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IN THE HIGH COURT OF DELHI
Satish Chandra Sharma, Subramonium Prasad, JJ.
GKC Projects Limited - Appellant
Versus
National Highways Authority of India - Respondent
W.P.(C) 11752 of 2022 & CM Appls. 34979 of 2022, 42175 of 2022
Decided On : 19-12-2022
The court affirmed that the interpretation of 'Net Worth' in tender documents rests with the author, emphasizing the necessity for clarity in bid evaluations and limiting judicial intervention unless blatant arbitrariness is proven.
Headnote:(A) Companies Act, 1956 - Section 7 of Insolvency and Bankruptcy Code, 2016; Bharatmala Pariyojana - RFP for construction of Highway - Rejection of bid for failing to meet minimum Net Worth criteria of Rs.42.98 crores on grounds of non-eligibility; Methodology of evaluation of Net Worth must adhere to defined criteria. (Paras 1, 17, 26)
(B) Bidding Process - Requirement for clarity and adherence to eligibility criteria - Interpretation of tender documents rests with the author unless arbitrary; 'Level playing field' essential in tendering process. (Paras 10, 12, 14, 19)
(C) Judicial Review - Limited in matters of contract between state instrumentalities; Intervention not warranted unless decision suffers from mala fides, arbitrary action, or gross illogicality. (Paras 20, 24)
Facts of the case:
The petitioner challenged the rejection of its bid for an infrastructure project based on the assessment of its Net Worth, claiming ambiguity in the evaluation criteria. Respondent rejected the bid based solely on the interpretation of 'Net Worth' as per the RFP, maintaining that only reserves derived from revenue profit were permissible.
Findings of Court:
The Court upheld the interpretation by the Respondent stating that the definition of Net Worth must be strictly adhered to as per RFP and acknowledged the decision as not arbitrary nor unjustly discriminatory given the context of the infrastructure project.
Issues: The main issues were whether the Respondent's interpretation of the Net Worth criteria was correct and sufficient grounds for bid rejection.
Ratio Decidendi: The court emphasized the need for clear eligibility criteria and maintained that the tendering authority's interpretation of documents must be respected unless proven arbitrary or unreasonable.
Result: Petition dismissed.
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 aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not
