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Bombay HC: LLP Can Rely on Partner's Prior Firm Experience for Tender Eligibility

Mumbai: In a significant ruling on tender eligibility, the High Court of Bombay , through a Division Bench comprising Hon'ble Chief Justice Alok Aradhe and Hon'ble Shri Justice Sandeep V. Marne , has held that the experience of a proprietor of a firm, who subsequently becomes a partner in a Limited Liability Partnership (LLP), can be considered as the experience of the LLP for tender qualification purposes. The Court set aside the rejection of Nandkumar Infrastructure LLP's bid for a road maintenance contract, directing the tendering authority to open its financial bid and conduct a renegotiation process.

Case Background: Tender Rejection Sparks Legal Challenge

The case, Nandkumar Infrastructure LLP vs. The Superintendent Engineer National Highway Division Pune and Ors. (Writ Petition No.13895 of 2024), arose from a tender notice dated August 23, 2024, for road maintenance work on NH-965D, estimated at Rs.3,22,63,404. Nandkumar Infrastructure LLP (Petitioner) submitted its bid but was declared 'non-responsive'.

Initially, the rejection on September 23, 2024, cited multiple reasons, including issues with turnover certification, bid capacity format, and lack of documents for plant/personnel, and crucially, failure to provide a legal document showing the relationship with M/s. Nandkumar Constructions (a proprietary firm whose proprietor is a partner in the Petitioner LLP). Despite the Petitioner submitting representations and documents, its bid was finally rejected by communication dated October 4, 2024, primarily for "non-submission of notarized Business Transfer Agreement" to establish the transfer of experience from M/s. Nandkumar Constructions to the Petitioner LLP.

The Petitioner challenged this rejection and the subsequent declaration of Respondent No.4 (Shri Pranil Dattatray Gharge) as the successful bidder.

Arguments Presented

Petitioner's Submissions (Adv. Yuvraj Narvankar ): * The rejection was arbitrary and irrational. * The tendering authority wrongly refused to consider the experience and financial credentials of M/s. Nandkumar Constructions, whose sole proprietor, Mr. Sahajiram Chhabad , is a partner in the Petitioner LLP. * Citing the Supreme Court's judgment in New Horizons Limited and another vs. Union of India and others, [(1995) 1 SCC 478] , it was argued that the experience of a constituent partner can be counted as the experience of the firm. * A Memorandum of Understanding for Business Transfer was submitted, and an opportunity should have been given to rectify any shortfall.

Respondents' Counter-Arguments: * State (Adv. Neha S. Bhide, Addl. GP O.A. Chandurkar ): The Petitioner failed to meet eligibility criteria. Without a valid business transfer agreement, the experience of M/s. Nandkumar Constructions could not be attributed to the Petitioner LLP. The New Horizons judgment was argued to be inapplicable to LLPs, citing A.G. Construction Co. vs. Food Corporation of India and others, [2021 SCC OnLine P&H 306] , which held that a partner's experience in an LLP isn't the LLP's experience.

* Respondent No.4 (Adv. Tejas Deshmukh ): An LLP partner is distinct from the LLP itself under Section 23 of the LLP Act, 2008. Doubts were cast on the authenticity and timing of the Business Transfer Agreement. It was argued that proper merger procedures under Section 60 of the LLP Act were not followed, and the Petitioner had relied on forged documents.

Court's Analysis and Reasoning: Experience is Key

The High Court, in its judgment authored by Justice Sandeep V. Marne , meticulously examined the arguments and legal precedents.

The "New Horizons" Principle Reaffirmed: The Court heavily relied on the Supreme Court's decision in New Horizons Limited , which established that experience should be viewed from a prudent businessman's standpoint, focusing on the persons behind the entity and their capacity, rather than just the name of the bidding entity. The judgment quoted:

"It is possible to visualise a situation where a person having past experience has entered into a partnership and the tender has been submitted in the name of the partnership firm which may not have any past experience in its own name. That does not mean that the earlier experience of one of the partners of the firm cannot be taken into consideration."

The Bench also referred to its own Division Bench ruling in Sagar Lookouts vs. Maharashtra Housing and Area Development Authority and the Gauhati High Court's decision in Trio Stony Mart vs. Jamal Ahmed , both of which followed New Horizons in allowing a partner's experience to be considered for the firm.

Distinguishing Contrary Precedents: The Court distinguished the Punjab and Haryana High Court's judgment in A.G. Construction Co. (relied upon by the Respondents) by noting it dealt with a "reverse situation" where a proprietor sought to count experience gained as a partner in an erstwhile firm for his individual proprietary concern.

Application to LLPs and Business Transfer: Addressing the argument that LLPs are distinct, the Court found that Section 23 of the LLP Act (governing mutual rights and duties) does not bar the application of the New Horizons principle. The Court stated:

"In our view, what Section 23 of the Act provides for is governing of rights and duties of partners and rights and duties of LLP by the agreement. In our view, provisions of Section 23 of the Act would not make inapplicable to a LLP, the principle of reckoning an experience of partner prior to his entry into partnership firm as experience of the firm."

Furthermore, the Court opined that once the principle of reckoning a proprietor's experience (after becoming an LLP partner) as the LLP's experience is recognized, "whether there is actual merger of the business or not becomes irrelevant." Thus, the requirement or authenticity of the notarized Business Transfer Agreement became secondary for the purpose of considering experience. Section 60 of the LLP Act, dealing with compromise or arrangement, was deemed irrelevant to the formation of the LLP or the reckoning of experience in this context.

The Court concluded:

"After considering the overall conspectus of the case, we are of the view that the tendering authority has grossly erred in holding Petitioner's bid as non-responsive. Petitioner has qualified the prescribed eligibility criteria and accordingly his financial bid is required to be considered."

Final Decision and Directions

The High Court partly allowed the writ petition, issuing the following directions: 1. The order dated October 4, 2024, adjudging the Petitioner’s bid as non-responsive, was set aside. 2. The Petitioner was held eligible for the opening of its financial bid. 3. After opening the Petitioner’s financial bid, the tendering authority shall invite both the Petitioner and Respondent No.4 for a renegotiation process and award the tender to the entity offering the lowest bid. No other bidder will participate in this renegotiation.

This judgment, pronounced on June 24, 2025, underscores a pragmatic approach to tender evaluations, emphasizing substance (experience of individuals involved) over strict formalism, even in the context of LLPs. It clarifies that the experience gained by a partner through a previous proprietary concern can be a valuable asset for an LLP in meeting tender eligibility criteria.