M/S. Gsec Limited Through Its Authorized Representative Shri Rakesh Ramanlal Shah vs. Aai Cargo Logistics And Allied Services Company Limited

Held

The Court held that the petitioner's claim based on the doctrine of legitimate expectation could not be sustained. It reasoned that the respondents had the right to invite bids for awarding the work through a competitive bidding process, and this action did not warrant interference. The Court relied on several Supreme Court judgments, including Sethi Auto Service Station & Ors. v. Delhi Development Authority & Ors., Michigan Rubber (India) Ltd. v. State of Karnataka & Ors., and Rishi Kiran Logistics Pvt. Ltd. v. Board of Trustees of Kandla Port Trust & Ors., to support its view that public tenders are essential for transparency and fairness. Regarding the claim for a right of first refusal, the Court found no provision in the agreement that obliged the respondents to grant such an opportunity or created such a right in favor of the petitioner. The Court stated that directing the respondents to grant this opportunity would amount to rewriting the agreement. It further noted that the petitioner's investment was made to discharge their contractual obligations, and the agreement already contained a mechanism for addressing the valuation of buildings and installations, including arbitration. The Court concluded that there was no legal basis for the petitioner to demand such an opportunity. Consequently, the petition was dismissed, and the notice was discharged.

Facts

M/s. GSEC Limited (the petitioner) has been operating the International Air Cargo Terminal at Ahmedabad Airport under an arrangement/agreement with AAI Cargo Logistics and Allied Services Company Limited (Respondent No. 1) and Airport Authority of India (Respondent No. 2). This arrangement was set to expire on May 31, 2019. On May 1, 2019, Respondent No. 1 issued a Notice Inviting Tender (NIT) for the operation and maintenance of the terminal for a period of 5 years. The petitioner challenged this NIT and sought a renewal of their existing allotment for a further period of 10 years without a tender process. The petitioner's claim was based on the premise of legitimate expectation and a right of first refusal due to their investment in constructing buildings and installing machinery over the years. The petitioner's agreement with the respondents contained provisions for the valuation and transfer of buildings and installations upon termination, with an option for the grantor to purchase them, and a remedy of arbitration in case of disagreement.

Key Issues

1. Whether the petitioner has a right to renewal of its allotment for a further period of 10 years without a tender process, based on the doctrine of legitimate expectation and past practice, under Section 10 of the Contract Act, 1872, and principles of natural justice? Petitioner's Argument: The petitioner contended that due to the long-standing practice of renewing agreements without tender and their significant investment, they had a legitimate expectation of renewal. They argued that discontinuing this practice and initiating a tender process was arbitrary and unfair. Revenue/State's Argument: The respondents argued that there was no legal right to renewal and that the decision to invite competitive bids was within their prerogative, supported by various Supreme Court judgments emphasizing the need for transparency and fairness in awarding contracts through public tenders. They also pointed out that the agreement did not contain any provision for automatic renewal or a right of first refusal. 2. Whether the petitioner is entitled to a right of first refusal for the operation and maintenance of the International Air Cargo Terminal, considering their investment in infrastructure? Petitioner's Argument: The petitioner claimed a right of first refusal based on their investment in constructing buildings and installing machinery, implying a proprietary interest that should be respected. Revenue/State's Argument: The respondents contended that the agreement did not grant any such right of first refusal. They argued that the petitioner's investment was made to fulfill their contractual obligations, and the agreement already provided a mechanism for addressing the valuation of assets upon termination, including arbitration. They also noted that the petitioner was now a participant in the tender process.