DECIDING AUTHORITY : Supreme Court
DATE OF JUDGMENT: 31/01/2000
BENCH: G.T.Nanavati, S.N.Phukan
FACTS : CIAL is a public sector undertaking. Some other public sector undertakings and the State of Keraia are its shareholders. It has been established for setting up and maintaining a new International Airport at Cochin. For awarding a contract for ground handling facilities at the new Airport it invited offers by writing letters to some companies having experience of that type. The letters were written on 12.11.1997 to Cambatta;Air India and six others. Proposals were ’ submitted by 31.12.1997. Kambatta, Air India, M/s DNATA of Dubal, M/s Ogden Aviation Services of Hong Kong and M/s P.S.M. Aviation Pvt. Ltd. – responded. Proposals of some of them contained alternative proposals also. On 13.7.1998 CIAL again wrote to them to make their best offers on or before 28.7.1998. Air India submitted its proposal on 20.7.1998. Cambata did so on 28.7.1998.
The Committed constituted by CIAL for evaluation of the offers met on 28.9.1998. It found that Cambatta, Air India, DNATA and Ogden Aviation were on par as regards technical competence, organisationai capacity and past experience. It took note of the fact that Cambatta and Air India are Indian organisations, operate mainly in India and have better proven adaptability for operating in Indian conditions. Out of those two it recommended Cambatta for awarding the work. On 11.8.1998 the Government of India wrote a letter to the Government of Kerala recommending Air India for awarding the contract on the ground that Air India is the national carrier and has better experience.
Thereafter a meeting took place between the Managing Director of Air India and the Chief Minister of Kerala. That was followed by a letter dated 29.10.1998 by Mr. P. Mascarenhas, Managing Director of Air India to the Chief Minister of Kerala seeking an opportunity to make a more detailed presentation to the Board of CIAL on the advantages CIAL would derive if Air India was appointed its exclusive handling agent. The Board of Directors met on 7.11.1998 and decided to have a detailed discussion with Air India before taking a final decision and informed it to give a presentation before the Board on 27.11.1998. Having come to know about this development^ Cambatta wrote a letter on 10.11.1998 to the Chief Minister of Kerala pointing out that their company is also an Indian company and they also have experience of over 30 years in ground handling work. It also took exception to the effort made by Air India to revise its offer on the ground that it was unethical and deserved to be condemned by the Board. It again wrote to the Chief Minister on 12.11.1998 against giving preference to a national carrier in view of the policy of liberlisation. On 23.11.1998
Cambatta wrote to CIAL that it was extremely perturbed over the fact that Air India was given a further opportunity to make a presentation to the Board and requested it not to go back upon its earlier decision to give the contract to Cambatta. It also warned that not adhering to its earlier decision would be a retrograde step and shake the confidence of the people in fairness and impartiality of CIAL. Air India gave the presentation and by its letter dated 1.12.1998, reaffirmed its proposal With some changes as discussed and requested CIAL to accept it as it was better than the offer made by any other party. Cambattta again protested by its letter dated 7.12.1998 and informed CIAL that to accept the revised offer of Air India and not to accept its offer would be unfair and unethical and violative of Limited Global Competitive Building Norms. On 12.12.1998 the first respondent awarded the contract to Air India. Cambatta filed a writ petition in the Kerala High Court challenging that action of CIAL. Its contention was that its offer was the highest and it had fulfilled all the conditions. The offer given by Air India did not come anywhere near their offer, yet the contract was given to Air India because of influence exerted by Air India and the Secretary of Ministry of Civil Aviation. It was also challenged on the ground that CIAL had not acted fairly and impartially as It had carried on negotiations with Air India behind the back of Cambatta and no opportunity was given to Cambatta to give a better offer. In the counter affidavit filed on behalf of CIAL it was stated that this was not a case where tenders were invited. It was a project to be implemented by raising finances from various sources and, therefore, it was decided to invite offers from reputed agencies in order to decide best terms and conditions and then to award the contract to the best suited party in order to make the project viable and successful. It was furtherstated that individual offers were assessed considering the background and Infrastructure of the companies, their financiat capacity, expertise and future benefits likely accrue to CIAL. While awarding the contract to Air India what had weighed with it was, apart from it selection by the evaluating Committee, that it is a public sector unit, the national carrier under the Government of India and that it had offered to support CIAL in a big way byshowing its willingness in equity participation. It had also taken into consideration the fact that Cambatta was not a airline operator like Air India and its interest and expertise was limited to ground handling work alone. Air India had also offered to help in improving the revenue of CIAL by increasing Air Traffic through the Cochin Airport. Thus, on a comparative analysis of the offers made by Cambatta and Air India it was found that the offer made by Air India was better and more beneficial to CIAL. The petition was heard by a learned Single Judge of the High Court who held that there was no illegality, arbitrarmess or un reasonableness in the decision making process of CIAL and the decision was taken bonafide afterevaluating both the offers and on being satisfied that in the matter of experience, expertise, infrastructure and financial capacity the offer of Air India was superior and more bsneficiai. As regards the allegation of actual mala fides the exercising Its power under Article 226 ought not to have Interfered as no substantial amount of public interest was Involved.
JUDGEMENT : The narration of facts makes it dear that all along, after the High Level Committee had recommended Cambatta for awarding the contract, what Cambatta was contending was that CIAL having accepted the limited global competitive bidding norms and having decided 28.7.1998 as the last date for inviting final offer, it was not open to it thereafter to negotiate with Air India behind the back of Cambatta and permit Air India to revise its offer. Even though Cambatta had written protest letters, it had not requested CIAL to give it any opportunity to negotiate or to improve upon Its offer. The decision of the High Level Comrnuttee.was obviously not the final decision and certainly it was not binding on the Board of Directors who were the final authority to take the decision. The Board of Directors, at the meeting heid on 7.11.1998, considered the proposals of Air India and Carnbatts rnd appears to have taken a tentative decision to award the contract to Air India and, therefore, called It for negotiations with a view to have better terms and take the final dedsion. The Board of Directors did take the final decision on 27.11.1998 as Air India agreed to make its offer more beneficial to CIAL. Thatat becomes apparent from Air India’s letter dated 1.12.1998. The Board of Directors having taken tentative decision on 7.11.1998 there was no point in calling Cambatta thereafter for any negotiation.
It may be recalled that Cambatta was recommended over Air India by the High-Level Committee only because Cambatta’s financial rating was found higher. What is significant to note is that even the High ’Level ’ Committee had in its minutes noted that financial rating cannot’ be the sole criterion for taxing the final decision. Moreover, ’in a commercial transaction of such a complex nature a lot of balancing work has to be done while weighing ail the relevant factors and the final decision has to be taken after takinging an overall view of the transaction. It is true that even though Cambatta had called upon CJAL to produce the minutes of the meeting of the Board of Directors held on 27.11.1995 the same was not made available to Cambatta. But that did not entitle the High Court to draw any adverse inference. The High Court had not called upon CIAL to produce those minutes. As regards the merits of Cambatta’s proposal, it was contended by Mr. Andhyarujina that all the three offers of Cambatta were superior in terms of parameters laid down by CIAL than Air India’s offer. He submitted that even after CIAL unllaterally raised the license fee of Air India from 17 per cent to 20 per cent in the 10th year to match Cambatta’s offer and imposed a condition that Air India would not sub-contract, it did not become comparabie with the offer of Cambatta as Air India did not offer to pay 2 per cent bonus in license fee. It was also submitted that Air India’s representation that it would be able to bring more traffic was illusory and for that reason also Air India’s proposal cannot be regarded as superior or even comparable with the proposal of Cambatta.
We do not think that CIAL did any wrong in taking into consideration the fact that Air India is an airline and being a national carrier would be in a position to bring more traffic of Air India and other domestic lines if It was awarded the contract. As regards the merits of the rival offers, we do not think it proper to look at only the financial aspect and hold that CIAL did not accept Cambatta’s offer, even though it was better, because it wanted to favour Air India or that it had acted under the influence of Air India and the Ministry of Civil Aviation. In a commercial transaction of a complex nature what may appear to be better, on the face of it, may not be considered so when an overall view is taken. In such matters the Court cannot substitute it’s decision for the decision of the party awarding the contract. On the basis of the material placed on record we find that CIAL bona fide believed that involving a public sector undertaking and a national carrier would, in the long run, prove to be more beneficial to CIAL. For all these reasons it is not possible to agree with the finding of the High Court that CIAL had acted arbitrarily and unreasonably and was also influenced by extraneous considerations during, its decision making process.
HELD : Appeal Allowed .
By Tejasv Anand , IVth Year , AMITY LAW SCHOOL,DELHI.
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