M/S. PGCCPL & ARYACON CONSORTIUM AISHWARYA TOWERS vs KERALA STATE ELECTRICITY BOARD LTD and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **WEDNESDAY, THE 9[TH] DAY OF NOVEMBER 2022 / 18TH KARTHIKA, 1944** **WP(C) NO. 32855 OF 2022** ## **PETITIONER/S:** 1 M/S. PGCCPL & ARYACON CONSORTIUM AISHWARYA TOWERS, PUTHENCRUZ ROAD, KARIMUGAL P.O., KOCHI - 682 303, REPRESENTED BY ITS AUTHORISED SIGNATORY SRI. T. V. PAULOSE. 2 T.V. PAULOSE, THURUTHIYIL HOUSE, BRAHMAPURAM P.O., AMBALAMEDU, KOCHI - 682 303. BY ADVS. JOSEPH KODIANTHARA (SR.) ISAAC THOMAS SHARAD JOSEPH KODANTHARA ALEXANDER JOSEPH MARKOS ## **RESPONDENT/S:** 1 KERALA STATE ELECTRICITY BOARD LIMITED REGISTERED OFFICE: VYDYUTHI BHAVANAM, PATTOM, THIRUVANANTHAPURAM-695004, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR. 2 THE CHIEF ENGINEER (CIVIL CONSTRUCTION) SOUTH, OFFICE OF THE CHIEF ENGINEER (CIVIL CONSTRUCTION) SOUTH, KERALA STATE ELECTRICITY BOARD LTD, PATTOM, THIRUVANANTHAPURAM-695004. 6TH FLOOR VYAYUTHI BHAVAN. 3 M/S. ANCHOR-SSIPL-MPL CONSOTRIUM ELOOR HOUSE, KOLENCHERY P.O., ERNAKULAM - 682 311, REPRESENTED BY ITS AUTHORIZED OFFICER. 4 M/S. PES KSR JV, 1ST FLOOR, PANCOM CHAMBERS, 6-3-1090/1/A, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD - 500082, REPRESENTED BY ITS AUTHORISED OFFICER. BY ADVS. G.KEERTHIVAS Mayankutty Mather K.I T.K.SREEKALA(K/000246/1987) VINEETH KOMALACHANDRAN(K/1521/2002) S.PARVATHI(K/000823/2015) KALLIYANI KRISHNA B.(K/000466/2019) W.P.(C)No.32855/2022 2 UTHARA ASOKAN(K/001361/2020) V.V.ASOKAN (SR.)(A-370) ## **OTHER PRESENT:** 0 SC FOR KSEB Harishankar THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 04.11.2022, THE COURT ON 9/11/2022 DELIVERED THE FOLLOWING: W.P.(C)No.32855/2022 3 ## **V.G.ARUN (J)** ## **----------------------** ## **W.P.(C) No.32855 of 2022** **--------------------------------------Dated this the 9[th] day of November, 2022** ## **JUDGMENT** The Kerala State Electricity Board Ltd./second respondent, invited tenders for the execution of Civil and Hydro Mechanical works of Upper Sengulam Hydro Electric Project vide Ext.P1 e-tender notice dated 3/5/2022, with the Probable Amount of Contract (PAC) fixed at Rs.175,60,70,410/-. The first petitioner, and respondents 3 and 4 were pre-qualified in the tender and Ext.P4 Note containing the details of the pre-qualified bidders was published on 7/10/2022. The price bids were opened on 10/10/2022 and the third respondent declared as the lowest bidder, as evidenced by Ext.P6, the BOQ summary details. As the petitioners had serious doubts about the third respondent's qualification, the materials submitted by the third respondent in support of its bid was downloaded from the website. A scrutiny of the documents proved the petitioners' suspicion to be correct. It came to light that the third respondent had failed to comply with Clause W.P.(C)No.32855/2022 4 26.2.1(c), Clause 3.1.6 and 27.1 of the instructions to the bidders forming part of Ext.P1 Notice Inviting Tender. Hence, this writ petition seeking the following reliefs; (a). Call for the records relating to Exhibit P4 Note No.CECCS)USHEP/Tender/2022-23 dated 7/10/2022 and Exhibit P5 Note NO.CECCS)/USHEP/Tender/2022-23 dated 10/10/2022 both issued by the 2[nd] Respondent and to quash the same to the extent it has pre-qualified the 3[rd] Respondent and declare its bid as L1 by issue of a writ of certiorari, or such other appropriate writ, order or direction. (b). declare that the 2[nd] Respondent cannot entertain the bid submitted by the 3[rd] Respondent due to lack of pre-qualification and consequently declare the 1[st] Petitioner as L1 in E-Tender No.CECCS/01/2022-23 dated 03/05/2022 invited by the 2[nd] Respondent by a writ of mandamus or such other appropriate writ, order or direction. (c). Stay all further proceedings pursuant to Exhibit P1 E- Tender No. CECCS/01/2022-23 dated 03/05/2022 invited by the 2[nd] Respondent and Exhibit P4 Note No. CECCS/USHEP/Tender/2022-23 dated 7/10/2022 and Exhibit P5 Note No. CECCS)USDHEP/Tender/2022-23 dated 10/10/2022. 2. Senior Advocate Joseph Kodianthara appearing for the petitioners contended that the third respondent having failed to satisfy the mandatory conditions for pre qualification, respondents 1 and 2 ought to have rejected its bid at the pre-qualification stage. As per Clauses 3.1.6 and 27.1.of Ext.P1, the lead bidder of a joint venture consortium should have a turnover of not less than 30% of the probable amount of contract for the last three years.The PAC being Rs.1,75,60,70,410/-,30% of the same would come to Rs.52,68,21,123/-. Going by the balance sheet and profit and loss accounts of M/s.Anchor Structural, Engineers & Contractors, the lead W.P.(C)No.32855/2022 5 bidder of the third respondent consortium, its turnover for the three financial years preceding the tender is only Rs.47,77,13,533/-. 3. In a patently illegal and fraudulent attempt to overcome this defect, the third respondent produced Ext.P8 Asset and Business Operation Transfer Agreement where under the lead member of the consortium agreed to acquire certain assets of a proprietorship concern. In an attempt to lend further support to its claim, the third respondent produced Ext.P9 Chartered Accountant's Certificate dated 17/6/2022, wherein the Chartered Accountant included the supposed outcome of Ext.P8 agreement to the turnover of the lead member, so as to make it appear that the lead member had the requisite turnover stipulated in Clause 3.1.6 and 27.1 of Ext.P1. 4. Learned Senior Counsel further contended that as per Clause 27.2, the assessment of the applicant's total turnover for the last three years should be based on the audited annual accounts submitted by the bidder. The Chartered Accountant should issue the certificate in the format prescribed as per Annexure 6 to Ext.P1. As such, there is no provision for producing and accepting a certificate like Ext.P9. Even otherwise, Ext.P8 takes effect only from 1-4-2022 and cannot support third respondent's claim of having satisfied the requirement under Clauses 3.1.6 and 27.1. 5. As regards the violation of Clause 26.2.1(c), it is contended W.P.(C)No.32855/2022 6 that the third respondent consortium or its members individually does not have sufficient experience in the execution of tunnel driving works. In its bid to get over this patent disqualification, the third respondent had produced Ext.P10 certificate issued to Dr.Sasi Eloor, who was only an office bearer of one of the members of the third respondent consortium. As the requirement is sufficient experience as a consortium member, the experience of an individual, who is only a signatory to the consortium document, cannot be taken into account. Relying on the decision in **Vidarbha Irrigation Development Corporation & Others v. Anoj Kumar Agarwala & Others (2020)** **17 SCC 577)** it is contended that, although the scope for interference in contractual matters is limited,the clear words used in the tender document cannot be ignored or treated as redundant or superfluous. They must be given meaning and their necessary significance. The employer having failed to do so, this court has ample powers to intervene and correct the illegality. 6.Adv.Keerthivas Giri, learned Standing Counsel for the KSEB Ltd., refuted the allegations raised against respondents 1 and 2 and put forth the following submissions in support of the award of tender to the third respondent; 7. The pre-qualification bids were opened on 20/7/2022 at 11.a.m. Thereafter, remarks were sought from the financial adviser on W.P.(C)No.32855/2022 7 the financial and commercial aspects of the pre-qualification bid. The financial adviser observed that Sri.Sasi Eloor had transferred his business as a going concern to M/s.Anchor Structural, the lead bidder, with effect from 1-4-2022. By virtue of Ext.P8 agreement, the contract receipts of the acquired proprietary business of Dr.Sasi Eloor forms part of the total turnover of M/s.Achor Structurals. Computed in the above manner, the total turnover of the lead bidder comes to Rs.70,46,76,665/-, which is well above 30% of the PAC. 8. The pre-qualification Committee consisting of experts also opined that the third respondent had submitted sufficient documents as stipulated in the tender condition. The Committee also noted that Sasi Eloor in his capacity as Managing Partner of M/s.Anchor Structurals, had sufficient experience as an engineering contractor in tunnel driving works. The Committee after detailed discussion decided to consider the tunnel driving experience of Sasi Eloor as the experience of M/s.Anchor Structurals, to which Sasi Eloor had transferred all his assets and business operations as a going concern. Based on these relevant considerations, the Committee concluded that the third respondent consortium meets the technical and financial criteria set for pre-qualification. 9. Learned Counsel pointed out that the Kerala's internal generation of its total energy requirement is only 30%. The upper W.P.(C)No.32855/2022 8 Sengulam Project is envisaged as a solution to this issue. The work was tendered in advance so that it can be awarded at the earliest and the contractor can mobilise men and materials at site and commence the works as soon as the monsoon starts reiterating. Any delay in commencement of the work will result in loss to the KSEB and will be against the public interest. 10. Adv.Mayankutty Mather, learned Counsel appearing for the third respondent, commenced his argument by drawing attention to the settled legal position as to the very limited scope for interference in contractual matters. On facts, it is explained that the third respondent is a consortium of three entities viz.Anchor Structurals, Saravana Industries Pvt.Ltd.and Mary Matha Infrastructure Private Ltd. Formation of the consortium was preceded by Ext.P8 Asset and Business Operation Transfer Agreement between Sasi Eloor and Anchor Structurals. The consortium members have given power of attorney to Sasi Eloor to represent them in the bid, he being the Managing Partner of the lead partner of the Consortium. As per Ext.P9 certificate, the Chartered Accountant of the third respondent has confirmed that the contract receipts of M/s. Anchor Structurals, the lead partner, is more than 30% of the probable amount of contract for the financial years 2019-2020, 2020-21 and 2021-2022. Therefore, the contention that assessment of the third respondent's total turnover W.P.(C)No.32855/2022 9 for the last three years is incorrect and unacceptable, the same not being based on the audited annual accounts, has no relevance. 11. By Ext.P10 certificate, the capability and experience of the Managing Partner of the lead partner of the Consortium, in executing the major projects, stands certified. Even Anchor Structurals, by itself, has sufficient experience as evidenced by Exts.R3(d) to R3(e) certificates. After evaluating the experience certificates, the Technical Evaluation Committee had found the third respondent to be having sufficient experience for executing the subject work. The experts having come to such a definite conclusion, this court is not supposed to sit in appeal over the opinion of the experts. 12. While deciding a dispute regarding the terms of a contract, the employer's interpretation and understanding of the terms should be given precedence. The employer being the author of the document and the best judge of its requirements. In the case at hand, the employer has made it unequivocally clear that, based on the documents produced by the third respondent, it had arrived at the satisfaction that the bidder had the financial capacity and technical experience for executing the works. On the other hand, the petitioners contended that, going by the plain meaning of the terms of the bid document, the third respondent ought to have been disqualified. The question therefore is whether to accept the interpretation of the bidder W.P.(C)No.32855/2022 10 or that of the employer. In this context, it will be apposite to read some of precedents on the point. In **Silppi Constructions Contractors v Union of India and another [(2020) 16 SCC 489],** after carefully analysing a plethora of precedents,the Apex court held as under; “ _19_ _**.** This Court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great_ W.P.(C)No.32855/2022 11 _deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer._ _20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate_ W.P.(C)No.32855/2022 12 _authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case.”_ Earlier,in **Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation Limited and another [(2016) 16 SCC 818]** relied on by the petitioner, it is held that, even if the interpretation to a tender document given by the owner or employer of the project is not acceptable to the constitutional courts, that by itself is not a ground for interference. Recently, in **N.G. Projects Ltd v Vinod Kumar Jain [ (2022) 6 SCC 127]** , the legal position was reiterated in the following words; W.P.(C)No.32855/2022 13 “ _**23.** In view of the above judgments of this Court, the writ court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the present day economic activities of the State and this limitation should be kept in view. Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. The approach of the Court should be not to find fault with magnifying glass in its hands, rather the Court should examine as to whether the decision-making process is after complying with the procedure contemplated by the tender conditions. If the Court finds that there is total arbitrariness or that the tender has been granted in a mala fide manner, still the Court should refrain from interfering in the grant of tender but instead relegate the parties to seek damages for the wrongful exclusion rather than to injunct the execution of the contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs_ W.P.(C)No.32855/2022 14 _and secondly, by being deprived of the infrastructure for which the present day Governments are expected to work.”_ 13. In the path breaking judgment in **Tata Cellular v Union of India [(1994) 6 SCC 651]** _**,**_ the Supreme Court indicated the parameters within which the Constitutional Courts ought to confine its consideration while deciding the legality of the award of a contract. Being contextually relevant, paragraph 77 is extracted hereunder; - “ _**77.** The duty of the court is to confine itself to the question of legality. Its concern should be:_ _1. Whether a decision-making authority exceeded its powers?_ _2. Committed an error of law,_ _3. committed a breach of the rules of natural justice,_ _4. reached a decision which no reasonable tribunal would have reached or,_ _5. abused its powers._ _Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary_ W.P.(C)No.32855/2022 15 _from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:_ _(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it._ _(ii) Irrationality, namely, Wednesbury unreasonableness._ _(iii) Procedural impropriety._ _The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind [(1991) 1 AC 696], Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, “consider whether something has gone wrong of a nature and degree which requires its intervention”_ 14. In **National High Speed Rail Corporation Ltd. v. Montecarlo Limited and Another (2022) 6 SCC 401)** after carefully analysing almost all the precedents , the Apex Court reiterated the legal position laid down in **Jagadish Mandal v. State of Orissa [(2007) (14) SCC 517]** that before interfering in a 16 W.P.(C)No.32855/2022 contract matter in exercise of powers of judicial review, the constitutional court should pose to itself the following questions; _“7.9.Thus, from the aforesaid decisions, it can be seen that a Court before interfering in a contract matter in exercise of powers of judicial review should pose to itself the following questions:-_ _(i). Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say :_ _“the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”? And_ _(ii). Whether the public interest is affected? If the answers to the above questions are in negative, then there should be no interference under Article 226. ”_ 15. Here the petitioner has no case that the action of respondents 1 and 2 is tainted by mala fides or arbitrariness. All that is attempted to be projected is a case of legal mala fides. In the light of Exhibits P8 and P9 certificates issued by the Chartered Accountant, the award in favour of the third respondent cannot be termed as a decision which no responsible authority, acting reasonably and in accordance with relevant laws, could have reached. As regards the element of public interest, it is pertinent to note that the third respondent's quote was 12% below PAC, whereas the petitioner's quote is 11% less than PAC. As such, there is a difference of Rs.1,67,69,426/- between the W.P.(C)No.32855/2022 17 petitioners and the third respondent. Therefore, the public exchequer stands to gain more than 1.5 Crores by awarding the contract to the third respondent. Hence, the public interest is also in favour of the award. In short, no infirmity that justifies this court's interference with the award of contract, exist. The resultant position is that the award of contract does not warrant interference in exercise of the power under Article 226. For the aforementioned reasons, the writ petition is dismissed. Sd/- **V.G.ARUN, JUDGE** dpk W.P.(C)No.32855/2022 18 ## **APPENDIX OF WP(C) 32855/2022** |PETITIONER EXHIBITS|| |---|---| |Exhibit P1|TRUE COPY OF THE VOLUME-L PRE-QUALIFICATION| ||BID E03.05.2022 TENDER NO.CECCS/01/2022-23| ||DATED INVITED BY THE 2ND RESPONDENT.| |Exhibit P2|TRUE COPY OF THE CONSORTIUM AGREEMENT DATED| ||07.07.2022 FORMED BY THE 1ST PETITIONER| ||PAULOSE GEORGE CONSTRUCTION CO. PVT. LTD.| ||(PGCCPL).| |Exhibit P3|TRUE COPY OF THE POWER OF ATTORNEY EXECUTED| ||BY THE 1ST PETITIONER IN FAVOUR OF THE 2ND| ||PETITIONER ON 07.07.2022 TO REPRESENT THE| ||CONSORTIUM FOR ALL PURPOSES.| |Exhibit P4|TRUE COPY OF THE NOTE NO. CECCS)| ||/USHEP/TENDER/2022-23 DATED 07.10.2022| ||ISSUED BY THE 2ND RESPONDENT.| |Exhibit P5|TRUE COPY OF THE NOTE NO. CECCS)| ||/USHEP/TENDER/2022-23 DATED 10.10.2022| ||ISSUED BY THE 2ND RESPONDENT.| |Exhibit P6|TRUE COPY OF THE COMPARISON OF RATES QUOTED| ||IN THE TENDER DOWNLOADED FROM THE E-TENDER| ||PORTAL.| |Exhibit P7A|TRUE COPY OF THE BALANCE SHEET AND PROFIT| ||AND LOSS ACCOUNT DATED 31.03.2021 OF THE| ||LEAD MEMBER OF THE 3RD RESPONDENT FOR THE| ||FINANCIAL YEAR 2019-20.| |Exhibit P7 b|TRUE COPY OF THE BALANCE SHEET AND PROFIT| ||AND LOSS ACCOUNT DATED 25.02.2022 OF THE| ||LEAD MEMBER OF THE 3RD RESPONDENT FOR THE| ||FINANCIAL YEAR 2020-21.| |Exhibit P8|TRUE COPY OF THE BALANCE SHEET AND PROFIT| ||AND LOSS ACCOUNT OF THE LEAD MEMBER OF THE| ||3RD RESPONDENT FOR THE FINANCIAL YEAR 2021-| ||22.| |Exhibit P9|TRUE COPY OF THE AGREEMENT DATED 01.04.2022| ||ENTERED INTO BETWEEN THE LEAD MEMBER OF THE| ||3RD RESPONDENT CONSORTIUM AND A| ||PROPRIETORSHIP.| |Exhibit P10|TRUE COPY OF THE CHARTERED ACCOUNTANT'S| W.P.(C)No.32855/2022 19 ||CERTIFICATE DATED 17.06.2022.| |---|---| |Exhibit P11|TRUE COPY OF THE CERTIFICATE DATED| ||01.08.2009 ISSUED TO DR.SASI ELOOR.| |RESPONDENT EXHIBITS|| |Ext.R3(a)|True copy of the Consortium Agreement| ||amongst (1) Anchor Structurals, (2) Shri| ||Saravana Industries Pvt. Ltd. and (3) Mary| ||Matha Infra Structure Pvt. Ltd. dated| ||11.06.2022.| |Ext.R3(b)|True copy of the power of attorney given by| ||the Consortium Members in favour of Dr. Sasi| ||Eloor dated 11.06.2022.| |Ext.R3(c)|True copy of the latest partnership deed of| ||Anchor Structurals dated 01.06.2017.| |Ext.R3(d)|True copy of the Certificate dated| ||07.10.2016 given by the Project Manager,| ||Vellathooval and Chinnar Hydro Electrical| ||Project| |Ext.R3(e)|True copy of the certificate dated| ||02.06.2022 given by the Deputy Chief| ||Engineer, Transgrid South KSEBoard Ltd.| |Ext.R3(f)|True copy of the work order dated 17.07.2019| ||given by the Deputy Chief Engineer and| ||Project Manager, Kerala State Electricity| ||Board Limited| |Ext.R3(g)|True copy of the work order dated 09.06.2009| ||given by the Chief Engineer (Civil| ||Constructions) South, KSE Board,| ||Thiruvananthapuram| |Ext.R3(h)|True copy of the proceedings dated| ||11.10.2022 of the KSEB Ltd.| |Ext.R3(i)|True copy of Annexure-A6 appended to the bid|