AXIS ENERGY VENTURES INDIA PRIVATE LIMITED v. UNION OF INDIA

14. The respondent has filed a detailed counter affidavit, claiming that Clauses 2.2.1(a) and 2.2.3(i) of the RFP are fair, reasonable, rational and in consonance with the well-considered policy decision which was taken with the help of subject-matter experts.

15. The respondent states in the counter affidavit that the impugned clauses stipulate the criteria for selection of a consortium, that may bid for subsidy under the Production Linked Incentive (PLI) Scheme notified on 09.06.2021. The criteria for qualification of a consortium are based on the consideration that ACC battery manufacturing is a nascent/ „greenfield‟ sector in India, which would require significant investment by the successful bidder over a sustained period of, at least, 7 years. Therefore, what is being tested by the impugned clause is the financial stability and viability of the bidding consortium (that it has the W.P.(C) 15161/2021 Page | 6 financial potential and stamina to execute the project), and not the actual execution of the project for which the consortium would pool in the resources of its members.

16. It was submitted that the respondent designed the eligibility criteria to address the following 3 key aspects, namely:- “(a) that the PLI Scheme is technology agnostic, whereby a consortium has the flexibility to change its composition depending on its technological requirements from time to time; (b) that since a consortium will have to make a sizable investment, though with the flexibility to change its membership, the consortium must be financially stable which can only be ensured if the overall viability of the consortium is underpinned by a party that has the wherewithal to make such investments and a shareholding that provides 'significant influence‟ over the Special Purpose Vehicle (SPV) executing the project; and,

(c) that this one member should act as the 'face of the consortium' i.e. be the Lead Member so that the Government's dealings with the SPV are streamlined and simplified and the Government can minimize risks (e.g. those arising from any conflicts between the consortium's members) that may impact the implementation of the project.”

17. As regards clause 2.2.4(i), the respondents submit that the clause was included to ensure that both - domestic and international bidders have an equal opportunity to furnish the requisite financial statements, (in the event international bidders follow different accounting standards with varying time lines). An addendum dated 06.01.2022 has been issued, that allows bidders under the RFP to submit certificated accounts prepared according to the Indian Accounting Standards as well. Therefore, the challenge to clause 2.2.4(i), as recorded in our order dated 03.01.2022, does not survive for adjudication. W.P.(C) 15161/2021 Page | 7

18. In respect of clauses 2.2.1(a) and 2.2.3(i), Mr. Kirpal, learned senior counsel for the petitioner has argued that the requirements under these clauses are contrary to the objective and principle of a consortium, because in a consortium, every consortium partner is required to pool in its resources. Mr. Kirpal submits that if the „lead member‟ alone is required to satisfy the criteria of Net Worth of 225 crore per GW, then there is no purpose of permitting a consortium to make a bid. Since the minimum bid has to be for 5 GWh, the lead member of the consortium will be required to have Net Worth of (Rs. 225 crores x 5) Rs. 1125 crores, which is very large. Mr. Kirpal has placed heavy reliance on the decision of the Supreme Court in New Horizons Ltd. & Anr. vs. Union of India & Others [(1995), SCC 478], wherein the Supreme Court examined the nature of a joint venture, and the manner in which the qualification of a joint venture enterprise – which submits its bid, should be adjudged. He submits that in the light of the said decision, the insistence on the lead member of the JV – bidder having net worth of minimum Rs. 1125 crores is untenable. He relies on the following extract from this judgment:-

19. Mr. Kirpal submits that the RFP is tailor-made to suit certain parties, and exclude a large number of parties. He further submits that in the case of the petitioner, the consortium members are 3, with respective W.P.(C) 15161/2021 Page | 11 net worth of Rs. 500, Rs. 500 and Rs. 700 crores, totalling to Rs. 1700 crores. He submits that it will be indeed ironical that a consortium with a lead member having net worth of Rs. 1125 crores - with other members having insignificant financial strength, would be permitted to participate, whereas the petitioner - whose combined financial strength/ net worth would be Rs. 1700 crores, would be ousted as the lead member would not meet the bid criteria in Clause 2.2.1(a) and 2.2.3(i) of the RFP.

20. Mr. Kirpal submits that the principle laid by Tata Cellular v. Union of India, [(1994) 6 SCC 651], would not be applicable to the facts of the present case, and the present situation should be viewed in the context of Wednesbury‟s reasonableness.

21. Per contra, Mr. Apoorva Kurup, learned CGSC submits that the impugned policy is a well thought-of policy decision, which was taken in consultation with subject experts, by the tender floating authority, and their key interests and rationale has been explained below: “(a) That the consortium should have the flexibility to change its composition so that it can facilitate the entry / exit of members depending on its technological requirements. This is because there are currently no operational ACC battery manufacturing facilities in India and, in such circumstances, a technical eligibility criterion, particularly in terms of prior experience, would be impractical and would have potentially led to the qualification of only foreign firms at the cost of domestic entities. Hence, the PLI Scheme for ACC battery manufacturing units is technology agnostic, i.e. there is no specified technical criteria and interested individuals / entities can partner with any technology provider to establish such manufacturing facilities. In other words, the impetus is currently on achieving self-sufficiency W.P.(C) 15161/2021 Page | 12 in energy storage since the technology for ACC batteries is still globally evolving. For example, a consortium can bid with members that have expertise in Lithium-ion batteries but can later replace them with members with technical knowledge in the more advance battery technologies like Solid State Batteries, Aluminium Zinc Batteries, Sodium-ion Batteries, Flow Batteries etc. Such flexibility therefore allows the beneficiary firm/ project proponent to introduce technical improvements and the latest / cutting-edge technology from time to time. (b) That such flexibility must be accompanied with financial stability of the bidding consortium / beneficiary firm / project proponent, given that the subsidy is being provided to firms that must make significant investments in a nascent sector, and that too, over an extended period of at least seven (7) years. The Answering Respondent took a policy decision based on expert advice that such financial stability can only be ensured if the overall viability of the consortium is underpinned by a party that has the net-worth i.e. financial wherewithal to make such investments-a task that will involve borrowing money and infusing its own funds i.e. debt and equity contributions-and who correspondingly has a shareholding that provides 'significant influence' over the Special Purpose Vehicle ["SPV"] through which the project is executed. It is submitted that such emphasis on the financial stability of a consortium is a well-accepted norm in government tenders.

(c) That a model where a Lead Member of the consortium provides the financial strength and acts as the 'face of the consortium', while the consortium has the flexibility to change its composition depending on the technological expertise / knowhow of its members, would also streamline and simplify the Government's dealings with the beneficiary firm and ensure accountability in case of any intraconsortium conflict(s) that may impact project implementation. This is particularly important because the Government, which is disbursing public funds as subsidy, must be in a position to minimize risks (for e.g., that the W.P.(C) 15161/2021 Page | 13 project would not be successfully implemented, or that the consortium members may have conflicts, or that there may be inconsistent planning and execution by the consortium) by requiring a clearly identified member of the consortium to be the administrative and financial lynchpin of that arrangement.”

22. Mr. Kurup further submits that a huge amount of subsidy is to be granted by the Government and, therefore, the Government is interested in ensuring that the lead member - as the face of the consortium, must be one with deep pockets to maintain financial stability. The reason for the same is that the „Green Field‟ industry is a nascent industry which requires a lot of investment to develop with a long gestation period. The financial eligibility criteria has been laid down to give comfort to the Government, specially, when the Government is required to give subsidy over a number of years.

23. It is also submitted that this rationale is reflected in other clauses of the tender as well. For instance, clause 2.2.[3] of the RFP mandates the Lead Member to have an equity share of at least twenty-six percent (26%) in the SPV, which is significant as it empowers the Lead Member to exercise influence over the SPV, including by ensuring that matters requiring special resolutions under the Companies Act 2013 are not passed without its consent. In addition, clause 2.[3] of the RFP allows a consortium to apply to the Government for changing its composition, only if the Lead Member continues as such in the consortium.

24. We have heard Mr. Saurabh Kirpal, learned Senior Advocate for the petitioner and Mr. Apoorva Kurup, learned CGSC for the respondent and have gone through the submission and the documents. W.P.(C) 15161/2021 Page | 14 ANALYSIS:-

25. In our analysis, we are mainly concerned with the following question – Whether there is a rationale/justification behind framing of clauses 2.2.[1] (a) and 2.2.[3] (i), or whether they are arbitrary, mala fide, irrationale or hit by Wednesbury‟s principle of unreasonableness with the sole purpose of favouring certain bidders?

26. Mr. Kirpal submits that the RFP is not a tender in the strict sense, but a subsidy scheme, and hence, the principle of Restricted and Limited judicial scrutiny of Tender Conditions will not apply. We are unable to agree with the same. In the present case, the respondent Union of India is inviting bids, with the intention „to develop greenfield giga-scale advance cell manufacturing for various end use applications and promotion of diverse energy sources, to ensure overall energy security for the nation in the long run‟. Though it may not be a tender in the strict sense, but has all the trappings of a tender, namely: i. Work or services are required from the tenderer; ii. Reserve price would be fixed for rendering those services; iii. It clearly defines scope of work to be completed within a fixed time frame. iv. The endeavour is to allow maximum participation within welldefined parameters of the RFP, to award the work to the most competitive and suitable bidder.

27. Hence, in our opinion the RFP in question is akin to a tender, and hence, the principle of „Restricted and Limited judicial scrutiny of Tender Conditions‟ will apply. We are not to sit in the armchair of the W.P.(C) 15161/2021 Page | 15 tender floating authority and decide its requirement. The tender floating authority is the best person to understand its requirement and frame tender conditions accordingly. The Court would not interfere with the tender conditions, or question the wisdom of the tender floating authority in laying down the tender conditions, unless they are clearly arbitrary, discriminatory, tailor-made to suit only a particular bidder, or suffer from unreasonableness.

28. The scope of our interference is clearly set out in the following judgments:a) The Supreme Court in Directorate of Education v. Educomp Datamatics Ltd.1, held as follows:

29. What we have to examine is whether the justification for imposing the qualification conditions as contained in clauses 2.2.1(a) and 2.2.3(i) are reasonable; have a sound basis, and; are not hit by Wednesbury

W.P.(C) 15161/2021 Page | 17 Principles of unreasonableness. The rationale and purpose behind imposing clauses 2.2.1(a) and 2.2.3(i) is financial stability and comfort to the tender floating authority, specially when it is looking to development of an industry which is at its nascent stage. The financial stability of the bidder is required by the tender floating authority, since the government would be disbursing public funds as subsidies over a number of years to ensure steady development of ACC battery manufacturing units. The lead member is required to have the financial strength, as the lead member will have to be the face of the consortium, and would be ensuring accountability and continuity. The project is capital intensive with a long gestation period, and a JV bidder, whose lead member does not meet the financial capacity/ strength criteria, may not be able to sustain its continued support and funding for the project over the years. Much is at stake for the government as it is seeking development of the new technology in National interest. The issue is not merely of the financial commitment of the government, but also of not losing the opportunity cost, lest the bidder fails to successfully implement the project. No unreasonableness and malafides can be found with the logic that the Respondent wants to minimize its risks to ensure that the project is successfully implemented. The rationale and purposes of the aforementioned clauses show that it is not arbitrary, unreasonable, mala fide or irrational and the reasoning finds its footing on public interest, i.e. ensuring the security of public money.

30. In addition, during the hearing, Mr. Sujit Jena from NITI Ayog also joined the proceedings and stated that before finalising the bid, the draft model bid document was put on the government portal for inviting W.P.(C) 15161/2021 Page | 18 stakeholders‟ consultation. The document was uploaded on NITI Ayog website, and all stakeholders were required to provide their written comment, if any, by or before 14.12.2020. The said statement also finds mention in the counter affidavit, wherein it has been stated on oath: “12.That, accordingly, the RFP issued on 22.10.2021 was designed to select only those individuals/ entities which actually have the ability to make such sizable investments. It is pertinent to note that since manufacturing of ACC batteries is a nascent sector in India, there were several rounds of deliberations with stakeholders through workshops and industry interactions. Thereafter, a model tender document was also shared in the public domain on 11.11.2020 to seek feedback from stakeholders which stipulated the same eligibility criteria for the Lead Member of a consortium, as is being impugned in the instant petition, considering that it is a 'greenfield' project, unlike manufacturing projects in the Solar PV industry, which is already developed, and such projects are therefore 'brownfield' projects. Consequently, as part of said eligibility criteria, the RFP required parties which bid as consortiums to designate a Lead Member who has a minimum net-worth of INR 225 crores per GWh (in case the bidder is not an Alternative Investment Fund or Foreign Investment Fund).”

31. The respondent states that after putting the draft RFP in public domain, suggestions and objectives were received from the stakeholders which were considered and duly acted upon.

32. The respondents have also filed the following chart showing the bidders who have submitted their bid, highlighting that the RFP has received a good response:- W.P.(C) 15161/2021 Page | 19 Receipt of Cost of RFP Process (INR 4,50,000/-) # Company Date of receipt of INR 4,50,000/- # Company Date of receipt of INR 4,50,000/- 1 NSURE Reliable Power Solutions Pvt. Ltd. 04-11-2021 9 Charge CCCV, USA (C4V) [Fee paid by Mr. Kuldeep Gupta] 10-11-2021

3 Exide Leclanche Energy Pvt. Ltd. (ELEPL) [Fee paid by Exide Industries Ltd.] 09-11-2021 11 OLA Electric Mobility Pvt. Ltd.

33. Hence, we are of the view that Clause 2.2.1(a) and Clause 2.2.3(i) are well-reasoned, have a sound basis, and are well-thought of by the tender floating authority. The rationale is enunciated in the counter affidavit, and we find no reason to not accept the same. The tender floating authority has also, for sufficiently long period of time, kept these conditions in public domain for inviting objections and has considered the same. There may be many ways to draft tender conditions, and it may be that they could have achieved the same objective with other terms and conditions, but that exercise is not for this Court to undertake as we do not write tender conditions. The formulation of tender conditions is a specialised exercise which require W.P.(C) 15161/2021 Page | 20 Specialists in their field, and as per Afcons (supra), the tender floating authority is the best judge of its requirements. Therefore, while undertaking judicial scrutiny, all that we have to see is whether the conditions are arbitrary, irrational, biased, mala fide or hit by Wednesbury principle of unreasonableness.

34. We are of the view that the clauses are neither of the aforesaid, and hence, see no reason to interfere in the same.

35. Reliance placed on New Horizons Ltd. (Supra) is misplaced, as, in that case the Supreme Court was dealing with the aspect of past experience requirement that the bidder had to fulfil, and not the financial capacity requirement as in the present case. Secondly, in that case, the Supreme Court found that the advertisement “when read with the notice for inviting tenders dated 26-4-1993 does not preclude adoption of this course of action.” The Supreme Court found nothing in the tender conditions to contra-indicate against the clubbing of the past experience of the joint venture partners. However, the situation is just to the contrary in the present case. The tender conditions aforesaid do not permit the aggregation of the net worth of the members of the JVbidder. Thus, the decision in New Horizon Ltd. (Supra) is of no avail to the petitioner.

36. Consequently, and for the reasons stated above, the writ petition is dismissed.

JASMEET SINGH, J VIPIN SANGHI, J JANUARY 12, 2022/ „ms‟