IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.GIRI WEDNESDAY, THE 1ST JULY 2009 / 10TH ASHADHA 1931 WP(C).No. 4003 of 2009(Y) ------------------------------------ PETITIONER(S): ----------------------- KERALA STATE CONSTRUCTION CORPORATION LTD, POST BOX.NO. 1944, CARMEL CENTRE BANERJI ROAD, ERNAKULAM REPRESENTED BY ITS MANAGING DIRECTOR K.S.RAJU. BY MR.V.N.ACHUTHA KURUP, SENIOR ADVOCATE MR.B.S.SWATHY KUMAR MR.BINDU SREEKUMAR MR.LEENA MURALI RESPONDENT(S): ------------------------- 1. THE CHIEF ENGINEER, CENTRAL REGION, KERALA WATER AUTHORITY, HOSPITAL ROAD, KOCHI. 2. THE MANAGING DIRECTOR KERALA WATER AUTHORITY, JALA BHAVAN, THIRUVANANTHAPURAM. ADDL. R3 IS IMPLEADED. 3. ABG EGINEERING INDIA (P) LTD., MUTHOOR P.O., ST.MARY'S CORPORATE TOWER, RAMANCHIRA, THIRUVALLA. ADDL. R3 IS IMPLEADED AS PER ORDER DT. 2.3.09 IN IA. 3092/09. ADDL. R4 IS IMPLEADED 4. ENGINEERING PROJECTS (INDIA) LTD., 3D, E.C. CHAMBERS 92 GN CHETTI ROAD, T.NAGAR, CHENNAI, 60017, REP.BY ITS MANAGER TECHNICAL, T.SHIBU. W.P.(C) NO.4003/2009 ADDL. 4TH RESPONDENT IMPLEADED AS PER ORDER DT. 30.3.09 IN IA. 2419/09. ADDL. R5 & 6 ARE IMPLEADED 5. THE CHIEF SECRETARY , GOVT. OF KERALA, SECRTARIAT, THIRUVANANTHAPURAM, (VICE CHAIRMAN OF EMPOWERED COMMITTEE). 6. THE PROJECT DIRECTOR, KERALA SUSTAINABLE URBAN DEVELOPMENT PROJECT (DESIGNATED AS MEMBER SECRTARY OF THEKKEMURIYIL EMPOWERED COMMITTEE). ADDL. R5 & R6 ARE IMPLEADED AS PER ORDER DT. 30.3.09 IN WPC. BY MR.M.DINESH, SC KWA FOR R1 BY ADV.MR.GEORGE THOMAS (MEVADA) FOR ADDL.R3 BY ADVS.MR.K.BABU THOMAS FOR ADDL.R4 SMT.MARYKUTTY BABU FOR ADDL.R4 BY GOVERNMENT PLEADER MR.M.A.ASIF FOR R MR.A.M.SHAFFIQUE, SENIOR ADVOCATE FOR ADDL.R4 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05/06/2009, THE COURT ON 01/07/2009 DELIVERED THE FOLLOWING: W.P.(C) NO.4003/2009 APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE TENDER NOTICE NO.KWA/CE/CR/NNURM/1107/2008 DT. 1.9.08. P2:- COPY OF THE ORDER NO.G.O(MS) NO.52/88/PW&T DT. 28.9.88. P3:- COPY OF THE GO(MS)16/92/PW&T DT. 12.2.92. P4:- COPY OF THE CIRCULAR NO.28673/L1/08/PWD DT. 30.12.08. P5:- COPY OF THE LETTER NO.1766/DC2/09/LSGD DT. 12.1.09. P5(a):- COPY OF THE LETTER DT. 5.1.09 SUBMITTED TO THE PRINCIPAL SECRETARY LOCAL SELF DEPARTMENT. P6:- COPY OF THE MEMORANDUM OF OUTSTANDING DT. 12.11.08. P7:- COPY OF THE CLAUSE 2.4. OF SECTION 3 OF BID DOCUMENT. P8:- COPY OF THE BID CAPACITY CALCULAIION LETTER. P9:- COPY OF THE CERTIFICATE DT. 29.8.06 ISSUED BY THE IST RESPONDENT. P10:- COPY OF THE CERTIFICATE DT. 24.10.05. P10(a):- COPY OF THE CERTIFICATE DT. 5..06. P10(b):- COPY OF THE CERTIFICATE DT. 10.8.06. P10(c):- COPY OF THE CERTIFICATE DT. 4.2.08. P10(d):- COPY OF THE CERTIFICATE DT. 24.5.08. P11:- COPY OF THE AGREEMENT NO.05/05-06 FOR WORKS CONTRACT DT. 18.6.05. P12:- COPY OF THE ORDER NO.KWA/CE/CR/CHN/WS/530/03 FOL. II DT. 9.12.08. P13:- COPY OF THE RELEVANT PAGE OF FINANCIAL SITUATION OF THE J.V. RESPONDENT'S EXHIBITS R1:- COPY OF THE TRIPARTITE MEMORANDUM OF UNDERSTANDING SIGNED ON 1.11.07. R1(a):- COPY OF THE MINUTES OF TAG MEETING. W.P.(C) NO.4003/2009 R1(b):- COPY OF THE JOINT VENTURE AGREEMENT OF PETITIONER. R1(c):- COPY OF THE REPLY DT. 23.1.09 TO SECRETARY, CORPORATION OF KOCHI. R1(d):- COPY OF THE RELEVANT PAGES OF THE INSTRUCTION TO BIDDERS. R1(e):- COPY OF THE PERSONAL DETAILS OF THE PETITIONER. R1(f):- COPY OF THE CALCULATION OF FINANCIAL STANDING AND BALANCE SHEET OF JOINT VENTURE. R3(a):- COPY OF THE INSTRUCTIONS TO THE BIDDERS ISSUED BY THE CHIEF ENGINEER FOR THE WORK IN EXT.P1. ANNEXURE A:- COPY OF THE MINUTS OF THE 6TH MEETING OF THE EMPOWERED COMMITTEE HELD ON 8.4.09. TRUE COPY P.S. TO JUDGE TSS V.GIRI, J ....................... W.P.(C).4003/2009 ....................... Dated this the 1st day of July, 2009 JUDGMENT The petitioner, a Government of Kerala undertaking, challenges the decision taken by the Kerala Water Authority treating the petitioner as not qualified, to be considered for the award of contract in relation to the work “ Designing, Constructing and Commissioning including Operations and Maintenance for a period of one year of 100 MLD output capacity Water Treatment Plant at Maradu, Kochi.” By Ext.P1 notification, the 1st respondent invited competent Electronic Tenders from registered A class Contractors or Contractors otherwise registered in other Departments in the State of Kerala or outside having experience, and technically and financially sound for the work in question, being administered under the scheme called Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The work is stated to be part of the Water Treatment Project sanctioned under the aforesaid mission providing assistance in which the local body namely the Corporation of Kochi in the instant case, would be the owner of the project and the Water W.P.(C).4003/09 2 Authority would be an implementing agency of such a project. As per Ext.R1 memorandum of understanding, a tripartite agreement between the Kochin Municipal Corporation, the Kerala Water Authority and the Department of Local Self Government and Water Recourses (Government of Kerala), the terms and conditions of the tender were drawn up by the Water Authority and approved by the Government. The relevant portions of the tender documents comprising of the instructions to bidders, (ITB) have been produced by the Water Authority along with their counter affidavit. Entire bid documents relating to the work in question was made available at the time of hearing. 2. The bids received are to be evaluated by a Tender Evaluation Committee constituted by the Water Authority Project Implementation Unit (PIU) with a representative of the Kochin Corporation. Tender documents are to be evaluated in the first instance by a Technical Advisory Group, empowered to take decision on the evaluation of the bids for acceptance of the tender documents. The bids made by each tenderer are comprised of two sections. Section-I relating to W.P.(C).4003/09 3 Technical Bid Part-I, Section II comprising of Part-A (Technical Bid Part-II) Part-B (Price Bid). It seems that 12 numbers of tender documents were sold and 5 tenders were received, pursuant to Ext.P1 notification. Tender from M/s. UEM, Delhi, was rejected outright as it did not contain the price bid. Four other tenders, including one submitted by the petitioner herein, were considered by the Technical Advisory Group. Ultimately TAG came to the conclusion that the petitioner's bid is not eligible to be considered further and that only the price bids of two other tenderers namely M/s. Nobletech Engineering (P) Ltd. and M/s. Engineering Projects (India) Ltd., are eligible to be considered. It is this decision taken by the Technical Advisory Group, which is in effect a decision by the Water Authority, that is under challenge in this writ petition. 3. This Court had at the time of admission of the writ petition stayed further proceedings for the award of the work for a period of one month, which was later extended from time to time and remains operative till the disposal of the writ petition. Later, by a detailed order dated 30.8.2008, this W.P.(C).4003/09 4 Court made a reference to the provisions of the tender documents, which provided that the ultimate decision in the matter of award of contract in question is to be taken by an Empowered Committee constituted as per the Government Orders dated G.O.(MS).66/2007/LSD dated 2.3.2007 and G.O. (MS).311/2008/LSGD dated 22.11.2008. It was noted that by the first order, the Government constituted an Empowered Committee under the chairmanship of the Minister (LSGD) having full powers of the Government to take decisions on matters regarding urban Development Projects. By the second order, the Empowered Committee constituted for urban Development Projects was given powers in relation to the project coming under JNNURM as well. This Court therefore, after impleading the Chief Secretary, Government of Kerala, as the additional 5th respondent, required the Empowered Committee constituted for the projects in question to consider the correctness of the reasons given by the Technical Advisory Group as regards the pre-qualification, the bid capacity and experience of the petitioner. It may be noted at this juncture that the petitioner had submitted a bid along with the joint venture partner W.P.(C).4003/09 5 which had later got itself independently impleaded as an additional 4th respondent. This Court directed that the opinion of the Empowered Committee shall then be placed before this Court. 4. The Empowered Committee so constituted as mentioned above, met on 8.4.2009 under the Chairmanship of the Minister of the LSGD. The Empowered Committee, referring to the interim order passed by this Court, proceeded to review the views given by the Technical Advisory Group. The minutes of the meeting of the Empowered Committee was later placed on record by the Government along with a verified petition on 18.4.2009. Petitioner has thereafter, proceeded to file an objection in relation to the views expressed by the Empowered Committee as well. 5. As noted above, the petitioner submitted his bid along with the joint venture partner, which later got itself impleaded as an additional 4th respondent. One of the bidders, whose technical bid has been considered by the TAG and whose bid has been decided to be evaluated on merits, M/s W.P.(C).4003/09 6 Engineering Projects (India ) Ltd, stated to be a Government of India undertaking, has got itself impleaded as additional 3rd respondent. 6. The Water Authority has filed a counter affidavit and the petitioner has filed a reply affidavit. The additional respondents have filed counter affidavits. 7. I heard Mr.V.N.Achutha Kurup, learned senior counsel along with Smt.Bindu Sreekumar for the petitioner, Mr.M.Dinesh, learned counsel for the Water Authority, Mr.M.A.Asif, learned senior Government Pleader, Mr.Babu Thomas, learned counsel for the 3rd respondent, and Mr.A.M.Shafeeq, learned senior counsel appearing for the additional 4th respondent, the joint venture partner of the writ petitioner. 8. It would be advantageous to first refer to the specific objection taken by the Water Authority, as discernible from its counter affidavit, and affirmed by the State Empowered Committee as discernible from the minutes of the meeting of W.P.(C).4003/09 7 the said Committee produced as Annexure-1 and placed on record by the learned Government Pleader, to formulate the issues that have to be considered. According to the Water Authority, and the Empowered Committee, the petitioner's bid was not eligible to be considered for the following reasons. (i). Petitioner had submitted its tender as joint venture along with ABG Engineering Limited (the additional 4th respondent). As per clause 4 (1)(a) of the instructions to bidders (ITB), all the partners of the joint venture should have been jointly and severally responsible and liable for the work. Such a sharing of the responsibility and an equal involvement of both the joint venture partners of the work in question is not discernible from the joint venture agreement, Ext.R1. Going by the joint venture agreement, according to the respondents, joint venture partner is to do the work and the petitioner the leave partner will be relatively inactive. W.P.(C).4003/09 8 (ii). Clause 4.5 of the ITB requires a tenderer to establish that it is legally and financially autonomous and that it operates under the principle of commercial law. Documents establishing the financial features were not submitted by the petitioner. (iii).Clause 2.4.1 of Section 3 of the bid document requires each one of the partners in a joint venture to have requisite experience of at least five years, for the work in question. The said requirement has not been satisfied in the present case. Clause 2.3 of the bid document deals with the financial situation. The requirement of clause 2.3.1 dealing with the Historical Financial Performance has not been favourably satisfied either by the petitioner or by the joint venture partner. Further more, the net worth of the leave partner namely the bid capacity of the petitioner is negative and that of the joint W.P.(C).4003/09 9 venture partner is inadequate. The combined total bid capacity is less than that prescribed in the bid document. 9. For all the aforementioned reasons, it is contended by the respondents, that the TAG had decided that the price bid offered by the petitioner was not eligible to be considered on merits. It is therefore, that they decided to go ahead with the opening of the price bids for only two among the tenderers. In other words, decision taken by the TAG was to treat only two among the tenderers as qualified, in the final stage of processing of the tenders. 10. The writ petitioner has proceeded on the premise that what is involved in the present case is a pre-qualification. Mr.Achutha Kurup, learned senior counsel for the petitioner and Mr.Shafeeq, learned senior counsel appearing for the joint venture partner, the additional 4th respondent, contended that the fundamental premise on which the TAG had decided not to pre-qualify the petitioner is clearly unsustainable. Reference has been made in this regard to W.P.(C).4003/09 10 Exts.P3 and P4, Government orders dated 12.2.1992 and Circular dated 30.12.2008 respectively. By Ext.P3 Government Order dated 12.2.1992, Government declared that the petitioner Corporation is pre-qualified to undertake the 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 Government undertakings and local bodies in cases where pre-qualification is adopted for the execution of works. Ext.P4 is a circular issued by the additional Secretary to Government (PWD) requiring all State Government Departments to comply with the directions in Ext.P3 Government order. It is contended that Ext.P3 virtually operates as an exemption of the 3rd respondent from pre-qualified for any civil work tendered by the Government, or an undertaking functioning under the control of the Government. Thus, on the strength of the pre eminent status of the petitioner as a Government of Kerala undertaking and with specific reference to Ext.P3, it is contended that the petitioner's price bid should have been considered straight away treating the petitioner as “pre-qualified”. W.P.(C).4003/09 11 11. This contention is resisted by the counsel for the Water Authority both with reference to the findings of the TAG and the specific views expressed by the Empowered committee, in a meeting chaired by the Minister of the Local Self Government Department. It has to be noted that the Empowered Committee constituted in terms of G.O.(MS). 66/2007/LSGD dated 2.3.2007 consists of the following persons. Minister for Local Self Government -Chairman Chief Secretary -Vice Chairman Additional Chief Secretary -Member Principal Secretary, LSGD -Member Principal Secretary, Finance Dept. -Member Principal Secretary,Planning Dept. -Member Principal Secretary, Water- Resources Dept. -Member Secretary, LSG Dept. -Member Secretary, Irrigation Dept. -Member 12. As evidenced by Annexure-1 to the said Government Order, the Empowered Committee, under the chairmanship of the Minister (LSG), will have the powers of the Government to take decision on the matters. It is a high powered body, which had gone into the correctness of the views expressed by W.P.(C).4003/09 12 the TAG including those relatable to Exts.P3 and P4, as regards the claim of the petitioner, a Government of Kerala undertaking, that it is practically exempted from pre- qualification for any civil work tendered by the Government or a Government of Kerala undertaking. 13. Apart from the views expressed by the Water Authority, the Chief Secretary of the State had also specifically given his opinion in the Committee and in my view the same merits re-production. “The Chief Secretary opined that this particular work of Water Treatment Plant is a specialized work where the design and performance is a major criteria for giving safe drinking water to the public of Kochi for which the specific technical expertise and experience is required. Also the tender document is prepared with specific qualification criteria applicable to all the participants. While evaluating the tender and finalizing the prequalification, the conditions are to be applied to all participants equally. As per the evaluation report M/s.KSCC or the JV partner did not meet the prequalification prescribed in the tender W.P.(C).4003/09 13 document. Therefore the technical bid submitted by M/s KSCC cannot be considered.” 14. I consider it significant to take note of the fact that Ext.P3 Government Order, specifically relatable to the petitioner has been construed by the Empowered Committee. The reasons given in this regard are firstly that Ext.P3 relates to civil works and that the work in question namely construction of Water Treatment Plant is a specialized work where designing and performance is also a major criteria. It requires specific technical expertise and experience. Tender documents are prepared with specific qualification criteria applicable to all participants. 15. The views taken by the high powered Committee, which had in detail deliberated on the various aspects involved in the work, and specifically relating to the eligibility of the petitioner and the Government of Kerala undertaking cannot be considered as either perverse or taken without due application of mind. This Court exercising powers of judicial review in relation to the decision taken by a tender evaluation W.P.(C).4003/09 14 Committee, would definitely not be by exercising any appellate powers over the views expressed by the Technical Advisory Group, which have been considered and affirmed in specific terms by the Empowered Committee. 16. I have independently considered the question as to whether Ext.P3 would support the case of the petitioner that it is eligible to be treated as pre-qualified for all civil works tendered by the Government or by a public sector undertaking. I am unable to accept the contention of Mr.Kurup and Mr.Shafeeq. Firstly, Ext.P3 relates only to civil works and it cannot be said, without any room for equivocation whatsoever, that the work in question is a civil work. No doubt a good portion of the work would be termed as a civil work. No doubt the 1st respondent might have previous experience with the construction of a Water Treatment Plant, as repeatedly pointed out by Mr.Kurup and Mr.Shafeeq. But there is no material on record to show that the Water Authority or the Government, on an earlier occasion, specifically considered or was required to consider whether the construction of a Water Treatment Plant W.P.(C).4003/09 15 is a civil work and whether an order in the nature of Ext.P3 would therefore, always operate as a pre-qualification of the petitioner for such works. As I had noted above, the scope and ambit of Ext.P3 qua the work in question was considered by the Government itself and a high powered body had come to the conclusion that Ext.P3 will not apply to a work like the present one and that it should be confined to pure civil works. The work in question relates to construction of Water Treatment Plant which will include mechanical work and electrical work, the latter comprising of a not insignificant portion of the work in question. In fact, as pointed out by Mr.Dinesh, learned counsel for the Water Authority and by Mr.Babu Thomas, learned counsel for the additional 3rd respondent, the bidders are to give a break down of the price, under six different schedules namely, schedule I (plant including machinery spare parts), schedule II (designing services), schedule III (installation and other services), schedule IV (operation and maintenance) schedule V (schedule 1 to 4) and schedule VI spare parts. Apart from the designing, construction and commissioning of the Water Treatment Plant, it also takes the operations and maintenance W.P.(C).4003/09 16 operative for a period of one year. I do not think that Ext.P3 Government Order issued in the year 1992 can be necessarily construed as comprehensive of a work like the present work, which cannot be categorized as a pure civil work. I am not in a position to hold that the view taken by the TAG and affirmed by the State Empowered Committee in this regard is either perverse or even erroneous. In fact, I am in agreement with the same. 17. Once it becomes necessary to proceed on the premise that Ext.P3 Government Order does not dispense with the petitioner getting pre-qualified for the work in question or entitled to assert the status as technically qualified for the work in question and therefore, entitled to a consideration of its price bid without getting its technical bid approved as such in the first stage, then it becomes necessary for the petitioner to prove the financial requirements in terms of clause 2.3 of Section 3 of the bid documents. Clause 2.3 of Ext.R1(a), deals with financial situation. The requirements as outlined therein are relatable to a tenderer who bids alone, or who bids as a joint venture as well. The joint venture is W.P.(C).4003/09 17 treated, on a par with a partnership firm for the aforementioned purpose. Clause 2.3.1 which deals with the financial situation provides for satisfaction of certain requirements separately in the case of a single entity and a joint venture. In the case of a joint venture, the requirements called for are relatable to “all partners combined”, “each partner”, and “one partner”. The requirements under clause 2.3.1, dealing with Historical Financial Performance, deals with the submission of audited balance sheets and income statements for the last five years to demonstrate the current soundness of the Bidder's financial position and its prospective long term profitability. Further, an Applicant's net worth calculated as the difference between total assets and total liabilities should be positive. The aforementioned requirements must be independently satisfied by each partner of a joint venture. According to the respondents, the net worth of the petitioner by itself is negative. The financial position relating to the petitioner, as a joint venture partner has been calculated by the tender Evaluation Committee and the details of the same had been placed on record as Ext.R1(f). The net worth has been derived from the details culled out W.P.(C).4003/09 18 from the balance sheet and the net worth of the petitioner for the years 2006-07, 2005-06 and 2004-05 has been consistently negative. The figures as such given in Ext.R1(f) have not been denied, as either the product of an inaccurate application of the formula given in clause 2.3 of Section 3 of the bid documents or resultant upon adoption of inaccurate figures. According to the petitioner, the view taken by the respondents as regards the bid capacity of the petitioner is mischievous and inapplicable. In other words, the contention seems to be that the petitioner, though the partner of a joint venture, is not required to prove its bid capacity or net worth. A separate contention is taken up in the reply affidavit filed by the petitioner to the counter affidavit filed by the Water Authority, and reiterated by Mr.Achutha Kurup and Mr.Shafeeq, learned senior counsel, as regards the mode of calculation of the net worth and bid capacity of a joint venture partner, namely the additional 4th respondent. I will deal with the said contention at a later stage. 18. The TAG and Empowered Committee have also come to the conclusion that the bid capacity of the petitioner is W.P.(C).4003/09 19 negative. Ext.R1(f) will show that the bid capacity of the petitioner has been calculated in terms of clause 2.3.1. Petitioner has not placed on record any materials to show that the mode of calculation of the bid capacity adopted is in any manner erroneous. The bid capacity has been calculated in terms of clause 2.3.3. The bid capacity is arrived at on the basis of the details relatable to the petitioner and taken from the balance sheet of the petitioner. In the case of a joint venture, each partner must meet 25% of the requirements and it has been demonstrated by the respondents that in the case of the petitioner, it is negative. It has also been demonstrated by them that the combined net worth and bid capacity of the joint venture is also negative. Thus, the requirement under clause 2.3.3 has not been satisfied qua the petitioner. 19. Considerable arguments were advanced by both Mr.Kurup as also Mr.Shafeeq, learned senior counsel, to demonstrate that the view taken by the respondents as regards the net worth and bid capacity of a joint venture namely the additional 4th respondent is wrong. Though a W.P.(C).4003/09 20 decision on this question may not be strictly necessary in the light of the fact that the view taken by the respondents as regards the applicability of Ext.P3, and the bid capacity and the net worth of the petitioner does not call for any interference, I propose to deal with the said argument also, for the sake of completion. Respondents have noted that the bid capacity of the 4th respondent is less than Rs.750 Lakhs, ie, 25% of the total required bid capacity