Karnataka High Court
The Secretary vs Sri Durga Constructions Pvt Ltd on 1 February, 2025
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W.A. No.59/2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 1ST DAY OF FEBRUARY, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
WRIT APPEAL NO.59/2021 (GM-RES)
BETWEEN:
1. THE SECRETARY
KARNATAKA PUBLIC WORKS DEPARTMENT
M S BUILDING
BENGALURU-560001.
2. THE CHIEF ENGINEER
Digitally signed
NATIONAL HIGHWAYS
by ARSHIFA P W D ANNEX BUILDING
BAHAR KHANAM
K R CIRCLE, BANGLAORE-1.
Location: HIGH
COURT OF
KARNATAKA 3. THE EXECUTIVE ENGINEER
PUBLIC WORKS DEPARTMENT
NATIONAL HIGHWAYS DIVISION
NEAR GANAPATHY TEMPLE
ASHOKNAGAR, URWA STORE
MANGALORE-575006.
...APPELLANTS
(BY SRI. REUBEN JACOB, ADLL. ADV., GENERAL A/W
SRI. DEVARAJ C.H. GOVT., ADV.,)
AND:
1. SRI. DURGA CONSTRUCTIONS PVT. LTD.
PLOT NO.A 38, DOOR NO.137/B
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W.A. No.59/2021
HIGHWAY COLONY, SALEM
TAMILNADU-636005.
REP. BY ITS MANAGING DIRECTOR
P. NARAYANAN.
2. SENIOR MANAGER
CANARA BANK
ALGAPURAM BRANCH
SALEM-636005
TAMILNADU.
...RESPONDENTS
(BY SRI. Y.C. SHIVAKUMAR, ADV., FOR R1
SMT. SAHANA P.S. ADV., FOR
SRI. SANDEEP KATTI, ADV., FOR R2)
---
THIS WRIT APPEAL IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO CALL FOR
RECORDS. SET ASIDE THE ORDER PASSED BY THE
LEARNED SINGLE JUDGE DATED 19.09.2018 IN W.P. NO.
23789/2012 (GM-RES) AND GRANT SUCH OTHER
RELIEF/S AS THIS HON BLE COURT DEEMS FIT IN THE
FACTS AND CIRCUMSTANCES OF THE CASE.
THIS WRIT APPEAL HAVING BEEN HEARD AND
RESERVED ON 27.01.2025, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT, THIS DAY
VIJAYKUMAR A. PATIL J., DELIVERED THE FOLLOWING:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
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W.A. No.59/2021
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL)
This intra Court appeal is filed under Section 4 of the
Karnataka High Court Act, 1961 challenging the order
dated 19.09.2018 passed by the learned Single Judge in
W.P.No.23789/2012 (GM-RES).
2. The brief facts leading to filing of this appeal
are that the respondent No.1-petitioner was a successful
bidder in a tender floated by the appellant No.3 for
periodical maintenance of N.H.48 and they were called
upon to furnish the performance security and enter into a
contract. The respondent No.1 failed to furnish the
security and to enter into the contract. The order of
forfeiture of Earnest Money Deposit (EMD) and Bank
Guarantee was passed. Being aggrieved, the respondent
No.1 filed writ petition which came to be allowed by
directing the appellants to return the EMD amount of
Rs.11,55,000/- to the respondent No.1. The appellant-
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State is challenging the order of the learned Single Judge
in this appeal.
3. Sri.Reuben Jacob, learned Additional Advocate
General appearing for the appellant-State submits that the
learned Single Judge has committed a grave error in
directing the appellants to refund the EMD amount in
favour of the successful bidder who has not come forward
to enter into contract by furnishing the performance
security as per the tender document. It is submitted that
the action of the Authority in forfeiting the EMD amount is
strictly in consonance with the tender document and the
learned Single Judge did not appreciate the fact that the
respondent No.1 did not raise any issue with regard to the
additional work or the additional payment in the pre-bid
meeting but indulged in sending the representations to the
appellants after the acceptance of his bid which is
impermissible.
4. It is further submitted that the Authority has
passed a well reasoned order rejecting the representations
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submitted by the respondent No.1 and decided to forfeit
the EMD amount as per the clauses of the tender
document. The finding of the learned Single Judge that
the action of the appellants is arbitrary and without reason
is contrary to the order at Annexure-N dated 06.07.2011
which was impugned in the writ petition. It is also
submitted that the finding of the learned Single Judge that
the original bid awarded to the respondent No.1 for
carrying out the work was Rs.7,14,00,000/- and the same
work was awarded to another agency with additional work
at Rs.13,69,63,788/-, is unwarranted. The scope of the
tender awarded to the respondent No.1 and the
subsequent bid is altogether different and due to the
inaction of the respondent No.1 in entering into the work
contract, the Authorities were required to call the fresh
tender. It is contended that in similar circumstances, the
co-ordinate Bench considering the law laid down by the
Hon'ble Supreme Court has held that the forfeiture of EMD
is permissible. In support of the said contention, he
placed reliance on the decision of this Court in the case of
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CANARA BANK Vs. Mr.SUBRAMANYA RAO K. AND
ANOTHER1. He seeks to allow the appeal.
5. Per contra, Sri.Y.C.Shivakumar, learned counsel
for the respondent No.1 supports the order of the learned
Single Judge and submits that the learned Single Judge
appreciated the fact that the tender was called on
07.12.2007. However, it was accepted on 19.07.2008.
There is a gap of 8 months. It is submitted that the
respondent No.1 sent a communication dated 30.06.2008
indicating the difficulties and requested for additional work
and its value. The said request of the respondent No.1 was
at the initial stage and as per Clause 32 of the bid
document, the bidder has an option to point out the
difficulties to the employer. Hence, the action of the
appellants in forfeiting the EMD amount is contrary to the
tender document. The appellants have not provided any
opportunity of hearing to the respondent No.1 before
passing the order at Annexure-N.
W.A.No.349/24 (GM-RES) dt.16.10.24
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6. It is further submitted that the learned Single
Judge taking note of the material available on record and
also keeping in mind the fact that this is the second round
of litigation, allowed the writ petition. It is also submitted
that the appellant-State has challenged the earlier order of
the learned Single Judge in W.A.No.3450/2010 which
came to be dismissed by imposing cost of Rs.50,000/- on
the appellants which clearly demonstrates that the action
of the appellants is contrary to law. Hence, he seeks to
dismiss the appeal.
7. We have heard the learned Additional Advocate
General for the appellants, learned counsel for the
respondents, perused the material available on record and
have given our anxious consideration to the submissions
advanced and the evidence on record. To consider the
issue involved in the present proceedings, it would be
useful to refer to the relevant dates and events. The
appellants invited the tender vide tender notification dated
07.12.2007 for periodical maintenance of N.H.48 from KM
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263.00 to KM 288.00 for the estimated cost of Rs.570.74
lakhs. The last date for submission of the bid was
06.02.2008 and before the last date, a pre-bid meeting
was convened by the appellants on 05.02.2008 to enable
the intended bidders to raise the queries with regard to
the tender in question. The appellants evaluated the
tenders and found that the tender of the respondent No.1
was responsive and issued the letter of acceptance on
19.07.2008 with a request to enter into an agreement for
the work by furnishing the performance security amount
as per Clause 34.1 of the 'instructions to bidders' of the
Standard Bid Document (hereinafter referred to as 'the
SBD').
8. The respondent No.1 furnished the Bank
Guarantee of Rs.11,42,000/- as per Clause 34.1 of the
SBD, however he did not comply all the requirements of
Clause 34.1 of the SBD. The respondent No.1 sent the
communications dated 30.06.2008, 07.08.2008,
30.08.2008 and 03.10.2008 to the appellants raising
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certain queries claiming for additional clarification in
respect of overhead cost which would be incurred by him
towards incremental maintenance and any other work
which would be outside the scope of tender work. It is the
case of the respondent No.1 that the appellants did not
respond to the said communications and proceeded to
issue notices dated 19.07.2008, 19.08.2008, 03.10.2008
and final notice dated 14.10.2008 intimating to the
respondent No.1 that on failure to execute the tender
agreement for the work in question they would take action
as per the clauses of SBD. The record indicates that the
respondent No.1 did not come forward to comply with the
demand of the appellants. The appellants cancelled the
award of tender and forfeited the bid security by
encashing the Bank Guarantee.
9. The action of the appellants was assailed by the
respondent No.1 in W.P.No.14091/2008. The learned
Single Judge vide order dated 31.05.2010 allowed the writ
petition. The order of the appellants at Annexure-L to the
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said petition was quashed and a direction was issued to
the Executive Engineer, PWD, National Highway Division,
Bengaluru-the appellant No.3 herein to consider the
representations of the respondent No.1 dated 30.06.2008,
07.08.2008, 30.08.2008 and 03.10.2008 and pass the
order. The aforesaid order was challenged by the
appellants herein in W.A.No.3450/2010. The Division
Bench vide order dated 08.03.2011 dismissed the appeal
by observing that the appellants cannot be aggrieved by
the direction issued by the learned Single Judge. The
learned Single Judge has only directed for consideration of
the representations of the respondent No.1. It has made
clear that the appellants shall consider the said
representations in accordance with law. The Division
Bench has imposed cost of Rs.50,000/- on the appellants.
What emerges from the aforesaid orders is that this Court
on earlier round of litigation had directed the appellant
No.3 to consider the representations submitted by the
respondent No.1 in accordance with law and to pass
appropriate order.
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10. Pursuant to the aforesaid directions, the
appellant No.3 passed the order dated 06.07.2011 which
was impugned in the writ petition and the said writ
petition came to be allowed. Admittedly, the respondent
No.1 failed to adhere to the terms and conditions of the
SBD as is evident from the material available on record.
The bid of the respondent No.1 was evaluated by the
experts and letter of acceptance was issued on
19.07.2008. Before issuance of the letter of acceptance,
the respondent No.1 had an opportunity to raise the
doubts / queries, if any with regard to the scope of work,
additional payments, maintenance etc., in the pre-bid
meeting which was specifically provided in the SBD. The
appellants have allowed the bidders to raise their doubts /
queries if any in the pre-bid meeting held on 05.02.2008.
In the said meeting, the respondent No.1 had participated.
However, he did not raise any queries. Later, the
respondent No.1 started sending communications to the
appellants seeking the clarification of certain doubts. Each
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of the doubts raised by the respondent No.1 in their
representations dated 07.08.2008, 30.08.2008 and
03.10.2008 are after thought and the said representations
have been duly considered by the appellant No.3 and each
of the queries raised by the respondent No.1 have been
answered in the order dated 06.07.2011 at Annexure-N.
Hence, the impugned order cannot be termed as a non-
speaking order or an order passed without application of
mind.
11. The respondent No.1, keeping his eyes wide
open has participated in the entire tender process and
after completion of the entire evaluation, on declaring him
as the successful bidder and after receiving the letter of
acceptance, raised the doubts with regard to the scope of
work which is beyond the purview of the tender document.
The queries raised by the respondent No.1 in their
representations referred supra are nothing but asking the
Tender Inviting Authority to expand the scope of work
under the tender which is impermissible. We also cannot
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ignore that the judicial review in the matters of contract /
tender is very limited. The interference by the writ Courts
in the tender process would amount to adding its wisdom
to the wisdom of experts. The writ Court cannot sit as an
Appellate Authority over the decision of the Tender
Accepting Authority unless the action of the Tender
Accepting Authority is arbitrary and contrary to the
procedures provided under the SBD. In the instant case,
the clauses of the SBD clearly indicate the consequences
of non-entering into contract after accepting the letter of
acceptance. The relevant clauses of the SBD are extracted
hereinbelow:
"16.6. The Bid Security may be forfeited
(a) if the Bidder withdraws the Bid after
Bid opening during the period of Bid
validity;
(b) if the Bidder does not accept the
correction of the Bid Price, pursuant to
Clause 27; or
(c) in the case of a successful Bidder, if the
Bidder fails within the specified time
limit to
(i) sign the Agreement; or
(ii) furnish the required Performance
Security.
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34. Performance Security
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 indicted
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 34.1 shall
constitute sufficient grounds for cancellation of
the award and forfeiture of the Bid Security."
12. The action of the appellants in cancellation of
tender and forfeiture of the EMD amount is strictly in
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consonance with the aforesaid clauses of the SBD. Hence,
no fault can be found with the action of the appellants.
The order at Annexure-N dated 06.07.2011 clearly
indicates the reasons for non-consideration of the 4
representations submitted by the respondent No.1 and the
reasons assigned by the appellant No.3 are strictly in
consonance with the SBD document and settled norms.
13. The respondent No.1 knowing fully well about
the consequences, had participated in the bid process,
attended the pre-bid meeting but did not raise any query
with regard to the scope of work and consequential
payment etc. and having accepted the offer of work
cannot be allowed to turn around and say that their doubts
raised in the representations were not considered and
hence they did not execute the work agreement, cannot
be accepted. The writ Court cannot issue any direction to
the appellants to act or to consider the representations of
the respondent No.1-bidder contrary to the terms of the
tender document. Be that as it may be, admittedly, the
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doubts raised in the representations of the respondent
No.1-bidder are outside the scope of tender work and
tender document and the appellant No.3 has considered
the representations of the respondent No.1-bidder as per
the earlier direction of this Court. The order dated
06.07.2011 at Annexure-N assigns detailed reasons on
each of the doubts of the respondent No.1. Hence, the
contrary contentions urged by the respondent No.1 is
liable to be rejected.
14. This Court also cannot lose sight of the fact that
the tender work is required to be completed within a time
bound manner and as per the scope of the tender
document if there is any deviation from the same or delay
in completion of the work, it would affect the public
interest. Hence, on this ground also, the action of the
appellant No.3 is required to be affirmed. The decision
relied on by the learned Additional Advocate General has
no application to the facts and circumstances of the case
as the said decision is on Rule 9 of the Security Interest
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(Enforcement) Rules, 2002. The case on hand is strictly
governed by the conditions of SBD and as per the
conditions referred supra, the appellant No.3 has cancelled
the tender and forfeitured the amount in deposit. The
same cannot be found fault with. The learned Additional
Advocate General is right in his submission that the
learned Single Judge has given due weightage to the
previous instance between the parties. The observations
of the learned Single Judge that the order dated
06.07.2011 impugned in the writ petition is without
reason, is contrary to the order dated 06.07.2011. A bare
perusal of the said order indicates that the appellant No.3
has passed a well considered order by assigning proper
reasons for cancellation of the tender and forfeiture of the
amount in deposit.
15. The contention of the respondent No.1 that
there is delay in issuing the letter of acceptance has no
merit for the simple reason that the letter of acceptance
was issued during the validity of the bid period as per the
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SBD. It is also not in dispute that the respondent No.1
themselves permitted the extension of the validity of the
bid. Hence, now he cannot contend that there was delay
in issuing the letter of acceptance. Insofar as the
contention that the bidder had expressed the difficulties at
the initial stage as per Clause 32 of the SBD, is also
required to be rejected. Clause 32 of the SBD is an option
given to the bidder to raise a doubt or query during the
time of execution of the work and the said clause has no
application to the case of the respondent No.1. The
respondent No.1 has contended that no opportunity of
hearing was provided to him before passing the order
dated 06.07.2011 at Annexure-N. The question of
providing opportunity to the respondent No.1 would not
arise as there is no such direction in the earlier rounds of
litigation. The direction was only to consider his
representations at Annexures C, E, G and H. Hence, none
of the grounds urged and submissions advanced will come
to the rescue of the respondent No.1.
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16. For the aforementioned reasons, we proceed to
pass the following:
ORDER
i. The writ appeal is allowed.
ii. Order dated 19.09.2018 passed in
W.P.No.23789/2012 (GM-RES) is set aside.
17. In view of the disposal of the appeal, pending
interlocutory application does not survive for consideration
and is accordingly disposed of.
No order as to costs.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(VIJAYKUMAR A. PATIL)
JUDGE
RV
