SC holds arbitrary exclusion of REL-HDEC consortium

New Delhi, Sep 11 (UNI) The Supreme Court today held arbitrary the exclusion of the consortium formed by Reliance Energy Ltd REL) and Korea based Hyundai Engineering and Construction Company Ltd (HDEC) from the global tender floated by Maharashtra State Road Development Corporation Ltd (MSRDC) for completing Rs 2600 crore Mumbai Trans Harbour Link (MTHL).

A bench comprising Justices Arijit Pasayat and H S Kapadia extended the period for presenting financial bid by REL/HDEC upto December 15, 2007.

The consortium of REL and HDEC was excluded by the consultants of MSRDC from the second stage of bidding on the ground that it has not fulfilled the criteria of proving net cash profit of Rs 200 crore per year for three consecutive years.

The apex court in its ruling said "in the evaluation process, the consultants were entitled to take into account future cash impact but in order to do so they had to say why the indirect method of 'cash flow reporting' should not be accepted and if at all the impact of the provisioning was to be seen than there was no reason for not examining the audited accounts of 2004.

There is a mix up of two concepts here. The concept of non compliance of financial criteria and the impact in future year on cash flow.

As stated above, the very purpose of cash flow reporting is to find out the ability of HDEC to generate cash flow in future and if an important method of cash flow reporting is kept out without any reason, than the decision to exclude REL/HDEC is arbitrary, whimsical and unreasonable. In our view for non consideration of the reconcilation method , under cash flow reporting system the impugned decision making process stood vitiated. In the result we sat aside the impugned judgement of the Bombay High Court: we hold that REL/HDEC(consortium) was erroneously excluded from the second stage of bidding process. Accordingly we allow this civil appeal".

M/S Jean Muller, France was appointed as consultant by MSRDC.

The project will link Mumbai and Navi Mumbai on BOT basis by the successful bidder. REL is engaged in generation , transmission and disbursement of power in Maharashtra and Delhi etc. while HDEC specialises in construction of bridges.

UNI