HINDUSTAN CONSTRUCTION COMPANY LIMITED v. NONE

S. Siri Jagan, J.=-=-=-=-=-=-=-=-=-=-=-=-=-=W. P (C) No.31044 of 2007=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 1st January, 2008.J U D G M E N TAn important issue of considerable public importance in thematter of award of contract for construction of a hydro-electricproject in the State of Kerala arises in this case. The issueinvolved is the sustainability of the decision of the Kerala StateElectricity Board to re-tender the contract of execution of theAthirapally Hydro-Electric Project of the KSEB, reversing theirearlier decision to award the contract to the Consortiumconsisting of the petitioner and the 3rd respondent, who wasearlier selected six years ago in a global tender, after giving priceescalation computed in accordance with the formula suggestedby the Government of India Undertaking, Water and PowerConsultancy Services (India) Ltd., (WAPCOS) taking into accountthe rise in costs from 2001, even at the risk of the likelihood ofthe bid price in a fresh global tender going substantially higherthan the escalated price as per the formula suggested by theWAPCOS. The facts necessary for the disposal of the writ petitionmay be summarised below: W.P.C. No.31044/07 -: 2 :-2.The 1st respondent Kerala State Electricity Boardinvited global tenders for the project work of Design, Build andTurnkey execution with financial package of Athirappally Hydro-Electric Project, by notification inviting tenders dated 6.6.1998.117 sets of pre-qualification bids were issued globally. The pre-qualification committee appointed by the KSEB pre-qualified 4tenderers including the Consortium consisting of the petitionerand the 3rd respondent, (hereinafter referred to as 'theConsortium') out of the 8 tenderers who submitted tenders on3.11.1998. Bid proposals were invited from the 4 pre-qualifiedbidders by tender notice dated 4.12.1999. The Consortiumsubmitted their bid on 15.4.2000. Out of the four pre-qualifiedbidders, only two submitted price bids, namely the Consortiumand the Chinese joint venture of CWAEC-CMFE. The bid of theConsortium was the lowest and the Consortium was declared thelowest bidder. On 27.4.2000 a scrutiny committee of the KSEBappointed a Technical Committee to study the technical aspectsof the bid. The financial aspects of the price bid were separatelyexamined by a Financial Scrutiny Committee headed by the W.P.C. No.31044/07 -: 3 :-Financial Adviser and Chief Internal Auditor of KSEB. On17.10.2000, the tender evaluation committee, after evaluatingthe reports of all committees, decided to have further discussionswith the Consortium on reducing the rates and other aspects. Inthe meeting dated 25.10.2000 of the Full Time Members of theKSEB, detailed discussions were held on the report of the TenderEvaluation Committee and it was decided to recommend to theFull Board to award the work to the Consortium. The Full Board inthe meeting held on 25.10.2000 itself decided to form a committeenominated by the Board to put up specific proposals regardingthe rates with reference to the bill of quantities for each item ofwork after asking the Consortium to withdraw all deviations fromtender conditions. The Committee was constituted on 3.11.2000,who submitted their report on 27.11.2000. The committee helddiscussions with the Board pursuant to which the Consortiumagreed to extend the validity period of the offer up to 31.1.2001,with a discount of Rs.50 lakhs and to withdraw deviations fromthe tender conditions. On 2.1.2001 the Full Time members of theBoard placed the matter before the Full Board of the KSEB. The W.P.C. No.31044/07 -: 4 :-Full Board met on 3.1.2001 and decided to award the work to theConsortium at the price of Rs.414,22,04,500/-. By order dated6.1.2001, the KSEB accorded sanction to award the work to theConsortium without financial package at the said price.3.Three Public Interest writ petitions, namely,O.P.Nos.1774/01, 3581/01 and 7713/01 were filed before thiscourt against the project on the ground of want of properenvironmental clearance, in which the award of the contract tothe Consortium was also challenged. At the request of the KSEB,the Consortium agreed to extend the validity period of the bidand the bank guarantees furnished. On 17.11.2001 by Ext.P7judgment a Division Bench of this court set aside theenvironmental clearance granted by the Central Government forthe project. However in that decision the Division Bench interalia held that there was no justification for this court, to interferewith the decision of the Board to award the contract to theConsortium. On 10.2.2005 the Central Government granted freshenvironmental clearance for the project. That environmentalclearance was challenged before this court in W.P(C). W.P.C. No.31044/07 -: 5 :-Nos.9542/2005 and 11254/2005. On 9.5.2005, the KSEB issuedExt.P28 letter to the Consortium informing that the work isawarded to the Consortium for Rs.4,14,22,04,500/-, withoutfinancial package less a discount of Rs.50 lakhs and requestedthem to execute the agreement at the earliest and to start thework within 30 days of receipt of the letter. The Consortiumissued Ext.P29 letter dated 10.5.2005 drawing attention of theKSEB to the various correspondence between them over the pastfive years, mentioned therein, which emphasised the need forrefixing the original bid price of Rs.4,14,22,04,500/- afterclearing environmental issues. The Chief Engineer (CivilConstruction) of the KSEB, on 18.5.2005 reported to the Boardthe suggestion of the Consortium for a revised price of Rs.585.62crores, taking into account escalation upto March 2005. ByExt.P30 letter dated 1.6.2005, the KSEB requested theConsortium to attend a meeting with the Full Board on 6.6.2005to consider their request. In the said meeting the Consortiummade a presentation on the escalation and their request forrevision of the bid price was discussed. Another writ petition, W.P W.P.C. No.31044/07 -: 6 :-(C).No.26073/2005 was filed before this court on 9.9.2005challenging the environmental clearance for the project. By Exts.P32 and P33 letters dated 27.6.2005 and 28.9.2005, theConsortium agreed to extend the period of validity of their bidand bank guarantees on the understanding that the impact of theeconomic changes which had taken place since the tender wassubmitted and the issues regarding completion date of theproject and dispute resolution mechanism would be discussedand agreed upon before implementing the contract.4.The Board referred the matter to the WAPCOS toascertain the reasonableness of the request for price escalationput forward by the Consortium. In the meanwhile, theConsortium had suggested a revised price of Rs.612.84 crorestaking into account the price escalation upto October, 2005.WAPCOS submitted their report computing the price of theproject at Rs.570 crores taking into account escalation up toSeptember, 2005, with a formula for calculating escalationbeyond September 2005. By Ext.P34 letter dated 22.12.2005,the KSEB requested the Consortium to attend a meeting on W.P.C. No.31044/07 -: 7 :-26.12.2005 to discuss the matter further. After discussion theKSEB agreed to place a revised price of Rs.570 crores, before theFull Board. The Full Board in its meeting on 30.12.2005 decidedto issue revised letter of award to the Consortium at thenegotiated price of Rs.570 crores without financial package, afterobtaining Government sanction and approval by Kerala StateElectricity Regulatory Commission. Accordingly, the KSEB byExt.P36 letter dated 11.1.2006 requested the Government toapprove the Board decision dated 30.12.2005. While so, byExt.P37 judgment dated 23.3.2006 in W.P(C).Nos.11254/05,9542/05 and 26073/05, a Division Bench of this Court quashedthe environmental clearance granted on 10.2.2005 and directedthe KSEB to apply for fresh environmental clearance afterpublishing the Environmental Impact Assessment Report andconducting a public hearing after publishing the report. ByExt.P40 letter dated 18.5.2005 the KSEB requested theConsortium to extend the validity period of their offer for afurther period of 6 months from 31.6.2007, since the revisedclearance from the Government of India for the project is W.P.C. No.31044/07 -: 8 :-pending, which the Consortium agreed on the understanding thatthe agreed project cost would be suitably discussed and mutuallyagreed upon before the implementation of the work. By Ext.P39dated 18.7.2007, the Government of India granted freshEnvironmental clearance for the project. On 10.8.2007, theGovernment again wrote to the Government of Kerala requestingto communicate orders on the approval of the decision of theBoard dated 30.12.2005 as requested in Ext.P36 letter dated11.1.2006. By Ext.P50 letter dated 20.8.2007, the Consortiumrequested the Board for implementation of the project work aftertaking into consideration price adjustment updated to the date ofcommencement of work, copy of which was forwarded to theGovernment of Kerala also. By Ext.P51 letter dated 5.9.2007,the Government informed the Consortium that Ext.P50 has beenforwarded to the KSEB for necessary action. In the meanwhilethe Consortium extended the period of validity of its offer and thebank guarantees upto 31.12.2007, at the request of the KSEB.While so, on coming across Ext.P52 news item in the New IndianExpress dated 5.9.2007, to the effect that the KSEB has decided W.P.C. No.31044/07 -: 9 :-to re-tender the work, the petitioner filed this writ petition on29.9.2007 challenging the decision to re-tender the work.Apparently on the same day, by Ext.P55 letter dated 29.9.2007,the Board cancelled Ext.P28 order dated 9.5.2005 and by Ext.P56tender notice dated 8.10.2007, fresh tenders were invited for theproject. The petitioner therefore amended the writ petitionincorporating additional facts, averments and reliefs. Thepetitioner, accordingly, seeks the following reliefs as per theamended writ petition:a)It is therefore humbly prayed that this Hon'ble Court be pleasedto issue a Writ of Prohibition or any other appropriate writ, orderor direction in the nature of prohibition to prohibit theRespondent Nos. 1 and /or 2 from re-tendering the Project Work(i.e. the work of Design-Build and Turnkey execution ofAthirappilly Hydro Electric Project (163 MW) which includes theconstruction of a dam at Athirappally, in the State of Kerala,across the Chalakudy River);(a1)this Hon'ble Court be pleased to issue a Writ of Certiorari or anyother appropriate writ, order or direction in the nature ofcertiorari to call for the records of the case and after going intothe same to strike down and set aside the said letter dated 29thSeptember, 2007 (being Exhibit P55 to the Petition) and the saidRe-Tender Notice dated 8th October, 2007 (being Exhibit P56 tothe Petition), as also the said decision dated 22nd August, 2007and the said letter dated 23rd August 2007 (being Exhibits P50Aand P50B respectively to the Petition) and quash and cancel thesame.b)this Hon'ble Court be pleased to issue a Writ of Mandamus orany other appropriate writ, order or direction in the nature of W.P.C. No.31044/07 -: 10 :-mandamus to direct the Respondent Nos.1 and /or 2 toforthwith permit the Consortium (i.e. the Petitioner and theRespondent No.3) to effectually implement the Project Work,after price adjustment updated to the date of commencement ofthe Project Work and to direct the Respondent No.1 toaccordingly issue instructions to the Consortium for commencingthe Project Work;c)issue a writ of mandamus or any other appropriate writ order ordirection, directing the Respondent Nos. 1 and 2 to takeappropriate steps:i)to appoint Water And Power Consultancy Services (India)Limited (WAPCOS), or such other agency as this Hon'bleCourt may deem fit, to arrive at the price of the ProjectWork, updated to the date of commencement of the ProjectWork;ii)to permit the Consortium to effectually implement theProject Work, after price adjustment updated to the date ofcommencement of the Project Work and to direct ehRespondent No.1 to accordingly issue instructions to theConsortium for commencing the Project work;”5. The petitioner raises four contentions. The first is thatthe reversal of the well considered decision of the statutory body,which the KSEB is, to accept the negotiated price offered by theConsortium for execution of the work, by directing re-tender isarbitrary, unreasonable and violative of Article 14 of theConstitution of India. The second is that since admittedly on re-tender the bid amount is likely to go substantially higher than thenegotiated price offered by the the Consortium, and since the W.P.C. No.31044/07 -: 11 :-Consortium alone can start the work before the expiry of theTechno-economic clearance on 31.3.2008, in the event of expiryof which fresh clearance has to be obtained forcing postponing ofthe work and resulting in further loss to the exchequer, publicinterest demands that the earlier decision taken by the Board toaward the contract to the Consortium at the negotiated price beimplemented. The third is that since the Consortium has alteredits position to its prejudice relying on the promise held out by theKSEB, the action of the KSEB is hit by promissory estoppel. Thelast is that the principles of legitimate expectation require theKSEB to act in accordance with its original decision to award thecontract to the Consortium for the negotiated price as per theformula suggested by the WAPCOS.6.In answer, the KSEB and the Government of Kerala intheir counter affidavits raise the following contentions: Being a contractual matter involving interpretation of theterms of a contract, this Court shall not interfere with thedecision of the Board, in exercise of powers under Article 226 ofthe Constitution of India by entertaining the writ petition which is W.P.C. No.31044/07 -: 12 :-not maintainable in law. Secondly, the earlier offer was cancelledinvoking the terms of the tender conditions, because of thefailure on the part of the Consortium to comply with thestipulations in the order dated 9.5.2005. Thirdly, the earlierdecision of the Board was cancelled and re-tender was orderedfor valid reasons. Fourthly, in the matter of award of contract ofsuch magnitude it is necessary to have transparency in publicinterest and therefore re-tender serves public interest. Therewas no promise held out by the Board to the Consortium at anytime which would give rise to any claim of promissory estoppel orlegitimate expectation in the Consortium so as to bind the Boardby such principles and to force the Board to award the contract tothe Consortium on any terms. The Consortium having submittedtheir bid for Rs.414 crores they are not entitled to alter that bidprice, which is prohibited by the tender conditions and theyhaving sought escalation of price contrary to the tenderconditions, the Board is perfectly within their rights to cancel thebid and to go for re-tender, as has been done by them.7.Since, in view of the facts disclosed, an early disposal W.P.C. No.31044/07 -: 13 :-of this writ petition is of vital importance to this power starvedState, this writ petition was given priority of hearing and washeard at length. I have considered the rival contentions in greatdetail with reference to the pleadings, documents and the caselaw cited on the subject, with the anxiety the subject matterdemands.8.The broad facts as stated in the writ petitionreproduced as above are not disputed by respondents 1 and 2.In fact the same are corroborated by Ext.P36 letter of the Boardthemselves written to the Government of Kerala seeking approvalof the decision of the KSEB to award the contract to theConsortium at the price suggested by WAPCOS. They only justifytheir action as it is, on alleged legal principles. Sincerespondents 1 and 2 contest the maintainability of this writpetition itself, I shall first deal with that issue.9.According to the respondents 1 and 2, the Board wasforced to cancel the order dated 9.5.2005 (Ext.P28) by which thecontract was awarded to the Consortium, because theConsortium failed to execute the agreement and start work within W.P.C. No.31044/07 -: 14 :-the 30 days stipulated therein in accordance with clause 15 ofExt.P1 tender conditions. They further submit that as per thetender conditions, the bidder is not permitted to modify his bidunder any circumstances, which the Consortium had done bydemanding price escalation which also justifies cancellation of theaward of contract to the Consortium. Since, for granting theprayers in the writ petition, it would be necessary to interpret theclauses in the bid documents and inter-se rights between theparties in relation to such clauses, in view of the decision of theSupreme Court in KSEB v. Kurien E. Kalathil [(2006) 6 SCC293], this writ petition is not maintainable, as the disputes aboutthe meaning of a covenant in a contract or its enforceability haveto be determined according to usual principles of Contract Act ina suit, especially since the present contract is not a statutorycontract, is the contention of the 1st respondent in this regard.10.According to the petitioner, they are not seekingenforcement of terms of any contract. They would submit thatthe KSEB being a statutory body, there is a public law element inall their actions and such actions shall be free from arbitrariness W.P.C. No.31044/07 -: 15 :-and unreasonableness. Their contention is that since the KSEBhad taken a well considered decision on 30.12.2005 to accept thenegotiated price suggested by the Consortium as verified by theWAPCOS and sought approval of the Government for the same,the sudden turn around to decide to re-tender and cancel theaward of contract to the Consortium, is arbitrary andunreasonable and violates the mandates of Article 14 of theConstitution of India and such arbitrary action is amenable to thewrit jurisdiction of this Court. In support of their contention, theyrely on the decision of the Supreme Court in ShrilekhaVidyarthi v. State of U.P (AIR 1991 SC 537) and a DivisionBench decision of this Court in Hindustan Construction Co.LTD v. K.S.E.B. [1999 (2) KLT 30] which was confirmed by theSupreme Court in K.S.E.B v. Hindustan Construction Co.LTD. (AIR 2007 SC 425) as also other decisions of the SupremeCourt.11.At the outset I note that the KSEB is taking aninconsistent stand in this case. In their counter affidavit, theKSEB categorically and repeatedly admits that there is no W.P.C. No.31044/07 -: 16 :-concluded contract between the parties. At the same time theycontend that since the case involves interpretation of covenantsin a contract, the writ petition is not maintainable. Sinceadmittedly there is no concluded contract, the question ofinterpretation and implementation of a clause in a contract doesnot arise in this case. That is what is frowned upon by theSupreme Court in Kurien Kalthils' case (supra) relied on by therespondents, as is clear from the following passage in paragraphs10 and 11 of that decision:“10. We find that there is a merit in the first contention of Mr.Raval. Learned counsel has rightly questioned the maintainability ofthe writ petition. The interpretation and implementation of a clause ina contract cannot be subject matter of a writ petition. Whether thecontract envisages actual payment or not is a question of constructionof contract. If the term of a contract is isolated ordinarily the remedyis not the writ petition under the Article 226. We are also unable toagree with the observations of the High Court that the contractor wasseeking enforcement of a statutory contract. A contract would notbecome statutory simply because it is for construction of a publicutility and it has been awarded by a statutory body. We are also unableto agree with the observation of the High Court that since theobligations imposed by the contract on the contracting parties comewithin the purview of the Contract Act, that would not make thecontract statutory. Clearly, the High Court fell into an error in comingto the conclusion that the contract in question was statutory in nature.11. A statute may expressly or impliedly confer power on astatutory body to enter into contracts in order to enable it to dischargeits functions. Dispute arising out of the terms of such contracts oralleged breaches have to be settled by the ordinary principles of lawcontract. The fact that one of the parties to the agreement is a W.P.C. No.31044/07 -: 17 :-statutory or public body will not by itself affect the principles to beapplied. The disputes about the meaning of a covenant in a contract orits enforceability have to be determined according to the usualprinciples of the Contract Act. Every act of a statutory body need notnecessarily involve an exercise of statutory power. Statutory bodies,like private parties, have power to contract or deal with property. Suchactivities may not rise any issue of public law. In the present case, ithas not been shown how the contract is statutory. The contractbetween the parties is in the realm of private law. It is not a statutorycontract. The disputes relating to interpretation of the terms andconditions of such a contract could not have been agitated in a petitionunder article 226 of the Constitution of India. That is a matter foradjudication by a civil court or in arbitration if provided for in thecontract. Whether any amount is due and if so, how much and refusalof the appellant to pay it is justified or not, are not the matters whichcould have been agitated and decided in a writ petition. The contractorshould have relegated to other remedies.” Therefore, in the absence of any necessity of interpretation andimplementation of a clause in a contract, I am of opinion thatK urien Kalathil's case (supra) has no application to the case athand.12. In Shrilekha Vidyarthi's case (supra) a Larger Benchof the Supreme Court defined the parameters of the powers ofthis Court under Article 226 of the Constitution in the matter ofinterfering with contractual matters involving the State or aninstrumentality of the State thus, in paragraphs 21, 22, 28 and29 thereof.“21.The Preamble of the Constitution of India resolves W.P.C. No.31044/07 -: 18 :-to secure to all its citizens justice, social, economic and political;and Equality of status and opportunity. Every State action mustbe aimed at achieving this goal. Part IV of the Constitutioncontains 'Directive Principles of State Policy' which arefundamental in the governance of the country and are aimed atsecuring social and economic freedoms by appropriate State actionwhich is complementary to individual fundamental rightsguaranteed in Part III for protection against excesses of Stateaction, to realise the vision in the preamble. This being thephilosophy of the Constitution, can it be said that it contemplatesexclusion of Art.14 – non-arbitrariness which is basic to rule oflaw- from State actions in contractual field when all actions of theState are meant for public good and expected to be fair and just?We have no doubt that the Constitution does not envisage orpermit unfairness or unreasonableness in State actions in anysphere of its activity contrary to the professed ideals in thePreamble. In our opinion, it would be alien to the ConstitutionalScheme to accept the argument of exclusion of Art.14 incontractual matters. The scope and permissible grounds ofjudicial review in such matters and the relief which may beavailable are different matters but that does not justify the viewof its total exclusion. This is more so when the modern trend isalso to examine the unreasonableness of a term in such contractswhere the bargaining power is unequal so that these are notnegotiated contracts but standard form contracts betweenunequals.22.There is an obvious difference in the contractsbetween private parties and contracts to which the State is party.Private parties are concerned only with their personal interestwhereas the State while exercising its powers and discharging itsfunctions, acts indubitably, as is expected of it, for public goodand in public interest. The impact of every State action is also onpublic interest. This factor alone is sufficient to import at leastthe minimal requirements of public law obligations and impresswith this character the contracts made by the State or itsinstrumentality. It is a different matter that the scope ofjudicial review in respect of disputes falling within the domain ofcontractual obligations may be more limited and in doubtful cases W.P.C. No.31044/07 -: 19 :-the parties may be relegated to adjudication of their rights byresort to remedies provided for adjudication of purely contractualdisputes. However, to the extent, challenge is made on the groundof violation of Art.14 by alleging that the impugned act isarbitrary, unfair or unreasonable, the fact that the dispute alsofalls within the domain of contractual obligations would not relievethe State of its obligation to comply with the basic requirementsof Art.14. To this extent, the obligation is of a public characterinvariably in every cases irrespective of there being any otherright or obligation in addition thereto. An additional contractualobligation cannot divest the claimant of the guarantee underArt.14 of non-arbitrariness at the hands of the State in any of itsactions.xxxxxxxxxxxxxxxxxxxxxxxx28.Even assuming that it is necessary to import theconcept of presence of some public element in a State action toattract Art.14 and permit judicial review, we have no hesitation insaying that the ultimate impact of all actions of the State or apublic body being undoubtedly on public interest, the requisitepublic element for this purpose is present also in contractualmatters. We, therefore find it difficult and unrealisitc to excludethe State actions in contractual matters, after the contract hasbeen made, from the purview of judicial review to test its validityon the anvil of Art.14.29.It can no longer be doubted at this point of timethat Art.14 of the Constitution of India applies also to matters ofgovernmental policy and if the policy or any action of theGovernment, even in contractual matters, fails to satisfy the testof reasonableness, it would be unconstitutional. (See RamanaDayaram Shetty V. The International Airport Authority of India(1979) 3 SCR 1014: (AIR 1979 Supreme Court 1628) and KasturiLal Lakshmi Reddy v. State of Jammu and Kshmir (1980) 3 SCR1338: (AIR 1980 Supreme Court 1992)). In Col. A. S. Sangwan v. W.P.C. No.31044/07 -: 20 :-Union of India, 1980 (Supp) SCC 599: (AIR 1981 Supreme Court1545), while the discretion to change the policy in exercise of theexecutive power, when not trammelled by the statute or rule, washeld to be wide, it was emphasised as imperative and implicit inArt.14 of the Constitution of that a change in policy must be madefairly and should not give the impression that it was so donearbitrarily or by any ulterior criteria. The wide sweep of Art.14and the requirement of every State action qualifying for itsvalidity on this touch-stone, irrespective of the field of activity ofthe State, has long been settled..................” (Emphasis supplied)13.Further contrary to Kurien E. Kalathil's case(supra), after analysing the various decisions of the SupremeCourt and quoting extensively from Shrilekha Vidyarthi's case ,the Supreme Court in a later decision of ABL InternationalLtd. and another v. Export Credit Guarantee Corporation ofIndia Ltd. and others [(2004) 3 SCC 553] held that in anappropriate case a writ petition as against a State or aninstrumentality of a State arising out of a contractual obligation ismaintainable and that merely because some disputed questionsof fact arise for consideration, the same cannot be a ground torefuse to entertain a writ petition in all cases as a matter of rule.In that case a contention was raised to the effect that for the W.P.C. No.31044/07 -: 21 :-correct interpretation of certain clauses in the contract involvedin that case, oral evidence is necessary and therefore the partiesshould be relegated to a suit. However, the court itselfinterpreted the clauses in the contract to find in favour of theappellant therein, which leads to the conclusion that even wheredisputed questions of fact pertaining to theinterpretation/meaning of documents are involved, courts can, inappropriate cases go into the same and decide the sustainabilityof the action of the State or an instrumentality of the State.After quoting from the decision of K.N.Guruswamy v. State ofMysore ( AIR 1954 SC 592), the Court said thus:'10. It is clear from the observations of this Court in the said case,though a writ was not issued on the facts of that case, this Courthas held that on a given set of facts if a State acts in an arbitrarymanner, even in a matter of contract, an aggrieved party canapproach the Court by way of Writ under Article 226 of theConstitution and the Court depending on facts of the said case isempowered to grant the relief -------”. (Emphasis supplied)Again after quoting from Shrilekha Vidyarthi's case the Courtagain held thus:“23. It is clear from the above observations of this Court,once the State or an instrumentality of the State is a partyof the contract, it has an obligation in law to act fairly, justly W.P.C. No.31044/07 -: 22 :-and reasonably which is the requirement of Article 14 of theConstitution of India. Therefore, if by the impugnedrepudiation of the claim of the appellants, the firstrespondent, as an instrumentality of the State has acted incontravention of the above said requirement of Article 14,then we have no hesitation in holding that a writ court canissue suitable directions to set right the arbitrary actions ofthe first respondent ........”'(Emphasis supplied)14.Tested on the anvil of the above legal principles, Ishall examine whether this case qualifies as one coming withinthe parameters laid down by the Supreme Court in those cases.After a very elaborate process of evaluating the global tendersreceived, spanning a period of 2 ½ years from 6.6.1998 (date ofpre-qualification tender notice) to 6.1.2001 (date of accordingsanction to award the project work to the Consortium), the KSEBfound that the Consortium was qualified for award of thecontract. From then onwards, the Consortium was waiting forthe execution of the formal contract to start the work. However,because of various reasons, none of which can be attributed tothe Consortium, the matter dragged on, without execution of theformal contract and issue of work order. In the meantime, asevidenced by Exts. P4, P5 and P6, the Consortium was repeatedly W.P.C. No.31044/07 -: 23 :-reminding the KSEB of the adverse impact of the delay on thecost of the project and the necessity to discuss the need forcompensating the Consortium for the additional costs they mayincur because of the delay. Still the KSEB, perhaps because ofcircumstances beyond their control also, could not finally awardthe contract to the Consortium. In the meanwhile at the requestof the KSEB, the Consortium was, from time to time, extendingthe period of validity of their offer and the bank guaranteesfurnished by them. The KSEB was able to obtain the revisedenvironmental clearance from the Government of India after theearlier one was quashed by this court, only on 10.2.2005 byExt.P27. That environmental clearance was challenged before thiscourt and was set aside, although in the meanwhile Ext.P28dated 9.5.2005 awarding the contract to the Consortium forRs.4,14,22,04,500/- and requesting them to execute theagreement and to start work within 30 days was issued. (Thepetitioner disputes that this is the letter of acceptanceconstituting the formation of the contract about which I shallrefer to later on). Thereafter also, the Consortium repeatedly W.P.C. No.31044/07 -: 24 :-impressed upon the KSEB of the need for re-fixing the lump sumprice of Rs.414 crores after the environmental issues werecleared. The Consortium suggested an increased price ofRs.585.62 crores. Apparently the KSEB also tacitly accepted theneed for price escalation on account of the long delay in awardingthe contract and issuing work order and invited the Consortiumfor a meeting with the Full Board. Again at the request of theKSEB the validity period of the offer and the bank guaranteeswere extended by the Consortium. By Exts.P32 and P33 theConsortium intimated the KSEB that the extension of validity oftheir offer was on the understanding that the impact of theeconomic changes which had taken place after the submission oftheir bid and other points raised would be discussed and agreedupon before the award of the contract. The fact that the KSEBhad no doubt at least about the necessity to revise the contractprice is clear from the fact that they had invited the Consortiumfor discussion on the subject, during which, they never insistedthat the Consortium should stick on to the original bid priceaccepted. On the other hand the Board referred the W.P.C. No.31044/07 -: 25 :-reasonableness of the increased price suggested by theConsortium to compensate the rise in cost for opinion to theWAPCOS, a Government of India undertaking, who themselveshad earlier conducted the Comprehensive Environmental ImpactAssessment Study, which was a mandatory requirement forobtaining environmental clearance from the Government of India.On 24.10.2005, the Chief Engineer of Civil Constructions of theBoard issued a work order to the WAPCOS for studying thereasonableness of the demand for revision of bid price. WAPCOSsubmitted their report computing the escalated Price as Rs.570crores taking escalation up to September 2005 with a formula forcalculation of escalation beyond September, 2005 (apparentlyexpecting further delay in award of the contract beyondSeptember 2005). Further deliberations followed and the FullBoard of the KSEB decided to accept the negotiated price and torevise the letter of award in favour of the Consortium at thenegotiated price of Rs.570 crores, without financial package andto seek the approval of the Government of Kerala and the KeralaState Electricity Regulatory Commission. Ext.P36 letter was W.P.C. No.31044/07 -: 26 :-addressed by the KSEB to the Government narrating the entirehistory of the issue and requesting the Government to approvethe Board decision dated 30.12.2005 and issue orders,(i)to accept the negotiated price of Rs.375 croresfor civil and hydro mechanical works as offered by theConsortium partner M/s. HCC Ltd. (ii)to make available the power to M/s. HCC – BHELConsortium at IIT industrial tariff for the Consortium of theproject and to keep it firm at the present level throughoutthe contract period of 48 months.(iii)to fix interest rate on mobilisation advance to12%.(iv)to accept the negotiated price of Rs.195 croresoffered by M/s. BHEL for electromechanical equipments andworks of the project. (v)to issue revised letter of award to M/s. HCC –BHEL Consortium at the negotiated price of Rs.570 cores forthe turnkey execution of the work of Athirapally HydroElectric Project (163 MW) without financial package andafter obtaining government sanction and approval byKSERC. A reading of Ext.P36 would make it abundantly clear that on11.1.2006 the KSEB had no doubt whatsoever in their mind that“it would be advantageous for the Board to fix up the contract ata cost of Rs.570 crores and to complete the implementation as W.P.C. No.31044/07 -: 27 :-early as possible” and that “a re-tender process may take manymonths and in the present trend of rates received for otherprojects, the re-tender is likely to result only in a higher rate”and “further M/s. HCC – BHEL Consortium having kept their offervalid till date is likely to approach court of law againstcancellation of tender which may further delay theimplementation of the project”. Yet after a still further delay ofmore than 2 ½ years, on 22.8.2007, by Ext.P50A, in a suddenvolte face, even without waiting for the response from thegovernment to Ext.P36, despite requesting repeatedly for suchresponse on 29.6.2007 and 10.8.2007 by Exts. R1(d) and R1(e),immediately after obtaining environmental clearance on18.7.2007 [Ext.P39], the Board unilaterally accorded sanction tore-tender the work subject to approval by the Government. Thisdecision of the KSEB only is challenged by the petitioner asarbitrary, unreasonable and against the mandate of Article 14 ofthe Constitution of India. 15.For deciding this question, it is not necessary for meto go into the interpretation of any of the tender conditions, W.P.C. No.31044/07 -: 28 :-much less that of any contract. Therefore none of the disabilitiessought to be made out by the respondents stands in my way inconsidering the matter under Article 226 of the Constitution ofIndia. Therefore, at least on the question as to whether theaction of the KSEB in reversing their earlier decision is arbitraryand unreasonable, this writ petition is perfectly maintainable. 16.Yet another question may arise in this case as towhether administrative decisions taken and orders issued by KSEBoard in reference to contractual works, are amenable to writjurisdiction and are liable to be tested under Article 14 in so faras those decisions and orders are taken and issued by the Boardas a public statutory body. I am spared of the task of examiningon first principles or wading through precedents to find an answerto this question since, on very similar facts, a Division Bench ofthis Court had, in a matter between the very same parties, inHindustan Construction Co. Ltd V. KSEB, [1999 (2) KLT 30),as affirmed by the Supreme Court in KSEB V HCC Ltd. (AIR2007 SC 425), answered the question in the affirmative. Itwould be useful to refer to the facts of that case briefly to show W.P.C. No.31044/07 -: 29 :-the similarity of the facts of the two cases, which I shall presentlydo.17.HCC claimed compensation for delay in execution of acontract undertaken by them on behalf of the Board. The Boardconstituted an ad-hoc committee to go into this claim, whichcommittee recommended payment of Rs.808.26 lakhs as againsta claim of Rs.1688.08 lakhs made by the HCC. Another subcommittee appointed by the Board also considered the matter.The Board took a unanimous decision to pay a sum of Rs.808.26lakhs to the HCC as recommended by the ad-hoc committee.However the amount was not paid. A writ petition seekingmandamus to pay was admitted on 14.5.96. On 17.5.96 theBoard decided to have their earlier decision reviewed, since thethen Minister, on the floor of the Assembly, had declared that thedecision would be reviewed. Ultimately the Board on 25.1.97decided to cancel the earlier decision, which was challenged byHCC by amending the writ petition. A learned Single Judgedismissed the writ petition, which was taken in appeal by HCCbefore the Division Bench. While allowing the appeal the W.P.C. No.31044/07 -: 30 :-Division Bench held thus:“9. ............... Though the decision taken by the Board and theorders issued by the Board are in reference to the contractual work,in so far as the decision and the orders are concerned, they are takenby the Board as a public statutory body. Those orders are amenableto and are liable to be tested under Article 14 of the Constitution ofIndia ..............”.After referring to decisions of the Supreme Court on the subject,the Division Bench further held:“12.The Kerala State Electricity Board is a Boardconstituted in exercise of the powers conferred by Section 79B ofthe Electricity Supply Act, 1948, by the State of Kerala. Thedecision and the orders taken by the Board have to satisfy the testof fairness and reasonableness envisaged under Article 14 of theConstitution of India. The action of the Board has got a public lawelement in it. The action of the Board bears public character withpublic interest and their's is administrative decision and areimpeached on the ground of arbitrariness and violation of Article 14of the Constitution of India, and therefore, writ petition underArticle 226 of the Constitution is clearly maintainable. The claim ofthe HCC satisfies the tests laid down in various decisions of theSupreme Court. As held by the Supreme Court in Air India StatutoryCorporation's case referred above, there is no limitation underArticle 226 of the Constitution except self imposed limitations. Thearm of the court is long enough to reach injustice wherever it isfound. The Court is empowered to give proper relief and grant thesame in accordance with law. Since the public law remedy given byArticle 226 of the Constitution is not only to issue prerogative writsbut also to issue any order or direction to enforce any of thefundamental rights or for any other purpose.”In that decision the Division Bench went into the correctness of W.P.C. No.31044/07 -: 31 :-the decision of the Board to cancel the earlier decision of theBoard to accept the recommendation of the ad-hoc committeeand held that the decision of the Board dated 29-03-1997 isarbitrary and illegal and quashed that order. Consequently theBoard was directed to pass orders on the basis of the earlierdecision and to make payment to HCC accordingly. 18.The Division Bench decision was challenged by theKSEB before the Supreme court and in the decision of KSEB v.HCC ( AIR 2007 SC 425) the Division Bench decision was upheld.19.The facts of that case are very similar to this case;perhaps “more similar” in the sense that in that decision theKSEB had at least advanced several reasons to deviate from theearlier decision, whereas in this case no plausible reasons areadvanced for deviating from the earlier decision of the Boardtaken on 30-12-2005. That being so I am more than satisfiedthat this writ petition challenging the decision of the Board todeviate from the earlier decision on 30-12-2005 as arbitrary andunreasonable is perfectly maintainable.20.Now, I shall proceed to examine the justifiability of the W.P.C. No.31044/07 -: 32 :-decision of the KSEB to accord sanction to re-tender the worksubject to approval of the Government deviating from the earlierdecision to award the contract to the Consortium at the revisedbid price as suggested by the WAPCOS. The initial decision toaward the contract to the Consortium itself was after a longdrawn out tender process of examining both the technical andfinancial credentials putting the same through a series ofevaluation processes at various levels which have beensummarised while narrating the facts of the case, at thebeginning of this judgment. The credentials of the Consortiumare still not questioned by the KSEB or the Government. Theonly dispute is as to whether the contract price is to be refixedcommensurate with the rise in costs over a period of almostseven years, after the initial acceptance of the bid of theConsortium on 3-1-2001. Nobody even alleges that the delay infinalisation of the contract is on account of anything attributableto the Consortium. May be the delay was due to reasons beyondthe control of everybody. The fact that the Consortium would notbe able to undertake the work at the bid price of 3-1-2001 is also W.P.C. No.31044/07 -: 33 :-beyond doubt. The KSEB was only too aware of that fact andthat is why they went about holding discussions with theConsortium on their request for refixation of the bid amount.They also appointed an independent Central Government Agencyviz. WAPCOS, who was very conversant with the project, theyhaving earlier conducted the Comprehensive EnvironmentalImpact Assessment study of the project for the purpose ofenvironmental clearance, to ascertain the reasonableness of therevised bid price suggested by the Consortium. The WAPCOSsuggested a revised bid price, which was subjected to furtherevaluation and discussion by the Board, which ultimately took avery well considered decision on 30-12-2005 to award thecontract to the Consortium at the revised bid price. Thejustifiability of that decision is more than clear from the veryelaborate letter dated 11-1-2006 (Ext.P36), which runs into 30typed pages detailing the entire history leading up to the decisionof the Board dated 30-12-2005 seeking Government approval forthat decision. Therefore it would require very strong reasons toreverse that decision, which should be apparent on the face of W.P.C. No.31044/07 -: 34 :-the record. But strangely, even without waiting for a responseeither way from the Government, the KSEB, by Ext.P50A decisiondated 22-08-2007, in one sentence ordered thus:“ Decided to accord sanction to retender the work subject toapproval of the Government.”Although the learned counsel for the KSEB, in the course of hisarguments would assure this Court that he has been instructed tosubmit that the said decision is supported by sufficient reasonsavailable in the files, no reasons are mentioned in the counteraffidavits filed by the Board before this Court, nor have theychosen to produce the files containing those alleged reasonsbefore this Court. Therefore even if there are reasons, thepetitioner and this Court are kept in the dark about those reasonsor they do not want to divulge those reasons. 21.The reason put forward by the KSEB in their counteraffidavit is the one contained in Ext.P55 letter dated 29-09-2007communicated to the Consortium after the filing of the writpetition on 29-09-2007. The same reads thus:“You had offered a bid price of Rs.414,22,04,300/- (rupees fourhundred and fourteen crores twenty two lakhs four thousand and five W.P.C. No.31044/07 -: 35 :-hundred only) for the work vide ref 2 cited. As per this office orderNo.CEN/DB-39/90/817 dated 08.05.2005, the contract for execution of163 MW Athirappally Hydro Electric Project was awarded to you onturnkey basis at your quoted price of Rs.414,22,04,500 (Rupees fourhundred and fourteen crores twenty two lakhs four thousand and fivehundred only) less the discount of Rs.50,00,000/- (Rupees Fifty lakhsonly) offered by you on the basis of conditions of contract and othertender conditions of KSE Board. You were also requested to executethe agreement at the earliest and start the work within 30 (thirty)days on receipt of the letter. But instead of executing the agreementand starting the work, you, vide letter under reference (5) demandedescalation for the work. Your request for escalation has been examinedand it is found that escalation cannot be granted since the contract isfor a fixed amount with no provision for escalation. Therefore, thisoffice order No.CECN/DB 39/90/817 dated 09.05.2005 standscancelled invoking the tender conditions.22.The Government responded to the request of the KSEBfor award of the contract to the Consortium at the revisedcontract price of Rs. 570 crores by Ext.P50B dated 23-08-2007,i.e. the next day after the Board issued Ext.P50A order directingre-tender. Strangely in that letter the references are to theletters dated 29-06-2007 and 10-08-2007, which are onlyreminders to Ext.P36 dated 11-1-2006 and not Ext.P36. Thesame reads thus:“I am to invite your attention to the reference cited and toinform you that the proposals is to enhance the value of the contractfrom the earlier agreed figure of Rs.413.2 cr. by Rs.156.28 cr. To afinally negotiated figure of Rs.570 crores. This is when the contract is afixed one, containing no provision for escalation is also noteworthythat the successful contractor HCC-BHEL Consortium had agreed toextend the validity of their total quote of Rs.413.72 crores up to W.P.C. No.31044/07 -: 36 :-31.1.2005. After this count down the review by the MoEF and thechange in design, KSEB issued work order to the consortium on 9-06-2005 at a cost Rs.413.72 crores. The consortium accepted this thoughwith a demand for escalation in quoted price.The increase in cost is sought to be justified on the ground thatif tenders were invited afresh, the rates would be higher. This ishowever not a valid argument because there is really no transparencyin giving an escalation of Rs.156.28 crores to the contractor, evenbefore the work has started. If the work is retendered and the rategoes up beyond Rs.570 crores quoted now, the increase can only betreated as the cost to ensure transparency in government contracts.The fact that the new rates have been certified to be reasonableby M/s. WAPCOS a Government of India undertaking is not really anacceptable one.I am therefore directed to request you to retender the work ofAthirappilly Hydro Electric Project urgently and take necessary stepsfor the commencement of the project strictly adhereing to thespecific and general conditions stipulated by the Ministry ofEnvironment & Forests, Government of India in its EnvironmentalClearance for the project vide reference 3rd cited.”23.Let me examine the sustainability of the reasonsstated in Exts.P55 and P50B. First of all it is interesting to notethat after issuing Ext.P50B on 23.8.2007, on 5.9.2007 the verysame government replied to Ext.P50 letter of the Consortium forreassessment of the bid price till commencement of the work,stating that, that letter was forwarded to the Secretary of theKSEB for further necessary action without even mentioning aboutExt.P50B. The reasons stated in Ext.P55 is that the contract was W.P.C. No.31044/07 -: 37 :-awarded to the Consortium for Rs. 414 crores and theConsortium was requested to execute the agreement at theearliest and to start the work within 30 days, without complyingwith which the Consortium demanded escalation for the work,which could not be granted since the contract is for a fixedamount with no provision for escalation. This reason is putforward without taking into account all what had happened from6-1-2001, the date when the Board accorded sanction to awardthe project work to the Consortium for Rs. 414 crores onwards.No contractor can do such enormous work in August 2007 at therate quoted by them in the year 2000, i.e. almost 8 years ago,for knowing which no technical expertise is necessary, but onlypure common sense. That the Full Board had both technicalexpertise and common sense in abundance is clear from theirdecision dated 30.12.2005, by which they decided to award thecontract to the Consortium at the revised bid price of Rs.570crores. Therefore, Ext.P55 is a negation of the Board's owntechnical expertise and common sense, to say the least. Further,the statement in Ext.P55 that the request of the Consortium for W.P.C. No.31044/07 -: 38 :-escalation was examined and rejected is not true to facts sincethe Board had on 30.12.2005 decided to award the contract tothe Consortium at the revised price of Rs.570 Crores, for whichapproval was sought for from the Government by Ext.P36 letterdated 11.1.2006. Therefore, Ext.P55 is a contradiction in termsand in fact an attempt to deceive themselves and thereforecannot be accepted as a reason, much less an acceptable reason,at all. 24. Further, on 9.5.2005, when Ext.P28, which is the letterreferred to in Ext.P55 as not having been complied with wasissued, the work of the project was not being capable of beingstarted within 30 days thereof at all, if for no other reason, forthe reason that even assuming that Ext.P28 is a letter ofacceptance contemplated in clause 15.2. of Ext.P1 tenderconditions (which itself is disputed by the petitioner), clause 15.4and 15.5. of Ext.P1 grants minimum 35 days for the successfulbidder to complete their part of the contract. Further, after theletter of acceptance, the Board is required to forward twounsigned originals of the agreement to be executed by the W.P.C. No.31044/07 -: 39 :-successful bidder, which has not been done by the Board in thiscase. At no point of time, the Board had requested theConsortium to execute the agreement for the contract. Stillfurther, at that time the contract could not have been finalisedsince the environmental clearance granted by the Government ofIndia was set aside by this Court by Ext.P37 judgment, which wasfinally granted by Ext.P39 only on 18.7.2007. Therefore, thework could not have been started any time before 18.7.2007. Itis not as if the Board was not aware of these ground realities.They in fact had got the Consortium to renew the validity of theirbid and the Bank guarantees from time to time, even as late ason 18.5.2007 by Ext.P40. If the bid of the Consortium for Rs.414crores was finally accepted by Ext.P28 on 9.5.2005, it was notnecessary for the Board to request the Consortium to keep thevalidity of their bid open as late as on 18.5.2007. Further as perclause 15.3.2, the letter of acceptance of the KSEB will constitutethe formation of the contract, but the KSEB in their counteraffidavit repeatedly states that there is no concluded contract. Infact in paragraph 43 of the counter affidavit of the 1st respondent, W.P.C. No.31044/07 -: 40 :-it is stated thus:“Therefore in law there has not been any acceptance asenvisaged under the bid documents”As such, there is considerable merit in the contention of thepetitioner that Ext.P28 was not a letter of acceptance ascontemplated as per clause 15.3.2 of Ext.P1 tender conditions.25. Again, if there is no provision in the tender conditionsfor escalation, why did the Board go about discussing the revisedprice with the Consortium and refer the reasonableness of therevised price suggested by the Consortium, to WAPCOS for theiropinion? On the other hand, as is evident from Ext.P36, theBoard had in fact decided to accept the revised price suggestedby the WAPCOS. Therefore, Ext.P55 does not make any sense atall. 26. Further, in Ext.P1 tender conditions and Ext.R1(a)general conditions, the prohibition is only against escalation afterthe contract is concluded. Here, in the counter affidavit of theKSEB, they repeatedly contend that there is no concludedcontract between the parties in this case. The contention of the W.P.C. No.31044/07 -: 41 :-petitioner is that, and rightly so, theirs was not a request forescalation of price after the contract has been entered into but arequest to up date their original price taking into account thedelay in awarding the work and rise in cost over the years onaccount of the delay, which cannot be attributed to theConsortium. As I have repeatedly said, when the delay is notattributable to the Consortium, they cannot be pinned down totheir original bid price of 2000, in 2007, since as is evident fromExt.P36, the Board itself accepted in 2005 that the work couldnot have been executed by anybody for a price less than Rs.570crores. On the other hand the Board itself accepts the fact that,if re-tendered, the bid price is likely to be much higher thanRs.570 crores even in 2005. By Ext.P55, the Board has beentrying to deceive themselves, if not others, to say the least. 27. It is crystal clear that even as late as on 10.8.2007,when they issued Ext.R1(e) letter to the Government, the Boardwas still sticking to their decision dated 30.12.2005 and wasrequesting the Government for approval of that decision. Thenbarely 12 days thereafter, without any ostensible reason, without W.P.C. No.31044/07 -: 42 :-even waiting for the response of the Government, Ext.P50A wasissued on 22.8.2007 according sanction for re-tender. Noremotely plausible reason has been pleaded by the Board in theircounter affidavits for their sudden turn around and change ofmind. What happened between 10.8.2007 and 22.8.2007 is amystery and no explanation is forthcoming from the Board, whois the only person in the know of that reason, if there is one.Therefore, I have no hesitation whatsoever to hold that theaction of the KSEB is arbitrary and unreasonable, which wouldnot stand the test of Article 14 of the Constitution of India, byany stretch of imagination. 28. Now let us turn to the stand of the Government ascontained in Ext.P50B. For 2 ½ years from 11.1.2006 (Ext.P36),in spite of reminders the Government did not find it expedient torespond to the request of the KSEB for approval of their decisionto award the contract at the revised price of Rs.570 crores.While echoing the stand of the KSEB that there is no provision forescalation of price in the contract which is a fixed one, theGovernment advocates re-tender for the sake of transparency, W.P.C. No.31044/07 -: 43 :-although they, as admitted by themselves, were aware of the factthat on re-tender the rates would go still higher. The argumentof lack of provision for escalation in the tender conditions hasalready been considered and rejected by me hereinbefore.Regarding the other reason, I am of opinion that the lack oftransparency is in the present action of the KSEB and theGovernment. It is no secret that the State is starved of fundseven for day to day activities, not to speak of developmentalactivities. They are finding it difficult to find funds for repair ofroads which have been practically destroyed during the lastmonsoon. They have no funds for providing drinking water facilityto people of various parts of the State, who have beenclamouring for the same, for years. The Board is clamouring forupward revision of electricity tariff for quite some time on theground that they are incurring heavy losses. It has been reportedin the press that the Government has accorded sanction to the KSEBto impose load shedding in the State for half an hour between 6 and10 p.m. from 1.1.2008 onwards. Both are aware that a re-tenderwould result in the rates going up still higher, how higher nobody W.P.C. No.31044/07 -: 44 :-knows. Perhaps the fact that in 1998 the bid security prescribedin the notification inviting tenders and the bid security furnishedby the Consortium was only Rs.1 crore, whereas the bid securitystipulated in Ext.P56 tender notification is Rs.4.41 crores is someindication as to how high it can be. The Board after thoroughevaluation is satisfied that the rate of Rs.570 crores (as on30.12.2005) is reasonable. The State is willing to sacrifice a fewcrores of rupees which the people of this State can ill afford forthe sake of imaginary transparency in their decision. The State isin dire need of additional power resources as fast as possiblewhich is clear from the decision to impose load shedding. Thetechno-economic clearance for the project is valid only up to31.3.2008. If the work is not started before that date, the KSEBhas to go through the cumbersome and time consuming processof getting the clearance all over again resulting in further delay ofthe start of the work of the project. Going by the earlierexperience, the tender process which started on 6.6.1998 (dateof issue of tender notification) culminated in acceptance of tenderonly on 6.1.2001. Therefore, a re-tender would certainly result W.P.C. No.31044/07 -: 45 :-in further delay. 29.In this connection it is worthwhile to note theimportance of completing the project for the State in the words ofthe 2nd respondent itself, as contained in paragraphs 34 and 37 oftheir counter affidavit, which reads thus:-“34. Athirappilly Hydro Electric Project is a prestigious major hydelproject which should be implemented without any more delay in order toimprove the power position of the State of Kerala. The project is all themore inevitable because it is a peak load station. In the State, the peak loadhas crossed 2500 MW wheres off peak load remains 1400-1800 MW. Inview of the introduction of Availability Based Tariff (ABT) any overdrawalduring peak hours would cost heavily to the Board. Therefore, every effortshould be made to improve the peak load generation. In the above context,the implementation of this hydel project, which would give 163 MW duringpeak hours has become inevitable and most desirable.xxxxxx37. Government have taken all sincere endeavours to implement theproject as proposed, in time, as Athirappilly Hydro Electric Project which, ifimplemented can add up 233 MU of energy annually. Therefore, theimplementation of the project assumes greater significance in the presentpower scenario and worsening power shortage of the state especially in thepeak hours.”Paragraph 34 of the counter affidavit of the 2nd respondent is infact a verbatim reproduction of paragraph 46 of the counteraffidavit of the 1st respondent.30.In such circumstances it defies logic as to why theKSEB and the Government would opt for a re-tender, when an W.P.C. No.31044/07 -: 46 :-admittedly cheaper and speedier option is available to them inawarding the contract to the Consortium at the negotiated price.I am of opinion that the lack of transparency is certainly in thepresent action of the KSEB and the Government in opting for re-tender on the face of all adverse circumstances, which wouldadmittedly result in delay and loss to the KSEB and the State.Hence the justification put forward by the State in Ext.P50Bsounds hollow. That leads to the irresistible conclusion that theaction of respondents 1 and 2 cannot be justified on the groundof transparency also. 31. In view of the above discussion, I have no hesitation tohold that the action of respondents 1 and 2 in reversing theearlier decision dated 30.12.2005 of the KSEB to award thetender to the Consortium at the revised negotiated bid price andopting for re-tender is clearly arbitrary and unreasonable andliable to be interfered with by this Court under Article 226 of theConstitution of India. 32. I am further satisfied that public interest also supportsthis view, some aspects of which I have already adverted to in W.P.C. No.31044/07 -: 47 :-paragraph 26 above. In Ext.P36, the KSEB had elaboratelystated as to why it is in the public interest and advantageous toKSEB to award the contract at the revised contract price ofRs.570 crores as computed in 2005. Even at the risk of being tooelaborate and sacrificing the virtue of brevity, I deem itnecessary to reproduce the same here. Ten reasons, the last oneof which is the conclusion, have been stated, which are :“The above facts were evaluated by the Full Time Members and othernegotiating officers and it was found that the total price of the projectoffered after negotiation by M/s. HCC/BHEL Consortium at Rs.570crores would be advantageous to the Board in view of the followinggrounds:(a)The Athirappilly Hydro Electric Project is a prestigiousmajor hydel project, which should be implemented without any moredelay in order to improve our power position. The project is all themore inevitable because it is a peak load station. In our State, the peakload has crossed 2500 MW whereas off peak load remains between1100 to 1400 MW. In view of the introduction of Availability BasedTariff, any over drawal during peak hours would cost heavily to theBoard. Therefore every effort should be made to improve the peakload generation. In State like Tamil Nadu (Kadampara – 400 MW),West Bengal (Puruliyu – 900 MW), Andhra Pradesh (Sreesailam – 700MW) etc, pumped storage projects are implemented to meet peak load.In pumped storage projects, water is pumped back into the reservoirduring off peak hours when cost of power is comparatively lesser andthat water is utilized during peak hours to generate energy to meetpeak load demands. In that context, implementation of this hydelproject, which would give 163 MW during peak hours, has becomeinevitable and most desirable. W.P.C. No.31044/07 -: 48 :-(b)Though the project was envisaged as early as in 1982,techno economic clearance environmental clearance and forestclearance could be obtained only on 13.5.96, 20.1.98 and 16.12.99respectively. Yet the project could not be implemented due to variouslitigations and such other factors. Though tender was invited as earlyas on 6.6.98 and a decision was taken on 3.1.2001 by the Full board, thework could not be awarded due to interference of the Hon'ble Courtand consequent procedural formalities like ComprehensiveEnvironmental Impact Assessment, environmental public hearing,renewal of techno economic clearance revitalization of environmentalclearance etc. It is after much difficulty, the Board could clear all suchproblems and get the techno-economic clearance and environmentalclearance revalidated on 31.3.05 and 10.2.05 respectively. The techno-economic clearance is valid only for a period of 3 ½ years . Further,after 1980, the Board could not start any major hydel project forcingthe board to implement Naphtha/I.SIIS based thermal power stations.In view of the exorbitant rate of Naphtha/USIIS, these thermalpower stations remain shut down on majority of the days and the boardis forced to pay their fixed charges though we are not utilizing thecapacity. This situation is likely to continue till LNG is made availableand the power stations are suitably transformed. Any further delay inawarding the project will only increase the cost of the project anddelay the benefits there from.(c ) This project has been included in the One Year Action Planof Government of Kerala and in the list of projects to be completedduring 11th Five Year Plan. Government of India and Central ElectricityAuthority are monitoring the project. It is also pertinent to note thatGovernment of India have launched a national initiative for capacityaddition of 100000 MW through thermal projects and 50000 MWthrough hydel projects before 2012. As far as Kerala is concerned,the hydel capacity addition in this national initiative is only to the tuneof 508 MW, in which Athirappilly Hydro Electric Project contributes163 MW. There will not be any capacity addition in our State throughthermal projects till LNG terminal is nationalized. Therefore speedyimplementation of this project is very crucial and inevitable. W.P.C. No.31044/07 -: 49 :-(d)The cost of labour and cost of materials are spiraling upespecially during last two years as could be seen from the whole-saleprice index for cement, steel, POL etc. The cost of labour is alsoincreasing steadily. There is no likelihood of reversal of the trend.M/s. WAPCOS has worked out the cost escalation of the projectconsidering all these facts.(e)The Board recently invited tenders for PallivasalExtension Scheme. The average cost per MW based on the lowesttenderer works out to Rs. 4.467 crores. Similarly, the rates forrecently completed Small Hydro Projects were also compared. It isfound that the present rate offered by M/s. HCC-BHEL at Rs.3.497 perMW is very reasonable.(f)at the time of inviting tenders, the rate for loans availedby Electricity Board were bearing interest in the range of 14 to 17%.Since the rate of interest has fallen to a rate of 10% and below, therate of interest of 12% on mobilization advance agreed to by M/s.HCC-BHEL Corporation is quite reasonable. Since the Board is presentlygetting loans at interest rate of and below 10%, granting of mobilizationadvance at 12% interest rate will not have any adverse financial impacton the Board. (g)In the original tender, the electricity required for theproject was offered at the following rates.Demand charge – Rs. 230 per KVA per monthEnergy charge – Rs. 2.15 per unit.It was also proposed to have an increase of 10% per annum. Ifwe work out the electricity charge as per tender condition, the demandcharge and energy charge at the end of construction period (after 48months) would be Rs. 306 per KVA per month and Rs. 2.86 per unitrespectively. Considering the average of these two values the demandcharge and the energy charge would be Rs. 268 per KVA per month andRs. 2.51 per unit respectively. The rate of energy now offered to M/s.HCC-BHEL Consortium by the Board is present HT-Industrial tariffwhich shall be firm for the construction period of 48 months. Thepresent HT-Industrial tariff is as follows: W.P.C. No.31044/07 -: 50 :-Demand charge – Rs. 270 per monthEnergy charge – Rs. 3.00 per unit.From the above, it is clear that there is no additional financialcommitment by agreeing to maintain the present HT-Industrial tarifffirm for the project construction period and in fact it is advantageousto the Board.(h)Though M/s. HCC-BHEL has requested for a specialamount of Rs. 5 crores for the Dam Toe Power House, they ultimatelyagreed to include Damtoc Power House and its machinery andequipments in the over all cost of Rs. 570 crores agreed to by them.Similarly, an amount of Rs. 69 lakhs which was omitted to be includedfor energy dissipating devices is also included in the amount of Rs. 570crores agreed to by them.(i)M/s. HCC-BHEL has also offered a package to give thefollowing without any additional cost over and above Rs. 570 crores:(1) To supply Max DNA based controls instead of Pro controlledcontrols offered earlier. The system now offered will cover all thefunctions as desired in the tender documents and is the latest state-of-the-art equipment. (2) To supply Digital Governer Panel in place of the Analoggoverner.(3) To supply Digital State Excitation Equipment.(4) To supply butterfly type main inlet valve in place ofspherical valve.(5) The Protection Relays shall be numeric type except the busbar protection relay which shall be static type.(j)If the present offer is not accepted, the only option forthe Board would be to cancel this tender and to go in for a re-tender.A re-tender process may take many months and in the present trend of W.P.C. No.31044/07 -: 51 :-rates received for other projects the re-tender is likely to result onlyin a higher rate. Further, M/s. HCC-BHEL Consortium having kept theiroffer valid till date, is likely to approach court of law againstcancellation of tender which may further delay the implementation ofproject.”33.In paragraph 48 of their first counter affidavit, theBoard has again stated, (probably intended as an argumentagainst granting stay of the process of re-tender,) thus:48.I respectfully submit that it is after much difficulty, theBoard could get the Techno economic clearance on 31-3-2005 with a validityperiod of 3 years, which will expire by 31-3-2008. While according TEC,the Central Electricity Authority (CEA) had stipulated that if the actualtime gap between TEC and actual start of work is three years or more, afresh TEC shall be obtained before start of the actual work. In view of theabove condition, if the actual work could not be commenced before 31-3-2008, fresh TEC has to obtained by the Board from CEA, which will furtherdelay the implementation of the project”This paragraph has been reproduced verbatim by the StateGovernment in paragraph 36 of their counter affidavit. 34. At paragraph 67 of Ext.P36, it is stated thus:“The probable result of an attempt to re-tender has been explainedin para 61(j). In view of the facts mentioned therein it is found that theproject cost would definitely increase in a retender at the present trend ofprices of materials and labour. At the same time energy to the tune of 233million units per annum will be lost to the Board. The State has a peakdeficit of nearly 700 MW and it is likely to increase further. Thereforeimplementation of this project would definitely contribute to meet the peakdemands of the State and of the nation at large. It is pertinent to notethat we were now selling peak energy at a rate of Rs.3.70 per unit and offpeak energy at a rate of Rs.3.05. At a moderate rate of Rs.3.00 per unit W.P.C. No.31044/07 -: 52 :-the 233 million units anticipated from this project would cost about Rs.70crores per annum. Any delay in completion of project would result in loss tothe above extent. Therefore the earlier the project is completed thebetter it would be in terms of generation of energy, meeting peak demandand financial gains.(Underlining supplied)35. From paragraph 27 of the counter affidavit of the 2ndrespondent it is clear that the Central Electricity Authority hasalso instructed the KSEB to revise the project cost of theAthirapally Hydro Electric Project.36.It is a mystery as to how these logical and wellconsidered reasons based on public interest which held good formore than 2 ½ years from 30.12.2005 suddenly turned 'noreasons' on 22.8.2007 so as to compel the KSEB to decide to re-tender the project. A decision arrived at after evaluation atvarious levels and long discussions taking into account all aspectsof the matter has been reversed, apparently, without anydeliberations whatsoever by an order in one sentence citing noreasons for arriving at such a mementous decision, which wouldresult in the KSEB shelling out several crores of rupeesadditionally, and causing further delay in implementing the W.P.C. No.31044/07 -: 53 :-project, which this state can ill afford. That would certainly benot in public interest by any stretch of imagination. 37.Weighing this overwhelming public interest, with thereasons advanced by the Board in support of reversing theirearlier decision, which themselves are against their ownreasoning in Ext.P36 and those of the Government (whichrevolves round 'transparency' and which according to me is not atall transparent), I am satisfied that public interest should prevailover those reasons (if they can be considered as reasons at all)advanced post facto by respondents 1 and 2. 38.Although the Board claims that the tender proceedingscan be concluded within the dead line of 31.3.2008 as admittedin Ext.P36, the earlier experience has proved that the process offinalising of the tender involves a time consuming process (lasttime it took 2½ years) and in all probability the same is not likelyto be completed before 31-03-2008. If it is rushed through thereis every likelihood of the decision being faulty also. Furtheradmittedly, on retender, the price is likely to go higher. Onaccount of the delay likely to be caused on re-tender, the State W.P.C. No.31044/07 -: 54 :-would be losing a further Rs.70 cores per annum by way of powerlost not to mention the inconvenience caused to the public. As ofnow the only person capable of starting the work before 31-03-2008, is the Consortium, who asserts that they can start thework within 30 days of award of the contract to them. 39.The above are more than sufficient reasons forreturning a verdict in favour of the petitioner in this case.Therefore I am not going into the grounds of promissory estoppeland legitimate expectation pleaded by the petitioner, and theyare left open. Needless to say, it follows as a necessaryconsequence that Ext.P56 notification inviting fresh tenders forthe Athirapally Hydro Electric Project is also liable to be quashed.40.In fact the absolute lack of reasons or the hollownessof the reasons put forward now by respondents 1 and 2 for theirbizarre action leaves me with the vague feeling that therespondents 1 and 2 actually want to award the contract to theConsortium and they only want the stamp of approval of thiscourt for doing the same, as an insurance against apprehendedadverse public opinion. W.P.C. No.31044/07 -: 55 :-In the result,a)Exhibits P50A, P50B, P55 and P56 are herebyquashed;b)the respondents, particularly the Board, are directedto implement the decision of the Board dated30-12-2005, approval of the Government for which issought for in Ext.P36 with further escalation as per theformula suggested by WAPCOS;c)the first respondent Board is directed to revise thecontract price as per the formula suggested by theWAPCOS, either by doing it themselves or by referringit to WAPCOS, if necessary and implement the decisiondated 30-12-2005 by awarding the contract to theConsortium, for the contract price so fixed;d)the Board is directed to take all steps necessary forthe above purposes and to issue consequential orders,to award the contract to the HCC-BHEL Consortium atleast by 25-02-2008, so that the Consortium cancommence the work of the project before 31-03-2008 W.P.C. No.31044/07 -: 56 :-to obviate the necessity of obtaining fresh Techno-Economic clearance; ande)the writ petition is allowed as above with no order asto costs;S.SIRI JAGAN, JUDGEsdk+