Delhi High Court stays SECI debarment of Reliance Power over fake bank guarantee

The Delhi High Court on Tuesday stayed a communication issued by Solar Energy Corporation of India (SECI) debarring Anil Ambani-owned Reliance Power Limited from participating in its bids for three years, on the ground that its subsidiary furnished a fake bank guarantee. [Reliance Power Limited v. Solar Energy Corporation of India]

Justice Tara Vitasta Ganju found that the order of debarment was issued without hearing Reliance Power and is therefore entitled to be stayed.

“Action like blacklisting is drastic, show cause notice has to be issued before doing it,” she said. 

On November 6, SECI debarred Reliance Power and its subsidiary, Reliance NU BESS Limited, from participating in its tenders for three years. This action was taken following irregularities in a tender for a Battery Energy Storage System (BESS) project.

The communication uploaded on the website stated that during the evaluation, SECI found that the endorsement for a bank guarantee submitted by Reliance NU BESS was fake. Since this was discovered after the e-reverse auction, SECI annulled the tendering process. According to the tender conditions, submitting fake documents disqualifies the bidder from future SECI tenders.

Furthermore, it stated that the investigation revealed that Reliance NU BESS relied on its parent company to meet financial qualifications. SECI concluded that Reliance Power was involved in critical decision-making for its subsidiary, therefore justifying its debarment.

SECI later issued a show cause notice to Reliance Power on November 13.

During the course of the hearing, counsel for Reliance Power argued that it was not granted any opportunity to be heard and a debarment of this nature will amount to debarring it from the business as a whole.

He further cited Supreme Court judgments which held that a subsidiary company does not lose its identity as a separate legal entity if the parent company only has a nominal majority in the subsidiary's share capital.

It was also argued that SECI did not follow the principles of natural justice before passing such a drastic order. He clarified that he was not pleading the case of the subsidiary, and sought no relief on its behalf. 

Counsel for SECI sought time to take instructions on the issue. Reliance Power's lawyer, however, insisted that every passing day would amount to a loss for company as this debarment has a cascading effect in its other operations as well.

The Court eventually decided to stay the communication of debarment and the public notice uploaded on the website till the next date of hearing on December 4. 

Senior Advocate Rajiv Nayar, briefed by Agarwal Law Associates, represented Reliance Power Limited.

Senior Advocate Bharat Sangal appeared for SECI and was assisted by Advocate Babita Kuswaha.