M/S Acciona Agua S a Vs Bangalore Water Supply and

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT, DIRECTION OR ORDER IN THE NATURE OF CERTIORARI QUASHING THE LETTER OF ACCEPTANCE DATED 25.03.2013 ISSUED BY THE RESPONDENT NO.1 AND ETC.

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THIS WRIT PETITION COMING ON FOR ORDERS AND HAVING BEEN RESERVED FOR ORDERS ON 17.12.2024, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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ORDER

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The Petitioners are before this Court seeking for the following reliefs:

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a. Issue a writ, direction or order in the nature of certiorari quashing the letter of acceptance dated 23.05.2013 issued by the Respondent no.1;

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b. Issue a writ, direction or order in the nature of mandamus directing the Respondent No.1 to return the Bid Security encashed by the Respondent No.1 for a sum of Rs. 1,980,00,000/- (Rs. One Crore Ninety Lakhs only) along with interest on the sum;

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c. Restrain the Respondent No.1 from taking any coercive or precipitative action against the Petitioners consequent to their non-acceptance of the LOA and their letter dated 23.05.2013 issued to the Respondent BWSSB;

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d. Pass such further or other order or orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.

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Petitioner No.1-M/s ACCIONA Agua S.A. [ACCIONA], claims to be a company incorporated and existing under the relevant laws of Spain and further claims that it is a leader in water treatment sector with ability to design, construct and operate drinking water treatment plants, residual purification plants, tertiary treatment plants for reuse and reverse osmosis, desalination plants etc.

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Petitioner No.2-M/s TECHNOFAB Engineering Limited [TECHNOFAB], is stated to be a company incorporated under the Indian Companies Act, 1956 [‘Act’ for short] having its offices in India and is a medium sized electromechanical engineering and construction company, serving the power, industrial

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and infrastructure sector by taking up turnkey contracts covering engineering, procurement and construction.

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Respondent No.1-Bangalore Water Supply and Sewerage Board [BWSSB], is stated to be an autonomous Board constituted under the statute. Respondent No.2- is the Bangalore Metro Rail Corporation Limited [BMRCL].

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BWSSB had invited sealed bids and a tender notification dated 16.08.2012 from all eligible bidders

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for the work of design, supply, construction, installation, testing, commissioning and operation of maintenance for a period of 7 years of a Sewage Treatment Plant [STP] at Kengeri [which hereinafter -referred to as Works which included civil, mechanical, electrical, instrumentation and any other allied works necessary for making the same fully functional].

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Petitioner No.1-ACCIONA with 51% participation, with petitioner No.2 TECHNOFAB having with 49% in a joint venture as a consortium participated in the aforesaid bidding on 26.11.2012, which bid was kept valid until 15.04.2013 and a Bank guarantee dated 23.11.2012 issued by Axis Bank Limited was submitted by the petitioners to BWSSB.

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On 29-12-2012, the JV received an email from the BWSSB requesting for clarification, which were furnished. On 22.02.2013, the BWSSB informed the JV that the bid was held to be technically qualified and invited a price bid opening, which was opened on 25.02.2013. On 12.03.2013, a meeting was called by the BWSSB and an oral request was made to the JV to extend the bid validity to 25.05.2013, which was so extended on the belief that agreement would be executed.

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Though the bid validity was extended, the letter of acceptance [LOA] was not issued, another meeting

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was called for on 24.04.2013, when the unsigned copy of LOA along with sample contractual documents were provided.

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On 21.05.2013, the BWSSB through an email requested the JV to extend the bid validity and Bank guarantee by 60 days. On receipt of the said email, the petitioners and the JV being aggrieved by the indefinite wait and delay, decided to exercise their option under clause 16.2, whereunder, the bidder could refuse the request without forfeiting its bid security and as such by its email dated 23.05.2013 informed the BWSSB that it was unable to extend the bid validity.

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On 24.05.2013, the BWSSB sent another email enclosing the LOA dated 23.05.2013 requiring the JV to provide performance security in terms of 43.1 of the instructions to bidders. The same was not acceptable to the petitioner.

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The BWSSB issued a letter to the Axis Bank on 30.05.2013 for encashment of the Bank guarantee alleging failure on part of the JV to extend the validity of the bid. The petitioner immediately wrote to the Bank on 31.05.2013 requesting not to honour the request for encashment of the Bank guarantee on account of the condition of Bank guarantee not being satisfied. The BWSSB contended that LOA having been issued, the contract is in force and it is entitled to encash the performance guarantee. The Bank having honoured the invocation, the petitioner vide its letter dated 5.06.2013 called upon the BWSSB to refund the amounts. The amount not having been paid, the petitioner had filed the above writ petition.

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Ms. Poornima Hatti, counsel for the petitioner would submit that the respondent-BWSSB has acted in a completely malafide manner inasmuch as firstly, the bid of the petitioner was in force till 25.05.2013, the

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BWSSB had sought for extension of validity vide its email dated 23.05.2013 which was rejected by the petitioner on 24.05.2013. Shockingly, the BWSSB vide another email dated 24.05.2013 enclosed the LOA dated 23.05.2013 and therefore, it is contended that the petitioner not having extended the bid validity, the petitioner not wanting to go ahead with the bid, which is also established by subsequent events of the site not being clear and a portion of the site being allotted to the BMRCL for establishment of its works, the BWSSB has acted in a malafide, dishonest manner in firstly seeking for extension of the bid and subsequently, the refusal thereof issuing LOA and thereby invoking the Bank guarantee which had been issued.

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Her submission is that all these things have been done to cover up the improper identification of site, a backdated LOA has been issued consequent upon which a Bank guarantee has been invoked putting

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the petitioner at loss. Once there was a request made for extension of the bid validity period and the said request was refused by the petitioner, the question of the BWSSB issuing the LOA, backdating it, only establishes the malafides on part of the BWSSB. The option for accepting the extension or not is that of the petitioner. The extension not accepted by the petitioner, the bid amounts could not be forfeited in terms of clause 16 of the Tender notification. Therefore, there was no question of the BWSSB invoking the Bank guarantee and calling upon the Bank to make payment of the amounts.

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Sri.B.S.Shrinivas, learned counsel appearing for the BWSSB would submit that the LOA was issued within 25.05.2013, that is within the period of validity of the bid submitted by the petitioner. The BWSSB was well within its right to issue the LOA within such period, merely because the BWSSB had sought for an extension which was refused by the petitioner

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would not disentitle the BWSSB from issuing LOA within the bid validity period.

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On this ground the respondent submits that no fault could be found with the BWSSB and the action taken by the BWSSB is proper and correct.

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Smt.Sumana Baliga, learned counsel for respondent No.2 submits that the matter is between petitioner and respondent No.1 and respondent No.2 has nothing to do with the same.

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Heard Smt.Poornima Hatti, learned counsel for the petitioner, Sri.B.L.Sanjeev, learned counsel for respondent No.1 and Sri.Sumana Baliga, learned counsel for respondent No.2. Perused papers.

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A short question that would arise for consideration in this matter is, whether the conduct of respondent No.1 is proper and correct, thereby rendering the invocation of the Bank Guarantee proper and correct?

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It is not in dispute that the bid validity was until 25.05.2013. It is also not in dispute that the BWSSB on 23.05.2013 itself sought for extension of the period of validity of the bid which was refused by the petitioner. It is on 25.04.2013 that the BWSSB sent another email enclosing the LOA which was followed by letter being addressed by the BWSSB to the Bank on 24.05.2013 itself seeking for extension of Bank guarantee on the ground that the Bank guarantee which had earlier been issued was expiring on 31.05.2013, followed by letter dated 30.05.2013 to the Bank invoking the Bank guarantee in pursuance of which payment has been made by the Bank to BWSSB.

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The sequence of events as afore stated leaves much to be desired and casts a long shadow of suspicion and doubt on the BWSSB. The BWSSB on 23.05.2013 having sought for extension, the same having been refused on 24.05.2013 has shockingly

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issued the LOA on 24.05.2013 itself and on 25.05.2013 has called upon the Bank to extend the Bank guarantee and on 30.05.2013 invoked the Bank guarantee. This sequence, to my considered opinion, indicates the malafides on part of the officers of the BWSSB in trying to pressurize the petitioner to agree

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to the terms of the BWSSB under threat of invocation

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of the Bank guarantee. The letter addressed by the BWSSB to BMRCL on 7.02.2013 reads as under:

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No. BWSSB/CE(K)/ACE(K)-1/TA-11/AE-2/14/13/2012-13 Date: 7/02/2013

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To,

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The Chief Engineer Bangalore Metro Rail Project Phase-2 Bangalore

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Dear Sir.

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Sub: Bangalore Metro Rail Project Phase-2-Transfer of BWSSB Land at Kengeri to BMRCL

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Ref: 24^th BMRCL High Power Committee meeting held on 09-01-2013

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Please refer to the discussions of the 24^th BMRCL High Power Committee held on 09-01-2013. In this regard it is to be informed that, the bids for 60 MLD STP at Kengeri have been received and the technical bids evaluation has reached the final stage. As the Sewerage

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components of JICA project are over delayed, it is not advisable to go for fresh financial bids or to request revision of cost from the bidders. In both the cases the approval of JICA has to be obtained and thus further delay in awarding the work. As verified with the layout plan the units which have to be shifted/relocated can be accommodated in the adjacent area. But the bidders may ask for variation cost for the relocation of the units.

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Under the above circumstances the following is proposed for consideration by BMRCL:

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a. BWSSB shall hand over the requested land of 6.20 acres and BMRCL will provide equal extent of land to BWSSB at adjoining location including forest land (survey no.30) which is adjacent to Survey nos. 29, 31 & 32.

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b. Since Bids have been received from prospective bidders for construction of STP, and due to handing over of the land to BMRCL, some of the proposed units of STP will have to be re-located. Any variation of cost because of shifting of these units has to be borne by BMRCL.

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c. If BMRCL provides the alternate land along the valley and adjacent to the existing BWSSB land, then the connecting bridge shall be constructed by BMRCT at their cost.

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d. With respect to the land in survey no.34 (12 guntas), the land owner had filed a writ petition in the Hon'ble High court and the hon'ble court has quashed the acquisition procedure. The same is being contested in the Hon’ble Supreme Court. BMRCL shall proceed further or re-notify the said land.

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e. The BMRCI shall provide thoroughfare to the STP, from the land which will be handed over by BWSSB for both entry and exit.

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BMRCL may consider the above and communicate the same immediately, thereby further necessary action can be initiated early.

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Thanking you.

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Yours faithfully Sd/Chief Engineer (K) BWSSB

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A perusal of the above letter would indicate that the

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BWSSB has categorically stated that it would hand over 6.20 acres of land to BMRCL, who is to provide equal extent of land to BWSSB including the forest land. It has also been clearly admitted that since bids have been received from prospective bidders for construction of the STP and due to handing over of the land to BMRCL some of the proposed unit of STP will have to be relocated. Any variance of cost on account of shifting of this Unit would have to be borne by BMRCL. If BMRCL were to provide an alternate land along the valley and adjacent to BWSSB land, a connecting bridge was to be

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constructed by BMRCL and an extent of 12 guntas of land in survey No.34, the acquisition has been quashed, thus reducing the extent of land to that extent.

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The BWSSB has also called upon BMRCL to provide a thoroughfare to the STP from the land which will be handed over by BWSSB for both entry and exit. This aspect would clearly indicate that there are several changes to the site and the works which are being discussed by BMRCL and the BWSSB behind the back of the petitioner without bringing these facts to the knowledge of the petitioner. These facts having come to the knowledge of the petitioner on account of an RTI application being filed subsequently.

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If both these set of facts are taken into consideration, the first set relating to the emails and the second set relating to the correspondence and the negotiations between BMRCL and BWSSB, it is categorically seen that the BWSSB without informing

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the petitioners about the changes being made in the site or the shifting of the Units, obligation on part of BMRCL, transfer of forest land to be made by the state, building of a bridge from one land to the other land if made available by BMRCL would have a severe impact on the project site and the financials thereto.

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In fact, the BWSSB has categorically stated in the said letter that any escalation cost would be borne by BMRCL and that some of the Units would have to be shifted. The bid which has been submitted by the petitioners was on the basis of the site shown by the BWSSB and the financial workings. As rightly contended by Ms.Poornima Hatti, learned counsel for the petitioner it is on the basis of those site conditions and any change in the site condition would require the petitioner to rework the calculation and resubmit its bid. More than this financial matter, the submission of the counsel for the petitioner is that

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there is no trust between the petitioners and BWSSB for the purpose of implementation of the project holds much water and credit.

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Statutory Board and corporations like BWSSB, BMRCL or the like, who are public Organisations dealing with public assets are not expected to hide relevant and material facts from a bidder who has participated in the tender issued by the BWSSB. The BWSSB has apparently chosen a site which has already been earmarked for the BMRCL, gone ahead with inviting tenders and having realised that the portion of the land was to be handed over to BMRCL has come up with a convoluted plan of firstly seeking for extension of the bid validity and secondly, when the bid validity was not extended to issue LOA, and immediately thereafter invoke the Bank guarantee thereby putting the petitioners in a difficult position.

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This invocation of the Bank guarantee, as rightly contended by Smt.Poornima Hatti, learned counsel

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for the petitioner also appears to be with the intention to put pressure on the petitioner to accept the terms of the BWSSB. The petitioners not having accepted has resulted in invocation of the Bank Guarantee. When Foreign companies were to bid for projects in India, the conduct on part of the tendering Authority would speaks volumes of the industrial atmosphere and the transparency of the process in the country. The BWSSB having chosen to mislead the petitioners, the petitioners not wanting to be so misled had chosen not to go ahead with the project which cannot be faulted with.

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What is in fault and default is the conduct of BWSSB as referred to supra. It would be required of the Secretary, Urban Development Department and Chairman of BWSSB to initiate such proceedings against such officers, in default, for the manner in which they have acted and to submit an enquiry

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report within a period of six weeks from the date of receipt of this order.

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In view of the above observations, I pass the following:

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ORDER

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i. The writ petition is allowed. A certiorari is issued, Letter of Acceptance [LOA] dated 23.05.2013 issued by respondent No.1 is quashed.

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ii. A mandamus is issued directing respondent No.1-BWSSB to return the bid security encashed by respondent of an amount of Rs.1,90,00,000/- (Rs.One Crore Ninety Lakhs only) along with interest at the rate of 12% p.a. calculated from the date of invocation to the date of payment. Payment to be within a period of 30 days from the date of receipt of this order.

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