Teq Green Power Xiii Private Limited vs Remc Limited on 21 March, 2023
26. The Apex Court in a catena of Judgments has held that the scope of
interference by the Courts in exercising jurisdiction under Article 226 of the
Constitution of India in contractual matters is extremely limited. The Court
interferes in contractual matters only when the decision making process is
faulty or that the decision arrived at by tenderer is calculated to favour
somebody or that the decision is so irrational that no man of prudence would
have come to that conclusion. In the facts of the present case, it cannot be
said that the decision that has been arrived at by the Respondent is to favour
somebody yet the method adopted by the Respondent for calculating net
worth is contrary to the definition of net worth given under the Companies
Act. Reliance placed by the Respondent on the Judgment of GKC Projects
(Supra) is not apt for the reason that in that case the tenderer had decided not
to include only reserves arising out of the revenue profits alone while
Signature Not Verified
Digitally Signed
By:RAHUL SINGH W.P.(C) 17599/2022 Page 18 of 19
Signing Date:23.03.2023
13:32:48
Neutral Citation Number - 2023:DHC:2069-DB
calculating the net worth which is not contrary to the statute. However, in
the facts of the present case, the tenderer has decided to exclude preference
shares from the definition of net worth on a wrong notion that preference
shares is a liability which is contrary to the Sections in Companies Act. Only
when the preference shares are redeemable at the instance of the
shareholders then only the preference shares can be called as a liability and
not in all cases. Preference shares are redeemed out of profits or out of a
fresh issue meant for the purpose and not from the existing share capital.
Since the entire basis of calculating net worth by the Respondent is contrary
to the provisions of the statute, this Court has no other option but to hold
that the decision of the tenderer to exclude preference shares from the
calculation of net worth is arbitrary and irrational. In view of the above, the
challenge of the Petitioner to its exclusion from the tendering process has to
be accepted. The Respondent is directed to re-work the net-worth of the
Petitioner herein by including the preference shares while calculating its net-
worth and take a decision as to whether the Petitioner‟s financial bid can be
considered or not.