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As per the Para 13.2(j) of Preliminary Information Memorandum (PIM), only where winding up or insolvency proceedings or other proceedings of similar nature are pending against a member of Consortium (i.e. IB) and/or Affiliate (only in case where a member of Consortium was taking benefit of financial strength of such Affiliate), would such Consortium be disqualified in terms of PIM. These were stated by High Court of Delhi, consisting Justice Hon’ble Chief Justice and Justice Jyoti Singh in the case of Dr. Subramanian Swamy vs. Union of India & Ors. [W.P.(C) 15240/2021] on 06.01.2022.

The facts of the case are that the process of disinvestment of Air India and its subsidiaries commenced in June, 2017, with the in-principle approval of Cabinet Committee on Economic Affairs (CCEA). A policy decision to disinvest was taken after following the transparent procedure through multi-layered decision making. Advertisements inviting bids mentioned that the Government would cease to be responsible for loss after the date of disinvestment, as brought out in the documents annexed with the writ petition. In the light of excessive debt and other liabilities of Air India, arising out of huge accumulated losses, the bidding construct was revised in October, 2020 to allow the prospective bidders an opportunity to resize the balance sheet and increase chances of receiving bids and competition. The bids were invited on the basis of the revised construct for total consideration for equity and debt. Further, it was clearly advertised and made known that the sum of certain identified current and non-current liabilities (other than debt) would be retained in Air India and would be equal to the sum of certain identified current and non-current assets of Air India. The balance debt, over the debt quoted in Enterprise Value bid and excess liabilities, over and above the value of identified current and noncurrent assets, for the pre-disinvestment period, would be transferred to an identified Government Company.

The Petitioner contended that the Air India Disinvestment process is arbitrary, unconstitutional, unfair, discriminatory and unreasonable and the same cannot be sustained in law. Process is also violative of Article 14 of the Constitution of India as well as against the interest of National integrity and security for the reason that there is an on-going investigation against Air Asia (India) Private Limited, wherein one of the shareholders was Air Asia Investment Limited, Malaysia and they exercise direct and indirect control over Respondent No.6. It was next submitted that the Consortium led by Mr. Ajay Singh, the Principal shareholder, Chairman and Managing Director of SpiceJet Limited had a pending litigation against him, filed by a decree holder under Order 39 Rules 1 and 2 CPC. Mr. Ajay Singh was one of the two bidders who was disqualified under Clause 13.2 of PIM. It was therefore, urged that since there were only two financial bids, out of which one bidder was the Consortium led by Mr. Ajay Singh, effectively the bidding process was a mere sham only to fulfil the technical requirement of there being more than one bidder. It is obvious that the whole process was collusive and tailored to facilitate Respondent No.6 acquire Air India. Therefore, the petitioner seeks a direction for quashing the Air India disinvestment process as also directing Central Bureau of Investigation (CBI)/Respondent No.5 to investigate into the role and functioning of the official Respondents, involved in the disinvestment process.

The Learned Solicitor General of India appearing on behalf of Respondents submitted that the fundamental premise on which the Petition is predicated is that there is an on-going investigation against AirAsia (India) Private Limited, wherein one of the shareholders is AirAsia Investment Limited, Malaysia and they have a direct and indirect control over Respondent No.6. This according to the learned Solicitor General, was an incorrect assumption as factually neither AirAsia (India) Private Limited nor Air Asia Investment Limited, Malaysia had a direct or indirect control over Respondent No.6. AirAsia (India) Private Limited had no interest in Respondent No.6. As a matter of fact and record, Respondent No.6 was a wholly owned subsidiary of M/s Tata Sons Ltd. It was also submitted that even as per the Petitioner there was no charge sheet filed by any Government Agency against AirAsia (India) Pvt. Ltd. or Respondent No.6 or Tata Sons Ltd and thus no ground for disqualification is made out against Respondent No.6, as per the criteria set out in the PIM. It was submitted that the criteria for disqualification had been specifically prescribed in the PIM and was strictly applied in the bidding process.

The High Court of Delhi held that SpiceJet Limited was neither a member of the Consortium nor an “Affiliate” on whose net worth any of the members of the Consortium had relied on to meet the financial capability criteria prescribed under PIM. As per the said criteria under PIM, only where winding up or insolvency proceedings or other proceedings of similar nature are pending against a member of Consortium (i.e. IB) and/or Affiliate (only in case a member of Consortium was taking benefit of financial strength of such Affiliate), would such Consortium be disqualified in terms of PIM. However, as brought out by the Respondents, SpiceJet Limited was not a member of the Consortium and thus, any proceedings pending against SpiceJet Limited was of no consequence and hence, would not result in disqualification of the Consortium, having Mr. Ajay Singh, as the lead member also there was no material on record which would support the allegations of the Petitioner that Respondent No.6 was aware of the Consortium’s bidding strategy. The Court observed the writ petition to be wholly devoid of merit and thus, was accordingly dismissed along with the pending application.

Judgment reviewed by Shristi Suman. Read Judgment