Ramana Dayaram Shetty v. The International Airport Authority of India & ors
Facts of the case:
· On 3rd January, 1977 a notice inviting tenders for putting up of IInd class restaurant and two snack bars at the International Airport Bombay was issued by the first respondent who is a corporate body established under the International Airport Authority Act 43 of 1971. In the paragraph 1 of the notice it was clearly stated that the sealed tenders in the prescribed form are hereby invited from IInd class hoteliers having at least 5 years’ experience for putting up and running of second class restaurant and snack bars for a period of 3 years. whereas Paragraph 8 of the notice clearly stated that the acceptance of tender rest with the airport director and he does not bind himself to accept any tender and can reject all or ally of the tenders received without assigning any reason thereof. There were six tenders in the response of the notice one of them was from the 4th respondent offering a licensing fee of Rs. 6666.66/ month others were from café mahim, central catering service, café seaside, and café excelsior offering much less amount in comparison to 4th respondent but their tenders were not complete since they were not accompanied by respective Income tax certificates, affidavits of Immovable property, and solvency certificates as required by cl(9) of the terms and conditions of the tender form. The only tender that was fully complied with the terms and conditions was that of 4th respondent but the offer was the highest amongst the all tenders.
· On dated 24th January, 1977 a letter was addressed to the airport director by 4th respondent stating they had considerable 10 years’ experience in catering to reputed commercial houses, training centres, banks and factories, and various institutions which appeared that it did not satisfy the criteria of 2nd class restaurant of 5 years’ experience as earlier set out in paragraph 1 of tender. On 19th April, 1977 the first respondent accepted the tender with certain conditions according to which the 4th respondent deposited Rs. 39,999.96 in the form of fixed deposit in the favour of 1st respondent and the agreement was entered into 1st may, 1977. The 4th respondent also got furniture, counters and showcase, uniforms for the staff, purchased other things and engaged necessary staffs for running the restaurant and two snack bars. But the 1st respondent did not hand over the appropriate sites since one Mr. A.S. Irani was running the same on these sites under a previous contract refused to vacate the site. Meanwhile, one K.S. Irani who owned café excelsior filed a suit in the city civil court Bombay against the respondents challenging the decision of the 1st respondent accepting the tender of the 4th respondent set out a notice of motion in this regard for restraining 1st respondent in pursuing further. Also obtained ad-interim injunction but after hearing respondents the city civil court vacated ad- interim injunction and dismissed the notice of motion by order. He made an appeal in the high court which was also rejected. On the same day two sites were handed over to the 4th respondent which was different from the sites held by A.S. Irani. An injunction was obtained by 1st respondent from city civil court against A.S. Irani in further running the restaurant and snack bars or from entering the premises except winding up of the restaurant and snack bars. A.S. Irani preferred an appeal against the order of injunction and was rejected and ultimately an appeal of special leave in the Supreme Court was also turned down.
· Subsequently he also filed another petition seeking mandatory injunction for removal of 2 snack bars put up by the 4th respondent. But however he did not succeed in obtaining ad-interim injunction. The 4th respondent put up two snack bars on the sites provided by 1st respondent and started running. Soon after the dismissal of appeal of A.S. Irani and failure to get a mandatory interim injunction the appellant filed a writ petition challenging the decision of 1st respondent in accepting the tender of 4th respondent. The writ petition was moved to the single judge after giving proper notice to the respondents and after hearing the parties the petition was dismissed again it is appealed before division bench who after giving necessary notice to the respondents and after considering the affidavits submitted by them in reply to the notice dismissed the appeal in limine. Ultimately a petition was filed for appeal under special leave in Supreme Court since it was felt that the matter is of seminal value court allowed special leave and decided to hear the appeal at a further date after giving a further opportunity to the parties to file their respective affidavits.
Embedded administrative law
J. Bhagwati, enunciated the rule of administration law hidden in this case. In support of the appellant he held that once the norms and standards are laid down by any executive authority he cannot go back from the standards established. It is the very essence of the rule of administrative law which was taken from the enunciation of Mr. Justice Frankfurter in Viteralli v. Setonwhere the learned judge held that “an executive agency must be rigorously held to the standards by which it professes its action to be judged”. This principle was later adopted by Supreme court in A.S. Ahluwalia v. Punjab and by Mathew, J. in Sukhdev v. Bhagatram. Justice Bhagwati denies the rule wholly dependent on Article 14. It is an independent concept which is evolved by the judiciary in checking the arbitrary exercise by executive authority. He continued further saying, “today with tremendous expansion of welfare and social service functions, increasing control of material and economic resources and large scale assumption of industrial and commercial activities by the state, the power of the executive government in affecting the lives of the people are steadily growing…… there is a vast and inevitable increase in frequency with which ordinary citizens are coming in direct relationship to the state power holders. This renders it necessary to structure and restrict the power of the executive government to prevent its arbitrary exercise”.
He highly stressed upon the idea of texts supported by various jurists that every action of the executive government must be informed with reason and should be free from arbitrariness. To quote Prof. Reich in an article on “The New Property” in 73 Yale Law Journal 733, “that government action be based on standards that are not arbitrary and unauthorised.” The government cannot be permitted to say that it will give jobs, or enter into a contract, or issue quotas or licenses in favour of those who has grey hair, belongs to a particular political party, or of a particular religion. The bench agreed by one of the judgment of Mathew, J. in Punnan Thomas v. State of Kerala where it was held that “ a government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal”. The same point was made by the Supreme Court in Erusian Equipment and Chemicals Ltd. v. State of West Bengal where the question was whether black-listing of a person without giving an opportunity to be heard was bad? Ray C.J. held that, ‘when the government is dealing with the public, whether by way of giving jobs or entering into a contract, or granting license or quotas or other forms of largess, it cannot act arbitrarily at its sweet will but it has to follow according to the norms and standards which is not arbitrary, irrational or irrelevant. The power and discretion of the government in awarding jobs, granting licenses, quotas, etc. must be in conformity with the rational, relevant and non-discriminatory standards or norms, and if the government departs any time its action is liable to be struck down unless it is proved that the action of government is based on some valid principle which is not irrational, unreasonable and discriminatory.
The action of government must be satisfied with its reason lying behind. The ‘reason’ is the most crucial element which determines validity of one’s act. A government has to act in accordance with norms and standards though not set. Standards may not be defined but it is invisible which carries the principle of non-arbitrariness. So, he is bound by it and cannot deviate any time according to its will.
Unit 2 :Viewpoint
Discretion is the sound principle of any administration. And that the discretion should be absolutely free from arbitrariness. The ruling of the case says so. But here the issue is if our judiciary understands so much of the importance of discretion then why did it rule against the appeal? There can be two probabilities. First the judiciary thought it is necessary to exhume the principle of discretion which is buried by huge load of arbitrary exercises continuing since long time for preventing it further. Second it thought in giving an existence to its principle independent to the decision rendered. These two principles what I feel should be taken into account while awarding any judgment.
The principle of discretion does not depict that the judiciary is in favour of appellant. The reason behind its judgment is to prevent the administration in falling prey to the sweet-will of others who exercise it. Notwithstanding, it is a government. We should understand the principle of the reason of the judgement. It says government cannot depart from its norms and standards. Did anybody notice where is the norm and what does it say? In this case it was clearly specific in the advertisement of notice itself that it depends upon the discretion of the authority whether to accept or reject the tender and he shall not be answerable to his acts. Though in the decision itself one flavour of norm is ruled out. So should it be considered same as the norm set out in the notice? No, absolutely not. The norm what is given effect is invisible but not undefined what I felt. It includes the principle of non-arbitrariness and reasonableness while awarding any largess by authority. It prevents acting on own will without furnishing any reason for that. And that is what we called administrative law.
This is one of the celebrated case of Bhagwati, J. where he beautifully explained the importance of discretion in an administration. From the criticism point of view I felt the judgment did not speak what does it mean by standards? Does it mean only the standards set out by the authority or its consistency with the rule of law? That is the area where I would like to point out. But overall the project work is such an energizing the knowledgeable exercise.
1) 1979 AIR 1628
2) rule of law in Dicey’s ‘the law of constitution’, Hayek’s ‘road to serfdom’ and ‘constitution of liberty’, exposition set forth by Harry jones in ‘the rule of law and the welfare state’, Mathew, J. in his artcle on ‘the welfare state, rule of law, and natural justice’
3) William Wade & Christopher Forsyth, Administrative law, 10th edition, Oxford University Press
4) Prof. Reich in “The New Property” in 73 Yale Law Journal 733
# 359 U. S. 535: 3 Law.Ed. (Second series) 1012
#  3. S. C. R. 82.
#  3 S.C.R. 619.
# rule of law in Dicey’s ‘the law of constitution’, Hayek’s ‘road to serfdom’ and ‘constitution of liberty’, exposition set forth by Harry jones in ‘the rule of law and the welfare state’, Mathew, J. in his artcle on ‘the welfare state, rule of law, and natural justice’
# AIR 1969 ker 81
#  2 S.C.R. 674
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