Airport Authority of India Versus Centre for Aviation Policy, Safety & Research (CAPSR) & Others

Airport Authority of India Versus Centre for Aviation Policy, Safety & Research (CAPSR) & Others

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6615-6616 OF 2022

Airport Authority of India …Appellant

Versus

Centre for Aviation Policy, Safety & Research

(CAPSR) & Others …Respondents

J U D G M E N T

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment

and order dated 14.07.2021 passed by the High Court of Delhi at New

Delhi in Writ Petition (Civil) No. 5722 of 2020, by which the High Court,

in exercise of its powers under Article 226 of the Constitution of India,

has allowed the said writ petition and has struck down the decision to

carry out region-wise sub-categorisation of the 49 airports falling under

Group D-1; the stipulation that only previous work experience in respect

of providing GHS to scheduled aircrafts shall be considered acceptable

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for the purpose of the impugned tender/RFP and the revised minimum

Annual Turnover criteria of INR 18 crores as discriminatory and arbitrary,

the Airport Authority of India (for short, ‘AAI’) has preferred Civil Appeal

No. 6615/2022. The subsequent order dated 24.09.2021 rejecting the

review application being Review Petition No. 150/2021 to review and

recall the final judgment and order passed in Writ Petition No. 5722/2020

is also the subject matter of Civil Appeal No. 6616/2022.

2. The facts leading to the present appeals in a nutshell are as under:

The appellant herein – AAI floated a Request for Proposal (for

short, ‘RFP’)/tender for concession of ground handling services at Group

‘A’, ‘B’ and ‘C’ airports owned by it on 01.05.2018. The appellant herein

– AAI also floated a RFP/tender for concession of ground handling

services at Group ‘D’ airports owned by it on 02.05.2018. That the RFP

for Group ‘D’ airports was modified multiple times and finally republished

as Corrigendum No. 21. However, subsequently, vide letter dated

10.06.2019, AAI cancelled the tender earlier floated for Group ‘D’

airports. That thereafter, the AAI published a fresh RFP on 28.07.2020

for Group ‘D1’ airports. The respective RFPs contained the eligibility

criteria which include the technical and financial qualifications.

2.1 Respondent No.1 herein – Centre for Aviation Policy, Safety &

Research (CAPSR) filed a writ petition before the High Court challenging

the eligibility criteria and the respective RFPs with respect to Group ‘C’,

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‘D1’ and ‘D2’ airports on the ground that the eligibility criteria contained

in the RFPs are not only a radical departure from the past, but also

stipulate onerous technical and financial qualifications, thereby rendering

most of the extant Ground Handling Agencies (for short, ‘GHAs’)

ineligible to participate in the tender process, especially those which

have been providing Ground Handling Services (for short, ‘GHS’) at the

smaller airports of the country, that fall under the categories of Groups

‘C’, ‘D1’ and ‘D2’ airports, for the last many years. It was also the case

on behalf of the original writ petitioner that the prescribed technical and

financial qualifications have no corelation with the GHS that the service

providers are expected to provide at the Groups ‘C’, ‘D1’ and ‘D2’

airports and that the same have been arbitrarily and whimsically tailored

with a view to oust the existing GHS providers, who have been providing

these services for years, without any complaint.

2.2 The writ petition was opposed by the AAI by filing a counter

affidavit. It was the case on behalf of the AAI that the objective of the

tenders for Group ‘C’, ‘D1’ and ‘D2’ airports was not to oust small players

but sought to exclude GHAs, which lack expertise and infrastructure and

used casual and unskilled labour in workforce which allowed them to

offer better rates as compared to other GHAs. It was also the case on

behalf of the AAI that considering the importance of experience in GHS

for scheduled aircrafts given the nature of work involved in scheduled

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flights are wider than non-scheduled flights. Thus, 36 months of

experience in past 7 years of handling ground handling services for

scheduled flights was reasonable. It was also submitted on behalf of the

AAI that the earnest money deposit, Annual Turnover criterion and

qualifying experience criterion is not arbitrary, irrational and

discriminatory. It was also pointed out that the amount of earnest money

deposit required in the tender for Group ‘D1’ airports has been reduced

from Rs. 35 Lakhs per region to Rs. 15 Lakhs per region. AAI also tried

to justify the Annual Turnover criterion of Rs. 30 crores for Group ‘D1’

airports. At this stage, it is required to be noted that pursuant to the

directions of the High Court, the AAI agreed to reduce the requirement of

Annual Turnover criterion to Rs. 18 crores for Group ‘D1’ airports. The

AAI also challenged the locus of respondent No. 1 – original writ

petitioner.

2.3 By the impugned judgment and order, the High Court has set aside

the respective RFPs and has set aside the decision to carry out regionwise sub-categorisation of the 49 airports falling under Group D-1. The

High Court has also set aside the stipulation in the RFPs that only

previous work experience in respect of providing GHS to scheduled

aircrafts shall be considered acceptable for the purpose of the impugned

tender/RFP and the revised minimum Annual Turnover criteria of INR 18

crores observing the same as discriminatory and arbitrary.

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2.4 Feeling aggrieved and dissatisfied with the impugned judgment

and order passed by the High Court, as also the order passed in the

review application, the original respondent – AAI has preferred the

present appeals.

3. Shri K.M. Nataraj, learned Additional Solicitor General of India

appearing for AAI has assailed the impugned judgment and order

passed by the High Court, inter alia, on the following grounds:

i) that the original writ petitioner before the High Court has no

locus standi to maintain the writ petition;

ii) that the terms and conditions invitation to tender, being in the

realm of contract, are not open to judicial scrutiny; and

iii) MSME order of 2012 and MSME order of 2018 are not

applicable in the facts of the present case

3.1 Elaborating the aforesaid grounds, it is vehemently submitted by

Shri K.M. Nataraj, learned ASG that the original writ petitioner claims to

be a non-profit organisation carrying out independent research, advisory

and advocacy in the field of civil aviation. It is submitted that as per the

settled position, NGOs have no locus standi to maintain a writ petition

challenging the tender conditions especially when the same is not in the

nature of a Public Interest Litigation. It is submitted that an NGO has no

business to enter into tender disputes as the same falls in the realm of

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contract. It is submitted that the original writ petitioner cannot be said to

be an affected and/or aggrieved party and therefore at the instance of

the original writ petitioner, a writ petition was not maintainable assailing

the tender process. Reliance is placed upon the decision of this Court in

the case of Anand Sharadchandra Oka v. University of Mumbai,

(2008) 5 SCC 217 (para 12).

3.2 It is submitted by the learned ASG that the original writ petitioner

mainly challenged three terms/conditions of the tender in question,

namely,

I. Clustering of 49 Airports into 4 Region-wise subcategories/Clusters;

II. Criteria for Evaluation – Clause 3.2.1 – 36 Months

Experience in past 7 years in providing 3 out of 7 Core GHS; and

III. Financial capacity – Clause 3.2.2 – Annual turnover of 30 Cr.

In any one of last 3 Financial Years

It is submitted that all the aforesaid criterions have sound rationale

and therefore the same could not have been the subject matter of a writ

petition before the High Court under Article 226 of the Constitution of

India. It is submitted that so far as the clustering of 49 airports into 4

Region-wise sub-categories/clusters is concerned, the clustering was

done with the aim of promoting regional connectivity and avoiding the

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cumbersome administrative task of inviting and dealing with separate

tenders for each of the 49 airports under Group ‘D1’ category.

3.3 It is submitted that so far as the criteria for evaluation - 36 months

experience in past 7 years in providing 3 out of 7 Core GHS is

concerned, the purpose of stipulating past experience of handling

scheduled airlines was that such airlines operate larger aircrafts and the

number of flights, passengers and amount of cargo would increase in

future with the opening up of the aviation sector.

3.4 Now so far as providing and/or insistence of the financial capacity

– Annual Turnover of Rs. 30 crores in any one of last three financial

years is concerned, it is submitted that as such the same was scaled

down to Rs. 18 crores. It is submitted that even otherwise the said

criterion was set in view of the nature of the tender and the

consequential financial strength which would be required in order to fulfil

the obligations.

3.5 It is submitted that the aforesaid conditions have been

incorporated keeping in mind the commercial considerations and

commercial expediency and the tender making authority is well within its

rights to formulate conditions based on its commercial wisdom.

3.6 It is submitted that as per the settled position of law, setting of

terms and conditions of invitation to tender are within the ambit of the

administration/policy decision of the tender making authority and as such

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are not open to judicial scrutiny unless they are arbitrary, discriminatory

or mala fides. Reliance is placed on the decisions of this Court in the

case of Maa Binda Express Carrier v. North-East Frontier Railway,

(2014) 3 SCC 760 (para 8); Directorate of Education v. Educomp

Datamatics Limited, (2004) 4 SCC 19 (para 12); Meerut Development

Authority v. Assn. of Management Studies, (2009) 6 SCC 171 (paras

26 & 27); and Michigan Rubber (India) Limited v. State of Karnataka,

(2012) 8 SCC 216 (paras 23 & 35).

3.7 Making the above submissions and relying upon the aforesaid

decisions, it is vehemently submitted that in the present case, the High

Court has erred in interfering with the administration/policy decision of

the tender making authority in exercise of powers under Article 226 of

the Constitution of India.

3.8 Now so far as the reliance placed upon MSME orders of 2012 and

2018 by the High Court is concerned, it is submitted that the reliance

placed by respondent No.1 on the aforesaid orders is misplaced as the

tenders in question have been issued with the purpose of selecting GHS

for providing GHS, which service is in fact akin to grant of a license to

the GHA, as opposed to procurement of any goo0ds and services that

form the crux of the MSME orders.

3.9 It is submitted that even otherwise it is evident from sub-clause (1)

of clause 3 of the MSME order of 2012, the minimum threshold

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prescribed is the annual goal for overall procurement and cannot be

made applicable to each tender individually. It is further submitted that a

reading of sub-clause (4) of clause 3 of MSME order of 2012 would

show that the mandate of the order is not absolute. It provides that in

the even of any Ministry, Department or PSU failing to meet the

objective, they shall substantiate the same with reasons, which means

that the departure from the requirement under the order has been

envisaged as long as the same is substantiated with reasons.

3.10 Making the above submissions and relying upon the aforesaid

decisions, it is prayed to allow the present appeals and quash and set

aside the impugned judgment and order passed by the High Court.

4. The present appeal is vehemently opposed by Shri Umakant

Mishra, learned counsel appearing on behalf of respondent No.1 –

original writ petitioner.

4.1 It is vehemently submitted by the learned counsel appearing on

behalf of respondent No.1 that all the members of respondent No.1 are

GHAs and were to participate in the tender. It is submitted that after the

authorities did not respond to the representations of the individual GHA

members of respondent No.1, only thereafter a writ petition was

preferred before the High Court challenging the illegal policy changes

made in the tender. It is submitted that therefore it cannot be said that

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respondent No.1 – original writ petitioner had no locus standi to file the

writ petition challenging the most arbitrary and illegal tender conditions.

4.2 It is then submitted that since the tender conditions No. 2.2.1(a)

allowed three entities to form a consortium to bid, the respondent could

have been a potential bidder as part of a consortium with two of its

member GHAs who as MSME could have a maximum turnover of Rs. 5

crore each. It is submitted that however since the turnover criteria to be

eligible to bid was arbitrarily fixed as Rs. 30 crores, even as a

consortium with two of its member GHAs, the said eligibility has impaired

the fundamental rights of the respondent and its members who are

MSMEs. It is submitted that there also respondent No.1 has locus to file

the writ petition.

4.3 It is then submitted that in the present case the AAI earlier had

disregarded the provisions of Section 12(5) of the AAI Act, 1994 r/w the

provisions of the MSME Act and MSME Order of 2012 and the statutory

Public Procurement Policy of the Government wherein it is mandated

that the AAI must procure 25% of services from MSME sector along with

giving other benefits such as free of cost tender and exemptions to be

granted from payment of Earnest Money Deposit (EMD) to register small

and medium enterprises. It is submitted that in the present case the AAI

artificially introduced differentiation in technical eligibility criteria,

specifying experience in providing GHS to scheduled airlines flights only

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even there is no differentiation between GHS provided to non-scheduled

or scheduled airlines in the AAI (GHS) Regulations, 2018.

4.4 It is further submitted that as rightly observed and held by the High

Court the terms and conditions set forth in the tenders are discriminatory,

restrictive, and exclusionary. It is submitted that clustering of small

airports of different sizes, different capacity to handle aircrafts, different

financial viabilities, different locations into regions etc. is not based on

intelligible differentia nor does it have any rational nexus to the avowed

objective of the respondent of security. It is submitted that as the

relevant eligibility criteria and the conditions mentioned in the respective

tenders were found to be discriminatory and arbitrary and no nexus with

the object of providing such eligibility criteria, the High Court has not

committed any error in striking down the decision to carry out regionwise sub-categorisation of the 49 airports falling under Group D-1; the

stipulation that only previous work experience in respect of providing

GHS to scheduled aircrafts shall be considered acceptable for the

purpose of the impugned tender/RFP and the revised minimum Annual

Turnover criteria of INR 18 crores as discriminatory and arbitrary.

4.5 Making the above submissions, it is prayed to dismiss the present

appeals.

5. We have heard learned counsel for the respective parties at

length.

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At the outset, it is required to be noted that respondent No.1

claiming to be a non-profit organisation carrying out research, advisory

and advocacy in the field of civil aviation had filed a writ petition

challenging the tender conditions in the respective RFPs. It is required

to be noted that none of the GHAs who participated in the tender

process and/or could have participated in the tender process have

challenged the tender conditions. It is required to be noted that the writ

petition before the High Court was not in the nature of Public Interest

Litigation. In that view of the matter, it is not appreciable how

respondent No.1 – original writ petitioner being an NGO would have any

locus standi to maintain the writ petition challenging the tender

conditions in the respective RFPs. Respondent No.1 cannot be said to

be an” aggrieved party”. Therefore, in the present case, the High Court

has erred in entertaining the writ petition at the instance of respondent

No.1, challenging the eligibility criteria/tender conditions mentioned in

the respective RFPs. The High Court ought to have dismissed the writ

petition on the ground of locus standi of respondent No.1 – original writ

petitioner to maintain the writ petition.

6. Even otherwise, even on merits also, the High Court has erred in

quashing and setting aside the eligibility criteria/tender conditions

mentioned in the respective RFPs, while exercising the powers under

Article 226 of the Constitution of India. As per the settled position of law,

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the terms and conditions of the Invitation to Tender are within the domain

of the tenderer/tender making authority and are not open to judicial

scrutiny, unless they are arbitrary, discriminatory or mala fide. As per the

settled position of law, the terms of the Invitation to Tender are not open

to judicial scrutiny, the same being in the realm of contract. The

Government/tenderer/tender making authority must have a free hand in

setting the terms of the tender.

7. While considering the scope and ambit of the High Court under

Article 226 of the Constitution of India with respect to judicial scrutiny of

the eligibility criteria/tender conditions, few decisions of this Court are

required to be referred to, which are as under:

In the case of Maa Binda Express Carrier (supra), in paragraph

8, this Court observed and held as under:

“8. The scope of judicial review in matters relating to award of contracts

by the State and its instrumentalities is settled by a long line of

decisions of this Court. While these decisions clearly recognise that

power exercised by the Government and its instrumentalities in regard

to allotment of contract is subject to judicial review at the instance of an

aggrieved party, submission of a tender in response to a notice inviting

such tenders is no more than making an offer which the State or its

agencies are under no obligation to accept. The bidders participating in

the tender process cannot, therefore, insist that their tenders should be

accepted simply because a given tender is the highest or lowest

depending upon whether the contract is for sale of public property or for

execution of works on behalf of the Government. All that participating

bidders are entitled to is a fair, equal and non-discriminatory treatment

in the matter of evaluation of their tenders. It is also fairly well settled

that award of a contract is essentially a commercial transaction which

must be determined on the basis of consideration that are relevant to

such commercial decision. This implies that terms subject to which

tenders are invited are not open to the judicial scrutiny unless it is found

that the same have been tailor-made to benefit any particular tenderer

or class of tenderers. So also, the authority inviting tenders can enter

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into negotiations or grant relaxation for bona fide and cogent reasons

provided such relaxation is permissible under the terms governing the

tender process.”

In the case of Michigan Rubber (India) Ltd. (supra), after

considering the law on the judicial scrutiny with respect to tender

conditions, ultimately it is concluded in paragraph 23 as under:

“23. From the above decisions, the following principles emerge:

(a) The basic requirement of Article 14 is fairness in action by the

State, and non-arbitrariness in essence and substance is the

heartbeat of fair play. These actions are amenable to the judicial

review only to the extent that the State must act validly for a

discernible reason and not whimsically for any ulterior purpose. If the

State acts within the bounds of reasonableness, it would be

legitimate to take into consideration the national priorities;

(b) Fixation of a value of the tender is entirely within the purview of

the executive and the courts hardly have any role to play in this

process except for striking down such action of the executive as is

proved to be arbitrary or unreasonable. If the Government acts in

conformity with certain healthy standards and norms such as

awarding of contracts by inviting tenders, in those circumstances, the

interference by courts is very limited;

(c) In the matter of formulating conditions of a tender document and

awarding a contract, greater latitude is required to be conceded to

the State authorities unless the action of the tendering authority is

found to be malicious and a misuse of its statutory powers,

interference by courts is not warranted;

(d) Certain preconditions or qualifications for tenders have to be laid

down to ensure that the contractor has the capacity and the

resources to successfully execute the work; and

(e) If the State or its instrumentalities act reasonably, fairly and in

public interest in awarding contract, here again, interference by court

is very restrictive since no person can claim a fundamental right to

carry on business with the Government.”

 In the aforesaid decision, it is further observed that the

Government and their undertakings must have a free hand in setting

terms of the tender and only if it is arbitrary, discriminatory, mala fide

or actuated by bias, the courts would interfere. It is further observed

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that the courts cannot interfere with the terms of the tender prescribed

by the Government because it feels that some other terms in the

tender would have been fair, wiser or logical.

Similar views have been expressed in the case of Educomp

Datamatics Ltd. (supra) and Meerut Development Authority

(supra).

8. In the present case, the AAI explained before the High Court the

rationale behind the respective conditions, namely, clustering of 49

airports into 4 region-wise sub-categories/clusters; criteria for evaluation

- 36 months experience in past 7 years in providing 3 out of 7 Core GHS

and the financial capacity – Annual Turnover of Rs. 30 crores (modified

as Rs. 18 crores) in any one of last three financial years.

9. Having gone through the respective clauses/conditions which are

held to be arbitrary and illegal by the High Court, we are of the opinion

that the same cannot be said to be arbitrary and/or mala fide and/or

actuated by bias. It was for the AAI to decide its own terms and fix the

eligibility criteria.

10. Applying the law laid down by this Court in the aforesaid decisions,

we are of the opinion that the High Court has committed a serious error

in first of all entertaining the writ petition at the instance of respondent

No.1 – original writ petitioner, an NGO and also holding the relevant

eligibility criteria/conditions mentioned in the tender documents as illegal.

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11. Now so far as the submission on behalf of the original writ

petitioner on MSME orders of 2012 and 2018 is concerned, the same

can always be subject to the fulfilment of other conditions of the tender

documents. Even otherwise, selecting GHS for providing GHS cannot

be equated with the procurement of any goods and services that form

the crux of the MSME orders. In any case, as observed hereinabove, at

the instance of respondent No.1, the High Court ought not to have

entertained the writ petition challenging the terms and conditions of the

tender documents and as observed hereinabove, none of the tender

conditions/eligibility criteria can be said to be arbitrary and/or mala fide

and/or actuated by bias.

12. In view of the above and for the reasons stated above, the

impugned judgment and order(s) passed by the High Court are

unsustainable and the same deserve to be quashed and set aside and

are accordingly hereby quashed and set aside. Consequently, the writ

petition filed before the High Court at the instance of respondent No.1 –

original writ petitioner stands dismissed.

13. The instant appeals are accordingly allowed. However, in the facts

and circumstances of the case, there shall be no order as to costs.

……………………………….J.

[M.R. SHAH]

NEW DELHI; ……………………………….J.

SEPTEMBER 30, 2022. [KRISHNA MURARI]

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