2006 Supreme(SC) 1061

2006(9) Supreme 228
SUPREME COURT OF INDIA
(From Delhi High Court)
Arijit Pasayat and S.H. Kapadia, JJ.
Reliance Airport Developers Pvt. Ltd. - Appellant
versus
Airports Authority of India & Ors. - Respondents
Civil Appeal No. 2515 of 2006
Decided on 7-11-2006
Counsel for the Parties :
For the Appellant : Mukul Rohtagi, Soli J. Sorabjee, Sr. Advocates, Saurabh Kirpal, Mahesh Agrawal, Ms. Manali Singhal, Nikhil Sakhardande, Rishi Agrawal and E.C. Agrawala, Advocates.
For the Respondents : Gopal Subramanium, A.S.G. Harish N. Salve, R.F. Nariman, L. Nageshwar Rao, K. Parasaran, K.K. Venugopal, V.A. Mohta, Dr. A.M. Singhvi, Sr. Advocates, R.N. Karanjawala, Gopal Jain, Ramesh Singh, Ankur Chawla, Ms. Meenakshi Grover, Ms. Ruby Singh Ahuja, Ms. Pragya Singh Baghel, Ms. Gayatri Goswami, Akshay Babu, Mrs. Manik Karanjawala, M.V. Kini, V.B. Joshi, T.S. Murthy, Saket Singh, Siddharth Aggarwal, Senthil Jagadeesan, Atul Sharma, Munish Sharma, Ravi Verma, Ashish Ahuja, Amit Sethi, Milanka Chaudhary, Prashanto Sen, Ms. Haripriya, Ms. Vibhuti Kabra, Devansh A. Mohta, Ms. Sonam Sharma, Nilankanta Nayak and M.A. Chinnasamy, Advocates.

IMPORTANT POINTS
1. While exercising power of judicial review courts should not proceed where if two views are possible and one view has been taken. In such a case, in the absence of malafide taking one of the views cannot be a ground for judicial review.
2. In the process of selection in the matter of joint venture partnership as a part of the privatization policy of the Government of India regarding two airports, the Government had adopted transparent and fair process.

Headnote:(i) ADMINISTRATIVE LAW - Privatization Policy of Government of India - Restructuring of airports of Mumbai and Delhi through joint venture route - Scope of judicial review - Multi-tier system in decision making process - Constitution of Empowered Group of Ministers (EGOM) to decide the detailed modalities including design parameters, bid evaluation criteria etc. - It was required to submit the final proposal for Government’s approval - An Inter Ministerial Group (IMG) was set up to assist EGOM - Bidders were invited to bid on certain basis and pattern - IMG decided that bid evaluation on all parameters shall be carried out by a composite team of Global Technical Adviser, Legal Consultant and Financial Consultant appointed on basis of recommendation of IMG - Evaluation Committee (EC) was set up to review evaluation carried out by GTA, LC and FC - Technical bids were opened - EGOM directed IMG to undertake an independent review of Consultants’ evaluation - A committee of Secretaries (COS) was set up to assist the EGOM - Two member Committee, Group of Eminent Technical Experts (GETE) was set up to recommend to COS on overall validation of evaluation process including calibration of the qualifying cut off and sensitivity analysis - GETE was accordingly appointed to review the Consultants’ Evaluation Report (CER) - Appellants, Reliance Developers wrote to Government of India asking it to adhere to ‘Request for Proposal’ norms - On opening of financial bids, appellant wrote to members of EGOM alleging illegalities in consideration of bids - GMR Infrastructures Ltd. and GVK Industries were selected as successful bidders - Writ petitions filed challenging assessment in the tender process - Whether High Court was justified in dismissing writ petition holding that EGOM had absolute discretion in the matter - (Yes).

       As per Arijit Pasayat, J.

       Held : In the ultimate, the question would be whether in the process of selection the Government had adopted transparent and fair process. While balancing several claims a rational approach is necessary and that is to be formed in line with the scope of judicial interference. It is to be noted that Clause 5.5. deals with a situation of the same bidder being the highest bidder for both the airports. It proceeds on the basis that there would be another eligible bidder for the other airport and on that basis the procedure to be adopted has been prescribed. In such a situation the bidder who would be successful i.e. the highest bidder would be asked to take the airport when the difference between his bid and the next higher bid is greater. Such a procedure could be followed where there is second valid bid at the final phase. This procedure does not deal with a situation where there is only one bidder with valid bids for both the airports. In such a situation he becomes the highest bidder for both the airports and for that reason alone, the question of evaluation of financial bid arises. If the RFP was to consider at the final phase of evaluation there would be only one bid for each of the airports. In that event, there would be no question of finding out difference between the various bids or comparing bids. That left no option with the EGOM but to either vary RFP or to award one of the airports to GMR and to cancel the process for the second or cancel the entire process. The latter course would not have been in larger public interest. Therefore, the EGOM exercised its option. In final analysis, what the EGOM has done is to accept the report of EC subject to validation done by GETE.(Paras 92 to 96)

       The mandate of EGOM was to validate and not to invalidate. It was a process for overall validation and calibration to apply the correct standard. It is the texture of the tendered document which is of paramount importance. EC has changed the texture whereas GETE did not do it. It needs no emphasis that uneven denomination breaks the integrity and textures. Perverseness in connection with a finding of fact is an aspect of mistake of law. Linked with the question whether GETE’s constitution was legal, other question is whether the jurisdiction conferred on GETE has been properly exercised. Examination of the second question alone would be necessary since we have held that constitution of GETE does not suffer from any infirmity.(Paras 102 and 103)

       Learned counsel for the appellant submitted that the expression ‘contract’ obviously means an illegal attempt for bribery etc. and cannot stand on the way of submission of documents for consideration. The plea is clearly untenable. Though, there is no penal clause for such breach it goes against a very concept of fairness in the process and evaluation of bids. Whatever documents are to be submitted are clearly stipulated. Any attempt to take advantage of any newspaper report, clearly falls foul of the mandate that there shall not be any contract with any person involved in the process of selection. It is unusual that the RFP did not make such a contract is a factor for disqualification. This is to be kept in view in future tenders.(Para 111)

       Pivotal challenge by the appellant is to the constitution of GETE and the scope for its constitution. It is to be noted that the ultimate authority to take the decision in the matter was EGOM. It was within the powers of EGOM to decide as to what inputs it can take note of and the source of these inputs. Therefore, the necessity for taking views of various committees constituted appears to be a step in the right direction. This was a step which appears to have been taken for making the whole decision making process transparent. There was no question of having the view of one Committee in preference to another. EC was a Committee constituted as a part of the decision making process like other Committees vis. GRC, COS and IMG. In the multi tier system in the decision making process the authority empowered to take a decision can accept the view expressed by one committee in preference to another for plausible reasons. It is not bound to accept the view of any committee. These committees, it needs no emphasis, are constituted to assist the decision making authority in arriving at the proper decision. It is a matter of discretion of the authority to modify the norms. It is not a case of absolute discretion.(Paras 24 & 25)

       Coming to the constitution of GETE, no mala fides are alleged against the members. It is only the method of evaluation done by GETE which is challenged apart from contending that GETE should not have been constituted. About the constitution of GETE, as noted above, the stand is clearly untenable. So far as evaluation of the marks as done by EC is concerned, GETE has given reasons for altering the marks allotted which ultimately led to the non qualification of the appellant. There were four identified areas where it was noted that the EC’s approach in the evaluation exercise was inconsistent with the terms of the RFP.(Para 49)

       As per S.H. Kapadia, J.

       Although, I respectfully agree with the conclusion contained in the opinion of brother, Arijit Pasayat, the importance of the scoring system in the tender process has impelled me to elucidate and clarify certain crucial aspects. Hence, this separate opinion. The basic controversy in the present case is: whether the E.C. had exceeded its authority in the assessment of technical pre-qualification.(Paras 112 & 113)

       In the scoring system objectivity has an important role to play (Clause 5.4). In the scoring system the identification of factors (including sub-factors), allocation of marks to each of these factors (including sub-factors) and giving of marks are three distinct and different stages. Clause 5.4 dealt with assessment of technical pre-qualifications. Under that clause a scoring system was to be applied based on the assessment of the Terms of the Offer against the Technical Pre-qualification criteria. It further stipulated that assessment shall be on absolute basis and not relative as between the offers. Under the said system, each factor had to be allocated certain marks. Objectivity had to be provided in the allocation of marks (and not in giving of marks) to each factor (including sub-factors). This was not done. For example, RFP required certain marks to be allocated for absorption of existing staff. Greater the absorption, higher the marks to be given. In the present case, the E.C. changed the factor, namely, "absorption of employees" to the overall approach. This led to change in priority. Similarly, in the RFP, the factor earmarked was "property development" which E.C. compared to "infrastructure development". Experience in property development is different from experience in infrastructure development. Similarly, RFP had given weightage to aeronautical revenue whereas in allocation of marks, E.C. obliterated the difference between aeronautical and non-aeronautical revenues. The above examples are given only to show that objectivity which was the underlying principle underlying clause 5.4 is completely lost either by expanding the enumerated factors like aeronautical revenue, overall capability vis-a-vis capacity to absorb existing work-force and comparison of property development with infrastructure development or by allocating un-even marks to sub-factors. In my view, E.C. had no business to expand or narrow down the scope of any of the above factors as it was beyond its authority and contrary to the scoring system. With these words, I agree with the conclusion contained in the opinion of brother, Arijit Pasayat.(Paras 114 & 115)

       (ii) ADMINISTRATIVE LAW - Public Law - Discretion - Meaning - Parameters to be followed while exercising the discretion - Where legislature concedes discretion it also imposes a heavy responsibility - When it is said that something is to be done within the discretion of the authorities, that something is to be done according to the rules of reason and justice, not according to private opinion.

       Held : Though the word, discretion ‘literally means and denotes an uncontrolled power of disposal’ yet in law, the meaning given to this word appears to be a power decide within the limits allowed by positive rules of law as to the punishments, remedies or costs. This would mean that even if a person has a discretion to do something the said discretion has to be exercised within the limit allowed by positive rules of law. The literal meaning of the word ‘discretion’ therefore, unmistakably avoids untrammeled or uncontrolled choice and more positively pointed out at there being a positive control of some judicial principles. (Para 27)

       Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgment directed by circumspection: deliberate judgment; soundness of judgment; a science or understanding to discern between falsity and truth, between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private-affections of persons. (Para 28)

       Such discretion is usually given on matters of procedure or punishment, or costs of administration rather than with reference to vested substantive rights. The matters which should regulate the exercise of discretion have been stated by eminent Judges in somewhat different forms of words but with substantial identity. When a statute gives a Judge a discretion, what is meant is a judicial discretion, regulated according to the known rules of law, and not the mere whim or caprice of the person to whom it is given on the assumption that he is discreet.(Para 32)

       (iii) ADMINISTRATIVE LAW - Judicial Review of Administrative Actions - Scope of judicial interference - Exercise of power, whether legislative or administrative, will be set aside if there is manifest error in exercise of such power or the exercise of power is manifestly arbitrary - Standards of judicial review.

       Held : The scope for judicial review of administrative actions has been considered by this Court in various cases. One of the points that falls for determination is the scope for judicial interference in matters of administrative decisions. Administrative action is stated to be referable to broad area of Governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi-legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary.(Paras 67 & 68)

       The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires.(Para 68)

       The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those class of cases which relate to deployment of troupes, entering into international treaties, etc. The distinctive features of some of these recent cases signify the willingness of the Courts to assert their power to scrutinize the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is ‘illegality’ the second ‘irrationality’, and the third ‘procedural impropriety’.(Para 69)

       The Court will be slow to interfere in such matters relating to administrative functions unless decision is tainted by any vulnerability enumerated above; like illegality, irrationality and procedural impropriety. Whether action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient. The famous case commonly known as "The Wednesbury’s case" is treated as the landmark so far as laying down various basic principles relating to judicial review of administrative or statutory direction. (Paras 70 & 71)

       To arrive at a decision on "reasonableness" the Court has to find out if the administrator has left out relevant factors or taken into account irrelevant factors. The decision of the administrator must have been within the four corners of the law, and not one which no sensible person could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. The decision could be one of many choices open to the authority but it was for that authority to decide upon the choice and not for the Court to substitute its view.(Para 73)

       To characterize a decision of the administrator as "irrational" the Court has to hold, on material, that it is a decision "so outrageous" as to be in total defiance of logic or moral standards. Adoption of "proportionality" into administrative law was left for the future. In essence, the test is to see whether there is any infirmity in the decision making process and not in the decision itself.(Paras 75 & 76)

       (iv) WORDS AND PHRASES - Word ‘Discretion’ - Meaning - Word ‘discretion’ literally means and denotes an uncontrolled power of disposal - Discretion, in general, is the discernment of what is right and proper - ‘Discretion’ when applied to a court of justice, means sound discretion guided by law - It must be governed by rule, not by humour.

       Held : ‘Discretion’ means when it is said that something is to be done within the discretion of the authorities that that something is to be done according to the rules of reason and justice, not according to private opinion: Rooke’s case according to law, and not humour. It is to be not arbitrary, vague and fanciful, but legal and regular.(Para 34)