Karnataka High Court
M/S Gsj Envo Ltd Jaysons Infrastructure vs The Chairman on 31 December, 2015
Author: Anand Byrareddy
Bench: Anand Byrareddy
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 31ST DAY OF DECEMBER 2015
BEFORE:
THE HON'BLE MR. JUSTICE ANAND BYRAREDDY
WRIT PETITION No.56872 OF 2014 (GM-TEN)
BETWEEN:
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.
...PETITIONER
(By Shri S. Vijay Shankar, Senior Advocate for Shri K.L.Ramesh,
Advocate)
AND:
1. The Chairman,
Bengaluru Water Supply and
Sewerage Board,
Cauvery Bhavan,
Bangalore 560 001.
2. The Chief Engineer (WWM),
Bengaluru Water Supply and
2
Sewerage Board, 5th Floor,
Cauvery Bhavan,
Bangalore 560 001.
3. Government of Karnataka,
Represented by its Chief Secretary,
Vidhana Soudha,
Bangalore 560 001.
[respondent no.3 impleaded
Vide court order dated 9.11.2015]
... RESPONDENTS
(By Shri D.N.Prasad, Advocate for Shri V.Y.Kumar, Advocate for
Respondent Nos. 1 and 2;
Shri A.S.Ponnanna, Additional Advocate General, for Shri
Vijaykumar A Patil, Additional Government Advocate for
Respondent No.3)
*****
This Writ Petition is filed under Articles 226 and 227 of the
Constitution of India, praying to quash the letter/order dated
18.10.2014 at Annexure-L passed by the second respondent and
direct the respondents to give effect to the communication vide
Annexure-E dated 21.2.2014 which is a letter of acceptance by the
respondents.
This Writ Petition having been heard and reserved on
25.11.2015 and coming on for pronouncement of Orders this day,
the Court delivered the following:-
3
ORDER
The petitioner is said to be a joint venture company, engaged in works related to transmission of water, pumping and creation of gravity sewers and other related activity. It is claimed that M/s GSJ Envo Ltd, ( Hereinafter referred to as 'the GSJ' for brevity) is said to be a public limited company, which is said to have implemented projects across the world. It is said to have executed several projects in the city of Bangalore, worth over Rs.100 crore, each. Similarly, the other company, Jayson Infra India Private Limited ( Hereinafter referred to as 'the Jayson', for brevity), is also said to be engaged in such activity for over 25 years.
The respondent no.1, the Bangalore Water Supply and Sewerage Board, (Hereinafter referred to as 'the BWSSB', for brevity) is a statutory body constituted by the State Government of Karnataka, under the Bangalore Water Supply & Sewerage Act, 1964. ( Hereinafter referred to as 'the BWSSB Act' for brevity) It 4 is governed by the said Act and the Rules and Regulations framed thereunder.
2. In order to implement a project envisaging the Design, Construction and Commissioning of a 192 MLD Intermediate Sewage Pumping Station at the Koramangala Sports Complex, Koramangala , Bangalore, with funds provided by the Jawaharlal Nehru National Region Renewable Machine (JNNURM), the BWSSB had invited tenders to select an agency to implement the project, vide notification dated 28.8.2013. In terms of the same, the successful bidder was required to submit the bid offering to design, supply, construct, commission the project within 24 months and was required to provide operation and maintenance for seven years. The tender process was governed by the provisions of the Karnataka Transparency in Public Procurement Act, 1999 (hereinafter referred to as 'the Transparency Act', for brevity).
The petitioner is said to have submitted its bid as on 6.11.2013. The petitioner was one of the two bidders, who had 5 responded. The cost of the project was estimated at Rs.52.03 crore. This was on the basis of rates projected for the year 2010-11. The petitioner however, had estimated the value of the work as on the date of tender and had quoted Rs.112.91 crore as its offer. The offer of the other contender is said to have been rejected for not meeting the technical criteria.
The Tender Evaluation Committee had found that the technical bid of the petitioner satisfied the conditions prescribed and had recommended the opening of the price proposal. The Committee on opening the bid, had in its financial evaluation report opined that the bid was 130.68% higher than the estimated cost, and left it to the wisdom of the Board to take a final decision, while observing that the works did involve additional costs not taken into account in the estimate prepared.
The Board at its meeting dated 20.2.2014, accepted the negotiated bid of the petitioner at Rs.111.78 crore. A letter of acceptance was said to have been issued on 21.2.2014. The 6 petitioner had acknowledged the letter of acceptance, by a letter dated 22.2.2014.
But to the shock of the petitioner, a further letter dated 22.2.2014 was said to have been issued, cryptically stating that the work is kept in abeyance. The petitioner's attempts to ascertain the reason for this volte-face was not revealed. The petitioner was however, assured that the contract would be formally awarded and that it should continue to make preparations for commencement of the work.
It was learnt in retrospect, that the Board at a meeting held on 24.2.2014 had again examined the price proposal and had thought it fit to appoint an Expert Committee comprising its Engineer-in-Chief, Chief Engineer (Quality Assurance) & the Chief Engineer (Maintenance) along with the Executive Engineer (NI) as the Convenor. The said committee was to study the estimates, the scope of work etc., and were required to submit their report.
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The Expert Committee submitted its report, dated 9.5.2014, concluding as follows:
"8. Conclusions:
• Contract S2D is very essential and important to avoid open flow of sewage in the Koramangala Valley / in the drain. Unless the Contract S2D is commissioned ongoing work at upstream portion (Contract S2E1, S2E2 and S2E3) will go futile and the purpose of laying the sewers at upstream will not be served.
• It is to be noted that this is already 2nd tender Call. If the contract is to be retendered for the 3rd call, there is a chance that BWSSB may not be getting competitive bids. Further, it is to be noted that the estimates are to be revised as per SoR 2014-15 which would increase the cost of the work to be tendered. Moreover, there will be a substantial time loss. Hence it is required to negotiate the present bid in order to avoid further delay.
• In the initial stretches of the pipeline there are encroachments, working at those locations is tough and has to be carried out in hostile environmental conditions.8
• The quoted rate for pumping station, i.e 50 crore is reasonable when compared to the
contemporary works at Agaram pumping station as indicated in section 5. The capacity of Agaram pumping station is on lower side with respect to capacity and flow but still the awarded cost is on higher side (refer table shown in section 5) which was awarded 2 years earlier.
• Rate quoted for GRP pipeline is however above the estimated cost which is to be negotiated. Other Pipeline contracts for the Koramangala Valley were awarded with a tender premium of 32% to 43% as shown in section 6. Suitable negotiation may have to be made with the bidder.
• The important item included in the bid of the firm is consumption of diesel during power shutdown period of 7 years of Operation and Maintenance, which is not in estimate / tender so that the bidder can offer substantial rebate against his costing for fuel consumption.
• The cost of overall contract seems to be little on higher side, can be negotiated for reduction."9
It was in furtherance of the said report that the petitioner is said to have been called for further negotiations on the price quoted by it. The petitioner is said to have offered a further rebate of 1% of the contract value, on such further negotiations.
In the above background, the Chief Secretary, Government of Karnataka is said to have addressed the Managing Director, Karnataka Urban Water Supply and Drainage Board, by a letter dated 5.6.2014, seeking a report on the offer made by the petitioner. That officer in turn is said to have expressed that the petitioner does not fulfill the technical bid criteria and that the offer of the petitioner was high. Consequently, the Chief Engineer, BWSSB, is said to have annulled the bidding process by a cryptic letter dated 18.10.2014, which is said to have been received by the petitioner only as on 18.11.2014. Hence the present petition.
3. The learned Senior Advocate, Shri S. Vijayashankar, appearing for the counsel for the petitioner would contend that in terms of the express clauses found in the bid documents, 10 pertaining to the acceptance of the bid and formation of contract, it is clear that on issuance of the letter of acceptance, a contract is formed between the parties. It is pointed out that it is further made explicit that notwithstanding the absence of a formal deed of contract, the contract formed by the acceptance of the offer is irreversible and it was no longer possible to claim that the bid process was being annulled, as was done by the respondent, BWSSB. The bidding process was completed and thus could no longer be "annulled".
It is contended, that the petitioner has had to draw its conclusions in retrospect as to the conduct of BWSSB, as no reasons are assigned for the bidding process being annulled.
It is contended that the Scheme of the BWSSB Act envisages that the Board take all decisions as regards its functions and there is no scope for the intervention of the Government. In the instant case, the Government has chosen to intervene on the basis of a subjective opinion of an individual administrative 11 officer, on a highly technical topic. This action is whimsical and illegal and is opposed to the Transparency Act.
It is contended that the only provision under the BWSSB Act which envisages the participation of the Government in the affairs of the BWSSB, is Section 89 of the said Act. This provision only contemplates the Government issuing directions with regard to matters of policy, after due consultation with the Board. There was no policy decision involved. And the Chief Secretary who is an officer of the State, is not the State Government.
It is therefore contended that BWSSB being an instrumentality of the State was obliged to act fairly and transparently. The impugned action is thus violative of Article 19(1) (g) and Article 14 of the Constitution of India. The action of the respondents is unreasonable and wholly illegal.
4. In the Statement of Objections filed on behalf of the BWSSB, it is candidly admitted that the sequence of events as narrated by the petitioner is accurate, while adding that the Chief 12 Secretary had, on the basis of certain newspaper reports as to allegations of irregularities in the estimate and tender process, requested the Managing Director of KUWSS& D Board, another statutory body, to review the tender process and the offer made by the petitioner, while also directing the Managing Director, BWSSB, not to place the Expert Committee Report dated 9.5.2014, before the Board. Therefore, the Board did not have occasion to take a final decision as to the acceptance of the contract. Further, the direction issued by the Chief Secretary, to annul the bid process, was construed as a direction issued by the State Government and hence the impugned communication is said to have been issued.
5. The Additional Advocate General for Karnataka, Shri A.S. Ponnanna, would contend that the quote of the petitioner for the estimate works out to 154.01% above the estimated price of Rs.44 crore. Though a letter of acceptance was issued to the petitioner, no formal agreement was signed by the parties. On the very day of issuance of the letter of acceptance, the approval of 13 the same by the Board was kept in abeyance. This was for the reason that on an initiative of the Board, an Expert Committee having been appointed, to review the cost estimate for the project, had increased the same to Rs.81.72 crore, which was marginally reduced to Rs.78.68 crore by a technical consultant. This according to Shri Ponnanna, was wholly impermissible - as once the work is estimated and put to tender, it was not possible for the tender inviting authority to tamper with the estimated amount to suit the convenience of the bidders.
It is admitted that in the above background, the Chief Secretary had taken a conscious decision to direct the BWSSB not to finalize the contract. It is further stated that the Managing Director, KUWSSB, had in his report indicated the following discrepancies in the acceptance of the offer of the Petitioner by the BWSSB.
Firstly, that the tenders were invited by recourse to the 'Tender Wizard' platform, instead of the 'E-Procurement ' platform of the State Government, which was a procedural lapse. The 14 'tender wizard', is said to be a manual process of inviting tenders. It was pointed out the BWSSB , was one of the authorities notified under the Transparency Act, with effect from 17.6.2011. On the creation of the E-Procurement platform by the State Government, it was impermissible for any department of the Government to adopt any other methodology for procurement of goods and services. Secondly, it was opined that the petitioner did not fulfill the technical criteria of design, procurement, supply, construction and commissioning of the plant and machinery. The Technical evaluation Committee of the BWSSB, had, in its opinion, 'blindly' accepted the technical bid of the petitioner. Thirdly, it was held by the said officer, that once an estimate of the work is made and put to tender, there is no scope for varying the scope of work or the estimate. Fourthly, it was found that the revised offer of the petitioner was 154.44% above the amount put to tender and was hence higher than the permissible limits. Fifthly, it was opined that the BWSSB was completely lax in maintenance of its records and files, thereby defeating transparency.
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The above report is said to have been forwarded to the BWSSB for its comments. It is stated that after studying the report of the Managing Director KUWSS& D, and the reply of the BWSSB, had expressed shock at the manner in which the tender process had been conducted and had directed the cancellation of the tender. This it is claimed is in exercise of power under Section 15 of the Transparency Act. The said action is said to have been ratified by the Chief Minister of the Government of Karnataka. It is contended that this action is well within the scope of Section 89 of the BWSSB Act. It is contended that since no right had vested in the petitioner, in the absence of a signed agreement, there is no illegality in the cancellation of the bid process. It is alleged that respondents 1 & 2 had acted in violation of the law and had fraudulently accepted the bid of the petitioner.
6. By way of reply, it is contended by Shri Vijayashankar, that the objection as regards the quote of the petitioner having been found to be 154% above the estimate, is for good reason, as was accepted by BWSSB, on recognition of the glaring 16 circumstance that the BWSSB had prepared its estimate based on the rates prevalent in the year 2011-12 and not with reference to the rates in the year 2013-14. It was on its own revised estimate was at Rs.78.36 crore, which was about 42.65% above the estimate. Further, the work was actually to be executed during 2014-15. An Expert Committee consisting of several experts had reviewed the offer of the petitioner and had concurred with the estimated costs.
It is also to be seen that though the Board at its meeting of 20.2.2014 had not issued any direction to keep the letter of acceptance in abeyance, as per the minutes of the meeting, it is falsely claimed that it was so.
The claim there is a change in the scope of work, which was held to be impermissible, is also not true. There is no such change in the scope of work. It is also pointed out that the Managing Director, Karnataka Urban Water Supply and Drainage Board (hereinafter referred to as 'the KUWS & D' for brevity, was not competent to evaluate the technical details involved and has not 17 touched upon the same in his report. He has only emphasized certain procedural lapses. He was not in a position to sit over the opinion expressed by a competent Expert Committee.
It is also pointed out that the increase in estimates that eventually occurs in works put to tender by such bodies as the BWSSB, is not unusual. It is pointed out that the following are some instances where there was indeed a steep variation in the actual cost of execution.
"i. Work order dated 03.06.2009 issued to Indian Hume Pipe Co. Ltd., in respect of Contract S2A is 181.12% above the amount put to tender.
ii. Work order dated 03.06.2009 issued to Indian Hume Pipe Co., Ltd., in respect of Contract S2B is 164.73% above the amount put to tender.
iii. Work order dated 17.02.2014 issued to Indian Hume Pipe Co., Ltd., in respect of Contract S2C4 is 56.62% above the amount put to tender.
iv. Work order dated 03.07.2010 issued to M/s. Swamy Concrete Products Private Limited in respect of Contract pipe laying work in Nayandahalli is 99.48% above the amount put to tender."
18Therefore it is sought to be emphasized that the present work is not the first of its kind which has resulted in an increased estimate.
It is further pointed out that reliance sought to be placed on Section 15 of the Transparency Act, is not tenable. For, the provisions of the said Act would not apply to a concluded contract, on acceptance of the offer of the petitioner. Further, the Chief Secretary, is not the Government and could not have issued any direction to the Managing Director, KUWS & D, to carry out any investigation. Nor could he act as the State in invoking power under Section 89 of the BWSSB Act in directing the cancellation of the bid process.
7. In the above background, the primary question that would arise is whether there was a contract that had come into existence by virtue of the offer of the petitioner having been accepted by respondents 1 & 2 and whether the Chief Secretary, acting on behalf of the State Government, could have directed the 19 respondent BWSSB to cancel and annul the bid process, on the basis of a report by the Managing Director, KUWS & D, indicating certain irregularities in the procedure followed and alleged variations in the scope of work and the financial bid.
It would appear that the BWSSB Act and the Regulations and Rules framed thereof, provide a complete Code for the BWSSB in conducting its affairs. This would include the invitation of tenders for carrying out various civil and other works pertaining to water supply and sanitation. There are no provisions under the Act which contemplates the requirement of the Board obtaining approval or ratification of its decisions by the State Government. The only provision that contemplates the role of the State Government in the functioning of the BWSSB, is Section 89. The said Section is reproduced below for ready reference.
"89. Directions by the State Government.-- The State Government may, issue to the Board such directions as it may think necessary for the purpose of carrying out the functions under this 20 Act and the Board shall comply with such directions."
The question which then arises is, whether the State Government, acting under this general provision could have exercised such power in the circumstances of the case and whether such cancellation of the bid process could be contemplated after acceptance of the offer of the petitioner. And further whether the direction issued by the Chief Secretary, Government of Karnataka could be construed as a direction of the State Government.
It is seen that in terms of Article 154 of the Constitution of India, the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers sub-ordinate to him in accordance with the Constitution. For all practical purposes 'the Governor' and the 'State Government', are identical terms. All executive action of the State must be expressed to be taken in the name of the Governor, and the Governor shall make rules providing for how orders and instruments executed in his name shall be authenticated. He shall 21 also make rules for the more convenient transaction of the business of the Government of the State and for allocation of business among the ministers. Executive power comprises all acts necessary for the carrying on or supervision of the general administration of the State, including both a decision as to action and the carrying out of that decision; It comprises all functions of the State which cannot be classed as legislative or judicial.
As it may not be possible for the Governor to discharge every executive act personally, Article 154 of the Constitution does provide that he may act through officers sub ordinate to him. The delegation of the Governor's functions to a sub ordinate officer may be made by him directly or may be by way of sub delegation by a Minister to whom the power has been allocated by the Governor. Rules of Business, made under Article 166 (3) of the Constitution of India, provided such sub-delegation is authorized by the Rules of Business. But the sub-delegation would not be valid unless the Rules of Business authorised it. 22
8. In the instant case on hand, there is no attempt on the part of the State Government to even plead that the Chief Secretary, Government of Karnataka, had taken the initiative of seeking a report, as to the merit and legality of the tender process undertaken by the BWSSB, from the Managing Director KUWS & D, under any such delegated power - and that the direction issued to the BWSSB to annul the bid process, while drawing sustenance from Section 89 of the BWSSB, even if such action was ratified by the Chief Minister of the Government, cannot be said to be in accordance with law and cannot be accepted as valid exercise of executive power of the State.
The direction issued to the BWSSB by the Chief Secretary, was therefore not a direction issued by the State Government. Further, the 'bid process' , had culminated in the acceptance of the offer of the petitioner and there was no subsisting bid process to be cancelled or annulled. The petitioner was left clueless as to the reason for such cancellation. There were no reasons assigned and the petitioner was not afforded any opportunity of hearing and 23 there was no notice issued to the petitioner before taking such a drastic measure.
Hence in the view of this court, without entering upon the merits of the petitioner's offer, when the decision making process, in the light of the admitted conduct of the Chief Secretary of the State Government is examined, it is clearly illegal and without authority of law.
The petition is allowed summarily on the above ground alone. Consequently, Annexure-"L" stands quashed and the respondents are directed to act pursuant to the letter of acceptance, dated 21.2.2014, Annexure-"E" to the petition, incorporating such changes that may be warranted, on account of lapse of time.
Sd/-
JUDGE KS*