NMRCL’s decision to grant tender to China Railway Rolling Stock is based on commercial wisdom, hence, valid

Supreme Court: The Bench of Dipak Misra and Amitava Roy, JJ held that the concept of “Government owned entity” cannot be conferred a narrow construction and it would include its subsidiaries subject to the satisfaction of the owner.

The Court was hearing the matter Government tender for the work of design, manufacture, supply, testing, commissioning of 69 passenger rolling stock for the Nagpur Metro Rail Project. The Appellant had challenged the acceptance of China Railway Rolling Stock’s (CRRS) bid stating that CRRS’s bid is not that of a ‘single entity’ and it had relied on the experience of its subsidiaries. It was alleged that CRRS has not submitted the bid on the basis of its own experience but on the strength of the experience of the subsidiaries of the erstwhile parent/original companies, upon the merger of which CRRS came into existence, which is not only contrary to the eligibility and qualification criteria but also to the settled position of law which provide that unless the subsidiaries are constituents of the Joint Venture, their experience cannot be taken into consideration for the purpose of considering the experience of the holding company.

Rejecting the said contention, the Court said that CRRS, a Government Company, is the owner of the subsidiaries companies and subsidiaries companies have experience. It was held that there need not be a formation of a joint venture or a consortium. The Court also took note of the argument of Nagpur Metro Rail Corporation Ltd. (NMRCL) that in the current global economic regime the multinational corporations conduct their business through their subsidiaries and, therefore, there cannot be a hyper-technical approach that eligibility of the principal cannot be taken cognizance of when it speaks of the experience of the subsidiaries. Accepting the said argument, the Court held that the decision taken by the NMRCL is keeping in view the commercial wisdom and the expertise and is no way against the public interest. [Consortium of Titagarh Firema Adler v. Nagpur Metro Rail Corporation Ltd., 2017 SCC OnLine SC 555, decided on 09.05.2017]

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