IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC TUESDAY, THE 22ND NOVEMBER 2011 / 1ST AGRAHAYANA 1933 WP(C).No. 31909 of 2007(W) ----------------------------------------- PETITIONER(S): ------------------------- M/S.LEAP TECHNO SYSTEM, NO.58, MALAPPURAM ROAD, THALAKADATHOOR POST, TIRUR - 676 103, REP. BY ITS PARTNER, MR.K.M.ABOOBACKER. BY ADVS. SRI.K.RAMAKUMAR, SENIOR ADVOCATE, SRI.JOE JOSEPH KOCHIKUNNEL. RESPONDENT(S): ---------------------------- 1. STATE OF KERALA, REP. BY THE PRINCIPAL SECRETARY, TRANSPORT DEPARTMENT,GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001. 2. THE TRANSPORT COMMISSIONER, GOVERNMENT OF KERALA, KTDFC COMPLEX, THIRUVANANTHAPURAM - 695 023. 3. M/S.I T I LIMITED, A GOVERNMENT OF INDIA UNDERTAKING ITI BHAVAN, DOORVANI NAGAR, BANGALORE 560 016 REP. BY ITS CHAIRMAN-CUM-MANAGING DIRECTOR. R1 & R2 BY SRI.K.A.JALEEL, ADDL. ADVOCATE GENERAL BY GOVERNMENT PLEADER SRI. JOSE KALLIATH R3 BY SRI.N.N.SUGUNAPALAN, SENIOR ADVOCATE, BY ADV. SRI.S.SUJIN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/11/2011 ALONG WITH WPC NO. 36231 OF 2007,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss WPC.NO.31909/2007 W APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE TENDER NOTICE NO.MIT 4/1747/TC/2004 DTD. 27/04/2005 ISSUED BY THE GOVERNMENT OF KERALA, MOTOR VEHICLES DEPARTMENT. P2: COPY OF THE TERMS AND CONDITIONS OF CONTRACT/TENDER AND INSTRUCTIONS TO THE BIDDERS, TENDER NO.MIT/1747/TC/2004. P3: COPY OF THE LETTER DTD. 18/05/2005 NO.MIT - 4/1747/TC/2004 ISSUED BY THE 2ND RESPONDENT. P4: COPY OF THE LETTER DTD. 27/05/2005 NO.MIT - 4/1747/TC/2004 ISSUED BY THE 2ND RESPONDENT. P5: COPY OF THE CONSORTIUM AGREEMENT DTD. 30/05/2005 BETWEEN THE 3RD RESPONDENT AND PETITIONER. P6: COPY OF THE LIST OF DOCUMENTS SUBMITTED BY THE CONSORTIUM ALONG WITH THE BID. P7: COPY OF THE GOVERNMENT ORDER NO.G.O.(MS) NO.09/2006/TRAN DTD. 20/01/2006. P8: COPY OF THE DRAFT AGREEMENT RECEIVED BY THE PETITIONERS FROM THE RESPONDENTS DTD. NIL. P9: COPY OF THE NOTIFICATION G.O.(P)NO.32/2006/TRAN.DTD. 19/06/2006. P10: COPY OF THE ORDER G.O.(MS) NO.6/2007/TRAN DTD. 19/02/2007 ISSUED BY THE 1ST RESPONDENT. P11; COPY OF THE JUDGMENT DTD. 26/04/2007 IN WP(C) NO.8749/2007. P12: COPY OF THE ORDER G.O.(MS) NO.35/2007/TRAN DTD. 07/09/2007. P13: COPY OF THE LETTER NO.MIT-4/1747/TC/03 DTD. 20/01/2006 ISSUED BY THE TRANSPORT COMMISSIONER TO THE PETITIONER. P14: COPY OF THE TENDER NOTICE NO.M-ITI/4703/TC/2008 DTD. 29/06/2011 ISSUED BY THE TRANSPORT COMMISSIONER. RESPONDENT'S EXHIBITS: R1(A): COPY OF G.O.(MS) NO.6/2007/TRAN DTD. 19/02/2007. R1(B): COPY OF G.O.(MS) NO.35/2007/TRAN DTD. 07/09/2007. /TRUE COPY/ P.A.TO JUDGE Kss ANTONY DOMINIC, J. ``````````````````````````````````````````````````````````` W.P.(C) Nos.31909 & 36231 of 2007 ``````````````````````````````````````````````````````````` Dated this the 22nd day of November, 2011 J U D G M E N T ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Issues raised in these writ petitions are common and, therefore, these cases were heard together and are disposed of together. For convenience, pleadings and the documents produced in W.P.(C) No.31909/2011 are referred to. 2. On 27.04.2005, first respondent issued Ext.P1 tender notice inviting sealed tenders for the implementation of Smart Optical Card based Registration Certificate Management System for issuing Certificates of Registration in Smart Optical Cards and Driving Licence Management System for issuing Driving Licences in Smart Cards on BUILD, OWN and OPERATE (BOO) basis at all Regional and Sub Regional Transport Offices throughout the State. A Consortium consisting of M/s.ITI Limited, a Government of India Undertaking, the petitioner in W.P.(C) No.36231/2007 W.P.(C) Nos.31909&36231/2007 : 2 : and the petitioner herein, was formed as per Ext.P5 agreement and the Consortium submitted Ext.P6 tender in response to Ext.P1 tender notice, along with its Earnest Money Deposit of `25 lakhs. 3. A Technical Committee appointed by the 1st respondent evaluated the technical bids and three tenderers, including the consortium, were prequalified. The financial bids submitted by the prequalified tenderers were opened on 03.08.2005 and on evaluation the financial bids, the bid submitted by the consortium was found to be the lowest, i.e., for Smart Optical Card Vehicle Registration Certificate `395/- and for Smart Card Driving License `198/-. It is stated that while so, on 22.09.2005, a Selection Committee was constituted, with the Transport Commissioner as its Convener. The Selection Committee invited the consortium partners on 15.10.2005 for a negotiation. Accordingly the rates were negotiated and the rates offered were reduced to `385/- for Smart Optical Card and `193/- for Smart Card. The W.P.(C) Nos.31909&36231/2007 : 3 : Selection Committee, scrutinized the recommendation of the Technical Committee and in the light of the negotiation held by it, recommended to the Government not to proceed with the tender and to float fresh tenders. This recommendation was considered by the Government, in the light of the clarification furnished by the Transport Commissioner and overruling the recommendation, the Government issued Ext.P7, G.O.(Ms)No.09/2006/Tran, dated 20.01.2006, to award tender to the consortium. The relevant portion of Ext.P7 Government Order dated 20.01.2006, reads thus; “2. The Technical Committee constituted as per the Government Order read as 4th paper above, verified the technical bids submitted and found the following companies as qualified. (i) M/s.I.T.I. Limited, Bangalore (ii) M/s.Keltron, Thiruvananthapuram (iii) M/s.ETCO, Telecom, Mumbai of these M/s.I.T.I Limited Bangalore quoted the lowest rates 3. A selection committee was constituted as per Government Order read as 5th paper above to scrutinize the recommendations of the technical committee. The committee W.P.(C) Nos.31909&36231/2007 : 4 : examining the technical committee’s recommendations and after negotiations with the lowest tenderer M/s.I.T.I. Limited, Bangalore recommended not to proceed with the tender. This report was further examined by Government on the basis of a clarification given by Transport Commissioner on the report and Government are pleased to accord sanction for the implementation of Smart Card based Driving Licences and Smart Optical Card based Registration Certificates and to entrust the lowest tenderer M/s.I.T.I. Limited, Bangalore, a Government of India undertaking as the service provider for the implementation of the Smart Card based Driving Licenses and Smart Optical Card based Registration Certificates.” 4. It is averred that on 20.01.2006 itself, the Motor Vehicles Department issued a letter to the consortium confirming acceptance of its bid and that thereupon, in compliance with the tender conditions, the consortium furnished a performance guarantee of `25 lakhs and remitted `25 lakhs towards security deposit. Thereafter, Ext.P8, the draft of the agreement to be executed between the parties, was issued to the tenderer. According to the petitioner, on receipt of Ext.P8 it was noticed that many of the terms of the W.P.(C) Nos.31909&36231/2007 : 5 : tender were unilaterally varied and therefore, the respondents were requested to adhere to the tender conditions. 5. In the writ petition, it is averred that at that point of time, since elections to the Kerala Legislative Assembly were announced, and the respondents expressed their unwillingness and helplessness to continue with the tender and its finalisation until the new ministry assumed office. It is stated that even after elections and the new ministry assumed office, the respondents refused to enter into an agreement and the matter was getting delayed. While the issue was thus pending, the first respondent issued Ext.P9 notification dated 19.06.2006, conveying its decision to render fully automated services from the Motor Vehicles Department and specifying that the Driving Licences and the Certificate of Registration to be issued or renewed or re-issued by the Licensing or Registration authorities shall be in terms of Form Nos.7 and 23A prescribed under the Central Motor Vehicles Rules. The relevant portion of the notification reads thus:- W.P.(C) Nos.31909&36231/2007 : 6 : “Now THEREFORE, in exercise of the powers conferred by sub-rule (2) of rule 16 and rule 48, of the Central Motor Vehicles Rules 1989 the Government of Kerala, hereby specify that the Driving Licences and the Certificates of Registration to be issued or renewed or reissued by the Licensing or Registration authorities, as the case may be, shall be in the Smart Card Format in Form 7 and in the Smart Optical Card Format in Form 23 A of the said Rules, respectively, as per the specifications, conforming to Smart Card Operations System for Transport Applications (SCOSTA) stipulated by the Government of India and the same shall be issued, renewed or reissued by various Offices under the department of India and the same shall be issued, renewed or reissued by various Offices under the department from such dates as may be notified separately by the Transport Commissioner in respect of each Office subject to the completion of the said Project. Consequently all the existing Driving Licence and Certificates of Registration shall be con veiled into Smart Card and Smart Optical Card formats within two years from the respective dates to be-notified.” 6. According to the petitioners, while they were awaiting execution of the agreement, without any notice or intimation to them or to the other consortium partners, the first respondent issued Ext.P10, G.O.(MS) No.6/2007/Tran. W.P.(C) Nos.31909&36231/2007 : 7 : dated 19.02.2007, cancelling Ext.P7 notification. A reading of Ext.P10 Government Order shows that cancellation of Ext.P7 was based on the recommendations of the selection committee. Challenging Ext.P10, petitioner and another consortium partner filed W.P.(C) No.8749/2007 before this Court, which was disposed of by Ext.P11 judgment, quashing Ext.P10 Government Order and giving liberty to the first respondent to reconsider the issue and take a fresh decision after hearing the parties. Accordingly, the parties were heard and the first respondent issued Ext.P12 GO(MS) No.35/2007/Tran. dated 07.09.2007, reiterating the cancellation of Ext.P7. Aggrieved by Ext.P12, this writ petition has been filed with a prayer to quash the same and to direct the acceptance of the tender submitted by the Consortium led by M/s.ITI Ltd. 7. In the counter affidavit, it is contended that, subsequent to Ext.P7, whole issue leading to the award of the tender pursuant to Ext.P1 tender notice was reconsidered by W.P.(C) Nos.31909&36231/2007 : 8 : the Selection Committee. It is stated that, on such re-examination, the Selection Committee submitted its recommendations to the Government. It is stated that the recommendation of the Selection Committee was that for the reasons mentioned in Ext.P12 government order, not to proceed with the tender and to invite new tenders. According to the respondents, therefore, the decision is a bonafide one and does not warrant any interference in this writ petition. 8. As already seen, the question involved in this writ petition is the legality of Ext.P12 Government Order and this order is extracted below for reference:- “Government had as per GO read as first paper above decided to introduce the system of issuance of Driving Licence on Smart Cards and Registration Certificate on Smart Optical Cards through the Build, Own and Operate (BOO) basis for a period of 5 years. Accordingly tenders were invited on 05.05.2005. As per G.O. read as 2nd paper above Government constituted a five member Selection Committee for selecting the service provider with Secretaries of Transport, Information Technology, Finance and Law Departments as members, and Transport Commissioner, as convener. W.P.(C) Nos.31909&36231/2007 : 9 : 2. As per the tender submitted by the lowest tenderer M/s.ITI Bangalore, the cost of Smart Card was Rs.198/- and that of Smart Optical Card was Rs.395/- per Card. The Selection committee examined the tender and found that the rate for Smart Optical Card was double the then existed market rate. Also Smart Cards are available with memory up to 64 KB. Moreover, Government will have to charge rates higher than stipulated under Rule 81 of the Central Motor Vehicle Rules 1989, for certain categories of vehicles from a customer for Smart Optical Card based Registration Certificate, whereas Government will have to incur Rs.395/- per card, which would result in annual cumulative loss to Government. The Selection Committee therefore recommended: (1) Not to proceed with the present tender for a Smart Card based Driving Licence and Smart Optical Card based Registration Certificate; and (2) To float revised tender for supply of both Driving Licence and Registration Certificate in Smart Card format, having required memory. 3. In supersession of the above recommendations, Government issued the GO read as 3rd paper above, entrusting the work of implementation of Smart Card based Driving Licence and Smart Optical Card based Registration Certificate with the W.P.(C) Nos.31909&36231/2007 : 10 : lowest tenderer M/s. I.T.I Ltd, Bangalore as the service provider. 4. Later Government decided to review the issue, and referred the matter to the Selection Committee again, to have a thorough examination of the matter and Committee had gone through the matter in detail, and arrived at the following findings: (i) When the project was originally conceived smart Cards could store only up to 4 KB memory. While this was enough for storing the data relating to a Driving License, this was not enough for storing the data relating to a Registration Certificate. Hence, the project envisaged storing of driving license data on Smart Cards and Registration Certificate data on Smart Optical Cards. This position has now completely changed. Smart Cards are now available with memory upto 64 KB, which is more than enough to store the data relating to a Registration Certificate as well. Hence, it is not necessary to go in for a complicated Smart Optical Card technology for Registration Certificate. This can also be done on Smart Cards, which costs only around Rs.100/- (as against Rs.385/- for a Smart Optical Card). (ii) The technology for Smart Optical Cards is not available with M/s. ITI Ltd, Bangalore, a Central PSU or Keltron, a State PSU or ETCO Telecom Ltd., Mumbai, which are the 3 tenderers. It is controlled by W.P.(C) Nos.31909&36231/2007 : 11 : a small group of 3 or 4 private manufacturers. A major portion of the quoted price of Rs.385 proposed to be paid per Smart Optical Card will go to one or more of the private manufacturers, through the successful bidder. This is considered totally avoidable because of the change in technology for smart cards enabling the use of cheap Smart Cards for storing of data relating to Registration Certificate as well. (iii) The technology behind the optical memory strip used in smart optical cards is said to be closely controlled and a monopoly of just these few firms. It does not conform to any open standards or protocol. As a result, there is virtually no competition as these vendors act as a cartel. On the other hand, the Smart Card technology is having open standards/ protocol and hence it is not a monopoly or a patented item. Healthy competition exists among the Smart Card vendors and hence competitive prices can be ensured. The price can be as low as Rs.100 per card, against the Rs.385 per Smart Optical Card. Hence, there is every reason to reject the smart optical card technology and go in only for the smart card technology. (iv) The earlier bid had insisted on a single vendor for both the Smart Card and the Smart Optical Card. This meant that even for the driving license using smart card, only the few vendors who alone had the smart optical card technology could quote. W.P.(C) Nos.31909&36231/2007 : 12 : This explains the reason for the quote of around Rs.193 per smart card against the normal rate of Rs.100 per smart card. It is therefore not desirable to insist on a single vendor for different technologies. (v) In the IT field, prices for hardware, solutions, etc are crashing due to competition, innovation and development of cheaper alternatives. This being so, it is not at all desirable to proceed on the basis of a tender issued in May 2005 i.e. more than 19 months ago; it will be desirable to go in for a re-tender. 5. Based on the above findings, the committee have reaffirmed their earlier stand and recommended: (i) Not to proceed with the present tender for Smart Card based Driving License and Smart Optical Card based Registration Certificate and (ii) to float revised tender for supply of both Driving License and Registration Certificate in Smart Card format having required memory and (iii) to get the bid document scrutinized by the Law Department and Finance Department before re-tender since the earlier tender apparently contains inaccuracies and since the parameters itself are changing. 6. Government have accepted these recommendation and decided to cancel the W.P.(C) Nos.31909&36231/2007 : 13 : GO read as Third paper above and orders were issued accordingly as per G.O. read as Fourth paper above. 7. Thereupon, M/s. Zodiac.com Solutions Pvt. Ltd and M/s. Leap Techno System filed W.P.(C)No.8749/2007 before the Hon’ble High Court and the Hon’ble High Court in its decision read as 5th paper above, has quashed the said order. The Hon’ble High Court has also observed that the Government would be at liberty to reconsider the issue and take a decision after hearing the petitioners therein, and the 3rd respondent, M/s. ITI Ltd. 8. Accordingly the parties concerned were heard on 28.5.07, by the Prl. Secretary, Transport. 9. In the hearing, M/s. ITI Ltd, Bangalore, the third respondent in the W.P. (C)No.8749/07 has put forth the arguments, inter alia, that consequent to the issuance of the G.O. third cited accepting them as a service provider, they have started work making investment and thus incurred expenses and therefore it was requested the Government to proceed further with the G.O. mentioned above. The other parties also took more or less similar view by making an argument that contract came into existence on the acceptance of the letter dated 20.1.2006. 10. The matter was examined in detail vis- à-vis the arguments put forth by the parties W.P.(C) Nos.31909&36231/2007 : 14 : during the hearing. The G.O. read as third above clearly indicates that it was only M/s. ITI Ltd., Bangalore, who submitted the tender document, which was selected as the service provider and not the petitioners in the W.P.(C). That apart there is no mention of any consortium in the said order. As such even if M/s. ITI Ltd. has got any consortium agreement with any Company, the Government had no contractual relationship with either of the petitioners in the W.P.(C) and hence are in no way answerable to them. It is also very pertinent that no formal agreement as stipulated in the tender has been signed till date so as to proceed further in the matter by the parties to the tender concerned. When the matter was again referred to the Selection Committee for examining the whole aspects of the issue it has been recommended that the tender may be cancelled and fresh tender invited since the rate quoted by M/s.ITI Ltd., Bangalore was very exorbitant as the Smart Cards are available at much lower rates. 11. Clause 3.19 of the Bid document, empower the Department to terminate the contract at Government convenience, at any time during the currency of the contract. Hence, even if the contract is construed to have been concluded, the action of State Government cancelling the earlier order can be treated as termination under clause 3.19. Principles of natural justice would have been fully met through the present notice and hearing process, although the bid document W.P.(C) Nos.31909&36231/2007 : 15 : does not envisage a notice preparatory to termination for convenience. 12. The Selection Committee has clearly pointed out that as Smart Cards are available with 64 KB memory, it is no longer necessary to use the Smart Optical Card Technology for storing Registration Certificate information; this can be done on another Smart Card using the same technology as for Driving Licence. By doing so, there would be considerable reduction in cost. The other benefit is that in the earlier tender a common vendor had to be selected for both Driving License and Registration certificate, as a result of which only a meager number of three or five who have Smart Optical Card Technology were eligible to quote tenders, resulting in high cost, not only for the Smart Optical Card, but also for the Smart Card. Those who have only the Smart Card Technology (the number is very high) have not been able to quote. If Government float tender for Smart Card technology even for the Registration certificate, the number of eligible persons who can quote would be very large, so that Government can get more competitive tenders. 13. For certain categories of vehicles the rate will exceed enormously that of the amount fixed as per Rule 81 of the Central Motor Vehicle Rules 1989 and a such Higher amount will have to be charged from a customer for Smart Card based Certificate W.P.(C) Nos.31909&36231/2007 : 16 : and hence the expenditure beyond this will have to be met by Government creating a huge financial commitment on the part of Government. If the total cost is brought below this amount, Government will not have to bear any additional financial commitment in this regard. 14. Government are confident that if a fresh tender is floated, the rate would be brought down substantially, and that it would be in public interest. 15. Under the above circumstances, Government order that the orders issued as per the G.O. read as 3rd paper above, entrusting the work of preparation and issuance of Driving Licence and Registration Certificate in Smart Cards and Smart Optical Cards to M/s. ITI Ltd Bangalore stands cancelled with immediate effect. Government also order that a new bid document duly scrutinized by Finance Department and Law Department would be prepared and floated.” 9. Exts.P7 and P12 orders show that, after tenders were invited, the bids received were examined by a Technical Committee. The Technical Committee evaluated the Technical bids and prequalified three tenderers including the consortium. Subsequently, a Selection Committee was W.P.(C) Nos.31909&36231/2007 : 17 : constituted to scrutinize the recommendations of the Technical Committee. After negotiation with the consortium, whose bid was the lowest, Selection Committee submitted its report to the Government with its recommendation not to proceed with the tender. To that recommendation of the Selection Committee, Transport Commissioner, who was its Convener, submitted clarifications. The whole matter was considered by the Government and Ext.P7 Government Order was issued, according sanction for the implementation of the Smart Card based Diving License and Smart Optical Card based Registration Certificates and to entrust the same to the lowest tenderer. It is to be noticed that the Government had overruled the recommendation of the Selection Committee. 10. From the counter affidavit filed by the respondents and the contents of Ext.P12 Government Order, it appears that, subsequent to the issuance of Ext.P7 and following the political changes, the Government decided to review the whole issue and again referred the matter to the very same W.P.(C) Nos.31909&36231/2007 : 18 : Selection Committee and that thereupon, the Selection Committee which did not have any new materials with it, gave its recommendations, which are extracted in paragraph 4 of Ext.P12. In sum and substance, the very same Selection Committee reiterated its earlier recommendation not to proceed with the tender in pursuance to Ext.P1 tender notice. This recommendation of the Selection Committee, which was already overruled by the Government when it issued Ext.P7, was accepted by the Government and it was on that basis, Ext.P10 dated 19.02.2007 cancelling Ext.P7 was issued and that decision is now reaffirmed in Ext.P12 also. 11. The question to be considered here is whether the Government was justified in reviewing its earlier decision. First of all, power of review is not inherent in any authority and review is a power which has to be expressly conferred. Nobody has a case that the Government have any power of review. Consequently, the review undertaken by the Government itself is an act without jurisdiction. Secondly, W.P.(C) Nos.31909&36231/2007 : 19 : even if it is assumed that the Government had power to review its decisions, such a review can be justified only if it is shown that the Government had fresh materials which were not available with it, when the earlier decision resulting in Ext.P7 Government Order was taken. Neither in the counter affidavit nor in Ext.P12 is there any statement that subsequent to Ext.P7, Government came in possession of any fresh material justifying a reconsideration of its earlier decision. On the other hand, as already stated above, what has been done was that following the political changes in the Government, the matter was remitted again to the same Selection Committee which had already made its recommendation not to proceed with the tender and the Selection