Writ petition dismissed as premature, petitioner's viewpoint to be considered by Cabinet Committee.

The court dismissed the writ petition as premature, emphasizing that the petitioner's viewpoint on the exclusion of certain liabilities from the "Net Worth" calculation should be considered by the Cabinet Committee on Economic Affairs. No costs were awarded, and the court directed that the petitioner's perspective, as outlined in the order, be presented to the Committee for review.

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Issues Involved:
1. Definition and interpretation of "Contingent Liability on Revenue Account."
2. Methodology for determining the "Net Worth" of a bidder.
3. Validity of the petitioner's claim regarding the exclusion of certain liabilities from the "Net Worth" calculation.
4. Prematurity of the writ petition due to pending decision by the Cabinet Committee on Economic Affairs.

Detailed Analysis:

1. Definition and Interpretation of "Contingent Liability on Revenue Account":
The central debate revolves around the phrase "Contingent Liability on Revenue Account" and its interpretation for calculating the "Net Worth" of a bidder. The petitioner argues that "Contingent Liability on Revenue Account" should align with the opinion of the Institute of Chartered Accountants of India (ICAI), which states that guarantees issued for a company's own obligations (e.g., payment of insurance premiums, deferred payments to suppliers, letters of credit) should not be considered contingent liabilities. The petitioner supports this with references to Accounting Standard 29, which defines contingent liabilities as possible obligations from past events confirmed by uncertain future events or present obligations not recognized due to improbability of outflow or inability to estimate the obligation reliably.

2. Methodology for Determining the "Net Worth" of a Bidder:
The methodology prescribed in the Notice Inviting Tender (NIT) includes the calculation of "Net Worth" as:
(a) Paid-up capital.
(b) Reserve and surplus.
(c) Miscellaneous expenditure to the extent not written off.
(d) Equity = (a) + (b) - (c).
(e) Contingent liability on revenue account.
(f) Net Worth = (d) - (e).
The petitioner contends that letters of credit (L/Cs) and guarantees for own obligations should not be included as contingent liabilities in the balance sheet, as they do not meet the criteria set by AS-29 and other accounting guidelines.

3. Validity of the Petitioner's Claim Regarding the Exclusion of Certain Liabilities from the "Net Worth" Calculation:
The petitioner argues that contingent liabilities on revenue account are not defined in any statute, accounting standards, or guidance notes by ICAI or NACAS. They assert that such liabilities should only include those that directly impact the profit and loss account, such as warranties or claims for damages. The petitioner's viewpoint is that items like L/Cs and guarantees for own obligations should be disclosed as footnotes rather than being included in the net worth calculation.

4. Prematurity of the Writ Petition Due to Pending Decision by the Cabinet Committee on Economic Affairs:
The respondents argue that amounts debited to revenue should be treated as contingent liabilities on revenue account. The minutes of the 4th meeting of the Empowered Committee of Secretaries (ECS) reflect a stance contrary to the petitioner's viewpoint, stating that contingent liabilities reported under AS-29 should be deducted from equity for net worth evaluation. The court notes that these are mere opinions and the final decision rests with the Cabinet Committee on Economic Affairs. Since the Cabinet Committee has yet to make a decision, the court holds that the writ petition is premature but emphasizes that the petitioner's viewpoint should be considered by the Committee.

Conclusion:
The writ petition is dismissed as premature, with no costs awarded. The court directs that the petitioner's viewpoint, as crystallized in the order, be placed before the Cabinet Committee on Economic Affairs for consideration. A copy of the order is to be supplied to the counsel for the parties.

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