Dismissed

Kerala Government Electrical Contractors Association, v. State of Kerala

Kerala HC3 Feb 2021WP(C)/9671/2020

Case brief

AI extract

What is this about?

This court dismissed a writ petition challenging a Government order implementing a composite tender system for civil and electrical works. The petitioner argued the system discriminated against electrical contractors and violated fundamental rights. The court held the system is non-discriminatory, offered opportunities for joint ventures, and is a valid policy decision within executive latitude.

What did the court decide?

The Government order dated 26.02.2020 (Ext.P1) implementing the composite tender system is not quashed or set aside; the writ petition is dismissed.

Kerala Government Electrical Contractors… — Contract and Commercial Disputes | Kerala HC (2021)

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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 N.NAGARESH

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WEDNESDAY, THE 03RD DAY OF FEBRUARY 2021/14TH MAGHA,1942

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WP(C).No.9671 OF 2020(H)

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PETITIONER:

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KERALA GOVERNMENT ELECTRICAL CONTRACTORS ASSOCIATION,REPRESENTED BY ITS WORKING PRESIDENT-P.VELAPPAN NAIR, REGISTER NO.T/529/1995, P.W.D ELECTRICAL DIVISION OFFICE, PMG JN, PATTOM P.O., THIRUVANANTHAPURAM-04.

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BY ADVS. SHRI.AJITH KRISHNAN SRI.G.SHRIKUMAR (SR.)

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RESPONDENTS:

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1 STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY, GOVERNMENT OF KERALA, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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2 ADDITIONAL CHIEF SECRETARY, STATE OF KERALA, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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3 THE CHIEF ENGINEER, PUBLIC WORKS DEPARTMENT-BUILDINGS, PUBLIC OFFICE, THIRUVANANTHAPURAM-695 033.

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4 THE CHIEF ELECTRICAL ENGINEER, PUBLIC WORKS DEPARTMENT(ELECTRICAL WING), PUBLIC OFFICE, THIRUVANANTHAPURAM-695 033.

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R1-R4 BY GOVERNMENT PLEADER SRI. K.V.MANOJ KUMAR

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03-02-2021 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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J U D G M E N T

~ ~ ~ ~ ~ ~ ~ ~ ~

Dated this the 3^rd day of February, 2021

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The petitioner is Kerala Government Electrical Contractors Association. The members of the petitionerAssociation are engaged in installing, maintaining and undertaking electrical contract works in the buildings constructed by the State Government and various Public Sector Undertakings. The petitioner has approached this Court aggrieved by the proposal of the 1^st respondent–State of Kerala to implement a composite tender system in the building wings for all building construction tenders.

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Electrical and civil contracts are normally tendered separately by the respondents as the need for electrical works arises and proper assessment thereof can be made only after completion of the structure of the building. The Electrical Wing of PWD used to invite tenders for carrying out electrical

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work, only when the structure of the building is about to be completed. The electrical works were being carried out by the registered Electrical Contractors under the Public Works Department who hold a licence granted by the Electrical Inspectorate of the State Government. Licence is granted only to those Electrical Contractors having sufficient experience and prescribed qualifications.

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While the scheme was of first awarding civil contracts in respect of a building and then inviting tenders from Electrical Contractors, the Government attempted to change the system by introducing a composite tender system for simultaneous execution of civil and electrical works. The Government on 20.04.2008 issued Ext.P2 Circular which stated that all civil works and electrical works should be tendered simultaneously and electrical works carried along with the civil works. By Ext.P3 letter dated 24.07.2009, the Chief Engineer informed the Principal Secretary to Government that if a composite tender system is adopted, only a limited number of Electrical Contractors will be involved

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and therefore requested that the Government may decide whether to follow composite tendering of civil and electrical works and to consider whether to follow the present separate tender procedure for civil and electrical works under the co-ordination of the concerned engineers of buildings and electrical wings.

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The petitioner approached this Court filing W.P.(C) No.30556/2009, aggrieved by the proposal of composite tender system. This Court held that none of the concerns of the petitioner has been answered by the Government. This Court by Ext.P4 judgment held that the system of inviting tender only through the civil contractors will effectively deny opportunities to the electrical contractors. It will result in absence of any competition. This Court found that it would violate the concept of level playing field resulting in violation of Article 19(1)(g) of the Constitution of India. This Court further held that Article 14 will be attracted while testing the validity of the Government Policy. This Court accordingly quashed the orders impugned in the writ petition and directed the

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Government to reconsider the matter in the light of the findings rendered in the judgment.

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Pursuant to Ext.P4 judgment, the Government issued Ext.P5 order dated 13.01.2011 directing that the component tender document should have two separate schedules of works, Part A for civil works and Part B for electrical works. The Government ordered that only contractors with electrical registration with PWD will be awarded electrical works. In 2015, when the Executive Engineer, Electronic Division issued a composite tender, the petitioner filed W.P.(C) No.2618/2015, which was allowed by this Court as per Ext.P6 judgment dated 31.03.2015.

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But, to the surprise and detriment of the members of the petitioner-Association, the Government has now issued Ext.P1 order dated 26.02.2020 according sanction to implement composite tender system. As per Ext.P1, if the major component is civil, the existing civil contractors may also be permitted to take part in composite tender upto their tendering limits provided that existing civil contractor will have

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to submit an undertaking that they will obtain valid electrical/electronic licence or associate with an agency having valid electrical/electronic licence. If the major component is electrical work, the existing electrical contractors may also be permitted to take part in composite tender upto their tendering limits, provided they will give an undertaking that they will obtain a valid civil licence/electronic licence or associate with an agency having civil/electronic licence.

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Ext.P1 does not provide a level playing field for the Electrical Contractors and put them at the mercy of big civil contracting Companies/Firms for survival. It will enhance costs of construction thereby substantially affecting public exchequer. Ext.P1 offends the fundamental rights guaranteed to the members of the petitioner-Association under Articles 14 and 19(1)(g) of the Constitution of India, contends the petitioner.

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The 2^nd respondent defended the writ petition filing counter affidavit. The 2^nd respondent stated that there were complaints among various Departments that the civil and

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electrical works are not arranged simultaneously and this has led to splitting and cutting open of walls already plastered and drilled and wiring activities carried out to the building. This tendency causes damage to the building and delays the functional use of the building even for years. Composite tender system was accepted for timely completion of building projects and to get quality output. The Government have adopted the process followed by Central Public Works Department.

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There is no discrimination shown to electrical

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contractors. On the other hand, they are given encouragement and facility to come over to the new process. The electrical contractors and civil contractors individually or as joint ventures are permitted to quote in the tender, till they attain experience in composite category. The 2^nd respondent emphatically denied the statement that electrical requirements can be assessed only after the structural work. There will not be delay in executing electrical work under the composite tendering system resulting in escalation of cost because the

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completion time is fixed between 12 to 24 months.

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In the initial stages, bidders from major component category are allowed. If a proper category of composite contractors is formed as soon as possible, wherein both eligible civil as well as electrical contractors are enlisted, the question of uneven advantage to civil category will not arise. The objective of composite tender is to have better co-ordination among different components of works. The electrical part of the work in the composite tender can be carried out only with the association of electrical contractors and hence the role of electrical contractors is inevitable, contended the 2^nd respondent.

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The major issue involved in adopting composite tender was that of extending level playing field for different categories of contractors. The Department has addressed the issue. The new scheme will create a new category of composite contractors. The existing civil contractors and existing electrical contractors can very well come over to the new category. In fact, the Government have provided ample

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opportunities to them for that purpose. A civil contractor will not be able to bid and complete the work without partnering with registered electrical contractors, unless the civil contractor himself is a registered electrical contractor. Under the existing scheme of things, projects used to take 5 to 6 years for completion. Under the new scheme, maximum completion period of major works will be from 12 months to 24 months. This time target cannot be achieved if tendering of electrical work is done after completion of civil structural work of a building. The fear expressed by the petitionerAssociation is therefore baseless. The writ petition is liable to be dismissed, contended the 2^nd respondent.

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Learned Senior Counsel Sri. G. Sreekumar, assisted by Sri. Ajith Krishnan, appearing for the petitioner argued that if the present composite tender system is implemented, at the time of acceptance of tender, authorities will have no idea about the execution of electrical works which usually can be commenced only after the execution of major part of civil works. By efflux of time taken for execution of civil

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work, the cost of electrical work will go up and there will be change in technology and user of electrical appliances also. The new system therefore will not produce the desired result.

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The learned Senior Counsel pointed out that as of now, registration is required for all components of work. Civil work will be carried out by civil contractors and electrical work by electrical contractors. Committing civil contractors to undertake electrical work after obtaining an undertaking that he will obtain electrical registration or associate with another electrical contractor, is not a reasonable classification. Electrical work in a building contract being a comparatively minor component work, the category of electrical contractors will be practically ousted from all bidding processes, since works where electrical component is major would be very few. Practically, the electrical contractors will be left to the mercy of big civil contractors.

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Placing reliance on the judgment of the Apex Court in Natural Resources Allocation, In re, Special Reference No.1 of 2012 [(2012) 10 SCC 1] , the learned Senior Counsel

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argued that the mandate contained in Article 39 of the Constitution requires that material resources of the community should be so distributed as best to subserve the common good and the Composite Tender System will cause accumulation of wealth in the hands of a few Civil Corporate Contractors. The system will only create powerful monopolies, violating the law laid down by the Apex Court in Rashbihari Panda v. State of Orissa [(1969) 1 SCC 414]. Relying on the judgment of the Apex Court in Jespar I. Slong v. State of Meghalaya and others [(2004) 11 SCC 485] , the learned Senior Counsel pointed out that exclusion of competition in public contracts was always frowned upon by the Apex Court.

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The learned Senior Counsel further pointed out that the new composite tender system will in effect curb competition. Experts in respective components will be ousted. Ext.P1 would prevent qualified electrical contractors from participating in the tender proceedings. Ext.P1 therefore would offend right of the members of the petitioner-Association

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under Article 19(1)(g). The learned Senior Counsel further argued that Ext.P1 has been issued with malafide motives and to circumvent the directions of this Court contained in Ext.P4 judgment. By Ext.P5 Government Order, it was decided that a composite tender must be divided into two parts and contractors with registration in the PWD alone can participate in the tender proceedings for execution of electrical works. But, by Ext.P1, participation of electrical contractors in tender proceedings is completely eliminated.

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Ext.P1 would result in fewer participation in tender proceedings, contended the learned Senior Counsel. Only a favoured lot will be awarded contracts. A cartel who monopolise the field would be formed which will takeover the entire works. As the contractors are given freedom to determine the estimate rate, huge loss will be caused to the public exchequer. There will be no transparency in the tender system. As the new system would take away the opportunity of the members of the petitioner-Association to bid for contracts, they will lose their livelihood offending Article 21 of

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the Constitution of India. Ext.P1 is therefore liable to be set aside, argued the Senior Counsel. Placing reliance on the judgment of the Apex Court in Reliance Energy Limited and another v. Maharashtra State Road Development Corporation Limited and others [(2007) 8 SCC 1] , the counsel urged that lack of level playing field under the proposed tender system, would make it unreasonable. Departure from the standard of eligibility followed until now, would make the State action unsustainable, contended the counsel placing reliance on Ramana Dayaram Shetty v. International Airport Authority of India and others [(1979) 3 SCC 489].

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Sri. K.V. Manoj Kumar, learned Senior Government Pleader, argued that composite tender system is proven to be the best system of awarding public works now. The Central Government, the CPWD, Central Public Sector Undertakings and State PSUs, all follow the composite tender system, which is more advantageous to the public exchequer. There will not be exclusion of electrical contractors from bidding. On the

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other hand, both existing civil and electrical contractors are given opportunity to come over to the new system and become composite contractors.

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The learned Senior Government Pleader placed reliance on the judgments of the Apex Court in Shri Sitaram Sugar Company Limited and another v. Union of India and others [(1990) 3 SCC 223] and Jal Mahal Resorts Private Limited v. K.P. Sharma and others [(2014) 8 SCC 804] to urge that this Court should not venture a judicial review in the matter which is essentially a policy issue best left to the executive. Test of reasonableness cannot be applied in these issues, as held by the Apex Court in G.B. Mahajan v. Jalgaon Municipal Council and other s [(1991) 3 SCC 91], contended the learned Government Pleader. No person can claim a fundamental right to carry on business with the Government, urged the Senior Government Pleader.

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In fact, the present system will be more beneficial to the electrical contractors, argued the learned Government Pleader. Once the Electrical Contractors join a composite

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project and complete the work, the entire value of both civil and electrical component of that work will go to the credit of the electrical contractors also. Civil contractors as well as electrical contractors are permitted to undertake works as a consortium. The fear expressed by the petitioner is therefore feigned, contended the learned Government Pleader.

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Heard.

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The prime ground of challenge against Ext.P1 is discrimination. A reading of Ext.P1 would show that once Ext.P1 composite tender scheme is implemented, existing civil contractors who do not have electrical contract registration will not be able to bid for the bids, unless they give an undertaking that they will associate with an electrical contractor having valid registration. Similarly, an existing electrical contractor also will have to undertake, unless he has a civil contract registration, that he will associate with a registered civil contractor. Therefore, it cannot be said that there is discrimination between civil contractors and electrical contractors.

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The argument of the petitioners is that since work where electrical component is major, would be few and far between, electrical contractors will be excluded from bidding in majority of the contracts where civil work will be the major component. This will be so, though to a lesser extent, to civil contractors also. When electrical work is the major component of a project, civil contractors will be put to a comparatively disadvantageous position.

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To ensure that contractors of minor components will have opportunities in all public works, the Government have taken a decision that a major contractor who has been awarded work will have to undertake that he will associate with minor component contractors to do minor component works, unless the major component contractor himself is a registered contractor for minor component work also. To compensate such loss of opportunities to registered contractors in the field, the Government have taken care to design the composite tender scheme in such a manner that all the contractors get a fair chance to be part of all contract

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works and can gradually migrate to the category of composite contractors.

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Learned Senior Counsel for the petitioner heavily relied on Ext.P4 judgment of this Court, which found that the competitive tender system introduced as per Ext.P1 Circular dated 20.04.2008 therein is unsustainable. At the outset, it is to be noted that the system sought to be introduced as per the said Circular dated 20.04.2008 and the system introduced as per Ext.P1 Government Order in this writ petition are different.

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The learned Single Judge of this Court found Ext.P1 Circular mentioned in Ext.P4 judgment unsustainable for the following reasons:-

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(1) The additional counter affidavit of the respondents does not answer the various contentions raised by the petitioners that the electrical contractors will be totally excluded from the scene and there will be a monopoly of civil contracts.

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(2) Para 20.5.1 of the PWD manual provides that the electrification works in Government buildings should be arranged only through licensed electrical contractors registered in the Department. No amendments to the PWD manual have been

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made so far.

(3) Ext.P1 Circular therein does not provide for level playing field for any electrical contractors. The system introduced through Ext.P1 therein will result in absence of any competition from among electrical contractors. It will offend Article 19(1)(g) of the Constitution of India.

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On a perusal of Ext.P1 Government Order, I find that it cannot be said that electrical contractors will be excluded from bidding exclusively and whenever electrical component is the major work of a project, registered electrical contractor can make their bid. In the case of works where the electrical component is not the major component, the electrical contractors can bid for the work as joint ventures/ consortium or can be a part of the project through agreements or understanding with the successful bidder.

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It has to be noted that if electrical component or electronic component is the major component of any work, in those cases the civil contractors can also participate only through a joint venture/consortium or through an agreement or understanding with the successful bidder. Therefore, it cannot

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be said that there is a discrimination as against electrical contractors.

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It may be true that majority of works awarded by Kerala Public Works Department will be having civil work as the major component and therefore electrical contractors will be at a disadvantageous position. But then, the 1^st respondent has devised a scheme by which the electrical contractors also can participate in all works where civil work is the major component, by mandating that wherever a registered civil contractor who himself is not a contractor having electrical contract registration, such civil contractor will have to undertake that he will carry out the work in association with a registered electrical contractor. The electrical contractors are provided with the opportunity of bidding in works through joint venture/consortium method also. Therefore, there will not be substantial reduction of opportunities to the electrical contractors to participate in Government works.

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In the matter of formulating conditions of a tender, greater latitude is required to be conceded to State Authorities unless the action is found to be malicious and misuse of powers. If the State acts reasonably, fairly and in public interest, interference by Courts is very restrictive. It has been so held by the Hon'ble Apex Court in Michigan Rubber (India) Ltd. v. State of Karnataka and others [(2012) 8 SCC 216].

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As regards non-amendment of PWD manual, the said ground relied on in Ext.P4 judgment is not available in the present writ petition as Ext.P1 Government Order itself envisages that necessary amendments will be done in the PWD manual. As regards the lesser competition that may be resultant of implementing Ext.P1 Government Order, it is to be noted that Ext.P1 is the result of a policy decision of the Government. Such decisions are taken by the Government taking into consideration and after analysing and studying data collected by the Government and after being convinced that the policy decision will be more beneficial to the public at

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large.

In the fast evolving economic, trade and industrial scenario in the world, there would always be an element of unpredictability on the efficacy of any policy decision. But, considering its past experience, the State may have to resort to and implement such decisions boldly. As long as such policy decisions do not contravene any of the provisions of Part III of the Constitution of India and as long as such decisions are not found to be devoid of any reasons or unconstitutional, courts of law shall not intervene. Such decisions are best left to the Executive Authorities.

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The learned Senior Counsel emphasised on Ext.P7 communication of the Additional Chief Secretary of Finance Department addressed to the Chief Engineer, PWD (Buildings), wherein the Additional Chief Secretary informed that for all building works, the Public Works Department should mandatorily move for simultaneous tenders for civil and electrical works to be awarded simultaneously to separate contractors. The contention of the petitioner is that when the

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Finance Department represented by no less than an Additional Chief Secretary has given a mandatory direction, the Public Works Department cannot ignore the same and go for composite tender system as envisaged in Ext.P1. Ext.P7 communication can be only taken as an interdepartmental communication wherein one Department has communicated its view on the aspect to another Department. The Government have to weigh the views and opinions of all Departments concerned and arrive at a final decision. Ext.P1 order signed by the Governor appears to be culmination of such a process made by the Government. Ext.P1 therefore cannot be settled on the basis of Ext.P7.

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For all the aforesaid reasons, this Court finds that there is no justifiable reason to interfere with Ext.P1 Government Order on any of the grounds raised by the petitioner. The writ petition is therefore dismissed.

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Sd/- N. NAGARESH, JUDGE

aks/25.01.2021

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APPENDIX

PETITIONER'S EXHIBITS:

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EXHIBIT P1	TRUE COPY OF THE GOVERNMENT OR	DER GO(MS)
	NO.27/2020/PWD DATED 26.02.2020 THE 2ND RESPONDENT.	ISSUED BY
EXHIBIT P2	TRUE COPY OF THE CIRCULAR DATED ISSUED BY THE 1ST RESPONDENT.	20.04.2008
EXHIBIT P3	TRUE COPY OF THE LETTER DATED ISSUED BY THE 3RD RESPONDENT.	24.07.2009
EXHIBIT P4	TRUE COPY OF THE JUDGMENT DATED IN WP(C) NO. 30556/2009.	19.11.2010
EXHIBIT P5	TRUE COPY OF THE GOVT.ORDE NO.65/2011/PWD DATED 13.01.2011 THE 2ND RESPONDENT.	R G.O(RT) ISSUED BY
EXHIBIT P6	TRUE COPY OF THE JUDGMENT DATED IN WP(C) NO. 2618/2015.	31.03.2015
EXHIBIT P7	TRUE COPY OF THE LETTER DATED ISSUED BY THE ADDITIONAL CHIEF FINANCE TO THE 3RD RESPONDENT.	11/10/2019 SECRETARY
EXHIBIT P8	TRUE COPY OF THE NO.SE(K)57/2016/17 DATED 30/0 RELATION TO WORK OF CONSTRUCTIO MEDICAL COLLEGE, PALAKKAD.	AGREEMENT 1/2017 IN N OF GOVT.
EXHIBIT P9	TRUE COPY OF THE LETTER NO.S.J. DATED 7/7/2015, ISSUED SUPERINTENDENT, SUB JAIL, ERNAKUL	E.03/2015, BY THE AM
EXHIBIT P10	TRUE COPY OF THE RELEVANT PAGE SCHEDULE ISSUED TO THE CONTRACTOR	S OF WORK .
EXHIBIT P11	TRUE COPY OF THE RELEVANT PAG SCHEDULE ISSUED TO THE CONTRACTOR	E OF WORK .
EXHIBIT P12	TRUE COPY OF THE LETTER NO.F	2/510/2013
	DTD.29/06/2013, ISSUED	BY THE
	SUPERINTENDING ENGINEER, KOZHIKOD	E.

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EXHIBIT P13 TRUE COPY OF THE ORDER NO.B3-6/2003/CT DATED 02/02/2018 ISSUED BY THE PRINCIPAL SECRETARY, TAX DEPARTMENT. EXHIBIT P14 TRUE COPY OF THE GOVERNMENT ORDER G.O.(RT) NO.902/2015/PWD DATED 29/6/2015, ISSUED BY THE 2ND RESPONDENT.

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EXHIBIT P15	TRUE COPY	OF THE LETTER DATED 16/10/2015,
	ISSUED BY	THE 3RD RESPONDENT PURSUANT TO
	EXHIBIT P1	4.

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EXHIBIT P16 TRUE COPY OF THE GOVERNMENT ORDER G.O.(RT) NO.1384/2018/PWD DATED 7-9/2018, ISSUED BY THE 2ND RESPONDENT.

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ncd

Kerala Government Electrical Contractors Association, v. State of Kerala

Case brief

What is this about?

What did the court decide?

Kerala Government Electrical Contractors Association, v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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