**WP(C) NO. 37952 OF 2010**
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## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT**
**THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN THURSDAY, THE 6[TH] DAY OF JANUARY 2022 / 16TH POUSHA, 1943 WP(C) NO. 37952 OF 2010**
## **PETITIONER/S:**
1 M/S.P.K.RAMACHANDRAN REP. BY ITS MANAGING PARTNER P.K.RAMACHANDRAN,, HAVING ITS OFFICE AT DEEPA MANDIR,, KARUVELIPADY, KOCHI-682 005. THE NAME OF THE MANAGING PARTNER, P.K.RAMACHANDRAN IN THE PETITIONER'S FIRM IS CORRECTED AND SUBSTITUTED AS "SRI.DENOOP.A.R" AS PER ORDER DATED 27/10/2021 IN I.A.1/21 IN W.P(C) 37952/10) BY ADVS. K.GOPALAKRISHNA KURUP (SR.) N.K.SUBRAMANIAN ABRAHAM MATHAN ATHUL TOM N.C.MOHANAN
## **RESPONDENT/S:**
1 UNION OF INDIA REP. BY ITS SECRETARY,, CENTRAL PUBLIC WORKS DEPARTMENT,, NEW DELHI-1. 2 EXECUTIVE ENGINEER CHCD, CENTRAL PUBLIC WORKS DEPARTMENT,, COCHIN CENTRAL DIVISION, KENDRIYA BHAVAN,, KAKKANAD, KOCHI-682037. 3 THE SUPERINTENDING ENGINEER TRIVANDRUM CENTRAL CIRCLE,, CENTRAL PUBLIC WORKS DEPARTMENT,, CGO COMPLEX, POONKULAM, THIRUVANANTHAPURAM-695522. 4 THE CHIEF ENGINEER
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CENTRAL PUBLIC WORKS DEPARTMENT,, KENDRIYA SADAN, KORAMANGALA,, BANGALORE-34.
BY ADVS. ASSISTANT SOLICITOR GENERAL SRI.SUVIN R.MENON, CGC
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.01.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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**P.V.KUNHIKRISHNAN, J -------------------------------------------W.P.(C.) No. 37952 of 2010 -------------------------------------Dated this the 6[th] day of January, 2022**
## **JUDGMENT**
The petitioner herein is an A class registered contractor undertaking major civil works for the Central Public Works Department, State Public Works Department and various other departments of the Central and State Governments. The respondents herein invited tenders for the construction of Boys Hostel for CIFNET, Kochi. The respondents decided to invite tenders by resorting to the mode of making contract through e-tender. According to the respondents, the intending tenderer have to download tender documents and submit their tenders online. General conditions of contract for Central Public Works Department works is produced as Ext.P1. Ext.P2 is the copy of the information and instructions for contractors for e-tendering forming part of the notice
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inviting tenders.
2. The estimate cost put to tender is Rs. 2,81,16,940/-. Earnest Money Deposit was Rs.5,62,339/-. The last date for the submission of tenders was on 14.10.2010 till 3 pm. Tenders were to be opened at 3.30 pm on 20.10.2010.
3. The petitioner submitted the tender documents online. It is the case of the petitioner that they have uploaded the quoted file after quoting their rates for all items and as per the instructions. It is the further case of the petitioner that at the time of opening the tender it was found that there were certain errors in the electronic records sent by the petitioner and received by the addressee. The tender received by the respondents did not contain the rates for all the items except for the first few items. It is the case of the petitioner that they have uploaded the quoted file after quoting rates for all items. It is further stated that when the petitioner realised the mistake at the time of opening the tenders, they sent an email on 20.10.2010 itself to the 2[nd] respondent and Ext.P3 is the email. Ext.P4 is the acknowledgement of tender
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submission by the respondents. Ext.P3 was followed by a letter dated 23.10.2010 as evident by Ext.P5. The 2[nd] respondent by his letter dated 24.11.2010 to the petitioner informed that the petitioner's tender has been accepted at an amount of Rs.12,28,610/- which is 95.63% below the corresponding estimate cost of Rs.2,81,16,940/-. Ext.P6 is the letter dated 24.11.2010. After receipt of Ext.P6, the petitioner informed the 2[nd] respondent that by an error in transmission, the rates quoted by the petitioner was not found in the communication sent by the petitioner. It was also informed that treating the same as rates for the entire items of work and acceptance of tender is not correct. Ext.P7 is the letter dated 30.11.2010 sent by the petitioner to the 2[nd] respondent. In reply to Ext.P7, the 2[nd] respondent sent a letter to the petitioner as evident by Ext.P8. By Ext.P8, the petitioner was informed that they are not prepared to review the earlier decision. It is further informed that the Government shall be at liberty to forfeit the Earnest Money and the petitioner shall be debarred from the participation in
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the re-tender process of the work without further notice. Subsequently, after filing this writ petition, Ext.P10 was received by the petitioner, which was dated 29.12.2020, by which the Earnest Money deposited by the petitioner was forfeited and the petitioner was debarred from participating in the re-tendering process of the work. In such situation, this writ petition was amended and now the prayers are like this :
“(i) to call for the records leading to Exhibit P-6 and Exhibit P-8 and to quash the same by the issue of a writ of certiorari or other appropriate writ direction or order;
(ii) to issue a writ of mandamus or other appropriate writ direction or order directing the respondents to retender the work relating to the construction of Boys Hostel CIFNET, Kochi (covered by Ext.P2) and to permit the petitioner also to participate in the process of retendering the work;
(iii) to direct the respondents to refund the earnest money deposited by the petitioner
(iii)(a) to call for the records leading to Exhibit P-10 and to quash the same by the issue of a writ of certiorari or other appropriate writ direction or order.
And
(iv) to grant such other reliefs and to pass such other orders as this Hon'ble Court may deem fit in the facts and circumstances of the case.”
4. When the writ petition came up for consideration, the counsel for the petitioner limit his prayer to prayer Nos.
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(iii) and iii(a).
5. Heard the learned counsel for the petitioner and the learned Central Government Counsel (CGC).
6. The counsel for the petitioner reiterated his contentions in the writ petition. The counsel for the petitioner submitted that a bare reading of the estimate cost of the tender, which is Rs.2,81,16,940/- and the petitioner's tender, for an amount of Rs.12,28,610/- which is 95.63% below the corresponding estimate itself will show that there was some technical error while uploading the tender of the petitioner. The counsel takes me through Exts.P5 and P7. Ext.P5 is dated 23.10.2010 and Ext.P7 is dated 30.11.2010. The counsel submitted that the forfeiture of the Earnest Money by the respondents is illegal in the facts and circumstances of the case. The counsel submitted that the e-tendering itself was started only during 2010 and there was several errors during that period while tenders were uploaded. The petitioner bring to the notice of the respondents about the same in Exts.P3 and P6. Without
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considering the same, Ext.P10 is passed forfeiting the Earnest Money and also debarring the petitioner from participating in the tender proceedings in future. The counsel takes me through the judgment of the Apex Court in **West Bengal Electricity Board** v. **Patel Engineering Company Ltd. and others** [AIR 2001 SC 682]. The counsel submitted that in similar situation, the Apex Court observed that the equitable relief will be granted to a bidder for a public contract where he has made a material mistake of fact in the bid which he submitted, and where upon the discovery of that mistake, he acted promptly in informing the public authorities and requested withdrawal of his bid or opportunity to rectify his mistake particularly where he does so before any formal contract is entered into.
7. The counsel also submitted that admittedly no agreement is executed by the petitioner with the respondents. The counsel also relied the judgment dated 26.10.2021 in W.P.(C.) No. 15459/2021 in which this Court Observed that if there is no concluded contract, the
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respondents cannot claim the performance guarantee.
8. On the other hand, the learned Central Government Counsel [CGC] seriously opposed the contentions of the petitioner. The learned CGC takes me through clauses 6, 10, 17 and 18 of Ext.P2. The CGC submitted that, from the facts it is clear that the petitioner was not vigilant and in such circumstances, the respondents are entitled to forfeit the Earnest Money. The CGC specifically takes me through the last sentence in Clause 10 of Ext.P2 in which it is stated that in case the contractor fails to deposit the said performance guarantee within the period as indicated in Schedule F, including the extended period, if any, the Earnest Money deposited by the contractor shall be forfeited automatically without any notice to the contractor. The CGC submitted that in the light of the above clause, it is clear that there is nothing wrong in forfeiting the Earnest Money and there is nothing to interfere with Ext.P10 order. The CGC also relied the judgment of the Apex Court in **Bharat Sanchar Nigam Ltd. v. Telephone Cables Ltd.** [2010 KHC 6181], in which
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the Apex Court observed that in the absence of a finding in regard to arbitrariness, bias or mala fides in the decision but only a mere error in assessment, the High Court ought not to have interfered in the contractual matters, especially in tender process. The CGC also submitted that the tender was submitted by the petitioner on the last day and that also at the last hour.
9. This Court considered the contention of the petitioner and the respondents. The admitted facts are like this : The respondents invited tenders. The petitioner uploaded the tender in time. It is also an admitted fact that the estimate cost put to tender is Rs.2,81,16,940/-. The Earnest Money deposited is Rs.5,62,339/-. It is also an admitted fact that the petitioner's tender has been accepted for an amount of Rs.12,28,610/- which is 95.63% below the corresponding estimate cost of Rs.2,81,16,940/-. The petitioner submitted the tender on 14.10.2010. The tenders were opened on 20.10.2010. Thereafter, the petitioner sent Ext.P3 email on 20.10.2010 itself. It will be better to extract
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## the contents in Ext.P3 email.
“While verifying the opened tender it was found that our tender do not have rates for almost all the items except for the first few items. We would like to inform you that we have uploaded the quoted file after quoting our rates for all the items and as per the instructions. But some technical error might have happened while uploading through internet. A copy of the quoted file is available with us. We are unaware as to how this has happened and we also came to know about this only after opening of the tender. In view if this phenomenon, we would request you to kindly make arrangements to allow the contractors who have submitted the tender to view their rates after submission so that this kind of anomalies can be avoided. At present there is no provision for the contractor to view the uploaded file after submission to ascertain whether the rates quoted have been correctly uploaded in the CPWD web site or not.
Hence we request you to do the needful so that we are given a chance to quote for the work and also for release of the EMD submitted along with the tender as the inconvenience caused was not due to any negligence or default on our part.”
10. There is no dispute about the receipt of the email. When the estimate cost was Rs.2,81,16,940/-, It is very difficult to digest that the petitioner will submit a tender for an amount of Rs.12,28,610/- which is 95.63% below the corresponding estimate cost. The petitioner immediately reacted after the opening of the tender and also submitted that necessary arrangements may be allowed to the contractors who have submitted the tenders to view their
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rates after submission, so that the anomalies can be avoided. Ext.P3 was submitted on 20.10.2010. The tenders were opened on 20.10.2010. That shows that the petitioner was vigilant about the error, immediately when he noticed about the same. I perused Ext.P9 tender submitted by the petitioner. From item No. 2.2 onwards in Ext.P9, no amount is quoted. According to the petitioner, he quoted amount but that is not there when it is uploaded. At this stage it is to be noted that the petitioner informed the respondents by sending Ext.P3 on 20.10.2010 itself about the anomaly. Thereafter, Ext.P10 is issued by the respondents forfeiting the Earnest Money and debarring the petitioner from participating in the re-tendering process of the work. When the petitioner says that certain errors occurred, while submitting the tenders and when the petitioner has got a definite case that it is a technical error on the part of the respondents in the system, the respondents ought to have responded to Ext.P3. They have no case that they have not received Ext.P3 email. In such circumstances, according to
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me, there is some force in the argument of the petitioner and the forfeiture of the Earnest Money is to be reconsidered by the respondents. In this situation, it will be better to consider the dictum laid down by the Apex Court in **West Bengal Electricity Board's** case (supra). Almost a similar situation was considered by the Apex Court. It will be better to extract paragraph Nos. 24 to 29, 32 and 33 of the above judgment.
24. “The mistakes / errors in question, it is stated, are unintentional and occurred due to the fault of computer termed as "a repetitive systematic computer typographical transmission failure". It is difficult to accept this contention. A mistake may be unilateral or mutual but it is always unintentional. If it is intentional it ceases to be a mistake. Here the mistakes may be unintentional but it was not beyond the control of respondent Nos. 1 to 4 to correct the same before submission of the bid. Had they been vigil in checking the bid documents before their submission, the mistakes would have been avoided. Further, correction of such mistakes after one and a half month of opening of the bids will also be violative of clauses 24.1, 24.3 and 29.1 of ITB. 25. The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of the care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender / bid and also award of a contract. The appellant respondent Nos. 1 to 4 and respondent Nos. 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a
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work of this nature and magnitude where bidders who fulfil prequalification alone are invited to bid, adherence to the instructions cannot be given a go bye by branding it as a pedantic approach otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our constitutional values. The very purpose of issuing Rules/instructions is to ensure their enforcement lest the Rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provided under ITB, by the State or its agencies (the appellant) in favour of one bidder would create justifiable doubt in the minds of other bidders, would impair the rule of transparency and fairness and provide room for manipulation to suit the whims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity. In our view such approach should always be avoided. Where power to relax or waive a rule or a condition exists under the Rules, it has to be done strictly in compliance with the Rules. We have, therefore, no hesitation in concluding that adherence to ITB or Rules is the best principle to be followed, which is also in the best public interest.
26. For all these reasons, in such a highly competitive bid of global tender, the appellant was justified in not permitting respondent Nos. 1 to 4 to correct the errors of the nature of the magnitude which, if permitted, will give a different complexion to the bid. The High Court erred in directing the appellant to permit respondent Nos.1 to 4 to correct the errors in the bid documents.
27. Mr. Chidambaram, however, submitted that in equity respondent Nos. 1 to 4 would be entitled to relief of correction of mistakes. He invited our attention to para 84 of the American Jurisprudence (Second Edition, Volume 64, page No. 944). It will be useful to quote the relevant part of that para here:
"As a general rule, equitable relief will be granted to a bidder for a public contract
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where he has made a material mistake of fact in the bid which he submitted, and where upon the discovery of that mistake, he acts promptly in informing the public authorities and requesting withdrawal of his bid or opportunity to rectify his mistake particularly where he does so before any formal contract is entered into."
The principle is based on the judgment of the Supreme Court of U.S.A. In Moffett, H. and C. Co. v. Rochester, 1899 (178) US 373; 44 Law Ed 1108, 20 SCt 957. There the plaintiff gave proposals by way of bid for two works of excavation of earth, quoting the unit rate 1.5 Dollar instead of 15 Dollars and 50 cents instead of 70 cents per cubic yard. The City of Rochester which called for tenders, was promptly informed of the mistake by the plaintiffs agent as soon as it was discovered but before entering into contract. However, the proposal of the plaintiff was accepted by the City of Rochester in regard to one work and the other work was allotted to another bidder. The plaintiff declined to enter into a contract with the City of Rochester which took steps to enforce execution of the contract. The plaintiff filed the suit for correction of proposals to conform to the asserted intention in making them and for execution of the contract on corrected rates or alternatively for the rescission of the proposals. It also sought injunction against the officers of the City of Rochester declaring it to be defaulter, its bond forfeited or enforced. It was found that the price noted was grossly inadequate and far below what would be the actual cost of the work under the most favourable circumstances. The Trial Court decreed the suit holding that the proposals of the bidder be rescinded, cancelled and declared null, void, and of no effect and granting the injunction prayed for. But on appeal the decree was reversed by the circuit court of appeals. On further appeal to the Supreme Court of U.S.A., it was observed that both the courts below found that there was a mistake and while the Trial Court opined it was clear, explicit and
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undisputed, the court of appeal was of the view that it was not a mistake in any legal sense but was a negligent omission arising from an inadequate calculation of the cost of the work and held that the mistake was not sufficient to preclude a claim for relief if the mistake justified it. The Supreme Court relied on the following observation in an earlier judgment of that Court in Hearne v. Marine Ins. Co. (1873-74) 22 Law Ed 305.
"A mistake on one side may be a ground for rescinding, but not for reforming a contract. Where the minds of the parties have not met there is no contract, and hence none to be rectified."
And it was concluded that the last two propositions might be claimed to be pertinent to that case even though the transactions between the parties be considered as a completed contract and held that the action of the City of Rochester in awarding one contract to another bidder and forcing the plaintiff to enter into the second contract after it had declared there was a mistake in its proposal was inequitable.
28. Exceptions to the above general principle of seeking relief in equity on the ground of mistake, as can be culled out from the same para, are :
(1) Where the mistake might have been avoided by the exercise of ordinary care and diligence on the part of the bidder but where the offeree of the bid has or is deemed to have knowledge of the mistake, he cannot be permitted to take advantage of such a mistake.
(2) Where the bidder on discovery of the mistake fails to act promptly in informing to the concerned authority and request for rectification, withdrawal or cancellation of bid on the ground of clerical mistake is not made before opening of all the bids,
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(3) Where the bidder fails to follow the rules and regulations set forth in the advertisement for bids as to the time when bidders may withdraw their offer; however where the mistake is discovered after opening of bids, the bidder may be permitted to withdraw the bid.
29. In the instant case, we have also noted that the mistakes in the bid documents of respondent Nos. 1 to 4 even though caused on account of faulty functioning of computer could have been discovered and notified by the said respondents with exercise of ordinary care and diligence. Here, the mistakes remained in the documents due to gross negligence in not checking the same before the submission of bid. Further clauses 24 and 27 of ITB permit modification or withdrawal of bids after bid submission but before the dead line for submissions of the bids and not thereafter. And "equity follows the law". Having submitted the bid they did not promptly act in discovering the errors and informing the same to the appellant. Though letters were written on October 25, 1999 and December 17, 1999, yet the real nature of errors/mistakes and corrections sought were not pointed out till December 23, 1999 when representation was made after interim direction of the High Court was given on December 21, 1999. Instead it appears to us that they improved their claim in the representation. In our view the said respondents are not entitled to rectification of mistakes / error for being considered along with the other bidders.
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32. The submission that remains to be considered is that as the price bid of respondent Nos. 1 to 4 is lesser by 40 crores and 80 crores than that of respondent Nos. 11 and 10 respectively, public interest demands that the bid of respondent Nos. 1 to 4 should be considered. The project undertaken by the appellant is undoubtedly for the benefit of public. The mode of execution of the work of the
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project should also ensure that the public interest is best served. Tenders are invited on the basis of competitive bidding for execution of work of the project as it serves dual purposes. On the one hand it offers a fair opportunity to all those who are interested in competing for the contract relating to execution of the work and on the other hand it affords the appellant a choice to select the best of the competitors on competitive price without prejudice to the quality of the work. Above all it eliminates favouritism and discrimination in awarding public works to contractors. The contract is therefore, awarded normally to the lowest tenderer which is in public interest. The principle of awarding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely because a bid is the lowest the requirements of compliance of rules and conditions cannot be ignored. It is obvious that the bid of respondent Nos. 1 to 4 is the lowest of bids offered. As the bid documents of respondent Nos. 1 to 4 stands without correction there will be inherent inconsistency between the particulars given in the annexure and the total bid amount, it cannot be directed to be considered along with other bid on the sole ground of being the lowest.
33. We find no force in the submission that as under clause 14.2 items against which no rate or price is entered by the bidder will not be paid by the employer when executed and shall be deemed covered by the other rates and prices in the bill of quantities, the unit price in items containing errors be ignored and the bid be considered on the basis of total price bid which is the lowest. In our view, there is a basic distinction between a case where against some items no rates or prices are quoted and a case where some rate is quoted. Whereas in the former case the bidder will not be entitled to claim any specific amount for the work done by him in the absence of any rate for that work, because in the aforementioned clause it is clarified that the bidders will not be paid by the employer and that the
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execution of the work shall be deemed covered by other rates and prices in the bill of quantities but in the latter case the bidder will be entitled to claim for the work executed on the basis of quoted price / rate.”
11. CGC takes me through Ext.P8 and submitted that the respondents gave a reply in detail to Ext.P3. I perused Ext.P8. Ext.P8 is dated 8.12.2010. Ext.P3 is an email sent by the petitioner on the date on which the tenders were opened. Ext.P8 is in response to Ext.P7 and Ext.P7 was submitted after Ext.P6. In such situation and also in the light of the general principle laid down by the Apex Court in **West Bengal Electricity Board's** case (supra), the forfeiture of Earnest Money by the respondents is to be reconsidered. Moreover, admittedly, there is no agreement executed between the petitioner and respondents. There is no concluded contract between the petitioner and respondents. This Court considered this question in the judgment dated 26.10.2021 in W.P.(C.) No.15459/2021 in detail and also the effect of a case in which there is no concluded contract. Anyway, according to me, it is a matter which is to be
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reconsidered by the respondents in the peculiar facts and circumstances of this case. For facilitating the respondents to pass a fresh order after giving an opportunity of hearing to the petitioner, Ext.P10 can be set aside.
Therefore, this writ petition is allowed in the following manner :
- 1) Ext.P10 is set aside.
- 2) The 2[nd] respondent is directed to reconsider the matter after giving an opportunity of hearing to a representative of the petitioner.
- 3) The above exercise should be completed by the 2[nd] respondent as expeditiously as possible, at any rate, within three months from the date of receipt of a copy of this judgment.
- 4) The petitioner is free to submit additional representation if any, to the respondents, within two weeks from the date of receipt of a copy of this judgment.
**sd/-**
## **P.V.KUNHIKRISHNAN JUDGE**
SKS
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## **APPENDIX**
## **PETITIONER'S EXHIBITS**
:
EXT.P1 TRUE COPY OF THE GENERAL CONDITIONS OF CONTRACT FOR CENTRAL PUBLIC WORKS DEPARTMENT WORKS
EXT.P2 TRUE COPY OF THE INFORMATION AND INSTRUCTIONS FOR CONTRACTORS FOR E-TENDERING FORMING PART OF NOTICE INVITING TENDERS PUBLSHED IN THE WEBSITE
EXT.P3 TRUE COPY OF THE EMAIL SENT TO THE 2ND RESPONDENT ON 20.10.2010
EXT.P4 TRUE COPY OF THE ACKNOWLEDGEMENT OF TENDER SUBMISSION BY THE RESPONDENT
EXT.P5 TRUE COPY OF THE LETTER SENT BY THE PETITIONER TO THE 4TH RESPONDENT
EXT.P6 TRUE COPY OF THE LETTER DATED 24.11.2010 ISSUED BY THE 2ND RESPONDENT
EXT.P7 TRUE COPY OF THE LETTER DATED 24.11.2010 ISSUED BY THE 2ND RESPONDENT
EXT.P8 TRUE COPY OF THE LETTER DATED 8.12.2010 SENT BY THE 2ND RESPONDENT EXT.P9 TRUE COPY OF THE TENDER SUBMITTED BY THE PETITIONER AS FOUND IN THE SITE OF THE RESPONDENT AT THE TIME OF OPENING THE TENDER EXT.P10 TRUE COPY OF THE ORDER DATED 29.12.2010.
EXT.P11 TRUE COPY OF THE PRINTOUT SHOWING THE FILE SIZE OF THE MAIN DOCUMENT (SCHEDULE B) OF THE PETITIONER'S TENDER AVAILABLE IN THE CPWD WEBSITE
**RESPONDENT'S EXHIBITS** :
EXT.R2(A) A PHOTOSTAT COPY OF THE QUOTED RATE SHRI.P.P.JOHN EXT.R2(B) A PHOTOSTAT COPY OF THE QUOTED RATE M/S. ITTOOP ASSOCIATES