Research › Search › Judgment

Kerala High Court · body

2017 DIGILAW 1145 (KER)

K. Moideenkutty Haji v. State Of Kerala

2017-08-10

P.B.SURESH KUMAR

body2017
JUDGMENT : P.B. Suresh Kumar, J. The petitioner is a PWD contractor. He was the successful bidder in a tender process for the execution of a road work. The work is one which is being executed by the State Government with the funds provided by the Ministry of Surface Transport, Government of India. Ext.P2 is the award of the work in favour of the petitioner. As per Ext.P2, the petitioner was directed to furnish performance security to the tune of Rs. 50,30,000/- and additional performance security to the tune of Rs. 1,31,00,000/-. The petitioner furnished the performance security and the additional performance security directed to be furnished as per Ext.P2 award. The case of the petitioner is that performance security and additional performance security are demanded in terms of the Instructions to Bidders (ITB) which is part of the Standard Bidding Document prescribed by the Ministry of Surface Transport, Government of India; that bids below the Probable Amount of Contract (PAC) are treated as unbalanced bids in terms of ITB; that additional performance security is to be furnished in terms of the ITB in the case of unbalanced bids if the employer, after evaluation of the price analyses based on the materials available by the contractor, finds that the bid is seriously unbalanced and that price analyses in terms of ITB has not been undertaken by the employer before the petitioner was directed to furnish additional performance security. The petitioner, therefore, challenges Ext.P2 award to the extent it directs the petitioner to furnish additional performance security. 2. A statement has been filed by the respondents contending that the additional performance security has been demanded from the petitioner in accordance with the ITB. 3. Heard the learned counsel for the petitioner as also the learned Government Pleader. 4. The PAC of the work awarded to the petitioner is Rs. 11,36,62,446/-. The bid of the petitioner was less than 11.52% of the PAC. Clause 29.5 of ITB reads thus: 29.5 If the Bid of the successful Bidder is seriously unbalanced in relation to the Engineer's estimate of the cost of work to be performed under the contract, the Employer may require the Bidder to produce detailed price analyses for any or all items of the Bill of Quantities, to demonstrate the internal consistency of those prices with the construction methods and schedule proposed. After evaluation of the price analyses, the Employer may require that the amount of the performance security set forth in Clause 34 be increased at the expense of the successful Bidder to a level sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the contract. Clause 34 of the ITB reads thus: 34.1 Within 21 days of receipt of the Letter of Acceptance, the successful Bidder shall deliver to the Employer a Performance Security in any of the forms given below for an amount equivalent to 5% of the Contract price plus additional security for unbalanced Bids in accordance with Clause 29.5 of ITB and Clause 52 of Conditions of Contract: - a bank guarantee in the form given in Section 8; or - certified Cheque/Bank Draft as indicated in Appendix. 34.2 If the performance security is provided by the successful Bidder in the form of a Bank Guarantee, it shall be issued either (a) at the Bidders option, by a Nationalized/Scheduled Indian bank or (b) by a foreign bank located in India and acceptable to the Employer. 34.3 Failure of the successful Bidder to comply with the requirements of Sub-Clause 34.4 shall continue sufficient grounds for cancellation of the award and forfeiture of the Bid Security. 5. It is evident from the clauses referred to above that additional performance security can be demanded by the employer only in accordance with clause 29.5 of ITB. Clause 29.5 of the ITB provides that if the bid of the successful bidder is seriously unbalanced in relation to the Engineer's estimate of the cost of work to be performed under the contract, the Employer may require the Bidder to produce detailed price analyses for any or all items of the Bill of Quantities, to demonstrate the internal consistency of those prices with the construction methods and schedule proposed. Clause 29.5 also provides that after evaluation of the price analyses, the Employer may require that the amount of the performance security set forth in Clause 34 be increased at the expense of the successful Bidder to a level sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the contract. Clause 29.5 also provides that after evaluation of the price analyses, the Employer may require that the amount of the performance security set forth in Clause 34 be increased at the expense of the successful Bidder to a level sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the contract. A combined reading of the aforesaid clauses would indicate beyond doubt that the employer is given the authority to direct the successful bidder to furnish additional performance security if the employer is of the opinion that his/her bid is seriously unbalanced. It is also evident from clause 29.5 of the ITB that in such cases, the employer may require the bidder to produce detailed price analyses for any or all items of the Bill of quantities to satisfy that the bidder would be able to execute the work satisfactorily in terms of his bid. It is further evident from clause 29.5 of the ITB that the issue of furnishing additional security arises only if the employer cannot agree with the detailed price analyses furnished by the bidder. Though the expression used in the first sentence of clause 29.5 is, 'the employer may require the bidder to produce detailed price analyses', in so far as the employer is expected to consider the issue whether the bidder would be able to execute the work in accordance with this bid, according to me, it is obligatory for the employer in such cases to call for the price analyses of the bidder for undertaking the price analyses provided for under the said clause. It is also evident from clause 29.5 of the ITB that in such cases, the successful bidder is liable to furnish additional security only to the extent sufficient to protect the employer against financial loss in the event of default of the successful bidder under the contract. It is, therefore, clear from clause 29.5 of the ITB that the employer cannot direct the successful bidder to furnish additional security unless the employer is satisfied that the price analyses of the successful bidder is not consistent with the construction methods and schedule proposed. In other words, there is no question of the employer directing the bidder to furnish additional performance security before the price analyses provided for under clause 29.5 of the ITB is undertaken. In other words, there is no question of the employer directing the bidder to furnish additional performance security before the price analyses provided for under clause 29.5 of the ITB is undertaken. Admittedly, the price analyses as provided for under clause 29.5 of the ITB has not been undertaken by the employer in the instant case. The demand made to the petitioner for furnishing additional performance security was, therefore, not in accordance with the Standard Bidding Document. 6. The writ petition, in the circumstances, is allowed and Ext.P2 award to the extent it directs the petitioner to furnish additional performance security is quashed. The Bank guarantee furnished by the petitioner towards the additional performance security shall be returned. It is made clear that this judgment will not preclude the employer from directing the petitioner to furnish additional performance security in accordance with the provisions contained in clause 29.5 of the ITB, if the employer is of the opinion that the bid of the petitioner is seriously unbalanced. It is also made clear that if the petitioner fails to furnish additional performance security demanded in terms of clause 29.5 of the ITB, the employer is free to terminate the contract or withhold the amount sufficient for the additional performance security from the bills payable to the petitioner in respect of the work.