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2022 Supreme(Del) 2189
IN THE HIGH COURT OF DELHI AT NEW DELHI
Satish Chandra Sharma, Subramonium Prasad, JJ.
GKC Projects Limited - Petitioner
Versus
National Highways Authority Of India – Respondent
W.P.(C) 11752 of 2022 & CM APPLs. 34979, 42175 of 2022
Decided On : 19-12-2022
For the Petitioner:Mr. Arun Kathpalia, Sr. Advocate with Mr. Milanka Chaudhary, Ms. Ashly Cherian, Ms. Swet Shika and Mr. Kauser, Advocates.
For the Respondent:Mr. Jayant K. Mehta, Sr. Advocate with Ms. Madhu Sweta, Ms. Raveena Dewan and Mr. Raghav Bhatia, Advocates.
The main legal point established in the judgment is the importance of reserves arising out of capital and revenue profit in the definition of 'Net Worth' and the need for legal certainty and consistency in its interpretation, especially in tender matters.
Headnote:
Net Worth - Infrastructure Development - Companies Act, 1956, Section 2.2.2.9 - The court discussed the definition of 'Net Worth' under Clause 2.2.2.9 of the RFP and its interpretation, highlighting the importance of reserves arising out of capital and revenue profit. The court emphasized the need for legal certainty and consistency in the definition of 'Net Worth' and its application in tender matters. The court also considered the impact of the decision on the CIRP and the objectives of the Insolvency and Bankruptcy Code, 2016.
Fact of the Case:
The Petitioner challenged the rejection of its bid for a highway development project by the Respondent, citing discrepancies in its bid and failure to meet the 'Net Worth' criteria under the RFP. The Petitioner argued that its Net Worth turned positive due to the extinguishment of liabilities pursuant to the Resolution Plan approved by the NCLT.
Finding of the Court:
The court considered the financial statements and balance sheets to demonstrate the positive change in the Petitioner's Net Worth and highlighted the discrepancy in the evaluation committee's interpretation of the 'Net Worth' criteria. The court emphasized the need for legal certainty and consistency in the definition of 'Net Worth' and its application in tender matters.
Issues: The key issue revolved around the interpretation of the 'Net Worth' criteria under the RFP and its impact on the Petitioner's bid, considering the positive change in its Net Worth due to the extinguishment of liabilities pursuant to the Resolution Plan approved by the NCLT.
Ratio Decidendi: The court emphasized the importance of reserves arising out of capital and revenue profit in the definition of 'Net Worth' and highlighted the need for legal certainty and consistency in its interpretation. The court also considered the impact of the decision on the CIRP and the objectives of the Insolvency and Bankruptcy Code, 2016.
Final Decision: The court dismissed the petition, upholding the decision of the tendering authority to restrict the reserves only to reserves arising out of revenue profits, citing the importance of financial capacity in awarding the tender and the need to defer to the understanding and appreciation of the tender documents by the tendering authority.
JUDGMENT :
Subramonium Prasad, J.
1. Aggrieved by the rejection of its bid with respect to a Request for Proposal ("RFP") issued by the Respondent for Development of a Six-Lane Access Controlled Highway from Ranipur Barsi (Saharanpur District) to Adhoya Musalmana (Ambala District) (From Ch. 45+500 To 84+400) of Shamli – Ambala Section of Bareilly – Ludhiana Economic Corridor on EPC Mode under Bharatmala Pariyojana Phase-I in the State of Haryana (Package-2) (hereinafter referred to as "Project") by communications dated 22.07.2022 and 28.07.2022, the Petitioner has filed the instant petition challenging the said communications.
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 Respondent informed the Petitioner that their bid was rejected on the ground that it does not satisfy the “Net Worth” criteria as defined under Clause 2.2.2 (b) of the RFP. The Petitioner, thereafter, made multiple representations to the Respondent protesting and seeking clarification regarding the decision taken by the Respondent. The representations made by the Petitioner were rejected vide communication dated 28.07.2022 on the very same ground.
d) Under the RFP, the bidder was required to have a minimum Net Worth (Financial Capacity) of Rs.40.56 crores at the close of the preceding financial year. By way of a corrigendum, the said amount was increased to Rs.42.98 crores. Clause 2.2.2.9 which defines “Net Worth” for the purpose of the RFP and forms the basis of the entire dispute reads as under:
"2.2.2.9 The Bidder shall enclose with its Technical Bid, to be uploaded on e – tendering and BIMS Portal, submitted as per the format at Appendix-IA, complete with its Annexes, the following:
(i) Certificate(s) from its statutory auditors or the concerned client(s) stating the payments received or in case of a PPP project, the construction carried out by itself, during the past 5 years, in respect of the Eligible Projects. In case a particular job/ contract has been jointly executed by the Bidder (as part of a Joint Venture), it should further support its claim for the payments received or construction carried out by itself in PPP Projects as applicable the share in work done for that particular job/ contract by producing a certificate from its statutory auditor or the client; and
(ii) Certificate(s) from its statutory auditors specifying the net worth of the Bidder, as at the close of the preceding financial year, and also specifying that the methodology adopted for calculating such net worth conforms to the provisions of this Clause 2.2.2.9 (ii). For the purposes of this RFP, net worth (the “Net Worth”) shall mean the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the agg
