Partly allowed

Radiance Realty Developers India Ltd., v. the State of Kerala

Kerala HC27 Jun 2022WP(C)/2859/2022

Case brief

AI extract

What is this about?

The Kerala High Court disposed of a writ petition challenging a Letter of Acceptance issued after the bid validity expired. The court held that the petitioner cannot be insisted upon furnishing an additional performance guarantee due to pandemic-related government relaxations. The petition was dismissed to the extent of refusing the additional guarantee, while permitting agreement execution within

What did the court decide?

Petitioner permitted to execute agreement without additional performance guarantee; additional conditions in LOA permitted except condition No.2.

Radiance Realty Developers India Ltd., Vs the State of… — Company and Corporate | Kerala HC (2022)

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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 V.G.ARUN

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MONDAY, THE 27^TH DAY OF JUNE 2022 / 6TH ASHADHA, 1944 WP(C) NO. 2859 OF 2022

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PETITIONER/S:

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RADIANCE REALTY DEVELOPERS INDIA LTD., NO.480, ANNASALAI,M KHIVRAJ COMPLEX, II, 6TH FLOOR, NANDANAM, CHENNAI-35, REPRESENTED Y ITS AUTHORISED SIGNATORY, MR.K.S.BHARANIDHARAN. BY ADVS. K.L.VARGHESE (SR.) RAHUL VARGHESE RANJITH VARGHESE SANTHA VARGHESE

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RESPONDENT/S:

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1 THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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2 THE PROJECT DIRECTOR, KSTP, TC 11/339, SREE BALA BUILDING, KESTON ROAD, KAWDIYAR P.O., THIRUVANANTHAPURAM-695 003. 3 THE CHIEF ENGINEER, KSTP, TC 11/339, SREE BALA BUILDING, KESTON ROAD, KAWDIYAR P.O., THIRUVANANTHAPURAM-695 003. BY ADV ADVOCATE GENERAL OFFICE KERALA

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OTHER PRESENT:

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GP AMMINIKUTTY K.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15.06.2022, THE COURT ON 27.06.2022 DELIVERED THE FOLLOWING:

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W.P.(C) No.2859 of 2022

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JUDGMENT

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Dated this the 27^th day of June, 2022

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The Kerala State Transport Project (KSTP) invited competitive bids for 'Rehabilitation and upgradation of Nenmara-Nelliyampathy Road for a length of 30.470 Km, vide tender notice dated 16.06.2021. In response, the petitioner submitted its online bid on 02.08.2021. As per Clause 18.1 of Section I of the Instructions To Bidders ('ITB' for short) published as part of the tender process, the validity period of the bid is fixed as 120 days. Thus, the validity period of the petitioner's bid was up to 30.11.2021. After submission of the bid, the petitioner was called upon to offer justification of the price offered for BoQ items 13.02, 13.03 and 13.07, since evaluation of the financial bid revealed the bid to be unbalanced in terms of pricing. Thereupon the petitioner submitted its detailed price

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analysis and justification for the price offered for the BoQ items. Thereafter, by Ext.P5 letter dated 04.10.2021, the petitioner was directed to submit the quotation from the specialized agency as indicated in the technical bid for all the specialist items for slope protection works under Bill No.13 of the BoQ, with an undertaking by the

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agency that the works will be carried out according to the technical specifications as per the rates in the quotation. The petitioner was also informed that if the substantiation is not found satisfactory, an additional performance

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guarantee of Rs.9.89 Crore will have to be submitted. Accordingly, the petitioner gave Ext.P7 reply, enclosing the quotation and undertaking for BoQ item 13. It was also informed that, because of the justification offered, there is no need for submission of

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additional performance guarantee for the particular item. Instead of informing whether the

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justification and quotation were accepted, the petitioner was served with Ext.P8 letter of the third respondent dated 29.11.2021, calling upon the petitioner to extend the bid validity for a further period of three months from 30.11.2021. The petitioner replied under Ext.P9, expressing its inability to extend the bid validity beyond 30.11.2021 due to administrative reasons. To substantiate its right to refuse, the petitioner quoted Clause 18.2 of ITB which empowers a bidder to refuse the request for extension, without forfeiting security. Surprisingly, after expiry of the bid validity period (30.11.2021), the petitioner received Ext.P10 LOA dated 07.01.2022, informing that its bid for execution of the work notified is accepted, since the High Court of Kerala, vide its judgment dated 21.12.2021 in W.P.(C) No.17116 of 2021, had extended the bid validity period. Under Ext.P10, the petitioner is imposed with the following additional conditions

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also;

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“ 1. Furnish the Performance Security for an amount of Rs.4,20,88,400/- (Rupees Four Crore Twenty Lakhs Eighty Eight Thousand and Four Hundred only) within 28 days from the date of this letter in accordance with the conditions of Contract using the Performance Security Form included in section X (Contract Forms) of the bidding documents.

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2. Furnish an Additional Performance Security for an amount of Rs. 9, 55, 70,000/- (Rupees Nine Crore Fifty Five Lakhs Seventy Thousand only) in accordance with ITB 36.5.

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3. Submit an undertaking to carry out all the scheduled items quoted below their BoQ rates during execution of the work, as part of the Agreement.

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4. Submit an undertaking that if any of the quantities exceed more than 125% of the BoQ, it is agreed to claim only prevailing DSR rate/ LMR/ quoted rate whichever is least.”

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Being aggrieved by the LOA with additional

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conditions, the petitioner submitted Ext.P13 letter dated 11.01.2022 informing the KSTP about

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its non-acceptance of the LOA with additional conditions and further that the judgment in W.P. (C) No.17116 of 2021 (Ext.P11) is not binding on the petitioner, not being a party to the judgment.

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Adv.K.L Varghese, learned Senior Counsel appearing for the petitioner ably assisted by Adv.Rahul Varghese and Ranjith Varghese, made the following forceful submissions;

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As per Clause 18.1, the bid shall remain valid for the period specified in the QBDS after the bid submission deadline date prescribed by the employer in accordance with ITB 22.1. The bid validity period in the instant case was 120 days, which even according to the respondents, expired on 30.11.2021. The respondent's request for extending the bid validity for a further period of three months was categorically turned down by the petitioner, exercising its option under Clause 18.2. As such, the bid stood terminated on

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30.11.2021 beyond which there cannot be any extension at the instance of either of the

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parties. Hence, the unilateral extension by the respondents and compulsion to accept the LOA, that too with additional conditions, is patently illegal and arbitrary. The observation in Ext.P11 judgment that the period during which the interim order in that case was in force can be excluded while calculating the bid validity, cannot have an impact on the petitioner’s bid, since the observation was made in an entirely different context and the petitioner is not a party to the judgment. Moreover, the situation is covered by the well accepted principle ' actus curiae neminem gravabit', that no person shall suffer by an act of the court. The observation in Ext.P11 judgment was made on a request by the Government Pleader pointing out that the fund of the project will be lapsed by 31.12.2021. The Government Pleader conveniently omitted to inform the court about

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expiry of the bid validity period of other bidders, including the petitioner. Had the full facts been brought to the notice of the learned Judge, such observation would not have been made.

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The LOA is also vitiated by reason of the additional conditions incorporated. Section 7 of the Indian Contract Act mandates the acceptance to be absolute. This position was dealt with by a Division Bench of the High Court of Chhattisgarh in its judgment in M/s.K.S.Infra JV v. South Estern Coalfields Ltd (W.P.(C) No. 2088 of 2018) .

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Section 69 of the Contract Act also does not provide for unilateral alteration/addition of terms and conditions of an agreement. As held in

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Union of India v. Vertex Broadcasting Company Private Limited [(2015) 16 SCC 198] and Suresh

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Kumar Wadhwa v. State of M.P. [(2017) 16 SCC

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757], bid security can be forfeited only in accordance with the clauses in the bid document. Therefore, the alleged threat of forfeiture of

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the bid security amounting to Rs.90,96,000/-, in

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case of failure to execute the agreement amounts

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to coercion and undue influence. Finally it is contended that the petitioner cannot be compelled to furnish the additional performance guarantee in view of the extant Government orders exempting contractors from submission of additional performance guarantee, considering the difficulties faced by them in the wake of Covid19 pandemic and lockdown.

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In reply, Adv.K.V.Manoj Kumar, learned

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Senior Government Pleader made the following candid submissions;

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The petitioner’s contention regarding expiry of the bid validity period is liable to be rejected outright in the light of the specific declaration in Ext.P11 judgment. W.P.(C) No.17116 of 2021 was filed by another bidder, aggrieved by its disqualification. In view of the interim order passed on 24.08.2021 in that writ

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petition, the bidding process came to a standstill. The writ petition was dismissed by Ext.P11 judgment dated 21.12.2021. By the time, almost four months had elapsed from the date of issuance of the interim order. It was in that

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context, a request was made for extension of the bid validity period. Being convinced of the reason put forth, the learned Single Judge had granted extension as sought for. The validity period having been extended, the respondents had every authority to issue the LOA. The execution of the agreement and completion of the work is in larger public interest and interference by the court will upset the whole process. There is no merit in the contention that additional conditions are being imposed through Exhibit P10. The respondent had exercised the power vested with it under Clauses 36.5 and 40.1 of Section I of the ITB. Being so, the petitioner is bound to execute the contract agreement within 28 days and

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furnish the performance security in accordance with the general conditions of contract, as provided under Clauses 41.2 and 42.1 of the ITB. Failure to submit the performance security and to sign the contract constitutes sufficient ground for annulment of the award and forfeiture of bid security.

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Although various contentions are raised as to the applicability of the declaration in Exhibit P11 judgment with respect to the extension of validity period of the bid, the fact remains that, this Court has, by the judgment, extended the validity period. Indisputably, Exhibit P10 LOA was issued within that extended period. The petitioner’s contention that, since it is not a party to Exhibit P11, the extension will not apply to its bid validity period cannot be accepted, for the reason that the specific intention behind the declaration, as discernible from a close scrutiny of Exhibit P11, was to

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extend the period lost by reason of the interim order granted. Viewed in such a manner, Exhibit

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P11 is more in the nature of a judgment in rem . The contention based on the maxim ' actus curiae neminem gravabit', will not come to the petitioner’s rescue, since the petitioner has an effective remedy of seeking review of the judgment, if aggrieved. Any expression by this Court regarding the correctness of Exhibit P11 judgment and the observations therein will amount to the exercise of the appellate jurisdiction, which this Court is not conferred with. Moreover,

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judicial discipline also restrains me from venturing into such exercise.

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As regards the contention that

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additional conditions are being imposed through Exhibit P10, the argument put forth by the learned Government Pleader regarding the limited scope of interference in contractual matters by the writ court assumes relevance. As held in Tata

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Cellular v. Union of India [(1994) 6 SCC 651] ,

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the court cannot interfere with the Government's

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freedom of contract, invitation of tender and refusal of tenders which pertain to policy matters; unless the decision/action is vitiated by arbitrariness, unfairness, illegality,

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irrationality or ‘Wednesbury unreasonableness’. In view of the above principle, it is not for this Court to decide as to whether the conditions imposed through Exhibit P10 are additional conditions or would fall within the ambit of Clause 36.5 of Section I of the ITB. Such factual

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disputes are beyond scope of the jurisdiction

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under Article 226 and has to be left to be

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decided by the appropriate forum, whether it be the arbitrator or the civil court.

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Having held so, I find that there cannot

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be any insistence on furnishing additional

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performance guarantee in views of G.O.

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(P).No.7/2021/Fin. dated 7.1.2021, the relevant

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portion of which is extracted hereunder;

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“As per the Government Order read as 1^st 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 ie, 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 Guarantee shall be (x10)% 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.

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2) On account of slow down in economy and acute financial crunch among the contractors

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due to COVID-19 pandemic, Government of India issued following guidelines vide Office Memoranda read as 4th and 5th papers above and State Governments were requested to consider issuing similar instructions in respect of procurement by the State Government, by State Government Public Undertakings, Local Bodies and all agencies controlled by them.

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i) Reduction in Performance Security from existing 5-10% to 3% of the value of the contract.

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ii) No provisions regarding Bid Security should be kept in the Bid Documents in future and only provisions for Bid Security Declaration should be kept in the Bid Documents.

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iii) No provision should be kept in the Bid Documents regarding Additional Security Deposit/Bank Guarantee (BG) in case of Abormally Low Bids.

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3. As per the Circular read as 6th paper above, it was ordered that the Additional Performance Guarantee may be released in proportion of successful completion of items having low rates. Several contractors and Associations submitted representations requesting to extend the benefits covered by the relief measures announced by the Government of India to the State Government Contractors also.

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4. Government have examined the matter in detail and are pleased to order as follows.

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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.

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2) Correspondingly Bid Security / Earnest Money Deposit is reduced from 2,50% to 1.50% of the estimated amount.

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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.

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5. The above relaxations on account of COVID19 pandemic are made applicable for works initially for one year and would be reviewed post that date.

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6. 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.”

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For the aforementioned reasons, the

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challenge against Ext.P9 on the premise that the

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bid validity period had expired on 30.11.2021 is rejected. The petitioner shall be permitted to execute the agreement without insisting on

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submission of additional performance guarantee. The respondents shall permit the petitioner to execute the agreement in terms of its original bid and the additional conditions in Ext. P10, except condition No.2, within 28 days. Needless to say, petitioner’s failure to execute the agreement within the period will entitle the respondents to take appropriate coercive action.

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The writ petition is disposed of accordingly.

Sd/-

V.G.ARUN JUDGE

scl

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APPENDIX OF WP(C) 2859/2022

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PETITIO Exhibit	NER EXHI P1	BITS TRUE COPY OF THE RELEVANT PAGES OF THE BID DOCUMENT INCLUDING CLAUSES 18, 19 AND 40 OF THE INSTRUCTIONS TO BIDDERS (ITB FORT SHORT0 UNDER SECTION 1 AND CLAUSES 18.1.AND 40.1 UNDER SECTION II (QUALIFICATION AND BID DATA SHEET) OF THE BID DOCUMENT FORMING PART OF E TENDER NOTICE.
Exhibit	P2	TRUE COPIES OF ORIGINAL DOCUMENTS INCLUDING BANK GUARANTEE FOR RS.90,96,0000/- ISSUED BY AXIZ BANK VALID UP TO 30.01.2022 TOWARDS BID SECURITY, POWER OF ATTORNEY ETC. SUBMITTED UNDER COVER OF LETTER DATED 31.07.2021.
Exhibit	P2 A	TRUE COPY OF THE BID ACKNOWLEDGEMENT DATED 02/.08.2021.
Exhibit	P3	TRUE COPY OF THE LETTER DATED 14.09.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
Exhibit	P4	TRUE COPY OF THE LETTER DATED 25.09.2021 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT ALONG WITH THE ACCOMPANIMENTS.
Exhibit	P5	TRUE COPY OF THE LETTER DATED 04.10.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
Exhibit	P6	TRUE COPY OF THE LETTER DATED 06.10.2021 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.
Exhibit	P7	TRUE COPY OF THE LETTER DATED 20.10.2021 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT ALONG WITH THE ACCOMPANIMENTS INCLUDING THE UNDERTAKING BY REINFORCED EARTH INDIA PVT. LTD. DATED 18.10.2021 DETAILED BREAK UP OF THE ITEM RATE FOR SLOPE PROTECTION OFFERED BY TERRE ARMEE, BANGALORE, UNDERTAKING ISSUED BY M/S. GLOBAL INFRA DATED 06.10.2021 AND

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	THEIR QUOTATION FOR THE BREAK UP ITEMS UNDER ITEM 13 SLOPE PROTECTION.
Exhibit P8	TRUE COPY OF THE LETTER DATED 29.11.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
Exhibit P9	TRUE COPY OF THE LETTER DATED 30.11.2021 ISSUED BY THE PETITIONER TO THE 3RD RESPONDENT.
Exhibit P10	TRUE COPY OF THE LETTER OF ACCEPTANCE DATED 07.01.2022 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER.
Exhibit P11	TRUE COPY OF THE JUDGMENT DATED 21.12.2021 IN WPC NO.17116 OF 2021 OBTAINED FROM THE WEBSITE OF THIS HON'BLE COURT.
Exhibit P12	TRUE COPY OF THE INTERIM ORDER DATED 24TH AUGUST 2021 WPC 17116/21 REFEREED TO IN EXT.P11 JUDGMENT OF THIS HON'BLE COURT.
Exhibit P13	TRUE COPY OF THE LETTER DATED 11.01.2022 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT.
Exhibit P14	TRUE COPY OF THE LETTER DATED 17.01.2022 ISSUED BY THE 2ND
	RESPONDENT TO THE PETITIONER.
Exhibit P15	TRUE COPY OF THE BANK STATEMENTS ISSUED BY AXIS BANK
RESPONDENT EXHIB	ITS
ANNEXURE R3(a):	TRUE COPY OF THE RELEVANT PAGES OF SECTION 1 ITB CLAUSE 36.5
ANNEXURE R3(b):	LETTER NO.KSTP/PMT/RADIANCE/RKI/003 DATED 06.12.2021
ANNEXURE R3(c):	TRUE COPY OF THE QUOTATION AND UNDERTAKING SUBMITTED ON 20.10.2021
ANNEXURE R3(d):	TRUE COPY OF THE LETTER NO.KSTP/233/2020-AE10 DATED 17.1.2022
ANNEXURE R3(e):	TRUE COPY OF THE RELEVANT PAGES OF SECTION 1 ITB CLAUSE 42.2.

Radiance Realty Developers India Ltd., v. the State of Kerala

Case brief

What is this about?

What did the court decide?

Radiance Realty Developers India Ltd., v. the State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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