Constitutional Law

Case Analysis: Ramana Dayaram Shetty V. The International Airport Authority AIR 1979 SC 1628

         

Case Analysis: Ramana Dayaram Shetty  V. The International Airport Authority AIR 1979 SC 1628

By

Sahil Tandon

Symbiosis Law School, NOIDA

PETITIONER:

RAMANA DAYARAM SHETTY

Vs.

RESPONDENT:

THE INTERNATIONAL AIRPORT AUTHORITY OF INDIA AND ORS.

 

DATE OF JUDGMENT

04/05/1979

 

BENCH:

BHAGWATI, P.N.

TULZAPURKAR, V.D.

PATHAK, R.S.

 

PROCEDURAL HISTORY:

In this case, International Airport Authority of Bombay issued a notice on 3rd January 1977 for inviting tenders for putting up restaurant at the Airport. But only one notice was chosen due to its due compliance with the requirements with the terms.

The possession of restaurant was questioned by K.S Irani because of the non compliance with the requirement of the terms and conditions as respondents instead of having 5 years of experience had 10 years of experience. Due to this reason K.S Irani filed Civil Suit No.6544 of 1977 in the City Civil Court of Bombay against the respondents by challenging the decision of the first respondent to accept the tender of the 4th respondent.

Earlier also K.S Irani had obtained an ad interim injunction against the respondent but after hearing the respondents, the City Civil  Court dismissed the notice by order dated on 10th October, 1977. But he filed an appeal against this order, but again the appeal was dismissed by the High Court on 19th October, 1977.

Further, an injunction was obtained by 1st respondent from City Civil Court suit No. 8032 of 1977  against A.S Irani for further running the restaurant. A.S Irani appealed against the injunction but was rejected and ultimately an appeal of special leave in Supreme Court was also turned down.

Subsequently, A.s Irani also filed another petition seeking mandatory injunction for removal of snack bars put up by the 4th respondent. But again he did not succeed in obtaining ad-interim injunction.

Soon after the dismissal of obtaining ad-interim injunction, A.S irani filed a writ petition challenging the decision of 1st respondent in accepting the tender of 4th respondent. This petition was moved to the single judge bench who after hearing the parties was held dismissed and was  again appealed before the division bench who also dismissed the appeal in limine.

Finally, the appellant filed a petition for special leave to appeal the Court, which is the final hearing by the court. Many issues were raised and discussed. The appeal was dismissed and the order of the High Court rejecting the writ petition was confirmed.

After the judgement of the court, the 4th respondent started running the restaurant and snack bars at the Bombay International Airport.

FACTS

  • International Airport Authority is a corporate body constituted under the International Airport Authority Act, 43 of 1971.
  • On 3rd January, 1977 It issued a notice for inviting Registered IInd class Hotelier having at least 5 years of experience for putting up and running a IInd class Restaurant and two snack bars at Bombay Airport for a period of 3 years.
  • Six tenders were received in the response of the notice.
  • Out of the six received tenders, the tender of only the 4th respondent was entertained as it was complete and offered the highest amount of license fee. All other tenders were rejected because they were incomplete.
  • The first respondent got prepared everything for the purpose of running the restraint and snack bars.
  • But, since the 4th respondent did not satisfy the description of the second class hotelier having a 5 years experience as stated in the tender notice, the first respondent in addition to this called upon the evidence by the 4th respondent proving that they are not the second class hoteliers.
  • A letter was made by the 4th respondent in response to the evidence stating they had considerable 10 years of experience in catering to reputed commercial houses, training centres, banks and factories which appeared that they did not satisfy the criteria of 2nd class restraint of 5 years experience as earlier set out in paragraph 1 of the notice.
  • Satisfied with the information given by the fourth respondents, the first respondent accepted their tender on the terms and conditions set out in its letter.
  • The 4th respondent got prepared with everything for running the restraunt and snack bars. But the 1st respondent was unable to handover the possession of sites because A.S Irani was already running his restraunt and snack bar under the previous contract.
  • Thus, Irani filed a Civil Suit in the Civil Court of Bombay against the respondents by challenging the decision of the 1st respondent to accept the tender of the 4th
  • The fourth respondents, on the other hand, contended that the requirement of the tender as stated must be a registered second grade hotelier was meaningless because the grading is given by the Bombay City Municipal Corporation only to hotels or restaurants and not to persons running them and, therefore there could be no second grade hotelier.
  • Earlier, K.S Irani obtained an ad interim injunction against the respondents, but after hearing to the respondents , the court dismissed the notice.
  • He filed an appeal in the High Court which was also dismissed.
  • On the same day two sites were handed over to the 4th respondent which was different from the sites held by A.S Irani.
  • In addition to this an Ad interim injunction was obtained by the first respondent against A.S Irani from running the restaurant and snack bar and also from entering the premises except during winding up of the sites.
  • S Irani again appealed against this order which was ultimately rejected by Supreme Court.
  • He again filed an appeal to prevent the 4th respondents from obtaining the contract given by the 1st respondents but still was put down by court and hence all attempts made by Irani failed.
  • Later on, Ramana Dayaram Shetty who didn’t submit any tender, was just a mere stranger but still filed a Writ Petition in the High Court of Bombay by challenging their decision of accepting the tender of the 4th
  • But, unfortunately his petition was also rejected and then he made an appeal to the division bench of the High Court against the order rejecting the writ petition but that too was rejected.
  • Many issues were raised and discussed. The appeal was dismissed and the order of the High Court rejecting the writ petition was confirmed.
  • Finally, after the judgement of the court, the 4th respondents started running the restaurant and snack bars at the Bombay International Airport.

 

ISSUES

The main issues to be discussed in the following case are:

  1. What is the meaning of “Registered IInd Class Hoteliers”? What category of persons falls within the meaning of this description?
  1. Whether the acceptance of tender of 4th respondents by the 1st respondents was invalid and liable to be set aside at the instance of the appellant?

DECISION OF THE ISSUES RAISED:

  1. What is the meaning of “Registered IInd Class Hoteliers”? What category of persons falls within the meaning of this description?

Ans.  The Court decided in this issue that the aspect of grading is given by the Bombay Municipal Corporation only to the hotels or restaurants but not to IInd grade hotelier and the requirement which is given in the notice is that the tender must be a registered IInd grade hotelier was therefore a meaningless requirement and it could not be regarded as laying down any condition of eligibility.

The 4th respondents have the experience equivalent to the condition mentioned in the notice and that is the reason their tender was accepted by the 1st respondent. There is no statutory or administrative law requiring the 1st respondent to give a contract only by tenders, they could have given the contract directly to the 4th respondent because it was clearly mentioned in the contract that there is no obligation on the 1st respondent to accept all the tenders. But still they did not give the tender directly.

 

  1. Whether the acceptance of tender of 4th respondents by the 1st respondents was invalid and liable to be set aside at the instance of the appellant?

ANS. The appellant was just a mere stranger and didn’t submit any tender to the 1st respondent but still he filed writ petition. There was no locus standi to maintain the petition.

That means, if the appellant didn’t enter into the competition by submitting a tender, so nothing should be affected to him. The grievance was that 1st respondent accepted the tender of the 4threspondents and said that in the notice it is written that the non- fulfillment of eligibility will be no bar to consideration of a tender, which is not known by the appellant and that is the reason he didn’t submit the tender due to the eligibility criteria.

It was violation of Article 14 of the Constitution of India which is Right to Equality.  Now, this was justified in law or not that the court had to decide.

The court held that the power of license or accepting the tender is in the hands of the Government; here it is in the hands of the International Airport Authority of India and it was also given in the notice. The writ petition was dismissed by the court and then he filed an appeal in the High Court that too was rejected.

RULES

  1. Article 12 of Constitution of India which defines the word ‘State’.

Definition-  In this part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.

  1. Article 14 of Constitution of India, which is regarding ‘equality before law’.

Equality before law.– The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

APPLICATION

  • Article 12 of Constitution of India “State”.

The Court held that there is no cut and dried formula which would provide the correct division of corporations into those which are instrumentalities or agencies of Government and those which are not. The Court made an analogy on the concept of State Action as developed in the United States wherein private agency if supported by extra-ordinary assistance given by the State may be subject to the same constitutional limitations as the State. The Court also held that if extensive and unusual financial assistance is given and the purpose of such assistance coincides with the purpose for which the corporation is expected to use the assistance and such purpose is of public character, it may be a relevant circumstance supporting an inference that the corporation is an instrumentality or agency of the Government.

The Court enumerated the following five factors which would determine whether a body comes under the definition of State as defined in Article 12 of the Constitution:

  • Financial assistance given by the State and magnitude of such
  • Any other forms of assistance whether of the usual kind or extraordinary.
  • Control of management and policies of the corporation by the State – nature and extent of control.
  • State conferred or State protected monopoly status and
  • Functions carried out by the corporation, whether public functions closely related to governmental functions, would determine whether a corporation is an instrumentality or agency of the State or not.

The SC concluded International Airport Authorities undoubtedly an instrumentality or agency of the Central Government and falls within the definition of ‘State’. The Court went on to conclude that just as Government acting through its officers, is subject to constitutional and public law limitations, similarly Government acting through agency is subject to equal restrictions. Therefore, the International Airport Authority of India is subject to the limiting or restricting provisions of the Constitution and other public laws.

Case laws relating to article 12:

Smt. Ujjam Bai v. State of Uttar Pradesh, [1961] 1 SCR 778

The court held that no doubt a Sales The Officer appointed under the U.P. Sales Tax Act, 1948 is an instrumentality of the State employed for the purposes of assessment and collection of taxes and merely because he has. in the discharge of his duties, to perform certain quasi-judicial functions i.e. has certain powers which are similar to the powers exercised by Courts, still is not a Court as understood in s. 195 of the Code.

Rajasthan State Eeletricity Board, Jaipur v. Mohan & Ors. (1967) 3 S.C.A. 377)

The court said that an “authority is a public administrative agency or corporation having quasi- governmental powers and authorised to administer a revenue- producing public enterprise. The expression “other authorities” in Article 12 has been held by this Court in the Rajasthan Electricity Board case to- be wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India.

The State as defined in Article 12 is comprehended to include bodies created for the purpose of promoting economic interests of the people. The circumstance that the statutory body is required to carry on some activities of the nature of trade or commerce does not indicate that the Board must be excluded from the scope of the word “State.” The concurring Judgment in the Rajasthan Electricity Board case said that the Board was invested by statute with extensive powers of control over electricity undertakings. The power of the Board to make rules and regulations and to administer the Act was said to be in substance the sovereign power of the State delegated to the Board.

Sukhdev Singh & Ors. v. Bhagatram Sardar Singh Baghuvanshi & Anr.. [1975] 3 S.C.R. 619

Authorities constituted under and corporations established by statutes have been held to be instrumentalities and agencies of the Government in a long catena of decisions of the Supreme Court. The observations in several of these decisions are general in nature and take in their sweep all instrumentalities and agencies of the State, whatever be the form which such instrumentality or agency may have assumed. If there is an instrumentality or agency of the State which has assumed the garb of a Government company as defined in section 617 of the Companies Act, it does not follow that it thereby ceases to be an instrumentality or agency of the State. For the purposes of Article 12 one must necessarily see through the corporate veil to ascertain whether behind that veil is the face of an instrumentality or agency of the State.

Ajay Hasia and Ors. v. Khalid Mujib Sehravardi and Ors.,

A Constitution Bench of this Court, while approving the tests laid down in the case. These tests are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression “other authorities”, it must be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the government within the sweep of the expression. A wide enlargement of the meaning must be tempered by a wise limitation.

Article 14 of Constitution of India:

In this case, the eligibility criteria of the tender were questioned at the time when the 1st respondent accepted the notice of the 4th respondent for giving him the tender of the restaurant as well as of the snack bar.

The grievance was that the 1st respondent accepted the tender of the 4th respondent and said that in the notice it is written that the non-fulfilment of eligibility will be no bar to consideration of a tender, which is not known by the appellant and that is the reason he didn’t submit the tender due to the eligibility criteria.

Thus the tender notice stated:

In Paragraph (1) that sealed tenders in the prescribed form were invited from registered second class hoteliers having at least five years’ experience for putting up and running a second class restaurant and two snack bars at the Bombay Airport for a period of three years Paragraph (8) stated that acceptance of the tender would rest with the Airport Director who does not bind himself to accept any tender and reserves to himself the right to reject all or any of the tenders received without assigning any reasons therefor.

The 1st respondents claim that it was violation of Article 14 of the constitution of India which is Right to Equality. Now, this was justified in law or not that the court had to decide.

 The court held that the power of license or accepting the tender is in the hands of the government; here it is in the hands of the International Airport Authority of India and it was also given in the notice.

CASE LAWS RELATING TO ARTICLE 14:

Maneka Gandhi v. Union of India

That Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non- discriminatory: it must not be guided by any extraneous or irrelevant considerations, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is protected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law.

 Erusian Equipment and Chemicals v. State of West Bengal 

The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C.J.,where the learned Chief Justice pointed out that “the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person The Government cannot choose to exclude persons by discrimination.

Rashbihari Panda v. State of Orissa.

A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling….It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods.” It must, therefore follow as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with any one, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground.

Trilochan Mishra v. State of Orissa & ors.

The complaint of the petitioner in this case was that the bids of persons making the highest tenders were not accepted and persons who had made lesser bids were asked to raise their bids to the highest offered and their re vised bids were accepted. The Constitution Bench negatived this complaint and speaking through Mitter, J., observed:

“With regard to the grievance that in some cases the bids of persons making the highest tenders were not accept ed, The facts are that persons who had made lower bids were asked to raise their bids to the highest offered before the same were accepted. Thus there was no loss to Government and merely because the Government preferred one tender to another no complaint can be entertained. Government certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. Moreover, Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tenderer.”

 

FURTHER MORE CASE LAWS REFERRED FOR THE JUDGEMENT:

 

Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (AIR 1981 SC 221)

wherein the a seven judge bench held that the ultimate test in determining whether an entity would be an instrumentality of the State would be whether functionally, financially and administratively the body was under the deep and pervasive control of the State. Mere regulatory control by the Government will not suffice to fulfill the requirements of Article 12.

 

Sabhajit Tewary v. Union of India.

The question that arose for consideration in this was whether the Council for Scientific and Industrial Research (CSIR), a body registered under the Societies Registration Act would fall under the definition of “other authorities” under Article 12. The CSIR was created by the Government of India to promote Industrial Research in India, with a majority of its members being nominated by the Central Government and most of its financial requirements supplied by the Government.

 Zee Telefilms v. Union of India (AIR 2005 SC 2677)

The Court was called upon to determine whether the Board of Cricket Control of India, the principle body regulating the sport of cricket in India, would fall within the definition of Article 12. On the basis of the “deep and pervasive State control” test laid down in Pradeep Kumar Biswas, the majority Court held that the BCCI would not come within the definition of State under Article 12. On the other hand, basing its reasoning on the “public function” doctrine, the minority Court held that the BCCI would fall within the ambit of the definition of “State” under Article 12. The minority in Zee Telefilms opined that keeping in view the fact that the BCCI discharges an important public function and that its actions may impinge on the fundamental rights of the players, the actions of the body are subject to judicial review. Interestingly, the minority Court in the same breath also opined that in times of privatization and liberalization wherein most of the Governmental functions are being relegated to private bodies; the actions of such private bodies would also be amenable to the writ jurisdiction of the Court.

Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh (2011) 5 SCC 29

Justice G. S. Singhvi of the Supreme Court culled out the principles of administrative law and constitutional governance to declare that the State could not act in an arbitrary manner to grant favorable land allotments without following principles of public policy so as to grant equal opportunity to all the citizens.

JUDGEMENT/CONCLUSION

After the dismissal of various injunctions, ad-interim orders, petitions filed by the Appellant, finally court was in opinion that they were not in a position to award relief to the appellant and thus accordingly dismisses the petition.

Finally after the judgement of the court, that appellant had no serious grounds that could prove the acceptance of the tender notice to be invalid and thus court approved the tender of 4th respondents after which they started running the restaurant and snack bars at the Bombay International Airport.

 

MY OWN VIEWS

Today the Government in a welfare State is the regulator and dispenser of special services and provider of a large number of benefits, including jobs, contracts, licenses, quotas, mineral rights, etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licenses. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Governments and local authorities.

Licenses are required before one can engage in many kinds of businesses or work. The power of giving licenses means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largesse in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilization by private corporations and individuals by way of lease or license. All these mean growth in the Government largesse and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privilege.

For achieving the goals of Justice and Equality set out in the Preamble, the State and its agencies/instrumentalities have to function through political entities and officers/officials at different levels. The laws enacted by Parliament and State Legislatures bestow upon them powers for effective implementation of the laws enacted for creation of an egalitarian society. The exercise of power by political entities and officers/officials for providing different kinds of services and benefits to the people always has an element of discretion, which is required to be used in larger public interest and for public good.

BIBLIOGRAPHY

http://jurisonline.in/2012/04/case-analysis/

http://legalservicesindia.com/article/article/the-administrative-aspect-of-ramana-dayaram-shetty-v-the-international-airport-authority-of-india-&-ors-1109-1.html

http://www.indiankanoon.org/doc/186428/

http://indiankanoon.org/doc/1186368/

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