TaxTMI 
TaxTMI 
2025 (6) TMI 1871
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.... favour of the plaintiff/respondent, a Non-Banking Financial Corporation (NBFC), thereby restraining the defendants/appellants from giving any effect or further effect to the notice dated April 16, 2025 till June 3, 2025. 2. Learned senior counsel appearing for the defendants/appellants argues that the appellant no.1 is not a Government company coming within the purview of Article 12 of the Constitution of India and, as such, is not bound by the rigours applicable to a Government company in such cases. 3. It is argued that the Guidelines issued by the Reserve Bank of India, relied on by the plaintiff/respondent in the suit, are for the purpose of protecting the borrower. The plaintiff/respondent, being a third-party, has virtually canvassed the cause of the borrower, which is a tell-tale sign that the plaintiff has been set up by the borrower to thwart the auction process. 4. It is argued that the „Swiss Challenge‟ method, adopted in the proposed auction, is a valid method in law. Learned Senior Counsel appearing for the defendants/appellants cites Ravi Development v. Shree Krishna Prathisthan and others, reported at (2009) 7 SCC 462, in support of the proposit....
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.... Company (NARC), is an Article 12 entity, thus bound by the strict rigours applicable to a Government auction process. 12. It is argued that the plaintiff/respondent challenges the very terms of the auction and, as such, in the event it participated in the said process, it would lose the right of challenging the terms. A distinction is sought to be drawn between a challenge to breach of the tender terms, in which case one has to participate to challenge the breach, on the one hand and, on the other, a case where the very terms of the tender are challenged, in which case participation would take away the legitimacy of a challenge to the terms. 13. Learned senior counsel cites in this context National High Speed Rail Corporation Limited v. Montecarlo Limited and Another, reported at (2022) 6 SCC 401, where it was held by the Supreme Court that if the original writ petitioner therein was aggrieved, either it would not have participated and/or ought to have challenged such clauses of the tender before participating in the tender process. Learned senior Counsel also cites Airport Authority of India v. Masti Health & Beauty Private Limited and Others, reported at (2022) SCC OnLine ....
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.... Locus Standi/Cause of Action 20. The reliance of the appellants on National Highways Authority (supra) is somewhat misplaced, particularly read in the context of National High Speed Rail Corporation (supra). In the latter judgment, the Supreme Court had observed that if the writ petitioner was aggrieved by the terms of the contract, either it should not have participated or ought to have challenged such clauses before participation in the tender process. Even in National Highways Authority (supra), the Supreme Court drew a distinction between a case where the terms of the tender document themselves were challenged, as opposed to a case where a breach of the said terms was assailed. The Supreme Court qualified its ratio by applying the touchstone of participation to instances where the validity of the tender document has not been put in issue or challenged before any competent forum. It reiterated that in the such case, the respondent could not be heard to contend that it had acquired any right, having failed to participate in the tender process and, more so, despite the express terms in the tender documents, validity whereof had not been challenged (emphasis supplied). 21.....
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....stly on December 28, 2023), provides that in general, lenders shall transfer stressed loans, including through bilateral sales, only to "permitted" transferees and ARCs. We do not find any pleading in the entire plaint that the plaintiff/respondents satisfied such condition or the eligibility sought by the defendant/appellant in their EoI invitation notice otherwise. 25. Even if participation is uncalled for if the terms of the tender themselves are challenged, a two-pronged test has to be met by the challenger in such cases, to have locus standi to prefer such challenge: (i) The challenger must have the eligibility otherwise to participate in the tender; and (ii) The challenger must otherwise be interested in participating in the auction process, either if the challenge is turned down or if the grounds of the challenge are accepted and the tender terms are rectified accordingly. 26. The attempt of the plaintiff/respondent to challenge the auction process is suspect, since it took a resolution at 11 a.m. on April 16, 2024 itself, the date on which the impugned notice of "Expression of Interest" was published, without even submitting its EoI for the same. It ....
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....bid to the lender(s), which shall be termed as the base-bid. 32. Sub-clause (b) of Clause 85 provides that the lender(s) shall then publicly call for counter bids from other prospective buyers on comparable terms by disclosing the essential elements of the base-bid and also clearly specifying the minimum mark-up price that would be acceptable. Thus, the very premise of the Swiss Challenge method, even in terms of the RBI Circular, is the acceptance of a prospective transferee's offer as the base-bid and proceeding therefrom. There is no requirement in the entire Circular to disclose the basis of selection of the Anchor Bidder. Hence, the challenge on such count thrown in the plaint cannot be accepted as tenable. 33. In Ravi Development (supra), the Supreme Court held that the Swiss Challenge method is transparent inasmuch as all the parties were well aware of the "right of first refusal" accorded to the "originator of the proposal". As per the method, it was known to all the parties that the originator of the proposal must, in consideration of his vision and his initiative, be given the benefit of matching the highest bid submitted. It was further held that the said method is....
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....r exercising due diligence. Since immediate access to all information was available online as well as otherwise from April 23, 2025, immediately after the last date of submission of EoI, we do not find that the time period of nine days was insufficient or inadequate and/or violative of Clause 59 of the RBI Master Circular. 39. The plaintiff/respondent has pleaded that the public holidays intervened. However, there is nothing on record to indicate that online access would be restricted on public holidays. Even otherwise, the time given for due diligence, on the touchstone of a man of ordinary prudence, is not so palpably insufficient or inadequate to violate Clause 59. Thus, the challenge to the impugned notice on such ground cannot be accepted. 40. The plaintiff/respondent has next alleged non-disclosure of the essential elements of the base-bid. We find that the said challenge is not in consonance with the plaint case, where the credentials of the Anchor Bidder and the process of selection of the Anchor Bidder were challenged and not non-disclosure of the essential elements of the base-bid. Be that as it may, even giving the benefit of such challenge to the plaintiff/respond....
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....idders during the due diligence period, would it be possible for the plaintiff/respondent to ascertain the same. Thus, the said challenge also cannot be upheld. 43. Hence, we do not find there to be any palpable violation of the clauses of the RBI Master Circular in the impugned notice inviting EoIs or the accompanying Deal Summary. Whether the appellant no.1 is a Government entity 44. Such question is rather irrelevant, since we have proceeded on the higher ground which is to be satisfied even by a Government entity to test the prima facie legality of the impugned auction notice. In fact, as discussed earlier, the Swiss Challenge method was accepted to be valid in respect of Government tenders in Ravi Development (supra). We do not find any palpable violation of natural justice being either alleged or proved at the stage by the respondent. In any event, such issue is rather academic, as the RBI Master Circular is applicable to the appellant no.1 in any event in terms of Clause 3 of the Chapter-I thereof. Sub-clause (f) includes all NBFCs within the fold of the Master Circular, and it is admitted in the very first paragraph of the stay application filed in the present appe....
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....g a moment. Such position is clear from the concerned resolution furnished by the plaintiff/respondent itself in the Trial Court. 49. Such hot haste raises a doubt as to whether the challenge was a pre- planned ploy to forestall and protract the sale of the debt for the possible purpose of buying time for the borrower. 50. The invitation for EoI is merely an inchoate stage in the auction process and cannot be said to be the commencement of the actual bid process. The said exercise is only a precursor to the actual bidding process, to screen out the unwilling and ineligible participants and fence-sitters. Having not participated therein, the plaintiff/respondent chose to evade establishing its eligibility or even the remote willingness to participate in the bid process at all. 51. For submission of EoI, certain declarations regarding eligibility, willingness and confidentiality were merely to be furnished. No financial loss, forfeiture of advanced money or other detriment would be suffered by the entities submitting such EoI, even if they subsequently withdrew from the auction process. More importantly, the impugned notice itself clarifies that the Bid Process Document and ....