Kerala High Court
Palliyalil Ahamedkutty vs State Of Kerala on 1 March, 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. 22186 of 2017 (W)
----------------------------
PETITIONER(S):
-----------------------
PALLIYALIL AHAMEDKUTTY,
S/O.AHAMED MUSSILIYAR, MANAGING PARTNER,
M/S. MALABAR ASSOCIATES, CITY GATE,
BY PASS JUNCTION, KACHERIPADI,
MANJERI, MALAPPURAM DISTRICT, PIN 676121
BY ADVS.SRI.K.M.SATHYANATHA MENON
SMT.KAVERYS THAMPI
RESPONDENT(S):
--------------------------
1. STATE OF KERALA,
REPRESENTED BY SECRETARYTO GOVERNMENT,
PUBLIC WORKS DEPARTMENT, SECRETARIAT,
THRIUVANANTHAPURAM 695001.
2. THE SUPERINTENDING ENGINEER.
PUBLIC WORKS DEPARTMENT, NATIONAL HIGHWAY
(CENTRAL) CIRCLE, VYTTILA, KOCHI 19.
3. THE CHIEF ENGINEER,
PUBLIC WORKS DEPARTMENT,
(NATIONAL HIGHWAY) THIRUVANANTHAPURAM 695001.
BY ADV. GOVERNMENT PLEADER SRI.SURIN GEORGE IYPE
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 10-08-2017, THE COURT ON THE SAME DAYDELIVERED THE
FOLLOWING:
TS
WP(C).No. 22186 of 2017 (W)
-------------------------------------------
APPENDIX
PETITIONER(S)' EXHIBITS
---------------------------------------
EXHIBIT P1 TRUE COPY OF THE INVITATIONS FOR BIDS (IFB)
DATED 01.03.2017 ISSUED BY THE PUBLIC WORKS DEPARTMENT,
NATIONAL HIGHWAYS KERALA THROUGH THE 2ND RESPONDENT
EXHIBIT P2 TRUE COPY OF THE COMMUNICATION DATED 20.06.2017 ISSUED
BY THE 2ND RESPONDENT
EXHIBIT P3 TRUE COPY OF THE RELEVANT PAGES OF THE INSTRUCTION TO
BIDDERS PREPARED BY THE 1ST RESPONDENT
EXHIBIT P3(A):- TRUE COPY OF THE RELEVANT PAGES OF THE ENGINEERING,
PROCUREMENT AND CONSTRUCTION AGREEMENT WITH
RESPECT TO THE WORK REHABILITATION AND UP-GRADATION OF
NH-85 (OLD NH-49) FROM KM 119/017 TO KM 161/300(DESIGN
CHAINAGE KM 119/017 TO 160/800) (BODIMETTU TO MUNNAR) TO
TWO LANE WITH PAVED SHOULDERS IN THE STATE OF KERALA.
EXHIBIT P4 TRUE COPY OF THE GO(P) NO. 19/2016/FIN DATED 03.02.2016
EXHIBIT P5:- TRUE COPY OF THE RELEVANT PAGES OF THE ENGINEERING,
PROCUREMENT AND CONSTRUCTION AGREEMENT WITH
RESPECT TO THE WORK REHABILITATION AND UP-GRADATION OF
NH-85 (OLD NH-49) FROM KM 119/017 TO KM 161/300(DESIGN
CHAINAGE KM 119/017 TO KM 160/800) (BODIMETTU TO MUNNAR)
TO TWO LANE WITH PAVED SHOULDERS IN THE STATE OF
KERALA.
RESPONDENT(S)' EXHIBITS - NIL
-----------------------------------------------
/TRUE COPY/
PS TO JUDGE
TS
P.B. SURESH KUMAR, J.
========================
W.P.(C) No. 22186 of 2017
---------------------------------------------
Dated this the 10th day of August, 2017
JUDGMENT
Petitioner is a contractor. He is the successful bidder for execution of a work which is being managed by the State Government with the funds provided by the Ministry of Surface Transport, Government of India. Ext.P2 is the award in favour of the petitioner. The bid of the petitioner in respect of the said work was below the probable amount of contract (PAC) fixed in terms of the bid document. In terms of the award, the petitioner was directed by the employer concerned to furnish performance security as also additional performance security. The grievance of the petitioner in this writ petition concerns the additional performance security W.P.(C) No.22186 of 2017 -2- demanded from him in respect of the work referred to in the writ petition. According to the petitioner, 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 petitioner was directed to furnish additional performance security. It is the case of the petitioner that at any rate, he is liable to pay additional performance security only in accordance with Ext.P4 order of the W.P.(C) No.22186 of 2017 -3- Government. The petitioner has also a case that the direction in Ext.P2 award to furnish 50% of the performance security in the form of Treasury savings deposits is contrary to the terms contained in the Standard Bidding Document. The petitioner, therefore, challenges Ext.P2 award to the extent it directs him to furnish 50% of the performance security in the form of Treasury Savings Deposit and to the extent it directs him to furnish additional performance security. He also seeks a declaration that he is liable to pay additional performance security only in accordance with Ext.P4 order of the Government.
2. As per the interim order passed in this matter on 17.7.2017, the respondents were restrained from awarding the work to anybody else on account of the inability of the petitioner to comply with the impugned directions contained in Ext.P2 award.
W.P.(C) No.22186 of 2017 -4-
3. A counter affidavit has been filed by the respondents in the writ petition. The stand taken in the counter affidavit is that the demand of additional performance security from the petitioner is in accordance with the ITB. As regards the contention based on Ext.P4 order of the Government, it is stated in the counter affidavit that the same does not apply to work executed with the funds provided by the Ministry of Surface Transport, Government of India.
4. Heard the learned counsel for the petitioner as also the learned Government Pleader.
5. Ext.P4 provides that additional performance guarantee needs to be insisted from contractor executing public works only if his bid is below 10% of the probable amount of contract, whereas, the standard bidding document applicable to the work referred to in the writ petition provides that additional performance security can W.P.(C) No.22186 of 2017 -5- 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 work referred to in the writ petition is the work which is being executed by the State Government with the funds provided by the Ministry of Surface Transport, Government of India. The stand taken by the respondents in the counter affidavit is that such work is tendered in accordance with the standard bidding document prescribed by the Ministry of Surface Transport, Government of India. The petitioner does 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 petitioner has no case that general orders issued by the State Government for execution of work with the funds of the State Government W.P.(C) No.22186 of 2017 -6- have been made applicable for the works which are being executed with the funds of the Central Government. As such, the contention of the petitioner that he is liable to furnish additional performance security only in accordance with Ext.P4 is only to 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 W.P.(C) No.22186 of 2017 -7- 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. 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 the 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 W.P.(C) No.22186 of 2017 -8- 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 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 W.P.(C) No.22186 of 2017 -9- 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 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 W.P.(C) No.22186 of 2017 -10- 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 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 petitioner for furnishing additional performance security was, therefore, not in accordance with the Standard Bidding Document.
7. It is evident from Clause 34 of the ITB that performance security is contemplated in terms of the Standard Bidding Document only in the form of bank guarantee either from a nationalized bank or from a W.P.(C) No.22186 of 2017 -11- scheduled bank. The Standard Bidding Document does not authorise the employer to insist performance security in the form of Treasury deposits. The contention raised by the petitioner in this regard, is therefore, to be accepted.
8. The writ petition, in the circumstances, is allowed and Ext.P2 award, to the extent it directs the petitioner to furnish performance security in the form of Treasury deposits, is quashed. Likewise, Ext.P2 award to the extent it directs the petitioner to furnish additional performance security is also quashed. The petitioner is free to furnish performance security in the form of bank guarantee. It is, however, made clear that this judgment will not preclude the employer from directing the petitioner to furnish additional performance security in accordance with the provisions contained in clause 29.5 of the ITB, if the employer is of the opinion that the bid of the petitioner is seriously unbalanced. It is also made clear that if the W.P.(C) No.22186 of 2017 -12- petitioner fails 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 petitioner in respect of the works.
Sd/-
P.B. SURESH KUMAR JUDGE SKS //TRUE COPY// P.A. TO JUDGE