The Secretary Vs Sri Durga Constructions Pvt. Ltd.

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.

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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:

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CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN and HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL

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CAV JUDGMENT

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( PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL )

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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).

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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.

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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.

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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

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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

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ANOTHER¹ . He seeks to allow the appeal.

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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.

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1 W.A.No.349/24 (GM-RES) dt.16.10.24

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It is further submitted that the learned Single

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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.

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We have heard the learned Additional Advocate

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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

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as per Clause 34.1 of the 'instructions to bidders' of the Standard Bid Document (hereinafter referred to as 'the SBD').

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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.

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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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Pursuant to the aforesaid directions, the

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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.

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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 nonspeaking order or an order passed without application of mind.

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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 /

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tender is very limited. The interference by the writ Courts

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in the tender process would amount to adding its wisdom

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to the wisdom of experts. The writ Court cannot sit as an

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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

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acceptance. The relevant clauses of the SBD are extracted hereinbelow:

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"16.6. The Bid Security may be forfeited

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(a) if the Bidder withdraws the Bid after Bid opening during the period of Bid validity;

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(b) if the Bidder does not accept the correction of the Bid Price, pursuant to Clause 27; or

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(c) in the case of a successful Bidder, if the Bidder fails within the specified time limit to

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(i) sign the Agreement; or

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(ii) furnish the required Performance Security.

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34. Performance Security

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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 :

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a. bank guarantee in the form given in Section 8; or certified Cheque/Bank Draft as indicted in Appendix.

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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.

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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."

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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.

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The respondent No.1 knowing fully well about

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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.

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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.

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The contention of the respondent No.1 that

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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

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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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