TaxTMI 
TaxTMI 
2022 (12) TMI 1486
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....tions. 2. The facts, in brief, leading to the instant petition are as under: a) The Petitioner is an unlisted public limited company incorporated under the Companies Act, 1956 and is engaged in the business of infrastructure development and execution of Engineering, Procurement Construction and Commissioning (EPCC) and Lumpsum Turnkey (LSK) facilities in various infrastructure projects in the country. b) The Respondent had invited a Request for Proposal (RFP) for the abovementioned project and the Petitioner was one of the bidders in the said project. In response to the Petitioner's bid, the Respondent vide letter dated 15.07.2022 informed the Petitioner that the evaluation committee had noticed certain discrepancies in its bid, stating that the same was not adhering to clauses of the RFP. The Petitioner responded to the query of the Respondent on 21.07.2022 inter alia submitting an explanation as to how its balance Capital Reserve Account has been considered to calculate its "Net Worth" as per methodology specified in Clause 2.2.2.9 (ii) of the RFP and it has a "Net Worth" of 49.04 Crores, thereby meeting the Net Worth criteria under the RFP. c) On 22.07.2022, the Responden....
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....ondent, the material as provided by the Petitioner in the bid does not meet the requirement of having a Net Worth of Rs.42.98 crores. f) At this Juncture, it is pertinent to mention the background of the Petitioner in brief. During the year 2019, the Petitioner experienced financial stress attributable to a host of internal and external factors and general economic slowdown, as a result of which one of the financial creditors of the Petitioner, i.e., State Bank of India, Muscat Branch filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Petitioner for initiation of the Corporate Insolvency Resolution Process (CIRP). The said application was admitted by the NCLT vide its Order dated 21.11.2019 resulting in the initiation of CIRP against the Petitioner. Vide the same Order an Interim Resolution Professional was appointed and later, on the same person was appointed as the Resolution Professional by the Committee of Creditors (CoC) by way of a resolution passed at the CoC meeting of the Petitioner on 20.12.2019. The Resolution Plan submitted by SMC Infrastructures Private Limited was accepted by the CoC in its 14th Meeting held on 28.10.2020 wi....
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.... due to the extinguishment of liabilities pursuant to the Resolution Plan approved by the NCLT. The figures as pointed by Mr. Kathpalia, the reserves and surplus were negative in the year 2020 i.e., - Rs. 6,879,330,927 which, after the resolution plan, turned positive in the year 2021 to Rs.49,04,09,768/-. The Balance Sheet for the year ending March 31, 2021 reads as under: 5. Mr. Kathpalia further submits that the decision of the Technical Evaluation Committee that the Net worth should be calculated on the basis of reserves created only out of revenue profit alone is against Clause 2.2.2.9 and also universally accepted accounting principles which are applied across the board. 6. Mr. Kathpalia draws the attention of this Court towards certain other projects issued by the Ministry of Road, Transport and Highways which have the same criteria for calculating the Net Worth of the bidders as is given in the Clause 2.2.2.3 of the Impugned RFP in the present case. He submits that there is no reason as to why the Respondent/NHAI should take a different view than the one taken by the Ministry of Road, Transport and Highways. Mr. Kathpalia has also drawn the attention of this Court towards....
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....tendering authority to make sure that there is certainty in the tender conditions, especially where there have been amendments issued in the tender condition. Changing the rules of the game post the clarification round, should allow the bidders to seek any clarification that they may have, at least in relation to the amendment. Right after the issuance of the Amendment no. 3 on 20.04.2021, the Petitioner had written on 21.04.2021 to the tendering authority to clarify its doubts. The Respondent no. 1 should have been forthcoming with clarifications since the pre-bid meeting was over. We are at pains to understand the attitude of the tender floating authorities. The laudable objectives of "ease of doing business in India" was frustrated by this high-ended attitude of the respondent. If the aim and objective of an open bidding process is to encourage bidding, and maximize participation to get the optimum price, then the attitude of the Respondent cannot be countenanced. The act of not clarifying the Petitioner's doubt has prejudiced him and left him in the dark. This Act/omission of Respondent no. 1 cannot be to the disadvantage of the petitioner. ***** 50. The doctrine of cont....
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....concept of ―globalisation‖. Decisions or acts which result in unequal and discriminatory treatment, would violate the doctrine of ―level playing field‖ embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of ―equality‖ should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of ―level playing field‖. According to Lord Goldsmith, commitment to the ―rule of law‖ is the heart of parliamentary democracy. One of the important elements of the ―rule of law‖ is legal certainty. Article 14 applies to government policies and if the policy or act of the Government, even in contractual matters, fails to satisfy the test of ―reasonableness‖, then such an act or decision would be unconstitutional. ***** 38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This ―legal certainty‖ is an important aspe....
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....lace in AS 3. According to the said principle of ―cash flow reporting‖, when P&L accounts and balance sheets are prepared on accrual basis, revenues and expenses are recognised on accrual basis i.e. when the transaction or event occurs. However, timing of cash flow is not reckoned in such system of accounting. Similarly, in cases where accounts are based on accrual system of accounting, recognition of assets and liabilities is not dependent on the actual timing of cash spent on capital expenditure and cash inflow on account of capital receipt. Thus the financial statements prepared on accrual basis do not reflect the timing of the cash flow and amount of cash flow. The object of the cash flow statement is to assess the company's ability to generate the cash flow in future and to assess reasons for difference between ―net profit‖ and ―net cash flow‖ from operations. ***** 50. Taking into account the above principles, it is clear that there are two methods of ―cash flow reporting‖ i.e. direct and indirect. Both give identical results in the matter of the final total. They differ only in presentation of the data. They differ only ....
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....ode, 2016, and if the decision of the Respondent is not set aside, the entire CIRP of the Petitioner would be rendered redundant. Furthermore, several companies during a restructuring process, while carrying out the extinguishment of share capital propose transfer of such profits arising from the extinguishment of share capital in a Capital Reserve account. He states that the actions of the Respondent in rejecting the bid of the Petitioner not only goes against the terms of the RFP, but also the scheme of the Resolution Plan approved by the NCLT and objectives of the Insolvency and Bankruptcy Code, 2016. 14. Per Contra, Mr. Jayant K. Mehta, learned Senior Counsel appearing for the Respondent/NHAI, contends that the tenders in which the Ministry of Road, Transport and Highways has accepted the Net Worth of the company to include reserves arising out of capital, have not been tested in a Court of law and need not be accepted by the Respondent. The Respondent being the tenderer should be permitted to decide the same on the basis of the eligibility of the bidder. According to him, the purpose of finding out the financial capacity of the bidder is to ascertain as to whether the bidder ....
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....ansaction, the IB (whether a sole bidder or a Consortium) shall satisfy the following criteria: Net Worth: A minimum Net worth of INR 35,000 Mn (INR 3,500 Crore) computed in terms of Clause 11.3 and 11.4. OR ACI - A minimum ACI of INR 35,000 Mn (INR 3,500 Crore) computed in terms of Clause 11.3 and 11.4. Note: Certain special dispensation in respect of Scheduled Airline Operator in India, for manner of satisfying the Financial Capability requirement, are set out in clause 11.3.(b)(ii) and 11.6.(c) below. 11.3 Financial Capability shall be calculated as follows: a) Net Worth means the aggregate value of the paid-up equity share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet. Provided that for determining the Net Worth, any reserves created out of revaluation of assets, write-back of depreciation and amalgamation, intangible assets, redemption reserves, reserves made for any specific purpose shall not be included. Such methodology shall be applicable even to entities that ar....
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....states that these reserves are created out of the difference between net asset and amount of shares allotted (rather than explicitly through profits or securities premium account), these reserves may not be considered as a part of Net Worth. d. Further, it has not been mentioned by the Petitioner that the Hon'ble High Court has stated that the general reserve should be considered as a part of net worth. e. Hence, Petitioner ought to have been disqualified for not being able to meet the minimum Net Worth requirement. 14. Moreover, since Petitioner had raised the issues of treating the amalgamation reserve as ―general reserve‖ in light of an order by the Hon'ble High Court and a legal opinion, the Respondent No. 3 also advised the Respondent No. 1 and 2 to seek legal advice on the same. 15. Accordingly, it is the Respondent No. 3 humble submission that the Petitioner was not eligible in accordance with the eligibility criteria set out in Clause 11 of the PIM.(emphasis supplied) ***** 26) A bare perusal of Clause (f) of the Scheme of Amalgamation clearly shows that the so-called general reserve of the Petitioner is a surplus arising out of the difference between....
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....en meaning and their necessary significance" Furthermore, another important observation in the same judgment is as under: "15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given." 17. The short questions which arises for our consideration is whether the decision taken by the Respondent while rejecting the bid of the Petitioner on the ground that the Net Worth of the Petitioner is less than Rs.42.98 crores is correct or not and whether it warrants interference by this Court while exercising its jurisdiction under Article 226 of the Constitution of India. 18. Along with the co....
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....t its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given." 20. In Silippi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133, the Supreme Court, while discussing the aspect of judicial intervention in matters of contract involving state instrumentalities had held that the authority which floats the contract or tender, and has authored the tender documents is the best judge regarding interpretation of the same. Any interference by the Court has to be for the purposes of preventing arbitrariness, irrationality, bias, mala fides or perversity. In paragraph 20 of the said Judgement, the Supreme Court observed as follows: "20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; t....
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....ideration the national priorities; (b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited; (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted; (d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business ....
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....ould be visualised from a simple fact that in case of ambiguity, if two different tenderers suggest two different interpretations, the question would always remain as to which of the two interpretation is to be accepted? Obviously, to avoid such unworkable scenarios, the principle is that the author of the tender document is the best person to interpret its documents and requirements. The only requirement of law, for such process of decision-making by the tender inviting authority, is that it should not be suffering from illegality, irrationality, mala fides, perversity, or procedural impropriety. No such case being made out, the decision of the tender inviting authority (NVS) in the present case was not required to be interfered with on the reasoning that according to the writ court, the product ―smartphone‖ ought to be taken as being of similar category as the product ―Tablet". " 23. In view of the above, the Apex Court has categorically held that the Rule of contra preferentum shall not apply in tender matters for the reason that it is for the tenderer to decide as to who would be the best suitable bidder for award of the tender and unless the decision-making ....