Kerala High Court
M/S .K.V.Jacob & Sons vs Cochin Smart Mission Limited on 22 November, 2022
W.As. 615, 713, 726 &
941 of 2022 -:1:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 615 OF 2022
[AGAINST THE JUDGMENT IN WP(C) NO.26212/2021 DATED 22.04.2022]
APPELLANT/PETITIONER:
M/S. SKILLED CONSTRUCTIONS COMPANY LTD.,
34/455, THOPPIL LANE, MOTHER THERESA ROAD, EDAPALLY,
KOCHI-682024, REPRESENTED BY ITS AUTHORISED SIGNATORY.
BY ADV. SRI. SUNIL JACOB JOSE
RESPONDENTS/RESPONDENTS:
1 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY,
MINISTRY OF HOUSING AND URBAN AFFAIRS,
SMART CITIES MISSION, NIRMAN BHAWAN,
NEW DELHI- 110 001.
2 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE
(DEPARTMENT OF EXPENDITURE), NORTH BLOCK,
NEW DELHI- 110 001.
3 STATE OF KERALA,
REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
FINANCE (INDUSTRIES & PUBLIC WORKS-B) DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM-695 001.
4 COCHIN SMART MISSION LTD.,
10TH FLOOR, REVENUE TOWER, PARK AVENUE, KOCHI: 682 011,
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER.
W.As. 615, 713, 726 &
941 of 2022 -:2:-
5 THE CHIEF EXECUTIVE OFFICER,
COCHIN SMART MISSION LTD., 10TH FLOOR,
REVENUE TOWER, PARK AVENUE, KOCHI: 682 011.
BY ADVS. SRI. B. RAMACHANDRAN, CGC (B/O)
SRI. K.JAJU BABU (SR.)
SMT. M.U.VIJAYALAKSHMI
BY SPECIAL GOVERNMENT PLEADER SRI. K.V. MANOJ KUMAR
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG
WITH WA. NO.713/2022, AND OTHER CONNECTED CASES, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 &
941 of 2022 -:3:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 713 OF 2022
[AGAINST THE JUDGMENT DATED 22.04.2022 IN WP(C) NO. 26762/2021]
APPELLANT/PETITIONER:
M/S. DEENS GROUP,
DOOR NO.23/130-D2, 2ND FLOOR, MARVEL PLAZA,
HMT ROAD, KALAMASSERY, ERNAKULAM:683 104.
REPRESENTED BY ITS PROPRIETOR,
SRI.P.N. SHANAVAS, PALAYAMKOTTIL HOUSE,
KOLLAMKUDI NAGAR KAKKANAD, ERNAKULAM:682 030.
BY ADVS. SRI. R.V.SREEJITH
SRI. JELSON J. EDAMPADAM
RESPONDENTS/RESPONDENTS:
1 COCHIN SMART MISSION LTD.,
10TH FLOOR, REVENUE TOWER, PARK AVENUE, KOCHI: 682 011,
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER.
2 THE CHIEF EXECUTIVE OFFICER,
COCHIN SMART MISSION LTD., 10TH FLOOR,
REVENUE TOWER,
PARK AVENUE, KOCHI: 682 011.
3 THE GENERAL MANAGER,
COCHIN SMART MISSION LTD., 10TH FLOOR,
REVENUE TOWER,
PARK AVENUE, KOCHI: 682 011.
W.As. 615, 713, 726 &
941 of 2022 -:4:-
4 STATE OF KERALA,
REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
FINANCE (INDUSTRIES & PUBLIC WORKS-B) DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM:695 001.
5 GOVERNMENT OF INDIA,
MINISTRY OF HOUSING AND URBAN AFFAIRS,
SMART CITIES MISSION, NIRMAN BHAWAN, NEW DELHI: 110 001,
REPRESENTED BY ITS SECRETARY.
6 GOVERNMENT OF INDIA,
MINISTRY OF ROAD TRANSPORT & HIGHWAYS,
(HIGHWAYS DIVISION), TRANSPORT BHAWAN, 1,
PARLIAMENT STREET, NEW DELHI: 110 001,
REPRESENTED BY ITS SECRETARY.
7 *AJAY KUMAR S., TEAM LEADER, PMC TO CSML, IPE GLOBAL, 5TH
FLOOR, REVENUE TOWER, KOCHI 682 011. *(DELETED)
*THE SEVENTH RESPONDENT IS DELETED FROM THE PARTY ARRAY AS
PER ORDER DATED 19.7.22 IN I.A.NO.1/22 IN W.A.713/22.
BY ADVS. SRI. K.JAJU BABU (SR.)
SMT.M.U.VIJAYALAKSHMI (B/O), SC,
COCHIN SMART MISSION LIMITED
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG
WITH WA.NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 &
941 of 2022 -:5:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 726 OF 2022
[AGAINST THE JUDGMENT DATED 22.04.2022 IN WP(C) NO.23679/2021]
APPELLANT/PETITIONER:
M/S. K.V.JACOB & SONS,
ENGINEERS AND CONTRACTORS,
KALLAPPARA HOUSE, KUMARAPURAM P.O,
PALLIKKARA, KERALA,
REPRESENTED BY ITS PARTNER SRI.EDLHO JACOB,
RESIDING AT KALLPPARA HOUSE, KUMARAPURAM,
PALLIKKARA, ERNAKULAM DISTRICT.
BY ADVS. SRI. R.V.SREEJITH
SRI. JELSON J. EDAMPADAM
RESPONDENTS/RESPONDENTS:
1 COCHIN SMART MISSION LIMITED,
10TH FLOOR, REVENUE TOWER, PARK AVENUE, KOCHI - 682 011,
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER.
2 THE CHIEF EXECUTIVE OFFICER
COCHIN SMART MISSION LTD, 10TH FLOOR, REVENUE TOWER,
PARK AVENUE, KOCHI-682 011.
3 STATE OF KERALA
REPRESENTED BY ITS SECRETARY TO GOVERNMENT,
FINANCE (INDUSTRIES AND PUBLIC WORKS-B) DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM- 695 001.
W.As. 615, 713, 726 &
941 of 2022 -:6:-
4 GOVERNMENT OF INDIA
MINISTRY OF HOUSING AND URBAN AFFAIRS,
SMART CITIES MISSION, NIRMAN BHAWAN, NEW DELHI-110 001,
REPRESENTED BY ITS SECRETARY.
5 GOVERNMENT OF INDIA
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS, (HIGHWAYS
DIVISION),TRANSPORT BHAWAN-1,
PARLIAMENT STREET, NEW DELHI-110 001,
REPRESENTED BY ITS SECRETARY.
6 * AJAYKUMAR S., TEAM LEADER, PMC TO CSML, IPE GLOBAL,
5TH FLOOR, REVENUE TOWER, KOCHI-682 011. * DELETED.
*RESPONDENT NUMBER 6 IS DELETED FROM THE PARTY ARRAY
AS PER ORDER DATED 19.7.2022 IN IA 1/2022 IN WA 726/2022.
BY ADVS. SRI. K.JAJU BABU (SR.)
SMT.M.U.VIJAYALAKSHMI, SC,
COCHIN SMART MISSION LIMITED
BY ADV. SRI. MANU S., ASG OF INDIA
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG
WITH WA. NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 &
941 of 2022 -:7:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 941 OF 2022
[AGAINST THE JUDGMENT DATED 08.04.2022 IN WP(C) NO. 4140/2022]
APPELLANTS/RESPONDENTS IN WP(C):
1 STATE OF KERALA,
REPRESENTED BY ITS SECRETARY TO GOVERNMENT
DEPARTMENT OF PUBLIC WORKS, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM, PIN - 695001.
2 THE CHIEF ENGINEER (BUILDINGS),
PUBLIC WORKS DEPARTMENT, THIRUVANANTHPURAM, PIN - 695033.
3 THE SUPERINTENDENT ENGINEER
PWD (BUILDINGS), NORTH CIRCLE, KOZHIKODE, PIN - 673001.
BY SPECIAL GOVERNMENT PLEADER K.V. MANOJ KUMAR
RESPONDENT/PETITIONER IN WP(C):
SHAJI V.J., S/O. JOSEPH,
PWD CONTRACTOR, VATTAPARAMBIL HOUSE,
THOVIRIMALA P.O., MALAVAYAL,
WAYANAD DISTRICT, PIN - 673592.
BY ADV. SRI. ABRAHAM MATHEW (VETTOOR)
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022,
ALONG WITH WA. NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON
THE SAME DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 &
941 of 2022 -:8:-
JUDGMENT
S. Manikumar, CJ
Being aggrieved by the judgment passed in W.P.(C) Nos. 23679,
26212 and 26762 of 2021 dated 22.04.2022, W.A. Nos.615, 713, and 726
of 2022 are filed by the petitioners, whereas, W.A. No.941 of 2022 is filed
by the State and its instrumentalities, challenging the judgment in W.P.(C)
No. 4140 of 2022 dated 8.4.2022.
2. After considering the submissions, by judgment dated 22.04.2022
in W.P.(C) Nos. 23679, 26212 and 26762 of 2021, writ court ordered thus:
"12. By OM dated 12.11.2020, the Government of
India, Ministry of Finance decided to reduce Performance
Security from existing 5-10% to 3% of the value of the
contract for all existing contracts. The benefit of such
reduction was to be denied only to the contracts under
disputes wherein arbitration / court proceedings have
already started or contemplated. The Government of India
OM dated 12.11.2020 will apply only to contracts which are
governed by Rule 171 of General Financial Rules (GFRs), 2017
unless the OM is adopted by any other authority as such. The
said OM will not apply to the contracts awarded by Cochin
Smart Mission Limited.
13. The Government of Kerala has issued GO(P)
No.7/2021/Fin dated 07.01.2021 relaxing the requirements
of Performance Security / Security Deposit, Bid Security /
Earnest Money Deposit and Additional Performance
Guarantee for the execution of Public Works in the State.
Paragraphs 4 to 6 of the GO dated 07.01.2021 reads as
follows:
W.As. 615, 713, 726 &
"4. Government have examined the matter in detail
and are pleased to order as follows.
(1) Performance Security / Security Deposit
to be submitted at the time of executing the
agreement is reduced from the existing rate of 5%
to 3% of the contract amount.
(2) Correspondingly Bid Security / Earnest
Money Deposit is reduced from 2.5% to 1.5% of the
estimated amount.
(3) Additional Performance Guarantee is
waived for the low quoted items on the condition
that the bidder shall furnish an undertaking to
execute all low quoted items in full as per contract
terms.
5. The above relaxations on account of Covid-19
pandemic are made applicable for works initially for
one year and would be reviewed post that date.
6. This Government Order is made applicable to all
new tenders as well as works which have been
tendered and awarded, but agreements have not
been signed by the winning bidder."
It is therefore evident that the said GO is made applicable
only to new tenders and in respect of works which have been
tendered and awarded, but agreements have not been
signed by the winning bidder.
14. In the case of the works undertaken by the
petitioners in these writ petitions, admittedly, those are not
works undertaken after 07.01.2021. The agreements in
respect of the works in question have been signed by the
petitioners before 07.01.2021. Therefore, GO dated
07.01.2021 will not apply to the contracts undertaken by the
petitioners.
15. The contention of the petitioners is that exclusion
of contractors like the petitioners from the purview of GO
W.As. 615, 713, 726 &
dated 07.01.2021 for the reason that the petitioners have
already executed agreements for the work, is arbitrary and
discriminatory. The exclusion would offend Article 14 of the
Constitution of India.
16. This Court is not inclined to accept the said
argument for the reason that the petitioners are not claiming
any fundamental or statutory rights. The issue involved is
purely within the realm of contract laws. The petitioners
have executed agreements with open eyes. What is granted
under GO dated 07.01.2021 is only a concession. The
petitioners cannot claim any concession in contractual
matters invoking writ proceedings under Article 226 of the
Constitution of India.
The writ petitions are therefore devoid of any merits
and are dismissed.
3. Whereas, by judgment dated 8.4.2022 in W.P.(C) No.4140 of
2022, writ court ordered as under:
"16. Exts.P4 to P6 Office Memorandum issued by the
Government of India, Ministry of Finance on 12.11.2020
would ordinarily apply only to the Departments under the
Government of India. The said Office Memorandum will not
apply to the contracts executed on behalf of the Government
of Kerala automatically.
17. The Government of Kerala, however, followed the O.M.
dated 12.11.2020 of the Government of India and issued GO
(P) No.7/2021/Fin. dated 07.01.2021. As per the G.O. dated
07.01.2021, the Performance Security / Security Deposit is to
be submitted at the time of executing the agreement was
reduced from 5% to 3%. The Earnest Money Deposit was
reduced from 2.5% to 1.5%. The Additional Performance
Guarantee was completely waived for the low quoted items
on condition that the bidders shall furnish an undertaking to
execute all low quoted items in full as per contract terms.
W.As. 615, 713, 726 &
18. The said Government Order dated 07.01.2021 was made
applicable only to new tenders and to the works which have
been tendered and awarded but agreements being not
signed by the winning bidder. The tenders in question to
which the petitioners responded were subsequent to
07.01.2021. When the relaxations were extended in the year
2022, only the relaxations relating to Performance Guarantee
was extended for a further period up to 31.03.2023.
19. While examining the applicability of Government Orders
dated 07.01.2021 and 15.03.2022, one has to look at the
contents of the Government Orders and the context under
which those were issued. Those Government Orders were
issued in the backdrop of Covid-19 pandemic. The
Government was of the view that on account of slowdown in
economy and acute financial crunch among the contractors
due to Covid-19 pandemic, relaxation should be granted to
contractors who undertake public works in the State. There
was also a request by the Government of India in that regard.
20. Under the circumstances, the Government on 07.01.2021
ordered that Performance Security/ Security Deposit be
reduced from 5% to 3% of the contract amount and the
corresponding Bid Security/ EMD be reduced from 2.50% to
1.50%. Additional Performance Guarantee was waived for
low quoted items. Paragraph 5 of the Government Order
dated 07.01.2021 stated that the relaxations are on account
of Covid-19 pandemic and were made applicable for works
initially for one year and would be reviewed post that date.
21. The Government Order dated 07.01.2021 made it clear
that the order is applicable to:
(1) All new tenders, and
(2) Works which have been tendered and awarded
but agreements have not been signed.
The term 'All new tenders' would mean tenders floated on or
after 07.01.2021. 'Works which have been tendered and
awarded but agreements have not been signed' would take
W.As. 615, 713, 726 &
in tenders floated and awarded prior to 07.01.2021 but
agreements not signed before 07.01.2021.
22. In the case of the petitioner in W.P.(C) No.2558 of 2022,
the Notice Inviting Tenders (NIT) was floated on 06.12.2021
and in the case of the petitioner in W.P.(C) No.4140 of 2022,
bids were invited on 22.12.2021. Since both the NITs were
published after 07.01.2021, those are 'new tenders' as
contemplated in the G.O. dated 07.01.2021 and the
concessions/relaxation granted as per G.O. dated 07.01.2021
would apply to the petitioners. Therefore, the respondents
are not justified in demanding 5% Performance Security,
2.5% EMD and Additional Performance Guarantee.
23. The argument of the respondents is that before
execution of the agreement, the validity period of the G.O.
dated 07.01.2021 has expired on 06.01.2022. The
Government has issued a new G.O. dated 15.03.2022,
paragraph 3 of which reads as follows:
"3. The Government has examined the matter in
detail and are pleased to extend the relaxation in
Performance Guarantee ordered as per
Government Order read as 3rd paper above for a
further period up to 31.03.2023."
The new G.O. dated 15.03.2022 has retained relaxation only
in respect of Performance Guarantee and there will be no
relaxation for EMD or Additional Performance Guarantee,
contend the respondents
24. Even assuming that the G.O. dated 15.03.2022 provides
for relaxation of Performance Guarantee alone, the
petitioners' tenders should be governed by the G.O. dated
07.01.2021. This is because the provisions of the G.O. dated
07.01.2021 would apply to all new tenders floated during the
currency period of the G.O. which is up to 06.01.2022. The
fact that no agreement was executed during the currency of
the G.O. dated 07.01.2021 cannot take away the right
accrued on the petitioners under the said G.O.
W.As. 615, 713, 726 &
25. It is true that the G.O. dated 15.03.2022 is the order now
in existence. The said G.O. would be applicable to new
tenders floated on and from 07.01.2022 and to works
tendered and awarded prior to 07.01.2022 but agreements
have not been signed. Even then, the G.O. dated 07.01.2021
has conferred a corresponding right on the petitioners, which
cannot be taken away retrospectively.
For the afore reasons, the petitioners are entitled to succeed.
The writ petitions are therefore allowed.
Consequently, it is declared that the tenders awarded
to the petitioners, which are in issue in these writ petitions,
will be governed by the G.O. dated 07.01.2021. The
petitioners shall be permitted to execute agreements
granting the petitioners all relaxation permissible under the
G.O. dated 07.01.2021."
4. Brief facts leading to the filing of W.A. Nos. 615, 713 and 726 of
2022 are as under:
4.1 Appellants/writ petitioners are registered companies, engaged in
contractual works. They were awarded with contractual works for the
development of roads and bridges by Cochin Smart Mission Ltd.,
represented by its Chief Executive Officer, Kochi. Pursuant to the same, the
writ petitioners were served with letters of acceptance. Except the
appellant in W.A. No.615/2022, rest have submitted performance security,
which amounts to 10% of the total contractual value, as required by the
respondents. The appellant in W.A. No.615/2022 submitted performance
security at 5%. Work commenced in November, 2019 and is going
W.As. 615, 713, 726 &
smoothly. While so, due to the outbreak of COVID-19 Pandemic and
resultant lockdown, the companies have to face serious financial crunches.
4.2 Appellants/writ petitioners have further stated that, in order to
mitigate the hardships suffered by the contractors, Government of India,
Ministry of Finance had announced 'Atma Nirbhar Bharat Package' and
issued Office Memorandums, wherein it was stipulated that the
performance security should be reduced to 3% instead of 5-10%, and
retention amount is recommended to be released, in proportion to the
work already executed, in accordance with the contract specification. It
was also assured that Earnest Money Deposit (EMD) will not be required
for tenders and it will be replaced by Bid Security Declaration.
4.3 In terms of the above, writ petitioners submitted requests to the
Chief Executive Officer, Cochin Smart Mission Ltd., through Project
Management Consultant (PMC), for reducing the performance security and
to release the retention amount, by reducing it to 3%. However, the Chief
Executive Officer informed the writ petitioners that their requests cannot
be acceded to, in view of the directions contained in G.O.(P)
No.7/2021/Fin. dated 7.1.2021, that this Government Order is made
applicable to all new tenders as well as works which have been tendered
and awarded, but agreements have not been signed by the winning bidder.
W.As. 615, 713, 726 &
According to the writ petitioners, the benefit of the Office Memorandums
issued by the Central Government and State Government are being denied
to them since they had signed the agreements before the memorandums.
In such circumstances, appellants/writ petitioners have filed the respective
writ petitions for the reliefs stated supra.
4.4 The writ petitioners further contended before the writ court that
since the Central Government have framed 'Atma Nirbhar Bharat Package'
for providing relief measures, the respondents are bound to extend the
benefit contemplated by the Central Government that the Office
Memorandums clearly provide that the performance security is reduced
from 5-10% to 3% for all existing contracts. According to the writ
petitioners, the action of the Government of Kerala in issuing the
Government Order dated 7.1.2021 substantially departing from the Office
Memorandums issued by the Union Government is illegal and
unsustainable.
5. W.A. No.941/2022 is filed by the State of Kerala and its officials,
who are the respondents before the writ court, challenging the judgment
dated 8.4.2022 passed in W.P.(C) No.4140/2021, by which, the writ
petition was allowed declaring that the tenders awarded to the petitioners,
which are in issue, will be governed by the Government Order dated
W.As. 615, 713, 726 &
7.1.2021 and that the petitioners shall be permitted to execute agreements
granting all relaxation permissible under the said Government order.
6. The respondent/writ petitioner has filed W.P.(C) No.4140/2021
seeking a writ of certiorari to quash Exhibit-P3 Letter of Acceptance/
selection notice issued by the Superintending Engineer, Kozhikode,
respondent No.3 therein, to the extent it directs the writ petitioner to
furnish the performance guarantee worth 5% of the value of the work and
additional performance guarantee worth Rs.25,18,655/-; and also for a
direction, by way of writ of mandamus, commanding the 3 rd respondent to
modify the Letter of Acceptance limiting the performance guarantee to 3%
of the value of the work and totally waiving the additional performance
guarantee, in terms of Exhibits-P4 to P6.
7. Facts leading to the filing of W.P.(C) No.4140/2022 is that based
on the notice inviting tender issued by respondent No.3 dated 22.12.2021,
writ petitioner was selected as the lowest bidder and Exhibit-P2 tender was
submitted by him. Exhibit-P3 Letter of Acceptance was issued by the 3 rd
respondent, by which, the offer made by the writ petitioner was accepted.
As notified in the notice inviting tender, writ petitioner was asked to give
performance guarantee. In Ext-P3 Letter of Acceptance, the employer was
asked to submit a performance guarantee at 5% of the contract value. It
W.As. 615, 713, 726 &
was also notified that the additional performance guarantee of
Rs.25,18,655/- shall also be deposited for the unbalanced bid and that
both the performance guarantee and additional performance guarantee
should be submitted before executing the agreement. The modalities of
payment were also notified in Exhibit-P3 selection notice.
8. According to the appellant - State of Kerala, the prayer made in
W.P.(C) No.4140/2021 to quash the selection to the extent it notifies the
submission of performance guarantee and additional performance
guarantee, is liable to be rejected on account of the fact that no vested/
contractual right is accrued to the writ petitioner, as no concluded contract
has been entered into. In Exhibit-P1 notice inviting tender, it was
specifically noted that the bidders are liable to submit bank guarantee on
account of selection and also additional performance guarantee.
9. Appellant - State of Kerala has further contended that writ court
by the impugned judgment has declared that tenders awarded to the
petitioners will be governed by Government Order dated 7.1.2021 and the
writ petitioners shall be permitted to execute agreement granting all
relaxation, permissible under the said GO. According to the appellant, the
very approach made by the learned single Judge is that the rights already
conferred cannot be taken away retrospectively. It is also submitted that
W.As. 615, 713, 726 &
there is no vested right and writ petitioner therein is obligated to submit
performance guarantees as notified in the selection notice.
10. Appellant further contended that it is true that in the Government
order dated 7.1.2021, certain relaxations have been ordered. But, those
relaxations/concessions, according to the appellant, cannot be claimed as a
right by the writ petition. Here, the selection notice was issued much after
the expiry of the Government order dated 7.1.2021. The application of the
said Government order was only upto 6.1.2021. It is further submitted that
the relaxations in the Government order dated 7.1.2021 were reviewed by
the State Government and the relaxation in respect of additional
performance guarantee has been stopped.
11. Refuting the allegations, claims and demands raised by the writ
petitioners, the General Manager of Cochin Smart Mission Limited, has filed
a counter affidavit before the writ court, inter alia, contending that on
account of the slow-pace in the economy, due to COVID-19 Pandemic,
Ministry of Finance, Government of India, had issued Office Memorandum
dated 12.11.2020 reducing the performance security from the existing 5-
10% to 3% of the value of contract for all the existing contracts. Based on
the said OM, Government of Kerala have issued an order dated 7.1.2021,
in which paragraph 4.1 states that performance security/security deposit to
W.As. 615, 713, 726 &
be submitted at the time of executing agreement is reduced from the
existing rate of 5% to 3% of contract amount. However, the order vide
paragraph 6 has clarified that this Government order is made applicable to
all the new tenders as well as works which have been tendered and
awarded, but agreements have not been signed by the winning bidder.
That apart, the said Government order clearly mentioned that the same is
applicable only to new tenders. Hence, it is contended that CSML is not in
a position to reduce the performance guarantee for the project work as per
the Letter of Acceptance since it was awarded long prior to the date of the
said Government order and agreement executed and that CSML is
following the Government order dated 7.1.2021 in the matter of
performance security.
12. Learned single Judge after considering the submissions and the
materials on record, including the Government orders dated 7.1.2021 and
15.03.2022, has passed the impugned judgments, the relevant portion of
which is extracted above.
13. Being aggrieved, the appellants in W.A. Nos. 615, 713 and 726 of
2022 contended that writ court failed to take note of their specific claim
that the Constitutional guarantee conferred by Article 14 of the
Constitution of India has been violated through the discrimination practiced
W.As. 615, 713, 726 &
on them by respondents, by creating two different classes of contractors
from among a homogeneous class, i.e., those who have signed the
agreement prior to the Government order dated 7.1.2021 and those after
the said order. In support of the said contention, appellants have relied on
the decision of the Hon'ble Supreme Court in State of W.B. v. Anwar Ali
Sarkar reported in 1952 SCR 284.
14. That apart, it is contended that the specific contention of the
appellants that the contract undertaken by them is a project implemented
using the Central Government fund, and therefore, the subject Office
Memorandums/guidelines issued by the Central Government are
necessarily to be implemented in its true letter and spirit and was
overlooked by the writ court.
15. It was further contended that the writ court ought to have
appreciated the context in which 'Atma Nirbhar Bharath Package' and the
subsequent Office Memorandums were issued by the Central Government.
There cannot be any dispute to the fact that COVID-19 Pandemic has hit
one and all in the world. All these Office Memorandums and Government
order impugned in the writ petitions were issued to support the contractors
as well as the infrastructure industry. According to the appellants, when
the State is extending a benefit during the time of a crisis, it cannot
W.As. 615, 713, 726 &
differentiate between its citizens, who are all similarly placed and deny the
benefits to one set of citizens.
16. According to the appellants, the only exclusion for grant of the
benefit under OM dated 12.11.2020 was the existence of any dispute
wherein arbitration/Court proceedings have already started. The OM dated
12.11.2020 was specific that the benefit will be conferred on all existing
contracts and, therefore, the inclusion of a condition contrary to those
found in the basic document gave rise to the Government order dated
7.1.2021 is illegal.
17. Appellant - State of Kerala in W.A. No.941/2022 has contended
that there is no vested right to the bidder to seek modification of the
selection notice and terms and conditions of agreement. What is provided
in the Government order dated 7.1.2021 is a concession/relaxation,
particularly in view of the specific terms of the contract that the selected
bid shall submit performance guarantee and additional performance
guarantee as notified. In support of its contention, appellant has relied on
the decision of the Hon'ble Supreme Court in V. Pechimuthu v.
Gowrammal reported in (2001) 7 SCC 617 wherein, it was held that
relaxation/concession cannot be enforced as a right.
18. According to the appellant State of Kerala, the declaration of the
W.As. 615, 713, 726 &
writ court that as per Government orders dated 7.1.2021 and 15.03.2022
performance guarantee/security deposit is liable to be reduced to 3% and
additional performance guarantee was waived for low quoted items etc.,
are unsustainable.
19. Based on the above, learned counsel for the appellants, as well
as learned Government Pleader appearing for the State, made submissions.
20. Heard the learned counsel for the respective parties and perused
the material on record.
21. Office Memorandum dated 12.11.2020 issued by Government of
India, Ministry of Finance, Department of Expenditure, New Delhi, is
reproduced hereunder"
"No. F.9/4/2020-PPD
Government of India
Ministry of Finance
Department of Expenditure
Procurement Policy Division
512, Lok Nayak Bhawan, New Delhi
Dated the 12th November, 2020
OFFICE MEMORANDUM
Subject: Performance Security.
As per Rule 171 of General Financial Rules (GFRs)
2017, Performance Security is to be obtained from the
successful bidder awarded the contract for an amount of
five to ten percent of the value of the contract to ensure
due performance of the contract. Similar provisions also
exist in the Manual for Procurement of Works 2019 and
Manual for Procurement of Consultancy & other Services
W.As. 615, 713, 726 &
2017 issued by this Department.
2. The Government is in receipt of many representations
that on account of slowdown in economy due to the
pandemic, there is acute financial crunch among many
commercial entities and contractors, which in turn is
affecting timely execution of the contracts. lt has also been
represented that this may affect the ability of contractors
to bid in tenders and hence reduce competition. Requests
are being received for reduction in quantum of Security
Deposits in the Government contracts.
3. ln view of all above, it is decided to reduce Performance
Security from existing 5-10% to 3% of the value of the
contract for all existing contracts. However, the benefit of
the reduced Performance Security will not be given in the
contracts under dispute wherein arbitration/court
proceedings have already started or are contemplated.
4. Further, all tenders/contracts issued/concluded till
31.12.2021 should also have the provision of reduced
Performance Security.
5. ln all contracts where Performance Security has been
reduced to 3% in view of above stipulations, the reduced
percentage of Performance Security shall continue for the
entire duration of the contract and there should be no
subsequent increase of Performance Security even beyond
31.12.2021. Similarly, in all contracts entered into with the
reduced percentage of Performance Security of 3%, there
will be no subsequent increase in Performance Security
even beyond 31.12.2021.
6. Wherever, there are compelling circumstances to ask for
Performance Security in excess of three percent as
stipulated above, the same should be done only with the
approval of the next higher authority to the authority
competent to finalize the particular tender, or the
Secretary of the Ministry/ Department, whichever is lower.
Specific reasons justifying the exception shall be recorded.
7. These instructions will be applicable for all kinds of
procurements viz. Goods, Consultancy, Works, non-
consulting Services etc and are issued under Rule 6(1) of
the GFRs 2017.
Sd/- (Kotluru Narayana Reddy)
Deputy Secretary to the Govt. of India"
W.As. 615, 713, 726 &
22. Government order, G.O.(P) No.7/2021/Fin., dated 7.1.2021
issued by the Additional Chief Secretary, Finance (Industries & Public Works
- B) Department, Government of Kerala, Thiruvananthapuram, reads thus:
"GOVERNMENT OF KERALA
Abstract
Finance Department -- Covid - 19 pandemic - Relaxing the
requirements of performance Security/Security Deposit, Bid
Security/Earnest Money Deposit and Additional Performance
Guarantee for the execution of public works in the State -
Orders issued
-------------------------------------------------------------------------
FINANCE (INDUSTRIES & PUBLIC WORKS - B) DEPARTMENT
G.O.(P) No.7/2021/Fin.
Dated, Thiruvananthapuram, 07.01.2021
-------------------------------------------------------------------------
Read :- 1) G.O.(P) No.429/2015/Fin dated 28.09.2015
2) G.O.(P) No. 01/2019 /Fin dated 10.01.2019
3) G.O.(P) No.168/2019/Fin dated 07.12.2019
4) OM No. F 18/4/2020 - PPD dated 13.05.2020
5) OM No. F 9/4/2020 - PPD dated 12.11.2020
6) Circular No.62/2020/Fin dated 27/10/2020
ORDER
As per the Government Order read as 1 st paper above, It
was ordered that, Performance Guarantee, the amount
collected at the time of executing contract agreement will
be 5% of the Contract Value (Agreed PAC) and the deposit
will be retained till the expiry of Defect Liability Period.
Atleast 50% of this deposit shall be collected in the form of
Treasury Fixed Deposit and rest in the form of Bank
Guarantee or any other forms prescribed in the revised PWD
Manual. As per this Government Order, Additional
Performance Guarantee is the additional amount to be
deposited for unbalanced price i.e., for works quoted below
estimate rate. Additional Performance Guarantee will be
required if works quoted between 11% to 25% below
estimate rate. Government Order read as 2nd paper above
says that, if the quoted amount of the lowest bidder (L1) is
x% below the estimated PAC, the Additional Performance
W.As. 615, 713, 726 &
Guarantee shall be (x-10)% of estimated PAC. Subsequent to
this Order, clarifications were issued regarding calculation
of Additional Performance Guarantee for percentage rate
contracts and item rate contracts vide the Government
Order read as 3rd paper above.
2) On account of slowdown in the economy and acute
financial crunch among the contractors due to COVID-19
pandemic. Government of India issued following guidelines
vide Office Memoranda read as 4th and 5th papers above and
State Governments were requested to consider issuing
similar instructions in respect of procurement by the State
Government, by State Government Public Undertakings,
Local Bodies and all agencies controlled by them.
i) Reduction in Performance Security from existing 5-10% to
3% of the value of the contract.
ii) No provisions regarding Bid Security should be kept in the
Bid Documents in future and only provisions for Bid
Security Declaration should be kept in the Bid Documents.
iii) No provision should be kept in the Bid Documents
regarding Additional Security Deposit/Bank Guarantee
(BG) in case of Abnormally Low Bids.
3. As per the Circular read as 6th paper above. It was
ordered that the Additional Performance Guarantee may be
released in proportion of successful completion of items
having low rates. Several contractors and Associations
submitted representations requesting to extend the
benefits covered by the relief measures announced by the
Government of India to the State Government Contractors
also.
4. Government have examined the matter in detail and are
pleased to order as follows.
1) Performance Security / Security Deposit to be
submitted at the time of executing the agreement is
reduced from the existing rate of 5% to 3% of the
contract amount.
2) Correspondingly Bid Security / Earnest Money Deposit is
reduced from 2.50% to 1.50% of the estimated amount.
3) Additional Performance Guarantee is waived for the
low quoted items on the condition that the bidder shall
furnish an undertaking to execute all low quoted items
in full as per contract terms.
W.As. 615, 713, 726 &
5. The above relaxations on account of COVID -19 pandemic
are made applicable for works initially for one year and
would be reviewed post that date.
6. This Government Order is made applicable to all new
tenders as well as works which have been tendered and
awarded, but agreements have not been signed by the
winning bidder.
By Order of the Governor
RAJESH KUMAR SINGH
ADDITIONAL CHIEF SECRETARY (Finance)"
23. The question emerges for consideration is, as to whether any
interference is required to the judgments of the learned single Judge.
24. Admittedly, as per the notification dated 7.1.2021, the
performance security/security deposit, to be submitted at the time of
executing the agreement is reduced from the existing rate of 5% to 3% of
the contract amount and correspondingly bid security/earnest money
deposit is reduced from 2.50% to 1.50% of the estimate amount. Further,
additional performance guarantee, for the execution of public works in the
State, is waived for the low quoted items on condition that the bidder shall
furnish an undertaking to execute all low quoted items in full as per the
contract terms. In fact, the benefit of Ext-P14 notification dated 7.1.2021
was extended to the contractors, who have not executed any agreement.
25. The case projected by the appellants is that no classification need
be made between the contractors, who have already executed the
W.As. 615, 713, 726 &
agreement, and the contractors, who have not, after the bid was accepted.
In our considered opinion, the benefit of Performance Security/Security
deposit, Bid Security/Earnest Money Deposit and Additional Performance
Guarantee was extended by the Government only to those persons who
have not executed the agreement, apparently for the reason that there was
a slow down in economy and acute financial crunch among the contractors,
due to COVID-19 Pandemic.
26. It was taking into account the abovesaid situation, Government
of India have issued the guidelines as per the memorandums referred to in
Exhibit-P14 order dated 7.1.2021 and State Governments were requested
to consider issuing similar instructions in respect of procurement of the
State Government, by State Government Public Undertakings, Local Bodies
and all the agencies controlled by them.
27. Evidently, from the persons who have already executed the
contract, Government have secured the Performance Security, Bid Security
and additional Performance Guarantee, and therefore, the contract
obligations for conference of the contract was acted upon by the parties in
its entirety. Government thought it fit not to re-open the same by re-paying
or adjusting the Performance Security, Bid Security and additional
Performance Guarantee, given on higher terms and conditions. Moreover,
W.As. 615, 713, 726 &
the contractors, who have already executed the agreement, cannot turn
around and say that they are entitled to get the benefit of the notification
subsequently issued by the State Government, in order to deal with the
economic crunch.
28. Therefore, it can be deduced that there is no discrimination
between the contractors for the basic reason that the persons, who have
executed the agreement and paid the Performance Security, Bid Security
and executed the additional Performance Guarantee have to be treated as
a separate class from the contractors whose bids were accepted, but
agreements were not executed. Material on record also discloses that the
Government was of the clear opinion that such a benefit can be extended
to such persons for the reason that they are yet to execute an agreement
and carry out the obligations in terms of the notice inviting tenders, after
the outbreak of Covid-19 Pandemic, lock down's, and consequential
adverse situations, prevailed in the community.
29. Taking into consideration the above aspects, we are of the
considered view that there is no discrimination or unreasonable
classification by and between the contractors, who have executed the
agreement, and the contractors who were yet to execute the agreement,
entitling to secure the benefits as per the Government order dated
W.As. 615, 713, 726 &
7.1.2021. Therefore, we do not find any reason to interfere with the
judgment passed by the learned single Judge in W.P.(C) Nos. 23679, 26212
and 26762 of 2021 dated 22.04.2022.
30. Insofar as the writ appeal filed by the State and its
instrumentalities against the judgment dated 8.4.2022 in W.P.(C) No.4140
of 2022 is concerned, it is categoric and clear that in the said judgment,
which is impugned therein, learned single Judge has taken note of the
order dated 7.1.2021 (Exhibit-P4) and arrived at the conclusion that the
term "all new tenders" recited in the G.O. dated 7.1.2021 would mean
tenders floated on or after 7.1.2021. Writ court also entered into a finding
that works which have been tendered and awarded but agreements have
not been signed, would be entitled to get all the benefits on account of the
tenders floated and works awarded prior to 7.1.2021, but agreements have
not been signed before 7.1.2021.
31. However, in the impugned judgment, the learned single Judge
has clearly found that the bids in respect of the petitioner in W.P.(C)
No.4140 of 2022 were invited on 22.12.2021, which is after the issuance of
Government order dated 7.1.2021, and therefore, the petitioner therein is
entitled to get the benefit of the said Government Order. It was
accordingly, in the judgment leading to W.A. No.941 of 2022 dated
W.As. 615, 713, 726 &
8.4.2022, learned single Judge held that the respondents are not justified
in demanding 5% performance security, 2.5% EMD and additional
performance guarantee.
32. It is also to be taken note of, that before execution of the
agreement, the validity period of the Government order dated 7.1.2021
expired on 6.1.2022 and thereupon, Government have issued a new order
dated 15.3.2022, wherein clause (3) specifies that the Government have
examined the matter in detail and are pleased to extend the relaxations in
the Performance Guarantee ordered as per Government order dated
7.1.2021, for a further period up to 31.03.2023. But the fact remain, even
assuming that the Government order dated 15.03.2022 provides for
relaxation of the Performance Security alone, the tenders floated by the
Government and the offer made by the writ petitioner therein were
governed by the G.O. dated 7.1.2021, which was in force till 6.1.2022.
33. Considering the above aspects, we are of the view that the
learned single Judge was right in arriving at the conclusions discussed
above. Moreover, State Government have not made out a case of any
jurisdictional error or other legal infirmities, susceptible to be interfered
with the judgment dated 8.4.2022 in W.P.(C) No.4140 of 2022, in exercise
W.As. 615, 713, 726 &
of the powers conferred under Section 5 of the Kerala High Court Act.
Resultantly, the writ appeals have no sustenance and accordingly,
they are dismissed. No costs.
Sd/-
S.MANIKUMAR
CHIEF JUSTICE
Sd/-
SHAJI P.CHALY
krj JUDGE
//TRUE COPY//
P.A. TO C.J.
