Contractual Experience Cannot Be Derived From Parent Entity Without Formal Assignment: Delhi High Court in IVS Services v UOI - 2026-03-30

Delhi High Court Rules: Subsidiaries Cannot 'Borrow' Contractual Experience Without Formal Assignment

In a significant judgment delivered on March 30, 2026, the Division Bench of the High Court of Delhi, comprising Hon’ble Mr. Justice V. Kameswar Rao and Hon’ble Ms. Justice Manmeet Pritam Singh Arora, has reinforced the sanctity of tender conditions. The court held that a subsidiary, International Visa Services Pvt Ltd, could not rely on the experience of its parent company (IVS Global) to satisfy the Mandatory Eligibility Criteria (MEC) in a government tender process absent a formal assignment or novation of the original contract.

The Backdrop: A Dispute Over Operational Roles

International Visa Services Pvt Ltd (formerly IVS Lanka) had been performing consular outsourcing services in Sri Lanka for over a decade. While the services were physically performed by the Petitioner, the formal 2013 contract and its subsequent extensions were executed exclusively in the name of IVS Global.

Following the issuance of a new Request for Proposal (RFP) in November 2025, the Petitioner was disqualified because it failed to demonstrate three years of independent experience as a primary contracting party. Despite the Petitioner's argument that it was the "actual" service provider recognized by the Respondent through various appreciation letters and fee confirmations, the Union of India maintained that the contractual risks and liabilities remained solely with the parent, IVS Global.

Arguments from the Bench

The Petitioner argued that the Respondent had "consistently recognized" its role as the operational entity and that excluding it after years of service was arbitrary and retaliatory. They sought parity with a similar model used in the UAE, where an entity was permitted to transition rights.

The Respondent, however, contended that the Petitioner was merely an "extended operational arm" functioning under the direct supervision and control of IVS Global, as defined by their internal Memorandum of Understanding (MOU). Counsel for the Union of India emphasized that tender conditions must be strictly construed and that permitting a separate legal entity to "inherit" experience without a formal assignment would effectively allow an applicant to rewrite tender terms.

The Court’s Analysis: Privity and Commercial Reality

The High Court relied heavily on the principle of privity of contract . The bench noted that while the Petitioner performed on-ground tasks, these were under the "supervision, control and guidance" of IVS Global.

The Court further distinguished the current situation from the UAE case, noting that in the latter, the relevant authorities had formally recognized a written transfer and novation of rights, a step missing in the Sri Lanka operations. The Court emphasized that courts should exercise restraint in commercial matters, stating that the tendering authority is the "best person to understand and appreciate its requirements."

Key Observations

• On Privity: "The 2013 Agreement and its extensions remained exclusively between the Respondent and IVS Global, and IVS Lanka/Petitioner is not a party thereto."
• On Agent Status: "Section 230 of the Indian Contract Act, 1872 embodies the principle that where an agent acts for a disclosed principal, the principal alone is bound by and liable under the contract qua third parties."
• On Judicial Restraint: "The courts must give ‘fair play in the joints’ to the government and public sector undertakings in matters of contract. Courts must not interfere where such interference will cause unnecessary loss to the public exchequer."
• On Expert Assessment: "This Court has no material before it to form a contrary opinion and substitute it for the opinion expressed, by the Respondent, on the basis of its actual experience."

Final Decision and Implications

The High Court dismissed the writ petition, upholding the disqualification. The judgment sends a clear message to corporate groups: if a subsidiary seeks to rely on the credentials of a parent or group entity during public bidding, it must ensure there is a clear, formal assignment or novation of the underlying contract. The decision reinforces that "actual performance" of work does not equate to "contractual experience" in the eyes of the law, especially when the legal framework clearly vests risks and liabilities in a different corporate entity.

This ruling serves as a vital reminder to contractors engaged in outsourced public services to align their corporate legal structure with their bidding ambitions well in advance of tender deadlines.