M.M. VARGHESE v. KERALA WATER AUTHORITY

T.R.RAMACHANDRAN NAIR, J.- - - - - - - - - - - - - - - - - - - - - - - - - -W.P.(C).No. 12421 of 2012 - - - - - - - - - - - - - - - - - - - - - - - - - -DATED THIS THE 2nd DAY OF NOVEMBER, 2012JUDGMENT The petitioner seeks for issuance of a writ of mandamus directing thethird respondent to refund the Earnest Money Deposit amounts to the tuneof Rs.12 lakhs, furnished by him along with the tenders submitted.2. The respondents have mainly rejected the request by pointing outthat the withdrawal of tenders as well as certain other factors will result inforfeiture of the Earnest Money Deposit. 3. The petitioner is a contractor under the first respondent and is theproprietor of M/s. Cochin Steel Industrial Complex, Kizhakkambalam. Heis having 2 A-Class licences, one in his personal name and the other asproprietor of the said Industrial Complex. Electronic tenders were invitedby the third respondent by a notification published in leading dailies dated9.6.2011 and in the website. The tenders were invited in respect of threeitems, as Tender Nos.03/2011-12/KWA/PHC/TVM, 04/2011-12/KWA/PHC/TVM and 05/2011-12/KWA/PHC/TVM. As proprietor ofM/s. Cochin Steel he submitted three electronic tenders. But later, amistake was found out after sending the tenders, that the tenders were not W.P.(C).No.12421/2012-2-accompanied by scanned documents. The petitioner thereafter submittedtwo more tenders as Tender Nos.04 and 05 in his individual licenceaccompanied by all the required documents. These were submitted alongwith Ext.P1 letter wherein a request was made to accept Tender No.03submitted by M/s. Cochin Steel as well as Tender Nos.04 and 05 submittedin his personal capacity, as Tender Nos.04 and 05 submitted in the name ofM/s. Cochin Steel were defective.4. By the said process, he had remitted Rs.15 lakhs as EarnestMoney Deposit for the five tenders. Ext.P2 is produced by the petitioner toshow that the third respondent recommended for pre qualification of thetenders submitted by the petitioner in his capacity as proprietor of M/s.Cochin Steel, in respect of Tender No.03/2011-2012 as well as TenderNos.04 and 05 submitted in his personal capacity. Later, the petitionersubmitted Ext.P3 letter requesting to return the Earnest Money Deposit ofthe two invalid tenders. After coming to know that he was not pre qualified,two letters were submitted as Exts.P4 and P5 to return the Earnest MoneyDeposit covering all the five tenders. An amount of Rs.3 lakhs was returnedas per Ext.P6 in respect of Tender No.03/2011-2012 submitted in the nameof Ms. Cochin Steel. Again, the petitioner requested to refund the Earnest W.P.(C).No.12421/2012-3-Money Deposits in respect of the other four tenders by Ext.P7. Exts.P8and P9 are copies of the proceedings of the second respondent directing totake steps to forfeit the Earnest Money Deposit. These are followed byExts.P11 to P14 letters explaining their stand also.5. The stand taken in Exts.P8 and P9 is that the tenders submitted inthe personal capacity of the petitioner are additional tenders and thereforethose cannot be accepted. The petitioner points out that the lettersExts.P11 to P14 of the third respondent will show that the two tenderssubmitted by the petitioner as Proprietor of M/s. Cochin Steel wereconsidered as invalid tenders as they were incomplete thus the two tenderssubmitted in his personal capacity have been recommended for prequalification, by the third respondent.6. The respondents have filed a counter affidavit justifying theaction.7. Heard learned counsel for the petitioner Shri V. Rajendran andlearned Standing Counsel for the respondent, Shri George Mathew.8. Learned counsel for the petitioner submitted that the stand takenby the respondents in the documents produced and in the counter affidavit,that the submission of two tenders in the personal capacity is against the W.P.(C).No.12421/2012-4-conditions of Notice Inviting Tenders (NIT), especially clause 7.7.6, is notcorrect. The said clause is attracted only in a case where the tenderer isassociated with another tenderer in the particular tender. Herein, out of thethree tenders submitted in the name of the proprietorship in respect oftender Nos.04 and 05, the petitioner noticed the mistake later in notproducing the scanned documents. Thereafter, in his licence in personalcapacity, two tenders were submitted for tender Nos.04 and 05. Therefore,they are only fresh tenders and it is not a case where clause 7.7.6 will apply.It is also submitted that even before acting upon the tender documents, thepetitioner submitted a withdrawal as per Ext.P1. In the light of Section 5 ofthe Contract Act, an offer is entitled to be withdrawn before its acceptance.Therefore, the conditions under the NIT cannot go against the provisions ofthe Contract Act and reliance is placed on a Division Bench decision of thisCourt in State of Kerala v. Aboobaker Kutty (died) and others (1992 (2)KLJ 438). It is pointed out that the instructions in the NIT have nostatutory force. Reliance is also placed on the judgment of the Delhi HighCourt in M/s. Suraj Besan and Rice Mills v. Food Corporation of India(AIR 1988 Delhi 224) and that of the Gauhati High Court in Abdus SalamChoudhury v. The State of Assam and others (AIR 1991 Gauhati 9). It is W.P.(C).No.12421/2012-5-submitted that the petitioner was entitled to withdraw the two incompletetenders on submission of the fresh tenders in his personal capacity andtherefore the Earnest Money Deposits in respect of the four tenders have tobe refunded.9. Shri George Mathew, learned Standing Counsel appearing for therespondents contended, in the light of the averments in the counter affidavitand the relevant clauses of the NIT, that the tenderer cannot withdraw atender in the light of clause 7.13 before the firm period is over and it isclearly provided in the said clause that any such withdrawal will be at therisk of the tenderer and the Earnest Money Deposit will be forfeited. It isalso submitted that clause 7.7.6 of the NIT will show that a tenderer shallnot associate with any of the bidder in the particular tender. Herein, two setsof tenders have been submitted, one in his capacity as proprietor and theother as individual. Therefore, the rigors of clause 7.7.6 will squarelyapply. Reliance is also placed on the dictum laid down in Villayati RamMittal (Pvt) Ltd. v. Union of India & another (JT 2010 (10) SC 394).10. The factual aspects thus require a detailed analysis. The tendersin question are numbered as 03/2011-12, 04/2011-12 and 05/2011-12.Initially, three electronic tenders were submitted in the status of proprietor W.P.(C).No.12421/2012-6-of M/s. Cochin Steel. In respect of tender Nos.04 and 05, scanneddocuments were not forwarded. Along with Ext.P1 letter, two more tenderswere submitted in his personal capacity. In Ext.P1 it is mentioned that amistake was found out after submission of the tenders and a further requestwas made to consider Tender No.03 only in the name of the proprietorshipand Tender Nos.04 and 05 in the personal capacity. In Ext.P2 which is thecopy of the forwarding letter submitted by the Superintending Engineer tothe Chief Engineer, under item Nos.9 and 15 these tenders have beenevaluated. Under item No.9, after referring to the request of the petitioner,it is mentioned to the effect that “The firm has uploaded only the formatsQ1-Q8 and no other documents have been uploaded by them and thetechnical committee decided to recommend the request of the petitioner andonly his bid may be considered.” The above facts are discussed under itemNo.15 in the firm name also. In Ext.P8, with regard to the tenders of thepetitioner's firm, under item No.14 it is mentioned that the tender oncesubmitted in the name of the proprietorship cannot be withdrawn as per theNIT conditions. Under item 15, the reason stated for rejection of the tenderssubmitted in the personal capacity of the petitioner, is that the tender hasbeen submitted in two capacities which will entail in disqualification of the W.P.(C).No.12421/2012-7-two tenders. Therefore, both the tenders submitted in the status ofproprietor as well as individual capacity, have not been pre-qualified. Thesaid reasons are repeated in respect of the other tenders also as evidencedby Ext.P9, in respect of tender No.05/2011-12.11. The relevant clauses in the NIT, as elaborated in the counteraffidavit and contained in Exts.R1(a) and R1(b), are the following:“7.7.6 No firms/partner of any firm, consultant including designconsultant or individual be, who have submitted the tender for awork shall associate with any other bidder in the particular tender.EMD in such cases shall be forfeited and both the tenders will betreated as rejected.7.13 FIRM PERIOD OF TENDERTenders shall be firm for acceptance for a period of 9 monthsfrom the last date prescribed for submission of tender. No tender canbe withdrawn or altered before the firm period is over. Any tendererwho withdraws or alters the tender before the expiry of the firmperiod shall do so at the risk of the tenderer and the earnest moneywill be forfeited to Kerala Water Authority.8.11 The EMD of unsuccessful tenderer shall be refunded after thetenders are disposed off as per the discretion of the tenderingauthority.”12. The first question is whether clause 7.7.6 is attracted for W.P.(C).No.12421/2012-8-forfeiting the EMD by treating the bidder as disqualified. A reading ofclause 7.7.6 will show that it will be attracted if a firm/partner of any firm,etc. who have submitted a tender associates with any other bidder in the“particular tender”. Therefore, such association should be evident from thebid document itself. On a reading of para 2 of the counter affidavit itself,it can be seen that the tenders submitted by the petitioner are treated as intwo different capacities, one as proprietor of M/s. Cochin Steel and theother in his personal capacity. It is also stated that “the tenders submittedby the petitioner as proprietor of M/s. Cochin Steel for Tender Nos.4 and 5were incomplete as well as the documents required for evaluating the tenderwere not electronically uploaded.” Thus, actually these tenders weresubmitted in two different capacities and it is not by associating with anyother bidder. One set of bid documents were incomplete, even going by theadmissions of the second respondent. Therefore, those tenders, viz. TenderNos.04 and 05 submitted in the proprietorship of M/s. Cochin Steel areclearly defective which cannot obviously be evaluated at all. Thus, therigor of clause 7.7.6 will not be attracted as the respondents themselveshave treated these two sets of bids as submitted in two different capacities.What is prohibited under clause 7.7.6 is association with another bidder in W.P.(C).No.12421/2012-9-respect of a particular tender. The same is absent as far as the factualsituation herein is concerned. What was submitted by the petitioner in thepersonal capacity are fresh tenders, as the two tenders submitted asproprietor were clearly defective. The fact that a mistake was committedwhile submitting the two tenders in his personal capacity also, was informedby Ext.P1. In para 3 of the counter affidavit, with regard to Ext.P1 letter, itis stated as follows:“However based on Ext.P1 letter the mistake as reported by thepetitioner was favourably considered by the 3rd respondent andaccordingly for Tender No.3 the tender submitted by the petitionerin his capacity as proprietor of M/s. Cochin Steel wasrecommended to the 2nd respondent for pre qualification vide letterNos.KWA/PHC/D2/4116(C)/09 dated 24.8.2011.”That the tenders submitted under the proprietorship in respect of TenderNos.04 and 05 were defective as it was not accompanied by scanneddocuments and which amounts to a mistake, is therefore clear.13. The next argument to be considered is whether para 7.13 willapply. The same evidently contains a clause that no tender can bewithdrawn or altered before the firm period is over and the EMD will beforfeited if a tenderer withdraws or alters the tender before the expiry of W.P.(C).No.12421/2012-10-the firm period.14. Herein, the information regarding the mistake committed by thepetitioner was conveyed by him before the last date for submission of thebid documents was over. The information was therefore given by thepetitioner well in time. In such cases whether para 7.13 will apply, itselfwill have to be considered. 15. A Division Bench of this Court in Aboobaker Kutty's case(1992 (2) KLJ 438) considered a similar issue. Therein, the last date forsubmission of tender was 17.11.1987 and the time for opening the tenderwas 4.30 p.m. A mistake was committed by the tenderer which was foundout and he informed about the same as per Ext.P10 letter at 4.05 p.m.. Hesought permission to correct the mistake or in the alternative, to withdrawthe offer. The security deposit of the petitioner was withheld which wasunder challenge in the writ petition and the petitioner prayed for return ofthe earnest money deposit. The respondents relied upon the relevantclause of the P.W.D. Manual which is extracted in para 6 of the judgment,which provided that “a tenderer cannot withdraw his tender or make anymodification not acceptable to the Department once the tender has beendeposited in the tender box. Any contravention of the above rule will entail W.P.(C).No.12421/2012-11-forfeiture of the Earnest Money Deposit.” The writ petition was allowed bytaking the view that an offer can be withdrawn in the light of Section 5 ofthe Contract Act, even before the tenders were opened. The Division Benchexamined the issued in paragraphs 7, 8 and 9 which are extracted below:“7. Under Section 5 of the Contract Act a proposal could berevoked at any time before the communication of its acceptance iscomplete as against the proposer, but not afterwards. Theillustration under the said Section shows that 'A' proposes, by aletter sent by post, to sell his house to 'B'. 'B' accepts the proposalby a letter sent by post. 'A' may revoke his proposal at any timebefore or at the moment when 'B' posts his letter of acceptance, butnot afterwards. It is also settled that the provisions of GeneralLaw of Contract are applicable to Government contracts alsosubject to the provisions of Article 299 of the Constitution of India:vide Union of India v. S.S.H. Syndicate Poona, A.I.R. 1976 SC879. Therefore when the withdrawal letter was received before4.30 P.M. which was the time for opening tenders, there was nocompleted contract between the parties.8. At a stage when the contract had not come into force, the actionof the authorities was purely in the nature of administrative actionas stated in Ramana v. I.A. Authority of India, A.I.R. 1979 SC1628 and in fact the actions are subject to the provisions of Article14 of the Constitution of India. W.P.(C).No.12421/2012-12-9. So far as the clauses in the PWD Manual are concerned, it hasbeen held by the Supreme Court in C.J. Fernendez v. State ofMysore, A.I.R. 1967 SC 1753 that the instructions contained in theP.W.D. Manual are administrative instructions and not statutoryrules. The question arose in a writ petition filed by a citizen forenforcement of the Mysore Public Works Department Code. Itwas held by the Supreme Court that the rules not being statutorythey were not enforceable. As the said rules are not enforceable atthe instance of the tenderer they would not be enforceable in acourt of law at the instance of the Government, particularly whenthe said rules govern a situation before the contract to be formed.When the action of the Government is purely an administrativeaction, it is governed by the principles laid down by the SupremeCourt in Ramana's case (supra), as stated above.The above paragraphs will show that in the light of Section 5 of theContract Act, a proposal could be revoked at any time before thecommunication of its acceptance is complete against the proposer, but notafterwards. At a stage when the contract had not come into force, theaction of the authorities was purely in the nature of administrative actionwhich will be subject to the provisions of Article 14 of the Constitution ofIndia and as far as P.W.D. Manual is concerned, they are not statutory innature. Finally, in para 10 it was held as follows: W.P.(C).No.12421/2012-13-“10. If that be so, the withdrawal of the offer by the writpetitioner before the time fixed for opening tenders wasperfectly in order, and as much as the Government is governedby Section 5 of the Contract Act, it could not rely upon the PWDManual for the purpose of negativing the statutory right of thepetitioner which had accrued to him because of the clearprovisions of Section 5 of the Contract Act, and theadministrative instructions cannot have the effect of overridingstatutory provisions. We, therefore of the view that the learnedSingle Judge was right in allowing the writ petition.”16. The position herein is also similar. Even before the outer timefixed for submission of the tender, the petitioner had informed about themistakes in the two tenders and had requested to consider the tenderssubmitted in his individual name instead of those submitted in theproprietorship, in respect of Tender Nos.04 and 05. Therefore, he hadcommunicated the withdrawal well in time. It is further to be noticed thatthe two tenders were defective for want of supportive documents. In fact,under item No.14 in Ext.P8 while considering the tender submitted in thename of the proprietorship, it is clearly mentioned that “since the firmfailed to submit complete documents supporting the formats, the firm is notpre-qualified.” The same is the reason given in Ext.P9. Therefore, as far as W.P.(C).No.12421/2012-14-the question of withdrawal is concerned, it is before any acceptance of thetender. Clause 7.13 which is not statutory in nature, cannot therefore helpthe respondents, in the light of Section 5 of the Contract Act and theprinciples stated in Aboobaker Kutty's case (supra).17. In Suraj Besan and Rice Mills' case (AIR 1988 Delhi 224) alsoit was held in paragraphs 9 and 10 that “a person who makes an offer, isentitled to withdraw his offer or tender before its acceptance is intimated tohim. The Government by merely providing a clause to the contrary in thetender notice could not take away the legal rights of a person.”18. In Abdus Salam Choudhury's case (AIR 1991 Gauhati 9) alsothe matter was considered under Section 5 of the Contract Act and it washeld in para 10 that “under the provisions of Section 5 of the IndianContract Act, a proposal may be revoked at any time before communicationof its acceptance is complete as against the proposer but not afterwards.Admittedly, the petitioner withdrew his offer made in his tender by theapplication dated 21.3.1977 well before acceptance thereof. In otherwords, the petitioner revoked his proposal/offer well before acceptancethereof. Under the provisions of the Indian Contract Act, the petitioner hasthe statutory right to withdraw/revoke his offer for getting settlement of the W.P.(C).No.12421/2012-15-Mahal or coupe before acceptance thereof by he settling authorities. Itbeing a statutory right of the petitioner under the provisions of the IndianContract Act entitling him to withdraw/revoke his offer/proposal made inhis tender before acceptance thereof by the authorities and the petitionerhaving done so in the instant case, the contract of sale of the Mahal inquestion for the settlement period could not be enforced on the petitionerand he cannot be saddled with the liability to make good the deficiency.19. Learned Standing Counsel for the respondents, by relying uponthe decision of the Apex Court in Villayati Ram Mittal (Pvt) Ltd.'s case(JT 2010 (10) SC 394), contended that a clause provided in the NIT isenforcible against a person who revoked his offer. 20. Learned counsel for the petitioner submitted that in the abovecase the tender was accepted and the revocation was after thecommunication of acceptance and therefore the said dictum will not applyto the facts of this case.21. A reading of the judgment in Villayati Ram Mittal (Pvt) Ltd.'scase (JT 2010 (10) SC 394), will reveal the following facts: The petitionersubmitted its offer along with an earnest money of Rs.40 lakhs. Thetenders were opened on 5.5.2004 and the offer of the petitioner was found to W.P.(C).No.12421/2012-16-be the lowest at Rs.32 crores. The estimated cost of the work was Rs.40crores. On the next day, i.e. On 6.5.2004 the petitioner sent a letter to thesecond respondent making correction of a figure in his tender to read asRs.32,76,000/- instead of Rs.23,76,000/-. This resulted in the offer of thepetitioner for the work increased from Rs.32 crores to Rs.41 crores. Thiswas treated by the respondents as a revocation of the offer and the earnestmoney deposit was forfeited. Clause 6 of the Notice stipulated that “if thefirm revokes its offer during the validity period, its earnest money shall beforfeited.” The above facts will show that the subsequent correction wasmade after the bid was opened and the petitioner was found to be thelowest. In para 10 of the judgment, the Apex Court rejected the contentionsin the following words:“10. In facts of the present case, the respondents have stated intheir reply to the Writ Petition before the High Court that as aconsequence of the failure of the petitioner to stand by its offerdated 05.05.2004 the tender for the work had to be re-invited bythe respondent No. 2 on revised costs of the construction and in thecircumstances, the respondent No. 2 had to forfeit the earnestmoney of the petitioner. This was thus a case where on account offailure on the part of the petitioner to stand by its offer, thetransaction or the contract did not come through and therefore the W.P.(C).No.12421/2012-17-respondents were entitled to forfeit the earnest money furnished bythe petitioner in terms of Clause 6 of the Notice.”Therefore, it is a case where the offer was accepted and the transaction didnot come through later because of the failure of the petitioner to stand by tothe offer. Herein, the situation is totally different. This is not a case whereany offer is revoked after its acceptance. In the light of the above, the factsof the case are clearly distinguishable.22. Herein, as far as the four tenders are concerned, two are in thename of the proprietorship which are defective and the two tenders in theindividual name of the petitioner are supported by documents. By nostretch of imagination it can be said that the two defective tenders will beacted upon at the stage of pre qualification. Herein, the petitioner hadrequested as per Ext.P1, to accept only the two tenders submitted by him inhis personal capacity which are uploaded with documents. Therefore, therewas no iota of chance even for considering the tenders submitted in thename of the proprietorship, as they are defective. Clause 7.7.6 also will notapply to these tenders, as the subsequent tenders submitted in the name ofthe petitioner were in his personal capacity and they were fresh tenders also.23. In the light of the above, the writ petition is allowed. There will W.P.(C).No.12421/2012-18-be a direction to the respondents to refund to the petitioner the earnestmoney deposit in respect of the four tenders, viz. Rs.3 lakhs each ( Rs.12lakhs in total), within a period of one month from the date of production ofa certified copy of this judgment. No costs.(T.R. Ramachandran Nair, Judge.)kav/