Seguro Foundations and Structures Private Limited v. State of Kerala, Roads and Bridges Development Corporation of Kerala Ltd., and Kerala Infrastructure Investment Fund Board

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** ## **TUESDAY, THE 26TH DAY OF DECEMBER 2017/5th Pousha, 1939** ## **WP(C).No. 39062 of 2017 (G)** **----------------------------** ## **PETITIONER:** **---------------------** **SEGURO FOUNDATIONS AND STRUCTURES PRIVATE LIMITED DOOR NO.27/635 A4,** **SECOND FLOOR, CHAKKAPPAN CENTRE, EDAPPILLY P.O, ERNAKULAM -682024, REPRESENTED BY ITS MANAGING DIRECTOR, RAJEEV C VIJAYAN, S/O C.V.VIJAYAN, AGED 58 YEARS, CHIRAMMAL HOUSE, NETAJI ROAD, ALUVA P.O-683101.** ## **BY ADVS.SRI.K.JAYAKUMAR , SENIOR SRI.N.AJITH** ## **RESPONDENT(S):** - **----------------------------** **1. THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARAIT, THIRUVANANTHAPURAM -695001.** **2. ROADS AND BRIDGES DEVELOPMENT CORPORATION OF KERALA LTD., 2ND FLOOR, PREETHI BUILDINGS, M.V.ROAD, PALARIVATTAM, KOCHI-682025. REPRESENTED BY ITS MANAGING DIRECTOR.** **3. THE CHIEF EXECUTIVE OFFICER, KERALA INFRASTRUCTURE INVESTMENT FUND BOARD, FOURT FLOOR, INDIA HEIGHTS, GOVT. WOMEN'S COLLEGE ROAD, VAZHUTHAKKAD, THYCAUD P.O 695014- THIRUVANANTHAPURAM.** - **R1, R3 BY SR GOVERNMENT PLEADER SRI.K.V. MANOJ KUMAR R2 BY ADVS. SRI.V.J.MATHEW, SENIOR SRI.VIPIN P.VARGHESE SRI.DILJITH K.MANOHAR SMT.C.H.AMRITA GULSHAN SRI.M.VIJAYA KUMAR, SC,** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20-12-2017, THE COURT ON 26-12-2017 DELIVERED THE FOLLOWING:** **sdr/-** ## **WP(C).No. 39062 of 2017 (G)** ## **-----------------------------------------** ## **APPENDIX** ## **-------------------** ## **PETITIONERS EXHIBITS** **---------------------------------------** ## **EXT.P1 TRUE PHOTOSTAT COPY OF THE MEMORANDUM OF ASSOCIATION AND THE ARTICLES OF ASSOCIATION OF THE PETITIONER COMPANY** - **EXT.P2 TRUE PHOTOSTAT COPY OF THE RESOLUTION DATED 12.12.2012** - **EXT.P3 TRUE PHOTOSTAT COPY OF THE RESOLUTION DATED 16.11.2017** - **EXT.P4 TRUE PHOTOSTAT COPY OF THE INVITATION FOR BIDS TENDER (IFB, FOR SHORT)** - **EXT.P5 RUE PHOTOSTAT COPY OF THE APPENDIX 20 TO CPWD WORKS MANUAL 2014 AS AMENDED ON 10.10.2016** - **EXT.P6 TRUE PHOTOSTAT COPY OF THE MINUTES OF THE EIGHTH TECHNICAL COMMITTEE MEETING HELD ON 23/10/2017** - **EXT.P7 TRUE PHOTOSTAT COPY OF THE INVITATION FOR BIDS (IFB) FOR THE CONSTRUCTION OF SIX LANE FLYOVER AT VYTILLA JUNCTION** - **EXT.P8 TRUE PHOTOSTAT COPY OF THE NOTICE INVITING TENDER NO. D1/4511/2014/SE DTD. 24/11/2017 ISSUED BY THE HARBOUR ENGINEERING DEPARTMENT THIRUVANANTHAPURAM** **EXT.P9 A TRUE COPY OF THE BID DOCUMENT ISSUED BY THE RESPONDENT NO. 2** ## **EXT.P10 A TRUE COPY OF THE TENDER SUMMARY REPORT FOR THE WORK OF CONSTRUCTION OF KUNDANNOOR FLY OVER** - **EXT.P11 TRUE COPY OF THE BALANCE SHEET OF THE PETITIONER COMPANY FOR THE YEARS 2014-15** - **EXT.P12 TRUE COPY OF THE BALANCE SHEET OF THE PETITIONER COMPANY FOR THE YEARS 2015-16** - **EXT.P13 TRUE COPY OF THE BALANCE SHEET OF THE PETITIONER COMPANY FOR THE YEARS 2015-17** **WP(C).No. 39062 of 2017 (G)** ## **-----------------------------------------** ## **RESPONDENTS EXHIBITS** ## **-----------------------------------------** ## **EXT.R2(A) TRUE COPY OF THE ORDER NO.GO. (P) 596/2017/PWD DATED 04/05/2017** **EXT.R2(B) TRUE COPY OF THE ORDER NO. APR-2/136/2017/KIIFB DATED 17/09/2017 PASSED BY THE KIIFB** **EXT.R2(C) TRUE COPY OF THE RESOLUTION OF THE 5TH BOARD MEETING, DATED 30/05/2000 OF BOARD OF DIRECTORS OF RBDCK** **EXT.R2(D) TRUE COPY OF THE ADDENDUM TI THE EXHIBIT P4 TENDER** **/TRUE COPY/** **PA TO JUDGE** **sdr/-** ## **C.R.** ## **SHAJI P. CHALY, J.** -------------------------------------------------- ## **W.P.(C) No.39062 of 2017 ----------------------------------------------Dated this the 26[th] day of December, 2017** ## **JUDGMENT** The subject matter of this writ petition is in relation to the tender invited for the construction of Flyover at Kundannoor Junction on NH 66 in Ernakulam District. Petitioner seeks direction to respondent No.2 to proceed with the tender and to award contract pursuant to Ext.P4, ignoring the prescription of average annual turnover of Rs.120 Crores for previous three years, contained in Ext.P4, and for other consequential reliefs. Material facts for the disposal of the writ petition are as follows: 2. Petitioner is a private limited company registered under the Companies Act, 1956, and is an “A class” contractor registered with the Public Works Department. The 1st respondent as per the Government Order dated 22.07.2017 issued Administrative Sanction and appointed the 2nd respondent viz., Roads and Bridges Development Corporation of Kerala Ltd. as the Special Purpose Vehicle (SPV) for the construction of Flyover in question. Respondent No.3 is **W.P.(C) No.39062 of 2017** 2 funding the project as per order dated 17.09.2017, and accorded sanction for the same. 3. Accordingly, respondent No.2 invited online bids for the construction of works from all bidders registered with the Government of Kerala or other State Governments/Government of India or State /Central Government undertakings. The bid system consisted of (i) pre-qualification and Technical bid and (ii) Price bid, evident from Ext.P4 Invitation For Bids. The works mentioned in the bid include construction of 6 lane Flyover with 14 numbers of span and service roads, as per the approved design. An amount of Rs.80,98,85,893.60 was fixed as the estimated cost of the work. The total period of completion of the work is fixed at 24 calendar months. 4. Respondent No.1 has issued the norms for prequalification in the Standard Bidding Document and respondent No.2 has restated the conditions. The subject issue raised by the petitioner can be sorted out by making a reference to Clause 3.4 of Instructions to Bidders contained under SectionII of Ext.P4 Invitation For Bids, which read thus: 3 **W.P.(C) No.39062 of 2017** ## _“_ _**3.4 To qualify for award of Contract, bidders shall meet the following minimum qualifying criteria.**_ _(a) The prospective bidder should be in Civil Engineering business for a minimum period of five years in the same name and style._ _(b) The bidder have satisfactorily completed as prime contractor at least one similar work of value not less than Rs.40 crores during the last five years. (The cost of completed works of previous years shall be given a weightage of 5% per year based on rupee value to bring them to 2017-2018 price level)._ _(c)_ _**The average annual turnover of the bidder for the previous three years should be more than Rs.120 crores.**_ |_(d)_|_x_|_x_|_x_|_x_|_x_|_x_|_x_|_x_| |---|---|---|---|---|---|---|---|---| |_(e)_|_x_|_x_|_x_|_x_|_x_|_x_|_x_|_x_| |_(f)_|_x_|_x_|_x_|_x_|_x_|_x_|_x”._|| 5. According to the petitioner, the CPWD Manual, 2014, Appendix 20, (modified as on 10.02.2016) provides for fixing eligibility criteria for two/three envelop system and the modified provision of Clause 4, with reference to Paras 15.7.1.4 and 16.5 of the same are relevant, and the relevant portion of the same is produced as Ext.P5, which read thus: _“4. .............................._ _(i) Experience of having successfully completed works during the last 7 years ending previous day of last date of submission of tenders._ _Three similar completed works costing not less than the amount equal to 40% of the estimated cost_ 4 **W.P.(C) No.39062 of 2017** _put to tender, or_ _Two similar completed works, costing not less than the amount equal to 60% of the estimated cost put to tender, or_ _One similar completed work of aggregate cost not less than the amount equal to 80% of the estimated cost._ _............................._ _(Deleted)._ _(B). Para 2(b) of the Invitations for bid and 7.2 of Section-II._ _Turnover: Average annual financial turnover on construction works should be at least 50% of the estimated cost during the immediate last 3 consecutive financial years._ _(C). Para 2(c) of the Invitation for bid and 7.3 of Section-II Profit/Loss: The date to be filled in this column should be 31[st] March of the previous financial year._ _(D). Para 2(d) of the Invitation for bid and 7.4 of Section II-Solvency Certificate: Solvency of the amount equal to 40% of the estimated cost of the work._ _.....................”._ 6. It is also submitted that, M/s. Segore Inkel Consortium LLP was an approved bidder by the Technical Committee held on 23.10.2017 for the construction of six lane Flyover at Vyttila Junction Kms. 348/380 of NH-47, evident from Ext.P6, minutes of the Eighth Technical Committee meeting held on 23.10.2017 and Ext.P7 Invitation For Bids for the Vyttila flyover. It is submitted that, as per Clause 4.5.3 of **W.P.(C) No.39062 of 2017** 5 Ext.P7, general experience of the bidders is restricted to Average Annual Turnover (defined as billing for works in progress and completed in all classes of civil engineering construction works only) of 40% of the value of contract/contracts applied for, over the last five years, and also experience in successfully completing or substantially completing at least one contract of Highway (road and/or bridge works)/airport runway of at least 40% of the value of proposed contract within the last five years, evident from Ext.P8. 7. Therefore, according to the petitioner, a conjoint reading of Exts.P5 to P8 would show that the eligibility criteria for a prospective bidder to be pre-qualified is that, he should have completed at least one similar work costing 40% of the estimated cost work put to tender. The estimated cost of work for the construction of Flyover in question as per Ext.P4 would show that the same is Rs.80,98,85,893.6. However, as per Clause 3.4 of Section-II to Ext.P4 stipulates that, the average annual turnover for the previous three years should be more than Rs.120 Crores, which is 150% of the contract value. It is the case of the petitioner that, prescribing such a preposterous 6 **W.P.(C) No.39062 of 2017** standard is absolutely foreign to the well settled norms in the industry, and therefore, arbitrary, illegal and unheard of in the existing works contract system. The prescription of average annual turnover at 150% of the estimated cost of the work tendered is in violation of the stipulation in the Standard Bid Document issued by the 1st respondent State Government. Therefore, according to the petitioner, since the said onerous conditions contained under Ext.P4 are arbitrary, illegal and unfair, interference of this Court is necessitated. 8. A detailed counter affidavit is filed by the 2nd respondent refuting the allegations and claims and demands raised by the petitioner. Among other contentions, it is stated that, the 3rd respondent had given financial sanction for Rs.82 Crores for the construction of a 6 lane Flyover at Kundanoor Junction in NH-66 to avoid the traffic congestion presently experienced, evident from Ext.R2(b). 9. The 2nd respondent submits that, the allegation in paragraph 4 that the norms for pre-qualification of Standard Bidding Document issued by the 1st respondent applies to the 2nd respondent is incorrect. The Standard Bidding Document issued by the Government of Kerala as per order dated **W.P.(C) No.39062 of 2017** 7 09.08.2017 is for works executed by the PWD and not intended for the 2nd respondent. The Board of Directors of the 2nd respondent has approved their own Standard Bidding Document _vide_ Item No.4 of the 5th Board meeting dated 30.05.2000 based on Federation Internationale Des Ingenieurs - Conseils, shortly known as FIDIC conditions of contract for tendering the works of the 2nd respondent, and this is the Standard Bidding Document followed by the 2nd respondent for years, evident from Ext.R2(c). It is also submitted that, the Bidding Document adopted by the Kerala Road Fund Board for the tender of the contract of Vyttila Flyover is also not as per the Standard Bidding Document in the Government Order dated 09.08.2017. 10. Further, it is submitted that, the qualifying condition for the bidders in Clause 3.4.b was modified as “the cost of completed works of previous years shall be given a weightage of 5% per year based on rupee value to bring them to 20162017 price level”. The said modification has been uploaded in the e-tender site as Addendum along with some clarification requested by the bidders after the pre-bid meeting held on 31.10.2017, evident from Ext.R2(d). That apart, it is 8 **W.P.(C) No.39062 of 2017** contended that, the guidelines of the CPWD Works Manual, 2014 or any other organization are not binding on the 2nd respondent. 11. It is further contended that, the pre-qualification criteria set up by the 2nd respondent is not arbitrary or illegal. It is aimed at selecting technically and financially sound contractors who are capable of carrying out the construction work efficiently within the stipulated time. The contractor should be financially capable of carrying out the work without any interruption along with all other works the said contractor/bidder has undertaken. Other contentions are also raised justifying incorporation of sub-clause (c) in Clause 3.4 of Ext.P4. 12. That apart, it is submitted that, the petitioner is well aware of all the standard tender conditions set by the 2nd respondent at the time of inviting tenders. One of the standard conditions in the Standard Bidding Document issued by the 2nd respondent is the requirement of average annual turnover amounting to 150% of the total value of the tendered work. The joint venture firm belonging to the petitioner has earlier successfully submitted quotations for the work of the 2nd **W.P.(C) No.39062 of 2017** 9 respondent with similar condition and has entered into agreement with the 2nd respondent for the construction of 'Stationkadavu Bridge'. The 2nd respondent has always issued the similar tender conditions as per their approved Standard Bidding Document for all tenders invited by them. 13. Even though, a pre-bid meeting was held on 31.10.2017 as specified in the Invitation For Bid, petitioner did not attend the same. No clarifications were also sought for by the petitioner at any point of time, as is stipulated in the Invitation For Bid, and therefore, the petitioner is not entitled to approach this Court seeking to delete the conditions incorporated. 14. A reply affidavit is filed by the petitioner reiterating the stand adopted in the writ petition, and producing additional documents along with the same, out of which, Ext.P9 is the Invitation For Bid issued by the 2nd respondent in respect of Design and Construction of Road Over Bridge at Kanhangad in Kasaragod District. According to the petitioner, the estimate amount is Rs.13.90 crores and the stipulation in respect of the average annual turnover of the bidder for the previous three years is fixed as more than 100% of the estimated value of the 10 **W.P.(C) No.39062 of 2017** work as per Clause 3.4 of Section-II Instructions to Bidders. The contention is so made by the petitioner to canvass the proposition that the submission made by the 2nd respondent in its counter affidavit that a uniform method of 100% average annual turnover of the bidder is requisited in all its bids is a blatant lie. Other contentions are also raised. 15. I have heard learned Senior Counsel for the petitioner, learned Senior Government Pleader as well as the learned counsel appearing for the 2nd respondent. Perused the documents on record and the pleadings put forth by the respective parties. 16. The summary of fact discussions made above would make it clear that, the sole question to be decided is, whether any manner of interference is warranted to Clause 3.4 of Section-II of Ext.P4 General Instructions given to the bidders, by which a stipulation is made, insisting upon the bidders to have an average annual turnover in the previous three years of Rs.120 crores. The predominant contention advanced by learned Senior Counsel for the petitioner is that, the conditions so incorporated is against the standard conditions fixed by the State Government, CPWD Works Manual etc. etc. So also, **W.P.(C) No.39062 of 2017** 11 relying on Ext.P9, it is also contended that, the 2nd respondent has also stipulated only a condition of more than 100% average annual turnover, in respect of design and construction of Road Over Bridge at Kanhangad, Kerala State. 17. So far as Ext.P9 is concerned, learned counsel for the 2nd respondent has produced the Bid Documents dated 15.09.2017 and 29.11.2017, during the course of argument. The contention advanced is that, even though tender was invited on 15.09.2017, incorporating the condition of average annual turnover of more than 150% of the estimated value of the work, there were no sufficient bidders, and it was thereupon that, tender was invited afresh as per the Invitation dated 29.11.2017, relaxing and incorporating the condition to “more than 100%”. Therefore, according to the learned Senior Government Pleader and the learned counsel appearing for the 2nd respondent, it was under exceptional circumstances, the stipulation of 150% of average annual turnover was brought down by the 2nd respondent, and in no other work, the condition was relaxed to more than 100% from 150% of the annual turnover for the last three years. It is also contended specifically, in the counter affidavit filed by the 2nd respondent **W.P.(C) No.39062 of 2017** 12 that, petitioner company has participated in a bid with the selfsame condition and carried out a work of the 2nd respondent Corporation, without any illwill or murmur, and therefore, petitioner is well aware of the reasons for insistence of such conditions by the 2nd respondent Corporation, while inviting bids from the contractors. Therefore, in my considered opinion, petitioner cannot too much rely on Ext.P9 and canvass for the proposition that generally a condition of more than 100% of average annual turnover alone is incorporated as a condition precedent for submission of technical bid. 18. I also bear in mind the argument advanced by learned Senior Counsel that the standard prescribed by 'FIDIC' are in respect of execution of agreements/contracts and the standard formats prescribed thereunder is not dealing with any stipulations incorporated in a pre-bid qualification. However, in my considered opinion, those are all look out of the 2nd respondent Corporation and a writ court, normally and ordinarily, will not attempt to decipher such complex details unless it is _prima facie_ satisfied that, circumstances are available justifying interference. ## **W.P.(C) No.39062 of 2017** 13 19. In my considered opinion, such conditions are incorporated for pre-qualification as a safety vault and precaution ensuring execution of contract in accordance with the stipulations contained under the notice for bid, translating into conditions of contract executed with the successful bidder in future. Which thus means, the intention of the 2nd respondent is _bonafide_ to achieve fruitful and time bound results, which will in turn would avoid escalation of price of various components, and put to use the end product for the beneficial enjoyment of the public at large, at the earliest. Moreover, the pre-qualification is prescribed for evaluating the financial worth, discipline, dedication, time bound execution of work, capacity to handle various works together etc. etc. Therefore, the question of reasonableness depends on the particular fact situation. It is evident from the documents produced, completion of the work in a time bound manner, i.e., within 24 months of the execution of the contract, is a predominant and vital condition, and therefore, the 2nd respondent under no circumstances can run a risk in the matter of evaluation of the bidder. 14 **W.P.(C) No.39062 of 2017** 20. It is also clear from the contentions advanced by the 2nd respondent that, the 2nd respondent is not bound by the Standard Bidding Documents relied on by the State Government or the CPWD Works Manual. Merely because such a stipulation is incorporated in the notice inviting bid, it cannot be said that the said condition is tainted with _malafides_ , arbitrariness, illegality unreasonableness or unfairness. It is evident from the pleadings and documents that the approximate value of work is more than Rs.80 crores, and the construction to be carried out by the successful bidder is that of a large Flyover of six lane with number of approach and service roads. Therefore, while inviting the bid, 2nd respondent _bonafidely_ thought that selecting technically and financially sound contractors, capable of carrying out the construction work efficiently within the stipulated period, is a necessary concomitant in order to ensure completion of the work within the stipulated time. In my view, it is only a balanced approach to achieve the target and the stipulation can never be termed as unreasonable. 21. So also, it is clearly evident, from incorporation of condition that, the contractor should be financially capable of 15 **W.P.(C) No.39062 of 2017** carrying out the work without any interruption or adverse financial circumstances, since the contractor may also be carrying on with other construction activities undertaken. Therefore, in my view, 2nd respondent insisted upon high standards of pre-qualification criteria to avoid any manner of laches, delay, and adverse financial conditions to the contractor. Above all these things, it is a condition in the invitation for bid, under challenge before this Court, and it is evident that, pre-bid meetings were constituted for the purpose of clarifying any doubts of the bidders, but the petitioner did not participate in any such pre-bid meeting. It is also evident from the pleadings of the 2nd respondent that, five bidders have submitted their tender. 22. Having evaluated the submissions made across the Bar, and analysing the situation, I do not think that the incorporation of sub-clause (c) in Clause 3.4 of Section-II General Instructions to Bidders in Ext.P4 is in any manner illegal, arbitrary, unreasonable or unfair. Moreover, the 2nd respondent is a State owned Corporation which is carrying out various works of the State Government. Petitioner could not establish before this Court any manner of adverse legal 16 **W.P.(C) No.39062 of 2017** circumstances or _malafides_ justifying interference of this Court under Article 226 of the Constitution of India. 23. Even though learned Senior Counsel for the petitioner has canvassed for the proposition of law laid down by the apex court in ' _**Directorate of Education and others v. Educomp Datamatics Ltd. and others**_ ' [(2004) 4 SCC 19], I am of the considered opinion that, the law laid down in the said judgment is in respect, of the realm of interference of a writ court under Article 226 of the Constitution of India in contractual matters, not in any manner inuring to the benefit of the petitioner. Paragraph 13 is relevant to the context, which read thus: _“13. Directorate of Education, Government of NCT of Delhi had invited open tender with prescribed eligibility criteria in general terms and conditions under tender document for leasing of supply, installation and commissioning of computer systems, peripherals and provision of computer education services in various Government/Government aided senior secondary, secondary and middle schools under the Directorate of Education, Delhi. In the year 2002-2003, 748 schools were to be covered. Since the expenditure involved per annum was to the tune of Rs. 100 crores the competent authority took a decision after consulting the technical advisory committee for finalisation of the terms and conditions of the tender documents providing therein that tenders be invited from firms having a turnover of more than Rs. 20 crores over the last three years. The hardware cost itself was to be Rs. 40-45 crores. The Government introduced the criteria of turnover of Rs. 20 crores to enable the companies_ 17 **W.P.(C) No.39062 of 2017** _with real competence having financial stability and capacity to participate in the tender particularly in view of the past experience. We do not agree with the view taken by the High Court that the term providing a turnover of at least Rs. 20 crores did not have a nexus with either the increase in the number of schools or the quality of education to be provided. Because of the increase in the number of schools the hardware cost itself went up to Rs. 40-50 crores. The total cost of the project was more than 100 crores. A company having a turnover of Rs. 2 crores may not have the financial viability to implement such a project. As a matter of policy Government took a conscious decision to deal with one firm having financial capacity to take up such a big project instead of dealing with multiple small companies which is a relevant consideration while awarding such a big project. Moreover, it was for the authority to set the terms of the tender. The Courts would not interfere with the terms of the tender notice unless it was shown to be either arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice the Court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender notice under consideration and order change in them, unless it is of the opinion that the terms were either arbitrary or discriminatory or actuated by malice. The provision of the terms inviting tenders from firms having a turnover of more than Rs. 20 cores has not been shown to be either arbitrary or discriminatory or actuated by malice.”_ 24. It is well settled that, a writ court under Article 226 of the Constitution of India is expected to interfere with the conditions incorporated in the notice inviting bids, and execution of contracts only if there are any arbitrary, illegal, unfair, unreasonable and _malafide_ circumstances. However, there is no established proof of any such legal consequences, 18 ## **W.P.(C) No.39062 of 2017** available for interference. Taking into account all these aspects, I have no hesitation to hold that no grounds are made out by the petitioner warranting interference of this Court, in Ext.P4 Notice Inviting Bid. Resultantly, the writ petition fails, accordingly, it is dismissed. Sd/- **SHAJI P. CHALY JUDGE** St/22.12.2017