Karnataka High Court
The Government Of Karnataka vs M/S Gsj Envo Ltd., on 30 June, 2017
Bench: Chief Justice, P.S.Dinesh Kumar
IN THE HIGH COURT OF KARNATAKA
AT BENGALURU
Dated this the 30th day of June, 2017
PRESENT:
THE HON'BLE MR SUBHRO KAMAL MUKHERJEE,
CHIEF JUSTICE
AND
THE HON'BLE MR JUSTICE P S DINESH KUMAR
Writ Appeal No.825 of 2016
c/w
Writ Appeal No.487 of 2016 (GM-TEN)
IN WRIT APPEAL No.825 OF 2016:
BETWEEN:
THE GOVERNMENT OF KARNATAKA
REPRESENTED BY ITS CHIEF SECRETARY
VIDHANA SOUDHA
BENGALURU-560 001 ...APPELLANT
(BY SHRI.A.S.PONNANNA, ADDITIONAL ADVOCATE GENERAL
FOR SHRI.VIVEK HOLLA, HIGH COURT GOVERNMENT PLEADER)
AND:
1. M/s.GSJ ENVO LTD.,
JAYSONS INFRASTRUCTURE INDIA PVT. LTD. (J.V.)
12, SUMERU, M.N.KRISHNA RAO ROAD
NEAR CANARA BANK, BASAVANAGUDI
BENGALURU-560 004
2
REP. BY ITS AUTHORIZED SIGNATORY
V.M.VIJAYARAMU
2. THE CHAIRMAN
BENGALURU WATER SUPPLY AND
SEWERAGE BOARD
CAUVERY BHAVAN
BENGALURU-560 001
3. THE CHIEF ENGINEER (WWM)
BENGALURU WATER SUPPLY AND
SEWERAGE BOARD, 5TH FLOOR
CAUVERY BHAVAN
BENGALURU-560 001 ...RESPONDENTS
(BY SHRI.S.VIJAY SHANKAR, SENIOR ADVOCATE FOR
SRIMATI.H.R.RENUKA, ADVOCATE FOR RESPONDENT No.1;
SHRI.K.M.NATARAJ, SENIOR ADVOCATE FOR
SHRI.M.S.NARAYAN, ADVOCATE FOR RESPONDENT NOs.2 & 3)
THE WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED IN THE WRIT PETITION No.56872/2014 DATED
31/12/2015.
IN WRIT APPEAL No.487 OF 2016:
BETWEEN:
1. THE CHAIRMAN
BANGALORE WATER SUPPLY AND
SEWERAGE BOARD
CAUVERY BHAVAN
BANGALORE-560 001
REP. BY SHRI.S.M.RAMAKRISHNA (R2)
3
2. THE CHIEF ENGINEER (WWM)
BANGALORE WATER SUPPLY AND
SEWERAGE BOARD, 5TH FLOOR
CAUVERY BHAVAN
BANGALORE-560 001 ...APPELLANTS
(BY SHRI.K.M.NATARAJ, SENIOR ADVOCATE FOR
SHRI.M.S.NARAYAN, ADVOCATE)
AND:
1. M/s.GSJ ENVO LIMITED
JAYSONS INFRASTRUCTURE INDIA PRIVATE LIMITED (J V)
12, SUMERU, M N KRISHNA RAO ROAD
NEAR CANARA BANK, BASAVANAGUDI
BANGALORE-560 004
REPRESENTED BY ITS AUTHORIZED SIGNATORY
V.M.VIJAYARAMU
2. GOVERNMENT OF KARNATAKA
REPRESENTED BY ITS CHIEF SECRETARY
VIDHANA SOUDHA
BANGALORE-560 001 ... RESPONDENTS
(BY SHRI.S.VIJAY SHANKAR, SENIOR ADVOCATE FOR
SRIMATI.H.R.RENUKA, ADVOCATE FOR RESPONDENT No.1;
SHRI.A.S.PONNANNA, ADDITIONAL ADVOCATE GENERAL FOR
SHRI.VIVEK HOLLA, HIGH COURT GOVERNMENT PLEADER FOR
RESPONDENT No.2)
THE WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED IN THE WRIT PETITION NO.56872/2014 DATED
31.12.2015.
THESE WRIT APPEALS, HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON JUNE 14, 2017, COMING ON
FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S. DINESH
KUMAR, J., PRONOUNCED THE FOLLOWING:-
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JUDGMENT
These two appeals are presented by the State of Karnataka and the Bengaluru Water Supply and Sewerage Board ('BWSSB' for short) respectively, challenging the judgment and order dated December 31, 2015, passed by the Hon'ble Single Judge directing the appellants to act in pursuance of the letter of acceptance dated February 21, 2014, issued by the second appellant-BWSSB.
2. Briefly stated the facts of the case are, the BWSSB floated a tender on August 28, 2013, for construction and commissioning of a 192 MLD Intermediate Sewage Pumping Station at the Koramangala Sports Complex, Koramangala, Bengaluru. The envisaged project intended the successful bidder to design, supply and commission the project within a time bound period of 24 months and to maintain the same for a period of seven years. The estimated cost was Rs.44,05,47,810/-. There were two bidders, M/s GSJ Envo Limited ('M/s GSJ' for short) the writ petitioner-contesting 5 respondent herein and one M/s EMS Infra Com., Ghaziabad. The bid submitted by M/s EMS Infra Com., was rejected in the technical evaluation. The financial bid of the petitioner, after negotiation was for Rs.111,78,29,344/- which was about 154 % in excess of the estimated cost. BWSSB issued a letter of acceptance dated February 21, 2014 to the writ petitioner. On the very next day, namely the February 22, 2014, it was communicated to the writ petitioner, that the work was kept in abeyance. Finally, by a communication dated October 18, 2014, the BWSSB annulled the bid process. The writ petitioner challenged the same in the instant writ petition inter alia with a prayer for a writ of certiorari to quash the letter of annulment and for a further direction to give effect to the letter of acceptance.
3. The Hon'ble Single Judge quashed the annulment and directed the respondents to act in pursuance of letter of acceptance.
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4. We have heard Mr.A.S.Ponnanna, learned Additional Advocate General for the Government, Mr.K.M.Nataraj, learned Additional Solicitor General for the BWSSB and Mr.S.Vijaya Shankar, learned senior advocate for the writ petitioner.
5. Mr.Ponnanna made following submissions:
a) that the letter of acceptance was only an intimation and it was kept in abeyance on the very next day. Hence, there was no concluded contract. Clause-42.2 of the bid document mandates the successful bidder to sign a form of agreement. It is only after the parties execute a valid agreement that any right would accrue to a bidder;
b) that it is an admitted position that the tender was floated in terms of the Karnataka Transparency in Public Procurements Act, 1999 ('KTPP Act' for short). As per Section 18-A thereof, all procurements are required to be made in a single unified E-Procurement platform, whereas the BWSSB had notified the tender in a website 7 www.tenderwizard.com and the same is in violation of law;
c) BWSSB is directly under the control of the State Government. Section 15 of KTPP Act empowers the Government to give appropriate directions to the procuring entity, to maintain transparency;
d) Section 89 of the BWSSB Act provides that the State Government may issue directions to the Board as it may think necessary;
e) as writ petitioner was the sole successful tenderer for the financial bid, the first option for the procuring authority was to order for a fresh tender in compliance with the circular dated December 3, 2002 issued by the Government; and
f) the present writ petition is not maintainable inasmuch as the tender, if awarded, would be a commercial contract.
6. Amplifying his submissions, Mr.Ponnanna submitted that the financial bid of the writ petitioner was about 154 % in excess of the estimate. The Chief Secretary 8 having taken note of certain irregularities, directed an independent evaluation from the Karnataka Urban Water Supply and Drainage Board. The matter was considered at the highest executive level such as Additional Chief Secretary, Department of Housing and Urban Development, the Chief Secretary and the Chief Minister. On a careful assessment of the state of affairs, it was found appropriate by the Government to direct the BWSSB to call for a fresh tender. Issuance of such direction has been approved by the Chief Minister. In the circumstances, the Hon'ble Single Judge erred in summarily allowing the writ petition on the ground that the direction by the Chief Secretary was not a direction by the State Government.
He placed reliance on an authority in the case of Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and another reported in (2005)6 SCC 138.
With these submissions, he prayed for allowing these writ appeals.
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7. Mr.Nataraj, learned Additional Solicitor General, arguing on behalf of BWSSB submitted that there was no concluded contract and much less a statutory contract and therefore, the High Court in exercise of its power under Article 226 of the Constitution of India, cannot not interfere and examine the subject matter of the writ petition. He also reiterated the arguments with regard to Section 15 of the KTPP Act and prayed for allowing these appeals.
He placed reliance on the following authorities:-
i) Kisan Sahkari Chini Mills Limited and others v.
Vardan Linkers and others reported in (2008)12 SCC 500;
ii) M/s.Radhakrishna Agarwal and others v. State of Bihar and others reported in (1997)3 SCC 457; and
iii) Kerala State Electricity Board and another v.
Kurien E. Kalathil and others reported in AIR 2000 SC 2573.
8. Mr.Vijaya Shankar, learned senior advocate opposing these appeals submitted that there is a clear 10 distinction between a statutory contract and an executive contract. The contract in question is a statutory contract as the tender is floated by the BWSSB in order to set up a sewage pumping station, which is one of its main functions. Adverting to Section 89 of the BWSSB Act, he submitted that the State Government may give directions only with regard to statutory obligations of the Board and cannot interfere with the routine business of the Board such as floating a tender for a project.
9. He further submitted that writ petitioner is one of the most technically qualified companies, which can handle such projects. The water pollution in the city has reached an alarming level with many lakes getting polluted due to discharge of untreated sewage and other effluents. The delay in establishing this project has also contributed in increasing pollution levels in the lakes. The National Green Tribunal having taken cognizance of the level of pollution has injuncted flow of effluents into the lakes. Any further delay in 11 commissioning the instant project would be detrimental to the ecology of the city.
He placed reliance on the following authorities:
i) State of Haryana and others v. Lal Chand and others reported in AIR 1984 SC 1326;
ii) Delhi Development Authority and another v. Joint Action Committee, Allottee of SFS Flats and others reported in (2008)2 SCC 672; and
iii) Kumari Shrilekha Vidyarthi and others v. State of U.P. and others reported in (1991)1 SCC 212.
10. We have given our careful consideration to the submissions of the learned Counsel for the parties and perused the records.
11. The incontrovertible facts of the case are, after negotiations, the writ petitioner submitted it's financial bid which was 154% higher than the estimated cost. A letter of acceptance was given on February 21, 2014 and on the very next day, the work was kept in abeyance.
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12. The Chief Secretary, Government of Karnataka, having taken note of certain irregularities, referred the tender to the Managing Director of the Karnataka Urban Water Supply and Drainage Board ('KUWS & DB' for short) for his comments. Based on the report received from the KUWS & DB, the matter was examined by the Government at various levels including the Additional Chief Secretary, Department of Urban Development and the Chief Secretary. File notings disclose that it was recommended to direct the BWSSB to call for fresh bids.
13. After the approval of the Chief Minister, a direction was issued to the BWSSB, to call for a fresh tender.
14. Hon'ble Single Judge has framed following two questions for consideration:
(i) Whether a contract had come into existence?
(ii) Whether the Chief Secretary acting on behalf of the State Government, could have directed the BWSSB to cancel and annul the bid process?13
15. A careful perusal of the order impugned, would show that no finding is rendered with regard to the first question. With regard to the second question, the Hon'ble Single Judge, has, in substance, held that the direction issued by the Chief Secretary could not be construed as a direction by the Government and on that sole ground, summarily allowed the writ petition.
16. In the above background, we have examined the power of the State Government to issue directions to the BWSSB.
17. The statements and objects of BWSSB Act, 1964 would show that prior to the enactment of the said Act, the Head-works and the Rising Main of the Water Supply Scheme were under the control of the Government, whereas the distribution was under the control of the Bengaluru Municipal Corporation. In order to improve the water supply and the drainage system, the Board has been constituted 14 under the said Act. However, the Government have retained their power to issue necessary directions under Section 89 of the Act.
18. The writ petitioner has categorically pleaded in paragraph No.3 of the petition that the tender process is governed by the provisions of KTPP Act. Section 15 of the said Act also empowers the State Government to give appropriate directions to the procuring authority and Section 17 empowers the Government to obtain the information. The said provisions read as follows:-
"15. Power to give directions.- It shall be competent for the Government to give appropriate directions to the Procurement Entity or the Authorities under the Act in order to secure and maintain transparency at any stage of the process of procurement, and it shall be duty of the Procurement Entity or such authority to comply with the directions.
17. Power to obtain information. - Notwithstanding anything contained in this Act or in any other law for the time being in force, the 15 Government may with a view to ensuring transparency call for and obtain, from any authority under the Act, any information relating to any matter in the process of procurement".
19. As rightly pleaded by the State Government in their memorandum of appeal, Rule 36 of the Karnataka Government (Transaction of Business) Rules, 1977 requires all such issues specified in second Schedule to be placed for consideration of the Chief Minister, by the Secretary of the concerned Department. BWSSB falls under Urban Development Department. We have perused the Chief Secretary's note dated July 14, 2014 to the Additional Chief Secretary, Urban Development Department and the file notings including the approval accorded by the Chief Minister.
20. It is fairly well-settled that Officers of the Government function as limbs of the Government. [See Samsher Singh v. State of Punjab and another reported in (1974)2 SCC 831]. The Government while discharging their 16 executive and administrative functions involve an hierarchy of officials and the decision is taken by the highest executive in terms of the Transaction of Business Rules. We are satisfied, that in the instant case, in compliance with Rule 36 thereof, the matter was placed by the Secretary of the concerned Department (Additional Chief Secretary, Urban Development Department) before the Chief Minister, for his consideration and the Chief Minister has accorded his approval for issuance of a direction.
21. Therefore, in our considered view, the direction issued was by the Government and the same is in consonance with the Transaction of Business Rules.
22. Learned Counsel for the parties canvassed arguments with regard to the statutory nature or otherwise of the contract in question. But, in view of the fact that the Hon'ble Single Judge has adverted only to the aspect with regard to issuance of directions by the Government, we have not examined the nature of the contract.
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23. However, we may record that the bid document annexed to the writ petition contains the terms and conditions which would govern the contracting parties. Clause-20 in Section 3, Part II of the bid document provides for resolution of disputes through Arbitration under the provisions of the Indian Arbitration and Conciliation Act, 1996. The parties having agreed on a particular methodology of resolution of disputes, in our view, the petitioner shall not be entitled for any relief under the writ jurisdiction.
24. It was vehemently contended by Shri Vijaya Shankar, learned Senior advocate that the writ petitioner possesses high technical expertise in the field and delay in implementation of this project has contributed in further de- generation of lakes in the City. We are also conscious of the alarming situation. Therefore, it would be in the best interest of the City, if the project is implemented post haste. However, this Court cannot remain oblivious of the fact that the project was envisaged in the year 2013 and estimates were prepared 18 based on the schedule of rates for the year 2010-2011. Reckoned from the date of notification, nearly four years have passed by. We may also take a judicial note that there would be obvious escalation in costs. Keeping in view the importance of the project, during the course of hearing, we did call upon the learned Counsel for the parties if a consensus could be arrived at between the parties to implement the project. There was no answer in the positive from the appellants. However, Mr.Vijaya Shankar expressed an apprehension that the appellants may also black-list the writ petitioner firm. In reply, Mr.K.M.Nataraj and Mr.Ponnanna jointly assured this Court that no such action was contemplated.
25. In the circumstances, we trust and hope that the appellants shall take immediate further action to implement the project.
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26. In the premise, in view of our finding that the direction issued by the Government is in accordance with the Transaction of Business Rules, we pass the following:
ORDER
(i) Appeals No.825 of 2016 and 487 of 2016, are allowed;
(ii) Judgment and Order dated December 31, 2015, passed by the Hon'ble Single Judge, is set aside;
(iii) Costs made easy.
27. In view of disposal of these appeals, all pending interlocutory applications in both appeals stand disposed of.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE Yn/cp*