Ramana Dayaram Shetty v The International Airport Authority & Others [RD Shetty v Airport Authority]

The judgement in RD Shetty v Airport Authority revolves around whether the International Airport Authority is considered “State” under Article 12 of the Constitution and the constitutional validity of a tender accepted by the respondents.

Facts of RD Shetty v Airport Authority

The International Airport Authority invited tenders for the establishment of a second-class restaurant and two snack bars at the International Airport in Bombay. The tender submitted by the fourth respondent was accepted. 

However, it was later discovered that the fourth respondent did not meet the tender condition requiring at least five years’ experience as a registered second-class hotelier. Despite this, the Airport Authority reaffirmed the fourth respondent’s tender, citing his significant experience with reputed clients, even though he was not a registered second-class hotelier.

Ramana Dayaram Shetty, the appellant, initially considered submitting a tender but refrained from doing so due to his failure to meet the specified conditions in the invitation. 

Upon learning that the fourth respondent’s tender was accepted despite non-compliance with the stipulated conditions, Shetty filed a petition under Article 226 of the Constitution in the Bombay High Court. The petition was dismissed, prompting Shetty to appeal to the Supreme Court under Article 136 of the Constitution.

Important Provisions in Ramana Dayaram Shetty v The International Airport Authority & Others

• Article 12 of the Indian Constitution: Defines “State” for the purpose of Part III (Fundamental Rights) of the Constitution.
• Article 14 of the Indian Constitution: Ensures equality before the law and equal protection of the laws.
• Article 136(1) of the Indian Constitution: Grants the Supreme Court discretionary power to grant special leave to appeal from any judgement or order of any court or tribunal.

Issues Raised

1. Whether the International Airport Authority is considered “State” under Article 12 of the Indian Constitution?
2. Whether the tender confirmed by the respondents is constitutionally valid?

Contentions

Petitioner’s Contentions

1. The fourth respondent’s tender was invalid as he did not fully meet the tender conditions.
2. The Airport Authority was bound to adhere strictly to the conditions outlined in the tender invitation.
3. Had Shetty known that strict adherence to the conditions was not mandatory, he would have submitted a tender.
4. The arbitrary actions of the Airport Authority violated Article 14 of the Constitution.

Respondents’ Contentions

1. The classification of a hotel or restaurant by the Bombay Municipal Corporation depends on the capability of the organisation, not on the owner being a registered hotelier.
2. Since the invitation for tenders did not have statutory force, deviations from the conditions would not invalidate the process.
3. The Airport Authority had reserved the right to accept or reject any tender and its decision was final as per the invitation terms.

Ramana Dayaram Shetty v The International Airport Authority & Others Judgement

1. Whether the International Airport Authority is “State” under Article 12: The Supreme Court in Ramana Dayaram Shetty v The International Airport Authority & Others first addressed whether the International Airport Authority qualified as “State” under Article 12, as this determination would establish the maintainability of the petition. Fundamental rights violations can be claimed only against the State or its instrumentalities. The Court examined the International Airport Authority Act, 1971 and found that the Central Government exercised substantial control over the Authority’s affairs, thereby classifying it as “State” under Article 12.

2. Validity of the Tender: The Court in R D Shetty v Airport Authority concluded that the acceptance of the tender was a violation of Article 14. The Court’s reasoning included:

1. Non-Compliance with Tender Conditions:
   • The tender conditions explicitly required that the bidder must have at least five years’ experience as a registered second-class hotelier, which the fourth respondent did not meet.
   • The tender process did not stipulate that the general capability to run a second-class hotel would suffice; rather, it laid down specific eligibility criteria which could not be disregarded by the Airport Authority.
2. Arbitrary Decision-Making:
   • The Airport Authority had reserved the right to reject tenders and negotiate directly, but this power did not extend to selectively waiving conditions for one bidder while adhering to them for others.
   • The Authority’s decision to accept the fourth respondent’s tender despite non-compliance with essential criteria constituted arbitrary action, thereby violating the principle of equality enshrined in Article 14.
3. Violation of Equal Opportunity:
   • The petitioner, Ramana Dayaram Shetty, was effectively denied a fair opportunity to compete for the tender due to the arbitrary relaxation of conditions for the fourth respondent.

RD Shetty vs Airport Authority: Five Points to Consider Whether a Body is State or Not

In Ramana Dayaram Shetty v The International Airport Authority & Others, Justice P.N. Bhagwati provided five points to consider before deciding whether a body is a State under Article 12 of the Constitution:

1. Creation by Statute:

Whether the body is created by a statute, i.e., whether it is a statutory body. If it is created by a statute, it may be considered a State.

2. Financial Autonomy or Government Funding:

Whether the body is financially autonomous or receives funding from the government. If the body receives government funding, it may be considered a State.

3. Governmental Functions:

Whether the body is vested with powers or duties that are normally associated with governmental functions. If the functions are akin to governmental functions, then the body may be considered a State.

4. Control by Government:

Whether the body is subject to a significant degree of control by the government or the government exercises regulatory control over its functions. If there is significant control by the government, then the body may be considered a State.

5. Monopoly or Public Function:

Whether the body has a monopoly in a particular field or performs a public function. If the monopoly is given by the government, then the entity may be considered a State.

Conclusion

The Supreme Court in Ramana Dayaram Shetty v The International Airport Authority & Others held that the International Airport Authority’s actions were arbitrary and discriminatory, thus violating Article 14. The Authority, being an instrumentality of the State, was bound to adhere to the principles of equality and non-arbitrariness. The acceptance of the fourth respondent’s tender was declared invalid, reaffirming the importance of transparency and fairness in the State’s dealings.

RD Shetty v Airport Authority underscores the judiciary’s role in ensuring that State actions comply with constitutional mandates and principles, particularly those related to equality and non-arbitrariness. The decision also clarifies the scope of “State” under Article 12, extending it to entities with significant government control.