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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. & O RS. ……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 CS-

cum-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 ten der, 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 shee t 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: 2

nd

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 20

th

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 30.08.20 19 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 Up-

gradation and Modernization of Dr. Babasaheb Ambedkar International

Airport, Nagpur on DBFOT basis under PPP (the “Project”)

14

th

October 2019

Record Note of Discussions

The 9

th

meeting of the Project Monitoring and Implementation Committee

(PMIC) on the captioned project, chaired by Honourable Chief Secretary,

Government of Maharashtra was held on 14

th

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 30

th

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 re-

tender 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 thos e 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 w ere

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 Cour t

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 flow s 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 up-

gradation, 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, G oI 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 Concessio naire 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, op erate and

maintain the Site, together with all and singular

rights, liberties, privileges, easements and

appurtenances whatsoever to the said Si te,

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 f or

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 p ublic 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 re-

tendering 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.