Delve into a detailed examination of a recent legal case where the court’s focus was on scrutinizing the bidding process and upholding contractual obligations. This case sheds light on the importance of fairness, transparency, and adherence to established norms in governmental contracts. Stay tuned to unravel the complexities of contract law and the judicial perspective on bidding processes.
Facts
- The High Court issued a notice and listed the case for hearing on 18.03.2020.
- The concluded contract between the parties resulted from the actions taken.
- The annulment of the bidding process by MIL was deemed arbitrary and unfair and thus quashed.
- There were no disputed questions of facts that would prevent the High Court’s jurisdiction.
- The case involved the enforcement of public law arising from contractual obligations.
- Four appeals were filed challenging the judgment in favor of GMR Airports Limited and GMR Nagpur International Airport Limited against MIL and GoM.
- The involvement of GoM, AAI, and MoCA was deemed imperative in the case.
- The High Court directed further steps to implement the prayer made in the Writ Petition.
- GAL and GNIAL filed a Writ Petition seeking direction for MIL and GoM to sign the Concession Agreement.
- The importance of the bid and its long-term impact was emphasized, leading to the cancellation of the bid.
- Objections were raised by GoM and MIL against the Writ Petition.
- The High Court held that the letter dated 07.03.2019 was a Letter of Acceptance and not just a communication of bid acceptance.
- The High Court set aside the annulment of the bidding process and directed further necessary steps.
- The Nagpur International Airport was being run by the Airports Authority of India (AAI).
- A Memorandum of Understanding (MoU) was signed in 2006 between the Government of India (GoI), AAI, Government of Maharashtra (GoM), and Maharashtra Airport Development Company (MADC) for the establishment of a Joint Venture Company (JVC) to develop the airport into MIHAN.
- The JVC, known as MIHAN India Limited (MIL), was formed with 51% equity held by MADC and 49% by AAI.
- An issue arose regarding the bidding process for the airport project, specifically in relation to the communication dated 07.03.2019 accepting a revised proposal.
- Disputes arose between MIL, GMR Airports Limited (GAL), and other parties regarding bid security, revenue share, and the execution of the Concession Agreement.
- Multiple legal proceedings were initiated challenging the annulment of the bidding process and seeking enforcement of the letter dated 07.03.2019.
- Various meetings and communications took place between the parties, including negotiations on revenue share and requests for explanations.
- The High Court and various parties were involved in the litigation surrounding the airport project, with issues of non-joinder of necessary parties and the execution of agreements being key points of contention.
Issue
- The issue at hand centers around several key questions related to the selection of the bidder for the airport land transfer to a private developer.
- Some of the key questions include determining if the endorsement of GAL as a selected bidder qualifies as a Letter of Acceptance (LoA) and a concluded contract, as well as assessing the validity of the communication annulment of the bidding process on 19.03.2020.
- Another important consideration is whether GAL, as the successful bidder, has limited rights to request specific performance and if seeking remedy under Article 226 of the Constitution of India is permissible.
- Furthermore, the necessity of the involvement of the UoI and AAI in the proceedings, and the relevance of their absence in the granted relief by the High Court, is also under scrutiny.
- The successive questions are interrelated and the answers are contingent upon the final decision in the case.
Arguments
- The Railways can reject tender offers without giving reasons
- The Railways has the power to accept or not accept the lowest offer
- The exercise of power to reject bids must be within the realm of the objective for which the clause is incorporated
- In the case of Sterling Computers Ltd. etc. v. M/s. M & N Publications Ltd. (1993 1 SCC 445), the court recognized the need for authorities to have discretion in entering into contracts under special circumstances.
- Authorities should have the liberty to assess the overall situation to make decisions on awarding contracts and determining terms.
- This discretion allows authorities to consider various factors before finalizing contracts.
Analysis
- The judgement discusses the formation of a Joint Venture Company (JVC) between Airports Authority of India (AAI) and Maharashtra Airport Development Company Ltd (MADC) to upgrade the Nagpur airport.
- It mentions that the Joint Venture Company, known as Multi Modal International Passenger and Cargo Hub Airport at Nagpur India Limited (MIL), was formed with AAI holding 49% equity and MADC holding the remaining 51%.
- The Cabinet approved the proposal of formation of the second Joint Venture through competitive bidding and directed that partners for the second JVC be selected through this process.
- The issue of financial viability in relation to the revenue share offered by the selected bidder was raised, prompting directions for re-tendering of the bid for the MIHAN Project.
- The action of annulling the bidding process and the subsequent re-tendering was scrutinized in terms of fairness, justification, and compliance with established procedures.
- The Court observed that the annulment and re-tendering decision needed to be backed by valid reasons and adherence to the established norms and procedures of competitive bidding.
- Bids are invited for the Project based on the Revenue Share payable to the Authority in terms of the Concession Agreement.
- The term ‘Highest Bidder’ refers to the Bidder offering the highest Revenue Share.
- The Highest Bidder may request to renew/extend the Concession for an additional period of 30 years after fulfilling obligations for 27 years from the COD.
- The Bidder with the highest Revenue Share offered is usually declared as the selected Bidder.
- The Authority reserves the right to reject any bid and annul the bidding process without liability or obligation.
- If all bids are rejected or annulled, the Authority may invite eligible Bidders to submit fresh Bids.
- Section 12A applies to lease by the authority, which requires approval from the Central Government.
- No lease is required to be executed in favor of GAL or GNIAL in the present case.
- After selection, a Letter of Award (LOA) is issued to the Selected Bidder, who must sign and return it within 7 days.
- Public authorities must ensure no bias, favouritism, or arbitrariness in the bidding process.
- Rejecting bids cannot be done arbitrarily; it must be in line with the provisions and not violate Article 14 of the Constitution.
- State must act fairly and reasonably under Article 14, unless public interest dictates otherwise.
- Compromise of private interests should align with the public interest.
- Annulling a bidding process arbitrarily after issuing the Letter of Award is a violation of RFP provisions and Article 14.
- Right to equality under Article 14 opposes arbitrariness.
- Governmental bodies must uphold fairness and equality in contractual matters.
- Transparency in bidding processes is crucial to meet constitutional requirements.
- Decisions taken in good faith may be upheld even if not strictly following norms, based on the principle of allowing ‘play in the joints’ to the executive.
- Compromise of private legitimate interest must correspond proportionately to public interest.
- Constitutional factors come into play in government contracts.
- The objection regarding non-joinder raised by the appellants has been considered unwarranted by the High Court.
- The findings of the High Court allowing the Writ Petition are deemed to be in accordance with the law.
- The relief and direction issued by the High Court based on the Cabinet decision of 11.2.2009 did not adversely affect UoI and AAI after the direction to select the second JV through competitive bidding.
- No new significant information has been presented to demonstrate serious prejudice caused to UoI and AAI due to non-joinder by the Writ Court, apart from the documents provided.
Decision
- Project will be awarded to the Highest Bidder as per Clause 2.16.
- Highest bidder must furnish performance security within the specified time.
- A Writ Petition (No 1343 of 2020) was filed seeking various reliefs related to the Letter of Award dated 07.03.2019.
- High Court issued notice and set the matter for final disposal on 18.03.2020.
- The Bidding Process can proceed at any time, and bids can be rejected without reasons.
- The criteria for bidder selection is based on the percentage revenue share.
- If all bids are rejected, eligible bidders may be invited to submit fresh bids.
- The Selected Bidder must submit the Performance Security within the specified time period after acknowledging the LOA.
Case Title: MIHAN INDIA LTD. Vs. GMR AIRPORTS LTD. (2022 INSC 534)
Case Number: C.A. No.-003699-003699 / 2022
