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2024 Supreme(Cal) 945
IN THE HIGH COURT AT CALCUTTA
SHAMPA SARKAR, J.
CMS Computers India Private Limited and Another – Petitioners
Versus
Union of India and Others – Respondents
W.P.A. No. 19107 of 2024
Decided On : 22-08-2024
Advocate Appeared:
For the Petitioners: Arindam Chattopadhyay, Lipika Chatterjee, Subhomoy Paul, Soumik Dey, Tapati Saha.
For the Respondents: Atarup Banerjee, Srikumar Chakraborty, Arnab Sardar, Lavanya B. Ananth.
IMPORTANT POINT
The court affirmed that a demerged company cannot claim eligibility for a tender if the relevant services and assets have been transferred to a resulting company, emphasizing the importance of continuous compliance with eligibility criteria.
Headnote:
Demerger - Tender Eligibility - Companies Act, 2013 - Sections 230-232 - The court interpreted the provisions of the Companies Act regarding demergers and their implications on eligibility criteria for tenders, concluding that the demerged company did not meet the necessary requirements post-demerger.
Fact of the Case:
The petitioners challenged the cancellation of their tender bid by the tendering authority, arguing that the demerged company still met eligibility criteria despite the transfer of its services to the resulting company as per a demerger scheme sanctioned by the NCLT.
Finding of the Court:
The court found that the demerged company did not fulfill the eligibility criteria for the tender as the relevant services had been transferred to the resulting company prior to the bid opening, and the authority's decision was justified.
Issues: Whether the demerged company met the eligibility criteria for the tender after the demerger and if the tendering authority's decision to cancel the bid was justified.
Ratio Decidendi: The court held that the eligibility criteria must be continuously met until the contract award, and the authority's interpretation of the demerger's impact on eligibility was reasonable and not subject to judicial interference.
Result: The writ petition was dismissed without interference.
JUDGMENT :
SHAMPA SARKAR, J.
1. The petitioner no. 1 is the resulting company and the petitioner No. 2 is the demerged company, incorporated by a scheme of demerger under the provisions of the Companies Act, 2013 pursuant to an order passed by the National Company Law Tribunal, Mumbai. The scheme of arrangement between the petitioner no. 1 and the petitioner no. 2 was sanctioned by the order of the NCLT, Mumbai dated August 4, 2023. As per the order, the appointed date was April 1, 2022. The petitioner no. 2 participated in the Limited Tender bearing No. 2023/MCI/741539/1 (REP No. EIII/64(6)/Revamp/2021), in February 2023. The tendering authority, upon examination of the bids and the certified copy of the scheme approved by the NCLT, found that the E-governance business, software solution services, digital services, analytics and cloud, datacenter, information security and IT related services of the demerged company had been transferred to the resulting company. It was detected that the demerged company no longer provided the services desired under the limited tender and did not fulfill the terms and conditions of the tender. The tender was also non-transferable as per the Request for Proposal (RFP). The decision of the authority, i.e. Directorate General of Commercial Intelligence and Statistics (DGCI&S), to cancel the bid of CMS Computers Limited i.e. the petitioner no. 2, is under challenge.
2. The learned advocate for the petitioners submits that till the effective date, all assets, bids, bonds, contracts, agreements, schemes, arrangements and other instruments of whatever nature which were in possession of the demerged undertaking, would be owned by the said demerged company.
3. Thus, once the demerged company put in its bid sometime in February 2023, the services of E-governance, software, and IT related works etc. were retained with the demerged company and the demerged company would satisfy the eligibility criteria. Reference in this regard is made to Clause 5.7 of the scheme.
4. It is next contended that the authorities were themselves confused as to the requirements for fulfilment of the eligibility criteria. Reference is made to a communication received from the tendering authority. The authority informed the petitioner No. 2 that the process of demerger was unclear to them. In the absence of apportionment of the balance-sheet of the two companies, the claim of the demerged company of having met the financial criteria, could not be clarified by its legal adviser.
5. Mr. Chattopadhyay further submits that when the authority was confused, the petitioners should have been allowed to further clarify the situation and explain the chronological sequence of the demerger.
6. Reliance has been placed on the decision of this court in the matter of Medium Packaging Pvt. Ltd. Vs. Indian Oil Corporation Limited & Ors. passed in W.P. No. 1591 (W) of 2019.
7. Mr. Banerjee, learned advocate representing the tendering authority, submits that the eligibility criteria as per Clause 2.4 of the RFP were not satisfied by the demerged company. The short listed bidder had to continue to meet the eligibility criteria as prescribed in the expression of interest, till the award of contract. The bidders were required to declare their continued fulfillment of the eligibility criteria in Annexure-C and provide evidence of the same to the tendering authority, if asked for.
8. Referring to the eligibility criteria, it is submitted that the bidders were required to have an annual turnover of INR 200 crores from IT, ITES and other IT related services in the preceding three financial years, i.e. 2020-21, 2019-20 and 2018-19 and should not have incurred loss during the said period. The technical qualifications required relevant experience in execution of integrated software projects involving complex business processes or experience in application development projects of similar nature, in the preceding five years.
9. According to Mr. Banerjee, in the letter of
