The court affirmed that public authorities must act reasonably and fairly, finding that the failure to seek required security clearance in contractual bids constituted arbitrariness, impacting public interest.

JUDGMENT

Rekha Palli, J. The present petition under Article 226 of the Constitution of India assails the communication dated 18.11.2021, issued by the respondent no.1/National Highway Authority of India (hereinafter referred to as `NHAI'). Vide the impugned communication the petitioner no.3, namely JMC-AGE Joint Venture, which is a joint venture (JV) of petitioner no.1, and M/s AGE INSAAT VE TICARET ANONIM SIRKETI (hereinafter referred to as `AGE INSAAT'), a company incorporated in Turkey, has been informed that security clearance required for award of the contract in its favour by the respondent no.1 has been denied by the Competent Authority i.e., respondent no.2.

2. The petitioner no.1 is a company incorporated in India under the Companies Act, having its registered office at Ahmedabad, Gujarat. The petitioner no.1 is the lead member holding 76% share in the petitioner no.3 JV, while AGE INSAAT is holding the remaining 26% share therein. The petitioner no.2 is a shareholder of the petitioner no.1 company.

3. The respondent no.1/NHAI, an authority under the Ministry of Road Transport and Highways (hereinafter referred to as `MORTH'), established vide the National Highways Authority of India Act, 1988, is responsible for the construction, development and maintenance of various highways across India. The respondent no.2/Ministry of Home Affairs (hereinafter referred to as `MHA'), is the authority entrusted with the task of granting security clearance to bidders, or in the case of a joint venture, to such members, wherein the controlling interest of 50% or more is held by persons residing outside India. It is respondent no.2 which has taken the decision to not grant security clearance to the petitioners, based on which the impugned communication dated 18.11.2021 has been issued.

4. On 13.05.2021, the respondent no.1 issued a Request for Proposal (hereinafter referred to as `RFP') for construction of `four laning of part of Ramban to Banihal Section of NH-1A (now NH-44), from CH.154+2.0 to CH158+675 (North Bound) and from CH.155+940 to CH.160+282 (South Bound) including construction of Twin Tube Tunnel (Package-I) in the Union Territory of Jammu && Kashmir by EPC Mode' (hereinafter referred to as `the project'). The work under the project was to be conducted in the EPC mode i.e. `Engineering Procurement and Construction' mode. As per routine, the bidding process was divided in two parts i.e. determining the technical responsiveness, followed by the assessment of the financial bids. In terms of the conditions of the RFP, the bidding was, subject to certain conditions, also open to persons from countries other than India; one of the primary conditions for the same being approval of the Competent Authority from national security and public interest perspective, as per the applicable instructions of the Government of India, in terms of clause 2.1.12(a) of the RFP. It is this clause which is the bone of contention between the parties.

5. On 28.05.2021, the petitioner no.1 entered into a Joint Bidding Agreement with AGE INSAAT, whereafter a bid was submitted by the JMC-AGE JV on 20.07.2021. The JV was declared as technically qualified, and the petitioner no.3 was informed that the financial bids of all the six respo