Bhagwati, J. - (1.) This appeal by special leave raises interesting questions of law in the area of public law. What are the constitutional obligations on the State when it takes action in exercise of its statutory or executive power Is the State entitled to deal with its property in any manner it likes or award a contract to any person it chooses without any constitutional limitations upon it What are the parameters of its statutory or executive power in the matter of awarding a contract or dealing with its property These questions fell in the sphere of both Administrative law and Constitutional law and they assume special significance in a modern welfare State which is committed to egalitarian values and dedicated to the rule of law. But these questions cannot be decided in the abstract. They can be determined only against the background of facts and hence we shall proceed to state the facts giving rise to the appeal.
(2.) On or about 3rd January, 1977 a notice inviting tenders for putting up and running a second class restaurant and two snack bars at the International Airport at Bombay was issued by the 1st respondent which is a corporate body constituted under the International Airport Authority Act, 43 of 1971. The notice stated in the clearest terms in paragraph (1) that "sealed tenders in the prescribed form are hereby invited from Registered IInd Class Hoteliers having at least 5 years' experience for putting up and running a IInd Class Restaurant and Two Snack Bars at this Airport for a period of 3 years". The latest point of time up to which the tenders could be submitted to the 1st respondent was stipulated in Paragraph 7 of the notice to be 12 p.m. on 25th January, 1977 and it was provided that the tenders would be opened on the same date at 12.30 hours. Paragraph (8) of the notice made it clear that "the acceptance of the tender will 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." There were six tenders received by the 1st respondent in response to the notice and one of them was from the 4th respondents offering a licence fee of Rupees 6,666.66 per month, and the others were from Cafe Mahim, Central Catering Service, one A. S. Irani, Cafe Sea-side and Cafe Excelsior offering progressively decreasing licence fee very much lower than that offered by the 4th respondents. The tenders were opened in the office of the Airport Director at 12.30 p.m. on 25th January, 1977 and at that time the 4th respondents were represented by their Sole Proprietor Kumaria, A. S. Irani was present on behalf of himself, Cafe Mahim, Cafe Seaside and Cafe Excelsior and there was one representative of Central Catering Service. The tenders of Cafe Mahim, Central Catering Service, Cafe Seaside and Cafe Excelsior were not complete since they were not accompanied by the 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 tender of A. S. Irani was also not complete as it was not accompanied by an affidavit of immovable property held by him and solvency certificates. The only tender which was complete and fully complied with the terms and conditions of the tender form was that of the 4th respondents and the offer contained in that tender was also the highest amongst all the tenders. Now it is necessary to point out at this stage that while submitting their tender the 4th respondents had pointed out in their letter dated 24th January, 1977 addressed to the Airport Director that they had 10 years' experience in catering to reputed commercial houses, training centres, banks and factories and that they were also doing considerable outdoor catering work for various institutions. This letter showed that the 4th respondents had experience only of running canteens and not restaurants and it appeared that they did not satisfy the description of "registered IInd Class Hotelier having at least 5 years' experience" as set out in paragraph (1) of the notice inviting tenders. The Airport Officer, therefore, by his letter dated 15th February, 1977 requested the 4th respondents to inform by return of post whether they were 'a registered IInd Class Hotelier having at least 5 years' experience' and to produce documentary evidence in this respect within 7 days. The 4th respondents pointed out to the Airport Officer by their letter dated 22nd February, 1977 that they had, in addition to what was set out in their earlier letter dated 24th January, 1977, experience of running canteens for Phillips India Ltd. and Indian Oil Corporation and moreover, they held Eating House Licence granted by the Bombay Municipal Corporation since 1973 and had thus experience of 10 years in the catering line. It appears that before this letter of the 4th respondents could reach the Airport Officer, another letter dated 22nd February, 1977 was addressed by the Airport Officer once again requesting the 4th respondents to produce documentary evidence to show if they were "a registered IInd Class Hotelier having at least 5 years' experience". The 4th respondents thereupon addressed another letter dated 26th February, 1977 to the Director pointing out that they had considerable experience of catering for various reputed commercial houses, clubs, messes and banks and they also held an Eating House Catering Establishment (Canteen) Licence as also a licence issued under the Prevention of Food Adulteration Act. The 4th respondents stated that their sole proprietor Kumaria had started his career in catering line in the year 1962 at Hotel Janpath, Delhi and gradually risen to his present position and that he had accordingly "experience equivalent to that of a IInd Class or even 1st Class hotelier." This position was reiterated by the 4th respondents in a further letter dated 3rd March, 1977 addressed to the Director. This information given by the 4th respondents appeared to satisfy the 1st respondent and by a letter dated 19th April, 1977 the 1st respondent accepted the tender of the 4th respondents on the terms and conditions set out in that letter. The 4th respondents accepted these terms and conditions by their letter dated 23 April, 1977 and deposited with the 1st respondent by way of security a sum of Rs. 39,999.96 in the form of Fixed Deposit Receipts in favour of the 1st respondent and paid to the 1st respondent a sum of Rs. 6666.66 representing licence fee for one month and other amounts representing water, electricity and conservancy charges. The 4th respondents thereafter executed and handed over to the 1st respondent an agreement in the form attached to the tender on 1st May, 1977. The 4th respondents also got prepared furniture, counters and show cases as also uniforms for the staff, purchased inter alia deep freezers, water coolers, electrical appliances, icecream cabinets, expresso coffee machines, crockery, cutlery and other articles and things and also engaged the necessary staff for the purpose of running the restaurant and the two snack bars. But the 1st respondent could not hand over possession of the requisite sites to the 4th respondents, since A. S. Irani was running his restaurant and snack bars on these sites under a previous contract with the 1st respondent and though that contract had come to an end, A. S. Irani did not deliver possession of these sites to the 1st respondent. The 4th respondents repeatedly requested the 1st respondent and the Airport Director who is the 2nd respondent in the appeal, to hand over possession of the sites and pointed out to them that the 4th respondents were incurring losses by reason of delay in delivery of possession, but on account of the intransigence of A. S. Irani the 1st respondent could not arrange to hand over possession or the sites to the 4th respondents.
(3.) Meanwhile one K. S. Irani who owned Cafe Excelsior filed Suit No. 6544 of 1977 in the City Civil Court, Bombay against the respondents challenging the decision of the 1st respondent to accept the tender of the 4th respondents and took out a notice of motion for restraining the Ist respondent from taking any further steps pursuant to the acceptance of the tender. K. S. Irani obtained an ad interim injunction against the respondents but after hearing the respondents, the City Civil Court vacated the ad interim injunction and dismissed the notice of motion by an order dated 10th October, 1977. An appeal was preferred by K. S. Irani against this order, but the appeal was dismissed by the High Court on 19th October, 1977. Immediately thereafter, on the same day, the Ist respondent handed over possession of two sites to the 4th respondents and the 4th respondents proceeded to set up snack bars on the two sites and started business of catering at the two snack bars. These two sites handed over to the 4th respondent were different from the sites occupied by A. S. Irani, because A. S. Irani refused to vacate the sites in his occupation. So far as the site for the restaurant was concerned, the Ist respondent could not hand over possession of it to the 4th respondents presumably because there was no other appropriate site available other than the one occupied by A. S. Irani. Since A. S. Irani refused to hand over possession of the sites occupied by him to the Ist respondent, even though his contract had come to an end, and continued to carry on the business of running the restaurant and the snack bars on these sites, the Ist respondent was constrained to file suit No. 8032 of 1977 against A. S. Irani in the City Civil Court at Bombay and in that suit, an injunction was obtained by the Ist respondent restraining A. S. Irani from running or conducting the restaurant and the snack bars or from entering the premises save and except for winding up the restaurant and the snack bars. A. S. Irani preferred an appeal against the order granting the injunction, but the appeal was rejected and ultimately a petition for special leave to appeal to this Court was also turned down an 31st July, 1978.;