‘Prior Experience Of LLP Partner As Proprietor Can Be Considered As Experience Of LLP’: Bombay High Court
The Bombay High Court has held that the experience of a proprietor who becomes a partner in a Limited Liability Partnership (LLP) can be considered for evaluating the LLP’s eligibility in a public tender, even in the absence of a notarized business transfer agreement.
The division bench of Chief Justice Alok Aradhe and Justice Sandeep V. Marne held that the rejection of the petitioner’s bid as “non-responsive” was arbitrary and directed the tendering authority to open the financial bid and proceed with renegotiation between the lowest two bidders.
The Court was dealing with a petition filed by Nandkumar Infrastructure LLP, which challenged the rejection of its bid for road maintenance work, and the decision of the tendering authority to declare another bidder as successful. The petitioner’s bid had been rejected on the ground that it failed to submit a notarized Business Transfer Agreement to evidence the transfer of experience and credentials from the sole proprietorship M/s. Nandkumar Constructions to the LLP.
The petitioner argued that the sole proprietor of M/s. Nandkumar Constructions had become a partner in the LLP and the merger of experience was valid. Relying on the Supreme Court’s decision in New Horizons Ltd. v. Union of India [(1995) 1 SCC 478], and various high court rulings, the petitioner submitted that the experience of a partner must be treated as the experience of the firm. The counsel further contended that a notarized business transfer agreement was never mandated under the tender documents.
The State and the successful bidder opposed the petition, arguing that LLPs are distinct legal entities under Section 23 of the Limited Liability Partnership Act, 2008, and that the petitioner failed to follow the statutory merger procedures under Section 60 of the Act.
The Court, however, rejected these objections and held that the principle laid down in New Horizons Ltd. was applicable even to LLPs. It observed that once the proprietor of the earlier entity becomes a partner in the LLP, the firm is entitled to claim such experience. The Bench noted:
“provisions of Section 23 of the Act would not make inapplicable to a LLP, the principle of reckoning an experience of partner prior to his entry into partnership firm as experience of the firm… Once the principle of reckoning of experience of a proprietor after his entry into LLP as experience of the LLP is recognized, whether there is actual merger of business or not becomes irrelevant.”
The Court further observed that the petitioner had qualified the eligibility criteria and the rejection was legally untenable. However, as the petitioner’s financial bid had not been opened, the Court directed both the petitioner and the declared successful bidder to participate in a renegotiation process.
Consequently, the writ petition was partly allowed.
Case Title: Nandkumar Infrastructure LLP v. The Superintendent Engineer & Ors. [Writ Petition No. 13895 of 2024]
