IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH MONDAY, THE SIXTEENTH DAY OF JUNE TWO THOUSAND AND FOURTEEN Present HON’BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION No.15380 of 2014 Between:
Naidu Brothers Transport, a partnership firm, Registered under Section 58 (i) of Indian Partnership Act, 1932, Rep. by its working partner Sri Thammina Naidu, S/o. Appa Rao, Aged 46 years, R/o. 24-110-27 (1), Kanithi Road, China Gantyada, Gajuwaka, Visakhapatnam District.
.. Petitioner AND M/s. Bharath Petroleum Corporation Ltd., A Company registered under Indian Companies Act, Office situated at Bharat Bhavan II, 5th Floor, 4 & 6, Currimbhoy Road, Ballard Estate, Mumbai, Rep. by its Managing Director & 7 others .. Respondents The Court made the following:
HON’BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION No.15380 of 2014 ORDER:
Bharath Petroleum Corporation Limited (respondent Corporation) issued tender notification, dated 04.02.2014, calling for willingness in submission of tender forms for transportation of bulk white oil products. 07.03.2014 was the last date for submission of tender schedules. The petitioner submitted his tender schedule enclosing all the relevant documents. The technical bid was opened and having found certain deficiencies, the petitioner was informed vide letter, dated 02.04.2014, to attend to the deficiencies noticed. Accordingly, on 08.04.2014, the petitioner rectified the deficiencies. Thereafter, as the petitioner was not informed of any further developments, the petitioner sent e-mail, dated 13.05.2014, requesting the status of tender process. It appears that on 14.05.2014, a reply was given to the petitioner by way of reply e-mail. Another e-mail was sent on 28.05.2014 referring to the earlier e-mail. The petitioner vide e-mail, dated 14.05.2014, was informed that on scrutiny of documents, it was noticed that the firm had a partnership comprising of 21 partners and the number of partners are in excess of the mandatory limit of 20 partners as prescribed by the Companies Act, 1956, applicable as on 07.03.2014 and, therefore, the petitioner’s tender was not processed further. On 16.05.2014, bids were opened. Since the petitioner’s bid was not accepted on account of the deficiency noticed, he was not subject to further selection process. This writ petition is instituted aggrieved by the replies given to the petitioner, dated 14.05.2014 and 28.05.2014.
2. Learned counsel for the petitioner submits that the rejection of the application on the ground of the composition of the petitioner’s firm as violative of Companies Act, 1956, is illegal. He further contends that the petitioner was not informed about this irregularity in the application submitted by him when he was asked to comply with certain other deficiencies vide letter, dated 12.04.2014, and if only the petitioner was informed of the same deficiency, he would have rectified. The learned counsel further contends that many of the partners were inducted as a matter of course and in law they could not have been treated as partners of the petitioner firm and the petitioner firm would have taken steps to delete those names and once those names are deleted, the composition of the partnership firm could have been less than 20.
3. Sri O. Manohar Reddy, learned Standing Counsel representing the respondent Corporation submits that Section 11(2) of the Companies Act, 1956, prohibits forming of an association or partnership exceeding 20 partners unless it is registered as a company under the Companies Act, 1956. This provision was in force when the tender notification was issued and when the petitioner submitted his tender. Thus, the petitioner’s firm was disqualified on this ground and, therefore, the question of recognizing the petitioner as a firm and an eligible person to participate in the tender process does not arise and, therefore, the decision of the respondent Corporation was valid. The learned Standing Counsel for the respondent Corporation also placed reliance on decisions of Supreme Court in the cases of BADRI PRASAD AND OTHERS Vs.
[1] NAGRIMAL AND OTHERS
and COMMISSIONER OF INCOME-TAX, PUNJAB, H.P., J. AND K. AND SIMLA Vs. M/s.
[2] CHANDER BHAN HARBHAJAN LAL
. Learned Standing Counsel for the respondent Corporation, therefore, submits that since there is inherent lack of eligibility of the petitioner to process the tender and, therefore, the petitioner is not entitled to any relief and the writ petition is liable to be dismissed.
4. The mandate of Section 11(2) of the Companies Act, 1956, is very clear and admittedly, when the tender was submitted by the petitioner firm, it had 21 partners. Thus, the forming of partnership firm having 21 partners is ex facie illegal and it is not a firm in law. The Companies Act, 1956, is repealed and the new Act has come into force called “the Companies Act, 2013”. Section 464 of the new Act is similar to the provision contained in Section 11 of the old Act. However, the membership of partnership firm is now enhanced to 100 in the new Act. However, this provision of the new Act has come into force with effect from 01.04.2014. Thus, a partnership can be formed consisting of upto 100 members as partners without registering the same as a company under the Companies Act, 1956, if such a firm is formed after 01.04.2014. Admittedly, the firm was in existence when tender applications were submitted and on the day when the applications were submitted, the old Act was in force and as per the old Act, the maximum limit is 20. Thus, the petitioner suffered the inherent eligibility criteria to participate in the tenders.
5. In BADRI PRASAD’s Case (Supra 1), the provision in Section 11(2) of the Companies Act, 1956, has fallen for consideration. A preliminary objection raised was considered by the Supreme Court and held as under:
“The first contention that respondent no. 1 should not be allowed to raise an objection of the kind which he has now raised at this late stage can be disposed of very easily. The objection taken rests on the provisions of a public statute which no court can exclude from its consideration. The question is a pure question of law and does not require the investigation of any facts. Admittedly, more than twenty persons formed the Association in question and it is not disputed that it was formed in contravention of S. 4(2) of the Rewa State Companies Act, 1935. A similar question arose for consideration in Surajmull Nagoremull v. Triton Insurance Co. Ltd., 52 Ind App 126: (AIR 1925 PC 83). In that case sub-s. (1) of S. 7 of the Indian Stamp Act (II of 1899) was pleaded as a bar before their Lordships of the Privy Council, the section not having been pleaded earlier and having passed unnoticed in the judgments of the courts below. At p. 128 (of Ind App): (at p. 84 of AIR) of the report Lord Sumner said:
“The suggestion may be at once dismissed that it is too late now to raise the section as an answer to the claim. No court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which a court can be dispensed by the consent of the parties, or by a failure to plead or to argue the point at the outset: Nixon v. Alibion Marine Insurance Co., (1867) 2 Ex 338. The enactment is prohibitory. It is not confined to affording a party a protection, of which he may avail himself or not as he pleases.”
In Shiba Prasad Singh v. Sirish Chandra Nandi, 76 Ind App 244: (AIR 1949 PC 297) the provisions of S. 72 of the Indian Contract Act were overlooked by the High Court, the section was only mentioned in passing by the Subordinate Judge and it appears that the bar of S. 72 of the Indian Contract Act was not argued or only faintly argued before the Subordinate Judge or in the High Court. In these circumstances, their Lordships of the Privy Council held that they were unable to exclude from their consideration the provisions of a public statute. In our view, the same principle applies in the present case and S. 4(2) of the Rewa State Companies Act, 1935, being prohibitory in the nature cannot be excluded from consideration even though the bar of that provision has been raised at this late stage.”
6. In COMMISSIONER OF INCOME-TAX, PUNJAB, H.P., J. AND K. AND SIMLA’s Case (Supra 2), the Supreme Court held as under:
“24. A further question which arises on the particular facts of this case is whether the Rupar firm can be aid to have legal existence because its real partners are not merely 14 persons but there are 7 persons in addition to that number. Under the provisions of S. 11 of the Companies Act., 1956 (S.4 of the 1913 Act) where the number of partners exceeds 20 the firm has to be incorporated and that is admittedly not what has been done here. If, therefore, the number is in excess of 20 the firm being unincorporated it cannot be said to have a legal existence. Unfortunately the Income-tax Appellate Tribunal has not discussed the facts and circumstances of this case but dismissed the second appeal preferred by the appellant on the short ground that there was no merit in it in view of the decisions cited by it. It was necessary for the Tribunal to ascertain whether on the facts of this case those decisions concluded the matter. The questions which arise are in my opinion, substantial between the parties and are not settled. For these reasons I allow the appeal, set aside the judgment of the High Court and direct the Tribunal to refer the question earlier set out to the High Court. Costs sol far incurred will abide the result.”
7. As rightly contended by the learned Standing Counsel for the respondent Corporation, Sri O. Manohar Reddy, the petitioner suffered the disqualification at the time of submission of tender application and, therefore, the petitioner is not entitled to any relief. That is informed to the petitioner by the respondent Corporation, which is in compliance of statutory mandate and, therefore, there is no error in the decision taken by the respondent Corporation in disqualifying the petitioner’s tender.
8. There is no merit in the contentions and the Writ Petition is dismissed. There shall be no order as to costs. Miscellaneous petitions, if any, pending in this writ petition, shall stand closed.
P.NAVEEN RAO, J Date: 16th June, 2014 KL HON’BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION No.15380 of 2014 Date: 16th June, 2014 KL
[1] AIR 1959 SUPREME COURT 559
[2] AIR 1966 SUPREME COURT 1490