AIR INDIA versus COCHIN INTERNATIONAL AIRPORT LTD

Citation: [2000] 1 S.C.R. 505 · Decided: 31-01-2000 · Supreme Court of India · Bench: G.T. NANAVATI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

AIR INDIA 
v. 
COCHl.'.'1 INTERNATIONAL AIRPORT LTD. 
JA!'.UARY 31, 2000 
jU.T. NANAVATI A."l'D S.N. PHUKAN, JJ.] 
Administrative Law-<::onstitution of India, Articles 14 and 226-Award 
of contract by >·tate corporati01t-<:ocl1in International Airport Ltd. (CIAL) 
awarding contract for ground handling facilities at the new airport to Air 
India-CIAL inviting offers by writing letters and not by public tenders~om
mittee constituted for evaluation recommending Cambatta Aviation Ltd. 
(Cambatta)--<iovernment of India writing to Government of Kera/a recom-
mending Air India for award of contract on ground of being national carrier 
and having better experience-Following diornssiom> CIAL awarding contract 
to Air lndicr-Cambatta's writ petition dismissed by Single Judg~ivision 
Bench of High Court allowing appeal held that award of contract to Air India 
was violative of principles of natural justice, arbitrary and illegal:-This 
Court held, allowing Air India's appeal, in such matters court cannot substitute 
its decision for decision of party awarding contract; CIAL had acted neither 
arbitrarily nor unreasonably and was also not influenced by extraneous con-
siderations during its decision making process. 
Practice and Procedure-Constitution of India, Article 226-Scope of 
writ jurisdiction of High Court in matters of award of contracts by public 
bodie~--lfeld, even when some defect is found in decfaion making process, 
court should exercise its discretionary power only in furtherance of public 
interest and not merely on the making out of a legal point . . 
A 
B 
c 
D 
E 
F 
For awarding a contract for ground handling facilities at the new 
International Airport at Cochin, the Cochin International Airport Ltd. 
('CIAL') invited offers by writing letters to certain companies. Responses 
v.:ere received, inter alia from Air India and Cambatta Aviation Ltd. G 
('Cambatta'). The Committee constituted by CIAL for evaluating the of· 
fers, recommended that Cambatta be awarded the con)ract. 
The Government of India wrote to the Government of Kerala recom-
mending Air India for award of coatract on the ground of it being a national 
carrier and having better experience. Discussions behveen CIAL and Air H 
505 
506 
SUPREME COURT REPORTS 
(2000] 1 S.C.R. 
A India ensu:id and despite prol:ests from Cambatta, the contract was ul-
timately awarded by CIAL to Air India. 
Cambatta's writ petition challenging the award of the contract to Air 
India was dismissed by a Single Judge who held there was no illegality in 
the decision malting process of CIAL and that the decision was taken 
B bonafide after evaluating the offers of both Air India and Cambatta. 
c 
Cambatta's appeal was allowed! by a Division Bench of High Court which 
held that award of contract to Air India was violative of principles of 
natural justice, arbitrary and illegal. Air India appealed to this Court. 
Allowing the appeal, th.is Court · 
Held : 1.1. CIAL had acted neither arbitrarily nor unreasonably and 
was also not influenced by extraneous considerations during its decision 
making process. [516-G; 517-A] 
1.2. CIAL did no wrong in talting into consideration the fact that Air 
D India being a national carrier would be in a position to bring more traffic 
of Air India and other domestic lines if it was awarded the contract. CIAL 
bonafide believed that involving a public sector undertalting and a national 
carrier would, in the long run, 11rove to be more beneficial to CIAL. 
[516-E-F; HJ 
E 
1.3. As regards the merits of the rival offers, it would not be proper 
to loo!• at only the financial aspect and hold that CIAL did nut accept 
Cambatta's olier, even though it was better, because it wanted to favour Air 
India or that it had acted under the influence of Air India and the Ministry 
11f Civil Avfati11n. In a commercial transaction of a complex natnre what 
F may appear to h: bdter, on the face of it may not be c1msidered so whea an 
overnll vim is Uli'ren. [516-F ·G] 
1.4. b:. such matters the Cmirt cml:ict sabstiruw its tl:cfafuu fer the 
decisicn of the p::rty avilll'ding the coctrect. [516-G] 
2. Even when s11me defect is found in the 11%cisio:11 ma..lting process Cucrt 
G must exercise its discretio11cry power umfl:r Article 226 l'+ith gmit a!Uthm and 
shollld exercise it only in furthenwce of P".tblic mterest and not merely en the 
mahlng out of a I~ point. The Court shoald clwnys !.eep the llll'&a pllblic 
intenst in 1:1ind to decide wheth:er its
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