HON’BLE SRI ANIL R. DAVE, THE CHIEF JUSTICE AND HON’BLE SRI JUSTICE R. SUBHASH REDDY WRIT APPEAL No.412 of 2008 Dated: 24.09.2009 Between: Ghanta Infrastructures Ltd., Hyderabad, rep. by its Director M.Raghuveer. …..Appellant/writ petitioner And Asset Reconstruction Company (India) Ltd (ARCIL), Mumbai, rep. by its Managing Director Mr.S.Khasnobis & others. …..Respondents/Respondents HON’BLE SRI ANIL R. DAVE, THE CHIEF JUSTICE AND HON’BLE SRI JUSTICE R. SUBHASH REDDY WRIT APPEAL No.412 of 2008 JUDGMENT : The original petitioner in W.P.No.8223 of 2007 has filed this writ appeal under Clause 15 of Letters Patent, aggrieved by the judgment of the learned Single Judge, dismissing its writ petition. 2. The writ petition in W.P.No.8223 of 2007 was filed, seeking directions by way of Mandamus, declaring the proceedings in ARG-II/PJ/FY07/04568, dated 12th December 2006, and the consequential Proceedings in ARG-I/PJ/FY07/04730, dated 22nd December 2006 of respondent No.1 i.e. Asset Reconstruction Company (India) Ltd. (hereinafter referred to as ‘ARCIL’), and consequently, seeking directions to the 1st respondent- Company to accept the bid of the petitioner in respect of the business and assets of the 3rd respondent-Company. By the aforesaid proceedings, dated 12th of December 2006, the 1st respondent-Company has informed the 5th respondent that its bid in respect of financial assets pertaining to the 3rd respondent-Company, is accepted. In further proceedings, dated 22nd of December 2006, the petitioner was informed that the Invitation for Expression of Interest (IEI) with regard to the 3rd respondent- Company, offered by the petitioner, has not been declared as successful. 3. The 3rd respondent-Company i.e. Spectrum Power Generation Ltd. (hereinafter referred to as ‘SPGL’), is a Company incorporated under the provisions of the Indian Companies Act, 1956 and is engaged in the business of generation of power, having set up 208 Mega Watts combined cycle gas based power project at Subbampeta village in East Godavari District of Andhra Pradesh. The authorized share capital of the petitioner-Company as per the last audited balance sheet as on 31st of March 2006, was Rs.2,35,00,00,000/-, divided into 23,50,00,000/- equity shares of Rs.10/- each. One Mr.M.Raghuveer and his family members, who were the promoters of the 3rd respondent-Company, have also floated the petitioner- Company for the purpose of showing their expression of interest to purchase the assets of the 3rd respondent- Company. The 3rd respondent-Company has several secured creditors such as IDBI, ICICI bank, IFCI etc. The banks and financial institutions, which are lenders of the 3rd respondent-Company, also had their nominee Directors on the Board of 3rd respondent-Company. In view of the recurring losses incurred by the 3rd respondent-Company, the banks and financial institutions took over its management after they converted a part of their debt into equity. After conversion of their debt into equity, they appointed their own Nominee Directors and inspite of such management also, the health of the 3rd respondent-Company deteriorated further, and there were accumulated losses to an extent of Rs.2,44,49,98,645/- as on 31st of March 2006, and the operating surplus generated every year, was not even sufficient to meet its interest obligation. The 1st respondent is a Company registered under the Companies Act, and also registered under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Securitisation Act’). The 1st respondent-ARCIL has acquired from IDBI, under an assignment agreement, dated 31st December 2005, and from ICICI bank under assignment agreement, dated 29.12.2005, the assignment of financial assistance granted to SPGL, together with all underlying security interest and all the rights, title and interest under various agreements entered into by SPGL with those banks. The said agreements were entered into in view of the powers conferred on it under Section 5 of the Securitisation Act, and in view of the said agreements, the 1st respondent-ARCIL is deemed to be the lender of the 3rd respondent-Company, and all the rights of IDBI and ICICI bank in relation to the financial assets and the underlying securities are vested with the 1st respondent-ARCIL. Similar such agreements were also entered into by various other banks namely, SBI, Punjab National Bank, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, etc. Consequent to entering into such agreements, 9 trusts were created in respect of the 3rd respondent-Company, and thus, by virtue of the aforesaid agreements, the 1st respondent- ARCIL has acquired the financial assets approximately to the tune of 77.6% of the total debt of SPGL and became entitled to enforce all the rights and obligations under various documents. The said Company, acting in the capacity of trustee of trusts as per the provisions of the Securitisation Act, had issued an invitation for expression of interest with a view to transfer the control of the 3rd respondent-Company by way of sale of business/assets in exercise of powers under Sections 5 (2) and 5 (3) of the Securitisation Act. The said invitation of expression of interest (IEI), dated 28th July 2006, was made through private circulation. As per the contents of the IEI, expressers were to outline the proposed transaction structure. Schedule-I of the IEI prescribed that the offer should be submitted in three parts; Part-I : Credentials of the Expressor, Part-II: Business Plan for SPGL and Part- III: Purchase Consideration for business/assets of SPGL. Pursuant to such invitation, the petitioner as well as the 6th respondent have expressed interest along with others. The petitioner expressed a non-binding interest on 11.09.2006 and binding final offer was made on 24.10.2006. The 6th respondent has also offered its bid through its Special Purpose Vehicle i.e. the 5th respondent, on 24.10.2006 and the further offer on 22.11.2006. After assessing the purchase consideration offered for the business and assets of SPGL and the future business plans quoted by the petitioner as well as the 6th respondent, the offer of the 6th respondent through its 5th respondent-Company, was accepted by the 1st respondent-ARCIL. Consequent to acceptance of the bid of the 5th respondent, the said Company was informed of the same, through the impugned proceedings dated 12th of December 2006 and it was asked to enter into further agreements. The petitioner-Company has questioned the acceptance of the bid offered by the 5th respondent and also the proceedings issued to the petitioner informing its bid to be unsuccessful, by way of filing W.P.No.8223 of 2007, on various grounds. The learned Single Judge, by his judgment, dated 23rd January 2008, has dismissed the said writ petition. Hence, this appeal by the writ petitioner. 4. The learned Single Judge, in his judgment, has detailed the various allegations of the petitioner as well as the averments in the counter affidavits filed by respondents in detail, as such, it is not necessary to mention them elaborately in this appeal. But mainly, it was the case of the petitioner in the writ petition that the 1st respondent-ARCIL, acting as a Statutory functionary under the provisions of the Securitisation Act, did not act fairly and accepted the bid of the 5th respondent illegally, though the offer of the petitioner was better offer than that of the 5th respondent. It was the case of the petitioner that the standards, which were applied for assessment of the bid of the 5th respondent and that of the petitioner were different and the bid of the 5th respondent was assessed in deviation to the conditions notified in IEI. It was its case that though the 6th respondent was the actual bidder, but ultimately, the 5th respondent-Company came into picture and the bid was accepted in favour of the 5th respondent, contrary to the terms and conditions of IEI. It was its case that as much as, as per the terms of the contract, the IEI was not transferable to any other bidder, the 1st respondent could not have allowed 6th respondent to submit bid in the name of 5th respondent and the same is in violation of the terms of IEI. It was also the case of the petitioner that the 1st respondent-ARCIL has applied two different yardsticks with a view to favour 5th respondent by not applying the same criteria and standards to the bid of the petitioner, and thus, acted arbitrarily and illegally in breach of its rights guaranteed under Article 14 of the Constitution of India. Though the petitioner has also submitted its expression of interest, but in the writ petition, a ground is also sought to be made out, attacking the very sale of business of 3rd respondent- SPGL in the absence of any guidelines framed by the Reserve Bank of India, on the ground that such action is in violation of the provisions under Securitisation Act. 5. The contesting respondents herein have filed detailed counters before the learned Single Judge, in the writ petition. It was the case of the 1st respondent that its invitation for expression of interest is purely in private contractual law realm, and it is neither a State nor other authority within the meaning of Article 12 of the Constitution of India, as such, the writ petition itself is not maintainable. In support of the same, it was its case that the intending purchasers are invited to express interest in respect of only the deliverables, which is evident from the terms of IEI itself, which read as under : (i) Secured Debt of S.P.G.L not less than 75% in value of the total debt either by way of consent as the secured creditor or by way of assignment of such debt with underlying security interest (provided that in case of assignment, the stamp duty, registration fees and any other tax, cess etc., applicable and payable on the same shall be entirely borne by the purchaser), and/or (ii) Procurement of exercise of voting rights in respect of 5,45,58,000/- number of Equity shares in equity capital of S.P.G.L of face value of Rs.10/- each held by Banks/Financial institutions (30.92% of total paid-up equity capital of S.P.G.L). (iii) Procure of exercise of pro-rata voting rights in respect of Promoters’ 2,65,00,000 number of shares held in equity capital of S.P.G.L of face value of Rs.10/- each pledged with lenders (15.01% of total paid-up equity capital of S.P.G.L)”. 6. Referring to above Clauses, it was its case that the 1st respondent-Company had offered to exercise and liquidate only its contractual rights as a lender and it was not exercising any Statutory Public duty. While denying the allegation of favoritism in favour of 5th respondent, it was its case that the offer given by the 5th respondent is better offer than that of the petitioner. By preparing a comparative statement, it was sought to be demonstrated that the offer of 5th respondent was a better offer, having regard to the terms and conditions of IEI. It was pleaded that the offer made by the 6th respondent through 5th respondent-Company has offered much larger sums payable to the secured creditors apart from its business plan to bring additional equity and funds for reviving the Unit by going in for expansion of the capacity to that of the existing capacity. Further, it was stated that the offer of the 5th respondent contemplates for conversion of equity capital into preference shares, which were redeemable at the end of 15 years. Further, pleading that having responded to the offer of the 1st respondent, petitioner is estopped from challenging such action of 1st respondent, and at the same time, further pleading that as the petitioner has already objected for the scheme of arrangement and sought approval in Company Petition No.43 of 2007 filed under Section 391 of the Companies Act, 1956, at the same time, cannot pursue the writ petition. Pleading that the acceptance of the bid of the 5th respondent is in accordance with the terms of IEI, and the final expression of bid offered by the petitioner is not in compliance with the deliverables as stipulated in IEI, sought for dismissal of the writ petition. 7. Further, it was the case of the 3rd respondent before the learned Single Judge that the majority of the secured creditors of SPGL had assigned/transferred their secured interest to ARCIL, which is withholding more than 75% of the secured bid advanced to SPGL, and thus, it is the major secured creditor of the SPGL. It was its further case that the SPGL, based on the terms and conditions of the sanctioned letter, dated 12th of December 2002, issued by ARCIL in favour of 5th respondent, filed Company Petition No.43 of 2007 before this Court with the scheme of arrangement, under Section 391 of the Companies Act, 1956 for approval. It was its further case that by order, dated 13th of February 2007, this Court directed for holding of meeting of shareholders and the secured creditors of SPGL for casting of votes on the said scheme and in the meeting held on 25th of March 2007, the scheme of arrangement for restructuring of the share capital of the secured debt of SPGL was passed by majority of 99.99% of shareholders with voting of 98.49% of secured creditors, who were present and voted. Further, pleading that in view of allowing of the Company Petition by this Court on 5th of October 2007, it was its case that the scheme of arrangement was also registered with the Registrar of Companies on 17th of October 2007, and consequently, the Board Meeting of SPGL was held on 12th November 2007, in which, further decisions were taken. 8. So far as 6th respondent is concerned, it was its case that as much as the bid was submitted by 5th respondent, which was accepted by the 1st respondent, it was neither a necessary nor a proper party and sought directions for striking off its name from the array of respondents. 9. Reply affidavits are also filed for the counters filed by the respondents herein. While denying the averments in the counters that the actions of respondents in inviting bids in the realm of the contracts, it was the case of the petitioner that as much as in view of the proposed actions for inviting bid for sale of business of SPGL, which involve much amount of public money in view of the involvement of interest of various Companies, it cannot be construed as a contract in private law realm. Further pleading that as the 1st respondent is discharging as a public duty under the provisions of the Securitisation Act, it is open to the petitioners to challenge such actions in this petition under Article 226 of the Constitution of India. 10. The learned Single Judge, by impugned judgment, on the question namely; whether the action challenged in the writ petition is amenable to writ jurisdiction of this Court for the purpose of judicial review, has held that the 1st respondent-Company is a creator of a Statute and is bound by the provisions of the Securitisation Act, 2002, as such, the plea of 1st respondent that its actions are not amenable to Writ Jurisdiction, cannot be accepted. While observing that the maintainability of writ petition and the scope of judicial review are two different aspects altogether, the learned Single Judge has held that the writ petition cannot be thrown out on the ground of maintainability. Coming to the merits and demerits of the offer of the petitioner as well as the 5th respondent, by taking note of various decisions of the Hon’ble Supreme Court, wherein the scope of judicial review is elaborately considered, it was held by the learned Single Judge that the bid of the 5th respondent is to be taken as a whole and cannot be viewed by splitting up the same, and also by noting the findings recorded in the order in C.P.No.43 of 2007, the various terms offered in the bid of the petitioner as well as 5th respondent, the learned Single Judge was of the view that the defence putforth by the ARCIL that both qualitatively and quantitatively the offer of the 5th respondent would be superior offer when compared with the petitioner, cannot be found fault and the conditions in the IEI as putforth by the 5th respondent also cannot be said to have been contravened in the light of the explanation offered by ARCIL. By further recording a finding that the series of events, if carefully examined, do not establish any favouritism on the part of ARCIL, and even in the general interest of shareholders, the decision cannot be found fault. Further, having found that the question of superiority or inferiority of the respective offers and the comparative study relating thereto, are the primary functions of ARCIL, and in the absence of any serious legal infirmities, the petitioner cannot assail the same on the ground of discrimination or on the ground of arbitrariness in the contest of Article 14 of the Constitution of India, seeking interference. While recording such findings, the learned Single Judge has declined to interfere with the decision taken by ARCIL. 11. Heard learned senior counsel Sri Uday Lalit for petitioner, Sri S.R.Ashok, learned Senior Counsel for the 1st respondent, Sri Ranjit Kumar, learned Senior Counsel for the 2nd respondent, learned Counsel Sri S.Ravi for the 3rd respondent, learned Senior Counsel Sri C.V.Mohan Reddy, for the 5th respondent, learned Senior Counsel Sri E.Manoher for the 6th respondent. 12. In this Writ Appeal, it is contended by Sri Uday Lalit, learned Senior Counsel representing the writ petitioner, at the outset, that the stand taken by the respondents that the writ petition is not maintainable, cannot be sustained as much as the 1st respondent has invited the IEI for sale of its assets and for the business plans, in exercise of powers under the provisions of the Securitisation Act, which is a Statutory function under the said Act, and as powers are floating out of Statutory provisions conferred under different provisions of the said Statute, the dispute will fall within the realm of public law, hence, the writ petition is maintainable. It is the further case of the learned counsel that in any event, as much as the 1st respondent-Company was discharging public functions, it is also amenable to writ jurisdiction. Coming to the merits of the case, it is submitted by the learned counsel that the very process undertaken by the 1st respondent for sale of assets of the 3rd respondent- Company and inviting business plans in the absence of any guidelines framed under Section 9 (b) of the Securitisation Act, is per se illegal, as such, the issuance of IEI and acceptance of the bid of the 5th respondent runs contrary to the provisions contained under Section 9 of the Act. It is further submitted that in any event, having regard to the offer of the petitioner herein, there is no reason or justification for accepting the bid of the 5th respondent in preference to the bid offered by the petitioner. It is submitted that the 1st respondent, in assessing the bids, has adopted different standards, to favour the 5th respondent and to exclude the bid of the petitioner, which is arbitrary, illegal and is in violation of the Constitutional rights guaranteed under Article 14 of the Constitution of India. It is submitted by the learned counsel that even in the contractual matters, it is now well settled that the actions of the authorities are subject to scrutiny for the equality rights guaranteed under Article 14 of the Constitution, as such, the action of 1st respondent in accepting the bid of the 5th respondent is illegal. Referring to comparative statement, as stated in the affidavit filed in support of the writ petition, it is submitted that there is no reason for accepting the bid of the 5th respondent, though the offer of the petitioner is better than that of the 5th respondent. While referring to the terms and conditions in the bid offered by the 5th respondent, it is stated that the offer made by the 5th respondent is a conditional one and the same is contrary to the terms and conditions of the IEI, but inspite of the same, the same is accepted contrary to the terms and conditions of the IEI itself. Referring to the findings recorded by the learned Single Judge, it is submitted that instead of independently considering the matter, the learned Single Judge has decided it only by giving due weightage to the findings recorded by the learned Company Judge in C.P.No.43 of 2007. With the above said contentions, the learned counsel seeks directions to nullify the action of respondent No.1 in accepting the bid of 5th respondent and to give consequential directions for accepting the bid of the petitioner. 13. The learned Senior Counsel Sri S.R.Ashok, appearing for the 1st respondent, explaining the various factors which led to accumulated losses of the 3rd respondent-Company and the further steps taken by the 1st respondent in issuing IEI, submitted that the action of the 1st respondent is a commercial transaction and the 1st respondent is the best authority to decide in between the bidding bidders as to which offer is best offer in the interest of the shareholders and the Company. It is the stand of the learned counsel that when the business proposals of the petitioner as well as the 5th respondent are comparatively assessed, the offer made by the 5th respondent was found to be the better offer when compared with the bid of the petitioner. It is also submitted by the learned counsel that pursuant to acceptance of the bid, there is a scheme of arrangement already formulated by the Company, which is also approved by the learned Company Judge in C.P.No.43 of 2007, and though objections are filed by the promoters of the petitioner-Company, there was no other better offer, and in that view of the matter, the scheme of arrangement is approved by the learned Company Judge. 14. The learned Senior Counsel Sri Ranjit Kumar, appearing for the 2nd respondent, also made submissions in furtherance of the stand taken by the learned Senior Counsel appearing for the 1st respondent. It is submitted by the learned counsel that the petitioner-Company is promoted by none other than the promoters of the 3rd respondent-Company, who are responsible for its losses, as such, they have no legal right to seek directions for accepting their bid, which is made through the petitioner- Company for purchase of the very same 3rd respondent-Company. It is submitted by the learned counsel that the promoters of the petitioner-Company, in individual capacity, have submitted their objections before the learned Company Judge and over-ruling such objections of the individual promoters of the Company, the learned Company Judge has already approved the scheme of arrangement. In that view of the matter, it is not open for the petitioner to raise the very same issue in the writ petition. It is submitted that in any event, it is not for the petitioner to comparatively assess and plead that its offer is better than that of the 3rd respondent. The 1st respondent has considered the bids offered by the petitioner, vis-à-vis, of the 6th respondent through its 5th respondent-Company and came to the conclusion that the offer of the 5th respondent is a better offer, as such, after critical analysis of various terms and conditions of the bid, the offer of the 5th respondent is accepted. It is submitted that the 1st respondent is only a Company registered under the Companies Act, 1956 and cannot be considered as neither a State nor an authority, and it is also not even a Government Company under Section 617 of the Indian Companies Act, 1956, so as to maintain a writ petition questioning the acceptance of the bid of the 5th respondent. It is submitted that invitation of bids by the 1st respondent is in relation to enforcement of the contractual obligations, as such, it is not for the petitioner to question the same in this writ petition filed under Article 226 of the Constitution. It is submitted that when the bids are invited, it is for the authority, which has invited the bids, to assess the relative merits