R.D. Shetty v. International Airport Authority of India (1979)
AIR 1979 SC 1628 — Article 14, tender fairness, and when a public body is “State” under Article 12.
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In this case, the International Airport Authority of India (IAAI) invited tenders to run a second-class restaurant and two snack bars at Bombay Airport. The notice asked for a “registered 2nd class hotelier” with at least five years’ experience. One bidder (the 4th respondent) was chosen even though the term “2nd class hotelier” actually applied to restaurant grading by the municipal body, not to persons. The Court discussed whether IAAI is a “State” under Article 12 and how Article 14 controls fairness in public tenders. In the end, the Court did not give relief to the appellant; the contract with the 4th respondent stood.
- What does “registered 2nd class hotelier” mean? Who falls in that category?
- Was the acceptance of the 4th respondent’s tender by IAAI invalid and liable to be set aside?
- Is IAAI a “State” under Article 12, and therefore bound by Article 14 in tender matters?
- Article 12: Defines “State.” If a body is a statutory authority performing public functions under government control, it may be “State.”
- Article 14: Equality before law. In tenders by public bodies, fairness, non-arbitrariness, and equal treatment are essential.
- The term “registered 2nd class hotelier” targets restaurant grading, not persons. The chosen bidder did not fit this condition.
- Relaxing the eligibility for one bidder is unfair and violates Article 14.
- As a public body, IAAI must strictly follow its tender terms.
- The 4th respondent offered the highest fee and had strong catering experience.
- Minor interpretation differences should not undo the entire tender process.
- The appellant never submitted a tender, so has weak standing to complain.
The Court declined to set aside the tender award. Various interim orders and petitions failed. The Court did not find grounds to grant relief to the appellant. The 4th respondent continued with the license to run the restaurant and snack bars at Bombay International Airport.
- IAAI is a statutory authority and counts as “State” under Article 12.
- Public bodies must follow fairness and equality in tenders as part of Article 14.
- Eligibility terms should not be bent for one bidder; if the term is unclear, it must be applied consistently and reasonably.
This case ties government contracts to constitutional discipline. Even in commercial matters, the State cannot act like a private club. It must honour its own tender terms or give clear, fair reasons for any flexibility. This protects the level playing field for all bidders.
- IAAI = “State” under Article 12.
- Article 14 applies to tenders: no arbitrariness.
- Eligibility terms must be applied evenly.
- “2nd class hotelier” refers to restaurant grading, not people.
- Courts are slow to disturb concluded contracts without clear illegality.
Mnemonic: AIR-PORT FAIR
- AIR — Article 12 & 14 apply to IAAI.
- PORT — Public body operates tenders, must follow rules.
- FAIR — Fairness and equal chance for all bidders.
| I | Issues |
|---|---|
| I | Meaning of “registered 2nd class hotelier”; validity of accepting the 4th respondent’s tender; whether IAAI is “State.” |
| R | Rules |
|---|---|
| R | Articles 12 and 14: public bodies must act fairly and without arbitrariness in tenders. |
| A | Application |
|---|---|
| A | The phrase was about restaurant grading, not persons. Even if ambiguous, the public body had to apply it evenly. The appellant, a non-tenderer, showed no clear illegality to undo the award. |
| C | Conclusion |
|---|---|
| C | No relief was granted; the contract with the 4th respondent continued. |
- Article 12
- Defines which bodies are “State” for Part III; includes some statutory authorities.
- Article 14
- Equality before law; bans arbitrary state action.
- Registered 2nd Class
- Municipal grading for restaurants; not a label for individuals.
- Tender
- Formal bid to get a government contract or license.
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