Ramana Dayaram Shetty v The International Airport Authority & Others [RD Shetty v Airport Authority]
Ramana Dayaram Shetty v. The International Airport Authority of India & Others
Supreme Court of India, 1979
AIR 1979 SC 1628
(1979) 3 SCC 489
Background:
Ramana Dayaram Shetty (RD Shetty), a contractor, had a contract with the International Airport Authority of India (IAAI).
The contract was terminated by IAAI, and the authority called for fresh tenders.
Shetty applied for the tender but was denied the contract, which was awarded to another party.
Shetty challenged the award, alleging that the tender process was unfair and arbitrary, violating the principles of equality and fairness.
Legal Issues:
Does the award of a contract by a public authority like the IAAI attract the rule of fairness and equality under Article 14 of the Constitution?
Are such contracts subject to judicial review for arbitrariness and mala fide exercise of power?
Can the government or its agencies reject bidders arbitrarily without following the principles of natural justice?
Supreme Court’s Decision:
The Court held that the award of contracts by public authorities is a public act and is subject to the rule of law and Article 14.
Public authorities must follow fair, non-arbitrary procedures in awarding contracts.
The Court emphasized that even in commercial contracts involving the government, the principles of equality, fairness, and reasonableness must be observed.
It held that the exercise of discretionary power must not be arbitrary, capricious, or discriminatory.
If the process is found to be unfair or mala fide, the courts can intervene and set aside such actions.
The judgment expanded the scope of Article 14 to include the award of contracts by public authorities.
Significance:
The case is a landmark in Public Contract Law in India.
It established that government contracts are not immune from constitutional scrutiny, particularly under Article 14.
It reinforced the doctrine of fairness and non-arbitrariness in public administration.
The judgment laid the foundation for judicial review of tender and contract processes involving the government.
It marked a shift towards accountability and transparency in government procurement.
Summary Table
| Aspect | Details |
|---|---|
| Case Name | Ramana Dayaram Shetty v. International Airport Authority |
| Year | 1979 |
| Legal Issue | Whether awarding of contracts by public authority is subject to Article 14 (equality) |
| Court’s Holding | Yes, such awards must follow fairness and non-arbitrariness |
| Principle Established | Public contracts attract constitutional scrutiny; no arbitrary or discriminatory exercise of power |
| Impact | Strengthened rule of law in public procurement processes |
Key Quote from Judgment:
"The Constitution of India is not a mere lawyers’ document but a vehicle of an evolutionary social process... Discrimination by the State in matters of contract is not permissible unless it is reasonable and justifiable."
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