Anil Ambani group firm Reliance Energy Ltd on Tuesday received a shot in the arm with the Supreme Court allowing it to bid for the Mumbai sea link project, where a consortium led by elder brother Mukesh Ambani was the front-runner.
Setting aside a Bombay High Court order, an apex court bench comprising Justice Arijit Pasayat and Justice S H Kapadia directed REL to submit its financial bid for sea link project within three months.
"We hold that REL/HECL (consortium) was erroneously excluded from second stage of bidding process... Since we have allowed this civil appeal, we extend the period for presenting financial bids by REL/HECL up to December 15, 2007," it said.
The Maharashtra State Road Development Corporation Ltd had earlier disqualified a consortium of REL and Hyundai Engineering and Construction Company Ltd, from bidding for building the country's longest sea link expressway to be built at an estimated cost of Rs 2,600 crore (Rs 26 billion).
MSRDC had disqualified REL-Hyundai consortium on the ground that Korean firm did not the meet the criterion of Rs 200 crore (Rs 2 billion) net worth. REL, however, had argued that it alone met that criterion and approached the Supreme Court.
Flaying MSRDC for vagueness in the terms and conditions of the bid, the apex court said the tenders must indicate with "legal certainty, norms and benchmarks". Otherwise, it may "violate doctrine of level playing field".
MSRDC's consultants had not given any reason for rejecting the indirect method (reconciliation method) invoked by KPMG, the chartered accountants of the REL consortium, the court said.
The apex court said if future cash impact was the basis to exclude REL-Hyundai consortium, then MSRDC consultants - Jean Muller, France, and Crisil - should have considered cash flow reporting methods, which includes reconciliation method.
"The very purpose of cash flow reporting is to find out the ability of HECL to generate cash flow in future and if an important method of cash flow reporting is kept out, without any reason, then the decision to exclude REL/HECL is arbitrary, whimsical and unreasonable.
"In our view, for non-consideration of reconciliation method, under cash flow reporting system, the impugned decision-making process stood vitiated," Justice Kapadia, writing for the bench, stated in the 53-page judgment.
According to the apex court, there was no question of difference of opinion as far as the application of cash flow reporting was concerned.
MSRDC had disqualified REL on the basis of its consultant Jean Muller's report that HECL's audited reports for December 31, 2004 included information supplied after the cut-off of January 10, 2005 and therefore, the consortium stood excluded.
REL counsel K K Venugopal stated that the decision-making process stood vitiated for the reason that report of peer committee, which disagreed with MSRDC's consultants, was referred to Crisil, which was just a rating agency and not a chartered accountancy firm.
Senior counsel Altaf Ahmed, appearing for MSRDC, had submitted that it had merely acted on the basis of evaluations done by consultants who stated that the financial position of HECL for December 2001 was poor and the provisioning made by it between 1999 to 2001 would have future cash impact.
