Kerala High Court
C.M.Ahammed Shafi vs State Of Kerala on 14 February, 2017
Author: P.B.Suresh Kumar
Bench: P.B.Suresh Kumar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
THURSDAY, THE 10TH DAY OF AUGUST 2017/19TH SRAVANA, 1939
WP(C).No. 21277 of 2017 (H)
----------------------------
PETITIONER:
-----------
C.M.AHAMMED SHAFI,
AGED 52 YEARS,
MANAGING DIRECTOR,
M/S. KUNDROLI BUILDERS AND
INFRASTRUCTURES PRIVATE LIMITED,
2ND FLOOR, KELAMBIKA TOWER (GATE WAY),
TISK, PONDA, GOA- 403 401.
BY ADVS.SRI.M.SASINDRAN
SRI.P.SASI
SRI.S.SHYAM KUMAR
RESPONDENT(S):
--------------
1. STATE OF KERALA,
REPRESENTED BY SECRETARY TO
GOVERNMENT, PUBLIC WORKS DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM-695001.
2. THE SUPERINTENDING ENGINEER,
PUBLIC WORKS DEPARTMENT,
NATIONAL HIGHWAY (NORTH) CIRCLE,
KOZHIKODE-673 001.
3. THE CHIEF ENGINEER,
PUBLIC WORKS DEPARTMENT (NATIONAL HIGHWAY),
THIRUVANANTHAPURAM-695001.
BY GOVERNMENT PLEADER SRI MANURAJ
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 4-08-2017,ALONG WITH WPC 21281/2017 THE COURT
ON 10.8.2017 DELIVERED THE FOLLOWING:
K.V.
WP(C).No. 21277 of 2017 (H)
----------------------------
APPENDIX
PETITIONER(S)' EXHIBITS
-----------------------
EXHIBIT-P1 TRUE COPY OF THE INVITATION FOR BIDS DATED 14/02/2017
EXHIBIT-P1(A) TRUE COPY OF THE INVITATION FOR BIDS DATED 20/02/2017
EXHIBIT-P2 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 16/2016-17
EXHIBIT-P3 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 17/2016-17
EXHIBIT-P4 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 21/2016-17
EXHIBIT-P5 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 22/2016-17
EXHIBIT-P6 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 24/2016-17
EXHIBIT-P7 TRUE COPY OF THE LETTER OF ACCEPTANCE ISSUED BY THE
2ND RESPONDENT WITH REGARD TO BID NO. 26/2016-17
EXHIBIT-P8 TRUE COPY OF THE RELEVANT EXTRACT OF THE STANDARD
BIDDING DOCUMENTS
EXHIBIT-P9 TRUE COPY OF THE G.O(P) NO. 19/2016/FIN.
DATE 03/02/2016
EXHIBIT P10 A TRUE COPY OF THE RELEVANT EXTRACTS FROM THE CPW
WORKS MANUAL 2014.
RESPONDENT(S)' EXHIBITS NIL
-----------------------
/TRUE COPY/
K.V. P.S.TO JUDGE
P.B. SURESH KUMAR, J.
========================
W.P.(C) Nos.21277 & 21281 of 2017
---------------------------------------------
Dated this the 10th day of August, 2017
JUDGMENT
Petitioners are contractors. They were successful bidders for execution of a few works which are being managed by the State Government with the funds provided by the Ministry of Surface Transport, Government of India. The bids of the petitioners in respect of the said works were below the probable amount of contract (PAC) fixed in terms of the bid documents. In terms of the awards, the petitioners were directed by the employer concerned to furnish performance security as also additional performance security. The grievance of the petitioners in these writ petitions concerns the additional performance security demanded from them in respect of W.P.(C) Nos.21277 & 21281 of 2017 -2- the works referred to in the writ petitions. According to the petitioners, performance security is demanded in terms of the Instructions to Bidders (ITB) which is part of the Standard Bidding Document prescribed by the Ministry of Surface Transport, Government of India; that bids below the Probable Amount of Contract (PAC) are treated as unbalanced bids in terms of ITB; that additional performance security is to be furnished in terms of the ITB in the case of unbalanced bids if the employer, after evaluation of the price analyses based on the materials available by the contractor, finds that the bid is seriously unbalanced and that price analyses in terms of ITB has not been undertaken by the employer before the petitioners were directed to furnish additional performance security. It is also the case of the petitioners that at any rate, they are liable to pay additional performance security only in accordance with Ext.P9 order of the Government, in W.P. W.P.(C) Nos.21277 & 21281 of 2017 -3- (C.) No.21277 of 2017. The petitioners, therefore, challenge the awards in their favour to the extent it directs them to furnish additional performance security. They also seek a declaration that they are liable to pay additional performance security only in accordance with Ext.P9 order of the Government in W.P.(C.) No.21277 of 2017.
2. By virtue of the interim orders passed in these matters, the petitioners were permitted to furnish additional performance security in the form of Bank Guarantee in accordance with Ext.P9 order in W.P.(C.) No. 21277 of 2017.
3. Counter affidavits have been filed by the respondents in the writ petitions. The stand taken in the counter affidavits is that the demand of additional performance security from the petitioners is in accordance with the ITB. As regards the contention based on Ext.P9 order of the Government, it is stated in the counter W.P.(C) Nos.21277 & 21281 of 2017 -4- affidavits that the same does not apply to works executed with the funds provided by the Ministry of Surface Transport, Government of India.
4. Heard the learned counsel for the petitioners as also the learned Government Pleader.
5. Ext.P9 in W.P.(C.) No. 21277 of 2017 provides that additional performance guarantee needs to be insisted from contractors executing public works only if their bid is below 10% of the probable amount of contract, whereas, the standard bidding document applicable to the works referred to in the writ petitions provides that additional performance security can be insisted, if the bid is below the probable amount of contract, in accordance with the provisions contained therein. It is beyond dispute that the works referred to in the writ petitions are works which are being executed by the State Government with the funds provided by the Ministry of Surface Transport, W.P.(C) Nos.21277 & 21281 of 2017 -5- Government of India. The stand taken by the respondents in the counter affidavits is that such works are tendered in accordance with the standard bidding document prescribed by the Ministry of Surface Transport, Government of India. The petitioners do not dispute the said fact. It is also beyond dispute that the standard bidding document prescribed by the Ministry of Surface Transport contains specific provisions for demand of performance security and also for demand of additional performance security. The petitioners have no case that general orders issued by the State Government for execution of works with the funds of the State Government have been made applicable to the works which are being executed with the funds of the Central Government. As such, the contention of the petitioners that they are liable to furnish additional performance security only in accordance with Ext.P9 Government order in W.P.(C.) No. 21277 of 2017 is only to W.P.(C) Nos.21277 & 21281 of 2017 -6- be rejected.
6. Clause 29.5 of ITB reads thus:
29.5 If the Bid of the successful Bidder is seriously unbalanced in relation to the Engineer's estimate of the cost of work to be performed under the contract, the Employer may require the Bidder to produce detailed price analyses for any or all items of the Bill of Quantities, to demonstrate the internal consistency of those prices with the construction methods and schedule proposed. After evaluation of the price analyses, the Employer may require that the amount of the performance security set forth in Clause 34 be increased at the expense of the successful Bidder to a level sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the contract.
Clause 34 of the ITB reads thus:
34.1 Within 21 days of receipt of the Letter of Acceptance, the successful Bidder shall deliver to the Employer a Performance Security in any of the forms given below for an amount equivalent to 5% of the Contract price plus additional security for unbalanced Bids in accordance with Clause 29.5 of ITB and Clause 52 of Conditions of Contract:
- a bank guarantee in the form given in Section 8; or
- certified Cheque / Bank Draft as indicated in Appendix.
34.2 If the performance security is provided by the successful Bidder in the form of a Bank Guarantee, it shall be issued either (a) at the Bidder's option, by a Nationalized/Scheduled Indian bank or (b) by a foreign bank located in India and acceptable to the Employer. W.P.(C) Nos.21277 & 21281 of 2017 -7- 34.3 Failure of the successful Bidder to comply with the requirements of Sub-Clause 34.4 shall continue sufficient grounds for cancellation of the award and forfeiture of the Bid Security.
It is evident from the clauses referred to above that additional performance security can be demanded by the employer only in accordance with clause 29.5 of ITB. Clause 29.5 of the ITB provides that if the bid of the successful bidder is seriously unbalanced in relation to the Engineer's estimate of the cost of work to be performed under the contract, the Employer may require the Bidder to produce detailed price analyses for any or all items of the Bill of Quantities, to demonstrate the internal consistency of those prices with the construction methods and schedule proposed. Clause 29.5 also provides that after evaluation of the price analyses, the Employer may require that the amount of the performance security set forth in Clause 34 be increased at the expense of the W.P.(C) Nos.21277 & 21281 of 2017 -8- successful Bidder to a level sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the contract. A combined reading of the aforesaid clauses would indicate beyond doubt that the employer is given the authority to direct the successful bidder to furnish additional performance security if the employer is of the opinion that his/her bid is seriously unbalanced. It is also evident from clause 29.5 of the ITB that in such cases, the employer may require the bidder to produce detailed price analyses for any or all items of the Bill of Quantities to satisfy that the bidder would be able to execute the work satisfactorily in terms of his bid. It is further evident from clause 29.5 of the ITB that the issue of furnishing additional security arises only if the employer cannot agree with the detailed price analyses furnished by the bidder. Though the expression used in the first sentence of clause 29.5 is, 'the employer may require W.P.(C) Nos.21277 & 21281 of 2017 -9- the bidder to produce detailed price analyses', in so far as the employer is expected to consider the issue whether the bidder would be able to execute the work in accordance with this bid, according to me, it is obligatory for the employer in such cases to call for the price analyses of the bidder for undertaking the price analyses provided for under the said clause. It is also evident from clause 29.5 of the ITB that in such cases, the successful bidder is liable to furnish additional security only to the extent sufficient to protect the employer against financial loss in the event of default of the successful bidder under the contract. It is, therefore, clear from clause 29.5 of the ITB that the employer cannot direct the successful bidder to furnish additional security unless the employer is satisfied that the price analyses of the successful bidder is not consistent with the construction methods and schedule proposed. In other words, there is no question of the employer directing W.P.(C) Nos.21277 & 21281 of 2017 -10- the bidder to furnish additional performance security before the price analyses provided for under clause 29.5 of the ITB is undertaken. Admittedly, the price analyses as provided for under clause 29.5 of the ITB has not been undertaken by the employer in the instant case. The demand made to the petitioners for furnishing additional performance security was, therefore, not in accordance with the Standard Bidding Document.
The writ petitions, in the circumstances, are allowed and the awards, to the extent it directs the petitioners to furnish additional performance security, are quashed. The Bank guarantee furnished by the petitioners towards the additional performance security in terms of the interim orders shall be returned. It is, however, made clear that this judgment will not preclude the employer from directing the petitioners to furnish additional performance security in accordance with the provisions W.P.(C) Nos.21277 & 21281 of 2017 -11- contained in clause 29.5 of the ITB, if the employer is of the opinion that the bids of the petitioners are seriously unbalanced. It is also made clear that if the petitioners fail to furnish additional performance security demanded in terms of clause 29.5 of the ITB, the employer will be free to terminate the contract or withhold the amount sufficient for the additional performance security from the bills payable to the petitioners in respect of the works.
sd/-
P.B. SURESH KUMAR JUDGE SKS //TRUE COPY// P.A. TO JUDGE