K.K. Builders v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HON'BLE ACTING CHIEF JUSTICE MRS.MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **WEDNESDAY, THE 2ND DAY OF MAY 2012/12TH VAISAKHA 1934** **WA.No. 88 of 2012 () IN WPC/34547/2011** **--------------------------------------AGAINST THE JUDGMENT IN WPC.34547/2011 DATED 11-01-2012** **APPELLANT(S)/APPELLANT: ----------------------** **K.K.BUILDERS A REGISTERED PARTNERSHIP FIRM REPRESENTED BY ITS MANAGING PARTNER K.K.MOHANDAS, S/O.K.K.KUNHIRAMANAGED 54 YEARS BUSINESS, HAVING ITS REGISTERED OFFICEAT PERAVOOR PERAVOOR DESOM, PERAVOOR P.O.,THALASSERY TALUK KANNUR - 670 673.** **BY ADVS.SRI.SHAJI P.CHALY SMT.K.JASMIN BABY SMT.S.K.SREEKALA** ## **RESPONDENT(S)/RESPONDENTS:** **--------------------------** **1. STATE OF KERALA AND OTHERS REPRESENTED BY THE SECRETARY PUBLIC WORKS DEPARTMENT,THIRUVANANTHAPURAM.** **2. PUBLIC WORKS DEPARTMENT, REPRESENTED BY CHIEF ENGINEER PUBLIC WORKSDEPARTMENT, THIRUVANANTHAPURAM.** **3. PUBLIC WORKS DEPARTMENT, NORTH CIRCLE, KOZHIKODE REPRESENTED BY EXECUTIVE ENGINEER.** **4. KERALA STATE TRANSPORT PROJECT TC 11/339, JAGAD BUILDING, KESTON ROAD KOWDIAR P.O,THIRUVANANTHAPURAM - 695 003 REPRESENTED BY THEPROJECT DIRECTOR.** **R1 TO R3 BY SPL.GOVT.PLEADER SMT.GIRIJA GOPAL BY ADV. SRI.K.BABU THOMAS BY ADV. SMT.MARYKUTTY BABU** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 30.1.2012, THE COURT ON 2.5.2012 DELIVERED THE FOLLOWING:** ## **Manjula Chellur, Ag. C.J. & P.R.Ramachandra Menon, J.** - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.A. No. 88 OF 2012 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 2[nd] day of May, 2012 ## **JUDGMENT** ## **Manjula Chellur, Ag. C.J.** The appeal is filed by the writ petitioner who lost his case before the learned Single Judge. The appellant writ petitioner a builder is conducting his business in a partnership firm at Peravoor in Kannur District. He claims to have ISO certificate and the activities of the petitioner company includes several engineering contracts under Government, Railways, Local Authorities etc. 2. The 4[th] respondent herein invited tenders for Riding Quality Improvement and Management(RQIM) works for roads in Package-IV under contract No.KSTP/RQI & M4 and for maintenance of Thalassery-Valavupara Road bearing contract No.KSTP-MC-02(0/600 to 55/127) as per Exts.P8 and P9. The norms prescribed in the tender notifications according to the petitioner are arbitrary and rather not sustainable because the tender notification dated 15.11.2011 consists of four different ## W.A. No. 88 of 2012 ## -:2:- contracts and again each of them having three to four different road works situated in different districts at a distance of 100 to 150 kilometers away from each other. Similarly the tender notification dated 29.11.2011 indicating pre-qualification norms to award tenders are excessive. According to the appellant/writ petitioner, these conditions imposed by the 4[th] respondent while issuing Exts.P8 and P9 are arbitrary, illegal and unsustainable as the said notifications totally ignore the hardships and difficulties faced by the contractors in carrying out the contracts at altogether different places. Contending that the insistence of very qualification norms are not legal and fair, the appellant/writ petitioner approached the learned Single Judge seeking the following reliefs: “i. To call for the records leading to the issuance of Exhibits P8 and P9 tender notices and quash the same, ii. To issue a writ of mandamus and command the 4[th] respondent directing him to call for tenders mentioned in Exhibits.P8 and P9 in accordance with Kerala Public Works Department prequalification norms. ## W.A. No. 88 of 2012 ## -:3:- iii. To issue a writ of mandamus and command the 4[th] respondent to call for separate tenders district wise for construction of road works. iv. To pass any other and such other orders as this Honourable Court deem fit to pass in the nature and circumstances of the case. v. To award cost of this proceedings to the petitioner.” 3. The learned Single Judge placing reliance on a Division Bench judgment of this Court in W.A. No.1986 of 2011 dismissed the writ petition following the judgment in appeal. Aggrieved by the same, the appellant is before us. 4. According to the appellant, the pre-qualification norms prescribed in the notifications indicated that the contractor should have satisfactorily completed as a prime contractor at least one work of value of not less than `140 million where the value of work is `176 million. This is with regard to KSTP-MC-02. Similarly with regard to other works, such imposition of prequalification would automatically exclude many of the contractors like the appellant from tender process on account of huge amounts involved. This is nothing but an arbitrary method adopted by the 4[th] respondent to restrain average contractors in W.A. No. 88 of 2012 ## -:4:- order to favour some of the high level contractors to obtain the tender. Therefore, according to the appellant, the tender notification lacks bonafides and merits. Contending that unless this Court interferes under Article 226, there is no other remedy efficacious and speedy remedy for the appellant Company, they have approached this Court. 5. As the 4[th] respondent did not file counter affidavit before the learned Single Judge, they have filed a detailed counter before this Court. In the counter the 4[th] respondent contended that in the State of Kerala major State Highway and National Highway roads especially during the monsoon season are causing severe difficulties to the general public on account of distress conditions of the roads. Major roads and National Highways need regular repair works during the monsoon and normally these works are undertaken during the summer before onset of monsoon. Frequently, the road pavement along with the base and sub-base layers got damaged during the monsoon resulting in huge potholes across the length of these highways causing danger to life and damage to the property of commuting W.A. No. 88 of 2012 ## -:5:- public. The poor quality and insufficiency of the works is the cause for such recurring failure of the main highways. Therefore, a specialised wing of Public Works Department, i.e., Kerala State Transport Project (hereinafter called as KSTP) was formed to carry out road works conforming to strict international quality standards in selected stretches of highways across the State. With the assistance of World Bank to upgrade 250 kms of major Highways, KSTP has taken its first project, besides heavy maintenance work over 1200 kms of other important road network in the State of Kerala. The different works taken are upgradation of road projects, heavy road maintenance works and overlaying work with BC layer. 6. Respondents categorically deny the allegations of the appellant that pre-qualification requisition in the tender notification is arbitrary and illegal. According to the respondents, when KSTP was created with a view to ensure quality works of the roads conforming to the strict international standards, the allegation of the appellant is unsustainable. If the works are not carried on by KSTP as intended, without any changes, the very ## W.A. No. 88 of 2012 ## -:6:- intention or object with which KSTP was created would be defeated resulting in poor quality of the works. Apart from that, such lethargic move will deprive KSTP of the facility to have funds aided by World Bank etc. Therefore, in order to enforce execution of quality controlled road works, different set of norms than those prevailing at present in State National Highway wing and Roads Wing of Public Works Department were evolved during the bidding and execution stage of the works. They categorically deny manipulation of any kind to favour some contractors. With these averments they have sought for disposal of the writ appeal. 7. Coming to the contention of the appellant, one has to see whether by the method adopted by the 4[th] respondent any vested right of the appellant is infringed causing violation of fundamental right. The contention of the 4[th] respondent is in order to have quality works which would ensure proper conditions of the Highways to facilitate commuting public, specific norms as terms of tender by way of pre-qualification was introduced and it is not at all arbitrary. It is possible that the appellant had executed work on earlier occasion but the fact remains whether W.A. No. 88 of 2012 ## -:7:- he is able to comply with the conditions imposed in the tender notification. The question would be whether stipulation of the specific terms in the tender are arbitrary and whether such stipulation is exercised by manipulation to favour certain contractors. There is no restriction for the present appellant also to participate in the tender process provided, he satisfies the terms and conditions stipulated at Exts.P8 and P9. The question is, can this Court by judicial review, interfere with the terms and conditions as stipulated in Exts.P8 and P9. The contention of the appellant is, the pre-qualification required in the tender virtually disables many contractors including the appellant/petitioner to participate in the tender, therefore it is illegal. 8. The 4[th] respondent has filed a detailed counter affidavit as stated above why such pre-qualification was introduced. The pre-qualification requirements in KSTP read as follows: - _“_ 1. Contractors shall have turn over for 2 yrs at least 2 times value of work tendered in the last five financial years. 2. He must have executed a similar single work with a value of not less than 80% of estimate value. W.A. No. 88 of 2012 ## -:8:- 3. The bid capacity to be determined by formula BC=Ax1.5xN-B where A= Max turnover into last 2 years. N= time of completion in years B= existing value of work in hand to be completed.” Whoever satisfies the criterion of pre-qualification for the works, they would be entitled to participate. The prequalification varies when the norms are applied to different works depending upon the value of the contract with reference to particular work. This ensures, only well equipped and technically capable contractors with requisite experience of implementing works of such magnitude would participate. The appellant Company obviously does not come within the pre-qualification criteria. Many other contractors' bidding capacity was also much below the norms prescribed, whether it is arbitrary or illegal is the question to be considered. 9. Learned counsel for the appellant relies on several decisions to contend that the administrative action must indicate fairness in action. In **Mahabir Auto Stores and others v. Indian Oil Corporation and others** [(1990) 3 SCC 752] their W.A. No. 88 of 2012 -:9:- Lordships held that the decision of the State or its instrumentality to enter into contract with private parties, and while acting in its executive power under Article 298 and its decision to enter or not to enter into contract is amenable for challenge on the ground of violation of Article 14 or any other ground available in public law field. Power of judicial review will depend upon nature of right involved in the facts and circumstances of each case. Their Lordships also emphasised on the fact that Article 14 does not permit judicial review of State action after the contract has been entered into. In the above case, the action of Corporation like Indian Oil Corporation brought an end to a course of transaction of over 18 years involving large amounts of money without informing affected party, i.e. the appellant firm and the alleged change of policy was considered unfair action especially in view of monopolistic nature of the power of the respondent in the field. 10. The learned counsel for the appellant places reliance on another decision in **Directorate of Education and others v. Educomp Datamatics Ltd. and others** [(2004) 4 SCC 19] to contend that terms of tender prescribing eligibility criteria W.A. No. 88 of 2012 ## -:10:- can also be challenged when arbitrary, discriminatory or biased exercise is adopted. He also relies on **Global Energy Ltd. and another v. Adani Exports Ltd. and others** [(2005) 4 SCCC 435] to contend again on the point that Courts can interfere under Article 226, if action of the State or its instrumentalities is arbitrary, discriminatory or actuated by malice. He also places reliance on **Peter v. State of Kerala** [2004(1) KLT SN 117] which reads as under: “It is important to note hat Manual does not make a distinction among civil works of different nature for the purpose of eligibility for the contractor to bid for the work. Experience required in the Manual is experience in the “construction of large work” an there is no strict requirement in the Manual that in order to be eligible to tender for the work, th contractor should have done exactly the similar work. Civil construction work generally undertaken by the PWD or the Irrigation Department (now Water Resource Department) as the case may be are essentially of same nature and that is why the subtle distinction between different civil works is not recognised in the Manual to compartmentalise the contractors as specialists in different nature of civil works. Therefore, the condition provided in the tender conditions that experience in similar work has only to be understood as experience in civil construction work of similar nature and is not capable of narrow interpretation given to it by W.A. No. 88 of 2012 ## -:11:- the respondents that the contractors should have experience in construction of canal work. The manual does not permit any such limited meaning or “experience”.” ## He also relies on **Directorate of Education v.** ## **Educomp datamatics Ltd.** [2004(3) KLT 104]. 11. What is discernible from the above decisions is even in a case where the State or its instrumentalities enters into a contractual field, it should be governed by the incidence of the contract. Though the rights of the parties are in the nature of contractual rights, judicial review is possible when the manner, method and motive of a decision of entering or not entering into the contract is vitiated by arbitrariness or malice. Such contractual rights are also subjected to judicial review if unreasonableness, violation of natural justice, discrimination in the transaction and the nature of dealings exists. One has to see whether stipulation of pre-qualification norms in the present tender warrants such judicial review. 12. As a policy specialised wing of Public Works Department the KSTP was formed with the sole object of W.A. No. 88 of 2012 -:12:- improving the quality of the Highways and also to have heavy maintenance works of road network in the State of Kerala measuring about 1200 kms. As a policy decision the respondent authorities decided to have pre-qualification norms to see that international quality standards are maintained in a strict sense. If the policy of the KSTP is to ensure quality works of the roads, the allegation of the appellant that it is arbitrary cannot be accepted. The very purpose or object with which KSTP was created is to see that quality is maintained inconformity with the strict international standards so that the general public commuting on these roads are not put to difficulties and hardships due to huge potholes, distress of roads during the monsoon season. There is no prohibition or impediment for the KSTP to introduce a package of several roads combining different areas which could be 100 kms away from each other. If individual contractors are allotted certain stretch of road work either for maintenance or to carry out road works, there would not be uniformity in the work to be carried out. The fact that quality is the criterion to give tender, pre-qualification requisition W.A. No. 88 of 2012 -:13:- was introduced for the first time so far as road works are concerned. It may be an impediment for some of the contractors to participate on account of not having all the pre-qualification requirements. This will not amount to illegal or arbitrariness on the part of the respondent authorities. 13. There is no decision of the respondent authorities to give contracts to a particular 'high level contractors' because whoever complies with the pre-qualification norms can again participate in the final tender. This pre-qualification requisition is only to ensure that the contractor who would eventually participate in the final tender would be able to meet the magnitude of the work, at the same time maintaining the quality so also the financial burden. The contents of Exts.P8 and P9 definitely indicate all care was taken to prescribe the specifications for the pre-qualification standards only to see that they maintain standard quality. If the appellant or any other participant satisfactorily complies with the requirement, there is no impediment for them also to participate in the tender process. W.A. No. 88 of 2012 -:14:- 14. When the decision taken by the authorities, who are at the helm of affairs to meet such policy decision adheres to pre-qualification requisition to maintain the standard quality, there cannot be any judicial review of such decision as long as the exercise is not vitiated by any malafides, arbitrariness or illegality. By this process there is no impediment for the appellant and others to participate, provided they satisfy the specific terms of the tender. Once the appellant satisfies the terms and conditions stipulated in the tender notifications (Exts.P8 and P9), no one can come in the way of the appellant to participate in the tender. Therefore, one cannot say there is discrimination causing obstruction to the appellant to participate in the tender. The course adopted by the authorities concerned cannot be found fault with, as there is no irregularity of any nature which warrants judicial review of the policy decision. The material placed on record neither points out malafides nor any discrimination to interfere with the exercise. It is well settled that in matters of this nature the scope of judicial review is very restricted and limited and further in the absence of any particular W.A. No. 88 of 2012 -:15:- material persuading us to conclude that there is exercise of arbitrariness or illegality, we cannot find fault with the exercise undertaken by the respondent authorities for issuing Exts.P8 and P9. It is nothing but a matter of policy and it is not for the tenderers or the participants to specify or dictate the terms and conditions of contract or that tender should be in a particular manner. It is for the policy makers to impose terms and conditions in order to achieve the desired result i.e., 'standard quality adhering to international standards'. Viewed from any angle, we are of the view, no material is forthcoming warranting interference. Accordingly, the Writ Appeal is dismissed. **Manjula Chellur, Ag. Chief Justice. P.R.Ramachandra Menon, Judge.** ttb