- 1-

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.617 OF 2007

1.Flemingo Duty-Free Shop Pvt.Ltd. 2.Mr.Vivek S.Bhatt. ...Petitioners vs. 1.Union of India 2.Airports Authority of India 3.Mumbai International Airports Pvt.Ltd 4.ITDC Aldeasa India Pvt.Ltd. 5.DFS Venture Singapore(Pte) Ltd. 6.DFS India Pvt.Ltd. ...Respondents.

--Mr.R.A.Nariman, Sr.Advocate with V.A.Bobade, Sr.Advocate, @ V.R.Dhond, A.Choudhary & Shailesh Merdon i/b. M/s.Crawford Baylay & Co., for Petitioners. Mr.G.E.Vahanvati, Solicitor General, for Respondent no.1. Mr.G.E.Vahanvati, S.G. With F.Divitre i/b. Rekha Rajgopal, for Respondent no.2. Mr.Dushant Dave, Sr.Advocate with P.K.Samdhani, Sr.Advocate , Farid Karachiwala, S.Jagtap i/b. M/s.Wadia Gandhy & Co., for Respondent no.3. Mr.Janak Dwarkadas, Sr.Advocate with N.H.Seervai, Sr.Advocate, Direndra Negi, Z.Doctor, Ms.A.Chandrachud i/b. J.Sagar & Associates, for Respondent nos.5 & 6. Ms.Vandana S. Mishra i/b. M/s.Little & Co., for Respondent no.4.

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CORAM: D.K.DESHMUKH & N.D.DESHPANDE, JJ. DATE : 5th June,2008. ---

ORAL JUDGMENT:(PER D.K.Deshmukh, J.)

1.

By

this

petition

the

Petitioner

challenges the process adopted by the Respondent No.3 beginning with the Expression of Interest and followed by issuance of Request for Proposal and culminating to in the award and of then contract to the

initially

Respondent

No.4

Respondent No.5.

2. for

The facts that are material and relevant deciding this petition are that the

Petitioner No.1 is a company incorporated under the Companies Act and having its registered

office in New Mumbai. According to the Petitioner No.1, it is engaged in the business of operating

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and

running

duty

Free

Retail

Outlets

in

International

Airports in India. The Respondent

No.1 is the union of India and the Respondent No.2 is Airports Authority of India constituted under Section 3 of the Airports Authority of

India Act, 1994. According to the Petitioners, the Respondent No.2 is owned and controlled by the Respondent No.1. The International Airport at Mumbai Airport and i.e. was Chhatrapati exclusively by the Shivaji controlled Respondent International and No.2. managed The

operated

Respondent no.3 is a company registered under the Companies Act 1956 and is a Joint Venture

Company. Respondent No.3 is a consortium of GVK Airport Holdings Pvt.Ltd.; ACSA Global Limited; Bid Services Division (Mauritius) Ltd., and the Respondent No.2. Respondent No.4 is a consortium between ALDEASA S.A. a company established and existing Tourism under the laws of Spain and Indian (ITDC)

Development

Corporation

incorporated under the laws of India. Respondent

- 4-

No.5 is a company established and existing under the laws of Singapore. subsidiary averments has Respondent of in been No.6 is a

wholly

owned to

Respondent the petition, with

No.5. the the

According Respondent objective developing,

No.3 of

created

operating,

maintaining, upgrading,

designing,

constructing,

modernizing, financing and managing Airports. The Respondent No.2 holds 26% in the equity of the Respondent Respondent control No.3. No.3 According operates to the petitioners, pervasive

under

the

of Respondent No.1 & Respondent No.2.

According to the petitioners, after the Airports Authority of India Act was amended by the

amendment Act of 2003, pursuant to the provisions of section 12A of the Act on 4-4-2006 an

agreement No.2 and

was the

executed

between

the

Respondent called the

Respondent

No.3

Operation, Management and Development Agreement (herein after referred to as OMDA) whereby and where under the Respondent No.2 leased out the

- 5-

Chhatrapati

Shivaji

International

Airport

to

Respondent No.3 for a period of 30 years. The lease is renewable for further period of 30

years. The Petitioners in the petition refer to the provisions of OMDA in detail. According to the Petitioners, on 9-10-2006 the Respondent No.3 made a public announcement in the newspapers

calling for Expression of Interest for setting up Duty free Shops at Chhatrapati Mumbai. The Shivaji

International

Airport,

Petitioner

No.1 entered into a consortium arrangement with Aer Rianta International (herein after referred to as ARI) which is a company incorporated under the laws of Ireland for the purpose of submitting the tenders pursuant to the public announcement dated 9-10-2006. According to the Petitioner, its partner ARI is a dedicated international division of the Dublin Airport authority and was the first to start duty-free business in the world. It

founded first duty-free shop at Shannon Airport at Ireland in 1947. According to the Petitioner,

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AIR

has

60

years

of

experience

in

duty-free

retailing. Its managed retail business turn over for 2006 is in excess of 900 million US$. The Petitioner and the said ARI intended to jointly bid for the tender. According the petition, this agreement to averments in and arrangement

reached between the Petitioner and the ARI is still subsisting. According to the Petitioner,

pursuant to the public announcement referred to above, the petitioner submitted its Expression of Interest along with Joint Venture Partner ARI on 11-10-2006 to the Respondent No.3, which was duly accepted. It was submitted within time and it was also accompanied by the prescribed fee. Pursuant to the Expression of Interest submitted by the Petitioner along with ARI, the petitioner was

invited to make a presentation by the Respondent No.3 on 9-11-2006 at ITC Grand Maratha Sheraton, Mumbai, Mumbai. According to the petitioner on 911-2006 the Petitioner to the satisfactorily representative made of its the

presentation

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Respondent

No.3.

According

to

the

Petitioner,

thereafter on 12-1-2007, Senior Vice President of the Respondent No.3 addressed an e-mail to the petitioner-company asking for details like sales turnover at Shops operation, international

traffic etc. It was replied to by the Petitioner. According to the Petitioner, this was the last correspondence addressed to the Petitioner by the Respondent No.3. Thereafter, there was, according to the Petitioner, No.3. no communication to the from the

Respondent

According

Petitioner,

though the Petitioner thereafter sent number of reminders to the Respondent No.3, they evoked no response. According to the Petitioner, it has not been informed either orally or in writing the decision of the Respondent No.3 in short-listing the persons to whom the tender documents would be issued. petition stunned document The Petitioner, therefore, that a thus, the stated in the was

that, to

Petitioner for

learn been

Request to the

Proposal

has

issued

participants.

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According

to

averments

in

the

petition,

the

Petitioner has learnt that the persons to whom RFP was issued are by required 23-2-2007. to submit their

bids/proposals

The

Petitioner

submitted that the Petitioner has not been asked to submit the RFP. The Petitioner feeling

aggrieved by the non-issuance of RPF document to the Petitioner, filed this petition on 20-2-2007 challenging basically the action of the

Respondent No.3 of non-issuance of RFP to the Petitioner for operating and setting up the dutyfree shop at Chhatrapati Shivaji International

Airports, Mumbai. It appears that the Petition was mentioned before the Division Bench on 22-22007. counsel The Division Bench for after hearing the the

appearing

the

Petitioner,

Counsels appearing for the Respondents Nos. 1 & 2 by order dated 22-2-2007 dismissed the petition on the ground that the Petitioner is guilty of latches in approaching the Court. That order was challenged before the Supreme Court by the

- 9-

Petitioner. The order of the Division Bench has been dated set aside by the Supreme the to Court by order has on

22-2-2008 this

and

Supreme the

Court petition

directed merits. 3. was

Court

hear

It appears that after the Writ Petition dismissed No.3 by the awarded Division the Bench, contract the to

Respondent

Respondent No.4/ITDC Aldeasa India Pvt. On 26-22007. The contract awarded in favour of the

Respondent No.4 was cancelled by the Respondent No.3 on 23-11-2007 and thereafter the contract has been awarded has been to the Respondent to No.5. The

contract because

awarded to

Respondent No.3

No.5, the

according

Respondent

Respondent No.5 was the second highest bidder. The Petitioner because of these developments

taking place after rejection of the petition by the Division Bench and during the pendency of Special amended Leave the Petition petition in and the has Supreme challenged Court the

- 10 -

awarding

of

contract

by

Respondent

No.3

to

Respondent No.5.

4.

The

Respondents The

have

filed has

their also

affidavits-in-reply. filed rejoinder.

Petitioner

In short the defence put up by

the Respondents is that the R.P.F. documents were not issued to the petitioner because the

Respondent no.3 found that the petitioner is not entitled to be short listed. It is also

contended that because the respondent no.3 is not State it is not bound by the Part III of the Constitution and is not so amenable to the

jurisdiction of the Court under Article 226 of the Constitution of India.

5.

We

have

heard

the

learned

Counsel

appearing for the Petitioner as also the learned Counsels appearing for the Respondents in detail. The parties have also filed their written

- 11 -

submissions.

6. Counsel

Shri

R.F.

Nariman, for

the

learned

Senior No.1 for

appearing that the

the

Petitioner which arise

submitted

issues

consideration in the present Writ Petition are: (i) Whether the Respondent No 3 Company, MIAL, is State within the meaning of Article 12?

(ii) Whether, even if it is not State, is it amenable to the writ-jurisdiction under

Article 226 of the Constitution?

(iii)

Whether the Invitation for Expression of is and so designed complete as to introduce and

Interest inherent

arbitrariness

unreasonableness

in the whole tender process

in that inter-alia, (a) it does not set out any criteria, much less definite, clear and objective Expressions criteria, of for evaluation (b) it does of not

Interest;

specify the absolute or relative importance, if any, of experience, turnover or the

financial offer ;(c) it expressly states that the final be criteria determined used by for MIAL short-listing in its sole

would

- 12 -

discretion; (d) it provides for short-listing (without even specifying the number to be

short-listed) thereby denying opportunity to all persons interested to submit their bids and thereby provide a level-playing field; (e) it provides for MIALs right to accept or reject any or all offers at any stage of the process and/or modify the process at its sole discretion, whatsoever? without assigning any reason

(iv)

Whether

the

impugned

process

beginning

with the Invitation, Expression of Interest, the exclusion of the Petitioners consortium from the bidding process, the issuance of the RFP to four parties, culminating in the

award of the contract to a fifth party, the Respondent Respondent No. No. 4 5 and is thereafter by to lack the of

vitiated

transparency which is the sine-qua-non of the tender process in the realm of public law for public utility services functioning in the public interest?

(v) Whether MIAL acted most arbitrarily in shortlisting only four parties and then issuing the bid-document to a fifth party

(ITDC/ALDAESA) well after the last date for

- 13 -

issuance contract

thereof, to it on

hurriedly 26th

awarding 2007,

the the

February

very date on which the Special Leave Petition was filed in the Supreme Court even though the scheduled date for awarding contract was 7th March 2007, and then cancelling the

contract on 24.11.2007 , and lastly, awarding the contract to DFS (Respondent No. 5) on

29.11.2007,without calling for fresh tenders and considering afresh the claims of all

others, including the Petitioner?

(vi) Whether the grant in favour of the Respondent Nos. 5 & 6 which is contrary to the express terms of the RFP (tender document) is

sustainable, legal and valid? (vii) Whether the decision to deny even the opportunity to the Petitioners consortium to bid for the contract for dutyfree retail shop, particularly when the offer i.e. Expression of Interest, is not expressly rejected for stated reasons is wholly arbitrary, unreasonable and unjust?

7. that

The the

learned

Counsel No. 3 is

further a

submitted Venture

Respondent

Joint

Company in which 26% shareholding is held by the Airports Authority of India(AAI) and this gives

- 14 -

control

to

the

AAI

over

vital

matters

which

require 3/4th majority. Respondent No. 3 has been specially incorporated inter alia with the

objectives of operating, maintaining, developing, designing, constructing, upgrading, modernizing, financing and managing the Airport . Airport is defined in Clause 1.1. of OMDA to mean the The

Chhatrapati Shivaji International Airport.

learned Counsel submitted that the Respondent No. 3 is the lessee of the AAI under Section 12-A of the Airports Authority of India Act, 1994, as amended in 2003, which provides that some of the functions of the AAI may be transferred to the Respondent No. 3 and that the said Respondent No. 3 shall have all the powers of the AAI in the performance of any such functions in terms of the lease. Lease MIAL was granted lease on 26.4.2006 vide Deed. The operation, maintenance and

development of the airport is governed by OMDA executed between the AAI and MIAL. The

relationship between the shareholders is governed

- 15 -

by

the

Shareholders into between

Agreement the

dated

4-4-2006 of MIAL

entered

shareholders

including AAI. The governmental services to be provided to MIAL is governed by the State Support Agreement dated 26-4-2006 entered into between

MIAL and the Government of India. It is further submitted by the learned Counsel that Respondent No. 3 is a Joint Venture Company. In a joint venture shares, Company 50% and where over the makes government the holds a

company

Government Company and therefore State, under Article 12. Mere reduction of the shareholding below 50% does not make it a purely private company outside Article 12. proposition he relied on In support of this the judgment of the

Supreme Court in the case of Amar Alcohol Ltd. V/s. SIICOM Ltd. 2006 (10 SCC 199). Clearly

therefore, he submits MIAL is a special purpose joint venture 12 A Company and is formed not a only because of

Section

purely

private

Company. There is public- private participation

- 16 -

right from the inception of the Company.

8.

The learned Counsel took us through the

relevant provisions of OMDA as also the State support agreement and the provisions of the Act. Then the learned Counsel submits that Section 12 of the Act delineates the functions of the

Authority and under Section 12 (3) thereof, the specific functions of AAI have been mentioned. Section 12-A (1), introduced by Act 43 of 2003 , begins with a non-obstante clause and empowers the AAI of in the public interest of or in the to

interest

better

management

airports

make a lease to carry out some of its functions under Section 12. This lease requires the

previous approval of the Central Government under sub-section (2). Under sub-section (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 functions in terms of the

- 17 -

lease. Therefore, the Respondent No. 3 carries out and performs the functions of the Airports Authority of India imposed upon the Authority by the Parliamentary enactment. A lease has been

executed between the Airport Authority of India and MIAL dated 26.4.2006 whereby Chhatrapati

Shivaji International Airport has been leased to the Respondent No.3 for a period of 30 years from the effective date and for a further period of thirty years . It is this Lease dated 26.4.2006 It is under assigned

which makes Section 12A operational. this provision that MIAL has

been

functions by the OMDA and granted a lease.

9.

It is submitted that the scheme of the

Act discloses that, in essence and truth, the lessee under Section 12A of an existing airport carries out the functions of the Authority and enjoys the powers necessary to carry out such functions. Such an entity functions exercising is clearly such an

public/governmental

- 18 -

instrumentality or agency of the State and is covered by Article 12. It is submitted that

Section 22-A empowers the Authority to levy on and collect from embarking passengers,

development fees for the purpose of clauses (b) and (c) viz. establishment or development of a new airport in lieu of the airport referred to in clause (a) and for investment in the equity in the shares to be subscribed by the Authority in Companies developing, engaged operating in or establishing, maintaining a owning, private

airport Thus money is collected from the airtraveling public under law for the funding of the new airport and for the Authority to acquire

shares in the company setting up the same or for developing or maintaining an existing airport

leased under Section 12 A.

Fee under Section 22A

can be appropriated by MIAL because it functions in place of the Airport Authority of India. He further submited that Chapter VA Section 28 A to Section 28 R) (comprising of provides the

- 19 -

procedure for eviction of unauthorised occupants of airports. The provisions are on the lines of the Public Premises (Eviction) Act. Thus the

property of the airport is public property even when given on lease and the lessee can resort to the provisions for eviction, without having to file a regular Civil suit. This section is a

strong and powerful indicator that airports are public premises and the company running them is State because if it were not so, the Company would never have been allowed to avail of the summary power of eviction and would instead have been relegated of to the ordinary civil law for or

eviction trespassers. of

unauthorised

occupants

Section 37 authorises the issuance by AAI to person or or persons any

directions in

engaged airport,

aircraft

operations or

using

heliport,

airstrip

civil

enclave

under specified clauses of Section 5(2) of the Aircraft Act, 1934, under which Rules have been framed in the Aircraft Rules,1937.

- 20 -

10. judgment

The of

learned the

Counsel Court

relied in the

on case

the of

Supreme

Ashoka Marketing Ltd. V.s,. Punjab National Bank (1990) 4 SCC 406 and submitted that the Honble

Supreme Court of India in its judgment in the case Ashoka Marketing Ltd. referred to above has while considering the provisions of of the

Public

Premises

(Eviction

Unauthorised

Occupants) Act, 1971 referred to its judgment in the case of Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay. Counsel judgment submits were that made the in The learned in of that the

observations the context

provisions of the Bombay Rents, Hotel and Lodging Houses Rates (Control) Act, 1947 whereby

exemption from the provisions of the Act has been granted to premises belonging to the Bombay Port Trust. The consequence of giving overriding

effect to the provisions of the Public Premises Act is that premises belonging to companies and

- 21 -

statutory bodies referred to in clauses (2) and (3) of Section 2(e) of the Public Premises Act would be exempted from the provisions of the Rent Control Act. The actions of the companies and statutory bodies mentioned in clauses (2) and (3) of Section 2(e) of the Public Premises Act while dealing with their properties under the Public Premises Act will, therefore, have to be judged by the same standard.

11.

The learned Counsel submitted

that the

Petitioner has the largest experience of running duty-free retail shops at international airports in India and its partner Aer Rianta, which,

according to the Petitioner, opened the worlds first Airport ever in duty-free Ireland in retail 1947, in is shop has this at the Shannon largest At 13

international present the

experience Petitioner

field. at

operating

international airports and running 37 duty-free retail shops. Inspite of this, MIAL has excluded

- 22 -

the Petitioners consortium at the threshold and prevented it even from bidding for the contract, without even rejecting their offer. It is

submitted that, ex-facie, the action of the MIAL is arbitrary and illegal.

12.

No

reason

has

been

assigned

by

the

Respondent No.3 to the Petitioner herein and none of its letters were replied or responded to by the said Respondent No.3. There is complete lack

of transparency in the Tender process and the absence of criteria in the EOI has given MIAL unbridled and arbitrary powers to act according to its whims and fancies.

13.

The

learned No.3 is

Counsel an

submits

that of

the the

Respondent

instrumentality

State within the meaning of Article 12 of the Constitution definition of of India. State He in submits Article that 12 is the an

the

inclusive one. The Article says includes, not

- 23 -

means or means and includes. What is included is allother authorities within the territory of India or under the control of the Government of India. The learned counsel referred to the

observations of the Supreme Court in the case of Rajasthan State Electricity Board v/s. Mohan

Lal, AIR 1967 SC 1857 ; and the

judgment of the

Supreme Court in the case of Pradeep Kumar Biswas v/s. IICB, (2002) 5 SCC 111. The learned Counsel then took us through the judgment of the Supreme Court in the case 1 of SCC Sukhdev 421, Singh v/s. the

Bhagatram, judgment of

(1975)

specially

Justice Mathew. The learned Counsel

pointed out that on the same day on which the Supreme Court decided Sukhdev's case, the same Constitution Bench held in Sabhajit Tewary v/s. Union of India (1975) 1 SCC 485 that the Council of Scientific and Industrial Research was not

'State'. It was pointed out that

the view taken

in the Sabhajit's case was later over-ruled by a Seven Judges Bench in Pradeep Kumar Biswas's

- 24 -

case. The learned Counsel also took us through the judgments of Ramana of the Supreme Court in the case Shetty v/s. International

Dayaram

Airport Authority of india and ors, (1979) 3 SCC 489 and the judgment in the case of Ajay hasia v/s. Khalid Mujib (1981) 1 SCC 722. The learned Counsel Supreme relying Court on in the all observations the above of the

referred

judgments submitted that the Respondent No.3 is the instrumentality of the State. The learned

Counsel also took us through the judgment of the Supreme Court in the case of v/s. Union of India, (2005) Zee Telefilms ltd. 4 SCC that 649. The

learned Respondent State, it

Counsel No.3 is is

submitted an

because of of the the

instrumentality by Article 14

bound

Constitution, and therefore, its conduct of not issuance of RPF to the Petitioner and awarding contract to the Respondent No.5 is liable to be set aside being violative of Article 14 of

Constitution. The learned Counsel also relied on

- 25 -

the judgment of

US Supreme Court in the case of

Burton v/s. Wilmington Parking Authority, (1961) 6 L.Ed. 2D 45 and in the case of Evans v/s.

Newton, (1966) 15 L.Ed.2d. 373, and in the case of 49 Jackson v/s. Metropolitan Edison Co. (1974) L.Ed.2d and 477 and are submitted obliged that to where the and for

State maintain

AAI

provide for

airports air

adequately travel

equipped which

international

necessarily

involves providing for a superlative duty freeshop and this function is delegated to Respondent No.3 under Section 12A and the Respondent No.3 assumes it voluntarily than the Respondent No.3's actions are State actions. The learned Counsel, then, submitted that the following factors in the present case show that the Respondent Nos. 1, 2 and 3 are joint No.3s actors actions and are therefore amenable to the the of

Respondent writ

jurisdiction

including

application

Article 14:

- 26 -

1.

Even though Respondent No.3 is a company registered functions developing Airport under in the companies Act, its and

operating, Mumbai be

managing

the

International Purely with the

cannot

characterized OMDA read

Private.

Indeed,

Shareholders Agreement and the lease deed specifically being a speak of Respondent between its there into No.3

Joint of In

Venture India

Airport private is an

Authority partners. agreement

and

addition, entered and

directly

between No.3,

the Union of India

Respondent

which is called State Support Agreement. The documents produced on record therefore clearly show that Respondent No. 3 is a Joint Venture company supported by the

Union of India in operating, managing and developing the Mumbai International

Airport on property that is owned by the Airports Authority of India i.e. Public

- 27 -

property. 2. Respondent No.3 in fact performs statutory functions and exercises statutory powers under the Airport Authority of India Act, 1994; it performs the Airport Authority of Indias statutory functions of operating, managing International powers of and developing and Mumbai the for or

Airport the

exercises Authority assigned

Airport functions

performing

the

delegated to it.

Under Section 12A of the

said Act, it is not a simple lessee of public property. The lease with

Respondent No.3 has to be made with the previous Government. approval All of the payable Central by the

moneys

lessee in terms of the lease made under Section 12A is to form part of the fund of the Authority and is to be credited

thereto as if such money is the receipt of the Authority for all purposes of Section

- 28 -

24. Thus, the moneys payable by the lessee to the Authority funds. is are public money the and

public

Further, given all

lessee of the

statutorily

powers

Authority necessary for the performance of its functions in terms of the lease. Thus, Respondent No.3 is a lessee under a

statutory lease exercising Governmental or public functions. 3. It is because Respondent No.3 performs

Governmental functions that Chapter VA of the said Act applies to it and it can just like Government use summary procedure to evict unauthorized occupants on the area leased to it without following the rigor of the Rent Act. This shows unmistakably

that Respondent No. 3 is State for the purpose of Article 12. 4. The Government has a large financial stake not only does the Airport Authority of India own 26% of the paid up share capital

- 29 -

of

Respondent but

No.3

(which be

can

never

be the

reduced

can

only

increased)

Respondent No.3 has to give 38.7% of its gross revenue quite apart from the down

payment made by way of consideration for the grant of the lease to Airport

Authority of India. 5. OMDA clearly shows that for the purpose of operating, managing and developing Mumbai International Airport Respondent No.3 has been conferred a monopoly status it

alone may exclusively perform all these functions and indeed cannot perform any

other function. 6. That Government exercises control in

various ways is clear 26% of the share capital of Respondent No.3 is held by the Airport therefore Authority block of any India, Special which can

Resolution

that is to be passed under the Companies Act. Further, no change in the Memorandum

- 30 -

of Association or Articles of Association of the company can be made unless Airport Authority of India gives its consent,

since it can block a special resolution. Both under the State Support Agreement and under OMDA, a by with Master Plan has to be in out.

formulated accordance

Respondent the criteria

No.3 set

After the Master Plan is so formulated a final Master Plan can the only come into makes which on and

existence comments comments Respondent other

after and and

Government changes, are

suggests changes

binding monthly

No.3.

Further, of the

reports

day-to-day

functioning of Respondent No.3 have to be submitted by Respondent 3 to the Airport Authority OMDA and of the India. The fact that the say

Shareholders

Agreement

that no agency is created is neither here nor there. Control is not exercised by way

- 31 -

of

agency

but

by

way

of

what

has

been

submitted above. 7. It is obvious that the Government and

Respondent No.3 are jointly interested Joint Coordination Committees have to be set up both for Government services as

well as Airports services and it is here that it is again No.1 to 3 have clear that Respondents to function

necessarily

together in running the Airport 8. OMDA the itself granting specifically of states that in

sub-contracts

Respondent

No. 3 has to do so fairly, objectively and without State discrimination as traditionally in short the

defined

insists

that Respondent No. 3 be subject to the same constitutional obligations under

Article 14 as the State is itself subject to. 9. Under the State Support Agreement, fees

that are statutorily levied and collected

- 32 -

under Section 22A of the 1994 Act are to be paid to Respondent No. 3 in fact, 35% of the fees so collected by the collecting agency that is the airlines have to be paid directly to Respondent No. 3. again makes it clear authority collecting distribute of the This

that the sovereign in levying in order of it and to to

State

fees is utilized a large part

Respondent No.3. 10. OMDA says that whenever contracts are

entered into by the Respondent No. 3, such contracts must contain a clause stating

that all contractual rights are to stand transferred automatically to the Airport

Authority of India under certain specified circumstances. 11. Even going by the six criteria laid down in the International Airport Authority

case the Respondent No.3 would be State under Article 12.

- 33 -

i)

26%

of

the is

share held

capital by the

of

the

company

Airport

Authority of India i.e. Government. ii) Financial involvement is great even though financial assistance may not be given in the facts of the present

case, 38.7% of the gross revenue of Respondent No.3 is to be given to the Airport Authority of India which in

turn is to put the money in the fund created under the 1994 Act. iii) Respondent No.3 enjoys monopoly

status, which is statutorily conferred and State protected. iv) Existence of deep and pervasive State control is clear from the fact that Master Plan and Major Development Plan can only be in accordance with what the State wants in short, operation, maintenance and development of Mumbai International Airport is only to be

- 34 -

along Further,

Central the

Government Airport

lines. of

Authority

India is entitled to get monthly and other reports of the day to day

functioning of Respondent No.3. v) The functions of Respondent No.3 are certainly of public importance they are vital to the tourist trade of the country. Section 2(i)(iii) of the

Essential Services Maintenance Act, of 1981 makes it clear that any service connected maintenance essential with of service the operation is or an vital

aerodrome which has

bearing on the life of the community. Further, No. 3 the in function operating, Mumbai also of Respondent and

managing

developing Airport is

International related to

closely

Governmental functions as the airport is a conglomerate of various sovereign

- 35 -

functions immigration, intertwined importance. vi) Specifically,

such etc. with

as

customs, which are

functions

of public

the

powers

and

the

functions of the Airport Authority of India, which and in the is a a Statutory of is

Corporation Government

department wider sense

transferred by and under the Airport Authority of India Act 1994 to the

Respondent No.3. 12. That these six criteria are not exhaustive but merely illustrative is clear and in

the present case the additional criteria pointed out above, viz., the application of Chapter VA of that is the summary

procedure

evicting

unauthorized

occupants; the joint action taken by Joint Coordination provision in Committees; OMDA that the express No.3

Respondent

- 36 -

cannot behave discriminatorily in awarding sub-contracts; the fact that 35% of

passenger service fee is paid directly to Respondent No.3; the fact that all

contracts entered into by Respondent No.3 must compulsorily contractual of have rights in clauses to the

transferring Airport

Authority

India

certain

circumstances

would all go to show that

State action is writ large in the present case.

14.

The

learned

Counsel

submits

that

the

very purpose of calling for bids is to ensure that as many bidders as possible submit their bids so that the best among them may be selected. The final criteria for short-listing were to be decided in MIAL sole discretion. No preliminary criteria are mentioned anywhere; in fact no

criteria or norms are at all mentioned and the information in the EOI are not clear, certain and

- 37 -

objective. The manner of evaluation has not been stated at all as to what will would be be the

determinative

factors

which

considered

for deciding who will be shortlisted or who will be awarded the contract eg. a certain minimum turnover, a certain minimum experience, and that the maximum experience or turnover will be the basis. Nothing is stated about the absolute,

relative or decisive importance of any factorsexperience or turnover for short-listing or

awarding the contract. There is total uncertainty about the norms and decisive factors. And this is compounded by the arbitrary power claimed by MIAL to decide the final criteria in their sole

discretion and to change or modify the process at any time. Power is also claimed to reject any offer or bid without assigning any reasons. The EOI is thus designed and calculated to make the competitive inherently bidding irrational process and completely of and fair-

destructive

play, rule of law and the public interest. The

- 38 -

EOI is framed in such a fashion as to allow MIAL to act arbitrarily, whimisically and unreasonably and also it is actively designed to prevent

fairness and objectivity in the selection process and to cast an opaque shroud over the arbitrary procedure and acts of MIAL . The EOI specified 3 criteria for evaluation experience and in viz. the (i) prior area, and

international (ii)

relevant capability

financial

commercial

(iii) past experience similar situations .

in increasing revenue in In the counter affidavit

dated 6.12.2007 filed before the Honble Supreme Court, the Respondent taken as a No. whole 3 mentioned which 10

criterions

allegedly

formed the basis of evaluation and short listing namely : The total turnover of the

bidder for the least 3 years. The total space managed. The total airport duty free

sales.

- 39 -

Total airport duty free sales under concessionaire type

agreements. Total airport duty free sales under management contract/nonconcessionaire type agreement. Asian airport presence and

experience. Asian duty free sales. Type of merchandise sold. Number of international Indian passengers. Customs inquiry resulting in

adverse findings or payment of penalty.

In

the

Additional

Affidavit

dated

20.2.2008 filed before the Honble Supreme Court, the Respondent No. 3 averred that three critical elements as concession turn over, were identified experience of

- 40 -

space managed and total turn over formed the basis for short listing three critical elements have

which which been

reiterated in the Affidavit in Reply dated 31.3.2008 filed before this Court. The

Respondent No. 3 further claims that it had the power under the EOI to determine the final criteria for short listing at its sole discretion. It is submitted that it is not permissible to change the rules or the criteria of selection either during the selection process or after the

selection process or to add an additional requirement or criteria. Counsel Supreme relied Court on in a the The learned of the

judgment case of

Hemani

Malhotra Vs. High Court of Delhi 2008(4) SCALE 645. He further submits that the

non-issuance of the tender document to the Petitioners consortium tantamounts to

total denial of a fair opportunity to the

- 41 -

consortium to participate in the bidding process. The Petitioners consortium has simply been excluded from the bidding

process without even rejecting its offer. No reasons whatsoever were ever

communicated; in fact, there was not even a communication of rejection of the offer. The process adopted was extremely high-

handed and whimsical. MIAL did not adhere to its own time-schedule in that four

parties were reportedly short-listed and the last date for issuing the RFP (tender document) was 19.1.2007 RFP to ITDC/ALDAESA ( MIAL issued the Respondent No. 4

which was not among the four short-listed) on 29.1.2007. It is submitted that one of the four Dufry- did not submit its bid. Immediately petition awarded by the after this the dismissal MIAL of the

Court, to

hurriedly on

contract

ITDC/ALDAESA

26-2-2007 on the very day that the Special

- 42 -

Leave Petition under Article 136 was filed so as to make out a case against grant of interim orders by the Honble Supreme

Court. This was done even though the last date for award of contracts was 7th March 2007. That contract was later cancelled on 24.11.2007 because of alleged labour

problems of ITDC and that ITDC could not fulfill its commitment. MIAL then simply awarded the contract to the Respondent

No.5 without calling for fresh tenders and the grant in favour of the Respondent No. 5 is contrary to the terms of the RFP. Clause 3.1 of the RFP has not been

triggered. Assuming arguendo that Clause 3.1 has been triggered, even then there is no power or provision to give the contract to the second No. highest 3 is bidder but to the

Respondent Section

obliged

follow and

III.

The

Petitioner

states

reiterates that the Expression of Interest

- 43 -

submitted by the Petitioner, and its joint venture partner Aer Rianta International, fully met the criteria laid down. The

Petitioner and its joint venture partner together have vast experience domestic in and

international

airport

retailing, strong relation and access to international as well as domestic brands and proven track record in and providing retailing The

quality sector

services

duty-free in

particularly

India.

Petitioner has the highest experience in India and has full understanding of Indian consumer. that the The facts clearly bidding and demonstrate process anything is but

entire

completely transparent. a

arbitrary

Everything has been done in manner that is highly

secretive

suspicious. The absence of any criteria at all, when legal certainty was required in the criteria which can be objectively

- 44 -

applied in making the decision of short listing and awarding contract, renders the entire process opaque i.e lacking in

transparency and allows MIAL to pick and choose any party it wishes for unknown and wrong reasons and exclude others from

competition for extraneous and irrelevant considerations. also encourages This not only permits but (and has encouraged and

resulted in) complete arbitrariness in the decision making process. There was no

justification to restrict the issuance of the Tender documents or not to to issue the 9

Tender bidders There

documents who is had no

(RFP)

all their

submitted rational

EOIs. or

basis

justification to resort to shortlisting as shortlisting is resorted to in cases where the number of applicants or participants are so large in number as the procedure of shortlisting is only a practical via

- 45 -

media

in

cases is

where and

the

number

of

applicants difficulties appointing

large for

would selecting 9

impose and

the

authorities.

participants

for a duty free tender cannot be by any stretch of imagination be held to be large so as to require that shortlisting. process has It is been

submitted

this

adopted and applied so as to exclude the Petitioners consortium from the fray,

knowing fully well that were it allowed to bid, it would have had the best chance of bagging the contract by offering the best proposal. This apprehension of MIAL stems

from the Petitioner's track record which undeniably is the best in India and, along with its partner who has the largest

experience internationally, and hence, the bid would have been hard to reject and the rejection would have been hard to defend. The procedure adopted by the MIAL is

- 46 -

against

the

prescribed of

and awarding law.

well of The

established tenders/

principles in

contracts

public

impugned action is not only prejudicial to the Petitioners consortium but would also adversely affect the larger public

interest since fair competition has been sought to be The excluded learned at the very also

threshold.

Counsel

relied on the observations of the Supreme Court in its judgment in the case of

Reliance Energy Ltd. Vs. Maharashtra State Road Development Corporation , (2007) 8 Supreme case of

SCC 1 and the observations of the court in its judgment in the

B.Ramakichenn Alias Balgandhi V. Union of India learned & ors., Counsel and that 2008 took counter there (1) us SCC 362. The the and

through

affidavits submitted

affidavits are

glaring

contradictions in the affidavits filed by

- 47 -

the Respondent No.3. The learned Counsel also submitted that awarding of contract to Respondent No.5 without inviting fresh bids is contrary to the terms of RFP.

15. Counsel

Shri also

Vinod

Bobde,

the for

learned the

Senior

appearing

Petitioner

submitted that in the alternative even if it is assumed that the Respondent No.3 is not an

instrumentality of the State, still its action can be subjected to judicial review under Article 226 of Constitution of India. He submits answer to the question whether an entity the is

amenable to the writ jurisdiction of this Court under Article 226 of Constitution of India

depends on two things: (a) the wide language in which Article 226 is couched, and (b) the nature of the functions or duties performed by the

entity i.e. whether they are public functions or purely private. He then submitted that 226 empowers the High Court to Article the

issue

- 48 -

specified writs or even orders or directions in the nature of those writs to any person or

authority, including, in appropriate cases any Governmentfor the enforcement of fundamental

rights or for any other purpose. There is no mention of the word State. The words any

Government were added apparently to remove any doubt because during the 19th century and early 20th century, the prevailing view in England was that the writ of mandamus could not issue

against the Crown. Furthermore, the word person is deliberately used. A person may be a natural person or a juristic entity such as a company or a society. Whenever, public therefore, or a person or is is

performing

duties

functions

acting in the public interest, the actions of such a person were always intended to be

amenable to judicial review by the High Court under Article 226. Article 226 is available not just for enforcement of fundamental rights but for any other purpose so that any legal right

- 49 -

can be enforced thereunder or the due discharge of a public duty commanded unless the High Court, in its discretion, considers that disputed

questions of fact are involved and the matter is best relegated to a civil suit, or it considers that there is an equally speedy and efficacious remedy. or Wherever there is a right in some person there of is a corresponding person or duty or For

entity,

obligation

another

entity.

example, in private law, the duty to take care and not to be negligent existed in the law of torts. The right to prevent trespass on property similarly existed. In the realm of public law, persons and bodies performing public functions

are under a duty not to infringe the rights of people. The legal rights and duties enforceable under Article 226 are not merely those which are statutory. There are also rights under common law or judge-made law, customary law or any other form of law. For example, rules of natural

justice have been judicially evolved as law and

- 50 -

have their origin in Roman law.

Another such

legal right is the human right to be protected from arbitrary, unreasonable and unjust action. It is submitted that every person has the legal right to be treated equally, not discriminated against, and be dealt with justly, fairly and reasonably. The basic principle underlying the

equality clause was called by Vivian Bose J. a way of life. It is submitted that a way of life does not spring from a Constitution or law. The right to be treated equally is so basic to human life that it is a right which is always justiciable, whether in a civil court, or High Court under Article 226. What Article 14 does is to guarantee that right by an injunction to the State not to deny equality before the law or the equal protection of the laws. The right to

equality inheres in the right to justice, being a human right, is itself all a basic The right writ and of

comprehends

almost

rights.

mandamus is designed to reach injustice wherever

- 51 -

it is found. The learned Counsel in support

of

his submissions relied on following judgments of the Supreme Court.

i.Dwarkanath v/s. I.T.O. AIR 1966 SC 81; ii.Rohtas industries v/s. Rohtas Industriest

Staff , 1976 (2) SCC 82; iii.Anandi Mukta sadguru v/s. V.R.Rudani (1989) 2 SCC 691; iv.Unnikrishnan v/s. State of A.P. (1993) 1 SCC 645; The learned Counsel heavily relied on the

observations of the Supreme Court in its judgment in the case Zee Telefilms Ltd. v/s. Union of

India, (2005) 4 SCC 649 and in the case of Binny Ltd. v/s. Sadasivan that the (2005) 6 SCC 657. He

submitted that

above

decisions

demonstrate when the

public

function

is

performed

result is some collective benefit for the public or a section of the public so that a private body intervening or participating in economic or

- 52 -

social

affairs

in

the

public

interest

are

amenable to the writ jurisdiction under Article 226. It is clear that the establishment,

operation and maintenance of airports is a public and governmental function performed for the

benefit of the public, and has always been so, historically and traditionally. That it is an

important public function is recognized by the Essential Services Maintenance Act, 1981. The Act of 1994, even as amended in 2003, particularly, Sections 12, 12-A, 22-A and Chapter V-A leave no manner of doubt that MIAL performs the public functions and duties of the AAI and exercises the powers of AAI for that purpose. Participation in economic affairs in the public interest may, and often does, involves commercial or business activity in the public interest. A public

function may be performed on a non-profit basis or by operating on commercial lines for profit. MIAL performs a public function in the public interest in providing for Duty Free Shops and

- 53 -

other amenities and facilities and the airport. In the discharge of its public function, MIAL is obliged to act fairly, reasonably and justly so that when it chooses to give a contract for any particular activity at the airport which is for the benefit of the public, it must choose the person by open competition, according to

objective and clear norms, and its actions should be transparent. MIALs actions are amenable to judicial review under Article 226.

16. The learned Counsel submits that the judicial review is available not merely when fundamental rights are infringed but also when a body or

entity having public duties and functions acts unreasonably, unjustly, irrationally, mala-fide, arbitrarily or in violation of natural justice or otherwise illegally in innumerable ways. He also relies on the observations of the Supreme Court in its judgment General in of the case of Comptroller &

Auditor

India

v/s

K.S.Jagannadhan

- 54 -

(1986) 2 SCC 679.

He submits that a challenge to

arbitrary and irrational or mala-fide action can be laid in a writ petition without invoking Article under Article 226

14. He relies on the

observations of the Supreme Court in its judgment in A.S.Ahluwalia v/s. State of Punjab, (1975) 3 SCC 503 as also in the case of R.D.Shetty

referred to above. He submitted that the same view that has been reiterated by the Supreme

Court in the case of B.Ramakichenin v/s. Union of India, (2008) 1 SCC 362.

17.

The

learned

Counsel

submits

that

importance of giving reasons for a decision, even an administrative is one the in the exercise to of give

discretion,

that

obligation

reasons acts as a check on arbitrary exercise of power. The total absence of reasons in any formal document of evaluation, the admitted non-

communication of any reasons to the Petitioners consortium, and the ever-shifting, contradictory

- 55 -

and untenable stands taken in the five affidavits of MIAL, clearly point to the fact that MIAL has acted in a grossly arbitrary manner from start to finish of the whole process beginning from the Invitation for Expression of Interest to the

ultimate award of contract to Respondent No.5. Apart from being arbitrary, it is contrary to the public interest since for months, MIAL tolerated the consortium of ITDC/ALDAESA from 26-2-2007 to 24-11-2007 which did not put up a duty-free shop resulting in a tremendous loss of revenue to MIAL and therefore the AAI and Central Government.

MIAL sat back while the consortium kept reducing its financial offer to Rs. 348 crores spread over four years. It is only on 29-11-2007 that MIAL gave the contract to Respondent No.5 on a much reduced financial bid of Rs. 388 crores spread over four years instead of Rs. 488 crores over three years. MIAL has not answered why such a course was followed. Failure to start a fresh tender process expeditiously instead of, firstly,

- 56 -

taking nine months of inactivity by Respondent No.4 and not cancelling their contract earlier, and, secondly, quietly handing over the contract to Respondent No. 5 on a substantially low bid affects the public exchequer and therefore the public interest. Reasons for excluding from the bidding process mean reasons which state why and how the Petitioners consortium was found wholly unworthy of being short-listed i.e. what is it that the Petitioners consortium lacked in terms of the criteria set out, what were its demerits, how it was disqualified. In other words, reasons for a decision, in law, involve the indication of consideration factors which of lead the to relevant the and objective Admittedly,

result.

there is no clear statement by MIAL as to what were the final criterea it is impossible to for short-listing. Thus that there were any

say

objective criteria at all which were objectively evaluated. There is not a single document either recording the process of evaluation either by the

- 57 -

Respondent No.3 Company or by a Committee which was formed to evaluate the Expressions of

Interest received, or indicating in any manner the reasons for the decision to eliminate the Petitioner from the bidding process. Lawful

reasons have to be clear, cogent and certain; they cannot be vague, from unclear loose and such as in to an

require

inference

language

affidavit. It is only conjectural to infer that because four out of nine were shortlisted, the

four were found better than the two left out; but nothing is clear as to the grounds on which this was done. The legal meaning of reasons is

disclosing the grounds for preferring the four and disclosing what was the demerit or lack of capacity or disqualification which the ousted

person suffered from.

18.

The learned Counsel further submits that

the Respondent No.3/ MIALs principal submissions may be summarized as follows:

- 58 -

(a) As soon as the functions of the AAI are transferred to MIAL under Section 12-A, they cease to be public functions and become

private functions. (b) MIAL is not acting for the public benefit or in the public interest but is acting for its own benefit and interest as a commercial organization out to make profits. (c) Under Article 226, only statutory duties can be required to be performed, not public duties. No writ lies against a company. (d) Contractual rights cannot be enforced

under Article 226. (e) Delay, waiver, acquiescence and the

equities arising in favour of Respondent No. 5 are enough to dismiss the petition. (f) Non-disclosure of the petition filed

against Bangalore International Airport Pvt. Ltd. He submits that none of the above submissions (a) to (f) merit acceptance. As regards (a) it

- 59 -

requires

little

argument

to

show of cannot

that

the

assignment/transfer/delegation functions of the AAI to MIAL

statutory possibly

change the nature of the functions. The functions continue performed to by remain the public Joint functions now being as a

Venture

Company

public- private partnership. The functions are from amongst those enumerated in Section 12 and their remain character the as public As functions, (b), in law, is

same.

regards

there

nothing antithetical between doing business for profit-making and performing public functions. It is clear from Sections 11 and 25(2) of the Act of 1994 that AAI is under a statutory obligation to function on business principles and to have its own Fund and to give the profits made to the Central Government. Plainly, this does not

detract from the fact the AAI performs public and statutory functions and it is some of these

functions that are assigned to MIAL. As regards (c), as already submitted, historically, mandamus

- 60 -

was issued in England for the proper performance of public duties, not just statutory duties, and this is settled law in India for the purposes of Article 226. The law was initially enacted in Section 45 of the Specific Relief Act, 1877.

Article 226 is much wider than the English law of writs and reaches any person or entity that is performing public duties. Zee Telefilms is a

Constitution Bench authority for the proposition that if the duties of a private body duties, Article 226 is available are public against the

actions of that body. that

Moreover, it is submitted duties of the AAI are

the functions and

statutory and it is those statutory functions and duties, along with powers to perform them, that have been assigned or delegated to MIAL. It can therefore statutory be said and that MIAL is which performing are also

duties

functions

public functions and duties. Several only decisions were duties cited are to indicate that by

statutory

enforceable

- 61 -

mandamus.

In

the

first

place

this

was

an

erroneous view taken in ignorance of the existing law on enforcement of public duties. In the

second place, all these cases are swept aside by the later decisions particularly Anadi,

Unnikrishnan, Binny and the Constitution Bench in Zee Telefilms. Reliance was placed on Praga

Tools (Two Judges Bench) to contend that no writ lies against a company. This decision has been held to be no longer good law in Air 377 India (Three

Statutory

Corporation,

(1997)9

SCC

Judges Bench). case where

As regards (d), this is not a rights being arising sought from to a be

contractual contract are

concluded

enforced; it is a case where the public tender process functions adopted is by a body performing as public

being

questioned

arbitrary.

Several decisions were cited but they dealt with rights arising from a contract and are therefore irrelevant. The situation here is wholly similar to that which obtained in the International

- 62 -

Airports Authority of India case which dealt with award of contracts by the Authority by inviting tenders. The only distinguishing factors- which make no difference in law at all are that the award of contract was for a restaurant and snack bars and here it is for a duty-free shop and the award is made by an assignee the of the Airports itself.

Authority,

instead

of

Authority

There cannot be waiver of fundamental rights. See Olga Tellis (1985)3 SCC 545. As far as the

legal right of the Petitioners consortium and the public duties and functions of MIAL are

concerned, there has been no waiver. Nothing has been shown as to how the Petitioner waived its rights or waived the performance of public duties by MIAL. It was urged that having participated in the process and by submitting giving a an Expression of and

Interest

then

presentation

furnishing all required information, without any complaint against the terms of the Invitation, the Petitioners consortium is estopped from

- 63 -

challenging the same. What is invoked is really the Scottish which of doctrine is of approbate to the is and

reprobate doctrine equitable

equivalent The

English that no

election. can

answer a

doctrine

impede

constitutional

remedy. Reliance was placed on the Judgment in the case of P.R.Deshpande Vs. Maruti, (1998)6 SCC 507. Furthermore no so-called equities

can be pleaded by MIAL or the Respondent No. 5. since the contract was awarded as late as 24-112007 when the Court. matter was sub-judice Respondents in the have

Supreme

These

consciously taken the risk with full knowledge of the proceedings. In fact, they deliberately tried to hastily put up the duty-free shop while

attempting to delay the hearing of this petition only to create the so-called equities. They

went to the extent of urging before this Honble Court that the petition has become infructuous which plea was turned down by order dated 10-32008. In any event, every impugned action done

- 64 -

before and during the pendency of the petition, is the subject matter of challenge and is

plainly subject to the result of the petition. In International Airports Authority of India ( at p.524 of SCC) the Supreme Court noted that the writ petition had been filed five months after the acceptance of the tender of respondent no. 4 therein and that he had incurred expenditure and started running the same. On those facts the

Court found

thus:

It would now be most iniquitous to set aside the contracts of respondents 4 at the

instance of the appellant. The position would have filed been the different petition if the appellant after had the

immediately

acceptance of the tender of respondents 4. But the appellant allowed a period of five months to elapse during which the respondents altered their position. The present petition was filed on 20-2-2007 and dismissed on 22-2-2007. Respondent No. 4 was

- 65 -

awarded the contract on 26-2-2007 , the very day on which Special Leave Petition was filed. In the said S.L.P. Respondent No.4 was impleaded. When the Petitioner learnt that after cancelling that contract the same has been awarded to Respondent No.5, this Respondent was also impleaded in the S.L.P. All parties were heard by the Supreme

Court before passing the remand order dated 21-22008. Thereafter the Writ Petition was suitably amended and Respondents Nos. 4 and 5 were

impleaded. All parties have been heard by this Honble Court at length. There is no scope

whatever for claiming any equities. As regards (f) there are three answers: (1) The litigation against BIAL in the

Karnataka High Court was not against an airport operator. BIAL was in the process of setting up a new Greenfield airport at Devanahalli which was scheduled to become operational in April ( now postponed to end of May, 2008). Hence BIAL was not operating an airport but establishing it.

- 66 -

Operations established

start and

only fully

when

the

airport to

is

ready

commence

operations. The object of the disclosure was to see if an operator of a duty-free shop litigates with its airport operator. Neither was the

Petitioners consortium an operator of any duty free shop at Devanahalli nor was BIAL an airport operator. (2) during The litigation was disclosed in any case the presentation on 9-11-2006 and this

averment was made in the Petitioners Rejoinder dated 24-1-2008 but was not controverted in the

Additional Affidavit filed by MIAL on 20-2-2008. For the first time, a denial is made in the SurRejoinder filed in this Honble Court during the hearing on 30-4-2008. If in earlier affidavits there is no denial, the denial made during the course of the hearing is obviously an

afterthought. (3) MIAL has nowhere averred when it came to Since it

know of the litigation in Bangalore.

- 67 -

has

now

denied

that

disclosure

was

not

made

during the presentation, it was incumbent on it to aver precisely the date on which it became aware. There is no averment that it became aware before 30-1-2008 when the short-listing of four parties had taken place. Thus it is clear that that the so-called non-disclosure was not the

reason for refusing to shortlist the Petitioners consortium. It must be noted that in the SurRejoinder dated 30-4-2008, MIAL gives as one of the reasons : for not wanting the Petitioners filed cases

consortium

Habitual

litigant;

against various airport operators. This shows, firstly, MIAL does not respect legal and

constitutional obligations and finds inconvenient and undesirable those persons who go to Courts of law to vindicate filed their have of rights. been Secondly, by the the MIAL

litigations arbitrary

occasioned like

conduct

companies

the

which underscores the need to lay down the law that they are subject to judicial review.

- 68 -

19. Mr.Dave, that

On the

behalf learned

of

the

Respondent counsel instance

No.3

Senior at the

submitted of the

the

petition

Petitioner is not maintainable. He submitted that the EOI was submitted by the Petitioner and ARI together on the basis of the combined strength of two entities. The Petitioner has not produced any collaboration agreement entered into between the petitioner and the ARI. ARI is not one of the Petitioners before this court. No affidavit on behalf of the ARI supporting the Petitioner has been produced. Therefore, according to the

learned Counsel this petition at the instance of the Petitioner alone is not maintainable. He

relies on the observations of the Supreme court in the judgment in the case of Jahar Roy and Anr. v/s. Premji Bhimji Mansata & Anr. AIR 1977 SC

2439. He also relied on the observations in the case of Monghibai vs. Cooverji Umersey, AIR 1939 PC 170, and two other judgments, one in the case

- 69 -

of Vyankatesh Oil Mill co. v/s. N.V.Velmohamed, AIR 1928 Bom, 191; and the judgment in the case of Sarju Prasad v/s. Badri Prasad, AIR 1939

Nagpur, 242. It was contended that the Respondent No.3 cannot be termed either as a State or a instrumentality of the State or other authorities within the meaning of Article 12 of the

Constitution of India. It is submitted that the Respondent No.3 is purely Private Limited Company incorporated under the Companies Act, in which 74% shares are held by private promoters and 26% are held by Airports Authority of India. It was submitted financially, that the Respondent and No.3 is

functionally

administratively

independent, managed and controlled by its Board of Directors under its Articles of Association, in which the Chairman and Managing Directors are nominated by the private promoters and further 8 out of 11 directors are nominees of private

promoters. It was submitted, therefore, that the ultimate tests propounded by the seven judge

- 70 -

constitution bench of the Supreme Court in the case of Pradeep Kumar Biswas, referred to above, are not satisfied in the facts of the present case, so as to make Respondent No.3 State

within the meaning of Article 12. The learned counsel took us through the various clauses of the Sharesholders Agreement, the OMDA, and

contended that it is clear that the Respondent No.3 was functionally, independent financially of and

administratively

Airports

Authority of India. It was submitted by referring to various clauses in State Support agreement

that far from deep and pervasive control, there was no control by AAI over Respondent No.3. In so far as the submissions on behalf of the

Petitioner that in view of clause 3.1A of the State Support Fee, Agreement the dealing with Passenger should be

Service

Respondent

No.3

construed to be a State. It was submitted that the Passenger Service Fee is not imposed by

Respondent No.3. It is imposed by the Central

- 71 -

Government under Rule 88 of the Aircraft Rules 1937 and collected by the airlines. The security component goes to AAI for meeting the security expenses and the facilitation component is paid to the airport operator to offset the expenses incurred by it for operating and modernising the airport.

20.

It

was

further

submitted

that

earlier

decisions of the Supreme Court in the cases of Rajasthan State Electricity Board, Sukhdev Singh and Ramana Dayaram Shetty, referred to above are clearly distinguishable both on principle and on facts. Same is true according to the learned

counsel in relation to Ajay Hasia's case (supra). The learned Counsel submits that the law laid down by the Supreme Court applicable in the

present case is the one which is laid down in the Pradeep Kumar Biswas's case, referred to above, General Manager, Kisan Sahkari, Chini Mills Ltd, Sultanpur, U.P. v/s Satrughan Nishad and Others

- 72 -

(2003) 8 SCC 639; Zee Telefilms Ltd, referred to above; S.S. and of Rana Anr v/s (2006) Registrar 11 SCC in Co-operative 634; the and case the of

Societies judgment

the

Supreme

Court

Federal Bank Ltd. v/s Sagar Thomas AIR 2003 SC 4325. It was contended that the Respondent No.3 does not have monopoly status merely because some of the functions of the AAI have been conferred on the Respondent No 3 under the OMDA. It is submitted that even the State Support Agreement contemplates the setting up of a second airport within 150 km radius of the existing airport, through a competitive bidding process. In so far as the submission made by the learned Counsel appearing for the Petitioner in relation to the provisions concerned, of Chapter VA of the Act are

it was submitted that the Respondent

No. 3 is entitled to take the benefits of the provisions of the said Chapter VA is not enough to construe that the Respondent No 3 is a

State. It is submitted that the benefits of

- 73 -

provisions of the Chapter VA can be taken also by a person operating a private airport. It was

submitted that the provisions in the OMDA and State Support Agreement provides the formation of the Joint Co-ordination Committee Committee Committee, OMDA not Airport Co-

ordination Oversight

and does

Implementation in any manner

indicate that there is any deep, pervasive or any control over the Respondent No 3 either by the AAI or the Central Government. It was submitted that the aforesaid Committees are formed only for coordination purposes and for ensuring the smooth and efficient rendering of the services to be provided by the Central Government without any of the aforesaid committees making any dictate/order upon the Respondent No 3 or in any manner

interfering with the operation and management of the Airport by the Respondent No 3. It was

submitted that the Respondent No.3 is exercising commercial functions and not public functions and is thus not amenable to the jurisdiction of this

- 74 -

Court under Article

226 of the Constitution. By it was submitted

making a reference to OMDA, that

the rights and obligations are commercial from being public

and contractual and are far

functions or public duties. It was submitted that so far as action impugned in the petition is

concerned, it is purely commercial and private and therefore, writ petition filed under Article 226 of the Constitution of India challenging that action is not maintainable. The learned Counsel, therefore submitted that the ratio of the

judgment in Andi Mukta (1989) 2 SCC 691 does not apply because it was clearly distinguishable in law as well on as on facts. The learned of the Counsel Supreme

relied

following

judgments

court in support of his case: (i) Commissioner, Lucknow Division and Ors

v/s Kumari Prem Lata Misra (1976) 4 SCC 486; (ii) Kulchhinder Singh v/s Hardayal Singh AIR

1976 SC 2216;

- 75 -

(iii)

C.K.

Achutan

v/s

State

of

Kerala

AIR

1959 SC 490; (iv) V.R. Misra v/s Managing Committee Shree

Jai Narain College (1972) 1 SCC 623; (v) Umakant Saran v/s State of Bihar (1973)

1 SCC 485; (vi) Har Shankar v/s Deputy Excise and

Taxation Commissioner AIR 1975 SC 1121; (vii) Bihar Eastern Gangetic Fishermen Co-op SCC

Society v/s Sipahi Singh and Ors (1977) 4 145; (viii)

Gujarat State Financial Corporation v/s

Lotus Hotels Pvt. Ltd (1983) 3 SCC 379; (ix) Kerala State Electricity Board and Anr

v/s Kurien E Kalathil and Ors (2000) 6 SCC 293; (x) Binny Ltd and Anr v/s V. Sadasivan and

Ors (2005) 6 SCC 657;

21.

It was submitted that no relief can be

granted against the Respondent No.3, which was discharging private and commercial functions and

- 76 -

its

impugned

decision

was

purely

business

decision in view of the policy of privatisation initiated by Govt. of India resulting in the

amendment to the Airports Authority of India Act in 2003. It was submitted that these documents need to be construed in a business like manner and to effectuate the purpose, namely, the state distancing itself from commercial activities. Our attention was invited to the statement of objects and reasons of the Airports Authority of India Amending Act 2003 and the observations of the

Supreme Court in its judgment in the case of Zee Telefilms (supra). The learned Counsel took us through paragraphs 58, 62, 64, 67 of the judgment in the Reliance Airport Developers's case. It

was submitted that in so far as the facts of the present case clear that (i)the advertisement for inviting EOIs was in the light of the above law it is

clear in terms and was not vague;

- 77 -

(ii)

The process of consideration of EOIs was

divided into two stages, the first stage of evaluation and short listing of offers and the second stage of submission of tender

document to short listed persons/ consortia and the consideration of bids submitted by them; (iii) Advertisement gave detailed criteria for

evaluation of offers and also indicated the broad basis of evaluation; The advertisement expressly stated the final criteria used for short listing would be determined by MIAL in its sole discretion and further provided

that the tender will be issued only to those persons / consortia shortlisted by MIAL. (iv) Further express right was reserved in

following terms: MIAL reserves the right to decide on the modalities of the EOI / tender, accept or reject any or all offers at any stage of the process and / or modify the process, at its sole discretion, without

- 78 -

assigning obligation

any or

reason liability

whatsoever. whatsoever

No shall

accrue to MIAL in such event.Undisputably, the offer was made on behalf of ARI /

Flemingo in terms of the said advertisement stating Requirements of Individual EOI. No challenge was raised by ARI/Flamingo at any stage to the advertisement, the criteria

provided therein, the process of evaluation set out thereunder, the terms of short

listing, the right to issue tender to only those short listed, etc. Even when called

upon to make a presentation in person on 9th November 2006 and to submit information on 12th January 2007, no clarification much less challenge to the advertisement was raised. ARI / Flemingo participated in the 1st stage of the process by submitting their EOI in terms of the advertisement. While Petitioner No 1/ ARI were offered the fullest

opportunity to represent their case in person

- 79 -

and otherwise, they listed on merits.

could Even

not be short ARI/Flemigo

when

realised by 24th January 2007 that others had been short listed while they were not, it did not seek to challenge its exclusion until the filing of the Writ Petition, which was only on 20th February 2007. The Writ petition most pertinently advertisement does not EOI. challenge Therefore, the the

inviting

arguments on behalf of the Petitioners as to the alleged vagueness in the criteria

prescribed for evaluation or absence thereof cannot and ought not to be entertained,

particularly they having participated in the process and having failed. That in any

case Respondent No.3 have evaluated the EOI of ARI/Flemingo bonafide with the assistance of their team comprising qualified internal and external No. 3 had experts. fully Clearly with set Respondent even the under

complied as

contractual

stipulation

out

- 80 -

clause 8.5.7 of the OMDA, which provided as under: (c) Before entering into

contracts or granting any sub-lease or license, the JVC will: (aa) comply with Applicable limitation procedures in the field Laws (where for of

including applicable) competitive

without the bidding

public works concessions and in any case for every contract whose value exceeds Rs. 50,00,00,000/- (Rupees Fifty Crores Only) the JVC shall ensure that the

selection of the counter party is by way of a competitive bidding procedure; and

(bb)

inform AAI of the counter-party

or parties to every contract, sub-lessee or licensee (as the case may be) and

their shareholding pattern.

(d) Without prejudice to the foregoing, every contract entered into by the JVC shall be on an arms-length basis

- 81 -

22.

It

was

submitted

that

neither

in

the

Writ Petition nor in the course of argument has it been alleged that the award of the contract by the Respondent No 3 either in favour of the ITDC, Aldeasa consortium or subsequently to the

Respondent No 5 involves any collateral purpose or there has been a malicious misuse of powers by the Respondent No 3 nor is any malafides alleged

against the Respondent No 3. It is submitted that in the absence of proof of malafides, the tender conditions are unassailable and are not open to judicial review. The following decisions were

submitted for our consideration:(i) Asia Foundation & Consultation Ltd v/s

Trafalgar House Construction (India) Pvt. Ltd and Ors (1997) 1 SCC 738; (ii) Raunaq International Ltd v/s I.V.R

Construction Ltd and Ors (1999) 1 SCC 492; (iii) Association of Registration Plates v/s

Union of India and Ors (2005) 1 SCC 679;

- 82 -

(iv)

Reliance Airport Developers Pvt. Ltd v/s

Airports Authority of India and Ors (2006) 10 SCC 1. 23. that The most learned all, Counsel on merits further submitted was

of

ARI/Flemingo

found to be less meritorious than the five short listed bidders as disclosed in the Affidavit in Reply and more particularly as even admitted by ARI in its email dated 26th February 2008.

Therefore, it was submitted that in the light of the law declared by the Honble Supreme Court in Reliance Cellular Airport case Developers other case and Tata cited

besides

decisions

above, the decision making process did not suffer from illegality, impropriety. Energy Road irrationality The decision and in Anr and the v/s

procedural case of

Reliance State

Ltd

Maharashtra

Development

Corporation

and Ors (2007) 8 SCC 1 was clearly inapplicable because therein the Honble Supreme Court had

clearly held that the doctrine of level playing

- 83 -

field was subject to public interest and it was held that Article14 applies to government policies and if the policy or act of government even in contractual matters fail to satisfy that test of reasonableness, then such an act or

decision would be unconstitutional. Therein it was held that judicial review must be justified by constitutional principles which governed the proper exercise of public power in a democracy. 24. The learned Counsel further submitted that

ARI / Flemingo having acquiesced in the process of evaluation of EOIs in terms of the

advertisement not even having assailed the same in the Writ Petition, have waived any right to question the terms thereof, and are estopped by conduct from questioning the same. It is equally important opportunity to state was and that even to though make ample

afforded to seek

personal in any the

representation writing, doubt, the

clarification expressed terms of

Petitioners less

never the

much

challenged

- 84 -

advertisement including the prescribed criteria for evaluation and Knowing manner fully and power well of they

shortlisting.

participated, were fairly considered and lost out to better bidders. Even after knowing on 24th January 2007 that the shortlisting of the bidders had taken place, they allowed the process to go into the 2nd stage of submission of tender by shortlisted entities, their consideration and

ultimate decision, and moved the Writ Petition only on 20th February 2007 by which time most of the process was the already Petitioners laid Ltd v/s over. to This any in conduct as

disentitles

reliefs

authoritatively International

down IVR

Raunaq Ltd

Constructions

(1999) 1 SCC 492

at para 17 and Tata Cellular

v/s Union of India (1994) 6 SCC 651 at para 153. The learned Counsel further submitted that the duty free shops No 6 are since being 7th operated March by the Any

Respondent

2008.

cancellation of the tender would result in huge

- 85 -

losses, jobless.

apart

from

rendering would be

many

employees of the

Passengers

deprived

opportunity of duty free shopping and it is in public interest that the when same be allowed have to

continue

especially

equities

been

created. It was submitted that even otherwise the Respondent No. 3 did not issue the RFP to the Petitioner No 1 and its partner ARI in view of, inter alia, the fact that the Petitioner No 1 did not fit into or fulfill the criteria for

selection for the purpose of the said tender. It is submitted that the Petitioner No 1

deliberately failed to make material disclosures as was required under the EOI such as litigation initiated by them against Bangalore International Airport Pvt Ltd which was filed by the Petitioner No.1 as early as on 9th October, 2006. It is further submitted that this condition on

litigation disclosure was incorporated in the EOI so that the Respondent No 3 would become aware of the nature of relationship and the conduct of the

- 86 -

duty

free

operator

vis

vis

other

airport

operators and this deliberate attempt to conceal the litigation spoke volumes of the conduct of the Petitioner No. 1. It is further submitted that even at the time of the presentation made by the Petitioner No 1 before the Respondent No 3 on 9th November, 2006, the Petitioner No 1 failed to disclose the litigation that it had filed against Bangalore International Airport Pvt. Ltd. It is further submitted that the process of evaluation of the EOIs was transparent and full opportunity was afforded to all nine persons including ARI and the Petitioner No. 1, who submitted the EOIs. It is further submitted that after receipt of the EOI submitted on 18th October, 2006, ARI and the Petitioner presentation further took No. on 1 9th were invited to make It a is

November, the for

2006.

submitted and

that

presentation a couple of

indeed hours

place

lasted

during which a team of senior,

experienced and

qualified personnel of Respondent No. 3 assisted

- 87 -

by experts present or otherwise had a very frank, open and fruitful discussion with the

representatives of ARI/ the Petitioner No. 1, who were also qualified and experienced executives. It is further submitted that during this meeting, the entire process was discussed threadbare and details of clarifications if any were duly

provided. It is further submitted that therefore fair opportunity was afforded to ARI/ the

Petitioner No. 1. It is further submitted that the process of application of mind in decision making process on the part of Respondent No. 3 even continued thereafter as is clear from the communications exchanged between the Petitioner, Respondent No. 3 and ARI. It is further submitted that these exchanges clearly show that Respondent No. 3 not only considered the EOI filed by the Petitioner No 1 and ARI on 18th October, 2006 seriously, but afforded every opportunity to ARI/ the Petitioner No 1 in support thereof. It is further submitted that the process was clearly

- 88 -

fair

and

reasonable

given

the

nature

of

the

proposed transaction.

It is further submitted

that at no stage any grievance was made on the part of ARI/ the Petitioner No. 1 as to the

procedure/ process not being fair, reasonable or lacking in any objective criteria. It is further

submitted that for the purpose of evaluation of the EOIs, the Respondent No 3 appointed Trammell Crow Meghraj and Crossbar Associates both of who are considered experts in the field of duty free retail as set out in the Affidavit in Sur

Rejoinder filed by the Respondent No 3. It is further submitted that during this period of

evaluation there was a free exchange of views and opinions and ideas and close interaction even

with those nine companies who had submitted the EOIs. There was no bias whatsoever against any one nor was there any preference in favour of any one. It is further submitted that the whole

process was designed and implemented to find the most suitable person to be shortlisted on merits.

- 89 -

It is further submitted that the Respondent No. 3 is a commercial entity and the entire decision making process was taken in the best interest of the Company keeping in mind the requirements of OMDA and interest of passengers needing world

class retail facilities. It is further submitted that throughout this process, Respondent No. 3 also had the benefit of advice and guidance from its then Chief Operating Officer Mr. Rudy

Vercelli, who had impeccable credentials and vast experience in establishing and operating

international airports. It is further submitted that after receiving the EOIs from the said nine companies the same were subject to the scrutiny of the aforesaid experts and the evaluation of EOIs were done on a daily basis. It is further submitted that the aforesaid experts periodically met the senior management of the Respondent No 3 and advised the senior management of the

Respondent No 3. It is further submitted that the said experts also prepared a detailed chart which

- 90 -

laid

down

various as to

categories/criteria which consortium

and

categorized

fulfilled

which condition/criteria and to what extent in order to short list the entities. It is

further submitted that it was decided to confine the issue of RFP to four or five of the best potential bidders. It is further submitted that the critical elements were identified as

concession turnovers, experience of space managed and total turnover. It is further submitted that the EOIs required that the financial details for the past 3 years as for be the the submitted. EOIs were It is further in

submitted October

that 2006,

submitted of

purpose

concession

turnover and total turnover, the details for the years 2003, 2004 and 2005 and where 2006 details were furnished were considered. It is further

submitted that as per the details submitted by the companies for the year 2005, the Respondent No 5 stood at No.2, the ITDC Aldeasa consortium stood at No 3 and the Petitioner No 1/ARI stood

- 91 -

at No 8. It is further submitted that although the concession turnover of Respondent No 5 for the year 2006 was not furnished it being the

middle of the year for the Respondent No 5, even then when one compares the concession turnover of the Respondent No 5 for the year 2005 with the concession turnover of the other companies who submitted their details for the year 2006 even then the Respondent No 5 stands at no 2, the ITDC Aldeasa consortium stands at no 3 and the

Petitioner No 1/ARI at the bottom of the chart. Given the fact that the Respondent No 5 is the largest duty free operator in the world, it was also expedient to expect that the concession

turnover of the Respondent No 5 for the year 2006 would be higher than its concession turnover for the year 2005 and which stands proved if one has a look at Annexure RA/1 to the Affidavit in

Rejoinder filed by the Petitioners. It is further submitted that the concession turnover of the

ninth bidder, i.e. Valiram was not incorporated

- 92 -

in the table inserted in the Affidavit in Reply and the concession turnover of only 8 bidders were set out. It is submitted that the reason why in any of the tables the details of all the

bidders is not provided is because what was being submitted by the Respondent No 3 was the

comparison of the Petitioner No 1/ARI with those who were ahead of the Petitioner No 1 / ARI and not those who were below the Petitioner No 1/ARI. It is further submitted that in the circumstances as the concession turnover of Valiram was much lower than the Petitioner No 1/ ARI, Valiram was not included in the first table which gave the comparison of the concession turnover of the

Petitioner No 1 together with its partner ARI as compared with those whose concession turnover

were higher than the Petitioner No 1 and ARI. It is further submitted by that likewise the and total

space

managed

Aelia,

Kingpower

Valiram

were not included in the table which gave the total space managed by the Petitioner No 1 and

- 93 -

ARI as compared with those who managed more space than the Petitioner No 1 and ARI and the total turnover of Aelia, Kingpower and Valiram were

not included in the table which gave the total turnover by the Petitioner No 1 together with its partner ARI as compared with those whose total turnover were higher than the Petitioner No 1 and ARI. It is submitted that with respect to the total turnover, the figures which were furnished by all including ARI and by were the only Petitioner for the not No 1 and its

partner 2003-04 alleged

years 2005-06

2002-03, as time was of

2004-05 the

and

Petitioners

at

the

arguments. It is further submitted that this was because the EOIs having been submitted only in the middle of the year 2006 one would not be able to have the final figures for the year 2006. It is submitted that initially a decision was taken to invite bids from only four bidders, and

subsequently it was

decided to include ITDC, It is further

along with their partners Aldeasa.

- 94 -

submitted

that

it

may

be

mentioned

that

ITDC

together with Aldeasa was 5th as per the rankings and on all these parameters rated higher than the Petitioner No 1 and ARI. It is further submitted that the fact of that duty ITDC free were shops the at incumbent the Mumbai

operators

Airport and the fact that a large labour force of ITDC would be rendered unemployed was also borne in mind when taking the decision to invite bids It is was the

from five of those who had submitted EOIs. further awarded tender submitted to the that ITDC after Aldeasa that the

contract

consortium, the

schedule

required

successful

bidder pay the performance deposit by 7th March 2007 and execute the contracts with the

Respondent No 3 by 15th March 2007. It is further submitted paid the that ITDC Aldeasa deposit consortium nor neither the

performance

executed

contracts schedule

within the time provided in the tender and even thereafter. It is further

submitted that in fact, it is relevant to point

- 95 -

out that at the same time and when the contracts were being considered, as a pre-emptive move the employees of the ITDC moved a labour court and obtained an injunction against ITDC vacating the duty free shops in the Mumbai Airport. It was submitted by the Petitioners at the time of

Rejoinder that even though the power was reserved upon the Respondent No 3 under clause 3.2 of the RFP to consider the remaining bidders there was no need for the Respondent No 3 to exercise the said power. It was further submitted that clause 3.2 also requires that Respondent No 3 has to evaluate all the shortlisted bidders and not only the Respondent No 5 in order to select Respondent No 5. It is further submitted that the Respondent No 5 was the second highest bidder and in all respects ranked much higher and than the other upon

shortlisted

bidders

therefore

cancellation of the award in favour of the ITDC Aldeasa favour Consortium, of the the same No was 5. It awarded is in

Respondent

further

- 96 -

submitted that this action of the Respondent No 3 in awarding the contract to the Respondent No 5 has not been challenged by the other shortlisted bidders and cannot be challenged by the

Petitioners. It is not open for the Petitioners to challenge the subsequent award of the contract in favour of the Respondent No 5.

25.

It is further submitted that in so far

as Clause 2.5.4 of the RFP is concerned, it is submitted that the validity of the bid is for the benefit of the Respondent No 3 in order to ensure that the bidders submitting their respective bids are bound by the same for a period of six months. It is further submitted that not knowing whether the Respondent No 5 would continue to be bound by the amount that it had originally bid in

February, 2007, the Respondent No 3 inquired and the Respondent No 5 confirmed that the original bid submitted by the Respondent No 5 would remain valid upto 31st December, 2007. It is further

- 97 -

submitted that upon receipt of this confirmation from the Respondent No 5, the Respondent No 3 executed the contract with the Respondent No 5 in terms of the original RFP without the necessity for going in for a fresh tender. It is further submitted that a fresh tender would have caused further delay in the setting up of world class duty free shops of grave duty and free would have deprived from the

passengers causing

shopping, hardship

apart to

financial

Respondent No 3. It is further submitted none of the companies who were not shortlisted were given any communication about they not being

shortlisted, as the EOI did not provide for it. and in view thereof, the grievance raised by the Petitioners unwarranted. on this count is misconceived and

26. for the

The

learned

Senior Nos.5

Counsel & 6

appearing

Respondent

Mr.Dwarakadas

adopted the submissions made on behalf of the

- 98 -

Respondent

No.3

in

relation

to

the

maintainability of the Writ Petition as also in relation to submissions that the Respondent No.3 is the instrumentality of the State. He further submits that function, concerned, involved further in in so far as the discharge of the providing is no such duty public a free law shops is

namely there

element It is the

awarding

contract. is

submitted

that

this

because

obligation to provide duty free shops is not a statutory obligation or a public duty, but flows out of a contractual obligation undertaken by

MIAL under the OMDA. Secondly, in any event, the commercial risk of operating, managing and

developing the CSIA airport having been passed entirely to MIAL, it is for MIAL to ensure that it gets the best commercial advantage for that venture. He further submitted assuming while

denying that there is any power conferred with public duty, it is submitted that in any event there is no duty owed by MIAL to the Petitioner

- 99 -

or

to

the

public

at

large.

It

is

further

submitted that it is open to MIAL, as long as it discharges its contractual obligation by

following a competitive bidding process, to award the contract to such party as MIAL may consider fit in its that of of lays commercial the wisdom. It is further in the free which

submitted the form

invitation/

solicitation enumerates for duty

advertisement individual down four EOIs

requirements shops. It

requirements

person submitting the EOI must comply with; (1)international free shop; (2)details operated; (3)experience in Asian International Airport; (4)details of consortium members if any. It also requires a person submitting the EOI to enclose proposal a presentation setting out a duty brief free of duty free shops being currently experience in operating duty

for

establishing/

managing

shops which shall inter alia include

- 100 -

(1) key management details; (2) details of relationships with brands; (3) maximum period required to commence

operation of the duty free shops after obtaining all legal and regulatory approvals; (4) minimum term of operation of duty free shops; (5) proposed various revenue share models

such as minimum guarantee turnover with revenue share, revenue share or any other innovative

revenue model; (6) details with photographs/videos, floor

layout and write ups about its existing duty free outlets in major international airports;

27.

The learned Counsel further submits that

the invitation makes it abundantly clear under the heading Other requirements applicable to

both EOIs as to how the EOIs would be evaluated, as also the fact that tenders would be issued only to those persons/consortia shortlisted by

- 101 -

MIAL.

He

further

submitted

that

it

makes

it

clear that submission of EOI does not give rise to any right and the heading Other requirements applicable to both EOIs read in the context of what that follows the thereafter would clearly indicate means It is the in a

word

requirements

clearly

conditions and must be read as such. submitted heading that 'Other the first sentence when

under read

requirements'

business like manner or in a commercial sense would indicate to the reader that out of the

various requirements and information required to be submitted along with the EOIs and the in

proposal,

prior

international

experience

running duty free shops, financial and commercial capability and past experience in increasing

revenue would, amongst other factors, be used to evaluate the EOIs. submits that tender The learned Counsel further conditions should be read

like a business document, irrespective of whether it was issued by a public or a private authority.

- 102 -

It is further submitted that the selection of the persons/consortia to be short listed was not

dependent merely upon international experience, financial capability and past experience in

increasing revenue but also other factors which were required to be enumerated in their

proposals/presentations including various revenue share models, either known or innovative in

character. It is further submitted that it would not have been possible for MIAL to indicate the final criteria The for short listing in the on EOI the

itself.

learned

Counsel

relied

judgment of the Supreme Court in the case New Horizons V. Union of India, (1995) 1 SCC 478. The learned Counsel further submits that the EOI also states that the final criteria used for

short listing would be determined by MIAL at its sole discretion. It is further submitted that the second sentence which leaves the final criteria to be used of for short listing and to has the not sole been

discretion

MIAL

cannot,

- 103 -

understood either by the Petitioner or any of the other persons who submitted the EOI, including Respondent no.5 that it is ex facie (a) arbitrary (b) unfair (c) malafide (d) discriminatory or

(e) an attempt to deliberately or otherwise meant to exclude any of the persons invited to submit an EOI. It is further submitted that MIAL would

be entitled issue tenders only to persons short listed by MIAL, and that such short listing would be in its sole discretion. further submits to that the the The learned counsel petitioners sole discretion are of

attempting

describe

MIAL to shortlist persons invited to submit the EOI as unfair and arbitrary by applying the

wisdom of hindsight. It is further submitted that the argument of the petitioner being that when there are only nine persons who submitted

interest for EOI, there was no necessity for MIAL to have a discretion that when was to short the list. It is

submitted

advertisement/ on October

solicitation/invitation

issued

- 104 -

9,2006 MIAL could not have envisaged how many persons would express their interest. It is

further submitted that it is possible that far more than nine persons e.g. Twenty or more could have done so. It is further submitted that the

fact that ultimately nine persons expressed their interest, does not mean that the power/discretion to short list, reserved to itself by MIAL, can be described as unfair or arbitrary. The learned

Counsel further submitted that the petitioner had submitted its EOI, after having accepted the

conditions of EOI and with full knowledge of the discretion submitted reserved that to itself by MIAL. cannot It is now

the

petitioner

challenge the very same conditions and discretion mentioned in EOI merely because it was not short listed. It is submitted that if the petitioner is disentitled to challenge the conditions of the invitation to tender, for the reasons and/or

grounds set out during or as submitted by MIAL, it is submitted in that event, it would not be

- 105 -

open to the petitioner to question the decision of MIAL after following the competitive bidding process amongst the 5 short listed tenderers to award the tender initially to Respondent no.4, and subsequently, awarding the contract to

Respondent no.5.

28. Solicitor

Shri.G.E. General of

Vahanvati, India

the

learned for

appearing

Respondent nos. 1 and 2 submitted that Indias policy of liberalisation/ privatisation owes its inception to the Statement on Industrial Policy dated 14.07.1991 and the said Policy envisaged private sector participation in various sectors which were hitherto under the control of public sector enterprises and the first sector to be privatised was the electricity sector in 1991

which was followed by allowing private sector to carry out coal mining operations for thermal

power projects in 1993.

It is further submitted

that in 1994, the National Telecom Policy was

- 106 -

announced to allow private companies to provide telecommunication related services in addition to the state owned enterprises viz., MTNL and BSNL. Other sectors to be privatised shortly thereafter were insurance, banking and petroleum etc.

Privatisation in the various sectors took various shapes such as: (i) Selling of assets owned by the State or by public corporations. e.g. Centaur Hotel (ii) Selling of certain percentage of Government shareholding to private companies e.g. BALCO and VSNL. (iii) Gradual reduction of Government

shareholding. e.g. Maruti and ICICI. It is further submitted that in certain cases such as banking and petroleum sectors, whilst

reducing government shareholding it was ensured that the government retained substantial

percentage of the shareholding in order to be able to exercise its control over the companies which were privatised. It is further submitted

- 107 -

that by the late nineties, the aviation sector was also privatised, and with the entry of a

numbers of private companies and the competition that followed, the infrastructure of the airports was found to be inadequate to sustain the pace of growth in the aviation sector and the sharp

increase in air traffic, and therefore, it was decided that the airports were also required to be privatised by allowing private companies to undertake operation, management and development of the major airports in India especially the international airports. It is further submitted

that the decision to privatise airports had a two way implication. Firstly, the greenfield projects of setting up new international airports were

given out to private players. Secondly, the task of operation and management of existing airports were entrusted to private that companies. greenfield It is

further

submitted

projects

included international airports at Bangalore and Hyderabad and upgradation of existing airports

- 108 -

were those located cities like Mumbai, Delhi and Cochin. It is further submitted that for this purpose various companies such as Mumbai

International Airport Pvt. Ltd. (the Respondent No. 3), Delhi International Airport Pvt. Ltd., Cochin International Airport Pvt. Ltd., Bangalore International International incorporated India (the Airport Airport where AAI) the is a Pvt. Pvt. Ltd. and Hyderabad have Authority been of

Ltd.

Airports joint

venture

partner

holding 26 % of the equity share capital. It is further submitted that the nature of private

sector participation is determined by the extent to which functions are performed by a private company and the role of a private company is

devised by various methods varying from entering into supply and civil works/ technical assistance contracts to entering into management/ leasing

agreements to entering BOT/ BOO contracts. It is further submitted that in relation to existing airports, the AAI has undertaken the route of

- 109 -

leasing agreement while for greenfield projects AAI has entered submitted into that BOT/ the BOO route. It is

further

Airports

Authority

Act, 1994 the AAI

was enacted to provide for creation of and for transfer and vesting in It the is of AAI the for

various their

international management and

airports control.

further

submitted that the Act as it stood at the time of enactment provided for performance of all

functions relating to the operation, management and development by the AAI. Section 12 (3) (n) merely enabled the AAI to form subsidiary

companies to carry out the said functions. It is further submitted that pursuant to the decision to privatise the international airports as stated above, in 2003, the Act in was Act amended to to

incorporate

provisions

the

enable

private companies to carry out certain functions which were performed by AAI and the Statement of Objects and Reasons of the Bill to amend the Act reads as under:

- 110 -

1. At present, the Airports Authority of India is a statutory organisation

under the administrative control of the Government of India, Ministry of Civil Aviation. It manages 94 civil airports and 28 civil enclaves at defence

airports in the country.

2.

There

is

need

to

improve

the

standard of services and facilities at the airports to bring them at par with international standards. To facilitate

the process for such improvement, there is need, both for the infusion of

private sector investments as also for restructuring speed up of airports. This will

airport improve

infrastructure managerial local service generally boosting

development, efficiency, responsiveness levels. stimulate It

increase and in improve turn, by

will, the

economy

tourism and trade. It has been decided to undertake the task of restructuring the airports of under India as the well Airports as to

Authority

encourage private participation for the greenfield airports in the country.

- 111 -

Since

the

Airports

Authority

of

India

Act, 1994 is applicable to all airports whereat air transport services are

operated or are intended to be operated, significant in such private sector investments an effective the secure

project framework would

require within feel safe

legal

which and

investors about

their

operational

and

managerial

independence. To achieve these purposes, the Bill proposes to amend the various provisions of the said Act. The salient features of the Bill are as under:(i) section It amends section 1 as well as 2 of the Act to exclude the

private airports from the purview of the Act except for certain limited purposes and to provide for definition of a

private airport. The proposed amendment would also provide adequate comfort

levels to enhance investors confidence and to ensure a level playing field to private lifting Authority respects. (ii) It inserts new clause (aa) in sector, greenfield of airports by

control of India

the in

Airports certain

except

sub-section (3) of section 12 and a new

- 112 -

section 12A in the Act. This amendment will enable the Airports Authority of

India to establish airport or assist in the establishment of private airports

and also to lease the airport premises to private operators with the prior

approval of the Central Government. By this amendment, some of the functions of the Airports Authority of India can be assigned to lessees subject to the

exception that air traffic service and watch and ward functions will continue to be provided by the Airports Authority of India. --3. The Bill seeks to achieve the

aforesaid objects.

It is further submitted that a reading of the said Statement of Objects and Reasons

demonstrates the intention of the Legislature in amending the Act. It is further submitted that the new provisions were incorporated into the Act to enable the and private entities to have in

operational

managerial

independence

- 113 -

carrying further

out

the

functions that the

of

the

AAI.

It of

is the

submitted

performance

functions of the AAI by the private entity is in terms of the agreement entered into between the AAI and the of private entity and and thus, of the the

performance

functions

exercise

powers of AAI by the private entity is purely contractual flavour private and in the nature without any statutory by the

functions cannot be

performed termed as

entity

public

functions as the Statement of Objects and Reasons specifically provides that the private entity has to have operational and managerial independence. It is further function and submitted militates managerial took us that the concept of of the The the

public

with

that

operational learned

independence. through OMDA

Counsel

provisions of the Act and relying on the Judgment of the Queen Bench, in the case of R v. Servite Houses & Anr Ex Parte Goldsmith & Anr.,(2001) LGR 55 claims that a private entity performing the

- 114 -

function of public body pursuant to privatisation of such function in terms of the agreement

between the parties cannot be said to perform public function. The learned Counsel relied on

some judgments of the Supreme Court which were pressed into service by the learned Counsel

appearing for respondent no.3 in support of his submission that respondent no.3 cannot be termed as instrumentality of State.

29. Counsel

In rejoinder , Shri Nariman the learned appearing for the Petitioner submitted

that the submission of the Respondent No.3 that the Respondent No.3 is a purely private company engaged in making profits cannot be accepted. He took us through the Statement of Objects and and the that the

Reasons of the Amendment Act 43 of 2003 provisions of the Act and submitted

public interest is paramount and writ large in Section 12A of the Act. He further submitted

- 115 -

that

the

Grounds

(B)

and

(C)

of

the

Writ

Petition at Pages 19-20 and prayer (a) of the Writ Petition at page 27 demonstrates that the Petitioner has challenged the entire process

pertaining to the Tender for operating duty free retail outlets at Chhatrapati Shivaji

International Airport, Mumbai beginning with the expression of interest followed by the issuance of the request for proposal and for

quashing/setting aside the tender as arbitrary, illegal and discriminatory. He submitted that in the Judgment in the case of Directorate of

Education & Ors. Vs. Educomp Datamatics Ltd. & Ors. {2004 (4) SCC 19} the Honble Supreme Court has held that if the terms of the tender are arbitrary, judicial the review Court can in exercise of So power far of as

interfere.

submission that ARI has not joined either as a Petitioner or the Respondent in the petition is concerned, the learned counsel took us through the averments in the petition and also relied on

- 116 -

email from John Woodhouse of ARI and submitted that the petition is at the instance So far of as the the

Petitioner

maintainable.

contention that by summiting their EOI without challenging the terms in the public notice, the Petitioners have waived their right to challenge the terms of the public notice is concerned, the learned Counsel relied on the observations of the Supreme Court in the case of Olga Tellis Vs.

Municipal Corporation of Greater Bombay, 1985 (3) SCC 545 to submit that that if the terms in the public notice violates fundamental rights of the Petitioner, then there can be no waiver. He

submitted that the judgments relied upon by Mr. Dave on the powers of the writ Court under

Article 226 of the Constitution of India pertains to enforcement of of contractual which are obligations in the realm a or of

breach private

contract and not

law

public

and

hence,

writ

petition under Article 226 was held to be not maintainable. Moreover, the said judgments

- 117 -

reflect

the

old

law

pertaining

to

writ

jurisdiction as the scope of mandamus has over the years has been The public expanded now can by is be judicial that any

determination. statutory or

position function

enforced

through a mandamus.

30.

It is clear from the rival submissions

which we have reproduced in detail above, that the principal challenge of the Petitioner is that the term in the public notice inviting EOI

regarding short listing is violative of the right of equality. The manner in which the Respondent No.3 shortlisted the persons/entities who had EOI pursuant to the public notice,

submitted

according to the Petitioner is also violative of the right of equality. On behalf of the

Respondents, apart from the objections raised to the maintainability of the petition, two

principal defences were raised (i) right of the quality is not available to the Petitioner as

- 118 -

against assuming

the that

Respondent right of

No.3

and is

(ii)

even

equality

available,

neither the terms in the public notice regarding shortlisting Respondent nor the in process adopted the by the

No.3

short

listing

entities

which had submitted their EOIs is violative of the right of equality.

31.

As

is

evident

from

the

rival

submissions, there was considerable debate before us on the question whether the Respondent no.3 can be termed as an instrumentality of the State. Obviously, that debate was raised because if the Respondent No.3 is held to be an instrumentality of the State, of Article 14 it will be bound by the provisions of the Constitution of India.

Alternatively, it was submitted by the Petitioner that even assuming that the Respondent No.3 is not an instrumentality of the State, because in allotting duty-free shop it is performing public function, it is bound to act in a fair and

- 119 -

reasonable assumed

manner the

and

therefore, No.3

even is

if not

it an

that

Respondent

instrumentality judged on the

of the State, its action can be touch-stone of the right of

quality. In our opinion, question whether the

before considering the Respondent No.3 is an

instrumentality of the State,

and whether even

if it is not an instrumentality of the State, its action can be judged on the touch-stone of the equality clause, because it is performing public function, it will be convenient and proper first to consider the question of the validity of the action of the Respondent No.3, assuming that the validity of the action of the Respondent No.3 in the allotment of duty-free shop can be judged on

the touch stone of the equality clause. In other words, for the purpose of examining the conduct of the Respondent No.3 in issuing a public notice inviting EOIs and awarding contract , we will assume that it is an instrumentality of the State and therefore, is bound by the provisions of

- 120 -

Article 14 of the Constitution. In case we reach the conclusion that the Respondent No.3 has acted arbitrarily, then we will examine the above

referred two contentions, because if we find that the action of the Respondent No.3 cannot be

faulted even if it is assumed to be bound by the provisions of Article 14 of the Constitution,

then it will not be necessary for us to examine the validity or otherwise of the contentions of the Petitioner referred to above.

32.

Looking at the matter from this point of

view, we find that following are the admitted positions: The Airports Authority of India Act,

1994 was amdnded by Amendment Act 43 of 2003. By the Amending Act, section 12A was inserted in the Act, whereby power was conferred on the Airports Authority to grant Airport to carry under lease of the premises of the out some 12 of of its the function Act. The

enumerated

Section

- 121 -

lessee

could

be

assigned

any

function

of

the

Authorities under Sub-section 1 and on function being assigned the lessee also possessed the

power necessary for performing the functions. In exercise of its power under Section 12A of the Act, admittedly the Respondent No.2 has executed lease of Chhatrapati Mumbai in Shivaji of International the Respondent

Airport,

favour

No.3. It is also an admitted position that the Respondent No.3 is under a duty as a lessee to set up duty free shop and it is for that purpose

that the Respondent No.3 issued the public notice on 9th October, 2006. By that public notice, the

Respondent No.3 solicited expression of interest from interested persons for establishment ,

management and operation of duty free shop at CSIA. The public notice stated that EOI may be submitted by the single person or a consortium with an identified lead member along with the details of the holding pattern of the members the consortium. in

The public notice further stated

- 122 -

Please note that

prior international experience

in the relevant areas, financial and commercial capability and past experience in increasing

revenue in similar situations would, inter alia, be used to evaluate the EOIs. The final criteria used MIAL for in short-listing its sole would be determined by

discretion........The

tender

will be issued only to those persons/consortia short-listed by MIAL.

. the

Reading of the above quoted portion from public notice No.3 makes it clear that the the

Respondent

contemplated

short-listing

persons from amongst the persons who will submit EOIs for the purpose of issuing tender. It is an admitted position the that pursuant to along the public its

advertisement,

Petitioner

with

partner ARI, the Respondent No.5, Respondent No.4 and six other entities only On 9 submitted EOIs of their EOIs. by the

Thus,

there

were No.3.

received the

Respondent

behalf

Petitioner

- 123 -

reliance was placed on a judgment of the Supreme Court in the case of above. It was B. Ramakichen, referred to that considering that

submitted

there was an obligation on the Respondent No.3 to allot the of duty-free shop after following and the

process

competitive

bidding

considering

that there were only 9 EOIs received, there was no need to resort to the device of short-listing. It was submitted that the Supreme Court has

observed in the aforesaid judgment in the case of B.Ramakichen that the device of short-listing can be adopted by the authority when there is

response from a large number of persons and it is impracticable for the authority to consider all those persons. Reliance was placed on following

observations in paragraph 17 of that judgment. It reads as under:-

However,

for

valid

shortlisting

there

have to be two requirements- (i) has to be on some rational and objective basis.

- 124 -

For

instance,

if

selection

has

to

be

done on some post for which the minimum essential requirement is a B.Sc. Degree, and if there are a large number of

eligible applicants, the selection body can resort to certain shortlisting minimum marks by in

prescribing

B.Sc. And only those who have got such marks may be called for the interview. This can be done even if the rule or advertisement does not mention that only those minimum who have the be aforementioned considered Thus is only or the a

marks, on of via by

will the

appointed procedure practical followed

post.

shortlisting media the which

has in

been

courts

various

decisions since otherwise there may be great difficulties for the selecting and appointing authorities as they may not be able to interview hundreds and

- 125 -

thousands

of

eligible

candidates;

(ii)

if a prescribed method of shortlisting has been mentioned in the rule or

advertisement then that method alone has to be followed.

It was submitted that there was no need to do any shortlisting in the present case. From the reply of the Respondents as also the affidavits we find that except for saying that there was a provision made in the public advertisement for shortlisting and therefore the experts evolved the procedure for shortlisting, we do not find any

justification given as to why considering that only a small number of persons and entities had submitted EOIs, it was found necessary by the Respondent No.3 to adopt the procedure of shortlisting.

33. number of

Even EOIs

assuming

that was

even only

though nine,

the the

submitted

- 126 -

Respondent

No.3

was

justified

in

adopting

the

procedure of short-listing, then for the purpose of short-listing No.3 it to was adopt necessary an for the and

Respondent

objective

rational criteria. Perusal of the public notice shows that in the public notice itself there is no criteria for short-listing mentioned. The

public notice states that the final criteria to be used for short-listing will be determined by the Respondent No.3 in its sole discretion. Now, even assuming that the criteria to be adopted

for short-listing could be in the sole discretion of the Respondent No.3, the Respondent No.3 being bound by the equality clause would be liable to fix the criteria for short-listing, which will be objective, rational and will have nexus with the purpose to be achieved. series of well-known Now, because of a of the Supreme

judgments

Court it can be safely taken as a settled law that in the early stages of the evolution of

Constitution,

principles of equality contained

- 127 -

in

Article

14

came

to

be

identified

with

the

doctrine of classification because the view taken was that that article forbids discrimination and there would be no discrimination the where the

classification

making

differentia

fulfills

two conditions i.e. (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that that differentia has a rational

relation to the object sought to be achieved by the impugned legislative or executive action.

For the first time in E.P.Rayappa v/s. State of Tamil Nadu, (1974) 4 SCC 3 the Supreme Court laid bare a new dimension of principle of equality and pointed against held out the that that it embodied The is the guarantee Court to

arbitrariness. equality That

Supreme

antithetic and

arbitrariness.

equality

arbitrariness

are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and

- 128 -

caprice of an absolute monarch. It was held that the principle of equality strikes at

arbitrariness and ensure fairness and equality of treatment. Therefore, the sole discretion which was conferred by public advertisement on the

Respondent No.3 was to be exercised by it fairly and for doing that, it was necessary for it to adopt objective rational and reasonable criteria for the purpose of short-listing the entities who had submitted their EOIs. The Respondent No.3

will have to determine that criteria and will have to do the short-listing on the basis of that criteria.

34.

We do not find any pleading on behalf

of the Respondent No.3 that at any point of time the will Respondent be done No.3 on decided basis that of short-listing A particular

the

criteria. The EOI specified three criteria for evaluation, viz. (1) prior international

experience in the relevant area; (2) financial

- 129 -

and commercial capability; (3) past experience in increasing revenue in the similar situation. In the counter-affidavit the Supreme dated the 6-12-2007 Respondent filed No.3

before

Court

mentioned 10 criteria as a whole which form the basis evaluation of short-listing. i.e.

1. The total turnover of the bidder for the least 3 years. 2. The total space managed. 3. The total airport duty free sales. 4. Total airport duty free sales under

concessionaire type agreements. 5. Total airport duty free sales under management contract/non-concessionaire type agreement. 6. Asian airport presence and experience. 7. Asian duty free sales. 8. Type of merchandise sold. 9. Number of international Indian passengers. 10.Customs inquiry resulting in adverse findings or payment of penalty.

- 130 -

In the additional affidavit dated 28-2-2008 filed before averred the Supreme three Court the Respondent elements No.3 were

that

critical

identified as

concession turnover, experience of

space managed and total turnover, which forms the basis for short-listing. These three critical

elements have been reiterated in the affidavit in reply filed in this petition. In the affidavit in reply filed by the Respondent No.3, three charts have been included giving comparative figures of

various entities, who had submitted EOI i.e. (i) the duty free sales under the Concession Model, (ii) the total space managed in square feet and (3) the total turnover. Perusal of the chart in relation to duty free sales shows that out of five entities who were shortlisted, three

entities namely

NUANCE, ITDC ALDEASA & DUFRY had

not given their sales figures for the year 2003 whereas the Respondent No.5 DFS had not given

its sale figure for the year 2006. If one goes by this chart, then ITDC is at serial No.3. The

- 131 -

second chart given by the Respondent No.3 is in relation to space management. This Chart shows that the Respondent No.5 is at serial No.1,

whereas the Respondent No.4 who was also shortlisted is at serial No.4. What is pertinent to be noted here is that no attempt has been made to co-relate the figures of sales with the space under management. for the In our opinion, No.3 to it was

necessary

Respondent

consider

what is the figure of total duty free sales in relation to the area under the management. In our opinion, the figures of duty free sales cannot be considered in isolation, they will have to be considered with the area in which the business was being done. The third Chart is in relation to total turnovers. In this chart, the Respondent

No.5 is at serial No.1 and the ITDC, Respondent No.4 is at serial No.4. Thus, if the shortlisting was done on the basis of these charts, then the ITDC which was at serial No.4 in two Charts and was at serial No.3 in one Chart could not have

- 132 -

been placed at serial No.5.

But according to

affidavit of the Respondent No.3 initially it was decided to short list only four entities, who had submitted EOI and admittedly the Respondent No.4 ITDC was not one of the four. the Respondent No.3 that It is stated by after

subsequently

discussing the matter with the representative of the Government, it was decided to short list the Respondent No.4 which was at serial No.5 in the list prepared for the purpose of shortlisting the entities who had submitted explained if EOIs. It is no where

the short listing was done on the

basis of these three Charts, how the ITDC could be listed at serial No.5 and at no point of time a copy of the original list prepared of the

entities who are to be shortlisted has ever been produced. doubts in In our opinion, to the this aspect creates of the

relation

correctness

assertion on behalf of the Respondent No.3 that shortlisting was done on three critical elements which are concession turn over, experience of

- 133 -

space

management

and

total the

turn

over. of

In

our

opinion,

therefore,

procedure

short

listing was resorted to by the Respondent No.3 without determining any objective criteria for

short listing and the process of short listing was gone through in a most arbitrary manner.

35.

In our opinion, firstly the Respondent

No.3 should have decided considering that there are only nine EOIs received, whether it is at all necessary to do any shortlisting. In case the Respondent No.3 found for good reasons that it was necessary to do shortlisting despite there being only a small number of entities had

submitted EOIs, the Respondent No.3 should have in terms of the public advertisement before

undertaking the process of short listing decided the objective criteria for short listing, made that criteria known to all the concerned entities and then on should the have proceeded of to that do short

listing

touch-stone

criteria

- 134 -

alone. It was necessary for the Respondent No.3 to proceed in this manner because it obligation to be is under an It is before

to act fairly and reasonably. that at no point of time

noted

affidavits were filed before the Supreme Court and in this the Court, the Respondent that it No.3 not even been

informed

Petitioner

has

chosen as one of the entities who can submit its tender. No reasons obviously was also

communicated. In our opinion, the total absence of any reason in in any formal document of of any

evaluation,

admitted

non-communication

reason to the Petitioner, and the contradictory and untenable filed the stands by taken in No.3, has different clearly acted in

affidavits shows that

respondent No.3

Respondent

arbitrary manner in the process of short listing of the entities.

36.

Now,

that

we

have

found

that

the

Respondent No.3

has acted in arbitrary manner in

- 135 -

short

listing

the

entities,

which

resulted

in

denial of rights of the Petitioner to submit its tender, it will be necessary for us to examine whether the Respondent No.3 is bound by the

equality clause. Before us the contention that because the Respondent No.3 performs the public function it is obliged to observe equality clause and it is also amenable to the jurisdiction of this court under Article 226 of the Constitution of India was advanced as an alternate argument, in our opinion, it will be appropriate to examine that argument first.

37.

For

the

purpose

of

examining

this

contention, in our opinion, the first judgment that is relevant is the judgment of the Supreme Court in the case of Comptroller And AuditorGeneral of India v/s. K.S. Jagannathan and anr. (1986) 2 SCC 679. In paragraph 20 of that

judgment the Supreme Court observed thus :

- 136 -

20.There is thus no doubt that the High Courts in India exercising their

jurisdiction under Article 226 have the power to issue a writ of mandamus or a writ pass in the orders where nature and the of mandamus give or to

necessary or a

directions

government

public authority has failed to exercise or has wrongly exercised the discretion conferred upon it by a statute or a rule or a policy decision of the government or has exercised such discretion mala

fide or on irrelevant consideration or by ignoring the relevant considerations and materials or in such a manner as to frustrate the object of conferring such discretion implementing or which the such policy discretion for has

been conferred. In all such cases and in any other can, fit in and proper case a of high its

Court

the

exercise

jurisdiction under Article 226, issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give

directions to compel the performance in a proper and lawful manner of the

discretion conferred upon the government or a public authority, and in a proper

- 137 -

case,

in

order

to

prevent

injustice

resulting to the concerned parties, the court may itself pass an order or give directions which the government or the public authority should have passed or given had it properly and lawfully

exercised its discretion.

Perusal of the above referred judgment shows that if in a petition filed under Article 226 of the Constitution of India, High Court finds that a public authority has wrongly exercised its

discretion conferred upon it by a statute or by a Rule or by a policy decision, or has exercised that power on irrelevant consideration, then a writ of mandamus can be issued by the High Court against that public authority. The second

decision, in our opinion, which is relevant is the decision of the Supreme Court in the case of Amarjit Singh Ahluwalia v/s. State of Punjab, 1975 (3) SCC 489, where the Supreme Court has

held that a challenge to arbitrary and irrational or malafide action can be made in a writ petition

- 138 -

under Article 226 without invoking Article 14. Following observations from paragraph 9 of that judgment, in our opinion, are relevant.

.......The sweep of Articles 14 and 16 is wide and embody and pervasive. the they These two of to and by the

articles

principle are intended

rationality strike

against

arbitrary action taken

discriminatory State. departs laid Where from down a

the

State of

Government seniority by the and

principle by it,

albeit and

administrative departure is

instructions, without

reason

arbitrary, it would

directly infringe

the guarantee of equality under Articles 14 and 16. it is interesting to notice that in the United States it is now well settled that an executive agency must be rigorously which it held to the its standards actions to by be

professes

judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. Vide the judgment of Mr.Justice Frankfurter in Vitaralli v./ Seaton.

- 139 -

This view is of course not based on the equality clause of the United States

Constitution and it is evolved as a rule of administrative law. But the principle is the same, namely, that arbitrariness should be eliminated in State action.

The Supreme Court in its judgment in the case of Unnikrishnan & Ors., & ors. v/s State of Andhra Pradesh 1 SCC 645 has considered this

(1993)

aspect of the matter in detail. The Supreme Court in paragraph 78 of the judgment has considered the observations of the Supreme Court in its

judgment in the case of Andi Mukta Sadguru's case referred to above, especially the observations

in paragraphs 12, 15 to 20 and has held that the term receive 'authority' a liberal used in Article unlike 226, must in

meaning

the

term

Article 12. The words 'any person or authority' used in Article 226 are not to be confined to statutory authorities and instrumentalities of

the State. They cover any other person or body

- 140 -

performing concerned

public is not

duty. very

The much

form

of

the

body is

relevant.

What

relevant is the nature of the duty imposed on the body, and the duty must be judged in the light of positive authority obligation to the owed by the person then or in

affected

party

and

paragraph 79 the Supreme Court has observed thus:

79.The emphasis in this case is as to the nature of duty imposed on the

body. It requires to be observed that the meaning of authority under Article 226 came to the be same laid term down from

distinguishing

Article 12. In spite of it, if the emphasis is on the nature of duty on the same principle it has to be held that these educational institutions

discharge public duties. Irrespective of the educational institutions

receiving aid it should be held that

- 141 -

it is a public duty. The absence of aid does not detract from the nature of duty.

Perusal of paragraph 81 of the judgment in Unnikrishnan itself unable and a shows to that aid the Government found

any

private the

institution came and

financially out with

therefore, to

Government private

policy

involve

voluntary efforts in the sector of education in conformity with accepted norms and goals. The

Supreme Court found that the institutions set up pursuant to this policy of the Government for public purpose are amenable to the jurisdiction of the High Court of find under Article it 226 of the

Constitution that if we

India. that

Thus, the

becomes

clear in

Respondent

No.3

allotting duty free shops was performing public duty, then in our opinion, it can be safely said that it was under a duty to act reasonably and fairly in the matter of allotment of duty free

- 142 -

shops and is also amenable to the jurisdiction of this Court under Article 226 of the Constitution of India.

38.

So far as this aspect of the matter is

concerned, it is clear that the Respondent No.3 is allotting duty free shop as a lessee of the Airports authority of India/Respondent No.2 and that lease has been given by Respondent No.2 to the Respondent No.3 because of the provisions of Section 12A of the Act. Section 12A of the Act reads as under:12-A Lease by the Authority.contained may, in (1) in the

Notwithstanding this Act, the

anything Authority

public interest or in the interest of better lease management of the of airports, of and an make a

premises

airport

including thereon and

buildings

structures thereto) to

appertaining

carry out some of its functions under section fit; 12 as the Authority may deem

- 143 -

provided affect

that

such

lease of the

shall

not

the

functions

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 the sub-section of the (1), shall have all

powers

Authority

necessary

for the performance of such functions in terms of the lease.

Perusal

of the above provisions shows that the

lease has been granted by the Respondent No.2 to Respondent No.3 to carry out some of its

functions and for the purpose of carrying out

- 144 -

those clothed

functions with

the the

Respondent necessary

No.3 powers

also of

is the

Respondent No.2. Thus, on execution of the lease for the purpose of discharging functions for

which lease has been granted, the Respondent No.3 also gets the powers of the Respondent No.2 which are necessary for performing those functions. The functions of the Respondent No.2 are enumerated

in Section 12 of the Act. Thus, the functions which are to be performed by Respondent No.3 are statutory functions and the power that it

exercised in performing those functions is also statutory power. A part of the amount that will be paid by the person who is allotted the duty free shop as per the terms of the agreement would go to the Respondent No.2 as also the Respondent No.1. Following statements found in paragraph 4 (xxii) of the affidavit in reply filed by the Respondent No.3, in our opinion, is relevant. It reads as under:-

- 145 -

xxii.

It

is No.3

submitted has the

that

the

Respondent

responsibility

not just to build a world class airport but has a commitment to share revenue with the Govt. high and revenues is expected the to Non

generate

from

Aeronautical Services. One important Non Aeronautical Service which can generate revenues shops. for is the running of duty free

Apart

from

generating No.3

revenues and the

the

Respondent

Government, the duty free shop is very important for the overall class, public perception international fact that and stature It is of a an known

airport. airports

like

Schipol,

Frankfurt, Singapore (changi) and Dubai international are known the world over for excellent not one be duty an of free shopping. to It say

would that

overstatement the reasons have

these become

international

airports

successful international hubs is because of the attraction of duty free shopping. The intent of the Respondent No.3 was to establish a duty free shopping facility of international class and caliber.

- 146 -

All monies payable by the lessee in terms of the lease made under Section 12A is to form part of the fund of the authority and is to be created thereto as if such money is received by the

authority for all purposes of Section 24. Thus, the monies payable by the lessee to the authority are public monies and public fund. Thus, the

higher amount received from the allotees of the duty free shops will augment to be and public funds. public monies

39. the

Under the Act it is contemplated that Respondent No.2 may make profit from the

operations of the Airports. Section 11 obliges the Respondent No.2 to act on business

principles. Section 22 gives it power to charge fees, rent etc. for the landing, housing or

parking of aircraft or for any other service or facility offered in connection with aircraft

operations at any airport, heliport or airstrip.

- 147 -

Section 22A empowers the Respondent No.2 to levy development fees at airports. Section 23 provides for the funds of the authority and its

investment. Section 25 contemplates allocation of surplus funds. Section 28 obliges AAI/ Respondent No.2 to submit accounts and audit to central

Government. OMDA

It is to be noted that under the

apart from Rs.150 crores, the Respondent

No.2 annually gets 38.7% of the revenue earned by Respondent No.3, so that large amount of money earned goes to the public exchequers.

40.

Taking it

overall can be

view safely

of

the said

matter, that in

therefore,

providing duty free shops at the International Airports, the Respondent No.3 is performing the public function in the public interest and

therefore in performance of those functions, it is obliged so for to act fairly it and reasonably to give at and a the

justly, contract

that any

when

chooses

particular

activity

- 148 -

airports which is for the benefits of the public, it must choose a person by a open competition according to objects and clear norms and its

action should be transparent.

And this action

can be examined by this court in a petition filed under Article 226 of the Constitution of India on the touch-stone of fairness and reasonableness. In our opinion, therefore, even assuming that the Respondent No.3 is not an instrumentality of the State, because the functions it performs are

essentially the functions of the Respondent No.2, which are statutory, the Respondent No.3 while discharging those functions is amenable to the jurisdiction of this court under Article 226 of the Constitution and in that petition this court would be entitled to examine the action of the Respondent No.2 on the touch-stone of

reasonableness and fairness.

41.

In our opinion, the question whether in the functions conferred on it in

discharging

- 149 -

terms of the lease executed under Section 12A of the Act and in exercising powers of the Airports authorities necessary for the discharge of those functions, the Respondent No.3 is bound by the provisions of Article 14 of the Constitution can be looked at from a slightly different angle

also. The Airports Authority

of India Act,has

been enacted by the Parliament in exercise of the legislative Constitution. powers conferred of on the it by the of

Because

provisions

Article 13(2) of the Constitution, the Parliament does not have powers to make any law which takes away or abridges the rights conferred by Part-III of the Constitution. By enacting Section 12 of the Constitution that the are Parliament to be enumerated by the the

functions

performed

airports authority. It is clear from the judgment of the Supreme Shetty, Court in the to case above of Ramana the

Dayaram

referred

that

airports authority was to perform those functions in consonance with the provisions of Part-III of

- 150 -

the Constitution. It is in this background that the Parliament in the year 2003 enacted Section 12A which permits the Airports authority to

delegate or assign some of its functions to a third party. If Section 12A of the Act is so read to mean that the Parliament by enacting Section 12A relieves the third party from the obligations to comply with Part-III of the Constitution, then the exercise of the legislative power of the

Parliament in enacting Section 12A will be hit by provisions of sub-Article 2 of Article 13 of the Constitution. In our opinion, Section 12A cannot be read to mean that it was enacted to do away with the compliance of provisions of Part-III of the Constitution in performing the functions and in exercising the powers which till the date the lease deed is executed under 12A in favour of a third party can be exercised only subject to the provisions of Part-III of the Constitution.

- 151 -

42.

Sub-Article

of

Article

13

of

the

Constitution reads as under: law 13(2) The State shall not make any which takes away of abridges the

rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the

contravention, be void. Perusal of the above provision shows that the provision issued is by in the the nature of an injunction the

Constitution

against

Legislature restraining it from making any law which takes away or abridges the rights conferred by Part-III of the Constitution. Therefore, when

the Parliament enacted Section 12A, it cannot be said that its intention of was to take away or

abridge

operation

fundamental

rights

guaranteed by Part III of the Constitution in relation to some of the functions and powers of the Airports authority enumerated in Section 12, on those functions and powers being assigned or

- 152 -

delegated to lessee of the authority.

Even in

the hands of the lessee, the functions and powers continue to be that of the airports authority. The lessee the discharges powers on those functions for and

exercises those

necessary behalf of as

discharging airports was an

functions and

the there

authority,

therefore,

obligation on the airports authority to discharge its functions 12, and exercise to its powers 14 of of under the the

Section

subject the

Article or

Constitution,

delegate

assignee

airports authority would also be bound by the provisions of Article 14 while discharging the functions airports and exercising In our the powers of the

authority.

opinion,

therefore,

even assuming that the lessee of the airports authority is not an instrumentality of the State, still the functions that the lessee would be

discharging and the powers that the lessee would be exercising the would lessee be statutory be powers by and the

therefore,

would

bound

- 153 -

provisions of Article 14 of the Constitution. In our opinion, therefore, the actions of the

Respondent No.3 have to be judged on the touchstone of Article 14 of the Constitution. In other words, the Respondent No.3 cannot avoid scrutiny of its action on the touch-stone of Article 14 of the Constitution merely by claiming that it is only a lessee of airports authority and the

transaction entered into by it is a commercial transaction. So far as maintainability of the

petition under Article 226 of the Constitution against the Respondent No.3 is concerned, we have already observed above that public because it is it an is

authority

exercising

function

amenable to the jurisdiction of this court under Article 226 of the Constitution of India, and therefore, Respondent Constitution in a petition under India, filed against 226 of of the the the

No.3 of

Article the

action

Respondent No.3 can be judged on the touch-stone of Article 14 of the Constitution. While

- 154 -

considering the question whether the Respondent No.3 is bound by Article 14 of the Constitution of India, one more aspect has to be taken into consideration. According to the Respondent No.3 what it is carrying on is purely commercial

activities. Assuming it that to be so, it is an admitted position that the property belonging to the Respondents Nos. 1 & 2, i.e. the land and building have been handed over by the Respondent Nos. 1 & 2 to the Respondent No.3 for the purpose of carrying out functions of the airports

authority. Admittedly, the land was acquired by the Government in exercise of its power to

compulsorily acquire the land and building that have been handed by to the Respondent money from No.3 the were

constructed

spending

public

fund. Even the building that the Respondent No.3 may construct on the land for the purpose of

discharging the functions of the Respondent No.2 would be owned by Respondent No.2 and ultimately on expiry of the lease it will be the Respondent

- 155 -

No.2 who would be entitled to the possession of both the building and properties. Thus, it is

clear that the property that the Respondent No.3 is using for its activities is admittedly public

property owned by Respondents Nos.1 & 2. In this background, therefore, the judgment of the

Supreme Court of the United State of America, which was relied for H. the Burton referred on by the learned in the Counsel case of

appearing William

Petitioner v/s. to

Wilmington becomes

Parking relevant.

Authority,

above

The facts involved in that case were that the Defendant was a Private Corporation and as a

lessee operated the Restaurant in an automobile parking lessor, Delaware building an to agency provide owned and operated by the by State the of The

created

parking

facilities.

restaurant constituted an integral part of the state's plan to operate the building as a selfsustaining unit. The lessee refused to serve the Plaintiff solely on the ground that he was a

- 156 -

Negro. Claiming violation of his rights under the equal protection clause of the Fourteenth

Amendment of the Constitution of United States, the Plaintiff instituted an action for

declaration and injunction. The matter ultimately went to the Supreme Court of America. The opinion of the court was delivered by Justice Clark. He noted that the State acquired the land and spent money from the state funds for parking facility. Then, he observed that *Before it began actual construction of the facility, the Authority was advised by its retained experts that the

anticipated revenue from the parking of cars and proceeds from sale of its bonds would not be

sufficient to finance the construction costs of the facility. Moreover, the bonds were not

expected to be marketable if payable solely out of parking revenues. To secure additional capital needed for its debt-service requirements, and thereby to make bond financing practicable, the Authority decided it was necessary to enter long-

- 157 -

term

leases

with

responsible

tenants

for

commercial use of some of the space available in the projected garage building. The public was invited to bid for these leases. He noted that

in 1957 a private lease for 20 years was made with Eagle Coffee Shoppe for use as a restaurant, dinning room, banquet hall, cocktail lounge and bar. Then, in the judgment, the terms of the

lease have been referred to. Then, it observed : In August 1958 appellant parked his car in the building and walked around to enter the restaurant by its front door on Ninth Street. Having he filed in motions on the was this the for entered refused and it.

sought

service, he

Thereafter, judgment Chancery. judgment,

declaratory Court of

action On based the to that

summary and

pleadings

affidavits, contrary to

Chancellor the

concluded, of the

contentions in fact

respondents,

whether

lease was a device or was executed in good faith, it would not serve to

insulate the public authority from the force and effect of the Fourteenth

- 158 -

Amendment. 150 A2d 197. He found it not necessary, therefore, to pass upon the rights state of private restaurateurs statutory ode $ 1501. under law, The

common 24

and Del (

including

Supreme Court of Delaware reversed, as we mentioned above, holding that Eagle in the conduct in a of its business, is

acting

purely

private

capacity........The Civil Rights Cases, 109 US 3, 27, L ed in 835, 3.S. Ct.18

(1883) law

embedded the

our

constitutional the action (Equal

principal by the

that

inhibited Protection Amendment

first of such

section the

Clause) is only

Fourteenth as may

action

fairly be said to be that of the States. That Amendment erects no shield against merely private or leased conduct, however,

discriminatory commercially

wrongful.......the areas were not

surplus state property, but constituted a physically and financially integral

and, indeed, indispensable part of the State's plan to operate its project as a self-sustaining maintenance of unit. the Upkeep and

building,

including

necessary repairs, were responsibilities

- 159 -

of the Authority and were payable out of public funds. the peculiar to It cannot be doubted that relationship the parking of the in

restaurant

facility

which it is located confers on each an incidental variety of mutual benefits.

Guests of the restaurant are afforded a convenient place to park their

automobiles, even if they cannot enter the restaurant directly from the parking area. diners demand Similarly, may for well the Should the its convenience for

provide

additional parking

Authority's any

facilities. effected in

improvements by Eagle

leasehold

become part of the realty, there is no possibility of increased taxes being

passed on to it since the fee is held by a tax-exempt government agency. Neither can it be ignored, especially in view of Eagle's affirmative allegation that for it to serve Negroes would injure earned contribute its by to

business,

that not

profits only

discrimination

but also are indispensable elements in, the financial agency. success of a governmental

- 160 -

Addition activities, responsibilities benefits with the

of

all

these and the

obligations of the Authority,

mutually obvious is

conferred, fact as

together that the

restaurant

operated

an

integral

part of a public building devoted to a public degree parking of service, indicates that and

state in was

participation

involvement which it

discriminatory the design

action of the It is

Fourteenth Amendment to condemn.

irony amounting to grave injustice that in one part of a single building,

erected and maintained with public funds by an agency of the State to serve a public purpose, all persons have equal rights, while in another portion, also serving the public, a Negro is a secondclass citizen, offensive because of his race, without rights and unentitled to service, enjoys but equal in As its at the same time to fully nearby owned pointed the

access wholly the lease

restaurants buildings. out, in

privately

Chancellor with

Eagle

Authority required

could Eagle

have to

affirmatively discharge the

- 161 -

responsibilities Amendment enterprise

under upon

the

Fourteenth private of state may its

imposed as a

the

consequence But no

participation. effectively

State

abdicate

responsibilities by either ignoring them as by merely failing to discharge them whatever the motive may be. It is of no

consolation to an individual denied the equal protection of the laws that it was done in good faith. in Certainly similar cases do the by not

conclusions the various

drawn

Courts

of

Appeals

depend upon such a distinction.

By its

inaction, the Authority, and through it the State, has not only made itself a part to the refusal of service, but has elected to place its power, property and prestige behind The the State a has admitted so far of

discrimination. insinuated

itself

into

position

interdependence with Eagle that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have3 been so purely the private of the as to fall

without

scope

Fourteenth

Amendment.

- 162 -

Then in the conclusion it is observed: Specifically defining the limits of

our inquiry, what we hold today is that when a State leases public property in the manner and for the purpose shown to have been the of case the here, the

proscriptions

Fourteenth

Amendment must be complied with by the lessee as certainly as though they were binding covenants written into the

agreement itself.

In our opinion, the facts which were considered by the Supreme Court of the U.S. in its judgment in the case of Burton are similar to the facts of the present case. In this case also the

Respondent No.3, a lessee is using the public property for the purpose of carrying out its

business and therefore, the lessee is bound by Article 14 of the Constitution, which is

analogous to the 14th Amendment of the United States' Constitution.

- 163 -

43.

Now,

that

we

have

reached

this

conclusion, it is really not necessary for us to examine whether the Respondent No.3 can be said to be an instrumentality of the State in view of the law laid down by the Supreme Court in its judgment starting with the case of Rajasthan

State Electricity Board (supra) and ending with the judgment of the Supreme Court in the case of Pradeep Kumar Biswas (supra). However, as we have spent considerable time in hearing the learned Counsel for both sides on this question, in our opinion, it will be appropriate to decide this

aspect of the matter also.

44.

In its judgment in the case of Pradeep

Kumar Biswas (supra), which is a judgment of a Constitution Bench consisting of Seven Hon'ble

Judges of the Supreme Court, the Supreme Court has considered in detail development of law on this aspect of the matter., initially the

definition of the State found in Article 12 of

- 164 -

the Constitution was treated as exhaustive and confined to the authorities or those which could be read ejusdem generis with the authorities

mentioned in the definition of Article 12 itself. The next stage was reached when the definition of State came to be understood with reference to the remedies available against it. Thus a

statutory corporation, with regulations framed by such corporation pursuant to statutory powers was considered a State, and the public duty was

limited to those which were created by statute. It was so in held the by the of Supreme court in its

judgment

case

Rajasthan

Electricity

Board (supra). In 1975, in his judgment in the case of Sukhdev Singh and ors, (supra), Mathew J. noted that the concept of State in Article 12

had undergone drastic changes in recent years . The question in that case was whether the Oil and Natural Gas Commission, the Industrial Finance

Corporation and the Life Insurance Corporation, each of which were public corporation set up by

- 165 -

statutes,

were authorities and therefore within

the definition of State in Article 12. The Supreme Court affirmed its decision in Rajasthan Electricity Board and held that the court could compel rules. of the compliance For with the an Mathew

statutory

identifying Justice

instrumentality

State,

propounded four indicia . The tests

propounded

by Justice Mathew in his judgment in the case of Sukhdev Singh referred to above, were affirmed

by the Supreme Court in its judgment in the case of Ramanana Shetty, referred to above. Thus, the

tests propounded by Mathew J. in Sukhdev's case were eleborate in the judgment in the case of Ramanna Shetty. The tests were referred to in

the judgment of the Constitution Bench of the Supreme Court in the case of Ajay Hasia, referred to above. The Supreme court in its judgment in the case of Pradeep Kumar Biswas after

referring to the development of law right from the judgment in Rajasthan Electricity Board 's

- 166 -

case till the judgment in Ajay Hasia's case in paragraph 27 of its judgment observed thus: 27. Ramana approval was in noted and and quoted the with tests

extenso

propounded for determining as to when a corporation can be or said agency to be of an the

instrumentality

Government therein were culled out and summarised as follows:(SCC p.737, para9) (1) the entire is One thing is clear that if share held capital by of the it

Corporation

Government,

would go a long way towards indicating that the corporation is an

instrumentality or agency of Government. (SCC p.507, para 14) (2) Where of the State entire it of the the is financial so much assistance as to of meet the some being

almost

expenditure would

corporation, indication

afford

corporation

impregnated with governmental character. (SCC p.508, para 15) (3) It may also be a relevant factor ... whether the corporation enjoys

monopoly status which is State-conferred or State-protected. (SCC p.508, para 15)

- 167 -

(4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p.508, para 15) (5) If the functions of the

corporation are of public importance and closely related to governmental

functions, it would be a relevant factor in classifying the corporation as an

instrumentality or agency of Government. (SCC p.509, para 16) (6) 'Specifically, of Government is if a department to a

transferred

corporation, it would be a strong factor supportive of this inference' of the

corporation being an instrumentality or agency of Government. (SCC p.510, para 18)

Then in para.40 the Supreme Court observed thus:-

40. The picture that ultimately emerges is that the tests formulated in Ajay

Hasia care not a rigid set of principles so that if a body falls within any one of them it to must, be a ex hypothesi, within be the

considered

State

- 168 -

meaning of Article 12. each light case of would the the be

The question in whether in the as

cumulative body is

facts

established, functionally

financially,

and

administratively

dominated by or under the control of the Government. Such control must be

particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State.

45. down by

Now, if in the light of this law laid the of Supreme Court, if we we examine find the even

status

the

Respondent

No.3,

though Respondent No.3 is a company registered under the companies managing Act, its functions the in

operating,

and

developing be

Mumbai

International

Airport

cannot

characterized

Purely Private. Shareholders

Indeed, OMDA read with the and the lease deed

Agreement

- 169 -

specifically Joint India there

speak

of

Respondent Airport partners. directly

No.3

being

a of

Venture and is its an

between private

Authority In

addition, into

agreement

entered

between the Union of India and Respondent No.3, which is called State Support Agreement. The documents produced on record therefore clearly

show that Respondent No. 3 is a Joint Venture company supported managing by the Union of India the in

operating,

and

developing

Mumbai

International Airport on property that is owned by the Airports Authority of India i.e. public property. statutory Respondent functions No.3 and in fact performs statutory

exercises

powers under the Airport Authority of India Act, 1994; it performs the Airport Authority of Indias managing statutory and functions Mumbai of operating, International

developing

Airport and exercises the powers of the Airport Authority for performing the functions assigned or delegated to it. Under Section 12A of the

- 170 -

said Act, it is not a simple lessee of public property. The lease with Respondent No.3 has to

be made with the previous approval of the Central Government. All moneys payable by the lessee in

terms of the lease made under Section 12A is to form part of the fund of the Authority and is to be credited of 24. to thereto the as if such money is the of the and

receipt Section lessee

Authority the

for

all

purposes by

Thus,

moneys are

payable public

the

Authority

money

public funds.

Further, the lessee statutorily is

given all powers of the Authority necessary for the performance of its functions in terms of the lease. Thus, Respondent No.3 is a lessee under a statutory lease exercising Governmental or public functions. It is because Respondent No.3

performs Governmental functions that Chapter VA of the said Act applies to it and it can just like Government use a summary procedure to evict unauthorized occupants on the area leased to it without following the rigor of the Rent Act.

- 171 -

This shows unmistakably that Respondent No. 3 is State for the purpose of Article 12.The

Government has a large financial stake not only does the Airport Authority of India own 26% of the paid up share capital of Respondent No.3 the

Respondent No.3 has to give 38.7% of its gross revenue quite apart from the down payment made by way of consideration for the grant of the lease to Airport Authority of India. OMDA clearly shows that for the purpose of operating, managing and developing Respondent Mumbai No.3 has International been conferred a Airport monopoly

status it alone may exclusively perform all these functions and indeed cannot perform any

other function. That Government exercises control in various ways is clear 26% of the share

capital of Respondent No.3 is held by the Airport Authority of India, which can therefore block any Special Resolution that is to be passed under the Companies Memorandum Act. of Further, Association no or change in the of

Articles

- 172 -

Association of the company can be made unless Airport Authority of India gives its consent,

since it can block a special resolution. Both under the State Support Agreement and under OMDA, a Master Plan has to be formulated by Respondent No.3 in accordance with the criteria set out. After the Master Plan is so formulated a final Master Plan can only come into existence after the Government makes comments and suggests

changes, which comments and changes are binding on Respondent No.3. reports of the No.3 Further, monthly and other day-to-day have to be functioning submitted of by

Respondent

Respondent 3 to the Airport Authority of India. The fact that the OMDA and the Shareholders

Agreement say that no agency is created is not determinative. Control is not exercised by way of agency but by way of what has been observed

hereinabove. It is obvious that the Government and Respondent No.3 are jointly interested

Joint Coordination Committees have to be set up

- 173 -

both for

Government services as well as Airports

services and it is here that it is again clear that Respondents No.1 to 3 have necessarily to function together in running the Airport . OMDA itself specifically states that in the granting of sub-contracts Respondent No. 3 has to do so fairly, objectively and without discrimination in short the State as traditionally defined

insists that Respondent No. 3 be subject to the same constitutional obligations under Article 14 as the State is itself subject to. Under that the are

State

Support

Agreement, and

fees

statutorily

levied

collected

under

Section

22A of the 1994 Act are to be paid to Respondent No. 3 in fact, 35% of the fees so collected by the collecting agency that is the airlines have to be paid directly to Respondent No. 3. This again makes it clear that the sovereign

authority of the State in levying and collecting fees is utilized in order to distribute a large part of it to Respondent No.3. OMDA says that

- 174 -

whenever

contracts

are

entered

into

by

the

Respondent No. 3, such contracts must contain a clause stating that all contractual rights are to stand transferred of automatically under to the Airport

Authority

India

certain

specified

circumstances.

46.

In

our

opinion

availability

of

the

powers under Chapter VA to the Respondent No.3 of summary strong eviction indicator of that unauthorised the occupant No.3 is is

Respondent

bound by Part III of the Constitution. In its judgment in the case of Ashoka Marketing Ltd.,

one of the reason that weighed with the Supreme Court in holding the provisions of the Public Premises Act, which are analogous to the

provisions of Chapter VA to be power of summary eviction

valid was that of unauthorized

occupant is available in relation to the premises owned by the authorities which are subject to Part -III of the Constitution. The Supreme Court

- 175 -

in paragraph 64 of its judgment in the Ashoka Marketing Ltd. (supra) has observed that a

special provision has been made by the Parliament of enacting Public Premises Act in relation to the premises belonging to the Government and by excluding the operation of Rent Act in relation to those premises, is that the Government while dealing with the citizens would act in public interest and what can be said with regard to

companies and corporation in relation to whose properties also the Public Premises Act operates. Following observations from paragraph 64 of that judgment are relevant.: 64....The reason underlying the

exclusion of property belonging to the Government from the ambit of the Rent Control while respect Act, dealing of is that the Government in it

with

the

citizens to

property

belonging

would not act for its own purpose as a private landlord but would act in public

- 176 -

interest. What can be said with regard to government in relation to property

belonging to it can also be said with regard other to companies, corporations mentioned and in

statutory

bodies

Section 2(e) of the Public Premises Act.

The Supreme Court again considered the question of operation of Rent Act in relation to the

premises to which the Public Premises Act applies in paragraph 69 and has observed thus:

69. It

has

been

urged

by

the

learned

counsel for the petitioners that many of the corporations referred to in Section 2(e)(2)(ii) of the Public Premises act, like the nationalised banks and the Life Insurance Corporation, are trading

corporations and under the provisions of the enactments these whereby they are are

constituted

corporations

required to carry on their business with a view to earn profit, and that there is nothing to preclude these corporations

- 177 -

to buy property in possession of tenants at a low price and after b uying such property terminating evict the the tenancy tenants and after

thereafter

sell the said property at a much higher value because the value of property in possession compared unable of tenants is much less We of as are the

to

vacant down

property. the scope

to

cut

provisions of the Public Premises Act on the basis of such an apprehension

because as pointed out by this Court in Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay:(SCC

p.306, para 27) ...every activity of a public authority background especially of the in the on

assumption

which such authority enjoys immunity from the rigours of the Rent Act, must be informed by reason and

guided by the public interest. All exercise of discretion or power by public authorities in respect as of the dealing which

respondent, with they

tenants have

in

respect treated

of

been

separately

and distinctly from other landlords

- 178 -

on

the

assumption

that

they

would

not act as private landlords, must be judged by that standard. These observations were made in the

context of the provisions of the Bombay Rents, Hotel and Lodging Houses Rates

(Control)

Act,1947

whereby

exemption

from the provisions of the Act has been granted to premises belonging to the

Bombay Port Trust. giving overriding

The consequence of effect to the

provisions of the Public Premises Act is that premises belonging to companies and statutory bodies referred to in clauses (2) and (3) of Section Act would 2(e) be of the

Public

Premises

exempted

from the provisions of the Rent Control Act. The actions bodies (3) of of the companies in 2(e) and

statutory (2) and

mentioned Section

clauses of the

Public Premises Act while dealing with their properties under the Public

Premises Act

will, therefore, have to

be judged by the same standard. The Supreme Court read an obligation on companies and authorities in relation to which the Public Premises Act was applicable to act reasonably and

- 179 -

fairly and in public interest even while carrying on commercial activities, because they were

instrumentality of the State and therefore, bound by the provisions of Part-III of the

Constitution. In our opinion, therefore, conferal of power on lessee of the airports authority also to summarily evict under Chapter VA strongly

indicates that the intention of the Legislature was that the lessee of the airports authority was also an instrumentality of the State. We , thus, find that the Respondent No.3 is in truth and substance is an instrumentality of the State and is, therefore, bound by Part-III of

the Constitution.

47.

An

objection

was

raised

to

the

maintainability that ARI has

of this petition on the ground not joined as a party to the

petition. In our opinion, the objection is not well founded. in The EOI was submitted ARI. by the

Petitioner

partnership

with

Therefore,

- 180 -

when an opportunity to submit tender was denied, rights of the Petitioner as also its partner were violated. In our opinion, therefore, it cannot be said that the Petitioner does not have a cause of action for challenging the action of the

Respondent No.3. 48. the It was also contended that in view of fact that the Petitioner instead of

challenging the public notice submitted its EOI, it is estopped from challenging the public

notice. In our opinion, this objection is also not well founded. has the Because made in for was the EOI only a

provision Therefore,

been

short-listing. justified in

Petitioner

believing that the short-listing will be resorted to only if it becomes necessary and before doing the actual short-listing, the Respondent No.3

will adopt an objective and relevant criteria for short-listing. In our opinion, merely by

submitting EOI, no estoppal will operate against the Petitioner.

- 181 -

49.

It

was

also

submitted

that

the

Petitioner had not disclosed to the Respondent No.3 the fact that it had filed petition before the Karnataka High Airport Court Ltd. against (BIAL). Bangalore It may be

International

pointed out that the explanation that has been given public by the Petitioner is that according to

notice,

information

about

litigation was to be time the

pending against the Airports operator given. At the relevant point of

Bangalore International Airports Ltd., a company against which the petition was filed was not an Airports operator and therefore, that

information was not supplied, in our opinion, is a reasonable explanation. Even the Respondent

No.3 did not submit that this information was intention ally suppressed with any ulterior

motive. Merely, because a Writ Petition has been filed by the Petitioner before the High Court, the party cannot be debarred from claiming that it is entitled to submit a tender. If that party

- 182 -

is otherwise entitled to or eligible to submit the tender. In our opinion, the relief cannot be denied to the Petitioner for that reason alone. 50. It was submitted on behalf of the

Respondents Nos. 5 & 6 that because they have invested considerable amounts, contract in their favour should not be cancelled. It is an admitted position that the

contract in favour of Respondents Nos. 5 & 6 was granted in the month of November, 2007, when the proceedings were pending. Obviously, therefore, the contract in favour of Respondents Nos. 5 & 6 was subject to the decision in the proceedings and the contract was taken by them with full

knowledge about the pendency of the proceedings. In any case, we propose to protect the interest of Respondents Nos. the 5 & 6 till No.3 on fresh a is the

consideration decision possible about that

Respondent of

takes It

awarding in the

contract. process

fresh

also

- 183 -

Respondents Nos. 5 & 6 may turn out to be the highest bidder.

51.

In the result, therefore, the petition

succeeds and is allowed. (i) The contract awarded to Respondent No.5 on 29-11-2007 and its subsequent novation in favour of Respondent No.6 is set aside. (ii) The Respondent No.3 is directed to

reconsider the question of grant of duty-free shop pursuant to the public advertisement

afresh, in accordance with law and in the light of the observations made above. (iii) The Respondent as No.3 shall in do any so as

expeditiously

possible,

case,

within a period of eight weeks from today. (iv) Though, by this order the grant of

contract in favour of Respondents Nos. 5 & 6 is cancelled, the Respondent No.3 shall be at liberty to continue running of duty free shop by Respondents Nos. 5 & 6 on the same terms

- 184 -

and conditions and to the same extent that is existing today till a fresh grant is made pursuant to this order. (v) Rule costs. At this stage a request is made for stay of the operation of the order. eight weeks time for the We have given no.3 to made absolute. No order as to

Respondent

initiate and complete the procedure, therefore, we do not see any reason to stay the operation of the order.

(D. K. DESHMUKH J.)

(N. D. DESHPANDE J.)