Kerala High Court
Imperial Rngineering Company vs Technopark on 22 July, 2021
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE T.R.RAVI
THURSDAY, THE 22ND DAY OF JULY 2021 / 31ST ASHADHA, 1943
WP(C) NO. 2084 OF 2017
PETITIONER:
IMPERIAL ENGINEERING COMPANY
37/1634, IMPERIAL HOUSE, KALOOR-KATHRIKADAVU ROAD,
COCHIN -682017, REPRESENTED BY ITS MANAGING
PARTNER EASO JOHN.
BY ADVS.
SRI.M.A.ABDUL HAKHIM
SRI.JAGAN ABRAHAM M.GEORGE
RESPONDENTS:
1 TECHNOPARK
PARK CENTRE, TECHNO PARK CAMPUS,
THIRUVANANTHAPURAM-695 581, REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER.
2 CHIEF EXECUTIVE OFFICER
TECHNO PARK, PARK CENTRE, TECHNO PARK CAMPUS,
THIRUVANANTHAPURAM-695 581.
BY ADV SMT.K.V.RASHMI, SC, TECHNOPARK
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 07.07.2021, THE COURT ON 22.07.2021 DELIVERED THE
FOLLOWING:
WP(C) No.2084/2017 2
JUDGMENT
(Dated this the 22nd day of July, 2021)
This writ petition is filed challenging Ext.P16 order, whereby
the petitioner has been blacklisted from participating in tenders
floated by the 1st respondent for a period of one year with effect
from 05.01.2017 and the EMD of Rs.50,000/- has been forfeited.
2. Heard Sri M.A.Abdul Hakhim on behalf of the petitioner
and Smt.K.V.Rashmi, Standing Counsel for respondents 1 and 2.
3. The petitioner, which is a registered firm, is involved in
undertaking electrical works from Governmental and semi-
Governmental institutions. The petitioner had undertaken the
electrical contract of the building named "Thejaswini" situated in
the 1st respondent Techno Park and the same was completed
during 2006-2009, as can be seen from Ext.P1. As part of
expansion, the respondents wanted to install two additional diesel
generators in the said building. The 2 nd respondent issued Ext.P6
dated 29.06.2016 inviting tenders for supply, installation, testing
and commission of two numbers of diesel generator sets and
modification of electrical panel, etc. Ext.P6 shows that the period
of completion was three months and earnest money deposit of
Rs.50,000/- was to be deposited and Rs.5,000/- plus tax at 5%
was to be deposited towards cost of tender documents. The last
date for submission of the e-tender was 20.07.2016. A pre-bid
meeting was scheduled on 05.07.2016 at Park Centre Building,
Technopark. The date of opening of the techno-commercial bid
was 25.07.2016 and the tenderers were expected to give a firm
period of 120 days for the tender from the date of opening of the
bid. The petitioner participated in the tender process. The
petitioner who submitted a bid for Rs.1,62,59,440/- was the
lowest tenderer. On 17.11.2016, the 1st respondent sent Ext.P9
mail to the petitioner, requesting them to submit an additional
bank guarantee for Rs.35,20,000/- (16% of Rs.2.2 crores) within
10 days to enable them to issue the work order. Respondents had
relied on clause 4.6 of the instructions to the tenderer. On
18.11.2016, the petitioner sent Ext.P10 reply stating that they
had already pointed out during discussions that rates were quoted
without taking into account the requirement for additional
performance guarantee. It was stated that since the notice
inviting tender did not specify the PAC, there was no way in which
they could have known whether the offer that they are making
was 25 % less than the PAC and that they would be liable to
provide an additional performance guarantee. On 28.11.2016 the
respondents wrote to the petitioner stating that they are yet to
receive a response regarding the submission of additional
performance guarantee for Rs.35,20,000/- and granting them 10
more days for submission of such guarantee. On 01.12.2016, the
petitioner informed that they had already sent a letter on
18.11.2016 explaining their position with regard to performance
guarantee. Thereafter the respondents issued Ext.P13, wherein
they informed the petitioner that the EMD for Rs.50,000/-
submitted along with the e-tender will be forfeited and further
action shall be taken regarding the tender, as per the procedure.
On 20.12.2016, the petitioners wrote Ext.P14 letter in reply to
Ext.P13 objecting to the decision to forfeit the EMD, pointing out
that clause 4.4 of tender conditions does not permit such an
action. It was also pointed out that the respondents had
intimated the PAC as Rs.2.2 Crores only in Ext.P9 e-mail and that
prior to the notice inviting tender and at the time of submitting
the tender, there was no way in which the petitioner could have
known the PAC. It was also pointed out that this vital information
regarding the tender was concealed, which is against the CPWD
norms. In Ext.P14, the petitioner had also made a suggestion
that since the major item of the tender is the DG set, they will
construct the necessary foundation and unload the DG set in the
site within 15-20 days thereby assuring that the major item is
already at site, which is a sufficient guarantee and that the
balance value of the work would only be Rs.69,84,580/-. It was
pointed out that such a course of action will assure a guaranteed
completion. It was again requested that if the above suggestion
was not agreeable, the EMD may be refunded. On 03.01.2017,
the respondents sent Ext.P15 letter to the petitioner stating that
even though the respondents had arranged a pre-bid meeting, the
petitioner failed to attend the same and if he had attended, he
could have sought clarification regarding the PAC even before the
submission of the bid. Thereafter, on 10.01.2017, the
respondents issued Ext.P16 to the petitioner, whereby the
petitioner was informed of the decision to forfeit the EMD and to
blacklist the petitioner from participating in the tenders floated by
the Technopark, for a period of one year with effect from
05.01.2017. The petitioner challenges Ext.P16 in this writ
petition.
4. The Standing Counsel for the respondents has filed a
statement wherein it is stated that the petitioner did not choose to
attend the pre-bid meeting and that it was his fault that he did not
seek any clarification regarding the PAC from the respondents. It
is stated that normally respondents do not specify the PAC, since
they want to get more competent rates and that no bidder has
asked any clarification regarding the PAC during the pre-bid
meeting. According to the respondents, the petitioner had quoted
the work at the rate of 26% below the estimated value and hence
under clause 4.6 of the tender conditions, the petitioner was
bound to provide additional performance guarantee. It is stated
that the additional performance guarantee is to ensure that a
person does not underquote the work and would ensure
completion of the work.
5. The petitioner has submitted a reply affidavit producing
Ext.P17 tender notice dated 18.01.2017, which was issued within
six months after Ext.P6 tender notice, in which the respondents
had specified the PAC. Exts.P7 and P8 issued during 2014 are
also instances where the respondents had specified the PAC in the
notice of tender. The petitioner has thereafter produced Ext.P18
along with I.A.No.1 of 2021, which is the copy of the notice
inviting tender for the very same work covered by Ext.P6. It can
be seen therefrom that the respondents had specified the PAC.
The respondents have produced Annexure R1(A) containing the
relevant pages of the conditions of tender, which was notified as
per Ext.P6. Reference is made to clauses 4.4 and 4.6, which are
extracted below, to justify the actions taken by the respondents.
4.4 EMD/SECURITY DEPOSIT/RETENTION MONEY
Earnest Money Deposit prescribed shall be remitted
in line with the online payment feature stipulated.
EMD of the unsuccessful tenderer will be refunded
without any interest on finalisation of contract.
E.M.D may be forfeited
I. If a bidder withdraws his bid during the period
of validity specified.
II. If the successful bidder fails within the time
limit to sign the contract document or fails to furnish
the required security deposit.
4.6 ADDITIONAL PERFORMANCE GUARANTEE
Additional performance guarantee will be required to
be submitted by the successful contractor if the
works are quoted between 11% to 25 % below the
estimated rate. This additional performance
guarantee shall be equal to the unbalanced price in
the estimate PAC and quoted PAC. This will be
released only after satisfactory completion of the
work without any interest."
6. A Learned Single Judge of this Court in M/s
K.V.Joseph & Sons Private Ltd., Kochi and another vs
Principal Secretary to Government, Thiruvananthapuram
and others reported in 2017 KHC 170, considered the
requirement to provide additional performance guarantee. On the
facts of that case, the learned judge held that the bidder was
bound to provide additional performance security and that as long
as the grievance of the bidder was addressed, he cannot challenge
an action for not providing additional performance guarantee on
the ground of violation of any principles of natural justice. The
counsel for the petitioner pointed out that the facts on which the
above judgment was rendered are totally different from the facts
involved in the case on hand. It can be seen from paragraph 19 of
K.V.Joseph(supra) that there is a specific clause in the contract
between the parties, which provided that the failure to provide the
additional performance guarantee would result in forfeiture of the
EMD as well as an annulment of the award. It is pointed out that
there is no such clause available in the contract involved in this
case. It is further pointed out that in K.V.Joseph(supra), the
estimate PAC was known to the bidders and hence the bidders
knew whether the quoted PAC is falling between the range of 11%
and 25%, warranting the provision of additional performance
guarantee. Since the estimate PAC was not revealed in the tender
document, it is the contention of the Counsel that there is no
justification for either blacklisting the petitioner or for forfeiture of
EMD. A reading of the above judgment would clearly show that
many of the clauses which were available in the contract between
the parties, on an interpretation of which the judgment was
delivered, are not available in the contract involved in the case on
hand. I am hence of the opinion that the judgment in K.V.Joseph
(supra) cannot be applied to the facts of this case.
7. The counsel for the petitioner relied on the decision of
the Hon'ble Supreme Court in Suresh Kumar Wadhwa v. State
of M.P., reported in (2017) 16 SCC 757 and contended that a
forfeiture of the EMD could have been resorted to only if there is a
specific clause in the agreement between the parties, which
permitted the same. The Hon'ble Supreme Court has in the above
said judgment held that as per Section 74 of the Contract Act,
1872, if there is no stipulation in the contract for forfeiture, there
is no such right available to the party to forfeit the EMD. On the
question of publishing the material aspects relating to the
contract, the Hon'ble Supreme Court held in the above said
judgment that the object behind publishing all material terms is to
make the same known to the contracting parties/bidders, so that
they can be aware of their rights, obligations and liabilities qua
each other and also of the consequences in the event of their non-
compliances and also to empower the State to enforce any such
term against the bidder in the event of any breach committed by
the bidder and to bind the bidder to the express terms in the
contract/public notice. A similar view was taken by the Hon'ble
Supreme Court in the decision in Union of India v. Vertex
Broadcasting Co. (P) Ltd., reported in (2015) 16 SCC 198.
In the absence of disclosure of estimate PAC in the tender
document, the demand for additional performance guarantee
cannot hence bind the petitioner. The circumstances in which EMD
can be forfeited has been specified in clause 4.4 extracted above.
Failure to provide Additional performance guarantee is not a
reason stipulated in the said clause. Moreover, since the estimate
PAC was not revealed in the notice calling for tender, the
petitioner cannot be found fault with for not being aware that his
bid was 26 % below the estimate PAC. As such, there is no
justification whatsoever, to withhold the EMD provided by the
petitioner.
8. Coming to the question of blacklisting of the petitioner,
the Hon'ble Supreme Court has in Erusian Equipment &
Chemicals Ltd. v. State of W.B. Reported in (1975) 1 SCC
70 held that the blacklisting order involves civil consequences and
casts a slur and that it creates a barrier between the persons
blacklisted and the Government in the matter of transactions. It
was held that the blacklists are "instruments of coercion" and it
has the effect of preventing a person from the privilege and
advantage of entering into lawful relationship with the
Government for purposes of gains. The Hon'ble Supreme Court
held that fundamentals of fair play require that the person
concerned should be given an opportunity to represent his case
before he is put on the blacklist. In Patel Engg. Ltd. v. Union
of India, reported in (2012) 11 SCC 257, the Hon'ble Supreme
Court held that the authority of the State to blacklist a person is a
necessary concomitant to the executive power of the State to
carry on the trade or the business and making of contracts for any
purpose and that the only legal limitation upon the exercise of
such an authority is that the State is to act fairly and rationally
without in any way being arbitrary. The Hon'ble Supreme Court
further held that the bid document is not a statutory instrument
and that the failure to mention blacklisting to be one of the
probable actions that could be taken against the delinquent bidder
does not, by itself, disable the State from blacklisting a delinquent
bidder, if it is otherwise justified. However, Patel (supra) was a
case in which the person who was blacklisted was put on notice
and given an opportunity of hearing. Admittedly, in the case on
hand the petitioner was not put on notice regarding the
blacklisting nor was he heard. The period of blacklisting was for
one year. This Court had stayed the operation of the order of
blacklisting. The period for which the petitioner was blacklisted
has expired. It is fairly submitted by the counsel for the
respondents that the petitioner had been permitted to enter into
contracts with the respondents during the period when this writ
petition has been pending consideration of this Court. Even
though there is no consequence to follow after the passage of four
years, nevertheless, it has to be held that the blacklisting of the
petitioner without putting him on notice is bad in law. The
Standing Counsel for the respondents submitted that the
petitioner was granted sufficient time to comply with the
requirement to furnish additional performance guarantee. Since I
have already held that the demand for additional performance
guarantee cannot bind the petitioner, the fact of granting sufficient
time is not relevant.
In the result, the Writ petition is allowed. Exhibit P16
order issued by the Respondents is quashed. It is declared that
the blacklisting of the petitioner as per Exhibit P16 is not in
accordance with law. The Respondents were directed to release
the EMD which has been forfeited by the Respondents, within one
month from the receipt of a copy of the judgment. The parties
shall bear their respective costs.
Sd/-
T.R.RAVI,
JUDGE.
dsn
APPENDIX OF WP(C) 2084/2017
PETITIONER EXHIBITS
EXT.P1 A PHOTOSTAT COPY OF THE CERTIFICATE
ISSUED BY THE 1ST RESPONDENT IN FAVOUR OF
THE PETITIONER DATED 29.1.2014
EXT.P2 A PHOTOSTAT COPY OF THE CERTIFICATE
ISSUED BY THE 1ST RESPONDENT IN FAVOUR OF
THE PETITIONER DATED 20.7.2016
EXT.P3 A PHOTOSTAT COPY OF THE WORK ORDER ISSUED
BY THE 1ST RESPONDENT TO THE PETITIONER
DATED 2.1.2009
EXT.P4 A PHOTOSTAT COPY OF THE WORK ORDER ISSUED
BY THE 1ST RESPONDENT TO THE PETITIONER
DATED 2.1.2009.
EXT.P5 A PHOTOSTAT COPY OF THE LETTER ISSUED BY
THE 2ND RESPONDENT TO THE PETITIONER WITH
THE ANNEXED CERTIFICATE ISSUED BY THE
GREEN BUILDING COUNCIL DATED 04.11.2016
EXT.P6 A PHOTOSTAT COPY OF THE NOTICE INVITING
TENDER ISSUED BY THE 2ND RESPONDENT DATED
29.6.2016
EXT.P7 A PHOTOSTAT COPY OF THE NOTICE INVITING
TENDERS ISSUED BY KINFRA DATED NIL.
EXT.P8 A PHOTOSTAT COPY OF THE NOTICE INVITING
TENDERS ISSUED BY KINFRA DATED NIL
EXT.P9 A PHOTOSTAT COPY OF THE EMAIL SENT BY THE
1ST RESPONDENT TO THE PETITIONER DATED
17.11.2016
EXT.P10 A PHOTOSTAT COPY OF THE REPLY EMAIL SENT
BY THE PETITIONER TO THE 1ST RESPONDENT
DATED 18.11.2016
EXT.P11 A PHOTOSTAT COPY OF THE COMMUNICATION
SENT BY THE 1ST RESPONDENT TO THE
PETIITONER DATED 28.11.2016
EXT.P12 A PHOTOSTAT COPY OF THE REPLY EMAIL SENT
BY THE PETITIONER TO THE 1ST RESPONDENT
DATED 1.12.2016
EXT.P13 A PHOTOSTAT COPY OF THE COMMUNICATION
SENT BY THE 1ST RESPONDENT TO THE
PETITIONER DATED 15.12.2016
EXT.P14 A PHOTOSTAT COPY OF THE REPLY SENT BY THE
PETITIONER TO THE 1ST RESPONDENT DATED
20.12.2016
EXT.P15 A PHOTOSTAT COPY OF THE COMMUNICATION
SENT BY THE 1ST RESPONDENT TO THE
PETITIONER DATED 3.1.2017
EXT.P16 A PHOTOSTAT COPY OF THE ORDER PASSED BY
THE 2ND RESPONDENT DATED 10.1.2017
EXT.P17 TRUE COPY OF THE NOTICE INVITING TENDER
DATED 08.01.17
EXT.P18 TRUE COPY OF THE NOTICE INVITING TENDER
(NIT)DATED 20.03.17 ISSUED BY THE
RESPONDENT
RESPONDENTS' EXHIBITS
ANNEXURE R1(A) TRUE COPY OF THE RELEVANT PAGES OF THE
TENDER CONDITIONS BEARING NO.TENDER
NO.ETPK/PH-1/2016-17/E-03 DATED NIL
