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TMI Blog2023 (6) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Constitution of India is well settled. The Apex Court in AFCONS INFRASTRUCTURE LTD. VERSUS NAGPUR METRO RAIL CORPORATION LTD. ANR. [ 2016 (9) TMI 1292 - SUPREME COURT] , has observed that constitutional courts must defer to the understanding and appreciation of the author of the tender documents unless there is malafide or perversity in the understanding or appreciation in application in the terms of the tender. In THE SILPPI CONSTRUCTIONS CONTRACTORS VERSUS UNION OF INDIA AND ANR. ETC. ETC. [ 2019 (6) TMI 1449 - SUPREME COURT] the Supreme Court, while discussing the aspect of judicial intervention in matters of contract involving state instrumentalities had held that the authority which floats the contract or tender, and has authored the tender documents is the best judge regarding interpretation of the same. Any interference by the Court has to be for the purposes of preventing arbitrariness, irrationality, bias, mala fides or perversity. The Petitioner has not been able to demonstrate as to how the decision arrived at by the tendering authority in rejecting the bid of the Petitioner as not being compliant of Clause 3.28 and Clause 6.1.2 of the bid document is perv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Respondent/ SAIL. JUDGMENT 1. Aggrieved by the action of the Steel Authority of India (Respondent/SAIL) in rejecting the Petitioner s bid in respect of a tender bearing NIT No. RSP/ROU/PROJ/NIT/TIM/22-23/03 dated 02.07.2022 (hereinafter referred to as Impugned Tender) by way of a letter dated 10.05.2023 (hereinafter referred to as Impugned Letter), the Petitioner has filed the instant writ petition challenging the decision taken vide the said letter. 2. Shorn of details, the brief facts leading to the filing of instant writ petition are as under: i. The Respondent floated the Impugned Tender on 02.07.2022 for engagement of Mine Developer-cum-Operator (MDO) for Development Operation of Mines at Taldih (7.0 Mtpa ROM feed) along with installation of 10 Mtpa Loading facility at Barsua Valley. ii. It is stated that the Petitioner submitted its techno-commercial bid in lieu of the Impugned Tender on 12.09.2022. iii. On 19.02.2023, the Respondent informed the Petitioner that it was in the process of evaluating offers for the Tender and provided its observations on the offer made by the Petitioner. The Petitioner replied to the said e-mail confirming and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect Method. Moreover, Deferred Tax liability is appropriation of the profit in compliance to AS 22 (Accounting of Taxes on Income) issued by the ICAI. This is ultimately reversed and transferred to Reserves in future years not being a outside liability. Hence this can be considered as free reserves on a given date and no specific liability exists against the same as on date. Our view as above is on the basis of generally accepted accounting principles. viii. On 19.04.2023, the Petitioner wrote a letter to its statutory auditor informing the Petitioner that it has asked for an opinion from the ICAI and also enclosed a certificate from an independent CA firm i.e. M/s P.A. Associates and an opinion from an independent Registered Value, CA Dr. Prithvi Ranjan Parhi to support the authenticity of treatment of Deferred Tax Liability in computing Net Worth. ix. Thereafter, the Petitioner, on 22.04.2023 wrote to the Respondent stating that it had requested to the Statutory Auditor to have an opinion from the Institute of Chartered Accountants of India (ICAI) regarding treatment of deferred tax liability for computation of Net Worth and requested the Respondent not to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expert opinion of an independent auditor as well as an independent registered valuer with ICAI, and both of them have opined that Deferred Tax Liability is calculated as part of net worth. He submits that the failure of the Respondent to consider the method of calculation adopted by the aforesaid experts is contrary to the law laid down by the Hon ble Supreme Court in Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489. 9. Heard learned Counsels for the parties and perused the material on record. 10. The short question which arises for the consideration of this Court is whether the action of the Respondent in rejecting the bid of the Petitioner on the ground that Net Worth of the Petitioner is not in compliance with the eligibility criteria (financial) is correct or not and whether it warrants interference by this Court while exercising its jurisdiction under Article 226 of the Constitution of India. 11. At this juncture, it is apposite to reproduce Clause 3.28 of the Bid which defines Net Worth and Clause 6.1.2 of the Bid Document, which provides the qualifying criteria (financial) of the NIT reads as under:- 3.28 Net Worth : Net Worth is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited; (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted; (d) Certain preconditions or qualifications for tenders have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court, while discussing the aspect of judicial intervention in matters of contract involving state instrumentalities had held that the authority which floats the contract or tender, and has authored the tender documents is the best judge regarding interpretation of the same. Any interference by the Court has to be for the purposes of preventing arbitrariness, irrationality, bias, mala fides or perversity. The said principle has been reiterated by the Apex Court in Galaxy Transport Agencies, Contractors, Trader, Transporters and Suppliers v. New J K Roadways, Fleet Owners and Transport Contractors Ors., 2020 SCC OnLine SC 1035. The Supreme Court in Silippi Constructions (supra) has observed as follows: 20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability is to be included in the balance sheet of a company does not mean that the same should be included in calculating the net worth of a company. 18. Similarly, the reliance placed upon by Mr. Rao on Section 115 JB of the Income Tax Act, 1961 and Rule 11 UA of the Income Tax Rules, 1962 also is incorrect. Section 115 JB of the Income Tax Act is a special provision which describes what 'book profit' of a company means for the purposes of determining the total income of a company for the purposes of payment of tax. Whereas Rule 11 UA of the Income Tax Rules, 1962 deals with the determination of fair market value for the purposes of determining income from other sources under Section 56 of the Income Tax Act. Both the provisions deal particularly with determining the income of a company for the purposes of payment of tax. The calculation of the net worth of a company and the calculation of income of a company for the purposes of payment of tax are two separate exercises and cannot be equated. It is, therefore, difficult for this Court to agree with the submission made by Mr.Rao that deferred tax liability should be included for the purposes of calculating the net worth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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