{"id":182404,"date":"2007-09-11T00:00:00","date_gmt":"2007-09-10T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007"},"modified":"2017-05-26T08:16:47","modified_gmt":"2017-05-26T02:46:47","slug":"reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","title":{"rendered":"Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007<\/div>\n
Author: Kapadia<\/div>\n
Bench: Dr. Arijit Pasayat, S. H. Kapadia<\/div>\n
           CASE NO.:\nAppeal (civil)  3526 of 2007\n\nPETITIONER:\nReliance Energy Limited & Another\n\nRESPONDENT:\nMaharashtra State Road Development Corporation Ltd. & Others\n\nDATE OF JUDGMENT: 11\/09\/2007\n\nBENCH:\nDR. ARIJIT PASAYAT & S. H. KAPADIA\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T
\nCIVIL APPEAL NO.3526 OF 2007<\/p>\n
KAPADIA, J.\n<\/p>\n
1.\tState of Maharashtra through Maharashtra State Road
\nDevelopment Corporation Ltd. (for short, “MSRDC”) floated
\nGlobal Tender for completing Mumbai Trans Harbour Link
\n(“MTHL”) between Mumbai and Navi Mumbai on BOT basis.\n<\/p>\n
2.\tReliance Energy Limited is a company registered under
\nthe Companies Act, 1956. It is engaged in generation,
\ntransmission and disbursement of power in Maharashtra,
\nDelhi etc.<\/p>\n
3.\tHyundai Engineering and Construction Company Ltd.
\n(for short, “HDEC”) is a company incorporated in Korea. It is
\nspecialized in construction of bridges.\n<\/p>\n
4.\tAt this stage, it may be noted that the above Project is to
\nbe at the cost of Rs. 26000 million (Rs. 2600 crores). The
\nbidders were required to submit RFQ Document by 10.1.2005.
\nUnder the PQ Document, M\/s Jean Muller, France was
\nappointed as consultant by MSRDC. Under the PQ Document,
\nthe bidders were required to submit financial statements of
\nthree financial years subject to the condition that the latest
\nshould not be earlier than the financial year ending
\n31.12.2002. REL\/HDEC formed a consortium. As a
\nconsortium they were required to comply with clause 7.2.2
\nwhich stipulated net cash profit at Rs. 200 crores. The said
\nconsortium has been excluded from the second stage of
\nbidding on the ground that it has not fulfilled the said criteria
\nmentioned in clause 7.2.2. The consortium had submitted
\ntheir RFQ Document on 9.1.2005. The said consortium had
\nsubmitted three audited accounts for the financial years
\nending 31.12.2001, 31.12.2002 & 31.12.2003. At this stage it
\nmay be noted that the financial year for REL ended on 31st
\nMarch whereas the financial year for HDEC, Korea ended on
\n31st December.\n<\/p>\n
5.\tAt this stage, we may quote the relevant provisions of the
\nPQ Document which read as under:\n<\/p>\n
 “Section 5.1 in the PQ document –\n<\/p>\n
The objective of the Pre-Qualification is to qualify
\nthe applicants that have the necessary experience
\nand financial and technical capabilities to
\nundertake the work for which the Request for
\nProposal is to be invited.\n<\/p>\n
Section 5.3.7 of the PQ document inter alia,
\nprovides:\n<\/p>\n
No change in, or supplementary information to an
\napplication shall be accepted after its submission.
\nHowever, MSRDC reserves a right to seek additional
\ninformation from the applicants, if found necessary
\nduring the course of evaluation of the applicants.\n<\/p>\n
Section 7.2.2 For Application by a Consortium
\nIn case of a Consortium, the entity declared as the
\nLead Member would be required to <\/p>\n
*\thold a minimum of 26% of paid up and
\nsubscribed equity capital in the Project Company
\n(MSRDC is of the view that a minimum paid up and
\nsubscribed capital of Rs.5000 million may be
\nrequired for implementing the project.] until
\ncompletion of construction and thereafter for a
\nperiod of two years from the date of commencement
\nof operations and<\/p>\n
*\tmeet the financial eligibility criteria of Lead
\nMember as detailed below<\/p>\n
In case of a Consortium, the following members
\ntaken together shall commit to hold majority
\n(minimum of 51%) of the total paid up and
\nsubscribed equity capital in the Project Company
\nuntil completion of construction and thereafter for a
\nperiod of two years from the date of commencement
\nof operations.\n<\/p>\n
* \tLead Member of the consortium committing to
\nhold a minimum of 26% of the paid up and
\nsubscribed equity capital of the Project Company,
\nuntil completion of construction and thereafter for a
\nperiod of two years from the date of commencement
\nof operations and meet the financial eligibility
\ncriteria of Lead Member as given below.\n<\/p>\n
*\tThose members of the Consortium committing
\nto hold a minimum of 5% of the paid up and
\nsubscribed equity capital of the Project Company
\nuntil completion of construction and thereafter for a
\nperiod of two years from the date of commencement
\nof operations.\n<\/p>\n
The aggregate (taken as the arithmetic sum) of Net
\nCash Profit and Net Worth as explained above) of all
\nsubsidiary companies in which the respective
\nentities hold a minimum of 51% of total paid up and
\nsubscribed equity capital would also taken into
\nconsideration.  In the case of financials of
\nsubsidiary companies being considered as above,
\nthe dividend paid by these subsidiary companies to
\nthe parent company will be deducted from the Net
\nProfit of the parent company for the purpose of
\nevaluation.  The financial evaluation criteria to be
\nsatisfied by a Consortium are detailed below.\n<\/p>\n
Criteria
\nTo be satisfied
\nby
\nAmount
\nNet worth  (as per
\nthe latest audited
\nbalance sheet  not
\nearlier than the FY
\nended December 31,
\n2002)
\nLead Member
\n(Holding a minimum
\nof 26% equity in the
\nproject company)
\nTotal Consortium (to
\nbe satisfied together
\nby the Lead member
\nand those
\nConsortium members
\ncommitting to hold a
\nminimum of 5%
\nequity in the project
\ncompany)
\nRs.2,000 million
\n(or equivalent
\nforeign currency)
\nRs.10,000
\nmillion (or
\nequivalent
\nforeign currency)
\nAND<\/p>\n
Criteria
\nTo be satisfied
\nby
\nAmount
\nNet cash profit
\n(simple average of
\nthe audited financial
\nfigures over the last
\n3 financial years of 2
\ncalendar months
\neach, with the latest
\nnot earlier than the
\nFY ended December
\n31, 2002, will be
\nconsidered for this
\nassessment).\n<\/p>\n
Lead Member
\n(Holding a minimum
\nof 26% equity in the
\nproject company)
\nTotal Consortium (to
\nbe satisfied jointly by
\nthe Lead member
\nand those
\nConsortium members
\ncommitting to hold a
\nminimum of 5%
\nequity in the project
\ncompany)
\nRs.500 million
\n(or equivalent
\nforeign currency)
\nRs.2,000 million
\n(or equivalent
\nforeign currency)<\/p>\n
All figures quoted in a currency other than Indian
\nNational Rupees (INR) would be converted into
\nIndian National Rupees (INR) at an exchange rate,
\nwhich is the Telegraphic Transfer (ASSESSEE-
\nCOMPANY) buying rate of State Bank of India as on
\nthe Due Date.  In the event of non-availability of
\nexchange rate for any currency from the above
\nsource, MSRDC reserves the right to use available
\nfrom any other source.\n<\/p>\n
7.4  Basis of Evaluation<\/p>\n
The information to be provided by the Applicant
\nmust be in conformation with the following:\n<\/p>\n
?\tThe information provided by the applicant
\nshould be based on the latest available audited
\naccounting statements.\n<\/p>\n
?\tThe latest audited accounting statements
\nshould not be dated earlier than 31st
\nDecember, 2002.\n<\/p>\n
?\tThe Request for Qualification (RFQ) must be
\naccompanied by the last three audited annual
\nreports\/accounts statements of the applicant
\nand should include the financial statements of
\nall subsidiary companies of the Applicant for
\nthe last three financial years.  In case of a
\nConsortium audited annual reports\/account
\nstatements of each member of the Consortium
\nfor the last three financial years should be
\nprovided and should include the financial
\nstatement of all subsidiary companies of the
\nentities forming the Consortium.\n<\/p>\n
?\tThe applicant (all members of Consortium)
\nmust submit information on all pending
\nlitigations or proceeding regarding liquidation,
\nwinding up, court receivership or other similar
\nproceedings that should have been initiated or
\npending against the Applicant (or any member
\nof Consortium).  In addition to the above,
\ninformation must also be provided of all
\npending litigations against the Applicant (or
\nany member of Consortium) in which the
\nmaximum value of liability that may arise in
\nthe event of adverse judgment exceeds Rs.100
\nmillion (or equivalent foreign currency).  A
\nconsistent history of litigation\/arbitration
\nawards against the applicant or any member of
\nthe consortium ”\n<\/p>\n
(emphasis supplied)\n<\/p>\n
6.\tBriefly the criteria and conditions were as follows:
\n“(a) In a consortium, the entity declared as “lead
\nmember” was required to hold the minimum of 26
\nper cent of paid-up and subscribed equity capital
\nin the project company until completion of
\nconstruction.\n<\/p>\n
(b) The aggregate of net cash profit and net worth
\nof the consortium was to be considered for
\nevaluation of financial criteria of the consortium.\n<\/p>\n
(c) Two criteria were required to be satisfied by the
\nlead member (REL) as also the total consortium
\n(REL\/HDEC), namely, net worth and net cash
\nprofit.\n<\/p>\n
(d) Net worth is defined as total paid-up share
\ncapital + reserves  accumulated losses,
\nrevaluation of reserves and deferred revenue
\nexpenditure only to the extent of it being not
\nwritten-off.  Net worth was to be calculated as per
\nthe latest audited balance sheet not earlier than
\nF.Y. ending 31st December, 2002.\n<\/p>\n
(e) The leading member (REL) was required to have
\na net worth of Rs.200 crores and the total of
\nConsortium (REL\/HDEC) was required to have a
\nnet worth of Rs.1,000 crores.  At this stage, we
\nmay clarify that this last criterion stands satisfied.\n<\/p>\n
(f)  As stated above, net cash profit of the lead
\nmember under the PQ document was stipulated at
\nRs.50 crores whereas for the Consortium it was
\nRs.200 crores.\n<\/p>\n
(g)  For the sake of convenience we quote the
\ndefinition of NCP given in the PQ document which
\nreads as follows:\n<\/p>\n
“NCP = PAT (profit after tax) + depreciation +
\namortization, not in the form of cash transaction”\n<\/p>\n
7.\tTherefore, the bidding process for selecting the BOT
\nConcessionaire was in two stages.  In the first stage MSRDC
\nhad to issue the Pre-Qualification (PQ) document with an
\ninvitation to prospective Applicants to submit their Request for
\nQualification (RFQ) for the Project.  The prospective Applicants
\nwere required to submit their RFQ document on or before
\n10.1.2005.  It was to be evaluated on technical and financial
\ncapability.  Under clause 7.2.2 one of the criteria laid down
\nwas that the Consortium should have net cash profit (NCP) of
\nRs.2,000 million (Rs.200 crores).  As per tender condition
\n7.2.2 the bidders were required to submit financial statement
\nof three financial years subject to the condition that the latest
\nshould not be earlier than the financial year ending
\n31.12.2002.  The choice of three years was left to the bidders.
\nREL\/HDEC exercised their option by submitting the financial
\nstatements of HDEC for three years, namely, 2001, 2002 and
\n2003.\n<\/p>\n
8.\tHDEC had undertaken construction contracts in Iraq.
\nOn account of war in Iraq their annual report for the year
\n2001 showed negative income.  However, the said Company
\nachieved net profit of US$ 16 million in 2002, US$ 66 million
\nin 2003 and US$ 164 million 2004.  These figures have been
\ntaken from the letter of KPMG, Korea, dated 12.8.2005 giving
\na schedule of net income after adjusting expenses and income
\nnot in form of cash transaction.  We quote hereinbelow the
\nentire letter dated 12.8.2005 along with the schedule of net
\nincome which reads as under:\n<\/p>\n
“10th Floor, Star Tower,\t\t\t\t\tTel +82 (2) 21120100
\n737 Yeoksam-dong,\t\t\t\t\t\tFax +82(2) 21120101
\nGangnam-gu, Seoul 135-984\t\t\t\t\twww.kr.kpmg.com
\nRepublic of Korea<\/p>\n
The Board of Directors and Management
\nHyundai Engineering & Construction Co.,Ltd.
\n140-2 Kye-dong, Chongro-gu
\nSeoul, 110-793, Korea<\/p>\n
August 12, 2005<\/p>\n
Dear Sir,<\/p>\n
We have performed the procedures described below, which were agreed by
\nHyundai Engineering & Construction Co., Ltd. (the ‘Company’).  The sufficiency
\nof the procedures is solely the responsibility of the Company.  Consequently, we
\nmake no representation regarding the sufficiency of the procedures described
\nbelow either for the purpose for which this report has been requested or for any
\nother purpose.\n<\/p>\n
The procedures that we performed are as follows:\n<\/p>\n
We compared the statements of cash flows for years ended December 31, 2001,
\n2002, 2003 and 2004 prepared by the Company to the accompanying schedule of
\nnet income after adjusting expenses and income not in form of cash transaction
\nwhich the company prepared according to the Pre-Qualification criteria for
\nMumbai Trans Harbour Link(MTHL) project in India.  The financial statements
\nof the company for years ended December 31, 2001, 2002, 2003 and 2004 were
\naudited by us and we expressed an opinion that the financial statements of the
\nCompany for years ended December 31, 2001, 2002, 2003 and 2004 were
\npresented fairly, in all material respects, in conformity with accounting standards
\ngenerally accepted in the Republic of Korea.\n<\/p>\n
We audited the statements of cash flows for years ended December 31, 2001,
\n2002, 2003 and 2004 that under the indirect method of presenting the statements
\nof cash flows, net income is adjusted to arrive at net cash flows from operating
\nactivities.  The adjustments to net income I performed by removing the effects on
\nnet income of all items that included in net income that do not affect cash receipts
\nand disbursements. (e.g., those that should be omitted altogether or categorized as
\ninvesting or financing activities, such as adding depreciation and amortization).\n<\/p>\n
We found no exceptions as a result of the above agreed-upon procedures.\n<\/p>\n
We were not engaged to, and did not perform an audit, the objective of which
\nwould be the expression of an opinion on the specified elements, accounts, or
\nitems.  Accordingly, we do not express such an opinion.  Had we performed
\nadditional procedures, other matters might have come to our attention that would
\nhave been reported to you.\n<\/p>\n
Accounting principles and auditing standards and their application in practice
\nvary among countries.  The financial statements are not intended  to present the
\nfinancial position, results of operations and cash flows in accordance with
\naccounting principles and practices generally accepted in countries other than the
\nRepublic of Korea.  In addition, the procedures and practices utilized in the
\nRepublic of Korea to audit such financial statements may differ from those
\ngenerally accepted and applied in other countries.  Accordingly, this report and
\nthe accompanying financial statements are for use by those knowledgeable about
\nKorean accounting procedures and auditing standards and their application in
\npractice.\n<\/p>\n
This report is intended solely for the use of the Board of Directors and
\nManagement of Hyundai Engineering & Construction Co., Ltd., and should not be
\nused by those who have not agreed to the procedures and taken responsibility for
\nthe sufficiency of the procedures for their purposes.\n<\/p>\n
Very truly yours<\/p>\n
Sd\/-\n<\/p>\n
S.H. Goo,.\n<\/p>\n
Partner<\/p>\n
(Attached: Cash flows from operating activities)
\n(Attached)<\/p>\n
Schedule of net income after adjusting expenses and income not in form of cash
\ntransaction.\n<\/p>\n
Description
\nDec
\n31st, 2001
\nDec
\n31st, 2002
\nDec
\n31st, 2003
\nDec
\n31st, 2004
\n(1) Net Income
\n(610,507)
\n15,963
\n65,546
\n164,248
\n(2) Expenses not in form of a cash transaction
\n686,310
\n200,753
\n199,084
\n285,039\n<\/p>\n
– Provision for retirement and severance benefit
\n27,009
\n39,173
\n32,706
\n39,541\n<\/p>\n
– Depreciation
\n49,475
\n36,221
\n31,279
\n27,699\n<\/p>\n
– Stock compensation expense\n<\/p>\n
–\n<\/p>\n
      89<\/span>
\n    107 <\/span>
\n      30<\/span><\/p>\n
– Bad debt expense
\n183,192
\n7,357
\n8,480\n<\/p>\n
–\n<\/p>\n
– Other bad debts expense
\n199,186\n<\/p>\n
–\n<\/p>\n
39,147
\n171,080\n<\/p>\n
– Interest expense
\n48,803
\n23,899
\n20,683
\n18,723\n<\/p>\n
– Loss on valuation of foreign currence
\n     107<\/span>
\n1,986
\n        3<\/span>
\n     699<\/span>\n<\/p>\n
– Loss on disposal of trade note and accounts
\nreceivables
\n2,770
\n17,772
\n10,844\n<\/p>\n
–\n<\/p>\n
– Loss on valuation of inventories
\n39,762
\n20,485
\n5,364
\n20,308\n<\/p>\n
– Loss on disposal of Investment securities
\n      42<\/span>\n<\/p>\n
–\n<\/p>\n
   309<\/span>
\n     43<\/span><\/p>\n
– Loss on investment securities impairment
\n61,104
\n29,900
\n12,845
\n2,348\n<\/p>\n
– Loss on disposal of investment in affiliates
\nusing equity method\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
1,286\n<\/p>\n
–\n<\/p>\n
– Loss on disposal of investment assets
\n9,120
\n1,248\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
– Loss on valuation of investment in affiliates
\nusing equity method (*)
\n5,805\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
– Loss on disposal of property, plant and
\nequipment (*)
\n7,888
\n4,121
\n3,933
\n1,591\n<\/p>\n
– Loss on impairment of property, plant and
\nequipment\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
29,584
\n2,977\n<\/p>\n
– Miscellaneous losses
\n(including other extraordinary loss)\n<\/p>\n
–\n<\/p>\n
13,802
\n2,513\n<\/p>\n
–\n<\/p>\n
– Loss on prior year adjustment
\n42,047
\n4,700\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
(3) Income not in form of a cash transaction
\n337,982
\n76,284
\n44,486
\n55,723\n<\/p>\n
– Interest income
\n        64<\/span>
\n2,860
\n2,117
\n     705<\/span>\n<\/p>\n
– Gain on valuation of foreign currency\n<\/p>\n
–\n<\/p>\n
   105<\/span>
\n      7<\/span><\/p>\n
1,891\n<\/p>\n
– Gain on disposal of investment assets
\n2,378
\n4,349
\n   172<\/span>\n<\/p>\n
–\n<\/p>\n
– Gain on disposal of property, plant and
\nequipment (*)
\n27,846
\n47,589
\n5,740
\n7,982\n<\/p>\n
– Gain on disposal of investment securities
\n    498 <\/span>\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
– Reversal of loss on investment securities
\nimpairment
\n1,879\n<\/p>\n
–\n<\/p>\n
1,167
\n2,386\n<\/p>\n
– Gain on valuation of investment in affiliates
\nusing equity method (*)\n<\/p>\n
–\n<\/p>\n
2,722
\n4,941
\n4,771\n<\/p>\n
– Gain on Debt exemption (*)
\n305,317
\n6,987
\n30,342
\n18,164\n<\/p>\n
– Gain on redemption of debentures\n<\/p>\n
–\n<\/p>\n
1,933\n<\/p>\n
–\n<\/p>\n
95<\/span><\/p>\n
– Miscellaneous gains
\n   (Including other extraordinary gain)\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
19,729\n<\/p>\n
– Gain on prior year adjustment\n<\/p>\n
–\n<\/p>\n
9,739\n<\/p>\n
–\n<\/p>\n
–\n<\/p>\n
(4) Net income after adjusting expenses and
\nincome not in form of cash transaction
\n[(1) + (2)  (3) ]
\n(262,179)
\n140,432
\n220,143
\n393,564<\/p>\n
(*) Gain on Debt exemption, Loss(gain) on valuation of investment affiliates using equity
\nmethod.  (Loss(gain) on disposal property, plant and equipment are included for
\ncalculation of net income after adjusting expenses and income not in form of cash
\ntransaction<\/p>\n
(Note)
\nWe translated Korean Won into U.S. dollars at the basic exchange rates on December 31,
\n2001, 2002, 2003 and 2004 to US$.  The corresponding rates are as follows:\n<\/p>\n
Dec 31, 2001
\nDec 31, 2002
\nDec 31, 2003
\nDec 31, 2004
\nW 1,326.1 to US$ 1
\nW 1,200.4 to US$ 1
\nW 1,197.8 to US$ 1
\nW 1,043.8 to US$ 1″\n<\/p>\n
                                                                                                            (emphasis supplied)<\/p>\n
9.\tAt this stage, we need to clarify that HDEC had
\nundertaken construction contracts in Iraq.  That, large
\nreceivables had arisen prior to 1999 on account of war in Iraq.
\nThe Iraq contract receivables had nothing whatsoever to do
\nwith the three accounting years  2001, 2002 and 2003,
\ntherefore, there were no Iraq contract receivables nor was
\nthere any write-off as and by way of bad debt in any of the
\nabove three accounting years.  Further, according to
\nREL\/HDEC, HDEC had incurred “non-cash expenses”
\namounting to US$ 686.310 million in 2001, US$ 200.753
\nmillion in 2002 and US$ 199.084 million in 2003 which did
\nnot involve direct cash outflow and, therefore, the said “non-
\ncash expenses” ought to have been added back to NCP and if
\nso added then the Consortium had NCP of Rs.2,000 million
\n(Rs.200 crores) as mentioned in clause 7.2.2.\n<\/p>\n
10.\tThe aforestated contention advanced by the Consortium
\nwas rejected by M\/s. Jean Muller Consultant of MSRDC in
\nfollowing words:\n<\/p>\n
“In case of  ‘Provision’ for bad debts even though
\nthey are just ‘Provision’ but not a ‘write-off’, the
\nsame is treated as cash expense because once a
\n‘Provision’ has been made, the ‘write-off’ does not
\nget routed through the profit and loss account.
\nMoreover, the ‘Provision’ for bad debt relates to a
\nrevenue item that has already been treated as cash
\ninflow on accrual basis.”\n<\/p>\n
11.\tIn view of the position taken by MSRDC’s Consultants,
\nREL\/HDEC stood excluded from the second stage of the
\nbidding process.\n<\/p>\n
12.\tTo complete the chronology of events, by letter dated
\n22.6.2005, MSRDC informed REL\/HDEC that their RFQ
\ndocument was under scrutiny and accordingly REL\/HDEC
\nwere requested to extend the validity of their Offer up to
\n6.10.2005.  By letter dated 24.6.2005, MSRDC requested
\nREL\/HDEC to submit further details and clarifications and
\naccordingly the Consortium of REL\/HDEC was once again
\nrequested to extend the validity of their Offer till 6.10.2005.
\nAccordingly, by letter dated 18.7.2005, REL\/HDEC extended
\nthe validity of their Offer up to 6.10.2005 (90 days).  By
\nanother letter dated 6.8.2005, MSRDC sought clarifications
\nfrom REL\/HDEC in respect of certain financial aspects and
\nthe said Consortium was given time up to 19.8.2005 to
\nfurnish such clarifications.  By the said letter, MSRDC stated
\nthat there were no queries in respect of REL, but there were
\nqueries in respect of HDEC.  By the said letter, MSRDC
\nreferred to the break-up of net cash profit submitted by
\nREL\/HDEC and asked for the basis for classifying certain
\nheads of expenditure under the heading “non-cash
\nexpenditure”.  By reply dated 18.8.2005, REL\/HDEC
\nsubmitted its clarification by pointing out that as on
\n10.1.2005 when RFQ document was submitted the audited
\naccounts for FY ending 31.12.2004 were not ready, so far as
\nHDEC was concerned and, therefore, it had submitted the
\naudited accounts of HDEC for the years 2001, 2002 and 2003.
\nBy the said letter dated 18.8.2005, the REL\/HDEC also
\nsubmitted audited accounts of HDEC for FY ending
\n31.12.2004.  In other words, by 18.8.2005 (i.e. before
\n6.10.2005 which was date up to which REL\/HDEC had kept
\nits Offer open) the said Consortium had submitted the audited
\naccounts for the financial years ending 31st December  2002,
\n2003 and 2004.  Therefore, according to REL\/HDEC, they had
\nalso complied with the conditions mentioned in the PQ
\ndocument by supplying audited account for the reference
\nyears, namely, 2002, 2003 and 2004.\n<\/p>\n
13.\tSince REL\/HDEC did not submit audited accounts
\nconcerning HDEC for the financial year ending 31.12.2004 by
\n10.1.2005, the Consultants of MSRDC took the position that
\nREL\/HDEC were not entitled to bid in the second stage of the
\nbidding process.  According to the said Consultants, the
\naudited accounts of HDEC for the FY 31.12.2004 constituted
\nsubsequent information (i.e. information supplied after the
\ncut-off date of 10.1.2005) and, therefore, REL\/HDEC stood
\nexcluded from the second stage of the bidding process.\n<\/p>\n
14.\tOn 22.8.2005, a committee by the name “Peer
\nCommittee” was constituted by MSRDC to review the draft
\nevaluation report submitted by the consultants, M\/s. Jean
\nMuller Consortium, relating to pre-qualification of bidders to
\nsuggest process of evaluation and to provide recommendations
\nto MSRDC.  The said Committee met on 21.9.2005. The
\nconsultants M\/s. Jean Muller Consortium and M\/s. Crisil
\nwere both called to give clarifications.  The said Committee
\nwas headed by Mr. Justice R.J. Kochar, Judge of Bombay High
\nCourt (retired), Shri A.K. Banerjee (Technical Member) in
\nNHAI, Mr. R.S. Agarwal, Executive Director of IDBI (retired),
\nMr. V. Giriraj, Joint Managing Director of MSRDC etc.  The
\nCommittee noted that pre-qualifications bids were received
\nonly from six Applicants, one of them was REL\/HDEC.  The
\nCommittee noted that while Indian companies could submit
\ntheir audited accounts up to 31.3.2004 as their FY ended on
\n31st March the foreign companies could submit their audited
\naccounts only up to 31.12.2003 as their FY ended on 31st
\nDecember.  The Committee further observed that although the
\ncut-off date was 10.1.2005, clarifications on break-up of non-
\ncash expenses were sought from REL\/HDEC up to 22.8.2005
\nand since in the mean time audited accounting statements
\nwere furnished by HDEC up to 31.12.2004, the same could be
\nconsidered for evaluation.  The Peer Committee did not agree
\nwith the opinion expressed by MSRDC’s Consultants that the
\nloss incurred by HDEC for the financial year ending
\n31.12.2001 would have a cash impact in future.  At this stage,
\nwe may reiterate that even according to the Consultants of
\nMSRDC, provision for bad debt may not involve cash outflow
\nin the year of incidence but it would have cash impact at a
\nfuture date and, therefore, out of abundant caution they
\ndecided to exclude REL\/HDEC.  However, the Peer Committee
\ndid not concur with this accounting interpretation.  According
\nto the Peer Committee the major provision for bad debt was in
\nthe accounts for the year 2001 and it related to receivables
\nfrom their contract in Iraq affected by war and since it was
\nonly a provision for bad debt and not a write-off, the
\nCommittee came to the conclusion that there would be no
\ncash impact in future.  The Committee took the view that even
\nwithout taking into account the audited accounts for the year
\n2004, REL\/HDEC fulfilled the financial criteria in clause
\n7.2.2.  Accordingly, the Peer Committee opined that
\nREL\/HDEC should not be excluded from the second stage of
\nthe bidding process.  At this stage, it may be noted that after
\nreceipt of the said report, made by the Peer Committee dated
\n1.10.2005, MSRDC placed the report of the Peer Committee
\nbefore their Consultants.  Needless to add that the
\nConsultants of MSRDC retained their original position,
\nnamely, that since the audited accounts for the year ending
\n31.12.2004 could not have been submitted after 10.1.2005,
\nthe said accounts of HDEC could not have been taken into
\naccount as it would violate the tender conditions and,
\ntherefore, REL\/HDEC should be excluded from the second
\nstage of the bidding process.\n<\/p>\n
15.\tBy letter dated 28.9.2005, in view of the position taken
\nby their Consultants, MSRDC requested REL\/HDEC to extend
\nthe validity of their Offer for further six months as they wanted
\nto study the implications arising from the audited accounts
\nsubmitted by HDEC for the year ending 31.12.2004.  MSRDC
\nbasically wanted to know as to what would be cash impact of
\nthe provision for bad debts in the accounts of HDEC for the
\nyear 2001.  Accordingly by letter dated 6.10.2005, REL\/HDEC
\nextended the validity of their Offer up to 6.4.2006.
\nUltimately, by letter dated 7.11.2006, MSRDC informed
\nREL\/HDEC that they stood disqualified as they had failed to
\nmeet the qualification criteria.\n<\/p>\n
16.\tIn the circumstances, REL\/HDEC moved the Bombay
\nHigh Court vide Writ Petition No.39 of 2007 in which they
\nalleged that a decision to disqualify, taken by MSRDC, was
\narbitrary, unjustified and contrary to the terms of the tender
\ndocuments; that REL\/HDEC met the financial criteria
\nspecified by MSRDC both in terms of the original submission
\nof RFQ document made on 9.1.2005 and further information
\ngiven to MSRDC; that in the alternative the decision of MSRDC
\nwas unjustified and incorrect, particularly when the
\nConsortium had given audited accounts of HDEC for the FY
\nending 31.12.2004 and, therefore, on the said basis it was not
\nopen to MSRDC to exclude REL\/HDEC from the second stage
\nof the bidding process.  It was further submitted in the said
\nwrit petition that the PQ document did not specify any
\naccounting standard (AS) and in the circumstances it was not
\nopen to MSRDC to exclude REL\/HDEC by applying AS No.26;
\nthat the accounts of HDEC indicated “net profits” for the FY
\nending December 31  2002, 2003 and 2004 and on that basis
\nit had calculated NCP in accordance with internationally
\naccepted ASs (GAPP) which has been certified by KPMG,
\nChartered Accountants in Korea.  According to REL\/HDEC, no
\nparticular AS was mentioned in the PQ document and,
\ntherefore, it was implied that the Consortium were free to
\nadopt GAAP.  That, in the circumstances, the impugned
\ndecision taken by MSRDC was arbitrary, unjust and wrongful
\nand contrary to the tender document (PQ document) issued by
\nMSRDC.\n<\/p>\n
17.\tBy the impugned judgment dated 4.6.2007, the High
\nCourt ruled that admittedly HDEC had suffered net loss of
\napproximately US$ 610 million in 2001; that they had earned
\nnet profits in 2002, 2003 and 2004; that audited accounts for
\n2004 were made available only after 10.1.2005 and, therefore,
\ncould not have been taken into account by the Peer Committee
\nand, therefore, MSRDC was right in excluding REL\/HDEC
\nfrom the second stage of the bidding process.  According to the
\nimpugned judgment, the basic debate was about accounting
\ntreatment to be given to “non-cash expenses”.  The High Court
\nwas of the view that it had no jurisdiction under Article 226 of
\nthe Constitution to interfere with the decision of MSRDC,
\nparticularly, when there were two different opinions regarding
\nadjustment to net income.  According to the High Court, the
\ndecision of MSRDC on the future cash impact of “the provision
\nfor bad debts” made by HDEC in its accounts for 2001 cannot
\nbe said to be arbitrary or unreasonable.  For the aforestated
\nreasons, without going into the question whether provision for
\nbad debts is or is not a “non-cash expense” liable to be added
\nback to arrive at net cash profit, the High Court dismissed the
\nwrit petition, hence this civil appeal.\n<\/p>\n
18.\tMr. K.K. Venugopal, learned senior counsel appearing on
\nbehalf of REL\/HDEC (Consortium), submitted that the
\ndecision-making process stood vitiated for the reason that the
\nreport of the Peer Committee, which disagreed with the
\nConsultants of MSRDC, was not referred to an independent
\nfirm of chartered accountants.  That, Crisil was rating agency
\nand not chartered accountants.  He submitted, in this
\nconnection, that it was obvious to MSRDC that Crisil had
\nalready taken a position in its first report that REL\/HDEC
\nwere disqualified and, therefore, fairness and transparency
\nwhich are important aspects of Article 14 of the Constitution
\nrequired MSRDC to have placed both the reports of Crisil and
\nthe Peer Committee, before any independent firm of chartered
\naccountants.  Learned counsel submitted that by not doing so
\nthe decision-making process itself stood vitiated.  In any event,
\nlearned counsel urged that Crisil was wrong if one looks at the
\naudited balance sheet of HDEC for the accounting year ending
\n31.12.2004.  Learned counsel urged that even according to
\nCrisil the provisioning for bad debts was “non-cash expense”,
\nhowever, according to Crisil, such provisioning could have a
\ncash impact in future years.  Learned counsel submitted that
\nthe conclusion of Crisil, namely, that such provisioning could
\nhave a cash impact in future years was unjustified if one takes
\ninto account the audited balance sheet for the year ending
\n31.12.2004.  Therefore, according to the learned counsel, the
\ndecision of Crisil was arbitrary, since, its conclusion was not
\nbased on application of proper AS.  Learned counsel further
\nsubmitted that when the entire basis of Crisil’s report against
\nHDEC was on the issue of future cash impact, the decision to
\nexclude the audited accounts for the FY 2004, clearly vitiated
\nthe decision-making process. In the alternative, learned
\ncounsel submitted that in any case where two views are
\npossible, the view holding that the person\/party concerned
\nshould not be disqualified, should be accepted as
\ndisqualification prevents the applicant from participating in
\nthe bidding process, it affects its fundamental rights under
\nArticle 19(1)(g) of the Constitution as also larger public interest
\nincluding State finances which ultimately makes MSRDC a
\nloser.\n<\/p>\n
19.\tMr. S. Ganesh, learned senior counsel appearing on
\nbehalf of REL\/HDEC, submitted that provision for doubtful
\ndebts in the present case has not been written-off till
\n31.12.2004; that by adding back provision for doubtful debts
\nmade by HDEC in 2001, the Consortium had met the
\nrequirement of NCP for the years 2001, 2002 and 2003; that
\nthe said provision was made only in the accounts of 2001; that
\nIraq contract receivables had nothing to do with the years
\n2001, 2002 and 2003 (reference years); that provision for
\ndoubtful debts is only appropriation of profits and not a
\ncharge on profits and that in fact regarded as “Reserve” for
\npurpose of “sur-tax” and since it is only appropriation the
\namount under it has to be added back to determine the NCP in
\nterms of the definition in the PQ document.  Learned counsel
\nfurther urged that provision for doubtful debts ought to be
\nincluded in the net profit; that since NCP is always more than
\nthe net profit it is obvious that the said provision for doubtful
\ndebt has to be included in the NCP.  Learned counsel further
\nurged that there was no “write-off” during 2001, 2002 and
\n2003 and, therefore, during those years there was no cash
\nimpact on the cash profit of REL\/HDEC or on the net profit of
\nthe said Consortium.\n<\/p>\n
20.\tMr. Altaf Ahmed, learned senior counsel appearing on
\nbehalf of the MSRDC submitted that REL\/HDEC had failed to
\nsatisfy clause 7.2.2 of the PQ document and, therefore, they
\nwere disqualified rightly.  It was urged that the evaluation of
\nprequalification criteria was done by reputed international
\nconsultants, namely, M\/s. Jean Muller which in turn took
\nopinion from Crisil.  The entire exercise was carried out by
\nexperts and according to the recommendations of Crisil, duly
\naccepted by the consultants, the impugned decision was taken
\nand, therefore, the High Court was right in refusing to
\nintervene under Article 226 to the Constitution.  Learned
\ncounsel submitted that the failure to satisfy the financial
\ncriteria laid down in clause 7.2.2 was the decision of the
\nconsultants and not the decision of MSRDC which had merely
\nacted on the basis of evaluation done by the consultants and,
\ntherefore, it cannot be said that the impugned decision taken
\nby MSRDC was arbitrary or unjustified.  Learned counsel
\nsubmitted that according to the opinion expressed by the
\nconsultants, the financial position of HDEC for the year ending
\n31st December 2001 was poor and the provisioning made by
\nHDEC for the years 1999, 2000 and 2001 would have future
\ncash impact.  This was the view of the experts which MSRDC
\naccepted.  That, the entire process was transparent and every
\naspect was considered.  There were detailed discussions
\nduring the decision-making process.  Queries were raised from
\ntime to time.  Explanations and clarifications were sought
\nfrom time to time.  Full opportunity was given to the
\nConsortium to put forth their case.  In the circumstances,
\nlearned counsel submitted it cannot be said that the decision-
\nmaking process was faulty, arbitrary, unjust or wrongful.
\nLearned counsel next contended that the cut-off date was
\n10.1.2005.  That cut-off date, according to the learned
\ncounsel, was applicable in the case of all the six bidders.
\nHence, it was not possible to look into the audited balance
\nsheet for the year 2004 which was placed by the Consortium
\nonly in August 2005.  In other words, learned counsel
\nsubmitted that the audited balance sheet for the year 31st
\nDecember, 2004 could not have been taken into account after
\nthe cut-off date.  This was the view of the Consultants for
\nMSRDC and that view has been accepted by MSRDC.\n<\/p>\n
21.\tLearned counsel submitted that Mumbai Trans Harbour
\nLink (MTHL) Project is based on BOT, therefore, global tenders
\nwere invited.  It is an important project which is required to be
\ngiven to the bidder who qualifies and goes successfully
\nthrough both the stages of the bidding process; that REL had
\nentered into an agreement with HDEC; that it was a
\nconsortium; that the said Consortium did not fulfill the
\nfinancial criteria of Rs.200 crores (NCP); that according to the
\nannual accounts of HDEC there was a loss of US$ 610 million
\nin the year 2001; that in Form F-S submitted by the
\nappellant’s Consortium, non-cash expenses for financial years
\nending December 31 – 2001, 2002 and 2003 in respect of
\nHDEC were US$ 686 million, US$ 201 million and US$ 199
\nmillion respectively which cannot be added back to net
\nprofit\/loss.  Learned counsel further contended that according
\nto the Consultants of MSRDC “adding back” was not
\npermissible and even if it is held to be permissible it is not
\nadvisable as it would result in future cash impact on the net
\nprofits of HDEC.  Learned counsel submitted that provision for
\nbad debts were examined by the consultants and upon
\nexamination of bad debts expenses, the consultants opined
\nthat the said expenses may not involve a direct cash outflow in
\nthe year of incidence but they may have a cash impact at a
\nfuture date and hence they cannot be treated as non-cash
\nexpenses.  Learned counsel submitted that there is a
\ndifference between “cash expense” and “non-cash expense”.
\nThe distinction lies in the answer to the question as to
\nwhether there is a cash impact in the current year or future
\nyears and if it has cash impact at a future date then it would
\nconstitute an item of cash expense, even though in the year of
\nincidence the item may be non-cash expense.  Therefore, the
\nimpugned decision, namely, that REL\/HDEC did not satisfy
\nthe financial criteria under clause 7.2.2, was right.  Learned
\ncounsel lastly submitted that bad debt expenses did not
\nqualify as “amortization” and, therefore, such provision cannot
\nbe added back to net profits of HDEC.  Learned counsel lastly
\nsubmitted that in the present case that Consultants of
\nMSRDC had rightly relied on AS 26 under which the terms
\n“amortization” and “write-off” are interchangeable and,
\ntherefore, provisioning for doubtful debts did not constitute
\n“amortization” and, therefore, it could not have been added
\nback to the net profits, particularly when the definition of NCP
\nin the tender document defined NCP to mean “PAT +
\ndepreciation + amortization, not in the form of cash
\ntransaction”.\n<\/p>\n
22.\tWe find merit in this civil appeal.  Standards applied by
\ncourts in judicial review must be justified by constitutional
\nprinciples which govern the proper exercise of public power in
\na democracy.  Article 14 of the Constitution embodies the
\nprinciple of “non-discrimination”.  However, it is not a free-
\nstanding provision.  It has to be read in conjunction with
\nrights conferred by other articles like Article 21 of the
\nConstitution.  The said Article 21 refers to “right to life”.  In
\nincludes “opportunity”.  In our view, as held in the latest
\njudgment of the Constitution Bench of nine-Judges in the case
\nof I.R. Coelho vs. State of Tamil Nadu<\/a>  (2007) 2 SCC 1,
\nArticle 21\/14 is the heart of the chapter on fundamental
\nrights.  It covers various aspects of life.  “Level playing field” is
\nan important concept while construing Article 19(1)(g) of the
\nConstitution. It is this doctrine which is invoked by
\nREL\/HDEC in the present case. When Article 19(1)(g) confers
\nfundamental right to carry on business to a company, it is
\nentitled to invoke the said doctrine of “level playing field”.   We
\nmay clarify that this doctrine is, however, subject to public
\ninterest.  In the world of globalization, competition is an
\nimportant factor to be kept in mind.  The doctrine of “level
\nplaying field” is an important doctrine which is embodied in
\nArticle 19(1)(g) of the Constitution.  This is because the said
\ndoctrine provides space within which equally-placed
\ncompetitors are allowed to bid so as to subserve the larger
\npublic interest.  “Globalization”, in essence, is  liberalization of
\ntrade.  Today India has dismantled licence-raj.  The economic
\nreforms introduced after 1992 have brought in the concept of
\n“globalization”.  Decisions or acts which results in unequal
\nand discriminatory treatment, would violate the doctrine of
\n“level playing field” embodied in Article 19(1)(g).  Time has
\ncome, therefore, to say that Article 14 which refers to the
\nprinciple of “equality” should not be read as a stand alone item
\nbut it should be read in conjunction with Article 21 which
\nembodies several aspects of life.  There is one more aspect
\nwhich needs to be mentioned in the matter of implementation
\nof the aforestated doctrine of “level playing field”.  According to
\nLord Goldsmith – commitment to “rule of law” is the heart of
\nparliamentary democracy. One of the important elements of
\nthe “rule of law” is legal certainty.  Article 14 applies to
\ngovernment policies and if the policy or act of the government,
\neven in contractual matters, fails to satisfy the test of
\n“reasonableness”, then such an act or decision would be
\nunconstitutional.\n<\/p>\n
23.\tIn the case of Union of India and another vs.
\nInternational Trading Co. and another – (2003) 5 SCC 437,
\nthe Division Bench of this Court speaking through Pasayat, J.
\nhad held :\n<\/p>\n
“14.\tIt is trite law that Article 14 of the Constitution
\napplies also to matters of governmental policy and if
\nthe policy or any action of the Government, even in
\ncontractual matters, fails to satisfy the test of
\nreasonableness, it would be unconstitutional.\n<\/p>\n
15.\tWhile the discretion to change the policy in
\nexercise of the executive power, when not
\ntrammelled by any statute or rule is wide enough,
\nwhat is imperative and implicit in terms of Article
\n14 is that a change in policy must be made fairly
\nand should not give impression that it was so done
\narbitrarily or by any ulterior criteria. The wide
\nsweep of Article 14 and the requirement of every
\nState action qualifying for its validity on this
\ntouchstone irrespective of the field of activity of the
\nState is an accepted tenet. The basic requirement of
\nArticle 14 is fairness in action by the state, and
\nnon-arbitrariness in essence and substance is the
\nheart beat of fair play. Actions are amenable, in the
\npanorama of judicial review only to the extent that
\nthe State must act validly for a discernible reasons,
\nnot whimsically for any ulterior purpose. The
\nmeaning and true import and concept of
\narbitrariness is more easily visualized than precisely
\ndefined. A question whether the impugned action is
\narbitrary or not is to be ultimately answered on the
\nfacts and circumstances of a given case. A basic and
\nobvious test to apply in such cases is to see whether
\nthere is any discernible principle emerging from the
\nimpugned action and if so, does it really satisfy the
\ntest of reasonableness.”\n<\/p>\n
24.\tWhen tenders are invited, the terms and conditions must
\nindicate with legal certainty, norms and benchmarks.  This
\n“legal certainty” is an important aspect of the rule of law.  If
\nthere is vagueness or subjectivity in the said norms it may
\nresult in unequal and discriminatory treatment.  It may violate
\ndoctrine of “level playing field”.\n<\/p>\n
25.\tIn the case of Reliance Airport Developers (P) Ltd. v.
\nAirports Authority of India and others<\/a> -(2006) 10 SCC 1,
\nthe Division Bench of this Court has held that in matters of
\njudicial review the basic test is to see whether there is any
\ninfirmity in the decision-making process and not in the
\ndecision itself. This means that the decision-maker must
\nunderstand correctly the law that regulates his decision-
\nmaking power and he must give effect to it otherwise it may
\nresult in illegality.  The principle of “judicial review” cannot be
\ndenied even in contractual matters or matters in which the
\nGovernment exercises its contractual powers, but judicial
\nreview is intended to prevent arbitrariness and it must be
\nexercised in larger public interest.  Expression of different
\nviews and opinions in exercise of contractual powers may be
\nthere, however, such difference of opinion must be based on
\nspecified norms. Those norms may be legal norms or
\naccounting norms.  As long as the norms are clear and
\nproperly understood by the decision-maker and the bidders
\nand other stakeholders, uncertainty and thereby breach of
\nrule of law will not arise.  The grounds upon which
\nadministrative action is subjected to control by judicial review
\nare classifiable broadly under three heads, namely, illegality,
\nirrationality and procedural impropriety.  In the said judgment
\nit has been held that all errors of law are jurisdictional errors.
\nOne of the important principles laid down in the aforesaid
\njudgment is that whenever a norm\/benchmark is prescribed
\nin the tender process in order to provide certainty that
\nnorm\/standard should be clear. As stated above “certainty” is
\nan important aspect of rule of law.  In the case of Reliance
\nAirport Developers (supra), the scoring system formed part of
\nthe evaluation process. The object of that system was to
\nprovide identification of factors, allocation of marks of each of
\nthe said factors and giving of marks had different stages.
\nObjectivity was thus provided.\n<\/p>\n
26.\tOne of the points which arise for determination in this
\ncase is whether the criteria of objectivity stand satisfied in the
\npresent case.\t “Profit\/net income” and “cash” are concepts.
\nHowever, there is a difference.  “Profit” is based on “value
\njudgment” whereas “cash” is “fact-specific”.  In the PQ
\ndocument, “net cash profit” has been defined to mean – “PAT +
\ndepreciation + amortization, not arising from cash
\ntransaction”.  The last five words which have underlined are
\ndescriptive.  They merely indicate the meaning of
\n“amortization”.  It is not in dispute that depreciation and
\namortization are “non-cash expenses”.\n<\/p>\n
27.\tIn the present case, REL\/HDEC claims adding back of
\nthe non-cash expenses of US$ 686,310 million for the year
\n2001, of US$ 200,753 million for the year 2002 and of US$
\n199,084 million in the year 2003, to the net loss of US$
\n610,507 million; net profit of US$ 15,963 million and US$
\n65,545 million during the years 2001, 2002 and 2003.
\nHowever, according to the Consultants of MSRDC, such “add
\nback” was not possible because even though provisions are
\nnot “write-offs” the former should be treated as cash expense
\nbecause once a provision is made, the “write-off” does not get
\nrouted through the P&L account and that in any event if such
\nadd back is allowed then it would result in “cash impact” in
\nfuture.\n<\/p>\n
28.\tTo answer the first point we need to know what is
\n“provision” and how it is made.\n<\/p>\n
29.\t“Provisioning” is a matter of estimation.  ASs are policy
\ndocuments.  Accounting interpretation depends on application
\nof several ASs simultaneously.  The concept of “amortization”
\nis not restricted only to AS 26.  Similarly,  the concept of “cash
\nflow analysis” is not restricted to AS 3.  Therefore, different
\nmethods are prescribed for estimating net profits and\/or net
\ncash profits.  There are no two views on this point.
\nProvisioning for doubtful debts cannot be equated to “write-
\noff”.  In the case of provisioning there is no “cash outflow”.
\nThis proposition is undisputed.  What is being argued is that
\nonce there is “provisioning”, the “write-off” does not get routed
\nthrough the P&L account and, therefore, there will be cash
\nimpact in future.  This argument amounts to begging the
\nquestion.  If this argument is to be accepted then we are
\nobliterating the difference between “provisioning” and “write-
\noffs”.  The question of “cash impact” in future is a separate
\nquestion.  It has to be answered in terms of “cash flow
\nreporting” which falls in AS 3 which has been invoked by the
\nchartered accountants of REL\/HDEC.  In the case of
\nCommissioner of Income-tax and Excess Profits Tax,
\nCentral, Bombay  v.  Jwala Prasad Tiwari  1953 (24) ITR
\n537, the Division Bench of the Bombay High Court speaking
\nthrough Chagla, C.J. has held as follows:
\n“‘Writing Off’ is a technical term used by
\nfinanciers and auditors.  There are two methods of
\ndealing with a debt which has been written off in
\nthe books of account, (1) by giving the
\ncorresponding credit to the debtor’s account, and (2)
\nby giving the corresponding credit to the bad and
\ndoubtful debts account.  The first method is only
\nemployed where it is desired to close the account of
\nthe debtor.  The second method is employed where
\nthere are some chances of recovery, howsoever
\nremote they may be.\n<\/p>\n
When we talk of ‘writing off’ we are not
\nconcerned with the credit to be given to an account.
\n‘Writing off’ means the raising of a debit entry.  This
\ncan only be to the debit of the profit and loss
\naccount.  This is the only debit which can possibly
\nbe raised as a result of writing off a bad debt.”\n<\/p>\n
30.\tIn the case of Metal Box Company of India Ltd. v.
\nTheir Workmen<\/a>  1969 (73) ITR 53, this Court has brought
\nout succinctly difference between “provision” and “reserve” as
\nfollows:\n<\/p>\n
“The next question is whether the amount so
\nprovided is a provision or a reserve. The distinction
\nbetween a provision and a reserve is in commercial
\naccountancy fairly well known. Provisions made
\nagainst anticipated losses and contingencies are
\ncharges against profits and, therefore, to be taken
\ninto account against gross receipts in the P. & L.
\naccount and the balance sheet. On the other hand,
\nreserves are appropriations of profits, the assets by
\nwhich they are represented being retained to form
\npart of the capital employed in the business.
\nProvisions are usually shown in the balance-sheet
\nby way of deductions from the assets in respect of
\nwhich they are made whereas general reserves and
\nreserve funds are shown as part of the proprietor’s
\ninterest (see Spicer and Pegler’s Book-keeping and
\nAccounts, 15th edition, page 42). An amount set
\naside out of profits and other surpluses, not
\ndesigned to meet a liability, contingency,
\ncommitment or diminution in value of assets known
\nto exist at the date of the balance-sheet is a reserve
\nbut an amount set aside out of profits and other
\nsurpluses to provide for any known liability of which
\nthe amount cannot be determined with substantial
\naccuracy is a provision: (see William Pickles
\nAccountancy, second edition, p. 192 ; Part III,
\nclause 7, Schedule VI to the Companies Act, 1956,
\nwhich defines provision and reserve).”\n<\/p>\n
31.\tApplying the tests laid down in the aforesaid two
\njudgments [Jwala Prasad (supra) and Metal Box (supra)] it is
\nclear that the concept of “provision for doubtful debts” is
\ndifferent from the concept of “write-off”.  The effect of the two
\nis quite different.  Provisions made against anticipated losses
\nare charges against profits and, therefore, to be taken into
\naccount against gross receipts in the P&L account and the
\nbalance-sheet.  “Provisions” are usually shown in the balance-
\nsheet by way of deduction from the assets whereas “reserves”
\nare shown as part of the interest of the proprietor.  In the
\npresent case, there is no dispute regarding the aforestated
\nconcepts.  However, according to the consultants for MSRDC
\nthough provision for doubtful debt is a non-cash expense it
\nhas to be treated as a cash expense because once a provision
\nhas been made, the write-offs cannot be routed through P&L
\naccount and, therefore, what is conceptually a non-cash
\nexpense is being treated as a cash expense.  As stated above,
\nthis is begging the question.  If the aforestated argument is to
\nbe accepted it would obliterate the conceptual difference
\nbetween “provision” and “write-off”.  The above reasoning
\nshows that the only reason for excluding REL\/HDEC is the
\nfuture cash impact of the provision made in the accounts of
\nHDEC for the FY 2001.  This aspect has been discussed by us
\nin the following paragraphs.\n<\/p>\n
32.\tOn the second question of future cash impact it may be
\nreiterated that KPMG, the chartered accountants for
\nREL\/HDEC has invoked the principle of “cash flow reporting”
\nwhich also finds place in AS 3.  According to the said principle
\nof  “cash flow reporting”, when  P&L accounts and balance-
\nsheets are prepared on accrual basis, revenues and expenses
\nare recognized on accrual basis, i.e., when the transaction or
\nevent occurs. However, timing of cash flow is not reckoned in
\nsuch system of accounting.  Similarly, in cases where
\naccounts are based on accrual system of accounting,
\nrecognition of assets and liabilities is not dependent on the
\nactual timing of cash spent on capital expenditure and cash
\ninflow on account of capital receipt.\tThus the financial
\nstatements prepared on accrual basis do not reflect the timing
\nof the cash flow and amount of cash flow.\tThe object of the
\ncash flow statement is to assess the company’s ability to
\ngenerate the cash flow in future and to assess reasons for
\ndifference between “net profit” and “net cash flow” from
\noperations.\n<\/p>\n
33.\t“Operating cash profit” can be derived by either “Direct
\nMethod” in which cash items of cash inflow are listed like cash
\nreceived from customers, payment of interest etc. as against
\ncash outflows like payment to supplier, payment for taxes etc.
\nor by “Indirect Method” which is also known as “Reconciliation
\nMethod” in which the “operating cash profit” is derived by
\nadding to the net profit non-cash items like provision for taxes,
\nprovision for doubtful debts, loss on sale of fixed assets and
\ninvestments, depreciation, amortization of intangibles etc.
\nbecause these items do not affect cash.  Similarly, profit on the
\nsale of fixed assets and investments are deducted from the net
\nincome figure as these items also do not affect cash.  Similarly,
\nadjustments in respect of current assets and liabilities are also
\nrequired to make to net income (loss) figure to arrive at cash
\nprofits.  Both the methods give the same results in respect of
\nthe final total.\n<\/p>\n
34.\tWe quote hereinbelow some of the illustrations of
\n“Indirect Method” which shows that provision for bad debts
\ncan be added back to “net profit” in order to arrive at “net
\ncash” from operating activities:\n<\/p>\n
\t(1) “Advance Accounts” by Shukla, Grewal and Gupta,
\nVol.II, Edition 2008, pages 23.20 – 23.21, which read as
\nunder:\n<\/p>\n
\t“”(ii)\tIndirect Method:\n<\/p>\n
Zed Ltd.\n<\/p>\n
Cash Flow Statement for the year ended 31st March, 2001<\/p>\n
Rs.\n<\/p>\n
Rs.\n<\/p>\n
Cash Flows from Operating
\nActivities
\nNet profit before income tax and extra-
\nordinary item:\n<\/p>\n
Adjustments for:\n<\/p>\n
    Depreciation
\n    Provision for bad debts
\n    Underwriting commission amortised
\n    Profit on sale of investments
\n    Income from investments
\n    Interest on debentures
\nOperating profit before working capital
\nchanges
\nAdjustments for:\n<\/p><\/blockquote>\n
    Increase in inventory
\n    Increase in trade debtors
\n    Increase in trade creditors
\n    Increase in outstanding expenses
\nCash inflow from operations
\nIncome tax paid<\/p>\n
Cash flow from extraordinary item:<\/p><\/blockquote>\n
    Compensation recd. in lawsuit
\nNet cash from operating activities
\nCash Flows from Investing Activities
\nPurchase of fixed assets
\nSale proceeds of investments
\nInterest recd. on investments*
\nNet cash used in investing activities
\nCash Flows from Financing
\nActivities
\nRedemption of debentures at par*
\nInterest on debentures paid
\nDividends and corporate dividend tax
\npaid
\nNet cash used in financing activities
\nNet increase in cash and cash
\nequivalents
\nCash and cash equivalents as on
\n31st March,2000 (Opening Balance)
\nCash and cash equivalents as on
\n31st March,2001(Closing Balance)<\/p>\n
7,77,000<\/p>\n
1,80,000
\n1,000
\n1,200
\n(7,500)
\n(21,000)
\n_____66,000<\/p>\n
9,96,700<\/p>\n
(93,800)
\n(20,000)
\n19,200
\n______5,600
\n9,07,700
\n___(4,16,000)
\n4,91,700<\/p>\n
_____55,000<\/p>\n
(2,00,000)
\n1,57,500
\n_____21,000<\/p>\n
(1,00,000)
\n(66,000)<\/p>\n
___(3,30,000)<\/p>\n
5,46,700<\/p>\n
(21,500)<\/p>\n
____(4,96,000)<\/p>\n
29,200<\/p>\n
_____1,64,200
\n_____1,93,400
\n*Alternatively, interest received on investments and interest paid on
\ndebentures may be treated as flows from operating activities.\n<\/p><\/blockquote>\n
Working Notes:\n<\/p>\n
(i) Net profit before income-tax and extraordinary item:\t\t    Rs.
\n    Net profit before income tax\t\t\t\t\t8,32,000
\n    Less: Compensation received in lawsuit                                      55,000
\n\t\t\t\t\t\t\t\t\t7,77,000
\nWorking notes (iii), (iv) and (v) as prepared under the direct method are also
\nrelevant under the indirect method.”
\n(emphasis supplied)<\/p>\n
\t(2) “Fundamentals of Corporate Accounting” by J.R.
\nMonga, 11 Edition 2005-06, pages 12.15, 12.16, 12.17, 12.20,
\nwhich read as under:\n<\/p>\n
“12.15.\n<\/p>\n
CASH FLOWS FROM PERATING ACTIVITIES
\n[CASH PROVIDED BY (OR USED IN) OPERATING ACTIVITIES]<\/p>\n
One of the major items of information in the cash flow statement is the net
\ncash flow provided by (or used in) operating activities.  In fact it is the
\nregular source of cash in any enterprise that determines whether or not an
\nenterprise will continue to exist in the long run.  The logic for
\ndetermining the net cash flow from operating activities is to
\nunderstand why net profit (loss) as reported in the profit and loss
\naccount must be converted.  As we know that financial statements are
\ngenerally prepared on accrual basis of accounting which requires that
\nrevenues be recorded when earned and the expenses be recorded when
\nincurred.  Earned revenues more often include credit sales that have not
\nbeen collected in cash and expenses incurred that may not have been paid
\nin cash during the accounting period.  Thus under accrual basis of
\naccounting net income will not indicate the net cash provided by operating
\nactivities or net loss will not indicate the net cash used in operating
\nactivities.  In order to calculate the net cash provided by (or used in)
\noperating activities, it is necessary to replace revenues and expenses
\non accrual basis with actual receipts and actual payments in cash.
\nThis is done by eliminating the non-cash revenues and non-cash expenses
\nfrom the given earned revenues and incurred expenses in the profit and
\nloss account.  In addition to regular non-cash revenue and non-cash
\nexpense items, the profit and loss account is also debited and credited with
\npurely non-cash items which reduce and increase the profits respectively
\nbut do not affect the cash at al e.g. depreciation, loss (or profit) on the
\nsale of fixed assets, amortization of intangible assets like goodwill, patents
\ntrademarks etc. deferred revenue expenditures like preliminary expenses,
\ndiscount on the issue of shares and debentures and so on.  Since cash
\nprovided by operations is to be calculated, certain non-operating items
\nlike rent income, interest income, dividend income, refund of tax etc.
\nshould also be adjusted although these items may have been recorded on
\ncash basis.  Such items are analysed separately in the cash flow
\nstatement as operating, investing and investing activities.\n<\/p>\n
ATTENTION  PLEASE<\/p>\n
The term ‘operating activities’ means business transactions pertaining
\nto regular business activities, e.g., purchase and sale of goods and
\nservices.\n<\/p>\n
DIRECT VS. INDIRECT METHOD
\nThere are two method of preparing the Cash Flow Statement.  Both
\nmethods give the identical or same results in respect of the final total as
\nwell as the sub-totals of the three sections  operating, investing and the
\nfinancing.  They differ only in the manner the data or information is
\npresented in Cash Flows from Operating Activities section.\n<\/p>\n
The direct method lists separately each significant cash inflows and
\noutflows from operating activities, e.g.,<\/p>\n
Cash inflows :\n<\/p>\n
(i)\tCash received from customers\n<\/p>\n
(ii)\tReceipts of interest payments\n<\/p>\n
(iii)\tReceipts of cash dividends on investment in the shares of other
\ncompanies<\/p>\n
Cash outflows :\n<\/p>\n
(i)\tPayments to suppliers for goods purchased\n<\/p>\n
(ii)\tPayments for operating expenses\n<\/p>\n
(iii)\tPayments for interest\n<\/p>\n
(iv)\tPayments for taxes<\/p>\n
The outflows (payments) are subtracted forms the inflows (receipts) to
\ndetermine the net cash provided (or used) by operating activities.”\n<\/p>\n
“12.16-12.17. The indirect method provides less information because it
\ndoes not disclose the individual cash inflows and cash outflows from the
\noperating activities.  Instead under this method we start with net profit (or
\nloss) and adjusts this figure to obtain net cash flows from operating
\nactivities.  The indirect method is also known as ‘Reconciliation
\nMethod’ because it involves reconciliation between net profit (or loss) as
\ngiven in the profit and loss account and the net cash flow from operating
\nactivities as calculated on the cash flow statement.\n<\/p>\n
DIRECT VS. INDIRECT METHODS<\/p>\n
Direct Method<\/p>\n
Cash Flows from operating Activities
\n(A)\tCash receipts from customers.\n<\/p>\n
(B)\tCash paid to suppliers and employees.
\n(A-B)   Cash generated from operations.\n<\/p>\n
           Less:  Interest and tax.\n<\/p>\n
(C)\tCash before extraordinary items.
\nAdjust for extraordinary items to get:
\n(1)\tNet cash from operations.\n<\/p>\n
(2)\tNet cash from (used on) investing activities.
\n(3)\tNet cash from (used on) financing activities.\n<\/p>\n
      (D) Net increase (decrease) in cash and cash equivalents (1+2+3)
\nOpening balance of cash and cash equivalents.
\nClosing balance of cash and cash equivalents.\n<\/p>\n
Indirect Method<\/p>\n
Net Profit as per Profit and Loss Account
\nAdjusted for:\n<\/p>\n
Provision for tax
\nProvision for doubtful debts.\n<\/p>\n
Profit (Loss) on sale of fixed assets.
\nDepreciation
\nProfit (loss) on sale of investments.
\nInterest expenses.\n<\/p>\n
Exchange rate effect
\nDividend income.\n<\/p>\n
Interest income.\n<\/p>\n
Leave salary provision (earlier year)
\nOperating profit before working capital change.
\nAdjusted for:\n<\/p>\n
Trade and other receivable.\n<\/p>\n
Inventories and other current assets.
\nTrade payables and other current liabilities.
\nCash generated from operations.\n<\/p>\n
Income tax paid (Net of refunds)
\nThe above provides:\n<\/p>\n
Cash flow before extraordinary items.
\nAdjust for extraordinary items to get.
\nNet cash from operating Activities.\n<\/p>\n
There are two stages for achieving the net cash flows from operating
\nactivities:\n<\/p>\n
Stage-1: Calculation of operating (cash) profit before working capital
\nchanges, by adding to net profit as reported in the profit and loss account,
\nnon-cash charges: depreciation, amortization of intangible assets, loss on
\nthe sale of fixed assets and long term investments, provision for tax and
\ndividends and the like because these items do not affect cash.  Similarly
\nprofit on the sale of fixed assets and long term investments are deducted
\nfrom the net income figure as these items also do not affect cash.  In fact,
\nit is a partial conversion of accrual basis profit to cash basis profit.  Such
\nadjustments are made by analyzing individual non cash items in journal to
\nfind out the absence of cash in these items.  Moreover, non-operating
\nitems (also known as extraordinary items) like rental income, interest
\nincome, dividend income are deducted from the reported net income
\nfigure because these items are disclosed separately on the cash flow
\nstatement.  The net result of these adjustments is operating (cash) profit
\nbefore working capital changes.\n<\/p>\n
Some of the significant non-cash items are explained in the following
\nparagraphs followed by adjustment of current operating assets and
\nliabilities. (See Stage II).\n<\/p>\n
Depreciation: This item of expense reduces the profit since it is a charge
\nmade against revenue for the use of tangible fixed assets.  The likely
\njournal entry to record the depreciation expense is:\n<\/p>\n
(i)\tDepreciation Account \t                       Dr.
\n\t    To Provision for Depreciation Account
\n                (or Accumulated Depreciation)
\nAlternatively
\n\tDepreciation Account\t\t\t\t\tDr.\n<\/p>\n
\t   To Fixed Asset Account <\/p>\n
In either case the depreciation account would be closed be transfer to
\nProfit and Loss Account.  The net affect would be:\n<\/p>\n
                   Either
\n          Profit and Loss Account                             \t\tDr.\n<\/p><\/blockquote>\n
                To Provision for Depreciation Account
\n                    Or
\n          Profit and Loss Account\t\t\t\tDr.<\/p>\n
                To Fixed Asset Account<\/p>\n
It is clear that cash is not affected in the above journal entries.  The
\ndepreciation does not require any expenditure in cash.  Thus, the
\namount of depreciation charge must be added to be reported net
\nincome in order to arrive at the total increase in cash provided from
\nthe operations.\n<\/p>\n
Amortization of intangibles-goodwill, patents, etc.: The amortization of
\n(i.e., writing off) goodwill, trade marks, patents copyrights, etc., has the
\nsame effect as the depreciation expense.  The amount of amortization
\nreduces the profit but does not involve any flow of cash as is evident from
\nthe following entry:\n<\/p>\n
Profit and Loss Account \t\t\t\tDr.\n<\/p>\n
\t\tTo Goodwill etc. Account<\/p>\n
There is no change in cash.  Thus amount of intangibles so written off
\nmust also be added back to the reported net profit (income).”\n<\/p>\n
“12.20.Stage-2 : Adjustments in respect of current assets and current
\nliabilities : The adjustments made in the net profit (income) figure as per
\nprofit and loss account as outlined in Stage-I above, gives As Operating
\nProfit before Working Capital Changes.  Several other adjustments
\nare made in respect of current (Operating) assets (e.g., debtors, bills
\nreceivable, inventories, prepayments etc.) and current (Operating)
\nliabilities (e.g., creditors bills payable, outstanding liabilities etc.) to
\nobtain the final net cash from operating activities.  There is an intimate
\nrelationship between the revenue and expense items of income
\nstatement and current assets and current liabilities items of the
\nbalance sheet.  Since the income statement is prepared on the accrual
\nbasis, the resultant net income figure is affected by cash and non-cash
\nitems.  But the net income on a cash basis considers only cash receipts as
\nrevenue and subtracts from cash receipts only cash spent for purchase of
\ngoods or raw materials) and expenses.\n<\/p>\n
The following general rules, as an aid to analysis of current assets and
\ncurrent liabilities affecting cash, may be noted :\n<\/p>\n
(i)\tAn increase in an item of current asset causes a
\ndecrease in cash inflow because cash is blocked in
\ncurrent assets.\n<\/p>\n
(ii)\tA decrease in an item of current asset causes an
\nincrease in cash inflow because cash is released from the
\nsale or recovery from current asset.\n<\/p>\n
(iii)\tAn increase in an item of current liability causes a
\ndecrease in cash outflow because cash is saved.\n<\/p>\n
(iv)\tA decrease in an item of current liability causes
\nincreases in cash outflow because of payment of
\nliability.\n<\/p>\n
Some of the adjustments are discussed below :\n<\/p>\n
(i)\tDebtors and Bills Receivable (Credit Sales) : It needs no
\nexplanation that the major source of cash from operations is
\ncash sales.  But it is not uncommon to find a significant
\namount of credit sales in the form of debtors and bills
\nreceivable representing current assets.  This indicates that
\nthe sales were made both for cash and credit.  Consequently
\nthe net income (or profit) figure does not disclose the cash
\nfrom operations.  The following adjustment, however,
\nenables to overcome this difficulty :
\nCash from Operations = Operating Profit before Working Capital
\nChanges + Net Decrease in Debtors and Bills Receivable.”
\n(emphasis supplied)<\/p>\n
35.\tTaking into account the above principles, it is clear that
\nthere are two methods of “cash flow reporting” i.e. direct and
\nindirect.  Both give identical results in the matter of the final
\ntotal.  They differ only in presentation of the data.  They differ
\nonly in presentation of the data contained in the cash flows
\nfrom operational activities.  No reason has been given by the
\nConsultants of MSRDC for rejecting the indirect method
\ninvoked by KPMG, Chartered Accountants of REL\/HDEC in
\ntheir letter dated 12.8.2005.  The said method is known as
\n“reconciliation method”.  In this case, as stated above, the only
\nreason given by the Consultants of MSRDC to exclude
\nREL\/HDEC was the negative impact on the future cash flows
\non account of the provisioning for doubtful debts in the
\naccounts of HDEC for the FY 2001.  If future cash impact was
\nthe basis to exclude REL\/HDEC, then the Consultants for
\nMSRDC should have considered cash flow reporting methods,
\nwhich includes Reconciliation Method.  There is no question of
\ndifference of opinion or different views as far as the application
\nof cash flow reporting, which also falls in AS 3.  There is
\nnothing to show whether indirect method has at all been
\nconsidered by Crisil, particularly when KPMG had invoked
\nthat method.  There is no reason given for rejecting it.  Lastly,
\nin the PQ document, the referral years were three years.  The
\ncriteria was that there should be NCP of not less than Rs.200
\ncrores.  However, the opinion of the Consultants proceeds on
\nthe basis that if “add back”  is allowed it may have future cash
\nimpact.  In the evaluation process, the Consultants were
\nentitled to take into account future cash impact but in order to
\ndo so they had to say why the indirect method of “cash flow
\nreporting” should not be accepted and if at all the impact of
\nthe provisioning was to be seen then there was no reason for
\nnot examining the audited accounts of 2004.  There is a mix-
\nup of two concepts here.  The concept of non-compliance of
\nfinancial criteria and the impact in future years on cash flow.
\nAs stated above, the very purpose of “cash flow reporting” is to
\nfind out the ability of HDEC to generate cash flow in future
\nand if an important method of cash flow reporting is kept out,
\nwithout any reason, then the decision to exclude REL\/HDEC,
\nis arbitrary, whimsical and unreasonable. In our view, for non-
\nconsideration of the Reconciliation Method, under cash flow
\nreporting system, the impugned decision-making process
\nstood vitiated.\n<\/p>\n
36.\tIn the result, we set aside the impugned judgment of the
\nHigh Court; we hold that REL\/HDEC (Consortium) was
\nerroneously excluded from the second stage of bidding
\nprocess.  Accordingly, we allow this civil appeal with no order
\nas to costs.\n<\/p>\n
37.\tSince we have allowed this civil appeal, we extend the
\nperiod for presenting financial bids by REL\/HDEC up to
\n15.12.2007.\n<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007 Author: Kapadia Bench: Dr. Arijit Pasayat, S. H. Kapadia CASE NO.: Appeal (civil) 3526 of 2007 PETITIONER: Reliance Energy Limited & Another RESPONDENT: Maharashtra State Road Development Corporation Ltd. & Others DATE OF JUDGMENT: 11\/09\/2007 BENCH: DR. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-182404","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nReliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\" \/>\n<meta property=\"og:site_name\" content=\"Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/LegalindiaCom\/\" \/>\n<meta property=\"article:published_time\" content=\"2007-09-10T18:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-05-26T02:46:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"512\" \/>\n\t<meta property=\"og:image:height\" content=\"512\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Legal India Admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@legaliadmin\" \/>\n<meta name=\"twitter:site\" content=\"@Legal_india\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Legal India Admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"52 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\"},\"author\":{\"name\":\"Legal India Admin\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\"},\"headline\":\"Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007\",\"datePublished\":\"2007-09-10T18:30:00+00:00\",\"dateModified\":\"2017-05-26T02:46:47+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\"},\"wordCount\":10479,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"articleSection\":[\"Supreme Court of India\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\",\"name\":\"Reliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\"},\"datePublished\":\"2007-09-10T18:30:00+00:00\",\"dateModified\":\"2017-05-26T02:46:47+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"name\":\"Free Judgements of Supreme Court & High Court | Legal India\",\"description\":\"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"alternateName\":\"Free judgements of Supreme Court & High Court of India | Legal India\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\",\"name\":\"Judgements of Supreme Court & High Court | Legal India\",\"alternateName\":\"Legal India\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"contentUrl\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"width\":512,\"height\":512,\"caption\":\"Judgements of Supreme Court & High Court | Legal India\"},\"image\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/LegalindiaCom\\\/\",\"https:\\\/\\\/x.com\\\/Legal_india\"]},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\",\"name\":\"Legal India Admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"caption\":\"Legal India Admin\"},\"sameAs\":[\"https:\\\/\\\/www.legalindia.com\",\"https:\\\/\\\/x.com\\\/legaliadmin\"],\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/author\\\/legal-india-admin\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Reliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","og_locale":"en_US","og_type":"article","og_title":"Reliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India","og_url":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","og_site_name":"Free Judgements of Supreme Court & High Court | Legal India","article_publisher":"https:\/\/www.facebook.com\/LegalindiaCom\/","article_published_time":"2007-09-10T18:30:00+00:00","article_modified_time":"2017-05-26T02:46:47+00:00","og_image":[{"width":512,"height":512,"url":"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1","type":"image\/jpeg"}],"author":"Legal India Admin","twitter_card":"summary_large_image","twitter_creator":"@legaliadmin","twitter_site":"@Legal_india","twitter_misc":{"Written by":"Legal India Admin","Est. reading time":"52 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#article","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007"},"author":{"name":"Legal India Admin","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea"},"headline":"Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007","datePublished":"2007-09-10T18:30:00+00:00","dateModified":"2017-05-26T02:46:47+00:00","mainEntityOfPage":{"@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007"},"wordCount":10479,"commentCount":0,"publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"articleSection":["Supreme Court of India"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","url":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007","name":"Reliance Energy Limited & Another vs Maharashtra State Road ... on 11 September, 2007 - Free Judgements of Supreme Court & High Court | Legal India","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/#website"},"datePublished":"2007-09-10T18:30:00+00:00","dateModified":"2017-05-26T02:46:47+00:00","breadcrumb":{"@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.legalindia.com\/judgments\/reliance-energy-limited-another-vs-maharashtra-state-road-on-11-september-2007#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.legalindia.com\/judgments\/"},{"@type":"ListItem","position":2,"name":"Reliance Energy Limited & Another vs Maharashtra State Road … on 11 September, 2007"}]},{"@type":"WebSite","@id":"https:\/\/www.legalindia.com\/judgments\/#website","url":"https:\/\/www.legalindia.com\/judgments\/","name":"Free Judgements of Supreme Court & High Court | Legal India","description":"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.","publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"alternateName":"Free judgements of Supreme Court & High Court of India | Legal India","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.legalindia.com\/judgments\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.legalindia.com\/judgments\/#organization","name":"Judgements of Supreme Court & High Court | Legal India","alternateName":"Legal India","url":"https:\/\/www.legalindia.com\/judgments\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/","url":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","contentUrl":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","width":512,"height":512,"caption":"Judgements of Supreme Court & High Court | Legal India"},"image":{"@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/LegalindiaCom\/","https:\/\/x.com\/Legal_india"]},{"@type":"Person","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea","name":"Legal India Admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","caption":"Legal India Admin"},"sameAs":["https:\/\/www.legalindia.com","https:\/\/x.com\/legaliadmin"],"url":"https:\/\/www.legalindia.com\/judgments\/author\/legal-india-admin"}]}},"modified_by":null,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/182404","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/comments?post=182404"}],"version-history":[{"count":0,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/182404\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/media?parent=182404"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/categories?post=182404"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/tags?post=182404"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}