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Delhi High Court - Orders

Teq Green Power Xiii Private Limited vs Remc Limited on 22 December, 2022

Author: Satish Chandra Sharma

Bench: Chief Justice, Subramonium Prasad

                          $~31
                          *      IN THE HIGH COURT OF DELHI AT NEW DELHI
                          +      W.P.(C) 17599/2022
                                 TEQ GREEN POWER XIII PRIVATE LIMITED ..... Petitioner
                                                    Through:      Mr. Jayant Mehta, Sr. Advocate with
                                                                  Mr. Vishrov Mukerjee, Mr. PSS
                                                                  Bhargava, Ms. Aayushi Khurana, Mr.
                                                                  Raghav Bhatia, Advocates

                                                    versus

                                 REMC LIMITED                                       ..... Respondent
                                                    Through:      Mr. Pulkit Agarwal, Mr. Pawas
                                                                  Agarwal, Advocate

                                 CORAM:
                                 HON'BLE THE CHIEF JUSTICE
                                 HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
                                               ORDER

% 22.12.2022 CM APPL. 56264/2022 (Exemption) Allowed, subject to all just exceptions.

W.P.(C) 17599/2022 & CM APPL. 56263/2022 (Stay)

1. The Petitioner seeks to challenge communication dated 16.12.2022, of the Respondent herein disqualifying the Petitioner herein and holding it ineligible to participate in the procurement process for selection of Project Developers for Supply of 1000 MW Round-the-Clock (RTC) Power from Grid-Connected Renewable Energy (RE) Power Projects, with or without Storage.

2. Facts of the case reveal that a notice inviting tender dated 14.07.2022 Signature Not Verified Digitally Signed W.P.(C) 17599/2022 Page 1 of 6 By:SHAZAAD ZAKIR Signing Date:24.12.2022 16:56 was issued by the Respondent herein for selection of Project Developers for Supply of 1000 MW Round-the-Clock (RTC) Power from Grid-Connected Renewable Energy (RE) Power Projects, with or without Storage. It is stated that the Petitioner herein submitted its technical and financial bid for the project. It is stated that on coming to know that the Petitioner has been excluded from participating in the tender without being given any reason, the Petitioner herein approached this Court by filing W.P.(C) 17230/2022. This Court vide Order dated 16.12.2022 directed that the Respondent must communicate its decision to the petitioner. This Court had also stayed the e- Reverse Auction (e-RA) till the expiry of one week commencing from the communication of said decision to the petitioner.

3. Pursuant to the Order dated 16.12.2022, the Respondent herein wrote a letter dated 16.12.2022 conveying the reason for disqualification of the Petitioner herein. The said letter reads as under:

"No. REMCL/CO/PP/P-85 Dt: 16.12.2022 To, Rakesh Garg, TEQ Green Power XIII Private Limited, C/o O2 Power Private Limited, 8th Floor, DLF Square, DLF Phase 2, Gurgaon.

Phone Nos. 012-44197150 Mobile Nos. +91-97114 86060 Fax Nos. 020-6749 0010 E-mail address : [email protected] Sub:.Selection of Project Developers for Supply of 1000 MW Round-the- Clock (RTC) Power from Grid- Connected Renewable Energy (RE) Power Projects, with or without Storage.

Ref:(i) Your application opened on 11.11.2022 for the subject tender. (ii)REMC Ltd's NIT No. REMCL/CO/PP/P-85/RTC/1000 MW/2022 dated 14.07.2022 In reference to technical bid opened on 11.11.2022 of subject tender under reference (ii) and pursuant to your Application in response to the subject tender, it is informed that your bid is disqualified at Technical Stage based on the Net Worth of the Parent company is less than the required criteria after exclusion of redeemable preference shares in net worth calculation." (emphasis supplied)

4. A perusal of the said letter shows that the Petitioner has been disqualified at the technical stage because the net-worth of the parent company of the Petitioner herein is less than the required criteria after exclusion of redeemable preference shares in net worth calculation.

5. A perusal of the tender document shows that Clause 33 of Section I of the tender document had defined net worth to mean the net-worth as defined under Section 2 of the Companies Act, 2013. Clause 33 reads as under:

"33. "NET-WORTH" shall mean the Net-Worth as defined under Section 2 of the Companies Act, 2013;"

6. Section 2 (57) of the Companies Act, 2013 reads as under:

"2. (57) ―net worth means 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 written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation;" (emphasis supplied) Signature Not Verified Digitally Signed W.P.(C) 17599/2022 Page 3 of 6 By:SHAZAAD ZAKIR Signing Date:24.12.2022 16:56

7. Section 43 of the Companies Act, 2013 states that the share capital of a company limited by shares can be of two kinds, namely, equity share capital and preference share capital.

8. Learned Senior Counsel appearing on behalf of the Petitioner contends that Clause 33 of Section I of the tender document has defined net worth to mean the net-worth as defined under Section 2 of the Companies Act, 2013 and Section 2(57) of the Companies Act, 2013 defines net worth to 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 and under Section 43 of the Companies Act, preference share capital is included in the definition of share capital. He states that the reasoning of the Respondents to exclude preference share capital while calculating net worth is contrary to the terms of the tender and the provisions of the Companies Act and is, therefore, unconscionable.

9. Per contra, learned Counsel for the Respondent has drawn the attention of this Court to Section 129 of the Companies Act, 2013, which relates to financial statement. He submits that the Financial Statement shall give a true and fair view of the state of affairs of the company and the statements must comply with the accounting standards notified under Section 133 and shall be in the form of companies in Schedule III. He further draws the attention of this Court to the Indian Accounting Standard (Ind AS) 32 which states that a preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or Signature Not Verified Digitally Signed W.P.(C) 17599/2022 Page 4 of 6 By:SHAZAAD ZAKIR Signing Date:24.12.2022 16:56 determinable future date, or gives the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount, is a financial liability. He further draws the attention of this Court to the report of the independent Auditor and more particularly to note 11 of the report to state that the Auditor had classified the share capital only to mean equity share and has not taken into account the preference share capital.

10. In rejoinder Mr. Mehta, learned Senior Counsel for the Petitioner, points out that in the same report, note 12 of the Auditor describes redeemable shares as equity and redeemable only at the option of the company and, therefore, the example given in the Indian Accounting Standard relied on by the Respondent to come to a conclusion that preference share is a liability would not apply to this case. The Petitioner has been able to make out a prima facie case in its favour. It is stated by Mr. Mehta that in case the financial bids are opened and reverse auction takes place, the Petitioner would be put to irreparable loss and injury since it will not be able to participate in the reverse auction. He further states that including the Petitioner in the bid would only increase the competition in the reverse auction.

11. In the considered opinion of this Court, balance of convenience lies in staying the tender process. Accordingly, the reverse auction and further tender process is stayed till the next date of hearing.

12. Issue notice.

13. Mr. Pulkit Agarwal, learned Counsel, accepts notice on behalf of the Respondent.

14. Counter affidavit be filed within ten days. Rejoinder, if any, be filed before the next date of hearing.

15. List on 23.01.2023.

SATISH CHANDRA SHARMA, CJ SUBRAMONIUM PRASAD, J DECEMBER 22, 2022 Rahul Signature Not Verified Digitally Signed W.P.(C) 17599/2022 Page 6 of 6 By:SHAZAAD ZAKIR Signing Date:24.12.2022 16:56