Back
2000(1) Supreme 351
SUPREME COURT OF INDIA
(From Kerala High Court)
G.T. Nanavati & S.N. Phukan, JJ.
Air India Ltd. -Appellant
versus
Cochin International Airport Ltd. -Respondents
Civil Appeal No. 3641 of 1998
With
Civil Appeal No. 3642 of 1998
Decided 31-1-2000
Counsel for the Parties :
For the Appearing Parties : Soli J. Sorabjee, Attorney General, F.S. Nariman, K.F. Nariman, K.K. Venugopal, Mukul Rohatgi, T.L.V. Iyer, A.H. Desai, T.R. Andharujina, I.M. Chagla, A.N. Haksar, H.N. Salve, Gulam Navati, Arun Jaitley, Sr. Advocates, H.D. Nanavati, A.K. Singh, Joseph Kodianthara, Jatinder K. Sethi, Puneet D. Tyagi, Rustam B. Hathikhanewala, Romy Chacko, Rajiv Shekhedhar, (Sakesh Kumar, K.L. Hathi,) Advocates for M/s. Hathi & Co., Ramesh Babu M.R., P.S. Shroff, M.P. Bharucha, Sunil Dogra, Ms. Monica Sharma, Subrat Birla, Shaneen Dastur, P.H. Parekh, Sameer Parekh, Ms. Indoo Verma, G. Prakash, Ms. Bina Madavan, Ms. Rahana, V.M. Satish Sah, Ms. S. Sagar Advocates.
The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene. (Para 7)
(ii) Contract-Limited Global competitive bidding-Award of contract by Public Corporation-Legality of-Public sector undertaking (CIAL) established for setting up and maintaining International Airport- Contract for ground handling facilities -Offer invited by writing letters to specific companies-Evaluation committee recommending award of contract to respondent company-Board of directors CIAL holding further negotiation with a Government Corporation (Air India) in whose preference technical evaluation committee recommended award of contract to respondent-Air India was given further opportunity to revise its earlier proposal-CIAL awarding contract to Air India-Challenge on ground awarding contract to Air India was arbitrary and illegal and against principles of natural justice-High Court cancelling contract to reconsider valid tenders once again-Held : CIAL never declared it would accept highest offer on a particular basis-CIAL made clear it would accept offer which was found to be best in their interest-CIAL bona fide believed that involving public sector undertaking and a national carrier would, in long run, prove beneficial to CIAL-Court cannot substitute its decision for decision of party awarding contract in a commercial transaction of complex nature-CIAL s actions could not be faulted with. (Paras 8 to 12)
JUDGMENT
G.T. Nanavati, J.-Both these appeals arise out of the judgment of Kerala High Court in Writ Appeal No. 462 of 1999. Cambatta Aviation Ltd. (hereinafter referred to as Cambatta ) had filed that appeal against the decision of a learned Single Judge of that High Court in O.P. No. 25560 of 1998 whereby its said petition was dismissed. Cambatta had challenged the action of the Cochin International Airport Ltd. (for brevity sake referred to as the CIAL ) of awarding contract for ground handling services at the new Cochin Airport at Nedumbassery to Air India Ltd. The learned single Judge held that the impugned action of CIAL was neither arbitrary nor illegal. On appeal Division Bench of that Court held that the said action was violative of principles of natural justice, arbitrary and illegal.
2. CIAL is a public sector undertaking. Some other public sector undertakings and the State of Kerala are its shareholders. It has been established for setting up and maintaining a new International Airport at Cochin. For awarding a contract for ground handling facilities at the new Airport it invited offers by writing letters to some companies having experience of that type. The letters were written on 12.11.1997 to Cambatta; Air India and six others. Proposals were to be submitted by 31.12.1997. Kambatta, Air India, M/s. DNATA of Dubai, M/s. Ogden Aviation Services of Hong Kong and M/s. P.S.M. Aviation Pvt. Ltd.- responded. Proposals of some of them contained alternative proposals also. On 13.7.1998 CIAL again wrote to them to make their best offers on or before 28.7.1998. Air India submitted its proposal on 20.7.1998. Cambata did so on 28.7.1998.
3. The committed constituted by CIAL for evaluation of the offers met on 28.9.1998. It found that Cambatta, Air India, DNATA and Ogden Aviation were on par as regards technical competence, organisational capacity and past experience. It took note of the fact that Cambatta and Air India are Indian organisations, operate mainly in India and have better proven adaptability for operating in Indian conditions. Out of those two it recommended Cambatta for awarding the work. On 11.8.1998 the Government of India wrote a letter to the Government of Kerala recommending Air India for awarding the contract on the ground that Air India is the national carrier and has better experience. Thereafter a meeting took place between the Managing Director of Air India and the Chief Minister of Kerala. That was followed by a letter dated 29.10.1998 by Mr. P. Mascarenhas, Managing Director of Air India to the Chief Minister of Kerala seeking an opportunity to make a more detailed presentation to the Board of CIAL on the advantages CIAL would derive of Air India was appointed its exclusive handling agent. The Board of Directors met on 7.11.1998 and decided to have a detailed discussion with Air India before taking a final decision and informed it to give a presentation before the Board on 27.11.1998. Having come to know about this development Cambatta wrote a letter on 10.11.1998 to the Chief Minister of Kerala pointing out that their company is also an Indian company and they also have experience of over 30 years in ground handling work. It also took exception to the effort made by Air India to revise its offer on the ground that it was unethical and deserved to be condemned by the Board. It again wrote to the Chief Minister on 12.11.1998 against giving preference to a national carrier in view of the policy of liberlisation. On 23.11.1998 Cambatta wrote to CIAL that it was extremely perturbed over the fact that Air India was given a further opportunity to make a presentation to the Board and requested it not to go back upon its earlier decision to give the contract to Cambatta. It also warned that not adhering to its earlier decision would be a retrograde step and shake the confidence of the people in fairness and impartiality of CIAL. Air India gave the presentation and by its letter dated 1.12.1998, reaffirmed its
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
