State instrumentality in tendering must follow its own eligibility norms; arbitrary acceptance of a non-eligible bid was invalid.

A statutory corporation under deep and pervasive Government control was treated as "State" within Article 12 and therefore bound by Article 14. In public contracting, it could not depart from an objective eligibility condition it had itself prescribed, and acceptance of a tender from a bidder who did not satisfy that condition was arbitrary and discriminatory. Relief was nevertheless refused on discretionary grounds because the challenge was delayed, the successful tenderer had altered its position and incurred expenditure, and the litigation was not pursued in a bona fide direct contest. The judgment thus affirmed constitutional discipline over State instrumentalities in tender matters while declining to disturb the existing arrangement.

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Issues: (i) Whether the International Airport Authority of India was an authority falling within Article 12 of the Constitution of India and therefore subject to the constitutional discipline of Article 14; (ii) whether acceptance of the tender of a bidder who did not satisfy the stipulated eligibility condition was invalid as arbitrary and discriminatory; (iii) whether relief should nonetheless be refused in the exercise of discretion on the facts.

Issue (i): Whether the International Airport Authority of India was an authority falling within Article 12 of the Constitution of India and therefore subject to the constitutional discipline of Article 14.

Analysis: The Authority was constituted by statute, its chairman and members were appointed by the Central Government, its policy was controlled by Government directions, its capital was supplied by the Central Government, its accounts were audited and laid before Parliament, and the functions earlier performed by the Central Government in airport administration were transferred to it. These features showed deep and pervasive governmental control and that it functioned as an instrumentality of the Central Government.

Conclusion: The Authority was held to be "State" within Article 12 and was bound by Article 14.

Issue (ii): Whether acceptance of the tender of a bidder who did not satisfy the stipulated eligibility condition was invalid as arbitrary and discriminatory.

Analysis: The tender notice prescribed an objective condition of eligibility, namely, that only a registered second-class hotelier with at least five years' experience could tender. The Authority could not depart from that norm after inviting tenders and accept a non-eligible tenderer, because State action in contracts must conform to rational, relevant and non-discriminatory standards. Acceptance of the tender in favour of a non-eligible bidder excluded similarly situated persons from competing on equal terms and was contrary to Article 14 and the rule against arbitrary administrative action.

Conclusion: The acceptance of the tender was held to be invalid.

Issue (iii): Whether relief should nonetheless be refused in the exercise of discretion on the facts.

Analysis: The challenge was brought after substantial delay, after the successful tenderer had altered its position and incurred expenditure, and the surrounding circumstances suggested that the litigation was not pursued bona fide as a direct contest by the appellant. In such circumstances, interference with the contract was considered inequitable.

Conclusion: Relief was refused in the exercise of discretion.

Final Conclusion: The judgment affirmed the constitutional control of public bodies and State instrumentalities in awarding contracts, but declined to unsettle the existing arrangement on discretionary grounds.

Ratio Decidendi: A statutory corporation that is an instrumentality of the State cannot act arbitrarily in public contracting and must adhere to the eligibility norms it has itself prescribed, since Article 14 requires fairness, reasonableness and non-discrimination in State action.

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