Prakash Constrowell Limited v. Kerala State Information Technology Infrastructure Ltd. & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE THE CHIEF JUSTICE MR.HRISHIKESH ROY** ## **&** **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **MONDAY,THE 28TH DAY OF JANUARY 2019 / 8TH MAGHA, 1940** ## **WA.No. 2280 of 2018** **AGAINST THE JUDGMENT IN WP(C) 26489/2018 of HIGH COURT OF KERALA DATED 19.9.2018** ## **APPELLANT/PETITIONER IN THE WPC:** **PRAKASH CONSTROWELL LIMITED THE EXCHANGE, NEAR VED MANDIR, TICKDE COLONY, TRIMBAK ROAD, NASHIK-422002. REP. BY ITS AUTHORIZED SIGNATORY JAMES JOSEPH, S/O JOSEPH, AGED 50 YEARS, VADAKKAKUTTE HOUSE, ALAKODE P O, KANNUR DISTRICT-670571.** **BY ADV. SRI.PAUL K.VARGHESE** ## **RESPONDENT/RESPONDENTS IN THE WPC:** - **1 THE KERALA STATE INFORMATION TECHNOLOGY INFRASTRUCTURE LTD. TC NO. 14/196/2, 3RD FLOOR, CHANDRASEKHARAN NAIR STADIUM, PALAYAM, TRIVANDRUM-695 033 REPRESENTED BY ITS CHAIRMAN.** - **2 THE CHIEF EXECUTIVE OFFICER, (CEO) KERALA STATE INFORMATION TECHNOLOGY INFRASTRUCTURE LTD., TC.NO.14/196/2, 3RD FLOOR, CHANDRASEKHARAN NAIR, STADIUM, PALAYAM, TRIVANDRUM-695 033.** W.A.2280/2018 2 **3 THE MANAGING DIRECTOR, (MD), KERALA STATE INFORMATION TECHNOLOGY, INFRASTRUCTURE LTD., TC.NO.14/196/2, 3RD FLOOR, CHANDRASEKHARAN NAIR STADIUM, PALAYAM, TRIVANDRUM-695 033.** **4 THE SENIOR TECHNICAL ADVISER, (KALAMASSERY PROJECT), KERALA STATE TECHNOLOGY INNOVATIONS ZONE, KALAMASSERY, KOCHI-683 104.** **5 THE URALUNGAL LABOUR CONTRACT CO-OPERATIVE SOCIETY, MADAPPALLY COLLEGE, VADAKARA, KOZHIKODE-673 102, REPRESENTED BY ITS PRESIDENT.** **6 THE CENTRAL VIGILANCE COMMISSION, SATARKATA BHAVAN A BLOCK, GPO COMPLEX, INA NEW DELHI, PIN-110 023.** **BY ADVS.** **SRI.K.A.ABDUL SALAM, SC, KERALA STATE IT INFRASTRUCTURE LTD. KSITIL SRI.M.SASINDRAN, SC, URALUNGAL LABOUR CONTRACT CO-OPERATIVE SOCIETY NO.10957** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 28.01.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A.2280/2018 3 ## J U D G M E N T ## A.K. Jayasankaran Nambiar, J The learned counsel Sri. Paul K. Varghese appears for the appellant/writ petitioner. The Kerala State Information Technology Infrastructure Ltd. (KSITI), who is the awarder of the work, is represented by the learned counsel Sri K.A. Abdul Salam. The 5[th] respondent, ie., the Uralungal Labour Contract Co-operative Society is represented by the learned counsel Sri. M. Sasindran. 2. This matter relates to a construction in the Technology Innovation Zone at Kalamassery, for which tenders were invited by the KSITI Ltd. The writ petitioner's bid at Rs.87,98,62,885.00 was determined as the L1 bid, whereas the bid of the 5[th] respondent (Uralungal Labour Contract Co-operative Society) at Rs.88,88,65,127.25 was determined to be the L2 bid, as can be gathered from the Ext.P3 document. The contract was however awarded to the L2 bidder (respondent No.5) on the basis of the price preference envisaged for Labour Contract Co-operative Societies, under the Government Order dated 13.11.1997 (Ext.R5(a)). Therefore, the aggrieved L1 bidder challenge the tendering decision. 3. Under the impugned judgment dated 19.1.2019 in the W.P(C). No.26489 of 2018, the case projected by the aggrieved L1 tenderer was considered but the learned single judge found the awarding of the contract to the 5[th] respondent to be justified on the basis of the price preference envisaged by Ext.R5(a) and consequently, the Writ Petition was dismissed. W.A.2280/2018 4 4. The appellant before us however argues that the preferential treatment for labour co-operative societies envisaged by the Ext.R5(a), was never intimated to the participating tenderers. Therefore, the preferential consideration of the Labour Contract Co-operative Society (respondent No.5) could not have been granted, ignoring the L1 bid of the writ petitioner. 5. The appellants also refer to the decision of this Court in Ramesan v. Asokan [2018 (4) KLT 730] wherein, while considering the legality of a price preference granted to the very same co-operative society (5[th ] respondent) under another tender notification, it was held that, inasmuch as the Government orders granting the benefit of price preference had not been published, and therefore not brought to the notice of the general public, the specific advantage possessed by the Labour Contract Co-operative Society was known only to the said society and the awarder of the contract. It was held, therefore, that since the other bidders were put to disadvantage in the bidding process, as they were not aware of the circumstances, whereunder they could be overlooked for the award of the work, notwithstanding their status as lowest bidders, the undue advantage conferred on the Labour Contract Co-operative Society, even before the commencement of the tender process, could not be seen as a fair procedure that would withstand the scrutiny of Article 14 of the Constitution of India. The learned counsel for the appellant relies on the said judgment to contend that, in the instant case also, the Government Order granting price preference to the 5[th] respondent society was not published at the time when the tender notification was issued, calling for tenders from various contractors. It is further pointed out with reference to the decision in Ramesan v. Asokan (supra) that this Court has noted that the publication of the Government Orders, conferring the benefits on the 5[th] respondent co-operative society, W.A.2280/2018 5 was done only by a Gazette notification dated 25.5.2018 and hence the 5[th] respondent society could get the benefit of the price preference orders only in tender notifications issued thereafter. Inasmuch as in the instant case, the tender notification itself was prior to 25.5.2018, the decision in Ramesan v. Asokan (supra) would squarely apply to disentitle the 5[th] respondent to the benefit of the price preference, envisaged in the Government orders aforementioned. 6. The learned counsel for the 5[th] respondent Sri. M. Sasindran would submit that, although this Court had, in Ramesan v. Asokan (supra) set aside the benefit of price preference obtained by the 5[th] respondent society under an earlier tender notification,it is a fact that the award of the contract in the instant case was only after 25.5.2018, when the notification granting the benefits was duly published in the Kerala Gazette Extra Ordinary. The learned Counsel's contention, therefore, is that the conferment of benefit was known to the bidders at the time of award of the contract. 7. It is further pointed out by the learned counsel for the 5[th] respondent society that pursuant to the award of the contract in favour of the society, and under circumstances where there was no interim order restraining the respondent society from carrying on activities pursuant to the work awarded, substantial work has already been undertaken by the society towards the completion of the project. It is stated that, apart from the works already completed, firm orders have also been placed on various vendors for supply of equipment and material necessary for completion of the work, and interfering with the contract at this distance of time would visit the respondent society with adverse consequences. Reliance is placed on the decisions in Air India Ltd., v. Cochin International Airport Ltd. and Others [2000 KHC 1002], Asia Foundation & W.A.2280/2018 6 Construction Ltd. v. Trafalgar House Construction (I) Ltd. and Others [1997 KHC 1324] and M/s. Master Marine Services Pvt. Ltd. v. Metcalfe & Hodgkinson Pvt. Ltd. and Another [JT 2005 (4) SC 408] to contend that under the factual circumstances obtaining in the instant case, this Court should not interfere with the award of the contract solely on the appellant making out a legal point warranting interference, and that this Court must also take note of the extent of construction completed during the pendency of the Writ Petition, which itself was belatedly filed, while exercising its discretion at this stage. It is also contended that it is only under exceptional circumstances, where the award of a contract is vitiated by mala fides or is against public interest that this Court would interfere with the awarding of a contract, keeping in mind the commercial expediency that is involved in such matters. 8. Sri.K.A. Abdul Salam, the learned counsel for the first respondent, the Kerala State Information Technology Infrastructure Ltd., the awarder of the contract submits that the Writ petition as also the Writ Appeal have been preferred at a stage when substantial work has already been done by the 5[th] respondent society, pursuant to the award of the contract, and interfering with the progress of the work at this belated stage would visit the first respondent awarder with severe adverse financial consequences, not to mention the possibility of the project itself being jeopardised. 9. On consideration of the rival submissions, we find that the defect in the notification inviting tender, as regards the non-publication of the Government Orders that envisaged a benefit of price preference in favour of the 5[th] respondent society, is one that vitiates the entire tender process as already found by us in our earlier judgment in Ramesan v. Asokan (supra). In the said judgment, after referring to the W.A.2280/2018 7 scope of judicial review in contract matters as were summed up in the decision of the Supreme Court in M/s. Michigan Rubber (India) Ltd. v. The State of Karnataka & Others [(2012) 8 SCC 216], it was found as follows with reference to the tender notification that was impugned in the said Writ Appeal: “....... .......... ............ .......... ....... 11. In the instant cases, while all the bidders participated in the tender process, the NITs in question did not contain particulars of any concession that was to be extended to ULCC Society and other like Cooperative Societies. Although there is a reference in the NITs, to the applicability of Government Orders, this can only be taken to be a reference to those Government Orders that are published consequent to a statutory requirement mandating their publication so as to give them their efficacy. In the instant cases, the Government Orders in question were manuscript Government Orders, in respect of which, there is no legal requirement of publication inasmuch as they are intended only to confer personal rights on a person or class of persons. In other words, the rights conferred by the Government Orders, not being in the nature of rights in rem, need not be brought to the notice of the general public, before they become effective in the matter of conferring a personal right on the said person or class of persons. As a result of non-publication of these Government Orders therefore, a situation arose in the instant cases, where the specific advantage possessed by one of the bidders was known only to that bidder, and the awarder of the contract. This put the other bidders at a disadvantage in the bidding process for, they were not aware of the circumstances whereunder they could be overlooked for the award of the work, notwithstanding their status as the lowest bidders. In our view, such non-disclosure of information, that would confer on one of the bidders an unfair advantage even before the commencement of the tender process, cannot be seen as a fair procedure that would withstand the scrutiny of Article 14 of the Constitution of India. The terms of the NIT had therefore to be strictly construed by referring only to the express conditions therein, and without reference to the Government Orders referred above, and the inter se rights of the bidders decided based on the said express terms of the NIT. We are therefore in agreement with the finding of the learned Single Judge in his judgment dated 2.2.2018 in W.P.(C).No.26206/2016 that, in the absence of a specific provision in the NITs that invited the attention of other bidders to the benefits conferred on the ULCC Society and other similarly situated Societies, the respondent awarders could not have taken into account the benefits flowing to the ULCC Society from the Government Orders referred above, for the purposes of rejecting the bid of the writ petitioners whose bids were declared as the lowest in the bidding process. We might also add that we are not impressed with the submission of the learned counsel for the appellant Society that the finding of the learned Single Judge was on a point that was not specifically pleaded in the writ petitions. A perusal of the writ petitions would clearly reveal that what was impugned was the action of the Awarder in granting a benefit to the appellant Society when such benefit was not expressly disclosed in the NIT. The judgment of the learned Single Judge indicates that the contention regarding nonpublication of the GO's was urged at the time of hearing, in support of W.A.2280/2018 8 the grounds taken in the writ petition. It is also evident that the appellant's objection to the said contentions were also considered by the learned Single Judge. It cannot be said, therefore, that the finding of the learned Single Judge was on an issue that was not deliberated upon during the hearing. We therefore find against the appellants on the first issue. We are also of the view that, in the light of our finding on the first issue, we need not enter into a discussion on the second issue. W.A.No.598/2018, W.A.No.807/2018 and W.A.No.898/2018 are hence dismissed. ............ .......... ....... .......... ..........” 10. In the instant case, the petitioner had specifically taken up a ground in the Writ Petition that, at the time of inviting tenders, nothing was mentioned in the tender as regards the privilege to be given to the 5[th] respondent co-operative society in the execution of the work. The said ground raised by the writ petitioner was not considered by the learned Single Judge in the judgment impugned in the Writ Appeal. The learned Single Judge merely noted that there was no challenge to the said Government Orders that conferred a benefit on the 5[th] respondent society and dismissed the Writ Petition in the absence of a specific challenge to the Government Orders aforementioned. 11. No doubt, the learned Single Judge did not have the occasion to consider the subsequent judgment of a Division Bench of this Court in Ramesan v. Asokan (supra) that found the conferment of the benefit of price preference to be illegal, on account of the non-publication of the Government Orders conferring benefits on one bidder to the exclusion of others, in the notification inviting tender. This Court found that suppressing such information from other bidders resulted in an unfair procedure having been followed, that vitiated any contract awarded based on such notification inviting tender. When we apply the ratio of the said judgment to the facts of the instant case, we cannot but find in favour of the appellant on his entitlement to an award of the contract in question, taking note of his undisputed status as the L1 bidder in the tender W.A.2280/2018 9 proceedings. We, therefore, set aside the impugned judgment of the learned single judge that dismissed the writ petition. 12. While under normal circumstances, as a consequence of our above finding, we would have been inclined to quash the decision to award the contract to the 5[th] respondent Society and declare the appellant herein as the succesful tenderer entitled to the award of the contract, we cannot ignore the fact that the work under the contract has progressed to such an extent that the 5[th] respondent society would now contend before us that intervention by this Court with the ongoing contract would visit not only the 5[th] respondent society, but also the awarder of the contract, with severe adverse financial consequences. We are also mindful of the practical difficulties that will be faced by the awarder of the contract, in dealing with a new contractor, if the progress of the work is disrupted at this stage. The element of public interest in timely completion of the work must also be borne in mind in the exercise of our discretion. 13. In order to balance the conflicting interests of the 5[th] respondent society, that secured the contract by obtaining an unfair advantage of price preference, and that of the appellant contractor, who would have been awarded the contract pursuant to his status as the lowest bidder (L1) in the tender proceedings, we feel that as an alternative to terminating the contract awarded to the 5[th] respondent, so as to award the contract to the appellant, and taking note of the fervent plea on behalf of the 5[th] respondent that it be permitted to continue with the contract, it would be in the interests of justice to merely deprive the 5[th] respondent society of the extent of unfair advantage that they obtained while securing the contract in their favour. The unfair advantage obtained by the 5[th] respondent is that it could secure the benefit of the price preference order to W.A.2280/2018 10 steal a march over the appellant, who was the LI tenderer, to be declared as the successful bidder. Without the benefit of the price preference order, its higher bid in an amount of Rs.88,88,656,127.25, as against the lower bid amount offered by the appellant herein of Rs.87,98,62,885.00, would have disentitled the 5[th] respondent to the award of the contract. The 5[th] respondent society, therefore, obtained an unfair advantage to the extent of Rs.90,02,242/- (which represents the difference between the L1 rate quoted by the appellant and the rate quoted by the 5[th] respondent) and we feel that if the 5[th] respondent society is to be permitted to continue with the contract, notwithstanding the illegality occasioned in its awarding, the appellant, whose rights were infringed, should be compensated to a like extent of Rs.90,02,242/-. 14. We hasten to add that while we are not for a moment condoning the illegality in the award of the contract to the 5[th] respondent, we are of the view that, in larger public interest, and taking note of the adverse financial consequences that would result to the awarder of the contract on account of the inevitable delay in completion of the project, if an interference is made with the progress of the contract at this stage, the alternate course of action whereby the 5[th] respondent is deprived of the unfair advantage obtained by it, and the appellant compensated to the said extent, would be the more prudent course of action under the circumstances. Accordingly, we dispose this Writ Appeal as under: 1. The impugned judgment of the learned single Judge is set aside; 2. The 5[th] respondent society is permitted to continue with the contract on condition that it pays an amount of Rs.90,02,242/- to the appellant within a period of two months from the date of receipt of a copy of the judgment. W.A.2280/2018 11 3. It is made clear that if the 5[th] respondent society fails to pay the amount as directed, within the period granted in this judgment, it will lose the benefit of this judgment and the contract awarded to them shall stand cancelled. In that event, the appellant shall be treated as the successful bidder in the tender proceedings, and be entitled to the award of the contract from the stage at which the default occurs. Sd/Hrishikesh Roy, Chief Justice Sd/A.K. Jayasankaran Nambiar, Judge sou. W.A.2280/2018 12 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **ANNEXURE I** **TRUE COPY OF THE PHOTOS OF THE THE SITE ON 16.1.2019** **ANNEXURE II** **TRUE COPY OF THE CIRCULAR/RESOLUTION OF THE APPELLANT DATED 22.7.2018.** ## **RESPONDENT'S EXHIBITS:** **ANNEXURE R1(a) PHOTOS** - **ANNEXURE R5(a) A TRUE COPY OF THE PURCHASE ORDER DATED 15.12.2018 ISSUED TO PUTZMEISTER CONCRETE MACHINES PRIVATE LTD.** - **ANNEXURE R5(b) A TRUE COPY OF THE PURCHASE ORDER DATED 15.12.2018 ISSUED TO PUTZMEISTER CONCRETE MACHINES PRIVATE LTD.** - **ANNEXURE R5(c) A TRUE COPY OF THE PURCHASE ORDER DATED 24.10.2018 ISSUED TO AMALA STEELS.** - **ANNEXURE R5(d) A TRUE COPY OF THE PURCHASE ORDER DATED 25.10.2018ISSUED TO PRISM JOHNSON LIMITED** - **ANNEXURE R5(e) A TRUE COPY OF THE PURCHASE ORDER DATED 19.1.2019 ISSUED TO GEO EQUIPMENTS FOR SUPPLY OF SHUTTERING EQUIPMENT.** - **ANNEXURE R5(f) A TRUE COPY OF THE PURCHASE ORDER DATED 19.1.2019 ISSUED TO GEO EQUIPMENTS FOR SUPPLY OF SHUTTERING EQUIPMENT.** - **ANNEXURE R5(g) A TRUE COPY OF THE PHOTOGRAPHS SHOWING THE LAW OF THE SITE AND THE WORKS BEING** - **DONE ON THE DATE THE 1[ST] RESPONDENT VISITED THE WORK SITE. ANNEXURE R5(h) A TRUE COPY OF THE PHOTOGRAPHS SHOWING DIFFERENT STAGES OF WORKS TILL NOW.** - **// TRUE COPY //** **P.A. TO JUDGE**