- (1.) By these proceedings under Article 226 of the Constitution, the petitioner seeks to challenge the legality and validity of a condition imposed by the second respondent, the Uttar Pradesh Expressway Industrial Development Authority, in the Request For Qualification (RFQ) in respect of five packages of the Agra to Lucknow Access Controlled Expressway. Under clause 2.2.2 B which is in question, bidders who apply for Corporate Debt Restructuring (CDR) in the last five financial years, shall not be considered for bid qualification. Clause 2.2.2 B is to the following effect: "2.2.2 To be eligible for pre-qualification, an Applicant, shall fulfill the following conditions of eligibility: A. Technical Capacity: For demonstrating technical capacity and experience (the 'Technical Capacity'), the Applicant shall, over the past 5 (five) financial years preceding the Application Due Date, have received payments for construction of Eligible Project (s), or has undertaken construction works by itself in a PPP project, such that the sum total thereof is more than Rs.3,225 Crore (Rs. Three Thousand Two Hundred and Twenty Five Crore Only) (the "Threshold Technical Capacity"). Provided that at least one similar EPC work of Rs. 645 Crore (Rs. Six hundred and forty five Crore) shall have been completed/substantially completed from the Eligible Projects in Category 1 and/or Category 3 specified in Clause 3.2.1. B. Financial Capacity: The Applicant shall have a minimum Net Worth (the "Financial Capacity") of Rs. 129 Crore (Rs. One Hundred Twenty Nine Crore only) at the close of the preceding financial year; AND The Applicant should be financially sound and should not have applied for Corporate Debt Restructuring (CDR) during the last five years. The Applicant has to give a certificate as per the format given at Appendix-I, Annex-II."
(2.) The second respondent has decided to undertake the construction of a six lane Greenfield Expressway with service roads between Agra and Lucknow. By a notice dated 18 January 2014, RFQs were invited for shortlisting of contractors for participating in the next stage of bidding. The second respondent intends to put in place international competitive bidding separately for five packages of the project. Consequently, RFQs were issued in five packets for each of which a separate document was issued containing, amongst others, the details of the work, estimated contract value put to tender and period of completion together with other tender conditions. Clause 2.2.2 of the RFQ documents contains eligibility criteria. The notice dated 18 January 2014 was cancelled and a fresh notice was issued on 22 February 2014. The RFQ document stipulates that the applicant should not have applied for CDR in the previous five years. This condition is challenged on the ground that it is arbitrary and unreasonable, and that it seeks to discriminate between various corporate entities/bidders on the sole basis of CDR which has no nexus with the pre or post execution stage of the project. Hence, it has been urged that the conditions imposed under clause 2.2.2 are violative of Articles 14 and 19 (1) (g) of the Constitution. According to the petitioner, the CDR mechanism was evolved as a voluntary, non-statutory system based on Debtor-Creditor Agreements in pursuance of a circular issued by the Reserve Bank of India on 23 August 2001. The entire focus of the CDR mechanism, it is urged, is to restructure and revive a company facing financial difficulties by providing the necessary flexibility and facilitating timely intervention for debt restructuring. Under CDR, a borrower virtually gets a moratorium of two years and a repayment schedule of eight years which, it is submitted, is an internal arrangement between the borrower and the lender, with which third parties have no concern. According to the petitioners, in the current global scenario and slow pace of growth, all sectors including infrastructure and development, have been adversely affected and many companies have adopted the CDR mechanism to restructure their debts and smoothen their finances.
(3.) On 28 March 2014, the Secretary in the Union Ministry of Finance (Department of Economic Affairs) addressed a communication to the Chief Secretary of the State Government, stating that it has been brought to the notice of the Union Government that some State Governments and State-owned Public Sector Undertakings had modified recently their eligibility conditions in public procurement bids to exclude corporate entities which have incurred losses or have applied for or are undergoing CDR. The opinion of the Secretary to the Union Government was that the viability of an entity is not decided by its profitability and the parameters for establishing financial soundness is in the form of debt procurement guidelines on restructuring including the detailed methodology and norms for restructuring of advances. It was opined that restricting competition in public procurement by disqualifying companies that otherwise satisfy the accepted norms of financial soundness and viability may not be prudent. Hence, a request was made to have such conditions reviewed at the earliest, in consultation with the Department of Expenditure, Ministry of Finance of the Union Government.;