2016 (6) TMI 1476 - HC - Companies Law

Rejection of bid - rejection on the ground that it has failed to meet the minimum eligibility criteria as the overdraft facility of Rs. 98.01 Crores availed would come under short term borrowing as per Schedule III of the Companies Act 2013 - HELD THAT - Clause 7.4 of RFQ speaks about minimum eligibility criteria for financial capability. This has been fixed for the bidding company or any one of its promoters forming a separate category and a bidding Consortium and the lead Consortium member or any one of the promoters of a bidding Consortium. In other words the criteria has to be complied with either by a bidding Company or any of its promoters or a lead Consortium Member or any one of the promoters of a bidding Consortium - This Court does not find any ambiguity in the above said clause qua a bidding Consortium. The criteria prescribed has to be satisfied either by a lead Consortium member or any one of the promoters of the bidding company or a lead Consortium Member as the case may be. Now in the case on hand it is not concerned with the Lead Promoter of the petitioner. Here the petitioner claims to be the Lead Consortium Member. This Court also does not find any ground to declare clause 7.4.1.2 as unconstitutional. The petitioner has not demonstrated any arbitrariness or illegality involved. The said clause has been introduced to satisfy with the capability of a bidder. The methodology adopted in fixation of net tangible asset by deducting the current liability from the current asset cannot be found fault with. As per the communication of the petitioner itself it is agreed to undertake and abide by all the terms and conditions of the RFQ. This Court does not find anything wrong in the definition clause 7.4.1.2 - The petitioner after having failed to satisfy the minimum eligibility criteria for financial capability made a belated attempt. Thus the challenge made on the validity of clause 7.4.1.2 of RFQ is rejected. The petitioner has shown the sum of Rs. 98.01 Crores as short term borrowings under the caption current liabilities . The records also indicate the amount as loan payable on demand from banks . Now the petitioner wants to treat it as a long term borrowing based on the Certificate of his Chartered Accountant. This Court is afraid that as against the records produced by the petitioner itself no sanctity can be given to the certification of the Chartered Accountant. As rightly submitted by the learned Senior Counsel appearing for respondent No. 2 the petitioner itself has shown its balance sheet the amount inclusive of Rs. 98.01 Crores as short term borrowings . It is also shown that the sum of Rs. 1, 26, 88, 28, 403 which is inclusive of Rs. 98.01 Crores is loans repayable on demand . Admittedly there are number of correspondence between the parties and thereafter only a decision was made by the 1st respondent after due consideration with its own expert - The submission of the learned Senior Counsel for the petitioner that there is no statutory prescription also cannot be countenanced as we are more concerned with the nature of the borrowings. When once the borrowing would come under short term and current liability as indicated in the balance sheet of the petitioner itself then it cannot make out a case in its favour. On the question of transparency and fairness also the petitioner has not made out a case. The various communications between the 1st respondent and the petitioner alone would be sufficient factors that ample opportunities have been given to the petitioner. It is not as if the petitioner is not unaware. The petitioner is not a novice. The decision was put up in the website and thereafter a reasoned order was passed. Hence this Court does not find any lack of fairness on the part of the 1st respondent. The writ petition stands dismissed.

Summary

Issues Involved:
1. Validity of the Request for Qualification (RFQ) and consequential notice.
2. Compliance with minimum eligibility criteria for financial capability.
3. Challenge to Clause 7.4.1.2 of the RFQ.
4. Transparency and fairness in the decision-making process.

Detailed Analysis:

1. Validity of the Request for Qualification (RFQ) and Consequential Notice:
The petitioner challenged the RFQ issued by the 1st respondent and the consequential notice dated 22.12.2015, which declared another consortium as the eligible applicant. The petitioner's bid was rejected due to non-compliance with the minimum eligibility criteria, specifically the classification of an overdraft facility as "short term borrowing" under Schedule III of the Companies Act, 2013. The petitioner argued that the RFQ clause was arbitrary and unreasonable.

2. Compliance with Minimum Eligibility Criteria for Financial Capability:
The petitioner claimed to meet the minimum eligibility criteria with a net tangible asset of Rs. 580 Crores. However, the 1st respondent rejected the bid, citing that the overdraft facility of Rs. 98.01 Crores should be classified as a "current liability" and "short term borrowing." The petitioner contended that the certification by their Chartered Accountant should classify it as a "long term borrowing." The court found that the petitioner had shown the amount as "short term borrowings" in its balance sheet and failed to provide sufficient evidence to classify it otherwise.

3. Challenge to Clause 7.4.1.2 of the RFQ:
The petitioner argued that Clause 7.4.1.2, which prescribes a Net Tangible Asset of not less than Rs. 580 Crores, was unconstitutional and contrary to the policy prescribed by the Government of India, Planning Commission, and CVC Guidelines. The court found no ambiguity in the clause and upheld its validity, stating that the criteria must be satisfied by either the bidding company or the lead consortium member. The court also noted that the petitioner's attempt to challenge the clause after participating in the bid process was an afterthought and dismissed the challenge.

4. Transparency and Fairness in the Decision-Making Process:
The petitioner alleged a lack of transparency and fairness in the decision-making process, claiming that the entire proceedings favored the 2nd respondent. The court examined the communications between the petitioner and the 1st respondent and found that ample opportunities were given to the petitioner to clarify its financial capability. The court concluded that the decision was made with conscious application of mind and sufficient input from experts, thus rejecting the petitioner's claims of unfairness.

Conclusion:
The court dismissed the writ petition, upholding the validity of Clause 7.4.1.2 of the RFQ and confirming that the petitioner failed to meet the minimum eligibility criteria for financial capability. The court also found no lack of transparency or fairness in the decision-making process by the 1st respondent. Consequently, all connected miscellaneous petitions were also dismissed.