TRT Builders and Construction (India) Pvt. Ltd. v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** ## **TUESDAY, THE 4TH DAY OF DECEMBER 2012/13TH AGRAHAYANA 1934** ## **WP(C).No. 10699 of 2012 (J)** **---------------------------** **PETITIONER :** **--------------------** **TRT BUILDERS AND CONSTRUCTION (INDIA) PVT. LTD. REPRESENTED BY ITS MANAGING DIRECTOR G. SUNDARESAN.** **BY ADVS.SRI.K.ANAND (A.201) SMT.LATHA KRISHNAN** **RESPONDENT(S): --------------------------** **1. STATE OF KERALA REP.BY SECRETARY, PUBLIC WORKS DEPARTMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **2. THE SUPERINTENDENTING ENGINEER PWD ROADS AND BRIDGES, SOUTH CIRCLE TRIVANDRUM - 695 001.** **3. KERALA STATE CONSTRUCTION CORPORATION LTD PB NO.30/1521A, NORTH SIDE OF RAILWAY BRIDGE PONNURUNNI, VYTTILA, COCHIN-19 REPRESENTED BY ITS MANAGING DIRECTOR, PIN-682 019.** **R1 & R2 BY ADDL. ADVOCATE GENERAL SRI. K.A. JALEEL R3 BY ADVS. SRI.P.RAVINDRAN (SR.) SRI.M.V.THAMBAN, SC., KSCC LTD.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11.10.2012, ALONG WITH WP(C) NO. 10940/2012 & WP(C) NO. 11666/2012,THE COURT ON 04-12-2012 DELIVERED THE FOLLOWING:** **Mn** **...2/-** ## **WP(C).No. 10699 of 2012 (J)** ## **APPENDIX** ## **PETITIONERS' EXHIBITS :** - **EXHIBIT P1COPY OF PREQUALIFICATION DOCUMENT.** - **EXHIBIT P2COPY OF TENDER NOTIFICATION DATED 19.3.2012 ISSUED BY THE 2ND RESPONDENT.** - **EXHIBIT P3COPY OF GOVERNMENT ORDER NO.G.O.MS NO.16/92/PW&T DATED 12.2.1992.** - **EXHIBIT P4COPY OF GOVERNMENT ORDER GO(MS) NO.23/PW&T/88 DATED 28.4.1988.** - **EXHIBIT P5COPY OF GOVERNMENT ORDER GO(MS)NO.81/97/PW&T/ DATED 7.8.1997.** - **EXHIBIT P6COPY OF AGREEMENT ENTERED INTO BETWEEN THE 3RD RESPONDENT AND THE SUBCONTRACTOR.** - **EXHIBIT P7COPY OF E-TENDERING DOCUMENT.** - **EXHIBIT P8COPY OF GOVERNMENT ORDER GO(RT) NO.706/2010/PWD DATED 29.4.2010.** - **EXHIBIT P9COPY OF AUDIT OBJECTION.** - **EXHIBIT P10- COPY OF AGREEMENT ENTERED INTO BETWEEN THE 2ND AND 3RD RESPONDENT.** ## **RESPONDENTS' EXHIBITS :** **EXHIBIT R3(a) COPY OF THE GO (MS) NO. 23/PW & T/88 DATED 28.4.1988.** **EXHIBIT R3(b) COPY OF THE GO (MS) NO. 52/88/PW &T DATED 28.9.1988.** - **EXHIBIT R3(c) COPY OF THE LIST OF MACHINERIES PROCURED BY THE CORPORATION.** - **EXHIBIT R3(d) COPY OF THE DETAILS OF WORKS COMPLETED DURING 2002 TO 2012 THROUGH SUB CONTRACT.** - **EXHIBIT R3(e) COPY OF THE DETAILS OF ONGOING WORKS THROUGH THE SUB CONTRACT.** - **EXHIBIT R3(f) COPY OF THE DETAILS OF WORKS ABANDONED DURING THE PERIOD FROM 2002 TO 2012.** **//TRUE COPY//** **P.S. TO JUDGE** **Mn** ## **P.N.RAVINDRAN, J.** **----------------------------------------W.P.(C).Nos.10699, 10940 and 11666 of 2012 ----------------------------------------Dated this the 4[th] day of December, 2012** ## **JUDGMENT** A common question arises in these writ petitions. They were therefore heard together and are being disposed of by this common judgment. ## 2. **W.P.(C).No.10699 of 2012:** The petitioner is a company incorporated under the Companies Act, 1956 engaged in undertaking the works tendered by the second respondent. By Ext.P2 notice dated 19.3.2012, the second respondent invited online bids from registered bidders of the Public Works Department who have successfully completed atleast one similar work costing more than 40% of the estimated cost of the tendered work during the last five years. Online bids were invited by Ext.P2 tender notice for providing Bitumen Macadam and Bitumen Concrete to Adoor - Ananthappally – Kaipattoor road, having a length of 12 Kms. The work is estimated to cost Rs.8,30,52,633/- and is to be completed in 18 months. The last date stipulated for submission of bids was 23.3.2012 and the bids **W.P(C).No.10699 of 2012 and connected cases.** -:2:- were to be opened on 26.3.2012. It is inter alia stipulated in Ext.P2 that all other conditions related to pre qualification tender of the Kerala Public Works Department will be applicable to the said tender as well. 3. Pursuant to Ext.P2 tender notice, the petitioner, the third respondent (the Kerala State Construction Corporation Ltd.) and M/s. Sree Dhanya Construction Company submitted their bids. It is stated that the tender submitted by the petitioner was the lowest. Relying on Ext.P7 Finance Bid Opening Summary published on the website of the Public Works Department, it is contended that the petitioner had quoted 19.9% above the estimated rate (Rs.9,48,11,547/-), M/s.Sree Dhanya Construction Company had quoted 32.5% above the estimated rate, (Rs.10,22,56,889/-) and the Kerala State Construction Corporation Ltd. (hereinafter referred to as the Corporation for short) had quoted 24.3% above the estimated rate (Rs.9,74,11,508/-). It is contended that notwithstanding the fact that the petitioner is the lowest tenderer, the work has not been awarded to the petitioner, but the petitioner understands that the work will be awarded to the Corporation. The writ petition proceeds to state that the Corporation is exempted from pre- ## **W.P(C).No.10699 of 2012 and connected cases.** -:3:- qualification by virtue of Ext.P3 Government order dated 12.2.1992, but it does not have the equipment required to carry out the work tendered as per Ext.P2, that after securing the work, the Corporation sub-contracts it to contractors who do not satisfy the eligibility criteria mentioned in the tender notification, that the Corporation is also given price preference by virtue of Ext.P4 Government order dated 28.4.1988 as modified by Ext.P5 Government order dated 7.8.1997 and that the exemption from pre-qualification and the price preference given to the Corporation are arbitrary and discriminatory. The petitioner relies on Ext.P6 to substantiate its contention that the Corporation does not execute the works directly, but sub-contracts it to other contractors. In this writ petition, the petitioner challenges Ext.P2 tender notice, Ext.P3 Government order pre-qualifying the Corporation and Exts.P4 and P5 Government orders giving price preference to the Corporation. The petitioner also seeks a declaration that the Corporation is not eligible to be considered for the tender pursuant to Ext.P2 as it does not satisfy the eligibility criteria mentioned therein and a direction to the second respondent to award the work tendered as per Ext.P2 to the petitioner. The principal contention raised in the writ petition is that the orders **W.P(C).No.10699 of 2012 and connected cases.** -:4:- declaring the Corporation to be pre-qualified and giving price preference to it are arbitrary and discriminatory, especially in view of the fact that the Corporation does not execute the work directly, but gets it executed by sub contractors. 4. The Corporation has filed a counter affidavit dated 23.5.2012 wherein it is contended that it is fully owned and controlled by the Government of Kerala and that it is allowed a price preference of 10% of the lowest quoted price. Relying on Ext.R3(b) Government order dated 28.9.1988 it is contended that the Corporation is permanently registered as A Class contractor in the State for all works under various departments and autonomous bodies of the Government and that the Corporation has also been exempted from making the cash deposit of Rs.50,000/- for getting A Class registration. It is stated that the Corporation was established on 25.3.1975, that works are executed under the supervision of well experienced engineers of the Public Works Department and the Corporation, that it is prequalified from 1992 onwards and ever since 1992 a large number of civil works have been executed by the Corporation to the satisfaction of all concerned. It is also stated that the Corporation has proved and demonstrated its ability in executing works and **W.P(C).No.10699 of 2012 and connected cases.** -:5:- that any profit earned by it is profit to the Government. It is also stated that pursuant to the decision taken by the Board of Directors of the Corporation at its meeting held on 30.9.2009 works are executed through A Class PWD Contractors shortlisted by the Corporation and included in the panel approved by the Board of Directors, that pursuant to the decision taken by the Board of Directors at its meeting held on 29.12.2010 applications were invited giving wide publicity through newspapers and other media for selection and registration as contractors to execute works undertaken by the Corporation, that pursuant to the said notice 82 applications were received, they were scrutinized and 76 were selected and included in the panel, that the list of contractors thus selected was approved in the meeting of the Board of Directors held on 27.6.2011 and that later, a list of 67 contractors was approved. It is also stated that the Corporation is executing works only through the contractors who are enlisted in the panel. 5. The Corporation has filed an additional affidavit dated 11.6.2012. In paragraph 4 (iii) it is stated that though the Corporation had plant and machinery to execute works till 1990, the plant and machinery were phased out gradually since the **W.P(C).No.10699 of 2012 and connected cases.** -:6:- Corporation had switched over to sub-contract system from piece work contract system from 1998 onwards. It is stated that at present the Corporation does not have any machinery as the method of execution of work was changed in consonance with its policy to compete with private contractors and for speedy and quality execution of works. It is stated that the said policy was taken to avoid loss to the Corporation on account of various reasons including delay in getting payment for the work done from the client department, shortage of skilled labourers etc. The Corporation has also set out the details of the works completed by it during the period from 2002 to 2012 through the sub contract system in Ext.R3(d) statement, the ongoing works in Ext.R3(e) statement and the works abandoned during the period from 2002 to 2012 in Ext.R3(f) statement. 6. The Corporation has in paragraph 4(viii) of the additional affidavit dated 11.6.2012 justified the decision take by it to get the works executed under the sub contract system on the following averments:- _“4(viii) In so far as the sub contract is concerned the work is done through the A class registered contractors from the panel of contractors having good track records, financial_ **W.P(C).No.10699 of 2012 and connected cases.** -:7:- _background and possessing required plant and machineries to carry out major works. Such panel of contractors is prepared and revised every year by issuing notification and inviting applications. The final list is approved by the Board of Directors only after circulating the list among the Chief Engineers in State and after obtaining their concurrence. Such panel is revised every year after inviting fresh application. Preparation of the panel of contractors getting works done through them is the policy decision of the Corporation. The above system has been found very successful especially in speedy execution and maintaining the quality of works. The direct execution of the work (piece work system) by the Corporation has been dispensed with from 1998 onwards. It is also worth mentioning here that same procedure is followed by similarly situated government agencies. The most leading government company in construction field is the National Building Construction Corporation belonging to the Government of India. They also follow the system of Sub Contract System. The petitioner in W.P. (C).No.10940/2012 namely M/s.K.T.Mathew and Company was in the panel of the Corporation earlier and he was entrusted with construction of a bridge namely Edamula Bridge and he is well aware of the system and procedure followed by the KSCC. However, in the panel for 2011-12, he could not be included due to technical reasons._ ## **W.P(C).No.10699 of 2012 and connected cases.** -:8:- _Hence the present suit WPC No.10940/2012 arised.”_ It is stated that the petitioner in W.P.(C)No.10940 of 2012 was an empanelled contractor of the Corporation and was entrusted with the work of construction of the Edamula Bridge and is well aware of the system and procedure followed by the Corporation, but the said contractor is not now included in the panel due to technical reasons. In paragraph 4(ix) of the additional affidavit dated 11.6.2012 it is stated that the Corporation has efficient, experienced and qualified engineers, who are occupying senior positions and experienced technical and supervisory staff and though the works are executed through sub contractors, they are under the direct supervision and control of the engineers and staff of the Corporation. 7. The petitioner has filed a reply affidavit dated 18.6.2012 and produced along with it as Ext.P10, a copy of the agreement dated 13.7.2010 entered into between the Corporation and the second respondent and contended referring to clause 20 thereof that without the written approval of the Executive Engineer, the contract cannot be sublet or assigned. It is stated that by awarding the work to the Corporation which in turn sub contracts **W.P(C).No.10699 of 2012 and connected cases.** -:9:- the work to third parties, additional expenditure is incurred, which it is contended, is not in public interest. 8. **W.P.(C).No.10940 of 2012:** The petitioner, a company incorporated under the Companies Act, 1956 has filed this writ petition challenging the steps taken by the third respondent to award the works tendered pursuant to Exts.P1 to P3 tender notices to the Corporation. This writ petition is filed contending that though the Government of Kerala have exempted the Corporation from pre-qualification norms, the works in question being works funded by the Central Government through the National Bank for Agriculture and Rural Development, the Kerala State Construction Corporation has to satisfy the prequalification norms. It is contended that the Corporation is not a registered contractor under the Kerala PWD Manual, but notwithstanding that fact the tenders submitted by the Corporation pursuant to Exts.P1 to P3 tender notices have been forwarded to the Government for approval. It is also contended that the Corporation has not remitted earnest money deposit and therefore, the tenders submitted by it are liable to be rejected. In this writ petition the petitioner seeks a declaration that the Corporation is ineligible to submit tenders pursuant to Exts.P1 to ## **W.P(C).No.10699 of 2012 and connected cases.** -:10:- P3 tender notices and a writ in the nature of mandamus commanding respondents 1 to 4 to refrain from considering the tenders submitted by the Corporation. 9. The Corporation has filed a counter affidavit dated 12.5.2012 raising the very same contentions as in the counter affidavit filed by it in W.P.(C) No.10940 of 2012. The petitioner has filed a reply affidavit wherein the principal contention raised is that the Corporation is not registered under the PWD Manual and is also not pre-qualified. It is also contended that the Corporation is not executing the works directly but is entering into subcontract with contractors who are not qualified in terms of the PWD norms and therefore for that reason also, the Corporation is ineligible to be awarded the work. A counter affidavit dated 26.5.2012 has been filed on behalf of the State of Kerala. Referring to Ext.R1(b) Government order dated 28.9.1988, it is contended that the Corporation is a registered “A” class contractor and is exempted from payment of cash deposit of Rs.50,000/- for getting “A” class registration. Referring to Ext.R1(c) Government order dated 12.2.1992 it is contended that the Government have declared the Corporation to be pre-qualified to undertake civil works put to tender by State Government Departments (except **W.P(C).No.10699 of 2012 and connected cases.** -:11:- National High Way works and Central Government works requiring scrutiny and approval of the Government of India) State Public Undertakings and Local Bodies in cases where pre-qualification system is adopted for execution of works. Relying on Ext.R1(e) Government order dated 7.8.1997 it is stated that the Corporation has been allowed a price preference of 10% over the lowest quoted amount/price and relying on Ext.R1(f) Government order dated 18.8.1998 it is contended that the Government have exempted the Corporation from depositing earnest money deposit and security deposit in respect of works to be executed by it for the State Government. The counter affidavit proceeds to state that the Corporation has executed and completed various works like the Sreemoolanagaram Bridge and that the work in respect of Edamula Bridge awarded to the Corporation was executed through the petitioner under a sub-contract arrangement. 10. **W.P.(C) No.11666 of 2012** : The petitioner herein, who has submitted bids pursuant to Exts.P1 and P2 tender notices for the construction of (i) a new block for Women and Children in Taluk Head Quarters Hospital, Chalakkudy and (ii) Rest House and Office Complex at Pathadipalam at Kalamassery respectively, has filed this writ petition contending that the exemption given to the **W.P(C).No.10699 of 2012 and connected cases.** -:12:- Corporation from remitting earnest money deposit and security deposit is arbitrary and discriminatory. It is also contended that the Corporation is not registered under the PWD Manual and therefore it is ineligible to participate in the tender. On these grounds the petitioner seeks a declaration that the preference given to the Corporation and the exemption given to it are violative of Articles 14, 19 and 21 of the Constitution of India and a writ in the nature of mandamus commanding respondents 1 to 3 to refrain from entertaining the bids submitted by the Corporation for the works tendered as per Exts.P1 and P2. In this writ petition also grounds similar to those in W.P.(C) No.10904 of 2012 are raised. The Corporation has filed a counter affidavit dated 26.5.2012 and the third respondent has filed a counter affidavit dated 29.5.2012, reiterating the contentions set out in the counter affidavit filed in W.P.(C) No.10940 of 2012. 11. I heard Sri.K.Ramkumar, learned Senior Advocate and Sri.K.Anand, learned counsel appearing for the petitioners, Sri. K.A.Jaleel, learned Additional Advocate General appearing for the State of Kerala and Sri.P.Ravindran, learned Senior Advocate appearing for the Corporation. The learned counsel for the petitioners contended that the price preference given to the **W.P(C).No.10699 of 2012 and connected cases.** -:13:- Corporation can no longer be justified in view of the admitted fact that it is not executing the work awarded to it, but it is subcontracting the work to enlisted contractors and collecting a fee of 5% from them. The learned counsel for the petitioners contended that only contractors who have got registration under the PWD Manual can submit tenders pursuant to the tender notices issued in the instant cases, that the Corporation is not registered under the PWD Manual and therefore, it is ineligible to participate in the tender. Relying on the PWD Manual, 2012 it is contended that only those persons who have registered themselves as contractors under the PWD Manual, 2012 are entitled to submit tenders, that registration granted is valid only for two years and will have to be periodically renewed and the application for renewal will have to be submitted before first of January together with bank guarantee and solvency certificate and that the exemption from registration contemplated in the PWD Manual does not apply to the Corporation but only to labour contract societies, Bharath Sevak Samaj and other workers bodies which are governed by separate Government orders and in respect of works which are executed under Famine Relief and Flood Relief Rules. Per contra, Sri.K.A.Jaleel, leaned Additional Advocate General appearing for **W.P(C).No.10699 of 2012 and connected cases.** -:14:- the State of Kerala and Sri.P.Ravindran, learned Senior Advocate appearing for the Corporation contended that by Ext.R1(b) Government order dated 28.9.1988 (produced in W.P.(C). No.10940 of 2012), the Corporation was declared as a registered “A” Class contractor for the State of Kerala, that it was also exempted from payment of cash deposit of Rs.50,000/- for getting “A” class registration and that the “A” class registration granted by the Government order dated 28.9.1988 is not limited in point of time like the registration granted under the PWD Manual to private contractors. Relying on Ext.R1(f) Government order dated 18.8.1998, (produced in W.P.(C).No.10940 of 2012) the learned counsel appearing for the respondents contended that the Corporation was exempted from remitting earnest money deposit and security deposit in respect of the works to be executed by it for State Government Departments by G.O.(P)No.144/76/PW dated 19.6.1976 and by the Government order dated 18.8.1998 from remitting earnest money deposit and security deposit in respect of works to be executed by it for State Government Public Undertakings and autonomous bodies where the Government have considerable investment. Referring to Ext.R1(e) Government order dated 7.8.1997, (produced in W.P.(C).No.10940 of 2012) **W.P(C).No.10699 of 2012 and connected cases.** -:15:- the learned counsel contended that the Corporation also enjoys a price preference of 10% over the lowest quoted amount or price and referring to Ext.R1(c) Government order dated 12.2.1992 (produced in W.P.(C).No.10940 of 2012) that the Corporation is also declared as pre-qualified to undertake civil works put to tender by the State Government Departments (except National Highway Works and Central Government sponsored works requiring scrutiny and approval of Government of India), State Public Undertakings and local bodies in cases where the prequalification system is adopted for execution of works. The learned counsel contended that the mere fact that the Corporation is sub-contracting the work to em-panelled contractors like the petitioner in W.P.(C) No.10940 of 2012, to whom the work of constructing the Edamula bridge was sub-contracted, is not a reason to hold that the Corporation is not qualified from participating in the tenders involved in these writ petitions. 12. After these writ petitions were heard and judgment was reserved, I came across G.O.(P)No.408/2007/Fin. dated 7.9.2007 wherein the Government had laid down guidelines to be followed while executing civil works through agencies other than Public Works Department. The writ petitions were therefore posted for **W.P(C).No.10699 of 2012 and connected cases.** -:16:- being spoken to on 4.10.2012. The writ petitions were reopened and posted for further hearing on 8.10.2012 after copies of the Government order dated 7.9.2007 were furnished to all the learned counsel and they were heard again on 11.10.2012 and judgment reserved. The Government have in the order dated 7.9.2007 laid down the guidelines to be followed while executing civil works through agencies other than the Public Works Department such as the Kerala State Industrial and Technical Consultancy Organization Limited, Kerala Small Industries Development Corporation Limited, Kerala State Warehousing Corporation, Nirmithi Kendra, Kerala State Construction Corporation, Roads and Bridges Development Corporation of Kerala Limited, Kerala State Police Housing Construction Corporation, Kerala Agro Industries Corporation, Kerala Land Development Corporation, Kerala State Housing Board etc. It is stipulated therein that when works are executed otherwise than by the Public Works Department, through the aforesaid agencies, they shall be paid consultancy charges/centage charges not exceeding 5% for works costing Rs.5 crore or more, 6% for works costing Rs.3 crore or more but below Rs.5 crore, 7% for works costing Rs.50 lakh or more but below Rs.3 crore and 8% for works **W.P(C).No.10699 of 2012 and connected cases.** -:17:- costing less than Rs.50 lakh. It is also stipulated that the scope of work will include preparation of rough cost estimate, design/architectural fees, preparation of detailed estimate, tender documents and tender notices, evaluation of tenders, supervision of construction, passing of bills etc., and that percentage shall apply to the estimate or the actual cost of construction, whichever is lower. It is also stated that this should be shown separately in the estimate while issuing Administrative Sanction and service tax on the charges/fees (and not on the project cost) can also be paid. The Government have also stipulated that these orders will apply to Kerala State Industrial and Technical Consultancy Organization Limited, Kerala Small Industries Development Corporation Limited, Kerala State Warehousing Corporation, Nirmithi Kendra, Kerala State Construction Corporation, Roads and Bridges Development Corporation of Kerala Limited, Kerala State Police Housing Construction Corporation, Kerala Agro Industries Corporation, Kerala Land Development Corporation, Kerala State Housing Board where they execute work for the Government or other Public Sector Undertakings/autonomous bodies and will not apply when such agencies undertake their own works utilizing their own funds or for works for agencies other **W.P(C).No.10699 of 2012 and connected cases.** -:18:- than the State Government and State Government Public Sector Undertakings, autonomous bodies etc. The learned counsel on both sides addressed arguments as regards the question whether in the light of the aforesaid Government order there is any rationale in the 10% price preference given to the Corporation in respect of the works executed by the Public Works Department. While the learned Senior Counsel appearing for the petitioners contended that in the light of the Government order dated 7.9.2007 the price preference given to the Corporation should be held to be objectionable, the learned Additional Advocate General appearing for the State of Kerala and the learned Senior Advocate appearing for the Corporation submitted that the Government order dated 7.9.2007 has no application to works executed through the Public Works Department and that it applies only when works are executed through agencies other than the Public Works Department such as the agencies named therein. The learned counsel for the respondents contended that the stipulation in the Government order dated 7.9.2007 can have no application to cases where works are executed through the Public Works Department after inviting tenders. The Government order dated 7.9.2007 is extracted below in full:- **W.P(C).No.10699 of 2012 and connected cases.** -:19:- ## _GOVERNMENT OF KERALA_ ## _Abstract_ _FINANCE DEPARTMENT – EXECUTION OF WORKS OF GOVERNMENT THROUGH AGENCIES OTHER THAN PUBLIC WORKS DEPARTMENT – GUIDELINES – ISSUED._ _FINANCE (IND & PW-B) DEPARTMENT_ _G.O(P)No.408/2007/Fin. Dated, Thiruvananthapuram, 7[th] September, 2007._ ## _ORDER_ _A good number of Departments in Government are executing civil works through agencies other than the Public Works Department such as Kerala State Industrial and Technical Consultancy Organization Limited, Kerala Small Industries Development Corporation Limited, Kerala State Warehousing Corporation, Nirmithi Kendra, Kerala State Construction Corporation, Roads and Bridges Development Corporation of Kerala Limited, Kerala State Police Housing Construction Corporation, Kerala Agro Industries Corporation, Kerala Land Development Corporation, Kerala State Housing Board etc. However, there are no clear guidelines on this issue and consequently, financially imprudent decisions and irregularities in entrusting such works are seen to be quite rampant. To remove such irregularities and to have a uniform pattern for works undertaken by agencies other than Public Works Department, Government have decided to have general guidelines in this regard._ _Accordingly Government are pleased to issue the guidelines as detailed in the annexure to this_ **W.P(C).No.10699 of 2012 and connected cases.** -:20:- _Government Order for agencies other than Public Works Department which are executing civil works as well as for the Administrative Departments who are getting the works done through the said agencies for compliance in future._ _By order of the Governor,_ _ASWINIKUMAR RAI, Secretary (Finance Expenditure) ANNEXURE._ _GUIDELINES TO BE FOLLOWED WHILE EXECUTING CIVIL WORKS THROUGH AGENCIES OTHER THAN THE P.W.D._ _(i) If a civil work is to be done for the Government (including for any of the Government Department) it can be taken up only with the approval of the Government, communicated through a valid order (administrative sanction) by the competent authority (i.e. HoD), depending on the extent of delegated powers or the Government in all other cases). Constructions, if any, will have to be on Government land and the asset created will have to belong to Government. The executing agency shall not contribute to the cost of construction work, unless the Administrative Sanction specifically permits it._ _(ii) If a work is being undertaken by the executing agency for any other Public Sector Undertaking, Co-operative body, autonomous institution, statutory undertaking etc., there has to be a valid sanction by the PSU etc. who will be meeting the cost. The funds will also have to be fully provided by such PSU, etc. Constructions, if any, will have to be on land belonging to PSU etc. Such constructions will not_ **W.P(C).No.10699 of 2012 and connected cases.** -:21:- _be undertaken on land belonging to or in the possession of the Government, unless there is a specific Government order permitting this: The asset created will belong to the PSU, etc. The executing agency shall not contribute to the cost of construction/work._ _(iii) The executing agency shall not undertake constructions on their own, using their own funds or funds of others, on land that belongs to or is in the possession of the Government, including a Government Department, unless there is a valid Government sanction for this, issued in consultation with Finance Department._ _(iv) The estimate for the construction for the Government must be based on the latest State Public Works Department Schedule of Rates (except in respect of Nirmithi Kendra in works where they do not follow PWD SOR). The PWD SOR will be revised hereafter with effect from April every year. Estimate shall not include any items such as “Tender excess”, “Cost of land”, etc._ _(v) If the executing agency is not inviting tenders and are undertaking the work on their own without tenders, only the estimated amount will be payable to the executing agency. Tender excess, contractor's profit, etc. will not be payable._ _(vi) The centage charges/consultancy charges, etc. payable to the executing agency shall not exceed 5% for works costing Rs.5 crore or more, 6% for works costing Rs.3 crore or more but below Rs.5 crores, 7% for works costing Rs.50 lakh or more but below Rs.3 crore and 8% for works costing less than 50 lakh. The_ **W.P(C).No.10699 of 2012 and connected cases.** -:22:- _scope of work will include preparation of rough cost estimate, design/architectural fees, preparation of detailed estimate, tender documents and tender notices, evaluation of tenders, supervision of construction, passing of bills etc. The percentage as above shall apply to the estimate amount or the actual cost of construction, whichever is lower. This should be shown separately in the estimate while issuing Administrative Sanction. Service tax (currently 12.2%) on the charges/fees (and not on the project cost) can also be paid._ _(vii) Technical Sanction for civil works for the Government can be issued by the executing agency, provided cost of the work (including centage/ consultancy charges) does not exceed the Administrative Sanction amount by more than 15%. If the revised cost exceeds 15% before TS is issued by the executing agency, revised A.S. should be issued by the competent authority._ _(viii) For giving tender excess, the power of executing agency will be that of Chief Engineer as ordered by Government from time to time (presently, 5% for works in excess of Rs.1 crore). For approving tender excess over and above such limits, approval of the Tender Committee in Government must be taken. The Secretary to Government concerned (from whose budget the expenditure is being met) shall move PWD Secretary with the details as per proforma prescribed by Public Works Department. The Secretary to Government concerned will also be a member of the Tender Committee, while considering such work._ ## **W.P(C).No.10699 of 2012 and connected cases.** -:23:- _(ix) These orders will apply to KITCO, SIDCO, Kerala State Warehousing Corporation, Nirmithi Kendra, Kerala State Construction Corporation, RBDCK, Kerala State Police Housing Construction Corporation, Kerala Agro Industries Corporation, Kerala Land Development Corporation, Kerala State Housing Board, where they execute work for the Government or other PSUs/autonomous bodies. This will not apply when such agencies undertake their own works utilizing their own funds or for works for agencies other than the State Government and State Government PSUs, autonomous bodies etc. It will also not apply in respect of works by PSUs (like KSCC) where the contract has been awarded after participating in a competitive tender. (emphasis supplied)_ _(x) These instructions shall apply only in respect of Administrative Sanctions issued after 31.8.2007._ 13. I have considered the submissions made at the Bar by learned counsel appearing on either side. I have also gone through the pleadings and the materials on record. The extension of price preference to the Corporation by the Government orders dated 28.4.1988 and 7.8.1997 was the subject matter of challenge in W.P.(C)No.1712 of 2010 on the files of this Court. The said writ petition arose pursuant to the tender notification issued by the Public Works Department for improving the Athirappally-Malakkappara Raod. The probable amount of ## **W.P(C).No.10699 of 2012 and connected cases.** -:24:- contract was Rs.30 crores and the time limit stipulated for completion of the work was 18 months. Five contractors including the writ petitioner and the Corporation participated in the tender. The writ petitioner quoted the estimate rate. The Corporation quoted 4.93% above the estimate rate. The tender submitted by the petitioner was the lowest one, but invoking the Government order providing for 10% price preference over the lowest quoted rate, the work was awarded to the Corporation. The award of the work was challenged in W.P.(C)No.1712 of 2010 mainly on the ground that the applicability of the Government orders dated 28.4.1988 and 7.8.1997 had not been mentioned in the tender notification and therefore it cannot be enforced. Overruling the said contention, a learned single Judge of this Court held that in the tender notification it is stipulated that all the conditions prevailing in the department regarding pre-qualification are applicable to the instant tender also, and therefore, the said contention cannot be accepted. 14. Referring to the decision of the Apex Court in **Harminder Singh Arora v. Union of India and Others** (1986 (3) SCC 247) the learned single Judge held that in that case, the tender condition did not stipulate that price preference will be **W.P(C).No.10699 of 2012 and connected cases.** -:25:- given, but in the case on hand there is such a stipulation and therefore there is no merit in the writ petition. The learned Judge also noticed that there is no challenge to the Government order giving price preference to the Corporation. The learned single Judge also held that apart from the fact that the Government orders giving price preference to the Corporation are not under challenge, the court has also to take into account the policy of the Government to provide price preference to the Corporation. The learned Judge held that in view of the stipulation in the tender notification that “all conditions prevailing in this department regarding tenders for pre-qualification are applicable to this tender also”, the absence of details of the Government orders giving price preference to the Corporation in the tender notice will not stand in the way of the respondents from implementing the Government orders giving price preference to the Corporation. The writ petition was accordingly dismissed. Though the petitioner in W.P.(C)No.1712 of 2010 filed W.A.No.144 of 2010, it was dismissed by judgment delivered on 6.2.2010. 15. The Government orders giving price preference to the Corporation was challenged in W.P.(C)No.3613 of 2011. The writ petition was dismissed by judgment delivered on 4.2.2011. It was **W.P(C).No.10699 of 2012 and connected cases.** -:26:- held that the Government being the awarder of the contract, it is open to the Government to frame a policy for giving price preference in favour of Government institutions like the Corporation and if such price preference is provided, there cannot be any invalidity as sought to be made out by the petitioner. 16. The work of constructing the Legislative Assembly Complex was awarded to the Corporation in preference to private firms. This was the subject matter of challenge in O.P.Nos.5213 of 1986 and 5321 of 1986. The writ petitions were dismissed. On appeal, a Division bench of this Court held that Corporation is a Government owned company and this Court cannot find fault with the award of the contract in its favour, in exercise of jurisdiction under Article 226 of the Constitution of India. In _**Biodigital (P)**_ ## _**Ltd. v. State of Kerala and Others**_ (ILR 2010 (4) Kerala 462) a Division Bench of this Court held as follows: _“5. What is clear from the above decisions of the Supreme Court is that even in the matter of awarding contract the Government should act fairly and reasonably and the decision should not be whimsical or arbitrary. However, it is a settled position that Government need not always be concerned with the cost in the award of contract. In other words, even by spending a little more, the_ **W.P(C).No.10699 of 2012 and connected cases.** -:27:- _Government should ensure that the purpose for which the contract is awarded is fully achieved to its satisfaction. In this particular case we notice that the appellant is a Private Company located in Delhi, whereas third respondent is a fully owned Central Government Undertaking located in Trivandrum i.e., within the State where the supply of the machinery and it’s servicing have to be made. In the first place, in our view, a Private Company and a fully owned Central Government Undertaking does not stand in equal footing, while considering award of a contract by the Central Government or even the State Government. A Government Company’s decision is always controlled by it’s Board which is constituted by the Government. Therefore, a Government Department awarding a contract to a Government Company can always expect that contract will be executed in terms of the tender conditions irrespective of the financial results of the same for the awardee namely, the Government Company. In other words, chances of breach of contract by a Government Company is rather nil, whereas chances of breach of contract by a Private Company as a contractor cannot be overruled. Secondly, in the award of contract normally Government considers financial gains in as much as the lowest of the tenders should be accepted. However, in this case it is to be noted that the awardee preferred by the Government over the appellant is a Central_ **W.P(C).No.10699 of 2012 and connected cases.** -:28:- _Government Company and the Government while awarding the contract very well knows that the profit if any in the contract will go to Government Company, which in turn reaches the Government as dividend. So much so, in regard to award of a contract to a fully owned Government Company, we feel Government need not be over sensitive about the contract amount as the cash flow is from itself to another agency of the Government. We, therefore, feel that even if Government Orders or tender conditions do not provide for any preference to a Government Company in the award of contract by the Government, still it is open to the Government while awarding the contract to favour such a contractor as the risk of breach of contract is less and actually there will be no financial loss to the Government, even if the contract amount is higher than the lower price quoted by a private contractor. In this case we notice that a fair procedure is adopted by second respondent by calling for revised quotations from both the parties, the appellant and third respondent, whereunder the third respondent’s tender happened to be the lower and so much so, contract is awarded to them, not merely because third respondent is a Government Company, but because it’s bid is the lower one. We, therefore, find no merit in the Writ Appeal and, therefore, dismiss the same.”_ It was held that private companies and a fully owned Central **W.P(C).No.10699 of 2012 and connected cases.** -:29:- Government undertaking do not stand on equal footing, while considering the award of a contract by the Central Government or even the State Government and that even if the Government orders or tender conditions do not provide for any preference to a Government company in the award of contract by the Government, still it is open to the Government while awarding the contract to favour such a contractor even if the contract amount is higher than the lower price quoted by a private contractor. In the light of the decisions of this Court referred to above, the petitioners cannot in my opinion successfully challenge the price preference given to the Corporation in respect of works tendered by the Public Works Department. Since the Government order dated 7.9.2007 quoted above has no application to works executed through the Public Works Department, it cannot be relied on to test the validity of the Government order giving price preference to the Corporation. The sub contractors empanelled by the Corporation are A class PWD contractors. The petitioner in W.P.(C)No.10940 of 2012 was an empanelled contractor of the Corporation. The Corporation has in paragraph 9(ii) of the counter affidavit filed by it in W.P.(C).No.10969 of 2012 stated that to execute works on sub-contract arrangement, a **W.P(C).No.10699 of 2012 and connected cases.** -:30:- memorandum of understanding is entered into with A Class PWD contractors shortlisted by the Corporation and included in the panel approved by the Board of Directors. The petitioners have not disputed the said fact. The petitioners' contention is that the sub-contractor would not have participated in the tender process pursuant to the tender notice issued by the Public Works Department. That apart, as stated earlier, the petitioner in W.P. (C).No.10940 of 2012, a registered A Class contractor, was included in the panel of sub-contractors approved by the Board of Directors of the Corporation. I therefore, find no merit in the contention of the petitioners that as the Corporation is executing works under a sub-contract arrangement, the tendered works cannot be awarded to it. 17. That takes me to the question whether there is any merit in the contention of the petitioners that the Corporation is liable to be disqualified from participating in the tender process for the reason that it has not obtained registration under the PWD Manual, 2012. By Ext.R1(b) order dated 28.9.1988 produced in W.P.(C)No.10940 of 2012, the Government exempted the Corporation from payment of cash deposit of Rs.50,000/- for getting 'A' Class registration and declared it as a Registered 'A' ## **W.P(C).No.10699 of 2012 and connected cases.** -:31:- Class contractor of the State for all works under various departments and autonomous bodies of the Government in relaxation of the orders issued by the Government in G.O.(MS) 67/87/PW&T dated 13.8.1987. The validity of the said order is not under challenge in any of these writ petitions. Likewise, the Government had by G.O.(P) No.144/76/PW dated 19.6.1976 exempted the Corporation from remitting earnest money deposit and security deposit in respect of the works to be executed by it for State Government Departments and by Ext.R1(f) order dated 18.8.1998 produced in W.P.(C)No.10940 of 2012, the Corporation was exempted from depositing earnest money deposit and security deposit in respect of works to be executed by it for State Government Public Undertakings and autonomous bodies where Government have considerable investment. The said orders are also not under challenge in these writ petitions. The learned counsel appearing for the petitioners however contend that as the Corporation has not obtained registration under the PWD Manual 2012, it is not entitled to participate in the tender. 18. Ext.R1(b) Government order dated 28.9.1988 (produced in W.P.(C).No.10940 of 2012), by which the Corporation was declared to be a Registered 'A' Class contractor **W.P(C).No.10699 of 2012 and connected cases.** -:32:- does not stipulate any period of validity for the registration. The said Government order was issued in relaxation of the stipulations in G.O.(MS)67/87/PW&T dated 13.8.1987. The PWD Manual originally prepared in the year 1972 was revised in the year 2012 and it was implemented with effect from 1.4.2012. Section 1901 thereof contains the rules for registration of contractors executing works in the Kerala Public Works Department. In para 1 thereof it is stipulated as follows:- _“1(a) Only persons who have registered themselves as contractor under these rules are entitled to submit tenders for works. The term 'works' includes (i) civil works and (ii) water supply and sanitary installation works. (b) Civil Works & Water Supply & Sanitary Installation Works. - A contractor who is in the register of any Circle/Division/Subdivision in the Kerala P.W.D., can tender for these works in all the Circles/ Divisions/Sub Divisions in the State. Temporary special Divisions or Special Subdivisions are not authorised to register contractors or renew their registration”_ In para 6(a) of section 1901 of the PWD Manual, 2012, it is stipulated that the registration issued is valid only for two financial years and registration cards are to be renewed every two years. **W.P(C).No.10699 of 2012 and connected cases.** -:33:- It is also stipulated that applications for renewal in the prescribed application form are to be submitted before 1[st] January together with bank guarantee solvency certificate. In para 6(b) of section 1901 of the PWD Manual, 2012 it is stipulated that the registering authority can renew the registration or refuse to do so at his discretion following directions for registration as in para 4. It is also stated that the registering authority may refuse renewal for the reasons set out therein. Para 6(a) and (b) in section 1901 of the PWD Manual, 2012 are extracted below:- _“6(a). The registration issued is valid only for two financial years. [GO(P)No.96/PW dated 23/03/1971]. Registration cards are to be renewed every two years. Application for renewal in the prescribed application form are to be submitted before 1[st] January together with bank guarantee solvency certificate. This may, however, be extended upto 31[st] January, after realising a fine of Rs.150 for such late application [GO(P) No.84/97/PWD&T dated 19/08/1997]._ _Following fees shall be remitted for renewal of registration._ _Category (Class) Fees (Rs.) A 1000 B 500 C 300 D 100_ _(b) The registering authority can renew the_ **W.P(C).No.10699 of 2012 and connected cases.** -:34:- _registration or refuse to do so at his discretion following directions for registration as in para 4. He may refuse renewal for the following reasons._ - _(i) Not being satisfied of the financial stability of the applicant._ - _(ii) Failure to execute satisfactorily a previous contract._ - _(iii) Poor quality of works executed._ - _(iv) Failure to put up schedule of progress of works or works taken up by the applicant previously._ - _(v) Or any other matter which, in the opinion of the registering authority, is undesirable._ _1. A contractor who fails to get his registration renewed for an year can apply afresh the next year for registration only as a new contractor._ _2. The registering authority shall, before 1[st] March, issue the renewal card or intimate the fact of having refused the request for renewal._ _3. A list of applications for registration and renewal shall be maintained by each registering authority in Form VII. The reasons for refusal should be clearly specified in the register. The register will be confidential record in the custody of the registering authority. But it will be open to inspection by his superior officer and by Audit._ _4. In case a contractor desires to be enlisted simultaneously as a registered contractor for executing non-electrical works also he may make the required deposit in the appropriate category either for electrical work or non-electrical works where the deposit is the highest._ _5. Application of the Rules.- These rules will not apply for the registration of L.C.C. Societies,_ **W.P(C).No.10699 of 2012 and connected cases.** -:35:- _B.S.S. and other workers' bodies which are governed by separate Government Orders and also in respect of works which are executed under the famine relief and flood relief rules.”_ In para 6(b)(5) it is stipulated that the rules will not apply for registration of L.C.C.Societies, B.S.S.(Bharath Sevak Samaj) and other workers' bodies which are governed by separate Government orders and also in respect of works which are executed under the famine relief and flood relief rules. The Corporation was not included in the list of excluded categories. Though at first blush it may appear that because of the stipulations in para 6(b)(5) of the PWD Manual, 2012, the Corporation cannot any longer be treated as an agency governed by a separate Government order and therefore the rules in section 1901 of the Revised PWD Manual, 2012 would apply to the Corporation also, in view of the substitution of para 6(b)(5) by Government order dated 5.11.2012, such a contention cannot any longer be raised. The Government have by Ext.P15 order dated 5.11.2012 produced by the petitioner in W.P.(C).No.10940 of 2012 along with I.A.No.15592 of 2012 filed on 20.11.2012, (which is the same as Ext.P14 produced by the petitioner in W.P. (C).No.11666 of 2012 along with I.A.No.15590 of 2012), ## **W.P(C).No.10699 of 2012 and connected cases.** -:36:- substituted para 6(b)(5) in section 1901 of the Revised PWD Manual, 2012. Revised para 6(b)(5) reads as follows:- _“Application of the rules – These rules will not apply for the registration of Labour Contract Cooperative Societies, Bharath Sevak Samaj, other workers, bodies and the Kerala State Construction Corporation Ltd., which are governed by separate Government orders and also in respect of works which are executed under the famine relief and flood relief rules”._ By the said amendment, the Government have clarified that the rules in the Revised PWD Manual, 2012 regarding registration will not apply to the Labour Contract Co-operative Societies, Bharath Sevak Samaj, other workers, bodies and the Corporation, which are governed by separate Government orders and also in respect of works which are executed under the famine relief and flood relief rules. It is evident from the Government order dated 5.11.2012 that it was issued on the request of the Corporation. By substituting para 6(b)(5) in section 1901 of the PWD Manual, 2012, the Corporation has been included in the list of excluded categories. I accordingly hold that there is no merit in the contention of the petitioners that for want of registration under the PWD Manual, 2012 the Corporation is disqualified from -:37:- ## **W.P(C).No.10699 of 2012 and connected cases.** participating in tenders floated by the Public Works Department. In view of the fact that the rules for registration of contractors contained in the PWD Manual, Revised Edition 2012 do not apply to the Corporation, the registration of which is governed by a separate Government order, namely, the Government order dated 28.9.1988, I am of the opinion that nothing turns on the failure of the Kerala State Construction Corporation to apply for and obtain registration under the Revised PWD Manual, 2012. For the reasons stated above I hold that there is no merit in these writ petitions. The writ petitions fail and are accordingly dismissed. The parties shall bear their respective costs. **P.N.RAVINDRAN, Judge.** ## **ahg/vps/rkc.** ## **P.N.RAVINDRAN, J.** **--------------------------W.P.(C).Nos.10699, 10940 and 11666 of 2012 ----------------------------** ## **JUDGMENT** **4[th] December, 2012**