MIHAN INDIA LTD VS GMR AIRPORTS LTD. & ORS. Case
MIHAN INDIA LTD VS GMR AIRPORTS LTD. & ORS. Supreme Court Case Judgement
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3699 OF 2022
[ARISING OUT OF SPECIAL LEAVE PETITION [C] NO.15556 OF 2021]
MIHAN INDIA LTD. …..APPELLANT
VERSUS
GMR AIRPORTS LTD. & ORS. ……RESPONDENT(S)
WITH
CIVIL APPEAL NO. 3701 OF 2022
[ARISING OUT OF SPECIAL LEAVE PETITION [C] NO._5686/2022]
DIARY NO.23479 OF 2021
AIRPORT AUTHORITY OF INDIA …..APPELLANT
VERSUS
GMR AIRPORTS LTD. ……RESPONDENT(S)
WITH
CIVIL APPEAL NO. 3702 OF 2022
[ARISING OUT OF SPECIAL LEAVE PETITION [C] NO.16737 OF 2021]
GOVERNMENT OF MAHARASHTRA …..APPELLANT
VERSUS
GMR AIRPORTS LTD. ……RESPONDENT(S)
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WITH
CIVIL APPEAL NO. 3700 OF 2022
[ARISING OUT OF SPECIAL LEAVE PETITION [C] NO._5687/2022]
DIARY NO.23477 OF 2021
UNION OF INDIA …..APPELLANT
VERSUS
GMR AIRPORTS LTD. ……RESPONDENT(S)
J U D G M E N T
Leave granted.
2. These four appeals have been filed challenging the
judgment dated 18.08.2021 of the Nagpur Bench of the
Bombay High Court whereby the Writ Petition of the
respondent No. 1- GMR Airports Limited (for short ‘GAL’) and
GMR Nagpur International Airport Limited (for short ‘GNIAL’)
filed against MIHAN India Limited (for short ‘MIL’) and
Government of Maharashtra (for short ‘GoM’) has been
allowed. The High Court set-aside the impugned
communication of annulling the bidding process and directed
to take further necessary steps as per prayer clause (b) of the
Writ Petition.
3. The appeal arising out of Special Leave Petition (C)
No.15556 of 2021 has been filed by MIL (which was the
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respondent no.1 before the High Court) and appeal arising out
of Special Leave Petition (C) No.16737 of 2021 has been filed
by the GoM (which was the respondent No.2 before the High
Court). The other two appeals arising out of Diary No.23479
of 2021 and Diary No.23477 of 2021 have been filed by the
Airports Authority of India (for short ‘AAI’) and Union of India
(for short ‘UoI’) respectively, which were not the party before
the High Court and hence applications for permission to file
the special leave petitions have been filed, which are granted
in both the special leave petitions.
4. Since, the order under challenge in all the appeals is the
same and the facts in the said appeals are common, however
Special Leave Petition No.15556 of 2021 titled MIHAN India
Limited versus GMR Airports Limited & Ors. is being
treated as the lead petition.
5. Briefly, the facts relevant for the purpose of the appeals
are that the Nagpur International Airport (for short ‘Nagpur
Airport’) was being run by the AAI. On the initiative of GoM to
develop a multi-modal international passenger and cargo hub
airport at Nagpur, for brevity sake referred as ‘MIHAN’, in
coordination with Government of India (for short ‘GoI’),
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Ministry of Civil Aviation (for short ‘MoCA’), AAI and Indian Air
Force through Ministry of Defence has prepared the report for
MIHAN project. On 18.12.2006, GoI through MoCA and AAI on
one side; and GoM and Maharashtra Airport Development
Company (for short ‘MADC’) on the other side, entered into a
Memorandum of Understanding (for short ‘MoU’) for the
purpose of establishing a Joint Venture Company (for short
‘JVC’) and transferring the Airport to the said JVC to develop
it into MIHAN. As per the said MoU, MADC shall have 51% of
the equity and AAI 49% equity of the JVC. Pursuant to the
MoU, the AAI and MADC entered into a Joint Venture
Agreement (for short ‘JVA’) on 22.02.2009 for the purpose of
incorporating a JVC, which is known as MIL. As per the terms
and conditions of the MoU dated 18.12.2006 and the JVA
dated 22.02.2009, MIL took over the Airport from AAI on
07.08.2009.
6. As per the instructions of GoI, it was thereafter, decided
that for the upgradation, modernization, operation and
maintenance of the Airport (subsequently named as Dr.
Babasaheb Ambedkar International Airport, Nagpur) global
tenders were to be called by MIL by inviting bids from private
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parties as per the Request for Qualification (for short ‘RFQ’)
for selection of private developers, through public private
participation (for short ‘PPP’) on Design, Build, Finance,
Operate and Transfer (DBFOT) basis. On 11.12.2017, GoM
constituted a High-Powered Project Monitoring and
Implementation Committee (for short ‘PMIC’) consisting of
eleven Members, being officers of GoM, GoI, MADC and AAI
and the Chief Secretary of the GoM would be its Chairman to
look after the MIHAN project on behalf of GoM. The Request
for Proposal (for short ‘RFP’) was prepared by MIL and
approved by PMIC in its meeting held on 24.01.2018. In
response, six bidders were shortlisted, but, only five of them
were approved for the next stage i.e. for issuance of RFP which
was sent vide email dated 01.03.2018. On the final date for
submission of bids i.e. 28.09.2018, MIL had received only two
bids out of which the bid submitted by GAL proposing revenue
share of 5.76% was found to be the highest. Thereafter, MIL
asked GAL for discussion and negotiations on 05.03.2019
before PMIC regarding the offered revenue share. During
discussion, GAL agreed for the revised revenue share of
14.49%. The said revised revenue share was communicated
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by GAL through letter dated 06.03.2019 with a request to
declare it as the selected bidder and to issue the letter of
award (for short “LoA”).
7. Thereafter MIL issued the letter dated 07.03.2019
accepting the revised proposal. GAL accepted the letter dated
07.03.2019 and acknowledged the same by letter dated
12.03.2019 and communicated the same through a duly
signed duplicate copy of the letter dated 07.03.2019.
8. Even on completing the said formalities, the Concession
Agreement was not executed for a long time, however on
25.02.2020, request was made by GAL to MIL for execution of
Concession Agreement so as to enable GAL to implement the
MIHAN project. The said letter was neither responded nor any
steps were taken to execute the Concession Agreement in
favour of GAL and GNIAL (being the SPV incorporated for
implementing the MIHAN project). Thus, GAL and GNIAL both
filed Writ Petition No.1343 of 2020 before the Nagpur Bench of
the Bombay High Court seeking direction to the MIL and GoM
to take all necessary and consequential steps pursuant to the
letter dated 07.03.2019 and to sign the Concession
Agreement. On 11.03.2020, the High Court issued the notice
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and listed the case on 18.03.2020 for hearing. The notices
were served on MIL and GoM by GAL on the same day and,
through court bailiff on 16.03.2020. Immediately on receiving
the notice, on the same day i.e. 16.03.2020, GoM issued the
direction to MIL for retendering. Pursuant thereto, MIL
annulled the bidding process vide communication dated
19.03.2020. MIL also informed GAL to take back the bid
security submitted towards bid. Thereafter, through email
dated 04.05.2020 MIL informed GAL that since the bank
guarantee towards bid security expired on 30.04.2020 and
because of lockdown due to Covid-19, the same may be treated
as cancelled and fully discharged and may be taken back.
9. GAL and GNIAL challenged the communication dated
19.03.2020 annulling the bidding process after issuance of
LoA by filing another Petition before the Nagpur Bench of the
Bombay High Court being Writ Petition No. 1723 of 2020. In
the said Writ Petition, the respondents have prayed for
appropriate directions to quash the letter of annulment dated
19.03.2020 and enforcement of letter dated 07.03.2019 with
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further directions as per prayer clause (b) reproduced as
under:
b. Issue a writ or any other appropriate writ, direction
or order directing the Respondents, to comply with the RFP
conditions in its letter and spirit and undertake necessary
and consequential steps in furtherance thereto and the
Letter of Award dated 07.03.2019, including but not limited
to the execution of the Concession Agreement in favour of
the Petitioner No. 2 and other ancillary documents;
10. By filing the response, MIL has not disputed the
formation of JVC, execution of MOU, handing over of Nagpur
Airport by AAI to MIL on behalf of JVC, preparation of RFP by
State Government, completing of tender process including
offer made by the GAL of 5.76% revenue share. It is admitted
that in front of PMIC, a meeting was held on 05.03.2019 at
Mumbai for negotiation in which enhancement of the revenue
share to 14.49% in place of 5.76% was offered by GAL and
GAL requested for issuance of LoA through communication
dated 06.03.2019. The appellant-MIL took stand before the
High Court that the communication dated 07.03.2019 was
merely an intimation regarding acceptance of revised bid
subject to the approval of GoI for alienation of land of AAI in
favour of the GAL as per the Concession Agreement and for
formation of SPV. Placing reliance on Clause 3.3.5 it is said
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that LoA is different than communication. It is said in
furtherance of the letter dated 07.03.2019, AAI initiated the
process. On the proposal of AAI, the GoI through MoCA
asked some explanations through the letter dated
20.08.2019. In the meeting held by MoCA on 30.08.2019, MIL
and AAI have not submitted the explanation as asked and
prayed for time to submit the same through PMIC. It was
said that those explanations were required to prepare the
note for Cabinet approval, otherwise for want of explanations,
approval of Cabinet was not possible. It is said that GoI
through MoCA was a necessary party which is not joined in
the Writ Petition. Due to non-joinder of necessary party, the
Writ Petition is not maintainable and may be dismissed. It is
also stated that under the instructions of GoM, the order of
annulling the bidding process was passed. On acceptance of
the refund of the bid security, the GAL is estopped from
challenging the order of annulling the bid process as the
letter dated 07.03.2019 was a conditional and the GoI has
not given any approval, therefore no vested right accrued to
GAL to question the order annulling bidding process. It is
also submitted that MIL earned profit of Rs. 49 crores during
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the financial year 2018-19 and has estimated gross profit of
Rs. 64 crores during the financial year 2019-20 and the offer
of gross revenue share made by GAL of Rs. 15 crores is
extremely low, which may not be in public interest and shall
cause a huge financial loss to the public exchequer.
Therefore, the action has rightly been taken by the
authorities.
11. GoM has filed a separate reply on an affidavit of CScum-CFO, MIL, not in the capacity of the officer of GoM. In
the said reply, it was urged that GoM is accepting the reply
filed by MIL and the stand and contentions as taken therein.
It was urged that MIL for implementation of MIHAN project is
using the resources of respondent No. 2 (GoM) and AAI. By
the outcome of acceptance of subject tender, the land
belonging to AAI and MADC was required to be handed over
to the concessionaire. In such circumstances, the active
involvement of GoM, AAI and MoCA is imperative.
Emphasising the importance of bid and its decision having
long term impact, it is said that the revenue paid by the
concessionaire shall be distributed amongst shareholders
and the offer was found to be low in comparison to the profit
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earned in the year 2018-19. Thus, the bid has rightly been
cancelled by annulling the bidding process. Thus, with the
said objections, the Writ Petition filed before the High Court
was resisted by the GoM and MIL.
12. The Nagpur Bench of the Bombay High Court, by
impugned judgment dated 18.08.2021, allowed the Writ
Petition and held that: (i) the letter dated 07.03.2019 is a LoA;
(ii) plea taken by MIL that the letter dated 07.03.2019 is a
mere communication of bid acceptance is not correct. In
fact, it has led to a concluded contract between the parties;
(iii) the action of MIL in annulling the bidding process by
letter dated 19.03.2020 is arbitrary, unreasonable and
unfair, therefore quashed and set-aside; (iv) in this case there
are no such disputed questions of facts as would shut out the
writ jurisdiction of the High Court and (v) this case does not
involve a mere enforcement of contractual obligations
simplicitor, but involves an issue of enforcement of public law
arising out of contractual obligations. Resultantly, the High
Court gave a direction to take further step to implement the
prayer as made in clause (b) of the prayer clause of the Writ
Petition.
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13. Being aggrieved, the present four Civil Appeals have
been filed, as described above by MIL, GoM, UoI and AAI.
14. We have heard Mr. Dushyant Dave, learned senior
counsel for MIL, Mr. Shyam Divan, learned senior counsel for
GoM, Mr. K.M. Natraj, learned ASG for AAI, Mr. Shailesh
Madiyal, learned counsel for UoI and Dr. Abhishek Manu
Singhvi, Mr. Maninder Singh and Mr. Parag P. Tripathi,
learned senior counsels for the respondents at length and
have perused the record.
15. After hearing the arguments as advanced and on
perusal of the material available on record, the issues which
arise for consideration in these appeals are as follows:
1) Whether the letter dated 07.03.2019
endorsing GAL as a selected bidder and on
communication by GAL on a duplicate copy to
MIL on 12.03.2019 would amount to LoA in
terms of Clause 3.3.5 of RFP and, would it be
treated as a concluded contract?
2) Whether the communication dated
19.03.2020 for annulment of bidding process
is arbitrary and not in conformity to the terms
of RFQ/RFP by following the procedure so
prescribed?
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3) In the facts and circumstances of the case,
GAL being a successful bidder has a limited
right only to ask for specific performance, and
being a non-statutory contract, remedy under
Article 226 of Constitution of India cannot be
availed ?
4) Whether in the facts and circumstances of the
case, UoI and AAI were necessary parties and
without joining them, the relief as granted by
the High Court warrants interference in the
special leave petitions under Article 136 of the
Constitution of India?
16. All the aforesaid questions are inter-related and the
consequential answer would depend upon the conclusion
that right exercised to annul the bidding process by the
authorities is in conformity to the touchstone of Article 14 of
the Constitution of India. Therefore, all the questions are
commonly dealt with in succeeding paragraphs. While
dealing with all the aforesaid questions, the background and
certain facts which are on record are required to be traced at
the cost of repetition.
17. In the present case, it is not in dispute that Nagpur
Airport was being run by the AAI. On the initiative of GoM,
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MIHAN project was approved in coordination with GoI, MoCA,
AAI and Indian Air Force through Ministry of Defence. Based
on techno-Economic feasibility study (in short “TEFS”) of
MIHAN project and report prepared by L&T Ramboll
Consulting Engineer Limited, MoU was signed on 18.12.2006
between GoI through MoCA and AAI on the one side and GoM
and MADC on the other side and decided to form JVC to
whom the Nagpur Airport would be transferred for
development maintenance and operation as per MIHAN
project. After signing the MOU, a note was prepared on
07.02.2009 by MoCA for the purpose of transfer of Nagpur
Airport to the joint venture company comprised of AAI and
MADC. The said note was approved by the Cabinet in its
meeting held on 11.02.2009. The note as approved has been
placed for ready reference during hearing, its contents are
relevant, therefore reproduced as thus:
“The Cabinet considered the note dated 07.02.2009
from the Ministry of Civil Aviation (Nagar Vimanan
Mantralaya) and approved the proposals contained
in paragraph 6 with the following directions:
(i) the valuation of the assets of the respective
partners, be carried out within one month and any
dispute in the matter be put to a Committee of
Secretaries for a final decision;
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(ii) irrespective of the assets brought in by the Joint
Venture (JV) partners, the equity structure will be
49:51 between AAI and MADC;
(iii) assets of the JV partners will not be the assets
of the JV and would form the basis for determining
the revenue share of respective partner;
(iv) assets placed at the disposal of second JV, as
and when it is formed, will continue to be the assets
of the respective partners;
(v) the proposal for formation of the second JV be
brought up before the Cabinet at an appropriate
time; and
(vi) partners for the second JV be selected through
competitive bidding.”
The said decision of the Cabinet was communicated by MoCA
vide letter dated 18.2.2009 to the Chairman, AAI with a copy
to GoM including the Ministry of Defence.
18. In terms of the MoU and approval of the Cabinet, JVA
was entered on 22.02.2009 incorporating the first JVC,
known as MIL. As per the MOU and the JVA, MIL took over
the Nagpur Airport from AAI on 07.08.2009. As per the
approval of the Cabinet, the valuation of assets of the
respective partners was to be carried out by a Committee of
Secretaries for final decision. MADC and AAI would be the
partners of 51:49% shares respectively. The assets which
belonged to AAI and MADC would not be the assets of JVC.
The bifurcation 51:49% is only for determination of the
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revenue share of respective partners. Even on formation of
JVC, the assets would continue to be the assets of respective
partners. The partners for the second JVC shall be selected
through competitive bidding and the proposal for formation
of second JVC be brought up before the Cabinet at an
appropriate time.
19. In view of the said decisions and to act there upon, MIL
prepared RFQ dated 12.05.2016 for upgradation,
modernization, operation and maintenance of the Airport
through PPP mode on DBFOT basis emphasizing the
importance of MIHAN project and specifying that the MIL
shall be authority for implementation of the MIHAN project.
The particulars of the Nagpur Airport, details about the
project, eligibility for the bidders, scope of work, who may
participate in bidding process and also specifying the selected
bidder were incorporated in RFQ. On perusal of the cabinet
decision and MoU, it is quite apparent that MIL was the first
JVC incorporated to act on behalf of AAI and MADC who are
banking upon the authority of MoCA and GoM. As explained
above, PMIC is a high powered committee constituted by GoM
and held its meeting on 24.01.2018. MIL presented the RFP
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for approval which was approved with certain changes and
published on 01.03.2018 with the intent to carry out and
complete the bidding process.
20. On the basis of the said RFQ and RFP, bids were invited
by the MIL and the GAL submitted its bid on 28.09.2018. The
bid submitted by the GAL at revenue share payable @ 5.76%
was the highest. But MIL was not satisfied by the said offer,
however invited GAL for negotiation before PMIC on
05.03.2019. During negotiation, the GAL gave the offer of
14.49% revenue share in place of 5.76%. After such
negotiation, a request was made by GAL to MIL on
06.03.2019 for issuance of LoA at the earliest. MIL, vide
communications dated 07.03.2019 in reference to the RFP
dated 01.03.2018 and the bid submitted by GAL dated
28.09.2018 and revised financial offer dated 06.03.2019,
accepted the proposal and selected GAL as a highest bidder.
In the said communication MIL informed that the Competent
Authority has accepted the revised bid with clarification that
the said acceptance is subject to further approval of GoI for
alienation of land owned by AAI in favour of the second party
and formation of SPV for the project (‘Approval’) means
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second JV. By the said letter, GAL was called upon to submit
the consent for revised bid on the duplicate copy within 7
days, on failure MIL would have the right to revoke the
acceptance, otherwise to follow the consequences as stated
in the letter. The GAL submitted acceptance after signing on
the duplicate copy of letter to the MIL on 12.03.2019 within
the time so prescribed.
21. As the tenders were invited in pursuance of RFP,
however to understand the procedure for selection of bid and
its acceptance or rejection and to issue LoA to declare the
selected bidder as concessionaire, relevant clauses are
required to be seen. As per Clause 1.2.6 (b) of RFP, it is clear
that the bidder, who is offering the highest revenue share at
the time of the evaluation of the bids, would be the highest
bidder subject to the provisions of Clause 2.16.1 of RFP. The
said Clause 2.16 deals with rejection of bids and Clause 3.3
deals with selection of bidder. All the aforesaid Clauses of
RFP are relevant however reproduced as thus:
CHAPTER -1:
Highest Bidder:
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1.2.6 (a) Bids are invited for the Project on the basis
of the Revenue Share payable to the Authority in
terms of the Concession Agreement.
(b) In this RFP, the term “Highest Bidder” shall
mean the Bidder who is offering the highest Revenue
Share. The concession period and other terms are
pre-determined, as indicated in the draft Concession
Agreement and the percentage revenue share shall
constitute the sole criteria for evaluation of Bids.
Subject to the provisions of Clause 2.16, the Project
will be awarded to the Highest Bidder.
CHAPTER -2
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.
2.16.2: The authority reserves the right not to
proceed with the Bidding Process at any time,
without notice or liability, and to reject any Bid
without assigning any reasons.
CHAPTER-3
3.3.1.: Subject to the provisions of Clause 2.16.1,
the Bidder whose Bid is adjudged as responsive in
terms of Clause 3.2.1 and, who quotes the highest
Revenue Share offered to the Authority shall
ordinarily be declared as the selected Bidder (the
“Selected Bidder”). In the event that the Authority
rejects or annuls all the Bids, it may, in its
discretion, invite all eligible Bidders to submit fresh
Bids hereunder.
3.3.5 : After selection, a Letter of Award (the “LOA”)
shall be issued, in duplicate, by the Authority to the
Selected Bidder and the Selected Bidder shall,
within 7 (seven) days of the receipt of the LOA, sign
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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 failure 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.
The said Clauses are required to be looked with the intent to
know the scheme of RFP, its applicability and object.
Chapter 1, in which the highest bidder has been defined,
deals with the incorporation of the project, description of
bidding process, schedule of bidding process and pre-bid
conference. As per the definition of highest bidder in Clause
1.2.6, it is clear that if any bid is invited for a project, it shall
be on the basis of the highest revenue share payable to the
Authority in terms of Concession Agreement and the sole
criteria would be percentage revenue share and, on the said
basis highest bidder of the project may be declared, subject
to the rejection of bid as per Clause 2.16.
20. Chapter 2 of RFP deals with the general terms of
bidding, change in composition of the Consortium, change in
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ownership, cost of bidding, site visit and verification of
information, verification and disqualification, contents of
RFP, clarifications, amendment of RFP, preparation and
submission of bids including format and signing of bid,
sealing and marking of bids, due date of bid, late bids,
contents of the bid, modifications/substation/withdrawal of
bids, rejection of bids, validity of bids, confidentiality,
correspondence with the bidder, bid security etc. The
abovesaid are the instructions to bidders in general. As per
Clause 2.16.1, the Authority reserves the right to reject any
bid and to annul the bidding process and reject all bids at
any time without any liability or any obligation for such
acceptance, rejection or annulment and without assigning
any reason therefor. In case the Authority rejects or annuls
all the bids, it has the discretion to invite all eligible bidders
to submit fresh bids hereunder. A literal construction of the
said Clause would mean that the Authority have a right to
annul the bidding process, reject all bids without having any
obligation for such acceptance, rejection or annulment, that
too without assigning any reason. As per later part of the
Clause, on rejection or annulment of the bids, the Authority
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may in its discretion invite all eligible bidders to submit the
fresh bids. Thus annulment of bidding process, rejection of
all bids is without any obligation for acceptance. It clarifies
that prior to acceptance, annulment, rejection may be done
without assigning any reason as per Clause 2.16.2.
22. Chapter 3 deals with evaluation of bids on its opening,
test of responsiveness, selection of bidder, contacts during
bid evaluation, bid parameter. Under Clause 3.3.1, subject
to the provision of Clause 2.16.1 means if the bid is not
rejected or annulled and whose bid is adjudged as responsive
as per Clause 3.2.1 ({a} to {i}) would be responsive with highest
revenue share and the said bidder shall ordinarily be declared
as a selected bidder. Thus, in the event, the bid is not
rejected, the procedure for selection of the bidder under
Clause 3.3.1 shall be observed. If the bidder quotes highest
revenue share and its bid is adjudged as responsive shall be
declared as the selected bidder under Clause 3.3.1. In
absence of the contingencies as specified in Clauses 3.3.2 to
3.3.4, the procedure contemplated on selection of highest
bidder as per Clause 3.3.5 is to be followed. As per said
clause, after selection, LoA is required to be issued in
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duplicate by the Authority to the selected bidder who shall,
within seven days of the receipt, sign it on duplicate copy and
return the same. Thereafter the highest bidder is required to
furnish the performance security within the time so
prescribed in LoA/Concession Agreement. In case,
acknowledgement of LoA within the time stipulated has not
been made by highest bidder, the next eligible highest bidder
may be called and considered. As per Clause 3.3.6, on
receiving the acknowledgment of the LoA by the selected
bidder, it shall cause the Concessionaire to execute the
Concession Agreement within 60 days of award of LoA as
prescribed in Clause 1.3 at serial No. 11. It is also clarified
that the selected bidder shall not be invited to cause any
default, modification of amendment in the Concession
Agreement, so executed. Thus, as per the scheme of RFP, if
the highest bidder has qualified the test of responsiveness
without any order of rejection or annulment and has offered
highest revenue share, he be declared as a selected bidder
and in terms of Clause 3.3.5, LoA be issued which shall be
acknowledged and after signing duplicate copy shall be
returned within specified time. Thereafter, the concessionaire
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is required to execute the Concession Agreement. In the
present case, the GAL has qualified the test of responsiveness
and on making offer of highest revenue, it was declared
selected bidder. LoA has been issued vide letter dated
07.03.2019 which has been acknowledged and signed on
duplicate copy and returned to Authority on 12.03.2019,
within the period as specified. The bid security of Rs. 16.85
crores deposited by the GAL was also extended from time to
time under instructions of MIL. Thus, GAL has become
concessionaire as per Clause 3.3.6 of RFP and cause the
execution of Concession Agreement as per Clause 1.3.
23. Thereafter, MIL through Shri Kumar Ranjan Thakur
sent an email on 20.03.2019 attaching the draft Concession
Agreement. He has shared the final version of the draft
Concession Agreement in MS Word format. Thereafter on
behalf of MIL, Shri M.A. Abid Ruhi sent a communication on
29.05.2019 with a request to amend the draft Concession
Agreement in “track change mode” only which would enable
him to identify the changes carried out by GAL. GAL
communicated the draft Concession Agreement after making
the changes. Thereafter, no communication was made on
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behalf of MIL. In the meantime, the GAL requested MIL to
provide space in old terminal building vide communication
dated 26.07.2019. The said request was accepted vide
communication dated 16.08.2019 and a space to run the
office was provided. Thereafter GAL on 24.08.2019 requested
for incorporation of a company namely; GNIAL to run the
MIHAN project on its behalf, which remained unresponded.
24. As per the above discussion, we do not have any
hesitation to hold that letter dated 07.03.2019 is a LoA after
selecting the GAL as a highest bidder and it acquired the
status of concessionaire. It was only the Concession
Agreement required to be executed and there was no fault on
the part of the GAL in complying with the provisions of RFP.
The conduct of appellant MIL also indicates that concession
agreement is required to be executed by concessionaire (GAL).
Thus, after proposal of highest revenue share on issuing the
letter of acceptance and also as reflected by conduct, it has
become a concluded contract.
25. When the steps for execution of the Concession
Agreement had not been taken after LoA for quite sometime,
a request was made by GAL on 25.02.2020 for execution of
26
the Concession Agreement being Concessionaire, but no heed
was paid. Then Writ Petition No. 1343 of 2020 was filed
praying the following reliefs:
a) Issue a writ of mandamus or any other appropriate writ,
direction or order directing the respondents to undertake
necessary and consequential steps in furtherance of the Letter
of Award dated 07.03.2019 including but not limited to
execution of the Concession Agreement in favour of the
petitioner No. 2 and other ancillary documents;
b) Pass an ex-parte ad interim order directing the respondents
not to undertake any coercive steps that shall be detrimental
to the interests and rights of the petitioners in the said project
and public at large.”
26. On issuing notice by High Court vide order dated
11.03.2020, the matter was kept for final disposal on
18.03.2020. The copy of the said notice was served on MIL
and GoM on 11.03.2020 and also through Bailiff of the Court
on 16.03.2020. On receiving the said notice, GoM on
16.03.2019 directed MIL to carry out the tender process
afresh in reference to the PMIC letter dated 14.10.2019. In
pursuance, letter dated 19.03.2020 was issued by MIL for
annulling the bidding process in terms of Clause 2.16.1. It is
relevant that fresh tender process as directed by PMIC cannot
be possible without taking decision after selection of the
bidder and issuing of LoA. Therefore, the MIL issued the order
of annulling the bidding process without any direction for
27
fresh tender process. The validity of the said letter dated
19.03.2020 was questioned in Writ Petition No. 1723 of 2020
before the Nagpur Bench of the Bombay High Court which
was allowed by the impugned order.
27. Now to justify the reasoning of the High Court, the
material which has been brought by filing the counter
affidavit, which formed the basis of annulling the bidding
process is required to be referred. From the material, it is
revealed that after communication of the Concession
Agreement and proposing amendments to be carried in Track
Change Mode, AAI put up a note sheet to the GoI on
26.07.2019 in which the entire background regarding
execution of the MoU dated 18.12.2006 between GoI through
MoCA and GoM through MADC for development of MIHAN
project is re-stated; formation of JVC; JV agreement dated
27.02.2009; admission of transfer of the airport to MIL;
determination of the shares of the partners of the JVC; steps
taken for inviting the bids and quoting the details of
negotiation to increase the revenue share as approved by AAI
Board, present status of land at Nagpur Airport, were
mentioned. However, in the said note sheet, it was prayed to
28
GoI to accord approval for long term lease of land to MIL for
30 years from the effective date of commencement of
operation by second JVC/Concessionaire (i.e. GNIAL for GMR
Airport Ltd) and ratification of possession of demised land
and operation of Nagpur Airport by MIL from 06.08.2009 till
the date of commencement of operation by the second
JVC/Concessionaire. A request was further made that for
formation of second JV i.e. Special Purpose Vehicle (SPV) (i.e.
GNIAL for GMR Airports Ltd) for upgradation, modernization,
operation and maintenance of Nagpur Airport, the license of
AAI Land admeasuring 897 acres approx. for a period of 30
years from the date of commencement of operation by the
second JVC/Concessionaire may be sent. The draft of
Cabinet Note was attached for perusal and to seek approval
of the GoI. On the said note, the MoCA sought certain
clarifications from the Chairman, AAI by letter dated
02.08.2019. The said letter is relevant, therefore reproduced
as thus:
“ AV-21018/2/2019-AAI-MOCA
Government of India
Ministry of Civil Aviation
B-Block, Rajiv Gandhi Bhawan,
Safdarjung Airport, New Delhi.
Dated: 2nd August, 2019
29
To,
The Chairman,
Airports Authority of India,
Rajiv Gandhi Bhawan,
Safdarjung Airport, New Delhi.
Subject: Execution of Lease Deed between AAI and Joint Venture
Company (JVC) MIHAN India Ltd. (MIL) for leasing of Nagpur Airport Land
AND
Approval of formation of the Second JV i.e. “Special Purpose Vehicle (SPV) for the
concession” for upgradation, modernization, operation and maintenance of
Babasaheb Ambedkar International Airport, Nagpur.
Sir,
I am directed to refer to AAI’s UO Note No. AV-21012/63/2003-LM/Vol.IV/369,
dated 26.07.2019 on the subject mentioned above and to say that the following
details/clarification may be provided urgently to this Ministry for processing the
matter further:-
(a) While granting permission to form JV at Nagpur between MADC and AAI, Ministry
vide letter dated 18.02.2009 had conveyed that the proposal of formation of the
second JV would be brought up before the Central Government at an appropriate
time. Further, during the PPP process for Delhi & Mumbai airports in the first
phase and six other airports in the second phase, AAI had taken prior approval of
the Union Cabinet before initiating bidding process to private concessionaires.
However, in the instant case, it is not clear as to why AAI did not seek prior
approval of the Cabinet before initiating any bidding process for MIHAN Project.
(b) Since the Nagpur airport is proposed to be developed through PPP, it may be
clarified as to whether all the guidelines issued by Department of Economic Affairs
and PPPAC (Public Private Partnership Appraisal Committee) in this regard have
been followed.
(c) What was the basis for increasing revenue share quoted by the highest bidder
from 5.76% to 14.49% and basis of the negotiations held between MIL and GMR?
(d) Copies of the bid and transaction documents may be shared for examination.
(e) Land ownership at Nagpur Airport is also not clear from the above proposal.
Therefore, AAI may inform the exact quantum of land in their ownership at
present.
(f) There is a land dispute between AAI and IAF w.r.t. 288.74 acres of land at Nagpur
Airport which has not been sorted out yet. Without concrete details the proposal
is difficult to process for the Cabinet approval. Also, it needs to be clearly stated
that demised land measuring 897 acres proposed to be licensed to second JV/SPV
does not overlap with the disputed land of 288.74 acres which is in possession of
IAF at Nagpur Airport.
(g) A coloured map showing clear demarcation of land belonging to AAI, MIL and the
land proposed to be given to GMR at Nagpur Airport has not been provided.
(h) It is not clear from the proposal as to what the revenue share between AAI and
MADC is at present and what will be the share between them after formation of
second Joint Venture.
30
2. AAI is requested to kindly furnish clarifications/information in respect of the
above mentioned observations to this Ministry at the earliest.
Yours faithfully,
Sd/-
(V R Hegde)
Director”
28. It appears that some correspondence has been made in
response to the said letter vide letter No. AV/21012/63/2003-
LM-Vol 656 dated 08/09.08.2019 to AAI, which is not on
record. In continuation, the MoCA, vide letter dated
20.08.2019, has reported some deficiencies in paragraph 2 of
the letter which is reproduced as under:
“No. AV-21018/2/2019-AAI(AD)
Government of India
Ministry of Civil Aviation
B-Block, R.G. Bhawan,
Safdarjung Airport, New Delhi.
Dated 20th August, 2019
To,
The Chairman,
Airports Authority of India,
Rajiv Gandhi Bhawan,
New Delhi.
Subject: Execution of Lease Deed between AAI and Joint Venture
(JVC) MIHAN India Ltd. (MIL) for leasing of Nagpur Airport Land.
AND
Approval for formation of the Second JV i.e. ‘Special Purpose Vehicle (SPV)
for the concession’ for upgradation modernization, operation and
maintenance of Babasaheb Ambedkar International Airport, Nagpur.
Sir,
I am directed to refer to AAI’s UO Note No. AV-21012/01/2016-LM/155,
dated 26.07.2019 and No. AV-21012/63/2003-LM/Vol.656 dated
08/09.08.2019 on the subject mentioned above.
2. The proposal of AAI has been examined and various deficiencies
have been observed which need to be addressed for preparing the Note for
the Cabinet. Major observations are as under:-
(i) While granting the approval in the meeting held on 07.02.2009,
Union Cabinet had decided that the developer will be selected through
31
competitive bidding for highest revenue share as per standard
methodology for development of airports, using the standard bidding
documents and procedures, including PFQ, RFP and concession
agreements, approved by the Government of India. This decision was
conveyed to AAI, Government of Maharashtra and MADC vide letter dated
18.02.2009.
It may be clarified whether the Model documents issued by the erstwhile
Planning Commission (standard document adopted by PPPAC) have been
adopted in the tendering process of Nagpur airport. If not, the deviating
statement may be furnished.
(ii) Whether there was provision in the Transaction document for
negotiation in the bidding parameter? What were the terms of negotiation
in the Revenue share from 5.14% to 14.49%? Whether other bidders also
given the option of negotiating the revenue share?
(iii) What are the benefits that will accrue to AAI on transfer of the
Airport land to private developer? What will be the return on the
investment made by AAI for development of airport so far?
(iv) The Equity Ratio between AAI and MADC in MIL is 49.51. Whereas
the current proposal provides for revenue sharing between AAI and MADC
in the ratio of (45:55) of Gross Revenue of MIL. AAI may provide the
justification for the deviation.
(v) What are the salient features of the bidding process viz. Stages of
bidding, qualification criteria, basis of the deciding the concession period,
no. of bids received etc.?
3. AAI is requested to kindly furnish clarification/reply on the above
observation to this Ministry urgently.
Yours faithfully,
Sd/-
Krishna Kr. Singh
Section Officer”
In furtherance, a meeting was held on 30.08.2019 under the
Chairmanship of the Secretary (Civil Aviation), MoCA wherein
in paragraph 5, the clarifications with regard to the letter
32
dated 20.08.2019 were sought for. The Minutes of the Meeting
are reproduced as thus:
“Minutes of the meeting held on 30.08.2019 under the Chairmanship of
Secretary, Civil Aviation in Rajiv Gandhi B Bhavan, New Delhi to discuss the
issues relating to leasing of Nagpur Airport under PPP.
A meeting was held on 30.08.2019 with the
officers/representatives of State Government of
Maharashtra to take forward the issues related to leasing
out of Nagpur Airport to a private concessionaire under
Public Private Partnership (PPP).
2. List of participants attached.
3. Secretary, Civil Aviation welcomed the participants
and requested Principal Secretary, Govt. of Maharashtra
to elaborate the details of the bidding process followed in
respect of leasing of Nagpur airport. A detailed
presentation was made by Government of Maharashtra
(copy enclosed).
4. During the presentation, it was informed that a
Joint Venture Company (JVC) between Airports Authority
of India (AAI) and Maharashtra Airport Development
Company Ltd (MADC) was formed in 2009 to upgrade the
Nagpur airport. The JVC so formed was named as Multi
Modal International Passenger and Cargo Hub Airport at
Nagpur India Limited (MIL) wherein AAI holds 49% equity
and MADC hold remaining 51%. It was further informed
that MIL is operating the Nagpur airport since 2009 and
earned a profit of approximately Rs. 49 crores for the year
2018-19. Thereafter, the detailed procedure followed for
inviting tender to select concessionaire was explained by
officials of Govt. of Maharashtra.
5. After the presentation, Secretary, Civil Aviation
requested MADC officials to clarify the following specific
issues related:
(i) Clause 2.2.1(c) of RFQ stipulates that the
concessionaire shall be selected based on the sole criteria
of highest revenue share quoted, negotiation with highest
bidder on revenue share (increased from 5.76% to
14.49%). Post bid negotiation needs to be justified.
(ii) There were frequent changes in the eligibility
criteria w.r.t. airport experience from the period of RFQ to
33
bid opening date. The grounds for the same may be stated
with cogent reasons.
(iii) Since the bid document has undergone frequent
changes and there are deviation from the standard
documents, a detailed deviation statement vis-à-vis
approved document along with justification needs to be
provided.
(iv) The airport is presently being operated
successfully by the government undertaking and earning
a profit of Rs. 49 cr. for the 2019 and will continue to earn
profits with an estimated traffic growth of more than 20%.
Therefore, the revenue share offered by the concessionaire
will result to a profit of just Rs. 15 crore to the Government
undertaking. Whether it is justified to lease out the airport,
which is earning a profit of Rs. 50 cr. per annum, to the
private concessionaire at a profit of Rs. 15 crores (even if
the potential revenue generation from the land parcel to
the concessionaire is not considered).
6. Secretary stated that for leasing of assets including
land of AAI to private party, approval of the Union Cabinet
is required. Therefore, he requested the representative of
Government of Maharashtra to send a detailed
justification for each of the above observations along with
the views of the State Government for placing the same
before the Union Cabinet.
5.6 Principal Secretary, Govt. of Maharashtra has
informed that since the bid process was carried out under
overall supervision of PMIC, the replies to above queries
will be sent to GoI with the approval of the PMIC.
6. Meeting ended with vote of thanks to the Chair.”
29. The counter-affidavit filed before the High Court by MIL
or GoM did not give any explanation to the letters dated
20.08.2019 and 30.08.2019, though it was incumbent upon
them to submit their explanation. They have taken a pretext
in meeting that the response be sent after discussion with
34
PMIC. The record further reveals that a meeting of PMIC was
held on 14.10.2019, wherein retendering was directed. The
record note of discussions of the said meeting is reproduced
as under:
Project Monitoring and Implementation Committee (PMIC) for Upgradation and Modernization of Dr. Babasaheb Ambedkar International
Airport, Nagpur on DBFOT basis under PPP (the “Project”)
14th October 2019
Record Note of Discussions
The 9th meeting of the Project Monitoring and Implementation Committee
(PMIC) on the captioned project, chaired by Honourable Chief Secretary,
Government of Maharashtra was held on 14th October 2019 at 4:30 p.m. at
the Chief Secretary Office, Mantralaya, Mumbai. The agenda for the meeting
was to discuss the justification/response to MoCA’s observations as per its
letter dated 30 August 2019.
The Vice Chairman & Managing Director, MADC / Chairman and Managing
Director, MIHAN India Limited welcomed the committee members and
provided opening remarks. Then he requested the Transaction Advisors (TA),
Ernst & Young LLP, to present the justification/response to MoCA’s
observations.
TA presented to the committee members the responses to the following
observations raised by MoCA as per its letter dated 30th August 2019.
1. Justification on post bid negotiation
2. Changes in the eligibility criteria at the RFQ and RFP stage
3. Deviations from the standard document
4. Considering the current financials of MIL, justification to lease out the
airport.
TA also presented the financial analysis with respect to justification to lease
out the Nagpur airport. Basis the analysis, TA brought to notice of PMIC that
the Net Present Value of the Revenue Share being offered by the Highest
Bidder is not commensurate with the profit that MIL would earn following
the AERA philosophy for tariff determination in the coming 30 years.
Based on the above discussions and deliberations, PMIC directed to retender the bid for the Project.
The meeting ended with a vote of thanks to the Chair and with a request to
CMD, MIL to keep the members informed about the developments in this
regard, from time to time.
35
Minutes of the meeting held on 30.08.2019 under the Chairmanship of
Secretary, Civil Aviation in Rajiv Gandhi B Bhavan, New Delhi to discuss the
issues relating to leasing of Nagpur Airport under PPP.
30. In the facts of the case, the objections raised vide letters
dated 02.08.2019, 20.08.2019 and in meeting of MoCA dated
30.08.2019 and in record note of discussion by PMIC in its
meeting dated 14.10.2019 are required to be analysed with
the intent that while issuing the direction of re-tendering, the
order of annulling the bidding process is how far just,
reasonable and equitable. In fact such letter is against the
various clauses of RFP. In this regard as explained above, for
the purpose of transfer of the Nagpur Airport to JVC
comprising of AAI and MADC, the Cabinet note was put on
07.02.2009 by MoCA which was approved with certain
directions. The Cabinet permitted to select the second JV
through competitive bidding and proposal for formation of
second JV be brought before the Cabinet at an appropriate
time. Therefore, on submitting the bid and on declaring GAL
as selected bidder after issuance of LoA, as per the Cabinet
decision, the second Cabinet note is required to be put up
after selection of the partner by the competitive bidding for
the formation of the second JV. It is to be observed that if
procedure of competitive bidding was fair merely on the
36
pretext of the Cabinet approval, interference by the
authorities would not be permissible.
31. MoCA held its meeting on 30.08.2019. Admittedly, the
said meeting is on the note of AAI dated 26.07.2019 to which
the objection was submitted vide letter date 02.08.2019 and
the response by AAI on 08/09.08.2019 (not available on
record but referred to in the letter of MoCA dated 20.08.2019)
have been considered. How far those objections may be
relevant are required to be considered to test the action of the
authorities for annulling the bidding process and to know
whether the said action was not arbitrary. In the meeting on
30.08.2019, presentation was made by MADC to which
Secretary, MoCA further asked for clarifications.
32. The first clarification sought was that the criteria for
selection of the bidder shall be based on the highest revenue
share quoted. After negotiation by PMIC, the revenue share
quoted as 5.76% was increased to 14.49%. However, what
was the justification for post-bid negotiation. From the
material available on record, neither PMIC which represents
GoM nor MIL has filed any material to clarify the same. But,
in the non-controverted facts, it cannot be lost sight that GAL
37
was called by GoM and MIL for negotiation to fetch more
revenue share in public interest. They were successful to get
14.49% revenue share in place of 5.76%. Thus, how far such
an action is required to be questioned by MoCA. In our view,
after negotiation if more revenue share has been earned by
MIL or GoM, such an act is just, fair and reasonable. It
cannot be said to be arbitrary and clarification on para 5(i) of
minutes of Meeting dated 30.8.2019 sought by MoCA was
unreasonable in terms of RFP. No material has been brought
before the High Court or even before this Court to justify such
objection.
33. The second clarification/objection raised was regarding
frequent changes in the eligibility criteria with respect to
airport experience from the period of RFQ to bid opening date
for which reasons were sought by the MoCA. It is to be noted
here that RFQ was prepared prior to the bidding process.
After floating the tender, five bidders were shortlisted, who
were issued the RFP dated 01.03.2018. Out of the five
bidders, two submitted the final bids. So, if any changes were
made in the RFQ prior to floating the tender, it was for all the
bidders. How can it affect the bid submitted by selected
38
bidder in terms of RFQ. There is no justification either before
the High Court or before this Court to say that such an action
would be arbitrary. Nothing is brought on record to suggest
that MIL or GoM has favoured the GAL for oblique reasons.
In such circumstances, the second objection/clarification as
raised in the meeting dated 30.08.2019 is wholly unjust,
particularly after issuance of the LoA.
34. The third objection/clarification was sought regarding
frequent changes in the bid document. It is said that there
was a deviation from the standard document (model Request
for Qualification for PPP Projects and model Request for
Proposal for PPP Projects). The statement of justification for
deviation was asked from MIL and GoM. The standard
document (Model Request for Qualification for PPP Projects
and Model Request for Proposal for PPP Projects, for short
“model RFQ and RFP”) is merely a model to be followed. On
the basis of said model RFQ and RFP, the authority inviting
the tenders for a particular project is required to prepare RFQ
and RFP. In the present case, the RFQ and RFP were
prepared by MIL and approved by PMIC considering the
nature of the project. Therefore, the clarification sought by
39
MoCA regarding deviation from model RFQ and RFP or in a
bid document based on the model RFQ and RFP cannot be
said to be justifiable. It appears the objection has been raised
analysing the terms of RFQ and RFP issued by the
department on the basis of which the bidding process was
completed. In our view, the said objection/clarification is
suffering from the vice of arbitrariness and without any
justification. In view of the discussion made above regarding
objections/clarifications of MoCA in para 5 (i to iii) in the
proceedings 30.8.2019 are arbitrary, unreasonable and
without any justification, submitted by the authorities even
before this Court. Therefore, all these queries are violative of
Article 14 of the Constitution of India.
35. The fourth objection/clarification sought was regarding
the profit of Rs. 49 crores earned in the year (2018-19) and
the prospective profit to be earned for the succeeding year i.e.
2019-20 due to estimated traffic growth of 20%. In this regard
justification was sought as to how the offer made by the
concessionaire which will result into lesser profit of Rs. 15
crores as against the profit of Rs. 50 crores which the airport
is currently earning is just. PMIC in its meeting held on
40
14.10.2019 considered this issue along with other three
issues as discussed above. In the said meeting, there is no
deliberation regarding the three issues and the issue of
financial viability of MIL on leasing out the Airport. In our
view, there would be no lease of the airport in favour of GAL.
In fact, the lease would be in favour of MIL by AAI and MADC
which is its first JV formulated to carry out their work.
Therefore, it is completely a mis-statement of fact. It is
clarified that after acceptance of the bid, GAL and GNIAL
would be a licensee for implementation of the MIHAN project.
36. For dealing the fourth objection of the meeting dated
30.08.2019 of MoCA and 14.10.2019 of PMIC, the Court
knows its limitation and is reluctant to interfere because they
are not expert to analyse the financial viability, but the Court
can see the justification of the issue in a matter where after
following the procedure established by law, LoA was issued in
favour of GAL. Awaiting long, when the Concession Agreement
was not executed, GAL knocked the door of the Court and
thereafter the order of annulling of the bidding process has
been passed, which is quashed by the High Court. In such
circumstances, we have to examine whether the defence taken
41
by the authorities is just and reasonable or suffers from vice
of arbitrariness on the pretext of loss to public exchequer.
37. The objection/clarification in para 5(iv) of the letter
dated 30.08.2019 has been discussed by PMIC in its meeting
dated 14.10.2019, wherein it perused the analysis of
Transaction Advisors Ernst & Young (for short “E&Y”) and
observed that the offer of highest revenue share made by the
selected bidder is not commensurate with the profit that MIL
would earn following the AERA philosophy for tariff
determination in the coming 30 years. The PMIC for the said
reason directed to re-tender the bid for the MIHAN project. In
the said context, the factual aspect of the report of E&Y is
required to be referred. The report of E&Y discusses about the
financial snapshot in case the development is taken by the
private concessionaire, on the basis of which it is clear that
the net present value of cash flows if MIL undertakes
investment of Rs. 1683 crores would be Rs. - 473 crores and if
revenue share of 14.49% is given, then its value would go to
Rs. + 472 crores. It is clarified that in case it is privatized,
MIL is not required to take any burden of CAPEX as it would
be done by the private sector. It is further put in the note that
42
a private player operating will make MIL an asset light
organization and that also it will earn revenue share from the
private player which in the net present value is more and
implementation, operational efficiency of the private sector can
be capitalized. Therefore, it is clear that as per the said report
without any investment made by AAI, MIL will get the revenue
of Rs. 15 crores per annum.
38. As per RFP, it is clear that MIL floated a tender for upgradation, modernization, operation and maintenance of
Nagpur Airport. Apparently, the primary impression which
can be gathered from the objection raised in the meeting held
on 30.08.2019 and the meeting of PMIC dated 14.10.2019
indicates the prospective revenue gain but it does not indicate
the investment in up-gradation and modernization of the
Nagpur Airport for which planning and designing of a world
class international airport, not only for the passengers but also
for the cargo transport in the name of MIHAN is required. As
per the RFP and the Concession Agreement, all the investment
for design, up-gradation, operation and maintenance has to be
borne out by the private player and not by MIL. It is pertinent
to note here that after issuance of LoA by the internal
43
correspondence of MoCA and GoM on the note of AAI, the
financial viability relying upon the report of E&Y has been
considered. If there was any issue regarding financial viability,
it was the duty of the GoM, AAI or MoCA to call GAL, to whom
the right has accrued and has to pay the revenue share as
proposed and agreed to by MIL, for justification. Otherwise,
taking a decision on the said basis behind the back of GAL was
violative of Article 14 of the Constitution of India and also
against the principles of natural justice.
39. Further, in paragraph 6 of the minutes of the Meeting
held on 30.08.2019, the Secretary, MoCA said that for leasing
of assets including leasing of land of AAI to private party,
approval of Union Cabinet is required. On perusal of the
record, it is not out of place to mention here that the lease of
the land is not required to be executed in favour of GAL. It is
only the license which is required to be given by Concession
Agreement. Prior to executing the agreement, the recourse, as
taken, is not fair and just. As per the terms of Clauses 3.1.1.
and 10.2.2 of the Concession Agreement, it is clear that the
44
GAL would be the licensee. For ready reference, the relevant
Clauses are reproduced as thus:
“3.1.1 Subject to and in accordance with the
provisions of this Agreement, GoI Approval,
Applicable Laws and the Applicable Permits, the
Authority hereby grants to the Concessionaire, the
concession set forth herein including the exclusive
right, license and authority to develop, finance,
operate and maintain the Airport (“Concession”) for
an initial period of 30 (thirty) years commencing
from the COD, and the Concessionaire hereby
accepts the Concession and agrees to implement
the Project subject to and in accordance with the
terms and conditions set forth herein.
Provided that in the event the Concessionaire shall
have discharged its obligations under this
Agreement without any material breach thereof for
a period of 27 (twenty seven) years from the COD,
and intimate the Authority about its interest and
request for renewing/extending the term of this
Concession by another period of 30 (thirty) years.
While making such request, the Concessionaire
shall submit a confirmation that it is agreeable to
participate in the international competitive bidding
process for the determination of the Premium for
an additional period of 30 (thirty) years, in the form
and manner, as may be prescribed by the
Authority, at such time, and in any such case of
international competitive bidding: (a) the
Concessionaire shall have a right to match the
highest bid, if its bid is within 05.00% of the
highest bid that may be offered at that time in
accordance with the terms and conditions of the
bidding documents issued at such time, and (b) the
Affiliate (s) of the Concessionaire shall not be
qualified, either directly or indirectly, participating
in any such bidding process. Provided further that,
in the event the Airport is not expanded by the
Concessionaire in accordance with the provisions
of this Agreement or the Concessionaire has been
in default of the provisions of this Agreement, then
the Authority shall not be under any obligation to
extent the Concession Period under this Clause
45
3.1.1. Any material breach shall for the purposes
hereof mean Suspension or cumulative levy of
Damages by the Authority exceeding a sum
equivalent to 10% (ten percent) of the Performance
Security. Along with the notice for extension of the
Concession Period, the Concessionaire shall
submit the following documents:
(a) a certificate confirming that there has
been no material default by the
Concessionaire under this Agreement
(including compliance of provisions
relating to any of the Key Performance
Indicators), resulting in the accrual of a
right in favour of the Authority to
identify any such event as
Concessionaire’s Default;
(b) a certificate confirming from Airports
Council International or any other
equivalent agency of similar
international repute confirming that the
Airport has been within top 20 (twenty)
percentile of all airports in its category
in the world, for a continuous period of
preceding 5 (five) years as on the date of
such application; and
(c) an undertaking that the Concessionaire
shall continue to comply with the terms
and conditions of the Agreement in its
full form and effect for the remainder of
the Concession Period.
Provided further that, in the event the Airport is not
expanded by the Concessionaire in accordance
with the provisions of this Agreement or the
Concessionaire has been in default of the
provisions of this Agreement, then, the Authority
shall not be under any obligation to extend the
Concession Period under this Clause 3.1.1.
In any event, at all times, any decision concerning
the extension of the Concession Period will solely
vest with the Authority.
46
10.2.2 In consideration of the Concession Fees,
and Revenue Share, this Agreement and the
covenants and warranties on the part of the
Concessionaire herein contained, the Authority, in
accordance with the terms and conditions set forth
herein, shall grant to the Concessionaire
commencing from the COD, license rights in
respect of all the land (along with any buildings,
constructions or immovable assets, if any, thereon)
comprising the Site which is described, delineated
and shown in Schedule A hereto as the Site, free of
any Encumbrances, to develop, operate and
maintain the Site, together with all and singular
rights, liberties, privileges, easements and
appurtenances whatsoever to the said Site,
hereditaments or premises or any part thereof
belonging to or in any way appurtenant thereto or
enjoyed therewith, for the purposes permitted
under this Agreement, and for no other purpose
whatsoever, for the Concession Period.”
40. In view of the aforesaid, it is clear that no lease is
going to be executed in favour of GAL or GNIAL. It is only
a license right in respect of all the lands along with any
buildings, constructions or immovable assets and other
movables specified in the schedules of concession
agreement is required to be conferred upon GAL or GNIAL.
In the said context, the argument advanced, relying upon
Section 12A of the Airports Authority of India Act, 1994
(for short “AAI Act”) requires consideration. Section 12A
is reproduced as thus:
47
“12A-Lease by the authority (1) Notwithstanding anything
contained in this Act, the Authority may, in the public
interest or in the interest of better management of airports,
make a lease of the premises of an airport (including
buildings and structures thereon and appertaining thereto)
to carry out some of its functions under section 12 as the
Authority may deem fit:
Provided that such lease shall not affect the functions of
the Authority under Section 12 which relates to air traffic
service or watch and ward at airports and civil enclaves.
(2) No lease under sub-section (1) shall be made without the
previous approval of the Central Government.
(3)Any money, payable by the lessee in terms of the lease
made under sub-section (1) shall form part of the fund of the
Authority and shall be credited thereto as if such money is
the receipt of the Authority for all purposes of Section 24.
(4)The lessee, who has been assigned any function of the
Authority under sub-section (1) shall have all the powers of
the Authority necessary for the performance of such function
in terms of the lease.”
41. On perusal thereto, it is clear that Section 12A applies
in the case of lease by the authority and no such lease under
sub-section (1) shall be made without previous approval of the
Central Government. In the present case, no lease is required
to be executed in favour of GAL or GNIAL. The pretext taken
on the basis of Section 12A of AAI Act in a case of annulment
of bidding process by the AAI and the GoI primarily appears to
be fallacious.
42. Now, as per the material available and discussed
hereinabove, it is clear that the appellants were aware of the
procedure which is being adopted. After completion of the
48
bidding process, GAL was declared as a selected bidder on
offering highest revenue share and on issuance of LoA, it has
been declared as a concessionaire and at the stage of execution
of Concession Agreement, all these formalities are not relevant
and it amounts to arbitrary exercise of the power by the
authorities which is not permissible under law. The said
approach is fortified with the view taken in the judgment of
this Court in Union of India and others vs. Dinesh
Engineering Corpn. and another (2001) 8 SCC 491,
wherein while dealing with the rejection of bid of the
respondent therein by Railways in a tender floated for
procurement of certain items of spare parts for use in GE
governors, this Court has held that power to reject bids cannot
be exercised arbitrarily merely because Railways has the
power to do so. Any arbitrary exercise of power to reject bids
has been held violative of Article 14. Paragraphs 15 and 16 of
the aforesaid judgment are relevant and reproduced thus:
“15. Coming to the second question involved in these appeals, namely, the
rejection of the tender of the writ petitioner, it was argued on behalf of the
appellants that the Railways under clause 16 of the Guidelines was entitled
to reject any tender offer without assigning any reasons and it also has the
power to accept or not to accept the lowest offer. We do not dispute this
power provided the same is exercised within the realm of the object for
which this clause is incorporated. This does not give an arbitrary power to
the Railways to reject the bid offered by a party merely because it has that
49
power. This is a power which can be exercised on the existence of certain
conditions which in the opinion of the Railways are not in the interest of
the Railways to accept the offer. No such ground has been taken when the
writ petitioner's tender was rejected. Therefore, we agree with the High
Court that it is not open to the Railways to rely upon this clause in the
Guidelines to reject any or every offer that may be made by the writ
petitioner while responding to a tender that may be called for supply of
spare parts by the Railways. Mr. Iyer, learned senior counsel appearing for
the EDC, drew our attention to a judgment of this Court in Sterling
Computers Ltd. etc. v. M/s. M & N Publications Ltd. (1993 1 SCC 445)
which has held: (SCC p. 455, para 12)
"Under some special circumstances a discretion has to be
conceded to the authorities who have to enter into contract
giving them liberty to assess the overall situation for purpose
of taking a decision as to whom the contract be awarded and at
what terms. If the decisions have been taken in bona fide
manner although not strictly following the norms laid down by
the courts, such decisions are upheld on the principle laid down
by Justice Holmes, that courts while judging the constitutional
validity of executive decisions must grant certain measure of
freedom of "play in the joints" to the executive."
16. But then as has been held by this Court in the very same judgment
that a public authority even in contractual matters should not have
unfettered discretion and in contracts having commercial element even
though some extra discretion is to be conceded in such authorities, they
are bound to follow the norms recognised by courts while dealing with
public property. This requirement is necessary to avoid unreasonable
and arbitrary decisions being taken by public authorities whose actions
are amenable to judicial review. Therefore, merely because the
authority has certain elbow room available for use of discretion in
accepting offer in contracts, the same will have to be done within the
four corners of the requirements of law especially Article 14 of the
Constitution. In the instant case, we have noticed that apart from
rejecting the offer of the writ petitioner arbitrarily, the writ petitioner
has now been virtually debarred from competing with the EDC in the
supply of spare parts to be used in the governors by the Railways, ever
since the year 1992, and during all this while we are told the Railways
are making purchases without any tender on a proprietary basis only
from the EDC which, in our opinion, is in flagrant violation of the
constitutional mandate of Article 14. We are also of the opinion that the
so-called policy of the Board creating monopoly of EDC suffers from
the vice of non- application of mind, hence, it has to be quashed as has
been done by the High Court.”
50
43. Bare perusal of the above stated case-law in light of the
facts of the instant case makes it clear that merely having the
power of rejection of bids does not entitle authorities to
exercise the said power arbitrarily. While discussing the
applicability of Clauses 2.16.1, 3.3.1 and 3.3.5, it is made
clear that in pre-bid procedure prior to acceptance, the
bidding process may be annulled otherwise after issuance of
LoA, the annulment cannot be done. The authorities further
acted arbitrarily relying upon the GoM’s letter dated
16.03.2020 in reference to PMIC’s meeting dated 14.10.2019
in which re-tendering was directed. Re-tendering was not
possible without ignoring the bid already accepted. Therefore,
the order of annulment has been directed applying Clause
2.16.1 arbitrarily.
44. As discussed hereinabove, while explaining the scope of
Chapters 1, 2 and 3 of RFP, it is clear that Chapter 2 deals
with the bidding instructions which are general in nature.
Clause 2.16 deals with the rejection of bid which is a situation
prior to acceptance of the bid. After Chapter 2, in Chapter 3
evaluation of bid starts. While evaluating those bids in
Clause 3.3.1, if the provision of Clause 2.16.1 has not been
51
invoked and the bidder whose bid has been adjudged as
responsive in terms of the Clause 3.3.1 and who offered the
highest revenue share would be a selected bidder. In the
present case, the selection of the bidder was complete.
Thereafter, LoA was issued as per Clause 3.3.5 and by
issuance of draft of Concession Agreement, it has been
declared as a concessionaire. At that stage, Clause 2.16.1 for
annulment of the bidding process would not apply. It appears
to us that as per the objections raised in the Meeting dated
30.08.2019 held by MoCA, clause (iv) in paragraph 5
persuaded the MIL and GoM to pass the order of re-tendering.
45. In this regard, a 3-Judge Bench judgment of this Court
in the case of Vice-Chairman & Managing director, City
and Industrial Development Corporation of Maharashtra
Ltd. and Another vs. Shishir Realty Private Limited and
Ors. [Civil Appeal No. 3956-57 of 2017] is relevant, paras 67
to 70 are reproduced as thus:
“67. Before we state the conclusions, this Court would like to
reiterate certain well established tenets of law pertaining to
Government contracts. When we speak of Government contracts,
constitutional factors are also in play. Governmental bodies being
public authorities are expected to uphold fairness, equality and
rule of law even while dealing with contractual matters. It is a
settled principle that right to equality under Article 14 abhors
arbitrariness. Public authorities have to ensure that no bias,
52
favouritism or arbitrariness are shown during the bidding process.
A transparent bidding process is much favoured by this Court to
ensure that constitutional requirements are satisfied.
68. Fairness and the good faith standard ingrained in the contracts
entered into by public authorities mandates such public authorities
to conduct themselves in a non-arbitrary manner during the
performance of their contractual obligations.
69. The constitutional guarantee against arbitrariness as provided
under Article 14, demands the State to act in a fair and reasonable
manner unless public interest demands otherwise. However, the
degree of compromise of any private legitimate interest must
correspond proportionately to the public interest, so claimed.
70. At this juncture, it is pertinent to remember that, by merely
using grounds of public interest or loss to the treasury, the
successor public authority cannot undo the work undertaken by
the previous authority. Such a claim must be proven using
material facts, evidence and figures. If it were otherwise, then
there will remain no sanctity in the words and undertaking of the
Government. Businessmen will be hesitant to enter Government
contract or make any investment in furtherance of the same. Such
a practice is counterproductive to the economy and the business
environment in general.
46. In view of the above, it is apparent that in government
contracts, if granted by the government bodies, it is expected
to uphold fairness, equality and rule of law while dealing with
contractual matters. Right to equality under Article 14 of the
Constitution of India abhors arbitrariness. The transparent
bidding process is favoured by the Court to ensure that
constitutional requirements are satisfied. It is said that the
constitutional guarantee as provided under Article 14 of the
Constitution of India demands the State to act in a fair and
53
reasonable manner unless public interest demands
otherwise. It is expedient that the degree of compromise of
any private legitimate interest must correspond
proportionately to the public interest. It is specified that
using a ground of public interest or loss to the treasury
cannot undo the work already undertaken by the authority.
47. Analysing the facts of this case in the light of the
judgments in Dinesh Engineering (Supra) and Shishir
Realty (Supra), after issuing the LoA in terms of Clause 3.3.5
of RFP and declaring GAL as concessionaire as per Clause
3.3.6, issuing letter of annulment of bidding process on the
basis of the meeting of PMIC on 14.10.2019, which directed
for re-tendering of the bid, is completely an arbitrary exercise
of power, contrary to the provisions of RFP and violative of
Article 14 of the Constitution of India.
48. In view of the discussion made hereinabove, we are of
the considered opinion that the findings as recorded by the
High Court in the impugned judgment are in consonance with
the above reasonings. The impugned judgment passed by
the High Court is based on the sound reasonings and true
54
analysis of facts, which do not warrant interreference by this
Court.
49. In the facts of the present case and the findings so
recorded hereinabove, it is clear that the authorities have
acted arbitrarily in violation of Article 14 of the Constitution
of India. In such a situation, the public law remedy has
rightly been availed, invoking the jurisdiction of the High
Court under Article 226 of the Constitution of India. The
findings recorded by the High Court to entertain the petition
in paragraph 95 are just and proper and we are in full
agreement to those findings. In the facts of the present case,
the argument advanced by the appellants to compel GAL to
take the remedy of specific performance under the provisions
of Specific Relief Act is hereby repelled.
50. Learned counsel on behalf of the UoI and AAI have
vehemently argued that without joining them as a party to the
proceedings, the Writ Petition was not entertainable and the
relief as directed, could not have been allowed.
51. From the above, it is clear that in pursuance to the
decision taken by the Cabinet, the second JV is required to be
selected through competitive bidding. In the present case,
55
global tenders were invited and competitive bidding process
was followed. The procedure of issuance of LoA is completely
a fair procedure as prescribed in RFP. As per the decision
taken by MoCA, AAI and MADC, MIL is the authority to
complete the bidding process and PMIC, acting on behalf of
GoM was supervising the entire process. The annulment has
been directed in reference to the letter dated 16.3.2020 for retendering of bid. Therefore, in issuing the annulment letter,
there is no role of UoI and AAI. The serious objection has
been raised regarding the grant of relief as prayed in Clause
(b) by the High Court. In this regard, if we examine the said
relief and direction, as issued by the High Court in terms of
the Cabinet decision dated 11.2.2009, we are satisfied that
UoI and AAI are not adversely affected after issuing the
direction to select the second JV by competitive bidding. More
so as discussed, except to produce the first approval of the
Cabinet dated 11.02.2009, letters dated 02.08.2019,
20.08.2019 and 30.08.2019, nothing new has been brought
before us to show what serious prejudice has been caused to
them due to non-joinder by the Writ Court. In absence
thereto, we are of the considered opinion that the objection
56
regarding non-joinder raised by the appellants is bereft of any
merit and the High Court has rightly rejected the same.
52. In view of the discussion made hereinabove, we are of
the considered opinion that the findings recorded by the High
Court allowing the Writ Petition are in accordance to law.
Those findings do not suffer from any illegality, warranting
interreference by this Court in exercise of the power under
Article 136 of the Constitution of India. All these appeals are
hereby dismissed. Parties to bear their own costs.
……………………….….J.
(VINEET SARAN)
……………………………J.
NEW DELHI; (J.K. MAHESHWARI)
MAY 9, 2022.
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