Allowed

Korea Electric Power Data Network v. the Govt. of Kerala

Kerala HC8 May 2012WP(C)/311/2011

Case brief

AI extract

What is this about?

The High Court quashed a State Government order cancelling an award of an IT implementation contract under the RAPDRP scheme. It held the Government lacked jurisdiction to interfere in the Board's award, declaring its cancellation order arbitrary and without legal basis.

What did the court decide?

Order Ext.P26 quashed; Sanction of State Government declared not required; Respondents 2 and 3 restrained from cancelling work or re-tendering.

Korea Electric Power Data Network Vs the Govt. of Kerala — Company and Corporate | Kerala HC (2012)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN

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TUESDAY, THE 8TH DAY OF MAY 2012/18TH VAISAKHA 1934

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WP(C).No. 311 of 2011 (L)

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PETITIONER:

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KOREA ELECTRIC POWER DATA NETWORK COMPANY LIMITED, 1355, SEOCHO 2-DONG-SEOCHO-GU, SEOUL, KOREA, WITH ITS OFFICE AT T.C. NO:3/2772(38), FIRST FLOOR,`STAR INN', PATTOM, MARAPPALAM, THIRUVANANTHAPURAM - 695 004, REPRESENTED BY ITS MANAGER, MR.JONG YUN SHIN.

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BY SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE, ADV. SRI.RAJESH NAIR.

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RESPONDENTS:

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1. THE GOVERNMENT OF KERALA, REPRESENTED BY ITS PRINCIPAL SECRETARY TO THE GOVERNMENT, POWER (C) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM.

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2. KERALA STATE ELECTRICITY BOARD, REPRESENTED BY ITS CHAIRMAN, VYDYUTHI BHAVANAM, THIRUVANANTHAPURAM.

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3. THE CHIEF ENGINEER (TC&M), KERALA STATE ELECTRICITY BOARD, VYDYUTHI BHAVANAM, THIRUVANANTHAPURAM.

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4. POWER FINANCE CORPORATION LTD., REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR, HAVING ITS REGISTERED OFFICE AT `UJRANIDHI', 1, BARAKHAMBA LANE, CONNAUGHT PLACE, NEW DELHI - 110 001.

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R1 BY GOVERNMENT PLEADER SRI. G. GOPAKUMAR, R2 & R3 BY ADVS. SRI.P.SANTHALINGAM (SENIOR) SRI.P.P.THAJUDEEN, S,C, R4 BY SRI.P.PARAMESWARAN NAIR ,A.S.G. OF INDIA.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05-03-2012, THE COURT ON 08/05/2012 DELIVERED THE FOLLOWING:

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W.P.(C).NO.311/2011-L:

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APPENDIX

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PETITIONER'S EXHIBITS:

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EXT.P.1:	COPY OF THE LETTER (F.NO.14/5/2007-APDRP DTD. 06/08/2008) ISSUED BY GOVERNMENT OF INDIA TO THE 4TH RESPONDENT.
EXT.P.2:	COPY OF THE ORDER (NO.14/04/2008-APDRP) DTD. 19/09/2008 ISSUED BY THE R.1.
EXT.P.3:	COPY OF THE OFFICE MEMORANDUM (NO.14/04/2008-APDRP) DTD. 22/12/2008 PRESCRIBING THE GUIDELINES.
EXT.P.4:	COPY OF THE PANEL OF IT CONSULTANTS ISSUED BY THE R.4. WHICH IS PUBLISHED IN OFFICIAL WEBSITE OF THE R-APDRP.
EXT.P.5:	COPY OF THE INFORMATION CONTAINED IN THE WEBSITE OF R-APDRP REGARDING THE ALLOCATION OF FUNDS TO THE STATES BY THE CENTRAL GOVERNMENT.
EXT.P.6 SER	IES: COPY OF THE REPLY TO THE APPLICATION ISSUED BY THE R.2. SHOWING THE ABOVE SAID FEEDBACK VENTURES AS THE ITC ALONG WITH THE TRUE COPY OF THE QUESTIONNAIRE.
EXT.P.7:	COPY OF THE INTERNET WEBSITE OF M/S. FEEDBACK VENTURES SHOWED THAT IT PARTICIPATED IN THE BID MANAGEMENT HELD FOR THE PURPOSE OF SELECTION ITIA BY THE R.2.
EXT.P.8:	COPY OF THE NOTICE INVITING TENDER ON 27/03/2010 ISSUED BY THE R.2.
EXT.P.9:	COPY OF THE INSTRUCTION TO THE BIDDERS ISSUED BY THE R.2.
EXT.P.10 SE	RIES: COPY OF THE LIST AND ADDITIONAL LIST OF EMPANELLED AGENCIES AS ITIA ISSUED BY THE R.4.
EXT.P.11:	COPY OF THE RELEVANT PART OF THE BID SUBMITTED BY THE PETITIONER.
EXT.P.12:	COPY OF THE LETTER OF INTENT (NO.CE(TCM)/XM/RAPDRP/ITIA/2010- 11/1/1751) DTD. 30TH JUNE' 2010 WAS ISSUED BY KSEB.
EXT.P.13:	COPY OF THE LETTER DTD. 01/07/2010 ISSUED BY THE PETITIONER TO THE R.2.
EXT.P.14:	COPY OF THE LETTER OF INTENT (FOR NON APDRP) (NO.CE (TCM) XM/NON-RAPDRP/ITIA/2010-11/2/1752 DTD. 30/06/2010) ISSUED BY THE P.2.
EXT.P.15:	COPY OF THE LETTER DTD. 01/07/2010 ISSUED BY THE PETITIONER TO THE R.2.
EXT.P.16:	COPY OF THE DETAILED LETTER OF AWARD DTD. 06/09/2010 ISSUED BY THE R.2. IN FAVOUR OF THE PETITIONER.
EXT.P.17:	COPY OF THE (G.O.(RT).NO.19/10/PD DTD. 04/09/2010) ISSUED BY THE R.1.

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W.P.(C).NO.311/2011-L:

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EXT.P.18:	COPY OF THE LEASE DEED.
EXT.P.19:	COPY OF THE LETTER DTD. 15/12/2010 ISSUED BY THE PETITIONER BEFORE THE R.2.
EXT.P.20:	COPIES OF THE PRESS RELEASE BY THE KSEB, IN ITS WEBSITE ON 27TH SEPT. 2010.
EXT.P.21:	COPIES OF THE PRESS RELEASE BY THE KSEB, IN ITS WEBSITE ON 29TH SEPT. 2010.
EXT.P.22:	COPIES OF THE PRESS RELEASE BY THE KSEB, IN ITS WEBSITE ON 6TH DECEMBER 2010.
EXT.P.23:	COPY OF THE PUBLICATION ISSUED BY THE KSEB, IN ITS WEBSITE ON 20TH DECEMBER 2010.
EXT.P.24:	COPY OF THE LETTER DTD. 20/12/2010 ISSUED BY THE PETITIONER BEFORE THE R.2.
EXT.P.25:	LETTER (NO.CE (TCM)/XM/R-APDRP/ITIA/2010-11/673 DTD. 6-1-11) TO THE PETITIONER.
EXT.P.26:	COPY OF THE ORDER DTD. 27/12/2010 (GO(RT).NO.281/2010/PD) ISSUED BY THE R.1.
EXT.P.27:	COPY OF THE CORRIGENDUM DTD. 13/04/2010.
EXT.P.28:	COPY OF THE AMENDMENT TO THE LETTER OF AWARD DTD. 24/09/2010.
EXT.P.29:	COPY OF THE LETTER DTD. 11/10/2010 SENT BY THE PETITIONER TO THE R.2.
EXT.P.30:	COPY OF THE FORWARDING LETTER DTD. 27/09/2010 SENT BY THE PETITIONER TO THE R.2.
EXT.P.31:	COPY OF THE PERFORMANCE BANK GUARANTEE.
EXT.P.32:	COPY OF THE GUIDELINES FOR INVITING R F P BY UTILITIES FOR SELECTION OF IT CONSULTANTS FOR IMPLEMENTATION OF PART A OF R A P D R P, DOWNLOADED FROM THE P F C WEBSITE.
RESPONDE	NTS' EXHIBITS:

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EXT.R1.A:	COPY OF THE LETTER FROM OPPOSITION LEADER ADDRESSED TO HONOURABLE CHIEF MINISTER DTD. 28/09/2010.
EXT.R1.B:	COPY OF THE LETTER FROM CHIEF MINISTER ADDRESSED TO HONOURABLE POWER MINISTER DTD. 07/09/2010.
EXT.R2.A:	COPY OF THE REPLY DTD. 01/10/2010.
EXT.R2.B:	COPY OF THE LETTER NO.4974/C1/10/PD, DTD. 01/10/2010.
EXT.R2.C:	COPY OF THE REPLY OF THE K.S.E. BOARD DTD. 01/10/2010.
EXT.R2.D:	COPY OF THE GO(RT).NO.281/2010/PD DTD. 27/12/2010.

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W.P.(C).NO.311/2011-L:

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EXT.R2.(A):	COPY OF THE LETTER DTD. 14/06/2010 SENT BY WIPRO.
EXT.R2.(B):	COPY OF THE LETTER DTD. 29/06/2010 SENT BY MIC ELECTRONICS LTD.
EXT.R2.(C):	COPY OF THE LETTER DTD. 09/06/2010 SENT BY M/S. OMNE AGATE.
EXT.R2.(D):	COPY OF THE REPLY SENT BY K.S.E. BOARD DTD. 23/07/2010.
EXT.R2.(E):	COPY OF THE REPLY SENT BY K.S.E. BOARD DTD. 08/07/2010.
EXT.R2.(F):	COPY OF THE REPLY SENT BY K.S.E. BOARD ON 30/08/2010.
EXT. R2.(G):	COPY OF THE TECHNICAL SCORES AWARDED TO THE 8 BIDDERS BASED ON THE TOOL KIT PROVIDED BY PFC.
EXT.R4.A:	COPY OF THE MAIL DTD. 04/06/2010.
EXT.R4.B:	COPY OF THE ADDITIONAL GUIDELINES DTD. 26/05/2010.
EXT.R4.C:	COPY OF THE LETTER NO.IT/CU/RAPDRP/2010-11/400 DTD. 26TH JUNE 2010.
EXT.R4.D:	COPY OF THE D.O.NO.CM/101/R-APDRP/KDN/2010/DTD. 25/06/2010.
EXT.R4.E:	COPY OF THE R.4. VIDE LETTER NO.02:10:R-APDRP:II:2008:ITIA DTD. 29/06/2010.
EXT.R4.F:	LETTER NO.02:10:R-APDRP:II:2008:ITIA DTD. 30/07/2010.

//TRUE COPY//

P.A. TO JUDGE.

Prv.

P.N.RAVINDRAN, J.

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W.P(C).No.311 of 2011

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----------------------------------------Dated this the 8^th day of May, 2012

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JUDGMENT

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The petitioner, a company established by the Korean Electric Power Corporation, which is a fully owned company of the Government of the Democratic Republic of Korea, has filed this writ petition challenging Ext.P26 order dated 27.12.2010 issued by the State Government cancelling Ext.P17 Government order dated 4.9.2010, by which, the State Government had accorded sanction to the Kerala State Electricity Board to award the work of implementation of IT systems under Part A of the Restructured Accelerated Power Development and Reforms Program in the State of Kerala. The petitioner also seeks an order restraining the second respondent from terminating the work awarded to it or from re-tendering the work and a consequential direction to the second respondent to release the mobilization amount of Rs.18.94 Crores for which bank guarantee has already been furnished by the petitioner. The brief facts of the case are as follows:-

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With a view to achieve loss reduction in the transmission

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and distribution of electricity, the Government of India decided to implement a program called Restructured Accelerated Power Development and Reforms Program (RAPDRP for short) during the eleventh five year plan. The Central Government also appointed the Power Finance Corporation Ltd., as the nodal agency to implement the program under the guidance of the Ministry of Power. The proposal was to cover urban areas - towns and cities with a population of more than 30,000 (10,000 in the case of special category States). In addition, in certain high-load density rural areas with significant loads, the work of separation of agricultural feeders from domestic and industrial ones and of High Voltage Distribution System (11 KV) was also to be taken up. The projects under the RAPDRP are to be taken up in two parts. Part A includes projects for establishment of baseline data and IT applications for energy accounting/auditing and IT based consumer service centres. Part B includes distribution strengthening projects like renovation, modernization and strengthening of 11 KV level sub stations, transformers/ transformer centres etc. Ext.P2 is a copy of the order issued by the Government of India on 19.9.2008 approving the Restructured Accelerated Power Development and Reforms

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Programme. Ext.P2 also provided for a funding mechanism. It is stipulated in paragraph 5 of Ext.P2 that 100% funds for approved projects shall be provided through loan from the Government of India on terms to be decided by the Ministry of Finance. It is also stipulated that the loan shall be converted into a grant once the establishment of the required system is achieved and verified by an independent agency, that interest on the converted loan shall be capitalized, that conversion of the loan to grant will not be made in case Part A is not completed within three years from the date of sanctioning of the project and that the project will be deemed to be completed on the establishment of the required system, duly verified by an independent agency appointed by the Ministry of Power. The project was sanctioned as far as the State of Kerala is concerned, on 26.11.2009.

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Pursuant to Ext.P2 order, the Government of India issued Ext.P3 Office Memorandum dated 22.12.2008 prescribing the guidelines for implementation of the project. It was stipulated in Ext.P3 that the Utilities (the Kerala State Electricity Board in the instant case) shall prepare detailed project reports under Part A and Part B for each of the project areas and while forwarding the detailed project reports to the Nodal Agency, indicate the order of

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priority of the projects. It was stipulated that the Utilities may appoint IT Consultants through an open bidding process from the panel of IT Consultants prepared by the Nodal Agency for preparing detailed project reports of Part A projects. It was also stipulated that IT Consultants shall be empanelled by the Nodal Agency/Ministry of Power after observing codal formalities and that hiring charges of the IT Consultant may be included in the project cost of Part A, only if an IT Consultant is appointed from the panel prepared by the Nodal Agency and the IT Consultant is appointed through competitive bidding.

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Pursuant to Ext.P2 order and Ext.P3 Office Memorandum, the Central Government allocated a loan of Rs.214.38 Crores to the Kerala State Electricity Board for implementation of the project. The Kerala State Electricity Board (hereinafter referred to as “the Board” for short) thereupon appointed M/s.Feedback Ventures, a consultant empanelled by the Power Finance Corporation of India, as the IT Consultant for preparation of the detailed project report. Thereafter, the Board issued Ext.P8 notice inviting tenders for appointment of the Information Technology Implementation Agency (IT Implementation Agency for short) for implementation of the Information Technology infrastructure in

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the Board under Part A of the Restructured Accelerated Power Development and Reforms Program. By that notice, sealed International Competitive Bids were invited for appointment as IT Implementation Agency. The last date stipulated for submission of bids was 20^th April, 2010. The last date was thereafter extended till 3^rd May 2010.

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Pursuant to Ext.P8 tender notice, the petitioner, one of the Implementation Agencies empanelled by the Power Finance Corporation of India submitted its technical bid and price bid. The price bid submitted by the petitioner was Rs.239.97 Crores consisting of two parts; Rs.189.94 Crores for RAPDRP areas and Rs.50.03 Crores for non-RAPDRP areas. There were eight bidders including the petitioner. Seven bidders including the petitioner were short listed. M/s.Omne Agate, one of the bidders was eliminated after the technical bids were opened as it did not meet the technical qualification criteria of obtaining 35 marks. After the technical bids were opened and the seven bidders were short listed, the financial bids were opened on 7.6.2010. After price bid evaluation, the offer made by the petitioner was accepted and Ext.P12 letter of intent dated 30.6.2010 was issued. The petitioner thereupon sent Ext.P13 letter dated 30.6.2010 to the

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third respondent who had issued Ext.P12 letter on behalf of the Board informing him that Ext.P13 letter may be treated as the petitioner's formal and complete acceptance of the letter of intent. The petitioner also mentioned therein that it is willing to meet or comply with the various points mentioned in the letter of intent. Simultaneously, on 30.6.2010 itself, Ext.P14 letter of intent was issued for non-RAPDRP areas and by Ext.P15 letter dated 1.7.2010 the petitioner accepted the said letter of intent as well. Thereafter, the third respondent on behalf of the Board issued Ext.P16 letter of award dated 6.9.2010, appointing the petitioner as the IT Implementation Agency for implementation of IT infrastructure under Part A of RAPDRP subject inter alia to the terms and conditions stipulated therein.

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After the letters of intent were issued, the State Government directed that the proposal should be vetted by the Government and approved by the Council of Ministers. The Chairman of the Board thereupon sent a letter dated 15.7.2010 to the Principal Secretary to Government, Power Department, Government of Kerala, informing the Government that the Full Board that met on 25.6.2010 has selected the petitioner as the IT Implementing Agency for implementing Part A of RAPDRP scheme

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at a price of Rs.189.94 Crores for RAPDRP works and Rs.50.03 Crores for non-RAPDRP works and that the letter of intent was issued on 30.6.2010. The Government after considering the said letter and examining the matter in detail issued Ext.P17 order dated 4.9.2010 accordng sanction to the Board to entrust implementation of IT systems under Part A of RAPDRP scheme to the petitioner for Rs.189.94 Crores and the non-APDRP works for Rs.50.03 Crores. It was thereupon that Ext.P16 letter of award was issued on 6.9.2010.

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Thereupon, the petitioner took a building on lease at Thiruvananthapuram, transferred the required number of personnel from the different establishments and project sites of the petitioner and its partners to Thiruvananthapuram and entered into agreements for procurement of equipment, IT Software & Hardware and other services, thereby incurring an expenditure of approximately Rs.30 Crores. When notwithstanding the steps taken by the petitioner pursuant to Ext.P16 letter of award, the mobilization advance of 10% of the value of the contract was not disbursed, the petitioner sent Ext.P19 letter dated 15.12.2010 to the Chairman of the Board and the third respondent inter-alia pointing out that the petitioner is entitled for

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payment of mobilization advance. When no reply was forthcoming, the petitioner sent Ext.P24 letter dated 20.12.2010 once again reminding the Chairman of the Board of the obligations of the Board under the work order. Shortly thereafter the third respondent sent Ext.P25 letter dated 6.1.2011 informing the petitioner that it shall not proceed with activities related to implementation of Part A of the RAPDRP scheme in view of the direction issued by the Government of Kerala to that effect. Shortly thereafter, the Government issued Ext.P26 order dated 27.12.2010 cancelling Ext.P17 order whereby the Government had earlier accorded sanction to entrust implementation of IT systems under Part A of RAPDRP scheme at a total cost of Rs.189.94 Crores and in the non-RAPDRP areas for Rs.50.03 Crores, to the petitioner. The Government also directed the Board to take steps to re-tender the project. In this writ petition the petitioner challenges Ext.P26 and seeks the following reliefs:-

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(i) To call for the records and proceedings relating to the order issued on 27.12.2010 by Principal Secretary to Government, Power (C) Department to cancel the order giving sanction by the first respondent to the second respondent Kerala State Electricity Board awarding the work of Part-A of Restructured-

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Accelerated Power Development and Reforms Program Scheme awarded to the petitioner in respect of 43 towns in Kerala and the work of Non-APDRP areas and to quash or set aside the said order as illegal, arbitrary, unfair, unconstitutional and void.

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(ii) to issue a writ of mandamus or other appropriate writ, order or direction restraining the second respondent from terminating the work awarded to the petitioner by Exhibit P16 letter of award dated 06.09.2010 or to retender the said work.

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(iii) to direct the second respondent to realize the mobilization amount of Rs.18.94 crores for which the bank guarantee has already been furnished by the petitioner pending disposal of the writ petition.

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It is contended that the action of the State Government

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is arbitrary and discriminatory and is violative of Article 14 of the Constitution of India. It is also contended that Ext.P26 order has been issued without application of mind and without following the principles of natural justice. The petitioner has also contended that Ext.P26 order has been issued with ulterior motives and on extraneous considerations and that there was absolutely no reason to cancel the sanction accorded by the Government to the Board to entrust the implementation of IT systems under Part-A

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of the RAPDRP scheme to the petitioner. The petitioner proceeds to state that it has acted on the basis of Ext.P16 letter of award to its detriment and incurred heavy expenditure for implementation of the project and therefore, the respondents are barred by the principles of promissory estopel from cancelling the work awarded to the petitioner. It is also contended that the order passed by the Government is vitiated by malice and is without jurisdiction and that no reasons have been stated in Ext.P26 to direct retendering of the work or to cancel the sanction accorded to the Board to award the work to the petitioner.

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The Additional Secretary to Government, Power Department, Government of Kerala, has, on behalf of the first respondent, sworn to a counter affidavit dated 8.3.2011. In paragraph 26 of the counter affidavit it is stated that though the tender was awarded after following the procedural formalities prescribed by the Power Finance Corporation; the Nodal Agency appointed by the Central Government for the project, the State Government subsequently considered several objections raised by the Hon'ble Chief Minister as well as the Hon'ble Leader of the Opposition, to the award of the tender and decided to cancel the award of the contract to the petitioner. It is stated that Ext.P26

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order dated 27.12.2010 cancelling the tender was issued after examining all aspects of the case and in good faith and in exercise of the inherent powers vested in the State Government. In paragraph 27 it is stated that though the Power Finance Corporation had confirmed that the bid evaluation procedure followed by the Board was in accordance with the provisions of the Request for Proposal and the RAPDRP guidelines, clause 23 of the General Conditions of Contract enabled the purchaser to terminate the contract at their convenience. In paragraph 28 it is stated that the Leader of Opposition had sent Ext.R1(a) letter dated 28.9.2010 to the Hon'ble Chief Minister raising some queries regarding the award of the contract, that the Hon'ble Chief Minister had sent Ext.R1(b) letter dated 7.9.2010 to the Hon'ble Minister for Electricity raising some queries regarding the award of the contract, that the Board thereafter furnished a detailed reply to the Government explaining the selection process and thereupon, by letter dated 1.10.2010 the Government instructed the Board to keep Ext.P17 Government order dated 4.9.2010 in abeyance and therefore, the Board could not proceed with the signing of the contract. It is also stated that the petitioner failed to provide manufacturer authorization forms

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within 14 days from the date of the letter of award. In paragraph 29 of the counter affidavit it is stated that the petitioner's request for payment of mobilization advance was not considered as the petitioner had not complied with the mandatory contractual formalities as per the letter of award as detailed therein. It is stated that the petitioner did not provide manufacturer authorization forms within 14 days from the date of the letter of award, that the petitioner has not executed the agreement within 14 days from the date of the award as stipulated in clause 10 of the letter of award and that the petitioner did not furnish bank guarantee for Rs.14.339 Crores as required in clause 8 of the letter of award. In paragraph 33 of the counter affidavit it is stated that based on the letters received from the Hon'ble Chief Minister and the Hon'ble Opposition Leader, the Government decided to cancel the contract awarded to the petitioner and to take steps to re-tender the work. In paragraph 42 it is stated that a quadripartite agreement, which is a mandatory prerequisite for the implementation of RAPDRP, was formally executed between the Ministry of Power, Government of India, Power Finance Corporation Ltd., Government of Kerala and the Kerala State Electricity Board on 17.8.2009, that though the

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funding agency is the Power Finance Corporation, as the Board is a fully owned utility under the Government of Kerala, the decisions of the Government are directly applicable to the Board. It is also stated that the Power Finance Corporation has already disbursed the sum of Rs.64.31 Crores to the Board as advance for implementation of Part A of the RAPDRP on 4.1.2010 and as per the time frame stipulated by the Ministry of Power, the new IT Implementation Agency will have to complete the project by 25.11.2012 which will not be an easy task, and, if the project is not completed within the stipulated time, the loan of Rs.214.38 Crores will not be converted to grant and the Board will have to repay the loan along with interest at 10% per annum.

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A counter affidavit dated 22.2.2011 has been filed on behalf of respondents 2 and 3 reiterating the contentions raised by the first respondent in the counter affidavit filed by it. However, it is stated in paragraph 30 of the counter affidavit that the entire tender process was carried out as per the Power Finance Corporation guidelines and that the Power Finance Corporation has also confirmed that the Bid evaluation procedure followed by the Board adhered to the provisions of the Request for Proposal and the RAPDRP guidelines. The fourth respondent

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has filed a counter affidavit dated 1.3.2011. In paragraph 4 of the counter affidavit it is stated that the fourth respondent has been designated as the Nodal Agency for operationalising the RAPDRP scheme by the Ministry of Power as per Ext.P1 order dated 6.8.2008 and that the role of the fourth respondent is to provide model documents and guidelines from time to time to the utilities. It is also stated that no relief is sought against the fourth respondent and that the factual aspects regarding the award of the contract have to be traversed by the Board.

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The petitioner has filed a reply affidavit dated 14.3.2011 to the counter affidavit filed on behalf of the first respondent. Inter alia it is contended therein that the first respondent has no power under the general conditions of the contract to terminate the contract, that there was no stipulation in the Request for Proposal issued by the second respondent and other related documents, that acceptance of the bid will require the approval of the Council of Ministers or of the Government, that the said requirement is extraneous to the tender conditions and therefore, the Government have no power to interfere with the award of the contract. With reference to Ext.R1(a) and R1(b) letters it is stated that the said letters have been issued based on

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hearsay allegations at the behest of bidders who failed in the bidding process, without understanding the technical aspects of the RAPDRP scheme and the nature of the bidding process. It is also stated that the decision of the Government is opposed to the interests of the State. As regards the failure to provide manufacturer authorization forms within 14 days from the date of the letter of award, the petitioner has, in paragraph 10 of the reply affidavit, stated as follows:-

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10. The averment in paragraph 28 that the respondent Board could not proceed with the signing of the contract in view of the illegal and mala fide actions of the Government is true. However, in order to cover up its submission to the illegal orders of the Government, it is alleged that the petitioner failed to provide pending Manufacturer Authorisation Forms (Hereinafter referred to as MAF's) as per PFC guidelines within 14 days from the date of LOA. The petitioner had complied with all mandatory terms and conditions of the contract. The allegation that MAF's were not furnished is without any substance. The petitioner denies this allegation. The petitioner submitted all the 31 MAFs, including MAF's for DB Convert, Bugzilla & MY SQL. The Board accepted all the MAF's, except the MAF issued by M/s Phoenix showing that it purchased and used certain sub assembly parts as customer care Products such as

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M/s Zoiper, M/s Redfone, M/s GN Netcom and M/s Snom to develop the required products as per Request for Proposal. M/s Phoneix has assembled these sub-assembly parts. The 2^nd respondent insisted for MAF's by service providers/Manufacturers for Sub-Assembly parts. The petitioner explained to the Board that it is not possible to get the MAF's from all the service providers/Manufactures for the subassembly parts. The Chairman and the Director (IT) of the respondent Board accepted this explanation. With reference to the MAF's for open source products, no MAF need be issued since no manufacturer or service provider has any role or right in the product. The product is open to any public use and it can be altered as required. The petitioner also customized this product even though it has no ownership rights over these products. The petitioner submitted the MAF's in its own name for applying the databases M/s. DB Convert, Bugzilla and My SQL to the project before the 2^nd respondent owing up responsibility on its part. The petitioner has explained these facts to the respondent vide letter dated 11.10.2010. The 2^nd respondent Board has not raised any objections subsequent to this letter. At any rate, the 2^nd respondent issued Exts.P20 to P22 in its website clarifying the tender and selection process after the above stated correspondence. The 2^nd respondent has not stated any irregularity regarding MAF in all its Exts.P20 to P22 website releases. The further allegations

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regarding failure to arrange kick off meeting is without any relevance.”

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As regards the failure to execute the agreement within

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14 days from the date of the award, the petitioner has, in paragraph 12 of the reply affidavit, stated as follows:-

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“12. With regard to the averment that as per Clause 10 of Letter of Award, the petitioner had to execute an agreement within 14 days from the date of Award from carrying out the work. It is submitted that there was no failure or delay on the part of the petitioner to execute the agreement. In fact, the petitioner had prepared the agreement according to the format furnished by the respondent Board on Non Judicial Stamp paper of Rs.100/- and submitted the same to the respondent Board along with the required documents. The petitioner forwarded a letter before the 2^nd respondent enclosing the Performance Bank Guarantee as well as Contract agreement in a Non Judicial Stamp Paper for Rs.100/- along with other documents. The 2^nd respondent has accepted the Performance Bank Guarantee. The averment that Clause 8 of Ext.P16 Letter of Award specifies 10% mobilization advance to be paid to the petitioner by the 2^nd respondent against Bank Guarantee had to be made by the Board. The respondent was not agreeable to receive the Bank Guarantee although the petitioner was ready to furnish the same. The allegation that the

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petitioner did not comply with the contractual formalities of executing the agreement and providing the Bank Guarantee is not true and is without any basis. Exts.P29 and P30 show that the petitioner has complied with these terms. The petitioner was and is ready to produce the bank guarantee for the purpose of availing the mobilization advance, which is for the benefit of the petitioner. The respondent did not at any time inform the petitioner that the petitioner has committed the alleged breach of not executing the agreement and furnishing the guarantee and the contract was liable to be terminated for that reason. With reference to the averments relating to MAF's in para No.29 of the counter affidavit, it is submitted that the petitioner has already clarified this issue in para No.11 of the reply affidavit. Reply to para No.29 is answered in the above regard.”

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With reference to Ext.P28 letter dated 24.9.2010 whereby Ext.P16 letter of award was amended, the petitioner has stated in paragraph 13 of the reply affidavit as follows with reference to the averments in paragraph 30 of the counter affidavit filed by the first respondent:-

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“13. The averments in para 30 regarding the time schedule for completion of the work is without any relevance as far as the petitioner is concerned. It is by reason of the delay caused by illegal, mala

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fide, arbitrary and unfair action of the Government and the respondent Board acting in submissive and collusive manner to the illegal, arbitrary, unfair and mala fide action of the Government that the delay has occurred. In the face of Ext.R2(a) and R2(c), and Exts.P20 to P22, the 2^nd respondent cannot be allowed to raise the said allegations of delay in execution of the project. The 2^nd respondent issued an amendment to the Letter of Award on 24.09.2010 clarifying the contents in clause 14 of Ext.P16 Letter of Award to the extent that the “part of delay will not be applicable to M/s.KDN, if reason for delay is conclusively proved attributable to KSEB”. True copy of the amendment to the Letter of Award is produced herewith and marked as Exhibit P28. There is absolutely no bona fides in the attempt of the respondent Board to put the blame on the petitioner, which are frivolous excuses discovered as an afterthought to justify the arbitrary, illegal and mala fide action of the Government.”

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The petitioner has in paragraph 15 of the reply affidavit stated that the State Government has no authority under the RAPDRP scheme to interfere with the award of the work and that the order passed by the Government (Ext.P26) is without the sanction or authority of law. The petitioner has filed an affidavit dated 14.3.2011 in reply to the counter affidavit filed on behalf of

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respondents 2 and 3 reiterating the contentions set out in the affidavit filed in reply to the counter affidavit filed on behalf of the first respondent. The petitioner has also filed an affidavit dated 14.3.2011 in answer to the counter affidavit filed by the fourth respondent wherein, relying on Ext.R4(f) letter produced by the fourth respondent, it is contended that the procedure followed by the Board conforms to the provisions of the RAPDRP guidelines issued by the Ministry of Power and therefore the impugned order is liable to be set aside.

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I heard Sri.M.Pathrose Mathai, learned Senior Advocate appearing for the petitioner, Sri.K.P.Dandapani, learned Advocate General appearing for the State of Kerala, Sri.P.Santhalingam, learned Senior Advocate appearing for the Kerala State Electricity Board and Sri.T.P.M.Ibrahim Khan, learned Senior Advocate appearing for the Power Finance Corporation. Sri.M.Pathrose Mathai, learned Senior Advocate appearing for the petitioner, contended that no reasons have been set out in Ext.P26 order to withdraw the sanction accorded by the State Government in Ext.P17 order to the Board to award the work to the petitioner and that the only reason stated therein is that in view of the letters sent by the Hon'ble Chief Minister to the Hon'ble Minister

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for Electricity and the Hon'ble Leader of Opposition to the Hon'ble Chief Minister, the Government have decided to cancel its earlier order dated 4.9.2010. The learned Senior Advocate contended that though the State Government is a party to the quadripartite agreement entered into between the Government of India, the Power Finance Corporation Ltd., the Government of Kerala and the Kerala State Electricity Board on 17.8.2009, the said agreement does not empower the State Government to interfere with the award of the contract, that the State Government has only guaranteed repayment of the loan in the event of default by the utility, that neither the Request for Proposal nor Ext.P8 tender notice or Ext.P9 instructions to the bidders stipulate that the award of the work will be subject to approval of the State Government and therefore the impugned order is liable to be struck down as one passed without jurisdiction. Relying on the averments in the counter affidavit filed on behalf of the first respondent and on behalf of respondents 2 and 3, the learned Senior Advocate contended that the respondents have virtually conceded the fact that the tender process was in tune with the guidelines issued by the Power Finance Corporation, that no one of the other bidders had challenged the award of the work to the

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petitioner and that it was only because of the queries raised by the Hon'ble Chief Minister and the Hon'ble Leader of opposition in the letters marked as Exts.R1(a) and R1(b) that the Government which had earlier accorded sanction to award the work to the petitioner, directed the Board to re-tender the work. The learned Senior Advocate appearing for the petitioner contended relying on the decision of the Apex Court in Shrilekha Vidyarthi v. State of U.P ., (1991) 1 SCC 212 that Article 14 will apply even in respect of contractual matters if the policy or action of the Government fails to satisfy the test of reasonableness, that every action of the State or its instrumentalities must be informed by reason and it therefore follows that an act uninformed by reason is arbitrary. The learned counsel contended that if the decision of the Government, which is impugned in the writ petition, is uninformed by reason, that decision is liable to be struck down as arbitrary even in the absence of any positive material to show that the Government had acted with oblique motives. The learned Senior Advocate contended that the entire action of the Government is vitiated and therefore, the petitioner is entitled to the reliefs prayed for.

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Per contra, the learned Advocate General appearing for

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the State of Kerala and the learned Senior Advocate appearing for the Board contended that the State Government being a signatory to the quadripartite agreement entered into on 17.8.2009 is entitled to oversee the award of the contract and that having regard to the apprehensions expressed by the Hon'ble Leader of Opposition and the Hon'ble Chief Minister in Exts.R1(a) and R1(b) letters, the Government was perfectly justified in cancelling the sanction accorded by the Government to the Board to award the work to the petitioner. The learned Advocate General contended that the petitioner has not entered into a contract with the Board after the Government passed Ext.P17 order dated 4.9.2010 according sanction to the Board to award the work to the petitioner and therefore, as no formal contract has been entered into and no right has accrued to the petitioner, the petitioner cannot challenge the direction issued by the Government to the Board to re-tender the work. The learned Advocate General also placed reliance on the decision of the Apex Court in Dresser Rand S.A. v. Bindal Agro Chem Ltd. , (2006) 1 SCC 751 in support of the said contention. Relying on the decisions of the Apex Court in Master Marine Services (P) Ltd., v. Metcalfe & Hodgkinson (P) Ltd ., (2005) 6 SCC 138 and Rajasthan

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Housing Board and another v. G.S.Investments and

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another , (2007) 1 SCC 477 the learned Advocate General contended that the Government, as the guardian of the finances of the State, is entitled to protect the financial interest of the State and that as the impugned decision was taken having regard to the apprehension expressed by the Hon'ble Chief Minister and the Hon'ble Leader of Opposition that the award of the work to the petitioner will cause loss to the Board and consequently to the State, the impugned action cannot be said to be arbitrary or illegal. The learned counsel appearing for the respondents also contended that the impugned order causes no prejudice to the petitioner and that as the petitioner is not disqualified, the petitioner can participate in the tender as and when the re-tender notification is issued.

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I have considered the submissions made at the Bar by the learned counsel appearing on either side. I have also gone through the pleadings and the materials on record. Shorn of details, the main issue that arises for consideration in the writ petition is whether the State Government have any role to play in the award of the contract pursuant to Ext.P8 notice inviting tenders for appointment of IT Implementation Agency for the

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RAPDRP scheme of the Government of India. Ext.P8, the notice inviting tenders for appointment of IT Implementation Agency issued by the Board, does not stipulate in express terms that the award of the contract will be subject to the approval or sanction of the State Government. All that is stated in Ext.P8 is that the Board reserves all rights to reject any or all of the tenders without assigning any reason whatsoever. Ext.P9, the instructions to bidders forming part of the Request for Proposal issued by the Board, also does not contain such a stipulation. Under the Request for Proposal and the tender notification, the purchaser is the Board and not the State Government. Paragraph 37 of the instructions to bidders under section II of the Request for Proposal reads as follows:-

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37. Purchaser's Right to 37.1	The Purchaser reserves the right to accept or
Accept Any Bid, and to	reject any Bid, and to annul the bidding
Reject Any or All Bids	process and reject all Bids at any time prior to Contract award, without thereby incurring any liability to the Bidders.

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It is not stipulated in Ext.P9 instructions to bidders that award of the contract will be subject to approval of the State Government. The respondents have no case that under the terms of the notice inviting tenders and the stipulations in the Request for Proposal issued by the Board, the State Government is empowered to

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interfere with the award of the contract. The only ground stated in the counter affidavit justifying the action of the State Government is that as the Board is a fully owned utility of the Government of Kerala, the decisions of the Government are applicable to it. The stand taken by the learned Advocate General in the course of arguments is also to the same effect.

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In paragraph 41 of the counter affidavit dated 8.3.2011 filed on behalf of the first respondent by the Additional Secretary to Government, Power Department, the deponent has stated that the entire selection process was carried out by the Board in a fair and transparent manner, that each stage of the selection process was intimated to the Power Finance Corporation, that the Power Finance Corporation has confirmed that the bid evaluation procedure followed by the Board is in tune with the provisions of the Request for Proposal and RAPDRP guidelines issued by the Power Finance Corporation/Ministry of Power. The only reason stated by the deponent in the counter affidavit, justifying the impugned action is that based on the letters sent by the Hon'ble Chief Minister and the Hon'ble Leader of Opposition, the Government decided to cancel Ext.P17 order according sanction for the award of the work to the petitioner and to direct the Board

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to re-tender the work. Apart from that, no other reason is stated in the counter affidavit filed on behalf of the Government to retender the work. The stand taken by the Board in its counter affidavit is also identical. The Assistant Executive Engineer of the Board has in the counter affidavit dated 22.2.2011, which is more or less identically worded as the counter affidavit filed on behalf of the first respondent, stated that the entire tender process was carried out as per the guidelines issued by the Power Finance Corporation and that the Power Finance Corporation had in Ext.R4 (a) letter produced along with the counter affidavit filed by the fourth respondent, stated that the procedure adopted by the Board conforms to the provisions of the RAPDRP guidelines and the guidelines issued from time to time by the Ministry of Power/Power Finance Corporation. It is relying on the quadripartite agreement entered into between the Government of India and its Power Finance Corporation on the one hand and the State of Kerala and the Board on the other, that the Government justifies the impugned action. The quadripartite agreement does not empower the State Government to select the IT Implementation Agency. That right is vested in the Board, as can be seen from paragraph 4 of the quadripartite agreement, which

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is extracted below in full:-

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4.O Modalities of implementing programme

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4.1 The Projects under the R-APDRP scheme shall be taken up by the Utility in Two Parts . Part-A shall include the projects for establishment of baseline data and IT applications for energy accounting/auditing & IT based consumer service centers. Part-B shall include regular distribution strengthening projects.

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4.2 Utility shall prepare DPRs of Part-A projects in-house or by appointing the IT Consultant through bidding from the panel of IT Consultants notified by the Nodal Agency and the same shall be submitted to Nodal Agency.

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4.3 The Utility shall implement Part-A Projects sanctioned under this programme on turnkey basis by appointing the IT implementing agency through the bidding process only from the Panel of IT implementing Agencies notified by the Nodal Agency to ensure quality and expeditious implementation.

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4.4 Utility shall prepare DPRs of Part-B projects in-house or by appointing the Consultant from the panel prepared by the Nodal Agency and implement the same on turnkey basis.

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In paragraph 6.1 of the agreement it is stipulated that the utility is required to ensure timely debt service for payment of principal, interest and other charges as applicable. In paragraph 6.2 it is stipulated that the utility receiving loans under R-APDRP will have to open an escrow account in the bank for Part-A and Part-B to ensure debt servicing of the principal, interest and other charges. In paragraph 6.3 it is stipulated that first charge (on pari-passu basis, if in syndication) shall be taken on the newly financed assets under the project. It is also stipulated that wherever this is not possible or value of such assets is not adequate, charge can be taken on/extended to other assets of the utility and existing

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assets shall be valued on depreciated replacement cost basis. In paragraph 6.4 it is stipulated that the State Government shall also undertake that in case of default by the utility, all outstanding dues of the utilities shall be recovered from the Central Plan Assistance due to the States. In paragraph 6.5 it is stipulated that the State Government Guarantee in the form of recovery from Central Plan Assistance due to the State may be invoked after the invoking the escrow account and the pari-passu charge on assets. The obligation of the State Government is set out in paragraph 11.1 of the quadripartite agreement which is extracted below:-

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“11.1 The State Govt. undertakes to

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comply the following

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a) Constitute the State Electricity Regulatory Commission

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b) Constitute Distribution Reforms

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Committee (DRC) at the State level under the Chairmanship of the Chief Secretary/Principal Secretary/Secretary (Power/Energy) to monitor the projects under R-APDRP at the State level.”

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The quadripartite agreement does not anywhere stipulate that the State Government shall implement the project by appointing the IT Implementation Agency through bidding process. It is for the utility (in the instant case, the Board) to implement the project by

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appointing the IT Implementation Agency through bidding process. On the terms of Ext.P8 tender notice, Ext.P9 instructions for bidders and the quadripartite agreement entered into on 17.8.2009, it cannot be stated that the State Government had the right to interfere with the award of the work pursuant to Ext.P8. As a matter of fact on the terms of the tender notification, the sanction of the State Government was not required to award the work. Even in Ext.P17 order, by which the Government initially accorded sanction to award the work to the petitioner, it is not stipulated that under the RAPDRP scheme or under Ext.P2 Government order or Ext.P3 Office Memorandum, it has to accord sanction for award of the work to implement the RAPDRP scheme. The role of the State Government is only that of a guarantor and its obligation is only to ensure the establishment of the State Electricity Regulatory Commission and the constitution of the Distribution Reforms Committee to monitor projects under the RAPDRP scheme. It is evident from the materials on record that the sanction of the Government was not required for award of the work that was tendered as per Ext.P8. The Government however proceeded on the basis that such sanction is required and accorded sanction when it issued Ext.P17 order. However, three

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months later it cancelled Ext.P17 and directed the Board to retender the work by issuing Ext.P26 order dated 27.12.2010. The only reason stated is that based on the letters sent by the Hon'ble Chief Minister and the Hon'ble Leader of Opposition requesting for cancellation of the tender and suggesting for re-tender of the work, the Government are pleased to cancel Ext.P17 order dated 4.9.2010 whereby it had earlier accorded sanction to award the work to the petitioner. The files leading to Ext.P26 also do not contain any other material. As a matter of fact the files disclose that though a decision was taken in the meeting of the Council of Ministers held on 15.12.2010 to direct the Board to re-tender the work after cancelling Ext.P17 order, no reason was given in the decision. Later, the matter was again considered by the Council of Ministers at the meeting held on 22.12.2010 and at that meeting the Council of Ministers approved a note placed before them to the effect that the earlier decision was taken in the light of the letters sent by the Hon'ble the Chief Minister and the Hon'ble Leader of Opposition. When the Government issued Ext.P17 order, which was really not called for, the Government had recorded the satisfaction that the tender process was in accordance with the guidelines issued by the Power Finance

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Corporation and the stipulations in the Request for Proposal. However, when the impugned order was passed, the Government merely stated that after further consideration of the matter the Government are pleased to order that the order dated 4.9.2010 (Ext.P17) be cancelled in view of the letters sent by the Hon'ble Chief Minister and the Hon'ble Leader of Opposition requesting for cancellation of the tender and suggesting for re-tender of the work. In my opinion in the absence of any right in the Government to sit in appeal over the decision taken by the Board to award the work to the petitioner, the stand taken by the Government in Ext.P26 cannot be sustained. As the purchaser it was for the Board to take an independent decision in the matter. However, in the case on hand the Board acted on the directions issued by the Government in Ext.P26 order. Such being the situation, as the Board has acted on the dictates of the Government and the Government had no authority to interfere in the matter, I am of the opinion that the reasons put forward by the Government to justify the impugned decision cannot be a reason to sustain Ext.P26.

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A reading of the counter affidavit filed by the Board as well as the State Government would indicate that but for the

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letters sent by the Hon'ble Chief Minister and the Hon'ble Leader of Opposition, the State Government would not have issued Ext.P26. That apart, no one of the other bidders had challenged the award of the work to the petitioner before this Court. Though the Board has raised a contention that the petitioner has not complied with the stipulations in the instructions issued to bidders and has not executed the contract or provided the manufacturer authorization forms within 14 days from the date of the letter of award, it is evident from the averments in paragraphs 10 and 12 of the reply affidavit filed by the petitioner that no reliance can be placed on the said contentions to sustain Ext.P26. It is evident from the records that it was only after the letters of intent were issued on 30.6.2009, that the Government directed that the proposal should be vetted by the Government and approved by the Council of Ministers. It was thereafter that the Government issued Ext.P17 order dated 4.9.2010 according sanction to the Board to award the work to the petitioner. Ext.P16 letter of award was issued thereafter. The materials on record disclose that but for the change in the stand of the Government, the Board would not have on its own revoked the letters of intent and the letter of award and re-tendered the work. I am therefore, of the opinion

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that the petitioner is entitled to succeed.

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I accordingly allow the writ petition, quash Ext.P26 and

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declare that the sanction of the State Government was not required for awarding the work pursuant to Ext.P8 notice inviting tenders, to the petitioner. Consequently respondents 2 and 3 are restraining from cancelling the work awarded to the petitioner based on Ext.P26 order or from re-tendering the work pursuant thereto. Needless to say, having regard to the fact that a dispute had arisen pursuant to the award of the work to the petitioner on account of interference by the State Government, the Government of India/Power Finance Corporation shall enlarge the time for implementation of the Restructured Accelerated Power Development and Reforms Program in the State of Kerala in consultation with the Board/State Government.

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The parties shall bear their respective costs.

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P.N.RAVINDRAN, Judge.

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ahg.

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P.N.RAVINDRAN, J.

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JUDGMENT