RELIANCE ENERGY LIMITED & ANR. versus MAHARASHTRA STATE ROAD DEVELOPMENT CORPORATION LTD. & ORS.

Citation: [2007] 9 S.C.R. 853 · Decided: 11-09-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

RELIANCE ENERGY LIMITED & ANR. 
v. 
MAHARASHTRA ST ATE ROAD DEVELOPMENT 
CORPORATION LTD. & ORS. 
SEPTEMBER 11, 2007 
lDR. ARIJIT PASAY AT AND S.H. KAP ADIA,JJ.] 
A 
B 
Tender-Global tender-Consortium of two companies applied for the 
tender-Excluded from second stage of bidding-On the ground that one of C 
the companies did not have net cash profit of Rs. 200 crores, as per Pre 
Qualification terms, which would have negative impact on future cash flows 
on account of provisioning for doubtful debts of Financial Year 2001-
Propriety of the exclusion-Held: The exclusion of the consortium was 
arbitrary whimsical and unreasonable-An important method of 'Cash flow 
reporting' i.e. 'reconciliation method' was kept out of consideration-The D 
decision-making process stood vitiated. 
Constitution of India, 1950-Articles 14, 19(1)(g) and 21-
Applicability of-To Government tenders-Held: Vagueness and subjectivity 
in terms and conditions of tenders regarding norms and bench marks would 
result in discriminatory treatment-Decisions resulting in unequal treatment E 
would violate doctrine of 'level playing field' embodied in Article 19(/) 
(g)-Principle of equality embodied in Article 14 has to be read in conjunction 
with Article 21 and not in isolation-Any Government policy, even -in 
contractual matters, if fails to satisfY the test of 'reasonableness', would be 
unconstitutional. 
Judicial Review--Applicability-1n contractual matters-Held: Judicial 
review is applicable even in contractual matters-Object of the same is to 
prevent arbitrariness-It must be exercised in larger public interest-
Standards applied by courts in judicial review must be justified by 
constitutional principles. 
Doctrine-Doctrine of 'level playing field'-Applicability of 
Words and Phrases- 'globalization', 'provisioning' and 'write ojf'-
Meaning of 
853 
F 
G 
H 
854 
SUPREME COURT REPORTS 
[2007] 9 S.C.R. 
A 
State of Maharashtra through respondent No. 1-Compnay (MSRDC) 
floated a global t~nder, for completion of Mumbai Trans Harbour Link 
(MTHL). Appellant-Companies (REL and HDEC) formed a Consortium and 
applied for the tender. Under Pre Qualification (PQ) document, the bidders 
were required to submit financial statements of three financial years subject 
to the condition that the latest should not be earlier than the financial year 
B ending 31.12.2002. As per clause 7.2.2 of PQ required a consortium to have 
net cash profit of Rs. 200 crores. The bidders were also required to submit 
their Request for Qualification (RFQ) for the project on or before 10.1.2005. 
The consortium submitted three audited accounts for the Financial Years 
ending 31.12.2001, 31.12.2002 and 31.12.2003. 
c 
D 
E 
One of the companies ofthe consortium namely HDEC was not having 
Net Cash Profit of Rs. 200 crores for the financial years. However, the 
company according to its chartered accountant had net income of Rs. 200 
crores after adjusting 'non-cash expenses' incurred during the Financial 
Years. 
• 
MSRDC kept the offer of the consortium open by extending Yalidity of 
the offer from time to time till 6.10.2005. Consortium by a letter dated 
18.8.2005 submitted audited accounts ofHDEC for Financial Year ending 
31.12.2004, thus complying with the condition of supplying account of the 
Financial Years latter than the Financial Year 20()1. 
Consultants of MSRDC excluded the consortium from the second stage 
of the bidding process. A committee constituted by MSRDC to review the draft 
eYaluation report submitted by the consultants, opined that the exclusion of 
the consortium was bad. The consultants did not agree with the report of the 
Committee and the consortium stood disqualified haying failed to meet the 
F qualification criteria. 
Writ Petition challenging the disqualification was dismissed by High 
Court upholding the disqualification. High Court also held that it had no 
jurisdiction under Article 226 of the Constitution to interfere with the decision 
of MSRDC, particularly when there were two different opinions regarding 
G adjustment of net income. Hence the present appeal. 
H 
Allowing the appeal, the Court 
HELD: I.I. Standards applied by courts in judicial review must be 
justified by constitutional principles which govern the proper exercise of 
public power in a democracy. Article 14 of the Constitution embodies the 
principle of "non-discrimination". However, it is not a free-standing provision. 
) .. 
>-
REL. ENERGY LTD. v. STATE ROAD DEVE. CORP.L

Excerpt shown. Read the full judgment & AI analysis in Lexace.