Kerala State Cable And Conductor ... vs The State Of Kerala
2023 Latest Caselaw 310 Ker

        IN THE HIGH COURT OF KERALA AT ERNAKULAM
                         PRESENT
           THE HONOURABLE MR.JUSTICE V.G.ARUN
  WEDNESDAY, THE 11TH DAY OF JANUARY 2023 / 21ST POUSHA,
                          1944
                 WP(C) NO. 32866 OF 2022
PETITIONER/S:

         KERALA STATE CABLE AND CONDUCTOR MANUFACTURERS
         ASSOCIATION,
         REPRESENTED
         BY ITS PRESIDENT, AUGASTIN KAYALLAKAM,
         HOUSE NO. 5, CONTINENTAL GARDENS,
         CHITTALLOOR, KOWDIAR,
         THIRUVANANTHAPURAM 695003.


         BY ADVS.
         UNNIKRISHNAN.V.ALAPATT
         P.K.SURESH KUMAR (SR.)

RESPONDENT/S:

    1    THE STATE OF KERALA

         REPRESENTED BY ITS SECRETARY, FINANCE (PUBLIC
         UNDERTAKINGS-A) DEPARTMENT,

         SECRETARIAT, THIRUVANANTHAPURAM-695001.
    2    SECRETARY TO THE GOVERNMENT,
         DEPARTMENT OF POWER, GOVERNMENT OF KERALA,
         SECRETARIAT, THIRUVANANTHAPURAM - 695001.
    3    SECRETARY TO THE GOVERNMENT,

         STORES PURCHASE DEPARTMENT, GOVERNMENT OF
         KERALA, SECRETARIAT, THIRUVANANTHAPURAM-695001.
    4    SECRETARY TO THE GOVERNMENT,

         DEPARTMENT OF INDUSTRIES, GOVERNMENT OF KERALA,
         SECRETARIAT, THIRUVANANTHAPURAM-695001. BOARD
         LTD.,
    5    KERALA STATE ELECTRICITY BOARD LTD.,
         REPRESENTED BY ITS SECRETARY, VYDHYUTHI BHAVAN,
         PATTOM, THIRUVANANTHAPURAM - 695004 ,
    6    THE CHIEF ENGINEER (SCM)
 WP.(C) No.32866 of 2022

                                -2-


             (KERALA STATE ELECTRICITY BOARD LTD., VYDHYUTHI
             BHAVAN, PATTOM, THIRUVANANTHAPURAM - 695004.
     7       CHIEF SECRETARY TO THE GOVERNMENT,
             GOVERNMENT OF KERALA,
             SECRETARIAT, THIRUVANANTHAPURAM 695 001.
             BY ADVS.
             Nirmal S
             Joseph Antony
             RAJU JOSEPH (SR.)(R-191)

OTHER PRESENT:

             gp P.S.APPU


         THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
16.12.2022, THE COURT ON 11.01.2023 DELIVERED THE FOLLOWING:
 WP.(C) No.32866 of 2022

                                   -3-



                            JUDGMENT

Dated this the 11th day of January, 2023

The petitioner is an Association of cable and

conductor manufacturers in the State, registered

under the Micro, Small and Medium Enterprise

Development Act, 2006 ('the MSME Act' for short).

The ACSR conductors manufactured by the

petitioner are used for transmitting high voltage

electric power and the only consumer for ACSR

conductors in Kerala is the KSEB Ltd/5th

respondent. As per Ext.P2 Government order, all

State PSUs and MSMEs in the State are entitled

for price preference up to 15% in all

procurements by the State Government Departments/

Organisations/Local Self Government

Institutions/Pubic Undertakings. Likewise, State

PSUs and Local MSMEs are entitled for purchase

preference if their quote is within the price WP.(C) No.32866 of 2022

band of L1+15%. The price and purchase preference

is limited up to 50% of the total order. By

Ext.P3 Government order, the price and purchase

preferences for MSMEs got limited to 50% of the

order quantity, since 25% of the total quantity

is set apart for State PSUs. The dispute raised

in this writ petition emanates from Ext.P7 Notice

Inviting Tender published by the KSEB Ltd, for

supply of 26060 Km ACSR Rabbit and 2593 Km

Raccoon conductors. Ext.P8 Bid Document attached

to Ext.P7 notice contains the general conditions

of the contract. The petitioner is aggrieved by

some of the Clauses in the contract, which,

according to the petitioner, militates against

the MSME policy, as given effect to by Exts.P2

and P3, and interdicts the right of the

petitioner's members to participate in the

notified tender. The most objectionable Clause in

Ext.P8 is Clause 7 of Annexure 1 Conditions for

Pre-qualification, which reads as under; WP.(C) No.32866 of 2022

"7) The Bidder should have sufficient financial capacity to manufacture and supply the item within KSEB Ltd's desired delivery schedule. The firm should have a minimum annual turn] over of 75% PAC of the quoted Circles for the last 3 consecutive years and furnish the turnover along with Profit and loss account and Balance Sheet for the last three financial years on year wise basis."

Objection is also raised against Clause 8 of

Annexure 1 below;

"8. Financial Certificates:

1) The bidders should produce Annual turnover certificate duly certified by a Chartered Accountant in the prescribed format Annexure-Ill along with the bid.

2) The bidders should produce a solvency certificate, obtained within a period of 6months for an amount equivalent to quoted PAC or more from the Thahasildar / Nationalized/ Scheduled Bank OR a Net worth certificate duly certified by a Chartered Accountant in the prescribed format Annexure- IV along with the bid.

3) The offer submitted by the bidder shall be true and complete as per tender conditions. Declaration Certificate to this extent in the letter head of the bidder in WP.(C) No.32866 of 2022

the format as per Annexure-V shall be furnished along with the bid.

All financial statements certified by a practicing Chartered Accountant only will be accepted. Audited Profit and Loss account and Audited Balance Sheet for the last 3 Financial years immediately preceding the date of submission of bid shall be furnished."

As the KSEB Ltd refused to redress or even

address the grievance, the writ petition is

filed, seeking the following reliefs;

"a) Declare that Clauses 7 and 8 of Annexure 1 Ext.P8 bid document are highly oppressive as far as MSME units are concerned and that they are inconsistent with the MSME Act and are not binding on the members of the petitioner association.

b) Nullify all the clauses in Ext.P8 bid document which go against the spirit of the MSME Act and also Ext.P2 order.

c) To grant such other reliefs prayed for from time to time.

d) Direct respondents 1 to 4 to see that the KSEB implements the government's policy regarding MSME units strictly and that the KSEB does not deny the benefits that derive out of the MSME Act and the WP.(C) No.32866 of 2022

orders issued thereunder to such units:

e) Direct the respondents 1 to 4 to take appropriate decision making ACSR Conductors to be exclusively purchasable from MSME units."

2. Adv.P.K.Suresh Kumar, learned Senior

Counsel appearing for the petitioner pointed out

that, by reason of the objectionable Clause 7,

only the MSMEs with minimum annual turn over of

75% of the Probable Amount of Contract (PAC) of

each circle for the last three years, are

qualified to participate in the tender. When the

turn over of the members of the petitioner for

the last three years is compared to the PAC in

Ext.P7, the micro units are disqualified or

rather, ousted from participating in the tender

with respect to the Perumbavoor, Thrissur, Tirur,

Palakkad and Sreekandapuram Circles. To buttress

this submission, the Senior Counsel drew

attention to the classification of the

enterprises under Section 7 of the MSME Act and WP.(C) No.32866 of 2022

Ext.P9 notification of the Government of India.

On a conjoint reading of Section 7 and the

notification, it can be seen that, a 'micro

enterprise' is one in which the investment in

plant and machinery or equipment does not exceed

one crore rupees and turn over does not exceed

five crore rupees. Being so, micro enterprises

cannot submit bids in the circles where the

minimum annual turn over of 75% of the PAC for

the last three years is more than five crores. In

addition, units having turn over of less than 75%

PAC for the last three years are also not

qualified to participate in the tender. Hence,

by incorporating the objectionable Clauses, the

KSEB Ltd has effectively prevented the

petitioner's members from participating in the

tender.

3. It is contended that the objectionable

Clause is opposed to the objectives of the MSME

Act, which is to promote, develop and enhance the WP.(C) No.32866 of 2022

competitiveness of Micro, Small and Medium

Enterprises. Therefore, the objectionable Clauses

should be quashed and the members of the MSMEs

permitted to submit bids for the circle of their

choice.

4. Adv.Raju K.Joseph, learned Senior

Counsel appearing for the KSEB Ltd submitted

that, being the employer, the KSEB Ltd has the

right to decide the conditions upon which the

tender can be awarded. As the tender for ACSR

cables is invited to complete targetted/urgent

work, the KSEB Ltd cannot consider firms which do

not have sufficient financial capacity and

stability to supply the ordered quantity in time.

The minimum annual turn over of 75% of the PAC is

insisted to ensure the financial capability of

participating bidders. Even according to the

petitioner, micro enterprises are denied

opportunity to participate in tenders only in the

Kottarakkara, Perumbavoor, Thrissur, Tirur, WP.(C) No.32866 of 2022

Palakkad and Sreekandapuram Circles. As such, the

micro enterprises can participate in the tender

for the other 19 circles. Moreover, the MSME

Development Act and Exts.P2 and P3 are not

intended to promote only Micro enterprises, but

the Small and Medium Enterprises as well.

Therefore, merely because a few micro

enterprises are disabled from participating in

the tender in some of the circles, the Clauses 7

and 8 cannot be quashed. It is assertively

submitted that the terms and conditions in

Exts.P7 and P8 does not violate provisions of the

MSME Act or Exts.P2 and P3 Government orders.

5. As contended by the petitioner, the

intention behind the MSME Act is to facilitate

the promotion and development of Micro, Small and

Medium Enterprises. It is also true that Exts.P2

and P3 Government orders are issued in

furtherance of those objectives. The short

question therefore is whether Clauses 7 and 8 of WP.(C) No.32866 of 2022

Ext.P8 militates against the objective behind the

MSME Act or violates Exts.P2 and P3 Government

orders.

6. Indisputably, the objectionable clauses

does not completely prohibit micro enterprises

from participating in the tender. Clause 7 only

stipulates that the participating firm should

have a minimum annual turn over of 75% PAC for

the last three consecutive years. Going by the

table in the writ petition, the 75% of notified

PAC of the Kottarakkara, Perumbavur, Thrissur,

Tirur, Palakkad and Sreekandapuram Circles are

concerned are above Rs.5 Crores. Therefore,

micro enterprises will not be able to participate

in the tender for those circles. Some of the

members of the petitioner may not qualify for

certain other Circles, if their turn over for the

last three years is less than 75% of the notified

PAC. Pertinently, these MSMEs can opt for other

circles, according to their financial capacity WP.(C) No.32866 of 2022

and convenience, as the tender is invited circle-

wise.

7. As contended by the KSEB Ltd being the

employer, the Board is best suited to decide its

requirements. The Board having fixed the

financial capability of the bidders based on

factor like quantity of cable to be supplied and

its price, that condition cannot be interfered in

exercise of the power under Article 226, on the

premise that the condition results in some micro

enterprises being denied participation in some

circles. The challenge on the premise that the

condition violates fundamental right guaranteed

to the petitioner's members under Article 19(1)

(g) can be countenanced only in case of complete

ouster from the tender process. It is also

pertinent to note that, even under Ext.P2, the

price preference and purchase preference for

MSMEs is only up to 50% of the total order and

Ext.P3 further limits the available quantity to WP.(C) No.32866 of 2022

25% of the 50% total quantity. It is therefore

evident that, even the State Government does not

intend to give exclusive privilege to MSMEs.

       For   the     aforementioned    reasons,     the   writ

petition       is dismissed.

                                       Sd/-

                                      V.G.ARUN
                                        JUDGE
Scl/
 WP.(C) No.32866 of 2022





                   APPENDIX OF WP(C) 32866/2022

PETITIONER EXHIBITS
Exhibit P1        TRUE COPY OF LIST OF MEMBERS OF THE
                  PETITIONER ASSOCIATION.
Exhibit P2        TRUE COPY OF G.O. (RT) 5382/2020 /FIN
                  DATED 18.9.2020
Exhibit P3        TRUE COPY OF THE G.O (RT)

NO.8284/2021/FIN DATED 20-12-2021 Exhibit P4 TRUE COPY OF NOTICE INVITING VENDOR DATED 11-7-2022 Exhibit P5 TRUE COPY OF INTERIM ORDER DATED 23-8-

2022 IN WP(C) NO. 26012 OF 2022 Exhibit P6 TRUE COPY OF INTERIM ORDER DATED 29-9-

2022 IN WP(C) NO. 26012 OF 2022 Exhibit P7 TRUE COPY OF THE NOTICE INVITING TENDER DATED 6.10.2022 Exhibit P8 TRUE COPY OF THE RELEVANT PORTIONS OF THE BID DOCUMENT ATTACHED TO EXT.P7 NOTICE DATED 6-10-2022 INCLUDING GENERAL CONDITIONS OF CONTRACT, ANNEXURE -1 CONDITIONS FOR PRE-

QUALIFICATION AND PRE-QUALIFICATION BID PART II Exhibit P9 TRUE COPY OF THE GAZETTE NOTIFICATION DATED 1.6.2020