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Informist, Monday, Sept. 1, 2025

 

NEW DELHI – The Delhi High Court has asked the government to examine the stipulation that barred companies, which underwent corporate insolvency resolution process in the last seven years, from participating in tenders. The high court was examining whether a tendering authority, while formulating tender conditions, should take into account provisions of the Insolvency and Bankruptcy Code, 2016, under which a company is resurrected as an ongoing concern by a successful resolution applicant.

 

The court was hearing a petition by Era Infra Engineering Ltd. against a condition issued by the Airports Authority of India to bar companies that had undergone insolvency in the last seven years from participating in its tender. The petitioner said that though all relevant laws were considered, the Insolvency and Bankruptcy Code, 2016 was simply overlooked by the government while formulating and drafting Manual for Procurement of Works, 2022. This manual provides instructions and templates for government departments and agencies to ensure public procurement of works is transparent, fair, and efficient. The petitioner said that the tender condition by the authority was an arbitrary and discriminatory stipulation, which ought to be either struck off or read down to treat the time spent by the company in the insolvency process as "zero period".

 

The high court said that it cannot introduce or delete any tender condition in the current petition filed under Article 226 of the Indian Constitution. It noted that petitioner Era Infra, in the present case, has not laid challenge to the offending Clause 1.8 of the Manual for Procurement of Works, 2022. "...We are not inclined to interfere in the present matter at this stage, however, (we) are of the considered opinion that the respondent/Union of India, also the tender issuing authority, must examine the aforesaid view expressed by us," said the court.

 

It asked the petitioner to submit its representation to the government and the airports authority in respect of the challenge laid before the court. Thereafter, the respondents will consider the representation in the light of views expressed by the court and dispose the case by Sept. 20.

 

The high court said that the Insolvency and Bankruptcy Code, 2016 was engrafted with the purpose to amalgamate many laws surrounding revival, resurrection and liquidation of various companies, to infuse fresh life into them, and rehabilitate it back into the mainstream industry as an "on-going concern".

 

Essentially, the efforts of the entire regime of 2016 code and all the stakeholders involved therein, is to evolve a methodology whereby a company which is a "corporate debtor", can be revived and resurrected to its previous health, said the court. The underlying object clearly appears to be to rid the "corporate debtor" of the previous unsuccessful management by introducing and involving an entity declared to be a successful resolution applicant, who would be given the task of reviving the corporate debtor as an "on-going concern" said the court.

 

"If that is the aim and purport of the IBC, 2016, it is necessary to underscore the fact that this law must and ought to be considered as a crucial component to Clause 1.8 of the said Manual for Procurement of Works, 2022, along with all other relevant laws," the court said.

 

Another crucial aspect to be considered is that the stakeholders involved in an "on-going concern" taken over by the successful resolution applicant would also include, perhaps, a large number of workers and employees apart from financial institutions, banks and other stakeholders whose existence may be fully dependent and contingent upon such ongoing concern being rehabilitated and revived, said the court. Though these may not be imperative considerations if examined purely from a commercial point of view, when the government is the sole authority formulating the public procurement policies and manuals and may many a times be the tender issuing authority, it may be a relevant consideration, to say the least, the court added.  End

 

Reported by Surya Tripathi

Edited by Nishant Maher

 

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