2008 (12) TMI 807 - HC - Indian Laws

BIAL's Tender Process Quashed: Court Orders Restart for Fairness and Transparency Due to Favoritism Concerns.

Flemingo Dutyfree Shops Pvt. Ltd. Versus Union of India (UOI)

The HC determined BIAL is a 'State' under Article 12 of the Constitution, subject to writ jurisdiction under Article 226. The court found BIAL's tender ... Validity of exercise of administrative power by the BIAL for issuing the tender documents in favour of respondents 5 to 9 by short-listing without assigning reasons for ignoring the petitioner - arbitrary and discriminatory - Award of contract in favour of 5th respondent - Whether the nature of duties performed by BIAL at the International Airport and operation of flights is a statutory function under Section 12 of Airport Authorities Act, 1994? - opportunity to offer financial bid to the 9th respondent - HELD THAT:- The action of the BIAL in short listing respondent Nos. 5 to 9 and excluding the petitioner company from issuance of the tender despite the fact that it has got qualification, experience in the Indian market as per the eligibility criteria enumerated in the EOI, it has been running its business in various international and national airports in different parts of other countries and our country which are referred to in the earlier paragraphs of the judgment, it is one of the important aspect which should have been weighed in the mind of the selection committee of the third respondent keeping in view that it is discharging public functions and the premises is a public premises. Therefore in the concession agreement, it has been specifically stated that Chapter V(A) of the A.A.I.A Act is applicable to the premises in question to follow the procedure for eviction of unauthorized occupants of the Airport availing the provisions are on the lines of Public Premises (Eviction of Unauthorized Occupants) Act, 1971 is made applicable to the premises of the third airport which is being managed by BIAL is one of the strong and powerful indicator that airport premises is a public premises in terms of the definition of Section 2(c) of the PP(EOUC) Act and the BIAL is managing it, therefore it is a State which we have already answered while answering issue No. 1 to 3 by assigning valid and cogent reasons with reference to the provisions of the Act and law laid down by the Apex Court in catena of cases referred to supra. Therefore, the decision of the Supreme Court in Ashok Marketing Ltd. v. Punjab National Bank [1990 (8) TMI 393 - SUPREME COURT] in which decision Dwarkadas Marfatia's decision[1989 (4) TMI 315 - SUPREME COURT] is considered and it has been held that every activity of public authority especially in the background of the assumption on which the authority enjoys immunity from the rigours of Rent Act would not act as private landlords must be judged by that standard. In view of our reasons recorded above as we have already held it is discharging public function, the further allegations made against the 4th respondent that action of the respondent No. 3 suffers from malice for the reason that the 4th respondent who has issued invitation for expression of interest has been an employee of Zurich Airport Authority and he was interested in the contract being awarded to respondent No. 5 which is Swiss Entity and further allegations made at para 34 in the writ petition that the 5th respondent was unit of Swiss Air (SAIR) which has also owned the Zurich Airport and Flughafen Zuerich AG, shareholder of BIAL were both owned by Swiss Air and it; went bankrupt in 2001. (both the units were sold). Although respondents' objection is that he was an employee of the Zurich Airport Authority and there was no such company whereas he admits that he was an employee of Zurich Airport Authority which holds 17% shares in BIAL and further contention of the 5th respondent that 5th respondent is owned and controlled by two Italian Companies and further it is the contention that the 4th respondent alone do not makes a decision but the BIAL decided the matter. This fact is falsified by the affidavit of Airport Authority of India, which clearly stated in para 9 that the matter was never placed before the Board of Directors of the Company. Therefore, it is clear that Board of Directors including two promoters were kept out from the decision making process, short listing and final choice of awarding contract ignoring the experience of the petitioner to render good service to the Indian Consumer. The contention is that it is a mala fide exercise of power. We have already held that the short listing is bad and opportunity was not given to the petitioner to submit its tender and participate in the competition, and reasons not assigned for excluding the petitioner and opportunity was not given to the 9th respondent to participate in the financial bid and not giving opportunity to the petitioner and 9th respondent to offer their financial bid for the purpose of establishing retail duty free shop in the Airport run by BIAL on such terms and conditions certainly it would have offered best price that could have increased the percentage of revenue to the second respondent-A.A.I out of the gross income that would have been earned by the BIAL. Issuing tender to the 5th respondent as already stated is not only arbitrary exercise of power by BIAL but also lacks transparency. Matter was not decided by the Board of Directors as stated by the second respondent in its affidavit at para 9 referred to supra and not given opportunity to the 9th respondent though it was in the short list, it has submitted its tender as we have to answer that as held in the Reliance Company's case referred to supra and also in other cases referred to supra, short listing and awarding of contract in favour of the 5th respondent is not only arbitrary, the same is against the public interest but also is at the instance of the 4th respondent Therefore, we have to answer that in discharging its public duty, it has not followed the well settled principle of law in awarding contract in favour of 5th respondent which is clear case of legal malice and the same is writ large on the face of the record. Therefore, we have to answer issue Nos. 7 to 9 in favour of the petitioner. Thus, the Writ Petition. Rule made absolute. The short-listing of respondent Nos. 5 to 9 and awarding of contract in favour of 5th respondent is hereby quashed. The 3rd respondent is directed to re-do the matter afresh from the stage of submission of E.O.I by petitioner and others keeping in view the observations made in this order and the principles laid down by the decisions of Apex Court. The entire process shall be completed by BIAL within 45 days from the date of receipt of a copy of this order and further we direct respondent No. 1-Union of India and respondent No. 2-A.A.I to see that the above directions issued to BIAL should be complied with. Issues Involved:1. Whether BIAL is a 'State' under Article 12 of the Constitution of India.2. Whether BIAL's duties at the International Airport are statutory functions under Section 12 of the Airport Authorities Act, 1994.3. Whether BIAL is amenable to writ jurisdiction under Article 226 of the Constitution.4. Whether the petitioner has locus standi to file the writ petition.5. Whether the petitioner has waived/acquiesced its right by participating in the selection process.6. Whether the shortlisting of tenders by BIAL without guidelines is reasonable and valid.7. Whether the administrative power exercised by BIAL in issuing tender documents to respondents 5 to 9 and awarding the contract to the 5th respondent is legal and valid.8. Whether BIAL's action in awarding the contract to the 5th respondent affects public interest.9. Whether the denial of the opportunity to offer a financial bid to the 9th respondent requires interference by the Court.Summary:Point Nos. 1 to 3:The court examined whether BIAL is a 'State' under Article 12 of the Constitution. It was found that BIAL, though a private airport, performs statutory functions and public duties under Section 12 of the A.A.I.A Act. BIAL's activities are subject to regulations under the Aircraft Act and the Airports Authority of India Act. Therefore, BIAL is considered an instrumentality of the 'State' and is amenable to writ jurisdiction under Article 226 of the Constitution. The court cited various Supreme Court decisions to support this conclusion, emphasizing that BIAL's functions have a public character and are essential for public interest.Point Nos. 4 and 5:The petitioner, being a consortium partner with AerRianta, has the locus standi to file the writ petition. The court rejected the contention that the petitioner had waived its right by participating in the selection process. It was held that fundamental rights cannot be waived, and the petitioner is entitled to challenge the arbitrary exclusion from the tender process.Point No. 6:The court found that the shortlisting process by BIAL lacked transparency and was arbitrary. No clear guidelines or criteria were provided for shortlisting the tenders. The decision-making process was not documented, and no reasons were communicated to the petitioner for its exclusion. The court cited several Supreme Court decisions emphasizing the need for transparency, fairness, and reasoned decisions in administrative actions.Point Nos. 7 to 9:The court held that the shortlisting of respondents 5 to 9 and the awarding of the contract to the 5th respondent by BIAL were arbitrary and lacked transparency. The decision was influenced by malice and favoritism, particularly by the 4th respondent, who had a conflict of interest. The court directed BIAL to re-do the tender process from the stage of submission of E.O.I by the petitioner and others, ensuring compliance with the principles of fairness and transparency.Order:The court quashed the shortlisting of respondents 5 to 9 and the awarding of the contract to the 5th respondent. BIAL was directed to re-do the tender process within 45 days, keeping in view the court's observations and the principles laid down by the Supreme Court. Respondents 1 and 2 were directed to ensure compliance with the court's directions.