IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.GIRI THURSDAY, THE 17TH SEPTEMBER 2009 / 26TH BHADRA 1931 WP(C).No. 11707 of 2009(G) --------------------------------------- PETITIONER(S): --------------------- V. MOHANAN, CONTRACTOR, PMC VI/205 A, M.C.ROAD, NEAR SASTHA TEMPLE, PERUMBAVOOR-683 542, ERNAKULAM DISTRICT. BY ADV. MR.RAJIV ABRAHAM GEORGE RESPONDENT(S): ------------------------ 1. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, TRIVANDRUM-695 001. 2. THE SUPERINTENDING ENGINEER, NATIONAL HIGHWAY (CENTRAL) CIRCLE, VYTTILA, COCHIN-682 019. 3. V.K.J. AND CO., REPRESENTED BY ITS MANAGING PARTNER V.K.JANARDHANAN NAIR, VADAKKEPUTHENPURA (H), VARAPPETTY P.O., KOTHAMANGALAM-686 691. R1 & R2 BY GOVERNMENT PLEADER R3 BY MR.M.PATHROSE MATTHAI, SENIOR ADVOCATE, ADV. MR.MURALI PURUSHOTHAMAN, MR.DEEPU LAL MOHAN, MR.NINU M.DAS, MR.LEENA MURALI. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28/08/2009, THE COURT ON 17/09/2009 DELIVERED THE FOLLOWING: WP(C) NO. 11707/2009-G APPENDIX PETITIONER'S EXHIBITS: EXT.P1: COPY OF THE RELEVANT PAGES OF THE BIDDING DOCUMENTS. EXT.P2: COPY OF THE PARTNERSHIP DEED DATED 11/10/2008. EXT.P3: COPY OF THE G.O. DATED 21/02/1998. EXT.P4: COPY OF THE LETTER DATED 02/02/2009 FROM THE INFORMATION OFFICER TO THE PETITIONER. EXT.P5: COPY OF THE LETTER DATED 03/02/2009 FROM THE PETITIONER TO THE CHIEF ENGINEER, NATIONAL HIGHWAY, TRIVANDRUM. EXT.P6: COPY OF THE CONDITIONS GOVERNING THE REGISTRATION OF CONTRACTORS EXECUTING WORK IN THE KERALA PWD. EXT.P7: COPY OF THE RULES REGISTRATION OF CONTRACTORS EXECUTING WORKS IN THE KERALA PWD. EXT.P8: COPY OF THE LETTER DATED 17/04/2009 FROM THE PETITIONER TO THE CHIEF ENGINEER OF THE RESPONDENTS. RESPONDENT'S EXHIBITS: EXT.R3(a): COPY OF THE CERTIFICATE NO.E3-18/05 DATED 25/11/2008 ISSUED BY THE EXECUTIVE ENGINEER , PWD ROADS DIVISION, MUVATTUPUZHA TO SHRI. V.K.JANARDHANAN NAIR. EXT.R3(b): COPY OF THE CERTIFICATE DATED 12/06/2007 ISSUED BY THE 2ND RESPONDENT TO SRI.V.K. JANARDHANAN NAIR. EXT.R3(c): COPY OF THE CERTIFICATE DATED 12/06/2007 ISSUED BY THE 2ND RESPONDENT TO SRI.V.K.JANARDHANAN NAIR. EXT.R3(d): COPY OF THE CERTIFICATE DATED 09/06/2008 ISSUED BY THE 2ND RESPONDENT TO SRI.V.K.JANARDHANAN NAIR. EXT.R3(e): COPY OF THE ORDER NO.E2-285/03 DATED 06/12/2008. EXT.R3(f): COPY OF THE AGREEMENT NO.5/SE/NH/CC/KOCHI/2009-2010 DATED 23/05/2009 ENTERED INTO BY THE PETITIONER WITH THE 2ND RESPONDENT. EXT.R3(g): COPY OF THE ACKNOWLEDGMENT OF REGISTRATION OF FIRM DATED 09/12/2008 ISSUED BY THE REGISTRAR OF FIRMS. EXT.R2(a): COPY OF THE NOTICE DATED 23/05/2009. //TRUE COPY// P.S. TO JUDGE rs. V.GIRI, J ....................... W.P.(C).11707/2009 ....................... Dated this the 17th day of September, 2009 JUDGMENT The 2nd respondent invited bids for the work “CRF 2008 – 2009 – Improvements to Kothamangalam – Kottappady – Muttathupara Road from Km 0/000 to 10/000” as per the tender notice dated 17.11.2008. Petitioner and the 3rd respondent responded to the notification. Bids were to be submitted in two separate parts, Part-I being the Technical Bid and Part-II being the Financial Bid. Petitioner and the 3rd respondent are registered 'A' Class contractors. Both the petitioner and the 3rd respondent were found to be pre qualified and the Bid submitted by the 3rd respondent was accepted. Petitioner challenges the same in this writ petition. 2. The challenge mounted by the petitioner is in relation to two aspects concerning the 3rd respondent. It is firstly contended that the registration granted to the 3rd respondent as an 'A' Class contractor is illegal. It is significantly contended that if that be so, the 3rd respondent would not have been pre qualified for the Bid in question. It is then W.P.(C).11707/09 2 contended that the 3rd respondent at any rate, did not have an available Bid capacity for submitting a Bid for the work in question and consequently the award of contract to the 3rd respondent is illegal. The 2nd respondent as also the 3rd respondent have filed separate counter affidavits. 3. The short facts necessary to understand the issue that has been raised by the petitioner can be narrated as follows. 4. As stated above, the 2nd respondent invited the tender for the aforementioned work. Ext.P1 contains the relevant pages of the Bid document. It is contended by the petitioner that Ext.P2 Partnership Deed has been executed on 11.10.2008 by one V.K.Janardhanan Nair who is now the Managing partner of the 3rd respondent firm solely for the purpose of obtaining 'A' category registration, in an attempt to circumvent the stringent requirements stipulated in the tender documents to be qualified for the work. It is stated as follows in paragraph 9 of the writ petition. “The petitioner submits that the 2nd respondent without any application of mind W.P.(C).11707/09 3 and without properly perusing and studying the Partnership Deed of the 3rd respondent firm dated 11.10.2008, proceeded to grant 'A' category registration which enables the 3rd respondent to take up works of unlimited value / limit without any previous experience as an entity which had executed any work, let alone a work having an estimated value of Rs.3.65 crores. The fact that Contractors having 'A' category registration can take up works of unlimited value would be evident from G.O.(P) No.13/98/PWD dated 21.2.1998 issued by the Secretary, Public Works Department on behalf of the Governor of Kerala.” 5. It is further contended that V.K.Janardhanan Nair, the Managing partner of the 3rd respondent is a registered 'A' category contractor in his individual capacity. V.K.Janardhanan Nair is currently executing a work namely “Improvements to Kothamangalam – Kottappady – Muttathupara Road” under an Agreement dated 31.7.2008 for a PAC of Rs.5,11,83,150/- and completion time of 24 months. In the above back-drop, petitioner contends that a sham Partnership Deed was brought into existence by V.K.Janardhanan Nair, his wife and two others, solely for the W.P.(C).11707/09 4 purpose of obtaining a fresh registration as 'A' Class contractor in the name of the 3rd respondent firm and apparently with a view to bid for the work in question. There was no enquiry by the 2nd respondent and registration was granted without application of mind. Such registration is liable to be cancelled as, according to the petitioner, it has been so done without applying the rules relating to registration of contractors in the PWD. The Managing partner of the firm is an independent 'A' Class contractor. The intention on the part of the partners, who constituted Ext.P2 is to obtain another 'A' Class registration in the name of a firm and then submit separate bids for the same work. This, the petitioner contends, amounts to a fraud and shall not therefore, be permitted to be perpetuated. 6. It is further contended by the petitioner that the available bid capacity of the individual bidder will have to be assessed in terms of Clause 4.1.5 of the Bid documents. The experience gained by the Managing partner of the 3rd respondent, V.K.Janardhanan Nair has been put forth by the 3rd respondent for obtaining an 'A' Class registration in the W.P.(C).11707/09 5 name of the firm. If that be so, then the value of the work currently undertaken by the Managing partner of the 3rd respondent firm in his individual capacity should also be taken into account in assessing the available bid capacity of the bidder. If it is so done, then, the available bid capacity of the 3rd respondent would fall far short of the requisite level and the 3rd respondent would therefore, not be pre qualified for the work in question, it is contended. 7. 2nd respondent in its counter affidavit has refuted the stand taken by the petitioner. It is contended that registration of 'A' Class contractors are done in accordance with the orders issued in that behalf. An application submitted by the 3rd respondent, a registered firm, for registration of an 'A' Class contractor was considered in accordance with rules relating to such registration and registration was granted. In granting such registration, the experience of the individual partners who constitute the firm, should be taken into account and accordingly the experience of V.K.Janardhanan Nair, the Managing partner of the firm was taken into account. The requisite security W.P.(C).11707/09 6 deposit in terms of the rules was made by the applicant and consequently, the 3rd respondent was granted registration as an 'A' Class contractor. It is contended that the petitioner has no lopus to challenge Ext.P2 Partnership Deed. At any rate, if the petitioner contends that the partnership is a sham document, then its remedy lies elsewhere. 8. It is then contended that the available bid capacity of the 3rd respondent firm has been calculated strictly in accordance with the aforementioned Clause 4.1.5 of the Instructions to Bidders. NABARD work currently undertaken by V.K.Janardhanan Nair in his individual capacity has not been taken into account in assessing the available bid capacity of the tenderer because the details regarding such work have not been furnished by the Bidder. This could be because the partners of the firm decided that the said work carried on by the Managing Partner of the firm in his individual capacity, as an 'A' Class contractor need not be treated as a partnership business. Such liberty has been reserved by the partners and this is evidenced in Ext.P2 Partnership Deed itself. There is nothing wrong in W.P.(C).11707/09 7 the partners of the firm managing their business in a legitimate manner. 9. 3rd respondent has taken a similar stand in its counter affidavit apart from contending that the petitioner has no locus standi to contend that Ext.P2 is a sham Partnership Deed. It is further contended that V.K.Janardhanan Nair and three others are perfectly entitled to constitute themselves into a firm and then seek an 'A' Class registration in the name of the firm. The rules relating to registration of contractors does not prohibit an existing 'A' Class contractor becoming partner in a registered firm and the firm in turn seeking a fresh registration as an 'A' Class contractor. Registration of the 3rd respondent as an 'A' Class contractor need not be linked to the submission of a Bid for the work in question. 3rd respondent is pre qualified for the work. 10. It is further pointed out by respondents 2 and 3 that the petitioner had quoted 17.1% above the PAC and the 3rd respondent had quoted at 7.5% below the PAC. The difference in the rates quoted by the petitioner and the 3rd W.P.(C).11707/09 8 respondent comes to Rs.51,58,508/-. An Agreement has also been executed by the 3rd respondent with the Government for the work in question. 11. Petitioner has filed reply affidavits to the counter affidavits filed by respondents 2 and 3. I heard Mr.Rajiv A. George, learned counsel for the petitioner, Mr.Pathrose Mathai, learned senior counsel, along with Mr.Murali Purushothaman, learned counsel appearing for the 3rd respondent and Mr.M.A.Asif, learned senior Government Pleader. 12. The first issue raised by the petitioner relates to grant of registration of an 'A' Class contract in favour of the 3rd respondent. Substance of the contention raised by the petitioner in this regard is relatable to the fact that V.K.Janardhanan Nair, the Managing Partner of the 3rd respondent is himself as an 'A' Class contractor. He has undertaken works of the PWD and he currently has a work in his hand. Petitioner contends that a sham Partnership Deed is constituted solely for the purpose of obtaining a W.P.(C).11707/09 9 fresh registration as an 'A' Class contractor. It is contended that the Managing Partner of the 3rd respondent, who is otherwise an 'A' Class contractor would have by himself bid for the work in question and had he done so, then the fact that he has already done a work with the PWD and therefore, he would have deployed his available resources for carrying on the said work, would definitely have been taken into account for assessing the Available Bid Capacity of the tenderer and this therefore, would have gone to the disadvantage of the Managing partner of the 3rd respondent. It is to avoid this that a namesake firm has been constituted and a fresh registration as 'A' Class contractor has been obtained solely with a view of making a bid for the work in question. 13. The Rules relating to registration of contractors which have been referred to do not contain a prohibition that an application for registration as an 'A' Class contractor cannot be made by a firm in which one of the partners is already registered as a contractor. I am not in a position to say that there is no substance in the contention of the petitioner that W.P.(C).11707/09 10 such prohibition could possibly achieve better discipline in the matter of registration of contractors in the PWD. This is essentially so since, as has happened in the present case the experience that is relied on by the firm in an application for registration is obviously the experience of one of its partners who has been a registered 'A' Class contractor. The firm is a sum total of its partners. But the Rules as such relating to registration of contractors do not contain a prohibition against the registered firm as a contractor. It also cannot be forgotten that several of the existing registered contractors are registered firms and it would always be open to the registered partnership firm to seek a licence as a contractor. Prohibition against the registration of a firm as a licenced contractor, with one of its partners as a registered contractor, cannot be impliedly inferred and such a prohibition cannot be read into the Registration Rules. 14. Registering authority cannot be faulted with for having granted registration to an entity, if the Rules otherwise do not prohibit such registration. W.P.(C).11707/09 11 15. Learned counsel for the petitioner Mr.Rajeev George submits that Ext.P2 Partnership Deed shows that it is a sham partnership which has been brought into existence. Except the Managing partner, V.K.Janardhanan Nair, none of the others have any experience as such. Second partner is the wife of V.K.Janardhanan Nair. It is contended that the entire arrangements have been brought into being solely for the purpose of obtaining a registration as an 'A' Class contractor. 16. I find it difficult to accept this submission for more than one reason. A stranger to the partnership firm like the petitioner, cannot claim a jural relationship with any one of the partners of the firm or the firm, as the case may be. Grant of a registration in favour of the firm by itself will not enable the petitioner to brand the very constitution of the firm as sham. The allegation of the petitioner that the 3rd partner of the firm is shown as the son of V.K.Janardhanan Nair and this is indicative of the sham nature of the transaction is sufficiently explained by the 3rd respondent in W.P.(C).11707/09 12 its counter affidavit. V.J.Aneesh, the 3rd partner of the firm is no doubt the son of Jananrdhanan Nair. His father also happened to be another Janardhanan Nair, but V.J.Aneesh is not the son but the nephew of V.K.Janardhanan Nair. I am unable to find any illegality in the grant of registration as an 'A' Class contractor in favour of the 3rd respondent. 17. The second contention raised by the petitioner relates to the calculation of the Available Bid Capacity of the tenderers in terms of Clause 4.1.5 of the Bid document. The same reads as follows:- “Bidders who meet the minimum qualification criteria will be qualified only if their available bid capacity is more than the total bid value. The available bid capacity will be calculated as under Assessed Available Bid Capacity = (A N 2 – B) A = Maximum value of Civil Engineering works executed in any one year during the last five years (updated to the price level of the year indicated in Appendix) taking into account the completed works as well as completed part of works in progress. W.P.(C).11707/09 13 N = Number of years prescribed for completion of the works for which bids are invited. B = Value (updated to the price level of the year indicated in (Appendix) of existing commitments and ongoing works to be completed during the next ..... years (period of completion of the work for which bids are invited) 18. Petitioner contends that Factor A in so far as the 3rd respondent has been computed by taking the maximum value of the Civil Engineering works executed in any one year during the last five years by the bidder. The bidder is entitled to take into account the completed works as well as the completed part of the works in progress. Factor B relates to the value of the existing commitments as ongoing works to be completed during the forthcoming period corresponding to the period mentioned for the work in question. It is contended that admittedly the works completed by V.K.Janardhanan Nair in his individual capacity during the last five years has been taken into account by the 3rd respondent for the purpose of calculating Factor A. If that be so, then the value of the NABARD W.P.(C).11707/09 14 work which is currently undertaken by V.K.Janardhanan Nair, though in his individual capacity, should also have been taken into account, it is contended. 19. The stand taken by respondents 2 and 3 in this regard is that the experience of the individual partner/partners in constituting the bidder firm can ultimately be availed of and relied on by the applicant firm for the purpose of assessing its Available Bid Capacity. This is perfectly legitimate, it is contended, going by the law laid down by the Supreme Court in New Horizons Limited and Another v. Union of India and Others (1995 (1) SCC 478) which dictum has been followed in Ganpati RV-Talleres Alegria Track Private Limited v. Union of India and Another (2009 (1) SCC 589). But V.K.Janardhanan Nair in his individual capacity is different from V.K.Janardhanan Nair as a Managing partner of the 3rd respondent firm and notwithstanding the fact that he is the partner of the 3rd respondent firm, he can still bid for the works and carry on works as an 'A' Class contractor in his individual capacity. It is contended that the NABARD work referred to in W.P.(C).11707/09 15 paragraph 10 of the writ petition currently undertaken by V.K.Janardhanan Nair has not been considered by the 3rd respondent as part of the business. The work has not been brought into the pool of partnership business. It remains as an individual work of V.K.Janardhanan Nair. The said work has not been taken into account in determining Factor A for the purpose of Clause 4.1.5 and consequently the value of the said work need not be taken into account in determining Factor B in the said formula. 20. 2nd respondent has taken an additional contention that even if the value of the NABARD work undertaken by V.K.Janardhanan Nair in his individual capacity is taken into account in determining Factor B in relation to the 3rd respondent firm, it still would have an Available Bid Capacity above the threshold. 21. The crucial question in this regard is whether the value of the works currently undertaken by V.K.Janardhanan Nair, in his individual capacity should necessarily go into reckoning Factor B, in assessing the Available Bid Capacity W.P.(C).11707/09 16 of the 3rd respondent firm. I am in agreement with the submission made by respondents 2 and 3 that there is no such necessity spelt out by Clause 4.1.5 of the ITB. No doubt the applicant firm would be able to show the Available Bid Capacity only if the firm is otherwise entitled to take into account the experience gained by V.K.Janardhanan Nair, the Managing Partner of the firm, in his individual capacity, since the firm as such is a new entity. When a firm is a bidder, it is entitled to take into account the past experience of individual partners and therefore, the experience gained by V.K.Janardhanan Nair in his individual capacity, can be taken into account and relied on by the firm for the purpose of determining its Available Bid Capacity in terms of Clause 4.1.5 of the ITB. But it does not necessarily oblige the firm to take into account the value of the works that are otherwise undertaken by the individual partners in their individual capacity for the purpose of determining Factor B. Such obligation can be spelt out only if the said work, carried on in individual capacity is also taken into account for the purpose of determining Factor A in Clause 4.1.5. It is significant to take note of the fact that Factor A W.P.(C).11707/09 17 will take into account maximum value of the Civil Engineering works executed in any one year during the last five years and this will take into account the completed works as well as the completed part of works in progress. Therefore, if the 3rd respondent had relied on any portion of the NABARD work currently undertaken by V.K.Janardhanan Nair in his individual capacity, for the purpose of determining Factor A, the value of the said work will also have to be necessarily taken into account for determining Factor B. But this has not been done and the Available Bid Capacity of the 3rd respondent has been determined without in any manner taking into account the NABARD work currently undertaken by V.K.Janardhanan Nair in his individual capacity. In these circumstances, I am unable to find any infirmity in the decision taken by respondents 1 and 2, pre qualifying the 3rd respondent and accepting its technical bid. I also find it significant to take note of the contentions raised by the learned Government Pleader that the difference in the rate quoted by the 3rd respondent which has been accepted by the department is significantly lower by Rs.51,58,508/- than the rate quoted by the W.P.(C).11707/09 18 petitioner. In the absence of any materials to indicate that acceptance of the bid made by the 3rd respondent for the award of work in favour of the 3rd respondent would be detrimental to public interest, I do not find any reason to interfere with the award of the contract in favour of the 3rd respondent. For all these reasons, I find no merit in this writ petition and it is accordingly dismissed. Parties shall bear their respective costs. V.GIRI, Judge mrcs