Delhi High Court - Orders
Jmc Projects (India) Limited vs Union Of India & Anr on 24 February, 2020
Author: G.S.Sistani
Bench: G.S.Sistani, Anup Jairam Bhambhani
$~25
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) No. 1236/2020 and C.M. No.4255/2020
JMC PROJECTS (INDIA) LIMITED ..... Petitioner
Through: Mr. Akhil Sibal, Senior Advocate
with Mr. Vikas Mishra, Advocate,
Mr. Venkat Rao, Advocate, Mr.
Shaleen Srivastav, Advocate, Ms.
Charul Mathur, Advocate and Ms.
Shriya Mishra, Advocate.
versus
UNION OF INDIA & ANR. ..... Respondents
Through: Ms. Maninder Acharya, ASG with
Mr. Ripu Daman Bhardwaj, CGSC
and Mr. R.K. Singh, Advocate.
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
ORDER
% 24.02.2020 The petitioner impugns Office Memorandum dated 10.01.2020 bearing No. DG/SOP/5 issued by respondent No.2/Central Public Works Department (CPWD), whereby a modification has been introduced by the Director General, CPWD in the initial criterion for eligibility in SoP Annexure-24 Para 7.3 of the CPWD Works Manual 2019. The existing and modified provisions of Rule 7.3 as contained in the impugned O.M. are as under:-
"
Rule Existing Provision Modified Provision 7.3 The bidder should not have The bidder should not incurred any loss (profit after have incurred any loss tax should be positive) in more (profit after tax should be W.P.(C) No.1236/2020 Page 1 of 5 than two years during positive) in more than available last five consecutive two years during balance sheets, duly certified available last five and audited by the Chartered consecutive balance Accountant. sheets, duly certified and audited by the Chartered Accountant. (The balance sheet in case of Pvt./ Public Ltd.
company means its
standalone finance
statement and
consolidated financial
statement both)
SECTION III FINANCIAL FINANCIAL
INFORMATION INFORMATION (FORM INFORMATION
REGARDING 'A') (FORM 'A')
ELIGIBILITY (ii) Profit/Loss. (ii) Profit/Loss
(standalone finance
statement and
consolidated financial
statement both)
"
2. As evident from the above table, while the parent provision appears to be the same, by way of a modification the CPWD has now said that if the bidder is a private or public limited company, such bidder would be required to submit a standalone financial statement as well as a consolidated financial statement as part of the balance sheet. The petitioner's grievance is that the requirement of submission of a consolidated financial statement, meaning thereby the financial details of the subsidiary companies of a bidder, as incorporated by way of modification in para 7.3, is per se arbitrary, unreasonable, discriminatory and legally untenable. The petitioner contends that by reason of such so-called modification, the CPWD has introduced a dis- qualification making a bid ineligible, even if the bidder may be in good W.P.(C) No.1236/2020 Page 2 of 5 financial health but one of its subsidiary companies is not.
3. Issue notice.
4. Mr. Ripu Daman Bhardwaj, learned Central Government Standing Counsel accepts notice and seeks time to file counter- affidavit. Let counter-affidavit be filed within four weeks; rejoinder thereto, if any, be filed within two weeks thereafter.
5. While the main contention raised by Mr. Akhil Sibal, learned senior counsel for the petitioner, is that the CPWD cannot demand the financials of the bidder's subsidiaries by asking for the consolidated financial statement since the 'bidder' is an entity defined in clause 2.3 Section II of Annexure 24 of the Standard Operating Procedures (SoP) for CPWD Manual 2019 as follows:-
"2.3 Bidder: Means the individual, proprietary firm, firm in partnership, limited company private or public or corporation."
6. He submits that by way of a so-called modification, the CPWD cannot be permitted to introduce a disqualification or ineligibility criterion that does not relate to the 'bidder' itself but to all subsidiary companies of such bidder. Senior counsel states that the financials of the subsidiary companies may show losses for various operational reasons, especially in business relating to infrastructural development; but such losses are irrelevant for the consideration of the financial health of the bidder itself. He contends that this requirement also militates against the very concept of an incorporated entity being the bidder.
7. On the other hand, Ms. Maninder Acharya, learned Additional W.P.(C) No.1236/2020 Page 3 of 5 Solicitor General appearing on behalf of the respondents states that by way of the impugned O.M., only a clarification to an existing eligibility criterion has been introduced and no fresh eligibility criterion has been added. She further submits that requirement of a consolidated financial statement is in consonance with the prevailing Accounting Standards as also in line with Section 129 of the Companies Act 2013 which reads as under:-
"Section 129 of the Companies Act, 2013 (1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III .....
(3) Where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2)."
8. Moreover, it is submitted by the learned ASG that consolidated financial statements are also now considered necessary to assess the true and accurate position of the financial health of a company as per the Regulation 33 of SEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 and Accounting Standards Ind AS 110. She further explains that the purpose of requiring the consolidated financial statement of a bidder is to enable the CPWD to fairly evaluate the financial position of the bidder; and it is for this reason that the consolidated financial statements and standalone financial statements W.P.(C) No.1236/2020 Page 4 of 5 of the bidder are now required.
9. She further argues that a modification has been introduced to improve the bidding process ; and in public interest. Learned ASG submits that in any event, in exercise of its powers under Article 226 of the Constitution, the court will not re-write the terms and conditions of a tender, nor interfere in the tender process, if the process being followed is fair, reasonable and rational.
10. While the contention raised on behalf of the petitioner requires consideration, we are of the opinion that the modification introduced by way of the impugned O.M. does bear a rational nexus to the purpose of obtaining a fair, true and correct state of the financial health of a bidder. Moreover, the modification applies to all bidders for the tender in question ; and being part of the terms and conditions of the tender, no final view can be taken with regard to validity of the modification introduced by the impugned O.M. without first eliciting a written response from the respondents. Accordingly, this is not a case where any interim relief can be granted to the petitioner at this stage.
11. Accordingly, the prayer for interim relief is declined.
12. C.M. No.4255/2020 is accordingly dismissed.
13. List on 23rd April 2020.
G.S.SISTANI, J.
ANUP JAIRAM BHAMBHANI, J.
FEBRUARY 24, 2020 Ne W.P.(C) No.1236/2020 Page 5 of 5