Public-works contractors disputed eligibility for pandemic-related security relaxations. The court upheld exclusion of contractors who had already executed agreements, while affirming relief for a bidder whose tender fell within the relaxation order's validity. All contractors' appeals and the State's appeal were dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
W.As. 615, 713, 726 & 941 of 2022 -:1:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 615 OF 2022
[AGAINST THE JUDGMENT IN WP(C) NO.26212/2021 DATED 22.04.2022]
APPELLANT/PETITIONER:
M/S. SKILLED CONSTRUCTIONS COMPANY LTD.,
34/455, THOPPIL LANE, MOTHER THERESA ROAD, EDAPALLY, KOCHI-682024, REPRESENTED BY ITS AUTHORISED SIGNATORY. BY ADV. SRI. SUNIL JACOB JOSE
RESPONDENTS/RESPONDENTS:
1 UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF HOUSING AND URBAN AFFAIRS, SMART CITIES MISSION, NIRMAN BHAWAN, NEW DELHI- 110 001.
REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE (DEPARTMENT OF EXPENDITURE), NORTH BLOCK, NEW DELHI- 110 001.
3 STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT, FINANCE (INDUSTRIES & PUBLIC WORKS-B) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001.
W.As. 615, 713, 726 & 941 of 2022
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BY ADVS. SRI. B. RAMACHANDRAN, CGC (B/O) SRI. K.JAJU BABU (SR.) SMT. M.U.VIJAYALAKSHMI
BY SPECIAL GOVERNMENT PLEADER SRI. K.V. MANOJ KUMAR
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG WITH WA. NO.713/2022, AND OTHER CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 & 941 of 2022 -:3:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 713 OF 2022
[AGAINST THE JUDGMENT DATED 22.04.2022 IN WP(C) NO. 26762/2021]
APPELLANT/PETITIONER:
M/S. DEENS GROUP, DOOR NO.23/130-D2, 2ND FLOOR, MARVEL PLAZA, HMT ROAD, KALAMASSERY, ERNAKULAM:683 104. REPRESENTED BY ITS PROPRIETOR, SRI.P.N. SHANAVAS, PALAYAMKOTTIL HOUSE, KOLLAMKUDI NAGAR KAKKANAD, ERNAKULAM:682 030.
BY ADVS. SRI. R.V.SREEJITH
SRI. JELSON J. EDAMPADAM
RESPONDENTS/RESPONDENTS:
W.As. 615, 713, 726 & 941 of 2022
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6 GOVERNMENT OF INDIA, MINISTRY OF ROAD TRANSPORT & HIGHWAYS, (HIGHWAYS DIVISION), TRANSPORT BHAWAN, 1, PARLIAMENT STREET, NEW DELHI: 110 001, REPRESENTED BY ITS SECRETARY.
*THE SEVENTH RESPONDENT IS DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 19.7.22 IN I.A.NO.1/22 IN W.A.713/22.
BY ADVS. SRI. K.JAJU BABU (SR.) SMT.M.U.VIJAYALAKSHMI (B/O), SC,
COCHIN SMART MISSION LIMITED
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG WITH WA.NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 & 941 of 2022 -:5:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 726 OF 2022
[AGAINST THE JUDGMENT DATED 22.04.2022 IN WP(C) NO.23679/2021]
APPELLANT/PETITIONER:
M/S. K.V.JACOB & SONS, ENGINEERS AND CONTRACTORS, KALLAPPARA HOUSE, KUMARAPURAM P.O, PALLIKKARA, KERALA, REPRESENTED BY ITS PARTNER SRI.EDLHO JACOB, RESIDING AT KALLPPARA HOUSE, KUMARAPURAM, PALLIKKARA, ERNAKULAM DISTRICT.
BY ADVS. SRI. R.V.SREEJITH
SRI. JELSON J. EDAMPADAM
RESPONDENTS/RESPONDENTS:
10TH FLOOR, REVENUE TOWER, PARK AVENUE, KOCHI - 682 011, REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER.
COCHIN SMART MISSION LTD, 10TH FLOOR, REVENUE TOWER, PARK AVENUE, KOCHI-682 011.
REPRESENTED BY ITS SECRETARY TO GOVERNMENT, FINANCE (INDUSTRIES AND PUBLIC WORKS-B) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM- 695 001.
W.As. 615, 713, 726 &
941 of 2022
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MINISTRY OF HOUSING AND URBAN AFFAIRS, SMART CITIES MISSION, NIRMAN BHAWAN, NEW DELHI-110 001, REPRESENTED BY ITS SECRETARY.
5 GOVERNMENT OF INDIA MINISTRY OF ROAD TRANSPORT AND HIGHWAYS, (HIGHWAYS DIVISION),TRANSPORT BHAWAN-1, PARLIAMENT STREET, NEW DELHI-110 001, REPRESENTED BY ITS SECRETARY.
*RESPONDENT NUMBER 6 IS DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 19.7.2022 IN IA 1/2022 IN WA 726/2022.
BY ADVS. SRI. K.JAJU BABU (SR.) SMT.M.U.VIJAYALAKSHMI, SC, COCHIN SMART MISSION LIMITED BY ADV. SRI. MANU S., ASG OF INDIA
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG WITH WA. NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.As. 615, 713, 726 & 941 of 2022
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
TUESDAY, THE 22ND DAY OF NOVEMBER 2022 / 1ST AGRAHAYANA, 1944
WA NO. 941 OF 2022
[AGAINST THE JUDGMENT DATED 08.04.2022 IN WP(C) NO. 4140/2022]
APPELLANTS/RESPONDENTS IN WP(C):
BY SPECIAL GOVERNMENT PLEADER K.V. MANOJ KUMAR
RESPONDENT/PETITIONER IN WP(C):
SHAJI V.J., S/O. JOSEPH, PWD CONTRACTOR, VATTAPARAMBIL HOUSE, THOVIRIMALA P.O., MALAVAYAL, WAYANAD DISTRICT, PIN - 673592.
BY ADV. SRI. ABRAHAM MATHEW (VETTOOR)
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.11.2022, ALONG WITH WA. NO.615/2022 AND OTHER CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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JUDGMENT
S. Manikumar, CJ
Being aggrieved by the judgment passed in W.P.(C) Nos. 23679, 26212 and 26762 of 2021 dated 22.04.2022, W.A. Nos.615, 713, and 726 of 2022 are filed by the petitioners, whereas, W.A. No.941 of 2022 is filed by the State and its instrumentalities, challenging the judgment in W.P.(C) No. 4140 of 2022 dated 8.4.2022.
“12. By OM dated 12.11.2020, the Government of India, Ministry of Finance decided to reduce Performance Security from existing 5-10% to 3% of the value of the contract for all existing contracts. The benefit of such reduction was to be denied only to the contracts under disputes wherein arbitration / court proceedings have already started or contemplated. The Government of India OM dated 12.11.2020 will apply only to contracts which are governed by Rule 171 of General Financial Rules (GFRs), 2017 unless the OM is adopted by any other authority as such. The said OM will not apply to the contracts awarded by Cochin Smart Mission Limited.
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“4. Government have examined the matter in detail and are pleased to order as follows.
(1) Performance Security / Security Deposit to be submitted at the time of executing the agreement is reduced from the existing rate of 5% to 3% of the contract amount.
(2) Correspondingly Bid Security / Earnest Money Deposit is reduced from 2.5% to 1.5% of the estimated amount.
(3) Additional Performance Guarantee is waived for the low quoted items on the condition that the bidder shall furnish an undertaking to execute all low quoted items in full as per contract terms.
It is therefore evident that the said GO is made applicable only to new tenders and in respect of works which have been tendered and awarded, but agreements have not been signed by the winning bidder.
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dated 07.01.2021 for the reason that the petitioners have already executed agreements for the work, is arbitrary and discriminatory. The exclusion would offend Article 14 of the Constitution of India.
The writ petitions are therefore devoid of any merits and are dismissed.
2022, writ court ordered as under:
“16. Exts.P4 to P6 Office Memorandum issued by the Government of India, Ministry of Finance on 12.11.2020 would ordinarily apply only to the Departments under the Government of India. The said Office Memorandum will not apply to the contracts executed on behalf of the Government of Kerala automatically.
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The term ‘All new tenders’ would mean tenders floated on or after 07.01.2021. ‘Works which have been tendered and awarded but agreements have not been signed’ would take
W.As. 615, 713, 726 & 941 of 2022
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in tenders floated and awarded prior to 07.01.2021 but agreements not signed before 07.01.2021.
The new G.O. dated 15.03.2022 has retained relaxation only in respect of Performance Guarantee and there will be no relaxation for EMD or Additional Performance Guarantee, contend the respondents
W.As. 615, 713, 726 & 941 of 2022
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For the afore reasons, the petitioners are entitled to succeed. The writ petitions are therefore allowed.
Consequently, it is declared that the tenders awarded to the petitioners, which are in issue in these writ petitions, will be governed by the G.O. dated 07.01.2021. The petitioners shall be permitted to execute agreements granting the petitioners all relaxation permissible under the G.O. dated 07.01.2021.”
2022 are as under:
4.1 Appellants/writ petitioners are registered companies, engaged in
contractual works. They were awarded with contractual works for the development of roads and bridges by Cochin Smart Mission Ltd., represented by its Chief Executive Officer, Kochi. Pursuant to the same, the writ petitioners were served with letters of acceptance. Except the appellant in W.A. No.615/2022, rest have submitted performance security, which amounts to 10% of the total contractual value, as required by the respondents. The appellant in W.A. No.615/2022 submitted performance security at 5%. Work commenced in November, 2019 and is going
W.As. 615, 713, 726 & 941 of 2022 -:14:-
smoothly. While so, due to the outbreak of COVID-19 Pandemic and resultant lockdown, the companies have to face serious financial crunches.
4.2 Appellants/writ petitioners have further stated that, in order to mitigate the hardships suffered by the contractors, Government of India, Ministry of Finance had announced 'Atma Nirbhar Bharat Package' and issued Office Memorandums, wherein it was stipulated that the performance security should be reduced to 3% instead of 5-10%, and retention amount is recommended to be released, in proportion to the work already executed, in accordance with the contract specification. It was also assured that Earnest Money Deposit (EMD) will not be required for tenders and it will be replaced by Bid Security Declaration.
4.3 In terms of the above, writ petitioners submitted requests to the Chief Executive Officer, Cochin Smart Mission Ltd., through Project Management Consultant (PMC), for reducing the performance security and to release the retention amount, by reducing it to 3%. However, the Chief Executive Officer informed the writ petitioners that their requests cannot be acceded to, in view of the directions contained in G.O.(P) No.7/2021/Fin. dated 7.1.2021, that this Government Order is made applicable to all new tenders as well as works which have been tendered and awarded, but agreements have not been signed by the winning bidder.
W.As. 615, 713, 726 & 941 of 2022 -:15:-
According to the writ petitioners, the benefit of the Office Memorandums issued by the Central Government and State Government are being denied to them since they had signed the agreements before the memorandums.
In such circumstances, appellants/writ petitioners have filed the respective writ petitions for the reliefs stated supra.
4.4 The writ petitioners further contended before the writ court that since the Central Government have framed 'Atma Nirbhar Bharat Package' for providing relief measures, the respondents are bound to extend the benefit contemplated by the Central Government that the Office Memorandums clearly provide that the performance security is reduced from 5-10% to 3% for all existing contracts. According to the writ petitioners, the action of the Government of Kerala in issuing the Government Order dated 7.1.2021 substantially departing from the Office Memorandums issued by the Union Government is illegal and unsustainable.
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7.1.2021 and that the petitioners shall be permitted to execute agreements
granting all relaxation permissible under the said Government order.
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was also notified that the additional performance guarantee of Rs.25,18,655/- shall also be deposited for the unbalanced bid and that both the performance guarantee and additional performance guarantee should be submitted before executing the agreement. The modalities of payment were also notified in Exhibit-P3 selection notice.
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there is no vested right and writ petitioner therein is obligated to submit performance guarantees as notified in the selection notice.
W.As. 615, 713, 726 & 941 of 2022 -:19:-
be submitted at the time of executing agreement is reduced from the existing rate of 5% to 3% of contract amount. However, the order vide paragraph 6 has clarified that this Government order is made applicable to
all the new tenders as well as works which have been tendered and awarded, but agreements have not been signed by the winning bidder. That apart, the said Government order clearly mentioned that the same is applicable only to new tenders. Hence, it is contended that CSML is not in a position to reduce the performance guarantee for the project work as per the Letter of Acceptance since it was awarded long prior to the date of the said Government order and agreement executed and that CSML is following the Government order dated 7.1.2021 in the matter of performance security.
W.As. 615, 713, 726 & 941 of 2022 -:20:-
on them by respondents, by creating two different classes of contractors from among a homogeneous class, i.e., those who have signed the agreement prior to the Government order dated 7.1.2021 and those after the said order. In support of the said contention, appellants have relied on the decision of the Hon'ble Supreme Court in State of W.B. v. Anwar Ali Sarkar reported in 1952 SCR 284 .
the State is extending a benefit during the time of a crisis, it cannot
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differentiate between its citizens, who are all similarly placed and deny the benefits to one set of citizens.
W.As. 615, 713, 726 & 941 of 2022 -:22:-
writ court that as per Government orders dated 7.1.2021 and 15.03.2022 performance guarantee/security deposit is liable to be reduced to 3% and additional performance guarantee was waived for low quoted items etc., are unsustainable.
“No. F.9/4/2020-PPD Government of India Ministry of Finance Department of Expenditure Procurement Policy Division
512, Lok Nayak Bhawan, New Delhi Dated the 12th November, 2020
OFFICE MEMORANDUM
Subject: Performance Security.
As per Rule 171 of General Financial Rules (GFRs) 2017, Performance Security is to be obtained from the successful bidder awarded the contract for an amount of five to ten percent of the value of the contract to ensure due performance of the contract. Similar provisions also exist in the Manual for Procurement of Works 2019 and Manual for Procurement of Consultancy & other Services
W.As. 615, 713, 726 & 941 of 2022
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2017 issued by this Department.
Sd/- (Kotluru Narayana Reddy) Deputy Secretary to the Govt. of India”
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issued by the Additional Chief Secretary, Finance (Industries & Public Works
“ GOVERNMENT OF KERALA Abstract
Finance Department — Covid - 19 pandemic - Relaxing the requirements of performance Security/Security Deposit, Bid Security/Earnest Money Deposit and Additional Performance Guarantee for the execution of public works in the State - Orders issued
FINANCE (INDUSTRIES & PUBLIC WORKS - B) DEPARTMENT
G.O.(P) No.7/2021/Fin.
Dated, Thiruvananthapuram, 07.01.2021
Read :- 1) G.O.(P) No.429/2015/Fin dated 28.09.2015 2) G.O.(P) No. 01/2019 /Fin dated 10.01.2019 3) G.O.(P) No.168/2019/Fin dated 07.12.2019 4) OM No. F 18/4/2020 - PPD dated 13.05.2020 5) OM No. F 9/4/2020 - PPD dated 12.11.2020 6) Circular No.62/2020/Fin dated 27/10/2020
ORDER
As per the Government Order read as 1st paper above, It was ordered that, Performance Guarantee, the amount collected at the time of executing contract agreement will be 5% of the Contract Value (Agreed PAC) and the deposit will be retained till the expiry of Defect Liability Period. Atleast 50% of this deposit shall be collected in the form of Treasury Fixed Deposit and rest in the form of Bank Guarantee or any other forms prescribed in the revised PWD Manual. As per this Government Order, Additional Performance Guarantee is the additional amount to be deposited for unbalanced price i.e., for works quoted below estimate rate. Additional Performance Guarantee will be required if works quoted between 11% to 25% below estimate rate. Government Order read as 2nd paper above says that, if the quoted amount of the lowest bidder (L1) is x% below the estimated PAC, the Additional Performance
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Guarantee shall be (x-10)% of estimated PAC. Subsequent to this Order, clarifications were issued regarding calculation of Additional Performance Guarantee for percentage rate contracts and item rate contracts vide the Government Order read as 3rd paper above.
W.As. 615, 713, 726 & 941 of 2022
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By Order of the Governor
RAJESH KUMAR SINGH ADDITIONAL CHIEF SECRETARY (Finance)”
interference is required to the judgments of the learned single Judge.
W.As. 615, 713, 726 & 941 of 2022 -:27:-
agreement, and the contractors, who have not, after the bid was accepted. In our considered opinion, the benefit of Performance Security/Security deposit, Bid Security/Earnest Money Deposit and Additional Performance Guarantee was extended by the Government only to those persons who have not executed the agreement, apparently for the reason that there was a slow down in economy and acute financial crunch among the contractors, due to COVID-19 Pandemic.
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the contractors, who have already executed the agreement, cannot turn around and say that they are entitled to get the benefit of the notification subsequently issued by the State Government, in order to deal with the economic crunch.
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7.1.2021. Therefore, we do not find any reason to interfere with the
judgment passed by the learned single Judge in W.P.(C) Nos. 23679, 26212 and 26762 of 2021 dated 22.04.2022.
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8.4.2022, learned single Judge held that the respondents are not justified
in demanding 5% performance security, 2.5% EMD and additional performance guarantee.
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of the powers conferred under Section 5 of the Kerala High Court Act.
Resultantly, the writ appeals have no sustenance and accordingly,
they are dismissed. No costs.
Sd/-
S.MANIKUMAR CHIEF JUSTICE
krj
Sd/SHAJI P.CHALY JUDGE
//TRUE COPY//
P.A. TO C.J.
2 issues framed by the court
Was excluding contractors who had already executed agreements from the pandemic-related security relaxations discriminatory?
Did tenders floated during the relaxation order's validity retain its benefits when agreements were executed after its expiry?
Colour shows how this judgement treated each authority
State of W.B. v. Anwar Ali SarkarReferred¶182
1952 SCR 284 · Who else cites this
V. Pechimuthu v. GowrammalReferred¶189
(2001) 7 SCC 617 · Who else cites this
2 provisions across 2 enactments
M/S. SKILLED CONSTRUCTIONS COMPANY LTD.
UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF HOUSING AND URBAN AFFAIRS
UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE (DEPARTMENT OF EXPENDITURE)
STATE OF KERALA
COCHIN SMART MISSION LTD.
THE CHIEF EXECUTIVE OFFICER, COCHIN SMART MISSION LTD.
S.MANIKUMAR
SHAJI P.CHALY
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
