Gist Of The Hon'ble Delhi High Court's Judgement In- HFCL Advance Systems Pvt. Ltd. vs Centre For Development Of Advance Computing (C-DAC) – Corporate and Company Law – India – Mondaq

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With perpetual expansion in technology, commerce and industry, various entrepreneurs and companies are determined to form partnerships or Joint Ventures, in order to bring forth and pool in their respective expertise and resources and accomplish a specific task. In the present case, the Petitioner had bid as a Joint Venture (JV) for a tender floated by the Respondent and was subsequently disqualified after a series of communication, on the ground that the Petitioner did not meet various terms of the Request for Proposal (RFP), more specifically its claim of being a “Joint Venture” entity as was to be reflected from an executed JV Agreement.
In order to understand the law laid down in the present case, it is necessary to be aware of the factual circumstances that led to this litigation. To state the facts briefly, Petitioner Company (HFCL Advance System Pvt. Ltd.) – hereinafter referred to as “HASPL”, claimed to be a Joint Venture entity (JV), with M/s HFCL Limited said to be holding 90% shares with M/s Polixel Security Systems Pvt. Ltd. holding balance 10% shares. C-DAC [Centre for Development of Advance Computing (C-DAC)], one of the Respondent, is a Scientific Society under the aegis of Ministry of Electronics and Information Technology, Government of India, registered under the Societies Registration Act, 1860, with administration and management vested in the Governing Council of the Society, chaired by Union Minister of Communication and IT.
The Respondent on 18.12.2020 floated a tender for implementation, Operation and Maintenance of Surveillance System under Safe City Project of Delhi Police, being Tender No.CDACP/Safety City/MSI/2020/313 and a Pre-Bid Corrigendum was issued by C-DAC on 20.06.2021 setting out definition of what was to be considered as “a Joint Venture”.
The Petitioner Company (HASPL) was originally incorporated on 23.02.2015 as a wholly-owned subsidiary of M/s HFCL Limited. On 13.02.2021, for the purpose of applying for the tender as a JV entity, M/s HFCL Limited divested its 10% shareholding in HASPL and transferred 10,000 equity shares of face value of Rs.10/- each in favour of M/s Polixel Security Systems Pvt. Ltd.
Thereafter, in compliance of Form-13 of the RFP, on 17.08.2021, the Petitioner (HASPL) alongwith the members of the JV entity executed certain documents and on 20.08.2021 submitted its bid as a JV entity. Upon scrutiny of the tender documents, on 02.10.2021 the Technical Evaluation Committee of the Respondent (C-DAC) raised some Pre-Qualification queries which were replied by the Petitioner on 07.10.2021 and further correspondence ensued between Petitioner Company and C-DAC on the issue of Petitioner being a JV entity and documents in support thereof. Not being satisfied with the answers and documents supplied by HASPL, on 16.11.2021 HASPL was disqualified by C-DAC on the ground that it being a JV entity did not meet various terms prescribed under the RFP and the Corrigendum issued thereafter. 
This lead to the Petitioner (HASPL) filing a writ petition against C-DAC's communication dated 16.11.2021 disqualifying Petitioner Company as a bidder for the tender in question.
Petitioner contention is summarised as under:
vii. The JV agreement covering (but not limited to) all the above-mentioned provisions should be submitted to C-DAC along with the technical bid. In case JV agreement is not acceptable to C-DAC, the JV will modify same so as to be acceptable to C-DAC.”
C-DAC filed its detailed counter affidavit defending their decision to disqualify HASPL. Relying upon various clauses of the RFP, particularly the definition of a JV as well as that of an eligible bidder, Respondent took the stand that a JV bidder was mandatorily required to submit following documents in support of its claim of being a JV entity:
It was set out by C-DAC that keeping in mind various clauses of the RFP, HASPL chose to bid as a JV entity; that despite repeated demands by C-DAC for specified documents in support of being a JV entity, HASPL did not submit the JV agreement, Memorandum of Association (MOA) and Articles of Association (AOA) of the “JV entity”. It was informed to the Court that HASPL repeatedly relied upon and submitted copy of the MOA and AOA of the company as it existed prior to formation of the JV entity by transfer of 10% equity shares. It was further contended by C-DAC that accordingly C-DAC concluded that there existed no JV agreement and hence disqualified HASPL's bid as a JV entity. With regard to the “undertaking” filed by HASPL, C-DAC contended that said document cannot be interpreted as a JV agreement in view of the following factors not being present in the said undertaking –
Mr. Sanjay Jain, Ld. ASG, defended C-DAC's decision and submitted that:
After careful perusal of the definition of a JV in the RFP, relevant terms and conditions of the RFP and taking into consideration reasons for rejecting Petitioner's bid, Hon'ble High Court concluded that they were unable to agree that – the Petitioner is a Joint Venture company; that the undertaking dated 17.08.2021 is a JV agreement. Court stated as under:
After a detailed consideration of all submissions and contentions of both the parties, Hon'ble Division Bench of the High Court concluded that the Petitioner was rightly disqualified by the Respondent for failing to submit the JV agreement and hence there was no perversity, arbitrariness and/or malafide in the impugned letter dated 16.11.2021 and hence the Court dismissed the Writ Petition for being devoid of any merit.
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