 %.
Petitioner no.1 communicated such upward revision of it's offer to
respondent no.1 vide it's letter dated 6.3.2019. It also noted the
fact that though the upward revision made in the offer would
impact adversely it's financial projections for the project, it
28 wp1723.20.odt
enhanced it's offer in view of request made by the PMIC, the
importance of the project and also larger interest of the people of
Maharashtra and Nagpur. Accordingly, it made a request to
petitioner no.1 to issue Letter of Award (LoA) at the earliest.
h) The revised offer of 14.49 % gross revenue share given
by petitioner no.1 was accepted by respondent no.1. The
acceptance was communicated to petitioner no.1 by respondent
no.1 (1st party) vide it's letter dated 7.3.2019. The acceptance
letter made it clear that respondent no.1 had right to revoke the
acceptance and forfeit and appropriate the bid security as per the
terms of RFP in the event the petitioner no.1 (2 nd party) failed to
accept and comply with it's obligations as specified in the RFP and
this letter and in case of such revocation of acceptance and
consequent encashment of bid security, the petitioner no.1 would
have no claim whatsoever against respondent no.1 save and except
as expressly provided under the law. By this letter of acceptance,
respondent no.1 informed the petitioner no.1 that, in the event of
duplicate copy of letter of acceptance duly signed by it was not
received by respondent no.1 within seven days, it may revoke the
acceptance and consequences noted earlier would follow.
29 wp1723.20.odt
Petitioner no.1 by it's letter dated 12.3.2019 sent it's acceptance
without prejudice and pursuant to the provisions of RFP and
Concession Agreement. It also sent along with it a duplicate copy of
the letter dated 7.3.2019 duly signed by the authorised signatory of
petitioner no.1.
i) In terms of RFP, every bidder was required to submit bid
security along with it's bid. The petitioner no.1 had also submitted
it's bid security by furnishing a bank guarantee of the requisite
amount in favour of respondent no.1. After issuance of letter of
acceptance dated 7.3.2019, further events took place such as
extension of bid security from time to time, at the request of
respondent no.1, exchange of drafts of Concession Agreement (CA)
to be executed by petitioner no.1 with some correspondence
regarding corrections of some errors suggested by petitioner no.1,
giving of no objection and concurrence by respondent no.1 to
petitioner no.1 for incorporation of Company, GMR Nagpur
International Airport Limited as SPV to execute the Concession
Agreement and implement the project, giving of No Objection by
respondent no.1 to petitioner no.1 for use of office space and
address by the SPV to be formed and formation of SPV i.e.
30 wp1723.20.odt
petitioner no.2 and it's intimation being given by petitioner no.1 to
respondent no.1. Apart from these events, there were also some
events which took place at the end of respondent nos. 1 and 2
together with Ministry of Civil Aviation and PMIC. But, the
petitioner no.1 was not aware of them as it was not kept informed
by the respondents. The CA was never executed and ultimately, the
whole exercise carried out by respondent no.1 for about five years
saw it's unexpected end, which was bitter for petitioner no.1, in
issuance of impugned communication annulling the bidding process
without award of contract.
j) Meanwhile, the petitioner no.1 kept on requesting
respondent no.1 to complete the formality of execution of
Concession Agreement and let it start the work of implementation
of the project. The petitioner no.1 informed the respondent no.1
that since it had complied with all it's obligations under the RFP and
the letter of acceptance dated 7.3.2019, it was necessary that the
Concession Agreement was executed. It sent a letter dated
25.2.2020 in this regard to the respondent no.1. But there being no
response given by the respondent no.l, the petitioners filed a Writ
Petition bearing Writ Petition No.1343 of 2020 seeking direction to
31 wp1723.20.odt
respondent no.1 to execute the concession agreement. Notice in
this petition was issued on 11.3.2020. Private service of notice was
permitted. The petitioners filed an affidavit of service on
17.3.2020. However, on 19.3.2020, the petitioner received a
communication from the respondent no.1 annulling the bidding
process without award of contract. The communication noted that
annulment of the bidding process was done in pursuance of the
directives dated 16.3.2020 received from the Government of
Maharashtra.
23. Being aggrieved by the abrupt end of the bidding
process, the petitioners have filed the present petition seeking
quashing of the letter dated 19.3.2020 annulling the bidding
process and issuing a direction to the respondents to comply with
the RFP conditions in their letter.
Questions To Be Answered
24. Now, let us come back to the present dispute as put
before us by the parties in the light of their rival submissions. These
rival submissions point out certain questions which we must
32 wp1723.20.odt
answer. These questions could be broadly formulated as under :
a) Whether the letter of acceptance dated 7.3.2019 is a
Letter of Award ?
b) Whether the letter of acceptance dated 7.3.2019 is only
a communication that the bid is accepted, it being
conditional ?
c) Is there any concluded contract between the parties ?
d) Whether the action of respondent no.1 in annulling the
bidding process by it's letter dated 19.3.2020 (impugned
communication) is arbitrary, unreasonable and unfair ?
e) Whether the case involves disputed questions of fact
and an issue of enforcement of contractual obligations
simplicitor, a remedy for which would lie elsewhere ?
25. We now begin our quest to attempt answers to the
questions by organising them in two parts; first part would deal with
first three questions; and the second part with remaining two
questions.
33 wp1723.20.odt
Part I Questions
26. The letter dated 7.3.2019, which is at the centre of the
controversy here, addressed by respondent no.1 to petitioner no.1
makes a reference to certain relevant facts. It notes that pursuant to
the bid submission for the said project by petitioner no.1 on
28.9.2018 and completion of bid evaluation process, the bid
submitted by petitioner no.1 was observed to be the highest with the
revenue share quote of 5.76 % of the gross revenue which was,
following the discussions and negotiations held between the parties
on 5.3.2019, revised to revenue share quote of 14.49 %. It makes a
categorical statement that this revised Bid has been accepted by the
Competent Authority. It, however, puts a rider that such acceptance
is "subject to further approval of Government of India for (a)
alienation of land owned by the AAI in favour of the second party i.e.
petitioner no.1 and (b) formation of SPV for the Project ("Approval)"
and other terms and conditions mentioned in the letter. It further
mentions that in case approval is not received, this acceptance would
stand revoked without any legal or financial implications to either
parties. It further states that subject to written intimation of the
34 wp1723.20.odt
approval by the first party i.e. respondent no.1 to the second party i.e.
petitioner no.1, the latter shall complete various activities from the
date of such intimation including but not limited to the actions named
therein within the time period specified therein. The actions that
were supposed to be completed by petitioner no.1 were in respect of
execution of the Concession Agreement (CA) within sixty days of
receipt of written intimation of the approval from the respondent
no.1 and the petitioner no.1 furnishing a performance security within
the time prescribed in the CA. The letter of acceptance emphasises
that the first party or the respondent no.1 would have the right to
revoke this acceptance, forfeit and appropriate the bid security as per
the terms of RFP in the event the second party fails to accept and
comply with it's obligations as specified in the RFP and the letter
dated 7.3.2019. Lastly, it lays down that in the event the duplicate
copy of this letter of acceptance duly signed by the petitioner no.1 is
not received within 7 days, the respondent no.1 may revoke this
acceptance and the consequences stated in the letter would follow.
Now, the question is whether this letter of acceptance
dated 7.3.2019 is a Letter of Award, which it is, as argued by the
learned Senior Advocate for the petitioners or it is only a simple
35 wp1723.20.odt
communication made by the respondent no.1 to the petitioner that
the bid is accepted, which it is, as submitted by the learned Senior
Advocate for the respondent no.1 and also learned A.G.P. for
respondent no.2.
27. Learned Senior Advocate for the petitioners submits that
this letter of acceptance having been issued in terms of the RFP and
containing categorical statements regarding acceptance of revised bid
offered by the petitioner no.1 and calling upon the petitioner no.1 to
send a duly signed duplicate copy of letter within seven days towards
acceptance of what is stated in this letter is unmistakably a Letter of
Award (LoA) of contract of the project to the petitioner no.1. He
submits that with issuance of LoA, there is a concluded contract
which binds the parties. He places reliance upon the case of Har
Shankar and Others .vs. The Deputy Excise and Taxation
Commissioner and Others reported in (1975) 1 SCC 737.
28. Learned Senior Advocate for respondent no.1 would
submit that not only the conditions stated in the said letter but also
various clauses of the RFP would certainly show that by the said
letter, respondent no.1 has only communicated to the petitioner no.1
36 wp1723.20.odt
it's acceptance of bid subject to fulfillment of the conditions stated
therein and as those conditions were not fulfilled and even the part
that was required to be completed by the petitioner no.1 remained to
be fulfilled, the said letter could not be termed as the LoA. Learned
Senior Advocate for respondent no.1 further submits that this LoA
does not create any binding obligations so as to result into a
concluded contract between the parties, as the acceptance is not
conditional. He seeks support from Section 7 of the Indian Contract
Act, 1872. He points out that, in the said letter of acceptance, the
words "tendered work is awarded to you " are not mentioned and
therefore, it could not be regarded as LoA. He also submits that
having accepted the conditions of the said letter of acceptance, it was
necessary for the petitioner no.1 to have executed Concession
Agreement and furnished a performance security and same having
not done, no vested rights are created in petitioner no.1 and that it
cannot say that it would accept only some of the conditions of the
said letter and would reject the others. He places reliance upon the
cases of Rishi Kiran Logistics Private Limited vs. Board of Trustees of
Kandla Port Trust and Others reported in (2015) 13 SCC 233, Padia
Timber Company Private Limited .vs. Board of Trustees of
Visakhapatnam Port Trust, through its Secretary reported in (2021) 3
37 wp1723.20.odt
SCC 24 and PSA Mumbai Investments PTE. Limited vs. Board of
Trustees of the Jawaharlal Nehru Port Trust and another reported in
(2018) 10 SCC 525.
29. Parties here have not pointed out to us any prescribed
format for issuance of LoA. The RFP and other approved documents
do no include any such pre-determined form. Therefore, whether the
letter of acceptance dated 7.3.2019 is a Letter of Award or not would
have to be ascertained from its contents, clauses of RFP and intention
of the parties as gathered from the attending facts and circumstances.
Let us, therefore, consider the relevant clauses of the RFP, the
contents of the letter of acceptance and the relevant circumstances.
30. Clause 3.3.1 of the RFP makes it clear as to who would be
declared as the Selected Bidder. It reads as under :
"3.3 Selection of Bidder
3.3.1 : Subject to the provisions of Clause 2.16.1, the Bidder
whose 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
38 wp1723.20.odt
rejects or annuls all the Bids, it may, in its discretion, invite
all eligible Bidders to submit fresh Bids hereunder. "
31. In this case, there is no dispute about the fact that
petitioner no.1's bid was found to be the highest and therefore, the
petitioner no.1 was declared as the highest bidder on 28.9.2018
based on the revenue share, highest among all, offered by the
petitioner no.1. Such declaration of the petitioner no.1 made it "the
Selected Bidder" in accordance with the above referred clause.
32. In the disclaimer statement of RFP, there is a clause to the
effect "the bidder shall not claim for selection or appointment as the
Selected Bidder or Concessionaire upon participation unless the
Authority intimates to any bidder about its selection as such and the
decision of the Authority in all cases would be final and binding on
Bidder as the case may be. " Here, the Authority is "respondent
no.1".
33. Thus, as per clause 3.3.1 r/w. said disclaimer part of the
RFP, the petitioner no.1 became the Selected Bidder or
Concessionaire. Clause 3.3.5 reveals what follows after appointment
39 wp1723.20.odt
of a bidder as the Selected Bidder. For the sake of convenience, it is
re-produced as below :
" 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 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 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 the Selected Bidder to
acknowledge the LOA or submission of Performance
Security as the case may be, and the next eligible Bidder
may be considered. "
34. It would be clear from the above referred clause that after
appointing a bidder as Selected Bidder what would follow is a "Letter
40 wp1723.20.odt
of Award (LOA)" to be issued in duplicate by the Authority i.e.
respondent no.1 to the selected bidder i.e. petitioner no.1. The
words "Letter of Award ("the LOA") shall be issued" are significant.
They do not leave any further choice to the Authority or respondent
no.1 to deviate from it's obligation to issue the Letter of Award in
duplicate. However, there is an exception to this course which is
otherwise mandated to be followed by respondent no.1 under clause
3.3.5. The exception is to be found in clause 2.6.3. This clause being
relevant is re-produced as below :
"2.6 Verification and Disqualification
2.6.1........
2.6.2.........
2.6.3. In case it is found during the evaluation or at any
time before signing of the Concession Agreementor after
its execution and during the period of subsistence thereof,
including the Concession thereby granted by the
Authority, that one or more of the pre-qualification
conditions have not been met by the Bidder, or the Bidder
has made material misrepresentation or has given any
materially incorrect or false information, the Bidder shall
be disqualified forthwith if not yet appointed as the
Concessionaire either by issue of the LOA or entering into
of the Concession Agreement, and if the Selected Bidder
41 wp1723.20.odt
has already been issued the LOA or has entered into the
Concession Agreement, as the case may be, the same
shall, notwithstanding anything to the contrary contained
therein or in this RFP, be liable to be terminated, by a
communication in writing by the Authority to the Selected
Bidder or the Concessionaire, as the case may be, without
the Authority being liable in any manner whatsoever to
the Selected Bidder or Concessionaire. In such an event,
the Authority shall be entitled to forfeit and appropriate
the Bid Security or Performance Security, as the case may
be, as Damages, without prejudice to any other right or
remedy that may be available to the Authority under the
Bidding Documents and/or the Concession Agreement, or
otherwise."
35. A bare reading of the above referred clause would show
that the power which it confers upon the Authority or the respondent
no.1 is about disqualification of the bidder if not appointed as a
Concessionaire either by issuance of Letter of Award or by entering
into the Concession Agreement or termination of the Letter of Award
or Concession Agreement as the case may be, upon happening of the
contingencies stated therein. These contingencies are :
a) the bidder not meeting any of the pre-qualification
conditions.
42 wp1723.20.odt
b) the bidder making material misrepresentations or
giving materially incorrect or false information.
If any of these contingencies are met, the Bidder shall be
disqualified forthwith if not yet appointed as a Concessionaire either
by issuance of LoA or entering into CA or the LoA or CA itself would
be liable to be terminated, in case the Selected Bidder has been
issued the LoA or has executed the CA.
36. In the present case, however, the contingencies mentioned
in clause 2.6.3 never arose and therefore, there was no occasion for
the respondent no.1 to have invoked it's power thereunder. That
being so, what was left for respondent no.1 to do was to proceed
further as per clause 3.3.5. It then became necessary for the
respondent no.1 to have issued LoA, in duplicate, in favour of
petitioner no.1 and thereby call upon the petitioner no.1 to sign and
return the duplicate copy of LoA in acknowledgement thereof, within
seven days of it's receipt, which in fact the respondent no.1 did.
37. Clause 3.3.6 lays down that after acknowledgement of the
LoA as required under clause 3.3.5 by the Selected Bidder, the
43 wp1723.20.odt
respondent no.1 shall cause the Concessionaire to execute the
Concession Agreement within the period prescribed in Clause 1.3,
which is sixty days of the LoA. For the sake of convenience, this
clause is re-produced thus :
"Clause 3.3.6. After acknowledgement of the LOA as
aforesaid by the Selected Bidder, it shall cause the
Concessionaire to execute the Concession Agreement
within the period prescribed in Clause 1.3. The Selected
Bidder shall not be entitled to seek any deviation,
modification or amendment in the Concession
Agreement."
38. It is seen from the letter dated 7.3.2019 that it not only
acknowledges the petitioner no.1 to be the Selected Bidder as
defined under clause 3.3.1, but also appoints the petitioner as
Concessionaire in terms of clause 2.6.3 which says that a Selected
Bidder would be a Concessionaire upon issuance of the LoA or
entering into of the Concession Agreement. It is further seen that
this letter of acceptance dated 7.3.2019 has all the attributes, barring
the GoI approval part, of a Letter of Award, which are detailed in
clauses 3.3.5 and 3.3.6. It requires that it's duplicate copy duly
44 wp1723.20.odt
signed by petitioner no.1 be returned to the respondent no.1 within
seven days in acknowledgement of it's acceptance by petitioner no.1
and any failure on the part of petitioner no.1, would lead to
respondent no.1 revoking the acceptance with the consequence of
forefeiture and encashment of bid security and the Selected bidder
having no claim as regards such forfeiture against the respondent
no.1 stated therein. It also directs the petitioner no.1 to execute the
Concession Agreement within sixty days of receipt of written
intimation of the approval from respondent no.1 and further directs
the petitioner no.1 to furnish the performance security within the
time prescribed in the CA. Here a deviation regarding the time
stipulated for execution of the CA is seen. As per clause 1.3, Item
No.11, CA is required to be executed within 60 days of the award of
LoA while, in this acceptance, period of 60 days is to be reckoned
from the date of written approval from respondent no.1. The
approval spoken about is of the GoI as regards alienation of land
owned by the AAI in favour of the petitioner no.1 and formation of
SPV for the project. This deviation about ascertainment of time of
sixty days would not be significant, if it is seen that putting of
condition of GoI approval itself was impermissible, and in any case
did not prevent the contractual relationship from coming into
45 wp1723.20.odt
existence, which we have found to be so in next paragraphs.
39. Now, if we consider the terms of the RFP, we would find
that in the entire RFP it has not been stated anywhere that
acceptance of bid and issuance of LoA would be subject to further
approval of Government of India as regards land alienation and SPV
formation. But, in the letter dated 7.3.2019, the acceptance though
given, has been made subject to such approval of GOI. This is a
departure from clause 3.3.5 of the RFP. This departure, would not, in
our opinion, be sufficient to say that the letter dated 7.3.2019 has not
been issued in terms of clause 3.3.5 as, except for the said deviation,
every parameter of the LoA prescribed in clause 3.3.5 read with
clause 3.3.6 of the RFP is seen to be met in it. The condition of GoI
approval, being not part of the RFQ or the RFP, is a post bid
condition, as rightly submitted by the learned Senior Advocate for
petitioners, and therefore, would not prevent the birth of a contract
from taking place on the petitioner no.1 signing a duplicate copy of
the said letter and returning it to respondent no.1 within stipulated
time in terms of clause 3.3.5 and what is stated in the said letter.
The petitioner no.1, there is no dispute, signed the duplicate copy of
the said letter acknowledging it's acceptance in toto and returned it
46 wp1723.20.odt
to petitioner no.1 within stipulated time of seven days. The
acceptance of letter dated 7.3.2019 here by the petitioner no.1 has
been absolute and unqualified, and it has turned the promise held
out by respondent no.1 in the letter dated 7.3.2019, the promise to
award the project with condition of GoI approval, into a binding
contract in terms of Section 7 of the Contract Act. It is the LoA which
would create binding obligations for respective parties and which
would conclude a contract. When acceptance of bid is communicated
without mention of Letter of Award and there is a dispute about what
it means, the Court is required to examine it's contents in the light of
the relevant clauses of the bidding documents and intention of the
parties discernible from their conduct and attending facts and
circumstances of the case. As said earlier, the letter dated 7.3.2019
fits into all the parameters and requirements of clause 3.3.5 read
with clause 3.3.6, except the post bid condition of GoI approval, not
part of the RFQ and RFP, which was really meant for, not the
petitioners, but the respondent no.1. A post bid condition like the
contract being subject to further approval of GoI regarding land
alienation and SPV formation, without saying anything about it's
rationale and permissibility, when accepted by the Selected Bidder
and Concessionaire as it is and without any qualification, would
47 wp1723.20.odt
result into a binding contract between the parties. Thereafter, the
burden to obtain approval from GoI would be on the party which has
put such a condition and in case approval is refused, at the most, it
would enable the party stipulating the condition to save itself from
the ignominy of paying damages. But, a post-bid condition like the
present one, would not stop the contract from coming alive. At the
most, it may affect the excutability and workability of a contract, and
that too, when the approval is expressly refused, and not otherwise.
40. As regards the approval of GoI mentioned in the letter
dated 7.3.2019, we must say, there is force in the argument of the
learned Senior Advocate for the petitioners that the approval of GoI
appears to be a formality considering the background facts discussed
earlier. We must say it here that petitioners have not said that
approval is not necessary. What they have said is that it is only a
formality. The MoU dated 18.12.2008 shows that it was agreed
between MoCU and AAI of one part and GoM and MADC of other
part to transfer Nagpur Airport to the JVC to be formed, which is now
Respondent no.1 and that parties would take all necessary steps to
transfer Nagpur Airport along with all it's land and other assets to the
JVC in 180 days of the date of the MoU. This was followed by Union
48 wp1723.20.odt
Cabinet giving it's approval for transfer of the Nagpur Airport to the
proposed JVC on 17.1.2008. This approval also permitted the
proposed JVC to involve a strategic partner on build, operate and
transfer basis for development of Nagpur Airport to world class
standards. The JVA dated 22.2.2009, by virtue of which respondent
no.1 was constituted, made it clear that further development of
Nagpur Airport would be undertaken by the respondent no.1 after all
the assets of the Airport were transferred to it and such development
of the Airport would be through a Developer with whom the
respondent no.1 would enter into a Concession Agreement and who
would 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
RFQ, RFP and CA, already approved by the GoI. On 6.8.2009, the
assets of the AAI pertaining to the Nagpur Airport were also handed
over. On this backdrop, it would be gee-whiz naivete to say that
seeking of approval regarding land alienation was a serious business
for respondent no.1 to do. Ordinarily, it would be a matter of course,
except for some extra-ordinary reasons interjecting between
respondent no.1 and the petitioners, which was never the case here
as there was no letter sent by respondent no.1 to GoI seeking latter's
49 wp1723.20.odt
formal approval and admittedly, there was no refusal of approval
whatsoever by the respondent no.1.
41. Coming back to the manner in which the bid process was
conducted, we find it worthy to note that respondent no.1 had
declared that the bidding process would be governed by the
approved documents including the RFQ and the RFP; that the bidders
had, believing in this declaration, submitted their bids and, therefore,
reasonable expectation of any bidder including the petitioner no.1
would be that these documents were treated by the party issuing the
documents with sanctity that they deserved. These documents laying
down a frame-work of rules of completion of bidding process
obligated not only the bidders but also the employer of the contract
who invited offers from the tenderers, to abide by the rules of the
game. The rules were framed by the employer and accepted by the
bidders and the sanctity of the rules and morality of law required the
parties, especially the State of which respondent no.1 is an
instrumentality, to adhere to the rules, and not deviate from them,
without any reason of extra-ordinary nature like some unforseen
event not within the power and control of parties overtaking the
bidding process. This is a principle of law which applies with greater
50 wp1723.20.odt
force to the State which is a willing party to a contract. Observations
of Hon'ble Apex Court, as they appear in paras 22 and 24 of it's
Judgment in Kumari Shrilekhavidyarthi vs. State of U.P., (1991) 1
SCC 212 would elucidate the point and they are extracted as below :
" The impact of every State action is also on public interest.
It is really the nature of its personality as State which is
significant and must characterize all its actions, in whatever
field, and not the nature of function, contractual or
otherwise which is decisive of the nature of scrutiny
permitted for examining the validity of its act. The
requirement of Article 14 being the duty to act fairly, justly
and reasonably, there is nothing which militates against the
concept of requiring the State always to so act, even in
contractual matters."
Such obligation of the State flows from the very nature of it's
Constitutional power and it's duty to act fairly under Article 14.
After all, the Government is nevertheless the Government; and it's
every action has a public element in it and the legality and morality
of it's Constitutional power would not let it go astray from it's
Constitutional duty [see Kasturilal Lakshmi Reddy .vs. State of J & K
(1980) 4 SCC 1, (para 11) and M/s. Motilal Padampat Sugar Mills
51 wp1723.20.odt
Co. Ltd. vs. State of Uttar Pradesh and Others reported in (1979) 2
SCC 409, (para 24)]
42. Clause 3.3.5 of the RFP did not contain any condition
that the Letter of Award shall be issued subject to further approval of
the Government of India regarding land alienation and formation of
SPV and yet this condition was inserted in the letter dated 7.3.2019.
But, this condition, a bare reading of it would suffice, was of such a
nature as had no bearing upon performance by the Selected Bidder
and the Concessionaire of the obligations resulting from acceptance
of it's bid in terms of clause 3.3.5. We may reiterate here that letter
dated 7.3.2019 has all the characteristics of LoA as envisaged under
the clauses 3.3.5, 3.3.1 and 3.3.6 of the RFP. These characteristics
were in the nature of the highest bidder being appointed as the
Selected Bidder, the requirement of clause 3.3.5 coming into
operation upon such selection, communication of acceptance of bid
in duplicate via sending a letter, which is of the date 7.3.2019 here
thereby requiring the petitioner no.1 to return the duly signed
duplicate copy of the letter within seven days of it's receipt, calling
upon the petitioner no.1 to execute the Concession Agreement
within the stipulated period and also to furnish performance security
52 wp1723.20.odt
within the time prescribed in the concession agreement. All these
requirements of clause 3.3.5 r/w. Clauses 3.3.1 and 3.3.6 were met
in the present case except for two deviations discussed earlier. The
first deviation is of the GoI approval and the second of the reckoning
of the time of sixty days from the intimation about GoI approval,
instead of from the date of issuance of the letter. But, this departure
from the RFP, going by the principles of law referred to earlier, was
not permissible and was unreasonable, there being no extra-ordinary
reason to justify it, on the touchstone of Article 14. Even on their
own merits, these deviations at the most cast a duty on respondent
no.1 to obtain the approval of the GoI at the earliest, which was
almost a formality, and in their worst consequence, the consequence
of rejection of the approval, the fall out would have been that of
inexecutability of the contract for reasons attributable to the GoI and
not the petitioner no.1, though that possibility never saw the light of
the day, as there was no refusal of approval anytime by the GoI. But,
for that matter, there is no gain saying that by issuing the letter
dated 7.3.2019, no conclusion of contract visited the parties as an
inevitable consequence of it.
43. Under Section 7 of the Indian Contract Act, 1872, in order
53 wp1723.20.odt
to convert a proposal into a promise, acceptance must be absolute
and unqualified and it should be expressed in some usual and
reasonable manner and if manner of expression of acceptance is
prescribed in the proposal, the acceptance has to be made in the
prescribed manner. In this case, the manner of acceptance of
proposal was prescribed in clause 3.3.5 of the RFP and it ought to
have been followed by the respondent no.1. But, the proposal of
petitioner no.1 was accepted by respondent no.1 subject to the
further approval of the GoI. This acceptance was nevertheless
substantially in the manner prescribed in clause 3.3.5, except for
insertion of condition of GoI approval. Even this condition was
accepted by petitioner no.1 in an unqualified manner when it
signified it's such unconditional acceptance by it's signing the
duplicate copy of the letter and returning it to the respondent no.1
within seven days. This act of the petitioner no.1 fulfilled the
requirements of Section 7 of the Contract Act.
The discussion thus far made has impelled us to find that
the letter dated 7.3.2019 is nothing but a Letter of Award in terms of
clause 3.3.5 of the RFP.
54 wp1723.20.odt
44. At this juncture, we would like to elaborate upon the
aspect of the condition of the GoI approval, though in some measure
it may sound to be an exercise in repetition of what we have said
earlier. But, that seems necessary, in our considered view. The
condition of further approval of the GOI had no bearing whatsoever
upon the performance of obligations of the Selected Bidder and
Concessionaire like the petitioner no.1 so appointed by the letter in
question and the burden was only upon the respondent no.1 to
obtain the requisite approval. But, pending such approvals, could it
be said that no binding contractual relations flowing from a
concluded contract between the parties came into being ? After all,
there is a difference in forging of a contact between the parties and
it's execution being frustrated by something not within the control of
the parties to the contract. It would then mean that if the approval is
obtained, the contract is on and the Concessionaire has to take
further steps which in this case would be such as furnishing of
performance security, execution of the Concession Agreement and
actual execution of the awarded contract in the manner prescribed
under the terms and conditions of the Concession Agreement. If the
approval is rejected, it would only lead to frustration of the contract
with attendant consequences. But, here, in this case, it is an
55 wp1723.20.odt
established fact that not a single letter was sent by the respondent to
the GOI seeking it's specific approval regarding land alienation. An
explanation has been given in this regard that considering the
observations made in the meeting subsequently held on 30.8.2019,
chaired by the Secretary of MoCA at New Delhi, such approval was
not sought. In fact, after issuance of the letter dated 7.3.2019, which
was done upon due evaluation of the offer of highest revenue share
by the petitioner no.1 from out of two bidders; due consideration of
implications of the offer; and due deliberations over the offer, made
in the meeting of the PMIC held on 5.3.2019, there was no reason for
questioning the financial viability of the project, as was done in the
meeting of the PMIC held on 30.8.2019, which as a fact has come out
for the first time in the reply of respondent no.1. We wonder if this
was done as an after thought or an excuse to not abide by the rules of
the game. Whatever be the intent, giving of reason of financial
impracticability of the offer after it's acceptance, was something
which was external to the whole bidding process rendering it
meaningless and aimless thereby raising a question why on earth it
was initiated at all and taken to it's logical end in issuance of letter
accepting the highest bid, substantially in terms of clause 3.3.5 of the
RFP ? But, the fact remains that the bidding process was initiated as
56 wp1723.20.odt
per the RFQ and RFP and was concluded by issuance of the letter
dated 7.3.2019 substantially in terms of the RFP. The condition of
the GoI approval was a post-bid condition, not a part of the bidding
documents and was almost a formality in view of earlier discussed
background facts, and in any case, it having been accepted as it is by
the petitioner no.1, it was to be fulfilled only by the respondent no.1
and not by the petitioner no.1, all of which did not prevent the
binding contract from coming into existence. In such a case, we are
of the view that it does not lie in the mouth of respondent no.1 to say
that the letter of acceptance dated 7.3.2019 is conditional and
qualified and therefore, does not result into any concluded contract
between the parties. If it is conditional, it is so only from the view
point of the respondent no.1 and not the petitioners. But even this
argument pales into obscurity once we consider the unqualified
acceptance given by the petitioner to the said additional post-bid
condition.
45. Apart from what is stated above, letter dated 7.3.2019
leaves no choice with the petitioner no.1 to reject it without suffering
the consequence of forfeiture and appropriation of the bid security
amount furnished by the petitioner no.l with no claim available
57 wp1723.20.odt
against the respondent no.1 as regards such forfeiture. This is really
a Hobson's choice; a choice to show on face but a compulsion
beneath the face. This condition of letter dated 7.3.2019 was in
accordance of clause 3.3.5, and it being what it was, the petitioner
no.1 accepted as it was. Now, can the respondent no.1 justifiably say
that letter dated 7.3.2019 was a harmless communication only
informing petitioner no.1 that it's bid was accepted and nothing
more? The answer is no, given the consequences that are threatened
to visit petitioner no.1, if it rejected the acceptance. It, therefore,
does not matter that the letter dated 7.3.2019 does not contain the
sentence "Letter of Award is issued to you". It is the intention of the
parties which, together with spirit and substance of an act, decides
the nature of an act. The forfeiture clause together with the contents
of the said letter and attending circumstances clearly points out that
the intention of the parties was to treat the said letter as Letter of
Award and they proceeded further considering it to be so,
irrespective of it's nomenclature and some play of words in it.
46. We, therefore, find that the letter of acceptance dated
7.3.2019 is indeed a Letter of Award and not a letter merely
communicating that the bid is accepted and this Letter of Award has
58 wp1723.20.odt
resulted into a concluded contract between the parties.
47. The conclusion so reached by us is further fortified by the
subsequent conduct of the parties showing the real intention of the
parties in issuance and acceptance of the letter dated 7.3.2019. We
have made an elaborate discussion of such conduct of the parties in
the later paragraphs of this judgment. Suffice it to say it here that
respondent no.1, by giving it's concurrence to the petitioner no.1 to
incorporate petitioner no.2 as SPV for execution of the CA and
implementation of the project, by exchanging draft CA and
requesting the petitioner no.1 to extend the Bank Guarantee from
time to time and so on, and petitioner no.1 positively responding to
same, has made it's intention loud and clear that the letter dated
7.3.2019 is not a letter which merely informs the petitioner no.1 that
it's bid has been accepted and nothing more. In fact, this letter, as
guaged from the conduct of the parties post it's issuance, accentuates
the intention of the respondent no.1 rather than slighting it, that the
respondent no.1 as well as the petitioner always meant, understood
and acted upon it like a Letter of Award resulting into a concluded
contract between the parties.
59 wp1723.20.odt
48. Now, let us turn to the cases relied upon by respondents
to support their case that the letter dated 7.3.2019 is not a Letter of
Award. They are :
(I) Rishi Kiran Logistics Private Ltd. vs. Board of Trustees
Kandla Port Trust and Others, (2015) 13 SCC 233.
(II) Padia Tumber Company Private Limited .vs. Board of
Trustees of Vishakhapatnam Port Trust, (2021) 3 SCC 24.
(III) PSA Mumbai Investment PTE. Ltd. vs. Board of
Trustees of the Jawaharlal Nehru Port Trust and another,
(2018) 10 SCC 525.
49. In the case of Rishi Kiran Logistics Private Ltd. (supra), the
Hon'ble Supreme Court has held in the facts of that case that there
was no concluded contract having come into existence as a matter of
fact and even if it was assumed for the sake of argument that there
was indeed such a contract, mere termination thereof could not be
considered as arbitrary, as a concluded contract when terminated in
a bona fide manner may amount to breach of contract and certain
consequences may follow thereafter under the Law of Contract, and
then the remedy for breach thereof would not be by invoking Writ
jurisdiction but by approaching a Civil Court.
60 wp1723.20.odt
50. The facts in the case of Rishi Kiran Logistics Private Ltd.
would, however, show that they are different from the facts of the
present case. In that case, the tenders were invited by Kandla Port
Trust for allotting it's plots on leasehold basis for a period of 30 years
for the purpose of enabling the allottees to put up construction of
liquid storage tanks. After considering the bids of various tenderers,
the letters of intent were issued to various successful bidders. The
letter of intent, however, mentioned that "formal letter" will be
issued after receipt of CRZ clearance. It was in the context of these
facts, the Hon'ble Apex Court held that the letter of intent which said
that the final allotment would be made later by issuing a "formal
letter" after obtaining of CRZ and other clearances, only displayed an
intention to enter into a contract at a later stage. In the present case,
there was no rider stated in the letter dated 7.3.2019 that "final letter
of acceptance or award of contract would be issued after obtaining
the approval from the GOI." Therefore, to this extent, in our
respectful submission, no assistance could be sought by the
respondents from the said case of Rishi Kiran Logistics Private Ltd.
But, even in this case, the Hon'ble Supreme Court has held that
whenever a case involves public law element, the Writ jurisdiction of
the High Court would be available.
61 wp1723.20.odt
51. In the case of Padia Timber Company Private Limited
(supra), it was held on facts that there being a conditional acceptance
of offer, there was no concluded contract between the parties, when
the condition was not accepted by any of the parties. The facts of this
case disclose that the contract that was to be awarded was for supply
of the sleepers to the Port Trust and offer of the lowest bidder therein
was accepted by the Port Trust subject to the condition that the
bidder would have to make delivery of the wooden sleepers at the
place of the Port Trust by transporting them by road at his cost and
final inspection would be made at the general store of the Port Trust.
These conditions were not as per the bidders offer and were not
accepted by the bidder. In this context of the facts, it was held that
the acceptance of offer of the bidder was conditional and the
condition not having been accepted by the bidder, no concluded
contract between the parties flowed from the conditional acceptance
by the Port Trust. We have already noted the facts of the present
case which are different from the said facts of Padia Timber
Company Private Limited and therefore, in our humble opinion, the
case of Padia Timber Company Private Limited would render no
assistance to the case of the respondents.
62 wp1723.20.odt
52. The respondents placing heavy reliance upon the case of
PSA Mumbai Investments PTE. Limited (supra), have maintained that
ratio of this case squarely applies to this case. In the said case, it is
held that under Section 7 of the Indian Contract Act, 1872, a
proposal would not be converted into promise unless the acceptance
is absolute and unqualified. It is further held on facts of the case that
there was no absolute and unqualified acceptance by the Letter of
Award. Learned Senior Advocate for respondent nos. 1 and 2 has
submitted that the decision in the case of PSA Mumbai Investments
PTE. Limited clinches the issue involved here in favour of the
respondents. He has submitted that the RFP documents which were
considered in the case of PSA Mumbai Investments PTE. Limited
contained almost similar clauses as the RFP which governs the
present case and the Hon'ble Supreme Court, after considering
various clauses thereof, has found that the bidding process was not
concluded therein. It would be, therefore, necessary for us to
consider the facts of the case of PSA Mumbai Investments PTE.
Limited (supra).
53. The facts of the afore-stated case would show that there
63 wp1723.20.odt
was a Consortium of appellant and respondent no.2 which had
submitted it's bid for award of contract of Fourth Container Terminal
Project on DBFOT basis at Jawaharlal Nehru Port and since it's offer
was found to be most favourable from the financial view point, Letter
of Award dated 26.9.2011 was issued by respondent no.1, the
Jawaharlal Nehru Port, to the Consortium of appellant no.1 and
respondent no.2. Some problem as to exact stamp duty between the
parties arose as a result of which there was some delay in signing the
agreement document. The facts further show that respondent no.2
therein opted out of the bid process and on being informed about the
same, respondent no.1 therein, by letter dated 30.4.2012, indicated
to the appellant therein that the appellant would be left as the sole
bidder and, therefore, it should be ready to form Special Purpose
Vehicle for entering into and execute the contract in the form of Draft
Concession Agreement. However, this letter was made conditional
upon the Ministry of Shipping according it's approval. The appellant
therein anticipated that such approval would be given and therefore,
by letter dated 30.5.2012, the appellant therein informed the
respondent no.1 therein that it had, in fact, incorporated another
Special Purpose Vehicle to execute and perform the Concession
Agreement. However, as things turned out to be, the Ministry of
64 wp1723.20.odt
Shipping refused to accord it's approval and the appellant was
informed by letter dated 30.8.2012 that the Ministry of Shipping had
refused to grant it's approval regarding change of constitution of the
bidder as from a Consortium to a single entity. Thereafter, on
18.9.2012, the bid security given by the consortium was encashed by
respondent no.1 therein for recovery of which, a suit was filed by the
appellant therein. At that stage, the respondent no.1, by show cause
notice dated 12.9.2012, called upon the Consortium to perform it's
part of bid as originally agreed to and since this was not done, by the
letter dated 16.10.2012, the Letter of Award that was accorded and
acknowledged by the appellant therein on 29.6.2011 was
"withdrawn" by respondent no.1. Consequent to this, respondent
no.1 therein also claimed a sum of Rs.446.28 Crores by way of
damages against the Consortium and sent an arbitration notice
stating that, according to it, Clause 19 of the draft Concession
Agreement being an arbitration clause governed the parties and so
the dispute would be resolved by resorting to it. Respondent no.1
therein also indicated the name of the arbitrator that it intended to
appoint. The appellant therein did not agree that there was any
scope for arbitration, there being no agreement having been entered
into between the parties. However, by taking recourse to the
65 wp1723.20.odt
arbitration clause in the Draft Concession Agreement, the respondent
no.1 therein declared that the arbitrator appointed by it would be the
sole arbitrator to ad-judicate upon the dispute between the parties.
The arbitrator agreed with the contention of the appellant therein
and against his decision, the respondent no.1 therein filed an appeal
before the High Court under Section 37 of the Arbitration and
Conciliation Act, 1996 ,wherein the High Court held that there was a
concluded contract between the parties as the Letter of Award had
been accepted by the appellant therein and since the arbitration
clause formed part of the bid documents between the parties, the
arbitration clause governed the dispute between the parties.
54. Against this decision of the High Court, the appellant
came before the Hon'ble Supreme Court and the Hon'ble Supreme
Court, against the background of the above referred facts and
circumstances, held that the acceptance being not absolute and
unqualified, there was no Letter of Award resulting into a concluded
contract between the parties. It also held that the RFP only showed
that there was a bid process which was going on between the parties
and that the conditional acceptance by itself was not a contract
concluded between the parties, that the bid process would conclude
66 wp1723.20.odt
upon the Draft Concession Agreement finally becoming an
agreement between the respondent no.1 and the Special Purpose
Vehicle, and that the bid process might be annulled without giving
any reason whatsoever by the respondent no.1, as it had not been
concluded therein. It was in this context that it was found that there
was neither any concluded contract between the parties nor any
Concession Agreement having been executed between the parties
which would give rise to an enforceable arbitration clause.
55. In the present case, we have already found for the reasons
stated earlier that the letter dated 7.3.2019 is a Letter of Award,
which has been issued after acceptance of the bid of the petitioner
no.1 offering highest revenue share in terms of clause 3.3.5 r/w.
Clauses 3.3.1 and 3.3.6 of the RFP together with such condition as
would have no bearing upon the performance of any obligations
under the contract by the petitioner. We have also found that
intention of the parties gathered from their subsequent conduct was
that the said letter was intended to be and was in fact treated to be
the Letter of Award by the parties and that it resulted into a binding
contract between the parties, though the executability of the contract
as such depended on respondent no.1 fulfilling it's obligation to
67 wp1723.20.odt
obtain the necessary approval of the GoI. Such being not the facts of
PSA Mumbai Investments PTE. Ltd (supra), in our respectful
submissions, it would have no application to the facts of this case.
Then, in PSA Mumbai Investments PTE. Limited (supra), as the
letter of acceptance had not become the Letter of Award, the bidding
process was alive and therefore, it was held that right uptil the stage
of entering into the agreement, the bid process may be annulled
without giving any reason. In the present case, the bidding process
was terminated on reaching the stage of issuance of Letter of Award
and therefore, what was required to be done thereafter was in the
nature of further steps given in clause 3.3.6 of the RFP. These facts
also distinguish themselves from the facts involved in PSA Mumbai
Investments PTE. Limited.
56. Now, let us consider what assistance the two cases namely
the case of Har Shankar and Others and the case of Proactive In and
Out Advertising Pvt. Ltd. vs. Pune Mahanagar Parivahan
Mahamandal Ltd. reported in 2018 (6) Mh.L.J. 561 relied upon by
the petitioners, offer to us in the present case.
57. In the case of Har Shankar and Others (supra) relied upon
68 wp1723.20.odt
by the petitioners, those interested in running liquor vends offered
their bids voluntarily in the auction held for grant of licences for the
sale of country liquor. The Government accepted the bids of willing
bidders and it was held that on such acceptance the contract between
the bidders and the Government became concluded and a binding
contract came into existence between them. It was noticed that after
coming into existence of binding agreements between the parties, the
successful bidders also granted licences evidencing the terms of
contract between the bidders and the Government under which they
became entitled to sell liquor. The licencees also exploited the
respective licences presumably in expectation of the profit. However,
this venture was found later on by the appellant therein as not
profitable and that they were unable to meet the conditions of the
license, and fell in arrears. The State Government threatened to
cancel the licences granted to the appellants unless they paid the
arrears. Matter came to Supreme Court. The Hon'ble Apex Court
held that commercial considerations may have revealed an error of
judgment in the initial assessment of profitability of the adventure,
but that is a normal incident of trading transactions. It further held
that those who contract with open eyes must accept the burden of
contract along with its benefits. It further held that reciprocal rights
69 wp1723.20.odt
and obligations arising out of the contract do not depend for their
enforceability upon whether the contracting party finds it proper to
abide by the terms of contract or not or otherwise no contract could
ever have any binding force.
58. In our view, the observations of the Hon'ble Supreme
Court and what it has held in the said case of Har Shankar and
Others squarely apply to the facts of the present case. Here, the bid
of petitioner no.1 was accepted by respondent no.1 and a letter
accepting the bid was issued substantially in accordance with clause
3.3.5 of the RFP, a duplicate copy of which was duly signed by
petitioner no.1 and returned to respondent no.1. This resulted into a
binding agreement coming into existence between the parties. Once,
a contractual relationship is built between the parties, a party thereto
cannot say that the contract ought not to have been entered into,
doubting it's profitability, as has been done in this case, and that the
validity of a binding contract between the parties here cannot be
made dependent upon what a party thinks about propriety of a
contract nor can it be judged by uncertainty of it's enforceability
resulting from imposition of a post-bid condition, which is accepted
unconditionally by the petitioner no.1 and which is for the
70 wp1723.20.odt
respondent no.1 only to fulfill.
59. In the second case of Proactive In and Out Advertising Pvt.
Ltd. vs. Pune Mahanagar Parivahan Mahamandal Ltd. and Others
reported in 2018 (6) Mh.L.J. 561 referred to us by the learned Senior
Advocate for the petitioners, it was held by the Hon'ble Apex Court
that once the letter of intent issued by the respondent therein was
accepted by the petitioner therein and the petitioner promised the
respondent therein to furnish a Bank Guarantee, it was not open for
the respondent therein to cancel the tender and issue a fresh tender.
These observations would show that upon acceptance of the letter of
intent with all conditions stated therein by the bidder, a binding
agreement would come into being between the parties and
thereafter, a reverse turn is not permissible. The facts of this case
being similar to the facts involved here, in our respectful
submissions, the ratio of the case of Proactive In and Out Advertising
Pvt. Ltd. would govern the instant case.
60. In view of above, we find that the letter dated 7.3.2019
cannot be treated as a communication by the respondent no.1 which
merely informs the petitioner no.1 that the bid is accepted, rather the
71 wp1723.20.odt
said letter, in our opinion, amounts to a Letter of Award which has
led to a concluded contract between the parties. The questions (a),
(b) and (c) are answered accordingly.
Part Two
61. Now we would take up the remaining two questions,
question (d) and question (e), for their answers. These questions are
about the arbitrariness, unreasonableness and unfairness or
otherwise of the action of respondent no.1 in annulling the bidding
process by the impugned communication and involvement of
disputed questions of facts and enforceability of contractual
obligations by invoking Writ jurisdiction of this Court.
62. The impugned communication sent by the respondent
no.1 to the petitioner no.1 dated 19.3.2020 is just a three liner which
informs the petitioner no.1 that pursuant to the directives received by
the Government of Maharashtra dated 16.3.2020 and in accordance
with clause 2.16 of RFP, respondent no.1 decided to annul the
bidding process without award of contract. The petitioners have
assailed this communication on several grounds while the
72 wp1723.20.odt
respondents have stoutly defended it saying it to be within the
parameters in law.
63. Upon consideration of the contents of the impugned
communication, the conduct of parties post issuance of letter dated
7.3.2019 by the respondent no.1, the law governing the field and
also in view of our finding that the letter dated 7.3.2019 is actually a
Letter of Award which has resulted into a concluded contract
between the parties, we would say that the argument advanced on
behalf of the respondent no.1 and adopted by the respondent no.2,
does not hold any water. We have stated the reasons for this
conclusion in the following paragraphs.
64. The letter dated 7.3.2019 which amounts to the Letter of
Award has created rights in favour of the petitioner no.1 to execute,
through the SPV formed for the purpose, a Concession Agreement
and implement the project in accordance therewith. Once a binding
agreement comes into existence between the parties, as held in the
case of Har Shankar and Others (supra), it would not be open for the
employer of the contract to go back on it's promise and cancel the
contract. Sometimes financial projections and commercial
73 wp1723.20.odt
considerations of one party to the contract may be found out
subsequently to be wrong but just because of that the party which
thinks it's such calculations have gone wrong, is not permitted in law
to cancel the contract and if it does so, it must suffer the
consequences therefor. In Har Shankar and Others (supra), the
Hon'ble Supreme Court has succinctly summed up the position of the
parties to the contract when it observed, "those who contract with
open eyes must accept the burden of the contract along with its
benefits" and also when it said, "reciprocal rights and obligations
arising out of contract do not depend for their enforceability upon
whether a contracting party finds it prudent to abide by the terms of
the contract. By such a test no contract could ever have a binding
force".
65. Apart from what is stated above, the figures of profit
shown by the respondent no.1 are seriously disputed by the
petitioners and therefore, nothing can be said about their being based
upon any realistic calculations. In any case, the consideration of
financial viability of the contract arising from issuance of LoA to
petitioner no.1 cannot be made a subject matter of judicial review,
this Court not being an expert and well equipped to deal with the
74 wp1723.20.odt
same and so, we would refrain from going into it. Suffice it to say
that when such consideration is turned into one of the grounds for
annulment of the bidding process by the employer of the contract,
which is respondent no.1 here, a question arises about it's
permissibility and tenability in law on the basis of principles of
Wednesbury unreasonableness and procedural fairness when the
State or it's instrumentality is the employer of the contract. The
principle of Wednesbury unreasonableness would require a party to
contract to shun irrelevant and extraneous considerations to direct
it's actions (See Raunaq International Ltd. vs. I.V.R. Construction Ltd.
And Others, (1999) 1 SCCC 492). The principle of procedural
fairness would confine the Court to only examine whether the parties
have followed the prescribed procedure equally and without
discrimination and to not consider what is right or what is wrong or
whether the decision taken should and ought to have been taken or
not (see Tata Cellular vs. Union of India, (1994) 6 SCC 651).
66. When these parameters are applied to the present case,
what we find here is an instance of procedural unfairness and also
unreasonableness. The clauses of RFP are very clear on the subject.
Clause 2.16.1 is the clause relied upon in the impugned
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communication. A careful consideration of this clause is, therefore,
necessary. It reads thus :
"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 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. "
67. It would be clear from the above referred clause that it
empowers the Authority to annul the bidding process only when it
exercises it's right to reject any bid or all bids. It does not give any
right to the respondent no.1 to annul the bidding process
independent of it's right to reject a bid. It indicates that annulment
of bidding process may follow upon rejection of a bid or all bids at
any time. The position here, however, is quite different from the
situation contemplated in clause 2.16.1. Here, the respondent no.1
had already accepted the bid of the petitioner no.1 and therefore,
76 wp1723.20.odt
there was no question of annulment of the bidding process under this
clause. The impugned communication, however, says that the
respondent no.1 has decided to annul the bidding process without
award of contract in accordance with clause 2.16 of the RFP and also
in accordance with the directives it received from the GoM vide letter
dated 16.3.2020. This reliance on clause 2.16 shown in the
impugned communication is wrong and to the knowledge of
respondent no.1, could not have been made by it. Yet it was made.
68. There is one more clause in the RFP i.e. clause 2.6.3.,
which speaks about disqualification of a bidder or termination of LoA
issued to the Concessionaire. Under this clause, disqualification or
the termination of the LoA is possible on meeting it's requirement.
The requirement is of the bidder not fulfilling the pre-qualification
conditions or the bidder making material misrepresentations or
giving materially incorrect or false information. If any of these
requirements are met, the consequence will be of disqualification of
the bidder to whom no LoA is issued or the termination of the LoA
and also the CA, when the LoA is issued and the CA, if any, is
executed. So, here at the most, the LoA could have been terminated
on any of the grounds stated in Clause 2.6.3. But, no ground being
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available thereunder, there was no termination of the LoA under
clause 2.6.3, and rightly so.
69. In the impugned communication, respondent no.1 has
also given the reason of directions issued by GoM vide it's letter
dated 16.3.2020 regarding re-tendering of the work following which
the impugned communication was issued. Learned Senior Advocate
for the respondent no. 1 has taken us through this communication
and also the minutes of the meeting held on 30.8.2021 under the
Chairmanship of Secretary, MoCA, record note of discussions in
respect of PMIC meeting held on 14.10.2019 and the documents
reflecting the calculations made by respondent no.1 with the help of
it's Auditor and Transaction Advisor regarding financial viability of
the contract.
70. We must point out here that the GoM was not a party to
the bidding process as could be seen from the RFQ and RFP and it
could not have been a party in view of object and purpose for which
the JVC i.e. respondent no.1 was formed and the sole authority given
to the respondent no.1 to be the anchor, driver and master of the
process of development of Nagpur Airport to be undertaken by it by
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selecting a Developer. A detailed narration of the relevant facts in
this regard has already been made by us in the Historical Facts
chapter of this Judgment. We are, therefore, of the opinion that the
GoM could not have taken upon itself to decide about re-tendering of
the project and should have left it to the discretion of the JVC i.e.
respondent no.1 to decide about it in accordance with the rules of
game as regulated by the RFQ and RFP. But, the GoM in fact did it,
albeit without any authority or right in law or under the contract, at a
time when the contractual obligations had come into play. This
action on the part of the GoM was arbitrary and unreasonable and
therefore, was not within it's Constitutional power.
71. Besides, all the acts as reflected in above-referred
documents having been not contemplated in any manner under the
RFQ and RFP, which together constitute a framework of rules within
which the tender process was required to be proceeded and
completed, could not have been made any basis for taking a decision
to annul the bidding process. All the acts as evidenced by these
documents are external and irrelevant for completion of the bidding
process as per the rules prescribed and the procedure laid down in
the RFP, in as much as, limits of our power of judicial review, would
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not permit us to go into them. This is where we find that there is a
fundamental flaw in the procedure adopted by the respondent no.1
in cancelling the bidding process which has amounted to cancellation
of the LoA issued in favour of the petitioner no.1. Then, the
respondent no.1 knew that the grounds that it were taking to annul
the bidding process could not have been taken by it under the terms
and conditions prescribed in the RFP and also under the law
governing the field. But still, it resorted to those grounds while
issuing the impugned communication. Therefore, we are of the view
that the impugned communication suffers from the vice of
arbitrariness and unfairness as contemplated by Article 14 of the
Constitution of India. It also exhibits unreasonableness of the degree
required for attracting the principle of Wednesbury
unreasonableness, as irrelevant considerations were taken into
account and relevant considerations as governed by the RFP were
ignored while arriving at a decision of cancellation of the bidding
process and the LoA issued to the petitioner no.1.
72. In the case of Smt. S.R.Venkataraman .vs. Union of India
and another reported in (1979) 2 SCC 491, the Hon'ble Supreme
Court has held that legal malice means such malice as may be
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assumed from the doing of a wrongful act done intentionally but
without just cause or excuse, or for want of reasonable or probable
cause. In another case of State of A.P. and Others vs. Goverdhanlal
Pitti reported in (2003) 4 SCC 739, it is held by the Hon'ble Supreme
Court that legal malice or malice in law means "something done
without lawful excuse". In other words, the Hon'ble Apex Court held,
"it is an act done wrongfully and wilfully without reasonable or
probable cause, and not necessarily an act from ill-feeling and spite.
It is a deliberate act in disregard of the rights of others."
73. Facts noted above would show that the impugned
communication is also hit by the principle of legal malice as
explained in above referred cases. The respondent no. 1 knew that it
could not annul the bidding process under clause 2.16.1 without first
rejection of the bid, that it could not draft in decision of a party
stranger to contract to cancel the LoA; and yet it did after acceptance
of the bid, without any lawful cause and in a deliberate disregard of
the rights of the petitioner no. 1.
74. There is another aspect of the impugned communication.
It relates to the conduct of the parties. On 20.3.2019, an email was
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sent by the respondent no.1 to the petitioner no.1 wherein it
forwarded in pdf format the final Concession Agreement
incorporating the corrigendum issued by it to the petitioner no.1.
There is a correspondence between the respondent no.1 and the
petitioner no.1, copies of which are filed on record and about which
there is no dispute. It shows that the bank guarantee issued towards
bid security to be furnished by the petitioner no.1 was renewed from
time to time at the request of respondent no.1 with last email sent in
this regard by the respondent no.1 to the petitioner no.1 being on
30.1.2020, in response to which, the petitioner no.1 got extended the
Bank Guarantee till 30.4.2020. An email sent on 29.5.2019 by the
respondent no.1 to the petitioner no.1 showed that as per the request
of petitioner no.1, the respondent no.1 sent to it a soft copy of the
Concession Agreement to enable the petitioner no.1 to make the
necessary corrections in the draft Concession Agreement. The letter
dated 13.6.2019 sent by the petitioner no.1 to respondent no.1
disclosed that the list of discrepancies observed in the final draft
Concession Agreement and the list of details to be filled in at the time
of signing of the Concession Agreement, were exchanged between
the parties and it was informed that necessary changes in MS-Word
version of draft Concession Agreement were incorporated by the
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petitioner no.1. By the letter dated 29 th July, 2019, the petitioner
no.1 made a request to the respondent no.1 to grant it's concurrence
to proceed with the SPV formation so as to enable the petitioner no.1
to sign the Concession Agreement at a short notice upon receipt of
intimation from respondent no.1 as mentioned in the LoA. By the
letter dated 5th August, 2019 addressed by the respondent no.1 to the
petitioner no.1, no objection regarding incorporation of a Company
by name GMR Nagpur International Airport Ltd. (petitioner no.2) for
the purpose of execution of Concession Agreement with respondent
no.1 subject to fulfillment of other conditions stated in the letter
dated 7.3.2019 and the RFP was communicated to petitioner no.1. By
the letter dated 16.8.2019, the respondent no.1 communicated to the
Ministry of Corporate Affairs, Government of India that it had no
objection for the proposed GMR Nagpur International Airport Ltd. to
use address "1st Floor, Old Terminal Building, Dr.Babasaheb
Ambedkar International Airport, Nagpur" as it's registered Office
address. By this very letter, the respondent no.1 also gave it's no
objection that the said "GMR Nagpur International Airport Ltd."
would carry out it's business activities from the said address. It also
certified that the respondent no.1 was in possession of the premises
located at the said address. By the letter dated 24.8.2019, the
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petitioner no.1 informed the respondent no.1 that it has promoted
and incorporated a wholly owned subsidiary Company named "GMR
Nagpur International Airport Limited", which would execute the
Concession Agreement with the respondent no.1 as a Concessionaire.
It also sent therewith a copy of Certificate of Incorporation of the said
subsidiary Company, which was SPV as contemplated under the RFQ.
75. Of course, there is an objection taken by the learned
Senior Advocate regarding formation of SPV in terms of the RFQ and
the RFP. He draws our attention to clause 2.2.6 of the RFQ and the
footnote appearing below it, which clarifies that Mihan Limited
Nagpur i.e. respondent no.1 and the Selected Bidder i.e. petitioner
no.1 shall, subject to and in accordance with the bidding documents,
subscribe to such shareholding in the subscribed and paid up capital
of the SPV as required to own and hold, legally and beneficially, to
the extent of 26% and 74% respectively in the share capital of the
SPV. He submits that in the SPV so incorporated, the condition of
26% and 74% share holding of the respondent no.1 and the
petitioner no.1 respectively has not been fulfilled and therefore, the
SPV has not been properly formed. The contention, in our opinion, is
incorrect. The SPV has been formed with due approval given by the
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respondent no.1 and while giving the approval, the respondent no.1
never questioned the composition of shareholding and never put any
condition about the shareholding at the time of formation of SPV.
Respondent no.1 has given it's no objection to the petitioner no.1 to
use it's Office address and carry out it's business activities from it's
premises at Nagpur. Not only that, the respondent no.1 also
accordingly informed the Ministry of Corporate Affairs, Government
of India regarding formation of the SPV. In none of these letters, the
respondent no.1 raised any issue about percentage of shareholding.
Such a conduct of respondent no.1 together with what is indicated by
footnote below clause 2.2.6 of the RFQ would show that the issue of
shareholding was not to come in the way of formation of SPV and it
was to be sorted out later on. Such a conclusion is further bolstered
up by what is stated in clause 5.4.1 of the draft Concession
Agreement which, as per the RFP, is part of the bidding documents.
"5.4 Obligations relating to Shareholding of the Authority :
5.4.1. The Concessionaire and the Selected Bidder shall
execute an agreement with the Authority, substantially in
the form specified at Schedule S ("Shareholders'
Agreement"), providing for the issue and allotment of one
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non-transferable equity share of the Concessionaire
("Authority's Share") in favour of the Authority and/or its
nominee, and shall inter-alia also provide for the
following:
(a) appointment of nominee(s) of the Authority on the
Board of Directors of the Concessionaire;
(b) an irrevocable undertaking that the rights vested in
the Authority shall not be abridged, abrogated or in any
manner affected by any act done or purported to be done
by the Concessionaire or any of its Associates or Affiliates;
(c) an irrevocable undertaking that any divestment of
Equity in the Concessionaire shall not in any manner
affect the rights of the Authority herein and that the
successors, assigns and substitutes of the Selected Bidder
and the Concessionaire shall be bound by such
undertaking; and
(d) any other manner mutually agreed upon between the
Parties. "
76. This clause stipulates that the Concessionaire and the
Selected Bidder shall execute an agreement with the Authority i.e.
respondent no.1 substantially in the form specified in Schedule S
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(Shareholder's agreement), providing for the issue and allotment of
one non-transferable equity share of the Concessionaire ("Authority's
Share") in favour of the Authority and/or its nominee and also other
mutually agreed matters. It would then follow that the SPV was duly
formed by the petitioner no.1 with the object of execution of the
Concession Agreement and implementation of the project as
contemplated by the RFP and the issue of shareholding could be
mutually sorted out later.
77. Reverting to the conduct of the parties post issuance of the
LoA dated 7.3.2019, as revealed by the earlier mentioned
documents, we would say that the only conclusion that is possible
from such conduct is that the parties not only intended that the
letter dated 7.3.2019 be the Letter of Award which awards the
contract, but the parties also acted upon it pushing forward the
contract towards execution of the Concession Agreement by the
petitioner no.2. It further showed that believing in the promise given
by the respondent no.1, the petitioner no.1 altered it's position and
incorporated the SPV. Petitioner no.1 went on to carry out several
other acts as a consequence to the issuance of LoA. It obtained no
objections regarding use of Office address and Office space of
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respondent no.1 at Nagpur and got extended the Bank Guarantee
given towards bid security at the request made by the respondent
no.1 from time to time. Such conduct of the petitioner no.1, we have
to say, would give rise to application of principle of promissory
estoppel against the respondent no.1 which is an instrumentality of
the State, and now the respondent no.1 is estopped from going back
on it's promise to award the contract, which in fact it already has
given.
78. In the case of M/S. Motilal Padampat Sugar Mills Co. Ltd.
(supra), the Hon'ble Supreme Court held that where the Government
makes a promise knowing or intending that it would be acted upon
by the promisee and, in fact, the promisee acting in reliance of it,
alters his position, the Government will be held bound by the
promise of the promisee, notwithstanding that there is no
consideration for the promise and the promise is not recorded in the
form of a formal contract as required by Article 299 of the
Constitution. It also held that if the Government makes a promise
and the promisee acts in reliance upon it and alters his position,
there is no reason why the Government should not be compelled to
make good such promise like any other private individual. It was
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observed that the law cannot acquire legitimacy and gain social
acceptance unless it accords with the moral values of the society. It
also held that the doctrine of promissory estoppel being an equitable
doctrine, it would yield when the equity so requires and that means if
it is shown by the Government that having regard to the facts of the
case it would be inequitable to hold Government liable to the
promise made by it, the Courts would not raise equity in favour of
the promisee and enforce the promise against the Government.
These observations appear in paragraph 24 of the Judgment. For the
sake of convenience, a portion of para 24 is extracted as below :
"The law may, therefore, now be taken to be settled as a
result of this decision, that where the Government makes
a promise knowing or intending that it would be acted
on by the promisee and, in fact, the promisee, acting in
reliance on it, alters his position, the Government would
be held bound by the promise and the promise would be
enforceable against the Government at the instance of
the promisee, notwithstanding that there is no
consideration for the promise and the promise is not
recorded in the form of a formal contract as required by
Article 299 of the Constitution. It is elementary that in a
republic governed by the rule of law, no one, howsoever
high or low, is above the law. Every one is subject to the
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law as fully and completely as any other and the
Government is no exception. It is indeed the pride of
constitutional democracy and rule of law that the
Government stands on the same footing as a private
individual so far as the obligation of the law is
concerned: the former is equally bound as the latter. It is
indeed difficult to see on what principle can a
Government, committed to the rule of law, claim
immunity from the doctrine of promissory estoppel. Can
the Government say that it is under no obligation to act
in a manner that is fair and just or that it is not bound by
considerations of "honesty and good faith"? Why should
the Government not be held to a high "standard of
rectangular rectitude while dealing with its citizens"?
There was a time when the doctrine of executive
necessity was regarded as sufficient justification for the
Government to repudiate even its contractual
obligations, but let it be said to the eternal glory of this
Court, this doctrine was emphatically negatived in the
Indo-Afghan Agencies case and the supremacy of the rule
of law was established. It was laid down by this Court
that the Government cannot claim to be immune from
the applicability of the rule of promissory estoppel and
repudiate a promise made by it on the ground that such
promise may fetter its future executive action. If the
Government does not want its freedom of executive
action to be hampered or restricted, the Government
need not make a promise knowing or intending that it
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would be acted on by the promisee and the promisee
would alter his position relying upon it. But if the
Government makes such a promise and the promise and
the promisee acts in reliance upon it and alters his
position, there is no reason why the Government should
not be compelled to make good such promise like any
other private individual. The law cannot acquire
legitimacy and gain social acceptance unless it accords
with the moral values of the society and the constant
endeavor of the Courts and the legislatures must,
therefore, be to close the gap between law and morality
and bring about as near an approximation between the
two as possible. The doctrine of promissory estoppel is a
significant judicial contribution in that direction. But it is
necessary to point out that since the doctrine of
promissory estoppel is an equitable doctrine, it must
yield when the equity so requires. If it can be shown by
the Government that having regard to the facts as they
have transpired, it would be inequitable to hold the
Government to the promise made by it, the Court would
not raise an equity in favour of the promisee and enforce
the promise against the Government."
79. In the present case, there is no equitable ground for the
respondent no.1 to take recourse to, to wriggle itself out of the
obligations which have come into play on issuance of Letter of
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Award. The LoA spoke about approval of GoI in respect of
alienation of land and formation of SPV. As regards formation of
SPV, the Ministry of Corporate Affairs was duly informed by the
respondent no.1 and there being no disapproval having been given
by the GoI, it can be taken that part of the condition regarding GoI
approval of SPV has been fulfilled. In respect of other part of the
condition, respondent no.1 did not make any attempt to seek
approval of GoI as it never wrote to it specifically in that regard. No
ducment seeking approval for land alienation in a specific manner
has been placed before us. Then, it is not the case of respondent
no.1 that such approval has been refused by the GoI. All these facts
and circumstances of the case would show that there is not available
any equitable consideration for not applying the principle of
promissory estoppel. Rather, these very facts and circumstances of
the case have tilted the balance of equity in favour of the petitioner
no.1. Then, the reason of the award of contract being not a very
profitable and financially unviable proposition, apart from it being
questionable on merits considering the objections taken by the
petitioner no.1, is itself irrelevant and extraneous to various clauses
of RFP which have delineated the contingencies in which and the
conditions on which the bidding process could be annulled, and
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these clauses nowhere incorporate the factor of unprofitability and
financial non-viability found subsequently after the LoA is acted
upon, as a ground for taking a reverse turn and cancel the bidding
process. On the contrary, we would say that when the LoA is issued
by communicating acceptance of bid, and in a manner prescribed in
the bidding document, which we have found substantially to be the
case here, it is presumed that the LoA has been issued by the
employer only on being satisfied about the profitability, and
workability of the bid offered by the tenderer and therefore, if the
employer seeks to wriggle himself out from such acceptance, he
could do so only on legally permissible grounds such as fraud,
misrepresentation, misconception of facts, change in law and the
like, but never on re-evaluation of the bid on merits post issuance of
LoA, as has been done here. Therefore, this ground taken
subsequently is hit by the principle of Wednesbury
unreasonableness. All these factors, in our view, make the
application of principle of promissory estoppel a reality and
necessity and accordingly, we find that the respondent no.1, which
is a State instrumentality, must be held bound by it's promise given
under LoA and as such, the LoA would be enforceable at law.
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80. There is a curious thing about the impugned
communication. It states two reasons for annulment of bidding
process and cancellation of LoA and both these reasons have already
been found by us to be arbitrary and not permissible to be taken in
view of the procedure prescribed in the RFP. The first reason relates
to GoM issuing directives to re-tender the work. These directives
have been accepted and acted upon by the respondent no.1 when it
cancelled the bidding process. This shows it's non-application of
mind. The GoM was not a party to the whole bidding process and
therefore, it could not have issued such directives as elaborated by
us earlier. Then, all the documents starting from the MoU dated
18.12.2006 through the Joint Venture Agreement dated 22.2.2009
to the bidding documents including RFQ and RFP would show that,
the development of Nagpur Airport was to be carried out by the
proposed JVC, which in fact was formed and after it's formation it
was for the JVC, which is respondent no.1, to select a Developer
through competitive bidding process at highest revenue share
arrived at by standard methodology based upon standard
documents including the RFQ and the RFP already approved by the
GoI. The RFQ and the RFP also showed that it were the respondent
no.1 only which was in-charge of and master of the bidding process.
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Against such overwhelming authority existing in favour of
respondent no.1 to embark upon and complete the bidding process,
there was no reason for the GoM to step in and issue directives for
re-tending of the work and even if it had, there was no reason for
the respondent no.1 to implement it without thinking about the
clauses of the RFP which authorised it to cancel the bidding process
only when those conditions were met. The respondent no.1,
however, simply implemented the directives and we would say it
did so mechanically and without any authority of law. The
impugned communication is, therefore, a no decision in the eye of
the law and it smacks of legal malice.
81. The respondent no.1 has also attempted to support it's
decision to cancel the bidding process by giving reason of
questionable financial viability of the contract. In support,
respondent no.1 has produced on record several documents to
demonstrate as to how true have been it's projections about
decrease in profitability and it's consequent increase in profitability,
if LoA is cancelled and the work is re-tendered. The impugned
communication, however, makes not even a whisper about all these
projections and therefore, they cannot be taken into account on the
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basis of the principle that when a statutory functionary makes an
order based on certain grounds, its validity must be judged by the
reasons so mentioned and it cannot be supplemented by fresh
reasons in the shape of affidavit or otherwise as propounded in the
case of Mohinder Singh Gill and Others vs. the Chief Election
Commissioner, New Delhi and Others reported in (1978) 1 SCC 38.
That apart, it does not lie within the power of this Court to examine
them in any manner, this Court not being a financial expert.
82. There are also other factors which must be considered. If
any query has been raised in the meeting held on 30.8.2019 at New
Delhi, and justification was sought regarding post bid negotiations,
changes made in the eligiblity criteria at the RFQ and the RFP stage,
deviation from the standard documents and the current financial
standing of respondent no.1 and justification to lease out the
Airport, we ask a question - Would it not have been appropriate for
respondent no.1 to have called upon the petitioner no.1, being a
Concessionaire in whose favour the LoA dated 7.3.2019 has been
issued and much water has flown from under the bridge after
issuance of the LoA dated 7.3.2019, to submit it's say in respect of
these issues. The answer has to be given in the affirmative. By
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issuance of the LoA dated 7.3.2019, a civil right regarding execution
of Concession Agreement and implementation of the project through
the SPV had arisen in favour of the petitioner no.1 and therefore,
there was a possibility of the petitioner no.1 being adversely affected
by some decision that may have been taken in the said meeting.
But, the petitioner no.1 was never asked to submit it's explanation
regarding the doubts expressed by the MoCA and this does not
speak of good governance on the part of the respondent no.1, which
it is obliged to exhibit, it being bound by rule of law. In the case of
Mohinder Singh Gill and another (supra), it is held that when a civil
right is likely to be adversely affected, an invocation of audi alteram
partem rule is a necessity. But, this rule, in the peculiar facts and
circumstances of this case, though attracted, was ignored.
83. At this stage, we would like to deal with the argument
made by learned Senior Advocate that by not extending the Bank
Guarantee beyond 30.4.2020 and not furnishing any performance
security, the petitioner no.1 has acquiesced in the decision of the
respondent no.1 to cancel the bidding process. He has also
submitted that even the Concession Agreement was not executed by
the petitioner no.1 and therefore, the fault also lay with the
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petitioner no.1. The argument is incorrect and deserves to be
rejected. Performance security could not have been furnished till
the CA was executed and the CA could not have been executed
unless written intimation of approval was given to the petitioner
no.1 and therefore, what was not in the hands of the petitioner no.1
cannot be made a ground to find any fault with the petitioner no.1.
There is also no question of acquiescence for the reason that even
after cancellation of the bidding process for about more than a
month, the Bank Guarantee had remained valid and the annulment
of bidding process having had taken it's toll on the petitioners, there
was no reason for them to get extended the Bank Guarantee just for
the heck of it. The argument is, therefore, rejected.
84. The respondents have also taken an objection to the
petitioners' not making GoI through MoCA a party. The objection
carries no weight and has no meaning as the petitioners have not
asked for anything from the GoI or MoCA, which could be seen from
the prayers made in the petition. Besides, they have not done
anything which has affected the rights of the petitioner. Whatever
the MoCA did was to ask for some justification from the respondents
which was not given by them and a decision was straightway taken
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not by the MoCA but by the respondent no.2 to cancel the bidding
process and re-tender the project, which was put into effect by
respondent no.1. They are, therefore, not necessary parties.
85. An argument has also been made in support of the
decision to cancel the bidding process that when for two years of
2018-19 and 2019-20 Nagpur Airport was operated by the
respondent no.1, good profit was earned and estimated, it made no
sense to allot Nagpur Airport for it's development, operation and
management to an outside agency. Alternatively, it has also been
argued that re-tendering is required to be done by adopting some
new model. It is also stated that already there is a long gap of five
years since commencement of the bidding process and now going
ahead with the same, may not be practicable.
86. All these submissions, in our considered view, do not appeal
to reason. When it is said that self-operation of Nagpur Airport
generates more revenue, it does not explain the decision taken by the
GoM. The decision is to re-tender the project, which goes against the
argument of self-operation and more revenue. When it is said that re-
tendering will be done by adopting some new model, again, it does not
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explain as to how would it be possible when the only approved model so
far, as per the JVA, RFQ and RFP, is of competitive bidding on the basis
of highest revenue share by adopting standard methodology. If this
methodology of highest revenue share is to be changed, the respondents
would be required to start right from amendment of the JVA. In any
case, it has not been explained to us as to the likely nature of new model
and whether or not the new model has been approved by the GoI and
MoCA. As regards the practicability of implementation of the project
through the petitioners after a long gap of about five years since
commencement of the bidding process, we must say that the delay is
entirely on the part of the respondents and not on the side of the
petitioners. We do not understand as to why the ground of practicability
of award of the project after a gap of five years has been raised by the
respondents when the respondents know it well that they themselves are
responsible and even if it is assumed for the sake of argument that they
are not responsible, they must be held responsible for not acting
responsibly in issuing the Letter of Award on 7.3.2019 about more than
three years after the bidding process began and cancelling the bidding
process and intimating the decision about cancellation of bidding process
and re-tendering the project about five months after the PMIC had taken
a decision in that regard and an year after the issuance of Letter of
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Award. All the submissions are, therefore, rejected.
87. Now we would consider some more cases, which we find as
supporting the conclusions made by us regarding the arbitrariness and
unreasonableness of action of respondent no.1 in annulling the bidding
process and also about enforceability of contractual obligations. The
consideration is made in ensuing paragaphs.
88. In the case of State of Orissa vs. Dr. (Miss) Binapani Dei
and Others reported in AIR 1967 SC 1269, the Hon'ble Supreme
Court held that when an order by the State is to the prejudice of a
person in derogation of his vested rights, it may be made only in
accordance with basic rule of justice and fair play. In the present
case, basic rule of justice and fair play required the respondent no.1
to atleast give an opportunity to the petitioner no.1 to submit an
explanation in respect of doubts raised by the MoCA before it went
ahead to cancel the bidding process by issuing the impugned
communication. Then, it is not the case that it were the MoCA which
had confirmed it's doubts about financial viability. It had only sought
justification to lease out the Airport in view of current financial
standing of the MIL and surprisingly enough, the respondent no.1
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did not send any justification to MoCA and straightway took a
decision through the PMIC and on the directives of the GoM, to
cancel the bidding process. Such an action of respondent no.1 is not
one of fair play; not the least of justice part.
89. In the present bidding process what was involved was
not a mere award of contract for completion of some work but
something which was for achieving a long term goal of development
of Nagpur Airport to world class standard which would usher in
economic development of Maharashtra in general and Vidarbha
region in particular. Master of the bidding process was an
instrumentality of the State and it was bound by such documents as
MoU dated 18.8.2006, JVA dated 22.2.2009, in-principle approval
given by the Union Cabinet for approval of Dr.Babasaheb Ambedkar
Nagpur Airport to the JVC i.e. respondent no.1, which all spoke
about developing the Nagpur Airport to world class Multi Modal
International Passenger and Cargo Hub which would lead to
improvement in tourism and international trade in the region and
would also enable optimum utilisation of the Airport and in this
way, would fulfill the long cherished demand of the people of the
Vidarbha region. The respondent no.1 was also bound by the RFQ
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and the RFP, which laid down the frame work within which the
bidding process was to be completed or aborted. All these factors
necessarily involved a public law element in the whole process and
therefore, this could not have been a case involving mere
enforcement of contractual obligations requiring the petitioner no.1
to shun the public law remedy of Writ Petition before this Court
and take recourse to a civil law remedy for resolution of it's
grievance as held in the case of Rishi Kiran Logistics Private Ltd.
(supra). Therefore, this Writ Petition is maintainable. Besides, this
case, as we have seen from the narration of facts made earlier, does
not involve any disputed question of fact.
90. In the case of ABL International Ltd. and another .vs.
Export Credit Guarantee Corporation of India Ltd. And Others
reported in (2004) 3 SCC 553, it has been held by the Hon'ble
Supreme Court that in an appropriate case a Writ Petition as against
the State or an instrumentality of the State arising out of a
contractual obligation is maintainable and not only that, even a Writ
Petition involving a consequential relief of monetary claim is also
maintainable. It is further held that when an instrumentality of the
State acts in contravention of Article 14, a Writ Petition can lie for
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setting right such arbitrary action. The observations in this regard
are to be found in paragraph nos. 23 and 24. The relevant portions
of paragraph nos. 23 and 24, for the sake of convenience, are re-
produced as below :
"23.It is clear from the above observations of this Court,
once the State or an instrumentality of the State is a party
to the contract, it has an obligation in law to act fairly,
justly and reasonably which is the requirement of Article 14
of the Constitution of India. Therefore, if by the impugned
repudiation of the claim of the appellants the first
respondent as an instrumentality of the State has acted in
contravention of the abovesaid requirement of Article 14,
then we have no hesitation that a writ court can issue
suitable directions to set right the arbitrary actions of the
first respondent."
"24.It is clear from the above two objects of the company
that apart from the fact that the company is wholly a
Government-owned company, it discharges the functions
of the Government and acts as an agent of the
Government even when it gives guarantees and it has a
responsibility to discharge such functions in the national
interest. In this background it will be futile to contend that
the actions of the first respondent impugned in the writ
petition do not have a touch of public function or
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discharge of a public duty. Therefore, this argument of the
first respondent must also fail.
91. There is another perspective to the issue involved here,
which we find it necessary to dwell upon. Awarding of a contract of a
project of immense public interest, which is the case here, is
ultimately a new form of property in the shape of Government
largesse, declared the Hon'ble Supreme Court in the case of Ramana
Dayaram Sheetty .vs. the International Airport Authority of India and
Others reported in (1979) 3 SCC 489. In this very case, the discretion
of the Government in grant of such largesse has been held to be not
unlimited; in that Government cannot give largesse in it's arbitrary
discretion or at it's sweet will or on any such terms as it chooses in
it's absolute discretion. The Hon'ble Supreme Court further held that
there are, however, two limitations imposed by law which structure
and control the discretion of the Government in this behalf with the
first being in respect of the terms on which largesse may be granted
and the other being in regard to the persons who may be recipients
of such largesse. Hon'ble Supreme Court in the case of M/s. Kasturi
Lal Lakshmi Reddy, represented by it partner Shri Kasturi Lal, ward
no.4, Palace Bar, Poonch, Jammu and Others .vs. State of Jammu and
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Kashmir and another reported in (1980) 4 SCC 1 has held that in
granting the largesse, the State cannot act as it pleases. It further
held that whatever be its activity, the Government is still the
Government and is subject to restraints inherent in its position in a
democratic society and therefore, the Constitutional power conferred
on the Government would require it to act reasonably and in public
interest even in contractual matters. The observations of Hon'ble
Apex Court made in this regard appear in paragraph 11 of the said
Judgment, which reads thus :
"So far as the first limitation is concerned, it flows
directly from the thesis that, unlike a private individual,
the State cannot act as it pleases in the matter of giving
largesse. Though ordinarily a private individual would be
guided by economic considerations of self-gain in any
action taken by him, it is always open to him under the
law to act contrary to his self-interest or to oblige another
in entering into a contract or dealing with his property.
But the Government is not free lo act as it likes in
granting largesse such as awarding a contract or selling or
leasing out its property. Whatever be its activity, the
Government is still the Government and is, subject to
restraints inherent in its position in a democratic society.
The constitutional power conferred on the Government
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cannot be exercised by it arbitrarily or capriciously or in
an unprincipled manner; it has to be exercised for the
public good. Every activity of the Government has a
public element in it and it must therefore, be informed
with reason and guided by public interest. Every action
taken by the Government must be in public interest; the
Government cannot act arbitrarily and without reason
and if it does, its action would be liable to be invalidated.
If the Government awards a contract or leases out or
otherwise deals with its property or grants any other
largesse, it would be liable to be tested for its validity on
the touch-stone of reasonableness and public interest and
if it fails to satisfy either best, it would be
unconstitutional and invalid."
93. The law laid down in above-referred cases applies to the
facts of this case. The facts of this case discussed earlier show that
the present bidding process involves a public law element and,
therefore, the requirement of law for a party like the respondent
no.1, an instrumentality of the State, is to act reasonably and in
public interest and not arbitrarily or capriciously. Even in a
contractual matter like the present one, necessity for the State and
it's instrumentality to act reasonably and fairly is an intrinsic part of
Article 14 of the Constitution of India and it along with Article 21
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channelises the exercise of Constitutional power into a vibrant and
life sustaining stream of rule of law. The impugned communication,
as we have seen, is arbitrary, unreasonable and unfair, and has,
therefore, breached the stream of rule of law. It has thereby
adversely affected the rights vested in the petitioner no.1 by virtue of
issuance of LoA to it. Such an action of respondent no.1 is against
public interest as it is not taken reasonably, and fairly. We,
therefore, find that the action of respondent no.1 in annulling the
bidding process by the impugned communication is arbitrary,
unreasonable and unfair.
94. About the objection of disputed questions of facts being
involved here, we must say that this case is mainly based on the
record created by the parties and it's correctness has not been
doubted by the parties. As such, there are no disputed questions of
fact which have troubled us here. About the availability of Civil court
remedy for enforcement of contractual obligations, we have already
made ourselves clear that this petition involving a public law element
and further elements of unreasonableness and lack of fair play in
State action, is maintainable here.
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95. In view of above, we find that the impugned
communication is arbitrary, unfair and unreasonable and, therefore,
it deserves to be quashed and set aside. We further find that in this
case there are no such disputed questions of facts as would shut out
the Writ jurisdiction of this Court. We also find that this case does
not involve a mere enforcement of contractual obligations simplicitor,
but involves an issue of enforcement of public law right arising out of
contractual obligations. This petition is, therefore, maintainable.
Questions (d) and (e) are answered accordingly.
Interlude
96. Before parting with the Judgment, we find it necessary to
deal with some more cases relied upon by the respondent no.1. They
are as follows :
a) Jagdish Mandal vs. State of Orissa and Others,
(2007) 14 SCC 517.
b) Gupta Sugar Works vs. State of U.P. and Others,
1987 (Supp) SCC 476.
c) Reliance Telecom Limited and another .vs. Union
of India and another, (2017) 4 SCC 269.
d) Municipal Council, Neemuch .vs. Mahadeo Real
Estate and Others, (2019) 10 SCC 738.
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97. In the case of Jagdish Mandal vs. State of Orissa and
Others reported in (2007) 14 SCC 517, it is held that evaluating
tenders and awarding contracts are essentially commercial activities
and principles of equity and natural justice stay at a distance. It is
further held that if the decision relating to award of contract is bona-
fide and is in public interest, Courts will not exercise power of
judicial review. In the instant case, we have found that the decision
as manifested through the impugned communication suffers from the
vice of arbitrariness and unreasonableness and it is hit by the
doctrines of promissory estoppel and legal malice and that it is not
found to be taken in public interest and therefore, on the parameters
of said case of Jagdish Mandal (supra), judicial review of the
impugned decision is permissible.
98. In the case of Gupta Sugar Works .vs. State of U.P. and
Others reported in 1987 (Supp) SCC 476, it is held that price fixing is
neither a function nor a forte of the Court and the Court only
examines whether the price determined was with due regard to the
considerations provided by the Statute and whether extraneous
considerations, have been excluded from determination, as the Court
not being an expert cannot substitute it's decision for that of an
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expert. Same principle of law is laid down in the case of Reliance
Telecom Ltd. and another vs. Union of India and another, (2017) 4
SCC 269. By applying these principles of law only that we have
made our enquiry and given our answers here.
99. In the case of Municipal Council, Neemuch .vs. Mahadeo
Real Estate and Others reported in (2019) 10 SCC 738, it is held that
the scope of judicial review of an administrative action is very
limited. It is further held that unless the Court comes to a conclusion
that the decision-maker has not understood the law correctly that
regulates his decision-making power or when it is found that the
decision of the decision-maker is vitiated by irrationality and that too,
on the principle of "Wednesbury reasonableness" or unless it is found
that there has been a procedural impropriety in the decision-making
process, it would not be permissible for the High Court to interfere in
the decision-making process. It is further held that it is not
permissible for the Court to examine the validity of a decision but the
Court can examine only the correctness of the decision-making
process. What we have examined here is the correctness or otherwise
of the decision making process by following these principles of law.
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Conclusion And Final Order
100. In the result, we find that the impugned communication is
not sustainable in the eye of law and it deserves to be quashed and
set aside. We further find that a direction to the respondents is
necessary to take further steps in the matter. The petition is,
therefore, allowed.
The impugned communication dated 19.3.2020 is hereby
quashed and set aside.
The respondents are directed to take further necessary
steps as prayed for in prayer clause (b) of the petition within six
weeks of the Judgment and Order.
In the facts and circumstances of this case, there shall be
no order as to costs.
JUDGE JUDGE
jaiswal
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