Gujarat High Court
N R Agarwal Industries Ltd vs Gujarat State Board Of School Texbooks on 5 February, 2026
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 17400 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
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Approved for Reporting Yes No
Yes
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N R AGARWAL INDUSTRIES LTD .
Versus
GUJARAT STATE BOARD OF SCHOOL TEXBOOKS & ANR.
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Appearance:
MR M.R.BHATT,LD.SR.ADV WITH MR.MUNJAAL M BHATT(8283) for the
Petitioner(s) No. 1
MR AD OZA(515) for the Respondent(s) No. 1
MR AKSHAY V MATANI(11363) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
Date : 05/02/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr.M.R.Bhatt with learned advocate Mr.Munjaal M. Bhatt for the petitioner, learned advocate Mr.A.D.Oza for the respondent No.1 and learned advocate Ms.Shweta Bharti with learned advocate Page 1 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Mr.Akshay V. Matani for the respondent No.2.
2. Having regard to the controversy in narrow compass, with the consent of the learned advocates for the parties, the matter was taken for hearing and arguments were completed and thereafter, the matter was adjourned for orders.
3. Today, when the matter is called out, an additional affidavit of the respondent No.2- Government e-Marketplace (GeM) to place on record the clarification issued by the Department of Expenditure vide letter dated 22nd January, 2026 is tendered. The same is ordered to be taken on record.
4. Rule, returnable forthwith. Learned Page 2 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined advocate Mr.A.D.Oza and learned advocate Mr.Akshay V. Matani waive service of notice of rule for and on behalf of the respective respondents.
5. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:
"a. That this Hon'ble Court may be pleased to issue a writ of mandamus or any other writ, order or direction in the nature of mandamus and be pleased to quash and set aside the impugned disqualification communications dated 12.12.2025 [Annexure-F (Colly)]; b. That this Hon'ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order, or direction directing the Respondent to Page 3 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined reconsider the technical bid of the Petitioner in accordance with law and the tender conditions, after excluding the illegal and erroneous interpretation of Clause 29 of the GTC; bb. That this Hon'ble Court may be pleased to hold and declare that the interpretation on the part of Respondent No.1 with regard to Clause No.29 is thoroughly misconceived, in the event the said clause is not read in consonance with Clause 24; In the alternative bbb. This Hon'ble Court may be pleased to hold and declare that the tender terms create an anomalous situation by incorporating only the word "Director"
in Clause 29 and thereby not excluding "Independent Director" from the said clause with regard to "one bid per Page 4 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined bidder".
6. The brief facts of the case are as under:
6.1. The petitioner is a Company registered under the Companies Act, 1956 and since its inception in the year 1993, it is engaged in the business of manufacturing qualify finished paper products. The respondent No.1-Gujarat State Board of School Textbooks floated five tenders on 04.11.2025 on e-portal of respondent No.2 GeM for procurement of 25,000 Metric Ton of printing Maplitho Paper V3 confirming to IS:1848 (Part-1)(Q2). The tenders were bifurcated into five parts, thereby, listing the total required quantity under each tender as 5000 MT. Page 5 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined 6.2. The petitioner submitted its bids on 25.11.2025 as per the tender conditions. 6.3. The respondent No.1 while relying on Clause No.29 of the General Terms and Conditions of GeM by letter dated 08.12.2025 informed the petitioner that during the litigation, it was found that an Independent Director of the petitioner-Company namely Kanhaiyalal Chunnilal Chandak was a common Director between the petitioner and one M/s.Sillverton Industries Limited-another bidder and on that ground, the petitioner was called upon to provide proper justification along with relevant documentary evidence to clarify why the bids of the petitioner should not be rejected.
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NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined 6.4. Similar clarification was also called from M/s.Sillverton Industries Limited by the respondent No.1. The petitioner as well as M/s.Sillverton Industries Limited provided explanation by letter dated 10.12.2025 whereby, it was clarified that Mr.Kanhaiyalal Chunnilal Chandak is an Independent Director and not a Promoter Director. It was also clarified that the said Mr.Kanhaiyalal Chandak does not hold any share in either of the Companies and hence, the the restriction under Clause No.29 of General terms and Conditions of the GeM would not be applicable. 6.5. The respondent No.1, however, by letter dated 12.12.2025 disqualified the petitioner Page 7 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined on the ground that an Independent Director of the petitioner was also a Director in another Company by treating the Director as a Key Managerial Personnel under the "One Bid Per Bidder" Clause No.29 of the General Terms and Conditions of the GeM.
6.6. Thereafter, the respondent No.1 opened the Price Bid on 15.12.2025 and also scheduled the Reverse Auction of the five tenders on 18.12.2025. Thereafter, this petition was filed with the aforesaid prayers. 6.7. This Court passed the following order on 18.12.2025:
"1. Heard learned Senior Advocate Mr. Manish Bhatt with learned advocate Mr. Page 8 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Harsh Pandya with learned advocate Mr. Munjaal M. Bhatt for the petitioner as well as learned advocate Mr. A. D. Oza for the respondent.
2. Learned Senior Advocate Mr. Manish Bhatt has tendered the draft amendment. The same is allowed in terms of the draft. To be carried out forthwith.
3. Issue notice, returnable forthwith.
4. Learned advocate Mr. A. D. Oza appearing for the respondent no.1 waives service of notice and has tendered the affidavit-in-reply and the same is ordered to be taken on record.
5. Learned advocate Ms. Krishna Rawal waives service of notice for the respondent no.2 and prays for time to file reply.
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NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined
6. S.O. to 23.12.2025."
6.8. During the pendency of this petition, an application for amendment was preferred by the petitioner to incorporate the grounds as well as the prayers to declare that the interpretation of Clause No.29 of the General Terms and Conditions of the GeM made by the respondent No.1 is misconceived and further to declare that the tender terms created an anomalous situation by incorporating only the word "Director" in Clause No.29 of the General Terms and Conditions of the GeM by not excluding "Independent Director" from the said Clause with regard to "One Bid Per Bidder". 6.9. Clause No.29 of General Terms and Conditions of the GeM reads as under: Page 10 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined "29: One Bid per Bidder A Bidder shall submit only one bid in a particular bidding process (unless otherwise allowed in the bid STC / ATC conditions). In case of a holding company having more than one independent manufacturing units or more than one unit having common business ownership / management, only one unit should quote. Similar restrictions shall apply to closely related sister companies. Bidder's sister/ Associated/ Allied concern(s) participating or applying against the same tender, shall lead to disqualification of Bidders. Sister / Associated / Allied concern means a company, society, partnership firm or proprietorship firm having one or more common persons as Director / Partner/ Member/ Owner. A Bidder who submits more than one bid will cause all the proposals submitted in the particular bid to be disqualified. In relation to the above, a person will include firm(s) of Proprietorship / Partnership Firm / Limited Liability Page 11 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Partnership / Private Limited / Limited company / Society registered under Society's Act / Statutory Bodies / any other legal entity, as the case may be, & will be deemed to have submitted multiple bids in a particular bid if a person bids in any of the two formats given below:
i. individual or proprietorship format and/or ii. a partnership or association of persons format and/or iii. a company format Whereby, • A company shall for this purpose include any artificial person whether constituted under the Indian laws or of any other country.
•A person shall be deemed to have bid in a partnership format or in association of persons format if he is a partner of the firm which has submitted the bid or is a member of any association of persons which has submitted a bid. •A person shall be deemed to have bid in a company format if the person holds: Page 12 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined i. More than 10% (ten percent) of the voting share capital of the company which has submitted a bid, or ii. Is a director and / or Key Managerial Personnel of the company which has submitted a bid, or iii. Holds more than 10% (ten percent) of voting share capital in and/or is a director and / or Key Managerial Personnel of a holding company of that company which has submitted the bid. By making a bid pursuant to the Tender Documents, the bidder / tenderer shall be deemed to have declared that the bidder / tenderer has not made any other bid or multiple bids as understood or deemed in terms of this clause.
All the bids of a bidder who has submitted multiple bids, as per the clause, shall be rejected and Bid Security for all such bids shall be forfeited, not by way of penalty or liquidated damages but by way of reimbursement of the pre-estimated costs likely to be incurred by the buyer towards bidding process and in Page 13 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the scrutiny & evaluation of bids. In addition to the above, bidders found to be in contravention to the said clause will be liable for administrative actions." 6.10. The above Clause for "One Bid Per Bidder" prohibits the bidder from submitting multiple bids in a particular bidding process in following cases:
(i) In case of holding company having more than one independent manufacturing units or more than one unit having common business ownership/management, only one unit should quote.
(ii) Similar restrictions shall apply to closely related sister companies.
Bidder's sister/ Associated/ Allied Page 14 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined concern(s) participating or applying against the same tender shall lead to cause disqualification of the bidders. Sister/ Associated/ Allied concerns are explained to mean a Company, Society, Partnership Firm or Proprietorship Firms having one or more common persons as Director/ Partner/ Member/ Owner. 6.11. Considering the above explanation, as the Independent Director Mr.Kanhaiyalal Chandak is common in both the petitioner- Company and other M/s.Sillverton Industries Limited, the respondent No.1 has disqualified the petitioner.
7.1. Learned Senior Advocate Mr. M. R. Bhatt Page 15 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined appearing for the petitioner submitted that the "Director" referred in clause No.29 for "One Bid Per Bidder" cannot be applied in the case of an Independent Director of a Company. It was submitted that as per the provisions of the Companies Act, 2013 (for short 'the Act'), an Independent Director is defined under Section 2(47) of the said Act to mean that an Independent Director referred to in Sub- section (6) of Section 149 of the Act. 7.2. It was pointed out by referring to Section 149(6) of the Act that for definition of the Independent Director in relation to a Company, means a Director other than Managing Director or a whole-time Director or a nominee Director who, in the opinion of the Board, is Page 16 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined a person of integrity and possesses relevant expertise and experience and who is or was not a Promoter of the Company or its holding, subsidiary or associate Company nor related to Promoters or Directors in a Company, its holding, subsidiary or associate Company or has no pecuniary relationship with the Company or its associated concerns. It was also pointed out that Section 149(6) of the Act further provides the qualifications and conditions to be appointed as an Independent Director.
7.3. It was submitted that as per Section 149 of the Act, statutory status is provided to the Independent Director converting what was earlier the Regulatory Guideline into the Page 17 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Binding Legal Obligation. Reliance was also placed on the decision in case of Kamalkishor Shrigopal Taparia Versus India Ener-Gen Private Limited & Anr. reported in 2025 SCC Online SC 321 wherein, the Hon'ble Apex Court quashed the proceedings against the Independent Director as he was neither involved in financial operations nor responsible for issuance of cheque on behalf of the Company as well as nor having any control over the affairs of the Company. 7.4. Reliance was also placed on the decision in case of National Small Industries Corporation Limited versus Harmeet Singh Paintal and Anr. reported in (2010) 3 SCC 330 wherein, it is held that vicarious liability Page 18 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined arises only where clear pleadings established actual responsibility for business conduct and no presumption can be drawn against all Directors more particularly, Independent Director.
7.5. It was further submitted that the Independent Director is meant to act as an external check on management conduct into safeguard the interest of shareholders and other stakeholders and he is not involved in day-to-day business affairs but act as an Board-level supervisor to ensure that Governance standards are maintained by the Company.
7.6. Learned Senior Advocate Mr.M.R.Bhatt also Page 19 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined refers to Sub-section (4) of Section 149 of the Act which mandates the appointment of the Independent Director in all listed Companies and in prescribed class of unlisted Companies based on threshold trade, capital turnover and borrowings.
7.7. It was therefore submitted that equating Director with an Independent Director to apply Clause No.29 of the General Terms and Conditions of the GeM by the respondent No.1 to disqualify the petitioner from technical bids, is erroneous and such decision is liable to be quashed and set aside.
7.8. It was further submitted that except applying Clause No.29 of the General Terms and Page 20 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Conditions of the GeM, the respondent No.1 has not assigned any reason to disqualify the petitioner.
7.9. Learned Senior Advocate Mr.M.R.Bhatt also referred to and relied upon the General Circular No.1 of 2020 dated 2nd March, 2020 issued by the Government of India, Ministry of Corporate Affairs regarding clarification on prosecutions filed or internal adjudication proceedings initiated against Independent Directors, non-promoters and non-KMP non- executive directors. Referring to the paragraph No.3 of the said General Circular, it was pointed out that Section 149(12) of the Act starts with an non-obstante clause which provides that the liability of an independent Page 21 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined director or a non-executive director not being promoter or key managerial personnel would be only in respect of such acts of omission or commission by the company which had occurred with his knowledge, attributable through Board processes and with his consent or connivance or where he had not acted diligently. It was therefore submitted that merely because there is a common Independent Director in the petitioner Company and the other bidder, both bidders could not have been disqualified by invoking Clause No.29 of the General Terms and Conditions of the GeM.
7.10. Learned Senior Advocate Mr.M.R.Bhatt therefore, succinctly drawn the distinction between the Independent Director and other Page 22 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined regular Director by referring to the provisions of Sections 2(34) and 2(47) of the Act to point out that the legislature has consciously created a differentiated regulatory and liability framework reflected in different distinct functional roles. It was submitted that the ordinary Directors are subject to full statutory and regulatory liabilities as they are involved in day-to-day management and may maintain financial employment of family relationships with the Company whereas, the Independent Directors by contrast, are statutorily required under Section 149(6) of the Act to remain free from such relationships, ensuring neutrality and objectivity of judgment having special Page 23 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined protection under Section 149(12) of the Act acknowledging their oversight-centric roles rather than operational control. 7.11. It was therefore submitted that the reference to "Director" in Clause No.29 of the General Terms and Conditions of the GeM cannot include "Independent Director" and the Independent Director is required to be excluded from the scope of the "Director" mentioned in the said Clause. 7.12. Learned Senior Advocate Mr.M.R.Bhatt also referred to Clause 2(g) of the General Terms and Conditions of GeM which provides for definition of Seller/Service Provider on the GeM which means any legal entity such as firm(s) of Proprietorship/ Partnership Firm/ Page 24 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Limited Liability Partnership/ Private Limited/ Limited company/ Society registered under the Society's Act, etc., registered on the GeM to sell its Good(s)/ Service(s) to submit that the petitioner-Company is registered on the GeM and therefore, it is entitled to participate in the bids flouted by the respondent No.1.
7.13. It was submitted that Clause 24 of the General Terms and Conditions of the GeM provides for Incident Management Policy on the GeM wherein, the definition of Allied firm/ Sister concern is provided which includes affiliated firm, sister concern, associate firm or a related party of a bidder that comes within the sphere of effective control/ Page 25 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined influence of the Principle Firm. It was submitted that the said Clause further provides that the Principal Firm has common management with Allied firm and its partners or directors have a majority interest in the management of the Allied Firms for having a controlling voice by owning substantial (20% or more) share in the Allied Firms. It was therefore submitted that the Independent Director has no say in the common management of the petitioner-Company and the other bidder i.e. M/s.Sillverton Industries Limited as Independent Director is not part of majority of the Directors with allied firms and therefore, petitioner and M/s.Sillverton Industries Limited cannot be said to be termed Page 26 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined as allied firm by any stretch of imagination as Independent Director does not own any share in the petitioner-Company.
7.14. It was therefore submitted by learned Senior Advocate Mr.M.R.Bhatt that disqualification of the petitioner by the respondent No.1 by invoking Clause No.29 of the General Terms and Conditions of the GeM is therefore, liable to be quashed and set aside and the bids submitted by the petitioner are required to be considered if found suitable on other parameters along with the other bidders. 8.1. On the other hand, learned advocate Mr.A.D.Oza appearing for the respondent No.1 submitted that the respondent No.1 is bound by Page 27 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the General Terms and Conditions of the GeM as the bidder is required to comply with such terms and conditions. Referring to the condition No.29 of the General Terms and Conditions of the GeM, it was pointed out that it refers only to the Director, which according to the respondent No.1 also includes Independent Director and it is of no consequence whether the Director is an Independent Director or a Non-Executive Director or a Managing Director or an Executive Director because ultimately, the person is a Director and once there is a common Director with the two bidders, clause 29 of "One Bid Per One Bidder" is violated. Therefore, the respondent No.1 has rightly Page 28 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined disqualified the bids submitted by the petitioner. In support of his submissions, reliance was placed on the following averments made in the affidavit-in-reply filed on behalf of the respondent No.1:
"9. It is submitted that the documents were verified and technical evaluation was carried out. Thereafter, certain queries were raised by the respondent Board through GeM portal on 08.12.2025 (produced at page no. 103 to 112). It is submitted that following three queries were raised qua the petitioner:
i. While verification of documents, it is found that Director namely Kanhaiyalal Chunnilal Chandak (DIN 00013487) is common in entities viz., N R Agarwal Industries Limited and Silverton Industries Limited and Page 29 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined accordingly, both entities will be disqualified in absence of proper justification along with documentary evidence.
ii. Affidavit is not provided iii. In FY 2024-25, work orders are provided, however, performance certificate is not provided.
10. It is submitted that vide letter dated 12.12.2025, the petitioner tendered its clarification/explanation to queries raised by the respondent Board. It is inter alia sought to be submitted by the petitioner and Silverton Industries Limited in response to query related to common Director that Mr. Kanhaiyalal Chunnilal Chandak is an independent Director and not a promoter Director in both bidder companies.
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11. It is submitted that since the clarification of the petitioner regarding common Director was not found satisfied, the petitioner was disqualified in Technical Bid of all five tenders on 12.12.2025. It is pertinent to submit that there are total four bidders including the petitioner, wherein, common Director was there. A copy of statement showing details of common Director and bidder companies is annexed herewith and marked as Annexure - I.
12. It is submitted that the Reverse Auction has already been over qua RA number: GEM/2025/591652, Whereas the Reverse Auction qua other four bids have already started. The copies of RA documents of all five tenders are annexed herewith and marked as Annexure Page 31 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined
- II Collectively."
8.2. Referring to the above averments, it was submitted that there is no misinterpretation of the Clause No.29 of the General Terms and Conditions of the GeM made by the respondent No.1 and the respondent No.1 cannot make any addition in the said Clause by excluding the Independent Director from the word "Director" referred therein.
8.3. It was further submitted that as per Clause No.29 of the General Terms and Conditions of the GeM, the bids by the bidders, being Companies having common Director, are required to be disqualified. It was also pointed out that as per the said Clause, the definition of "person" includes Page 32 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the Companies and thus, interpretation which is sought to be made by the petitioner is misconceived as the said Clause does not differentiate between the Directors in the different categories and therefore, the clarification given by the petitioner that Mr.Kanhaiyalal Chunnilal Chandak was neither the Promoter nor the Shareholder-Director and was only an Independent Director, is liable to be rejected as it is not in dispute that said Mr.Kanhaiyalal Chandak is a common Director in the two bidder Companies I.e. the petitioner- Company and M/s.Sillverton Industries Limited and therefore, the respondent No.1 was justified in disqualifying both the bidders under Clause No.29 of the General Terms and Page 33 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Conditions of the GeM.
8.4. It was further submitted that in view of the undisputed fact that Mr.Kanhaiyalal Chandak is a common Director of the petitioner-Company and M/s.Sillverton Industries Limited, it is of no consequence to the effect that whether the said person is functioning as Independent Director, having any interest in the Company, or not. It was also pointed out that the petitioner has submitted the clarification given by the M/s.Sillverton Industries Limited before the respondent No.1-Board during the ongoing tender process, which establishes that the petitioner-Company has all the access and involvement in M/s.Sillverton Industries Page 34 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Limited as there is a common Director in both the Companies. It was therefore submitted that the respondent No.1 has rightly disqualified the petitioner-Company in the technical bids invoking Clause No.29 of the General Terms and Conditions of the GeM.
8.5. Reliance was placed on the Clause No.4(xiii)(m)(iv) and (v) of the General Terms and Conditions of the GeM which provides that sellers holding valid Vendor Assessment or Vendor Assessment Exemption Report / confirmation or the sellers holding valid BIS License are exempted from furnishing bid/ security and the real reason for the disqualification of the petitioner is not to help the another bidder who stands technically Page 35 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined qualified, in spite of being granted relaxation of important requirement contrary to tender terms and conditions, as alleged by the petitioner. It was submitted that there is no substance in the allegation made by the petitioner on that count.
9.1. Learned advocate Ms.Shweta Bharti appearing for the respondent No.2 submitted that the respondent No.2 is a Public Procurement Portal which is an end-to-end online market for Central and State Government Ministries and Government Departments etc., for procurement of goods and services and the portal of the respondent No.2 is owned and managed by GeM SPV, which is a Section 8(non- profit) Company Registered under the Companies Page 36 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Act, 2013.
9.2. It was therefore submitted that the tender floated by the respondent No.1 on the GeM Portal inviting bid for supply of 25,000 Metric Ton Maplitho printing paper is on the basis of the General Terms and Conditions of the GeM and interpretation or mis- interpretation of such terms and conditions cannot be attributed to the respondent No.2 as it is a neutral, open and transparent portal for Government procurement of goods and services to bring about transparency, efficiency and accountability in public procurement. It was pointed out that the respondent no.2 is not a procuring entity and does not exercise discretion over the Page 37 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined initiation of procurement, formulation of tender conditions, evaluation of bids and/or disqualification of bids.
9.3. It was submitted that the respondent No.2 only acts as a facilitator, providing a digital interface for transparent, efficient and inclusive marketplace.
9.4. It was submitted that as the respondent No.2 is an intermediary platform wherein, buyers and sellers are enabled to participate in a hassle-free tendering process providing technological infrastructure and workflow automation necessary for fair and traceable manner procurement of the goods and services and therefore, the respondent no.2 has no role Page 38 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined whatsoever in the disqualification of the petitioner made by the respondent No.1 as such decision is exclusively taken by the respondent No.1 in its capacity as the procuring entity and in accordance with the tender conditions.
9.5. It was further submitted that Clause 16(d) and Clause 17(iv) of the General Terms and Conditions provide that the function of the respondent No.2 is solely intermediary and cannot be made a party to any disputes, arbitration or litigation arising out of or in connection with the contract between the parties.
9.6. In support of her submissions, learned Page 39 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined advocate Ms.Shweta Bharti has placed reliance upon the following averments made in the counter affidavit filed on behalf of the respondent No.2 :
"15. The provided definition of Intermediary encompasses online-auction sites and online-market places within its scope. Respondent No. 2 is an online marketplace platform with tools available for auction and is therefore clearly falls within the scope of the definition of 'Intermediary' as provided under the Information Technology Act, 2000. It is significant to consider the judgement of this Hon'ble Court in the case of Cloud Walker Streaming Technologies Pvt. Ltd. vs. Union of India & Ors., 2023 SCC OnLine Del 6720, wherein it was inter alia, held that the Respondent No. 2 is Page 40 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined an Intermediary under the provisions of the Information Technology Act, 2000 and since it has no role in framing the Tender conditions for the invitations to offer uploaded on the GeM portal, no discernible cause of action lies against the Respondent No. 2. Therefore, the Respondent No. 2 shall not be held liable in the present Petition and should be deleted from the array of parties.
16. That the procedure of evaluation of the bids, awarding of the same, issuing of the Contracts/work orders, are all sole prerogative of the Buyer departments, with GeM having no role or involvement in the same. Therefore, as far as the matter at hand is concerned, it is reiterated that, there is no active role on the part of Respondent No. 2 as the dispute is primarily Page 41 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined between the Buyer and the Seller and that the Respondent No. 2 is not a necessary party to the dispute as it merely acts as a platform/portal, which facilitates the selling and buying of the products through its portal. It is further pertinent to note that, the Answering Respondent is neither a necessary party nor a proper party and has been wrongly impleaded as Respondent and therefore, on this ground alone, the Answering Respondent should be removed from the array of parties.
17. That in light of the foregoing submissions, it is submitted that the Answering Respondent has no role to play in the impugned disqualification and no cause of action is made out against Respondent No. 2. The present Petition is therefore liable to be Page 42 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined dismissed qua Respondent No. 2."
9.7. Learned advocate Ms.Shweta Bharti for the respondent No.2 has further tendered the additional affidavit affirmed on 9th January, 2026 as time was granted to explain the stand of the respondent No.2 in relation to the term "director" in clause 29 of the General Terms and Conditions. Learned advocate Ms.Shweta Bharti has referred to and relied upon the following averments made in the said additional affidavit affirmed on 9th January, 2026 which read as under :
"6. It is submitted that during the proceeding before this Hon'ble Court on 06.01.2026, Respondent No. 2 was specifically called upon to clarify whether an Independent Director falls Page 43 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined within the ambit of the term "director"
as mentioned in Clause 29 of the GTC.
7. In the aforementioned context, it is pertinent to submit that Clause 29 of the GTC specifies that "Bidder's sister/ Associated/ Allied concern(s) participating or applying against the same tender, shall lead to disqualification of Bidders". It is submitted that the Clause 29 of the GTC must necessarily be interpreted in conjunction with Clause 24 of GTC as the interpretation of the term "Allied Concern" under Clause 29 of the GeM GTC cannot be read in a manner that is inconsistent with the definition of "Allied Firm" under Clause 24. The substantive basis for interpretation flows from the definition of "Allied Firms" as provided under Clause 24. Page 44 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
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8. That it is imperative to state that the definition of "Allied Firms"
contained in Clause 24 of the GTC has been verbatim adopted from the Manual for Procurement of Goods issued by the Department of Expenditure, Ministry of Finance, Government of India. The Department of Expenditure is the nodal Department for overseeing the public financial management system of the Central Government and for framing, issuing and interpreting public procurement policies applicable across Ministries and Departments of the Government..
9. That the Department of Expenditure plays a central and guiding role in public procurement by issuing manuals, policies and clarifications governing procurement of goods and services and by overseeing implementation through Page 45 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined platforms such as the Central Public Procurement Portal (CPPP), Government EMarketplace (GeM) etc.
10. That since the core issue raised before this Hon'ble Court pertains to the interpretation of the term "director" in the context of Allied Firms under the public procurement framework and particularly whether the said term would include an Independent Director, the Answering Respondent deemed it appropriate and necessary to seek an authoritative clarification from the Department of Expenditure. Any unilateral interpretation by the Answering Respondent may have ramifications on the broader public procurement framework, and therefore, it is appropriate that such interpretation emanates from the Department of Expenditure.
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11. Therefore, the Answering Respondent has addressed a letter to the Department of Expenditure seeking clarification on the interpretation of the term "director" in the context of Allied Firms/ Sister Concerns and specifically whether the said term would encompass an Independent Director, in order to appropriately analyse and clarify the issue.
12. A clarification from the DoE would further ensure that the provisions of the GeM GTC remain harmonised with the procurement framework prescribed by the DoE and are implemented in a manner consistent with the well-established principles governing public procurement. Thus, the reply of the Department of Expenditure forms the primary and determinative basis for Page 47 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined addressing the issue.
13. In view of the above, it is most respectfully prayed that this Hon'ble Court may be pleased to grant time to the Answering Respondent to place on record the response as and when the same is received from the Department of Expenditure."
10. Thereafter, the respondent No.2 has field the additional affidavit affirmed on 2nd February 2026 to place on record a copy of the clarification given by the Department of Expenditure of the Government of India vide letter dated 22nd January, 2026. The said clarification reads as under :
"I am directed to refer your email dated 08.01.2026 on the subject cited above Page 48 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined and to say that the term "Independent Director" does not find mention in the definition of "Allied Firms" as per Manual for Procurement of Goods, 2024. Independent Directors may have different roles and standing/status as compared to regular directors. Hence, DoE has no comments on this issue. For any further clarity in this regard, GeM may refer to Ministry of Corporate Affairs w.r.t definitions of independent directors, their role etc."
11. Referring to the aforesaid clarification, it appears that the term Independent Director does not find mention in the definition of the "Allied Firms" as per the Manual for Procurement of Goods, 2024 and Independent Directors may have different roles and standing/status as compared to the regular Page 49 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined director, however, no comments are offered on the issue with a further direction to the respondent No.2 to get verification from the Ministry of Corporate Affairs.
12. Considering the submissions made by the learned advocates for the parties, the short question which arises in this petition is whether Clause No.29 of the General Terms and Conditions of the GeM would include Independent Director under the provisions of the Act or not.
13. It would be therefore germane to refer the definition of the Director, Independent Director and the procedure for appointment of Independent Director as provided under Page 50 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Sections 2(34), 2(47), 149(6), 149(12) and 150 of the Act, which read as under :
"Section 2(34): "director" means a director appointed to the Board of a company;
Section 2(47):"independent director"
means an independent director referred to in sub-section (6) of section 149; Section 149(6): An independent director in relation to a company, means a director other than managing director or a whole-time director or a nominee director,--
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its Page 51 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined holding, subsidiary or associate company;
(c) who has or had no pecuniary
relationship, other than
remuneration as such director or
having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed, with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives--
(i) is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year:
Provided that the relative may hold security or interest in the company of face value not Page 52 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed;
(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year;
(iii) has given a guarantee or
provided any security in
connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the Page 53 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined current financial year; or
(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-
clause (i), (ii) or (iii);
(e) who, neither himself nor any of his relatives--
(i) holds or has held the
position of a key managerial
personnel or is or has been
employee of the company or its
holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
Provided that in case of a relative who is an employee, the Page 54 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined restriction under this clause shall not apply for his employment during preceding three financial years.
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of--
(A) a firm of auditors or
company secretaries in
practice or cost auditors of the company or its holding, subsidiary or associate company; or (B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of Page 55 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or
(f) who possesses such other qualifications as may be prescribed. Section 149(12): Notwithstanding anything contained in this Act,--
(i) an independent director;
(ii) a non-executive director not being promoter or key managerial personnel,shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board Page 56 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined processes, and with his consent or connivance or where he had not acted diligently.
Section 150: Manner of selection of independent directors and maintenance of databank of independent directors.--
(1) Subject to the provisions contained in sub-section (6) of section 149, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association, as may be notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by the company making the appointment of such directors:
Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an Page 57 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined independent director shall lie with the company making such appointment. (2) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director. (3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with such rules as may be prescribed.
(4) The Central Government may
prescribe the manner and procedure
of selection of independent
directors who fulfil the
qualifications and requirements
specified under section 149." Page 58 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
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14. On perusal of the above provisions of the Act as well as considering the fact that as per the Code for Independent Directors given in Schedule IV of the Act, the appointment of the Independent Directors is to be formalised through an appointment letter which provides the particulars such as Committees of the Board to be served by the director appointed, Expectations of the board from the director appointed, Term of office, Duties and liabilities of the Independent Director, Provisions of insurance for directors and officers, Code of business ethics to be followed by such director, Actions that are prohibited in the company, Remuneration, periodic fees, reimbursement of expenses etc., Page 59 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined to which such Independent Director is entitled. Further Schedule IV of the Act also provides for roles and responsibilities of the Independent Director versus Managing or whole- time Director.
15. The distinction between Independent Directors and Managing Directors or whole-time Directors is the clearest of all director category differences. Managing directors and whole-time directors are employees of the company and they receive salaries, have employment contracts, report to the board and are responsible for implementing the board decisions and running day to day affairs of the company and therefore, Managing Directors and whole-time Directors are insiders with Page 60 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined deep company knowledge and operational authority.
16. Whereas, on the other hand, Independent Directors, by definition under Section 149(6) of the Act can never be managing directors or whole-time directors as their roles are exclusive. An Independent Director cannot simultaneously be part of the management team being overseen and provide independent oversight of that team. Managing Directors are evaluated by the board on their performance whereas, Independent Directors are the ones doing that evaluation. This fundamental structural separation is therefore essential to corporate governance. The practical implication also matters for appointment Page 61 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined decisions because if an independent director is offered a whole-time director position, accepting it immediately terminates the Independent Director status as both the roles are different and cannot coexists. The difference between the Directors and the Independent Directors can be summarized as under:
Basis Director Independent Director General member Special category of of Board. Is an Definition director.
employee of the Not an employee company Legal Section 2(34) Section 149(6) provision May be Management executive, No executive role only role manages provides oversight operation Relationship May have No material pecuniary with company financial ties relationship By Board or By shareholders only.
shareholders and
Appointment Does not report to the
reports to the
board.
board.
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C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026
undefined
Tenure As per Articles Max 10 years (2 terms)
Retirement
Applicable Not applicable
by rotation
Salary,
Sitting fees +
Remuneration commission,
commission
perks
Code of
Section 166 Schedule IV
conduct
Management &
Objective Governance & oversight
growth
Liability Wider liability Limited liability
17. Similarly, there is also a distinction
between the Independent Director versus Non- executive Director. A Non-executive director is simply any director who does not hold an executive position in the Company, and such director is not an employee receiving salary for operational roles but non-executive director can have other relationship with the company that independent directors cannot have. The key distinction is that all the Page 63 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined independent directors are non-executive directors, but not all non-executive directors are independent directors. The non-executive director might be a nominee of a major investor, a representative of a lending institution, a significant shareholder, or someone with business relationship with the company whereas, such connections disqualify a person from being appointed as Independent Director even if such person is a Non- executive Director.
18. The Hon'ble Supreme Court in case of Sunita Palita Versus Panchami Stone Quarry reported in (2022) SCC Online SC 945 has held as under :
"41. A Director of a company who was not Page 64 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined in charge or responsible for the conduct of the business of the company at the relevant time, will not be liable under those provisions. As held by this Court in, inter alia, S.M.S. Pharmaceuticals, the liability under Sections 138/141 of the NI Act arises from being in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, and not on the basis of merely holding a designation or office in a company. It would be a travesty of justice to drag Directors, who may not even be connected with the issuance of a cheque or dishonour thereof, such as Director (Personnel), Director (Human Resources Development), etc. into criminal proceedings under the NI Act, only because of their designation.
42. Liability depends on the role one Page 65 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined plays in the affairs of a company and not on designation or status alone as held by this Court in S.M.S. Pharmaceuticals?. The materials on record clearly show that these appellants were independent, non- executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra a non-executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and Page 66 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs."
19. Similarly, the Hon'ble Supreme Court in case of K.S.Mehta versus Morgan Securities and Credits Pvt. Ltd. reported in 2025 (0) AIJEL- SC 74848 while considering the liability of non-executive director/ independent director under Section 138 of Negotiable Instruments Act, 1881 has held as under :
"16. This Court has consistently held that non-executive and independent director(s) cannot be held liable under Section 138 read with Section 141 of the NI Act unless specific allegations Page 67 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined demonstrate their direct involvement in affairs of the company at the relevant time.
16.1. This Court in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal & Anr., (2010) 3 SCC 330 observed:
13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how Page 68 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.
22. Therefore, this Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of Page 69 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the Directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to how the Directors concerned were alleged to be in charge of and were responsible for the conduct and affairs of the company.
39. From the above discussion, the following principles emerge: (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be Page 70 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not Page 71 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases."
16.2. In N. K. Wahi v. Shekhar Singh & Page 72 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Ors., (2007) 9 SCC 481 this Court in Para 8 observed:
"To launch a prosecution, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable."
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NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined 16.3. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr., (2005) 8 SCC 89, this Court laid down that mere designation as a director is not sufficient; specific role and responsibility must be established in the complaint.
16.4. In Pooja Ravinder Devidasani v. State of Maharashtra & Anr., (2014) 16 SCC 1, this Court while taking into consideration that a non-executive director plays a governance role, they are not involved in the daily operations or financial management of the company, held that to attract liability under Section 141 of the NI Act, the accused must have been actively in charge of the company's business at the relevant time. Mere directorship does not create automatic liability under the Act. The law has consistently held that only Page 74 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined those who are responsible for the day- to-day conduct of business can be held accountable.
16.5 In Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr., (2023) 8 SCC 473, this Court held:
"8. After having considered the submissions, we are of the view that there is non-compliance on the part of the second Respondent with the requirements of Sub-section (1) of Section 141 of the NI Act. We may note here that we are dealing with the Appellants who have been alleged to be the Directors of the Accused No. 1 company. We are not dealing with the cases of a Managing Director or a whole- time Director. The Appellants Have not signed the cheques. In the facts of these three cases, the cheques have been signed Page 75 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined by the Managing Director and not by any of the Appellants." 16.6. In Hitesh Verma v. M/s Health Care At Home India Pvt. Ltd. & Ors., Crl. Appeal No. 462 of 2025, this Court held:
"4. As the appellant is not a signatory to the cheque, he is not liable under Section 138 of the 1881 Act. "As it is only the signatory to the cheque who is liable under Section 138, unless the case is brought within the four corners of Section 141 of the 1881 Act, no other person can be held liable...."
5. There are twin requirements under sub-Section (1) of Section 141 of the 1881 Act. In the complaint, it must be alleged that the person, who is sought to Page 76 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined be held liable by virtue of vicarious liability, at the time when the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company. A Director who is in charge of the company and a Director who was responsible to the company for the conduct of the business, are two different aspects. The requirement of law is that both the ingredients of sub-Section (1) of Section 141 of the 1881 Act must be incorporated in the complaint. Admittedly, there is no assertion in the complaints that the appellant, at the time of the commission of the offence, was in charge of the business of the company.
Therefore, on a plain reading of Page 77 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined the complaints, the appellant cannot be prosecuted with the aid of sub-Section (1) of Section 141 of the 1881 Act."
17. Upon perusal of the record and submissions of the parties, it is evident that the Appellant(s) neither issued nor signed the dishonoured cheques, nor had any role in their execution. There is no material on record to suggest that they were responsible for the issuance of the cheques in question. Their involvement in the company's affairs was purely non-executive, confined to governance oversight, and did not extend to financial decision- making or operational management."
20. The Hon'ble Delhi High Court in case of Bhardwaj Thuiruvenkata Venkatavraghavan Versus Page 78 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined Ashok Arora reported in 2017 SCC OnLine Del 7416 while considering the liability of Independent Director under the provisions of the Negotiable Instruments Act, 1881 has held as under :
"13. As has been noted above, the Petitioner was appointed as an independent non executive nominee director in 2009 and he subsequently resigned from the company in the year 2015. In terms of Section 149(12) of the Companies Act, 2013 he shall be held liable, only in respect of such acts of omission or commission by the company which had occurred with his knowledge or consent or connivance or where he had not acted diligently attributable through Board processes. Thus specific averments are required to be made in the complaint to show that Page 79 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined offence was committed with the Knowledge/consent/connivance of the Petitioner."
21. In view of the above conspectus of law and the provisions of the Act, the Independent Director stands on a different foot than the Director whether he is a regular Executive Director, Non-executive Director, Managing Director or Whole-time Director of the Company as provided under the provisions of the Act.
22. Even the General Circular No.1 of 2020 issued by the Ministry of Corporate Affairs exclude the Independent Director from the rigors of the prosecution filed or internal adjudication proceedings initiated against the Directors of the Company as under: Page 80 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026
NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined "3. Section 149(12) is a non obstante clause which provides that the liability of an independent director (ID) or a non-executive director (NED) not being promoter or key managerial personnel would be only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. In view of the express provisions of section 149(12), IDs and NEDs (non-promoter and non-KMF), should not be arrayed in any criminal or civil proceedings under the Act, unless the above mentioned criteria is met.
Typically, apart from IDs, non-promoter and non-KMP, NEDs, would exist in the following cases;
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NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined
a) Directors nominated by the Government on the public sector undertakings;
b) Directors nominated by Public Sector Financial Institutions, Financial Institutions or Banks having participation in equity of a company, or otherwise;
c) Directors appointed in pursuance to any statutory or regulatory requirement such as directors appointed by the NCLT."
23. Considering the general terms and condition No.29 of the GeM, it only stipulates for regulating the one bid per bidder to prevent multiple bids in name of related parties, sister/associated/allied concerns who may be Company, Society, Partnership Firm or Proprietary Firm having one or more common Page 82 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined persons as Director, Partners, Member or Owner. Therefore, only because the word "director" is mentioned in Clause No.29 of the General Terms and Conditions of the GeM, it does not mean that it also includes "Independent Director" who has a different role to play in the Board of Directors of the Company.
24. Clause No.29 of the General Terms and Conditions of the GeM further refers to the formats of bid to be submitted by individual proprietorship, partnership or a company and the format of the Company only refers to if a person shall be deemed to have bid in a company format if that person holds more than 10% of the voting share capital of the Company Page 83 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined which has submitted a bid or a director of and/or co-managerial personnel of the Company which has submitted a bid or holds more than 10% of voting share capital in and/or is a director and/or is Key Managerial Personnel of a holding Company of that Company which has submitted the bid which means that the director is equated with a key managerial person either of the Company or a holding Company or the Company which has submitted the bid. Therefore, Independent Director is not intended to be covered within the scope of the "Director" referred in Clause No.29 of the General Arms and Conditions of the GeM.
25. Similarly, the Clause No.24 of the General Terms and Conditions of the GeM which is Page 84 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined referred to by the respondent No.2 in its affidavit regarding incident management policy also refers to the definition of allied firms which includes affiliates, affiliated firms, sister concern, associated firm or related party of a bidder wherein, one of the persons, which includes within its sphere of effective control/influence of the principle firm wherein, the principle firm refers to the common management or its partners, its directors having majority interest in the management of the allied firms.
26. Therefore, from the definition of the Allied Firm also the Independent Director cannot be considered as a part of the common management or having majority interest in the Page 85 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined management of such companies.
27. Therefore, We are of the view that the reliance placed by the respondent No.1 on the Cluase No.29 of the General Terms and Conditions of the GeM to reject the bid of the petitioner, only because Mr.Kanhaiyalal Chandak is an Independent Director in two companies, cannot be sustained as "Director" referred in clause 29 of the General terms and conditions of GeM shall exclude "Independent Director" of the company.
28. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned action of the respondent No.1 in rejecting the five bids of the petitioner- Company on the ground of technical Page 86 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026 NEUTRAL CITATION C/SCA/17400/2025 JUDGMENT DATED: 05/02/2026 undefined disqualification by invoking the Clause No.29 of the General Terms and Conditions of the GeM is hereby, quashed and set aside. The respondent No.1 is directed to consider the bids of the petitioner-Company along with the other bidders in accordance with the General Terms and Conditions of the GeM as well as the condition of the tender document. Rule is made absolute to the aforesaid extent. No orders as to cost.
(BHARGAV D. KARIA, J) (L. S. PIRZADA, J) PALAK Page 87 of 87 Uploaded by PALAK BRAHMBHATT(HC01391) on Tue Feb 10 2026 Downloaded on : Thu Feb 12 20:54:21 IST 2026