N. Pramod Sibi vs. The State Of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN TUE AY, THE 26TH DAY OF OCTOBER 2021 / 4TH KARTHIKA, 1943 WP(C) NO. 15459 OF 2021 PETITIONER: N. PRAMOD SIBI AGED 43 YEARS S/O. SUBRAMANYAN, ANDALATT HOUSE, KESERY COLLEGE ROAD, NORTH PARAVOOR, ERNAKULAM DISTRICT, PIN 683513 BY ADVS. MADHU RADHAKRISHNAN NELSON JOSEPH M.D.JOSEPH DEEPAK ASHOK KUMAR RESPONDENTS: 1 THE STATE OF KERALA DIRECTORATE OF INDUSTRIES AND COMMERCE, REPRESENTED BY ITS PRINCIPAL SECRETARY, VIKAS BHAVAN, 3RD FLOOR, UNIVERSITY OF KERALA, SENATE HOUSE CAMPUS, PALAYAM, THIRUVANANTHAPURAM, PIN 695 033 2 THE KERALA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION (KINFRA), KINFRA HOUSE, T.C 31/2312, SASTHAMANGALAM, THIRUVANANTHAPURAM, PIN 695 010, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV P.U.SHAILAJAN SMT.VIDYA KURIAKOSE. GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 26.10.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P.(C).No.15459/2021 2 P.V.KUNHIKRISHNAN, J. -------------------------------- W.P.(C).No.15459 of 2021 ---------------------------------------------- Dated this the 26th day of October, 2021 JUDGMENT The petitioner had applied for tender floated by the 2nd respondent to carry out the work of rectification of walkways (cable trench cover slabs) Phase II at KINFRA Apparel Park, Thumba, Thiruvananthapuram. The copy of the tender submitted by the petitioner is Ext.P1. The petitioner being the lowest tenderer, the 2nd respondent selected the petitioner to carry out the work. Ext.P2 conditional work order was issued by the 2nd respondent wherein two conditions were to be complied with for acceptance of the tender finally and also for signing the agreement. The first condition was that the petitioner should produce performance security deposit of Rs.2,18,127/-- and the second condition was that the petitioner should produce additional performance guarantee of Rs.2,05,569/-. The petitioner produced the performance

W.P.(C).No.15459/2021 3 security deposit of Rs.2,18,127/-. But, as far as the additional performance guarantee of Rs.2,05,569/- is concerned, the petitioner was not able to produce the bank guarantee, though he produced fixed deposit receipt for the same amount. However, since this was not acceptable to the 2nd respondent, there was no final acceptance of the tender by the 2nd respondent and consequently no agreement was signed nor the work site was handed over in the light of the same. Finally the work order was cancelled as per Ext.P3. However, as per Ext.P3, the petitioner has been informed that the performance security deposit of Rs.2,18,127/- will stand forfeited and further an additional liability of Rs.5,77,475/- has been imposed on the petitioner as cost. Aggrieved by the same, this writ petition is filed with following prayers: i. Issue a writ of Certiorari or any other writ calling for records leading to issuance of Exhibit P3 and Ext P6 and quash the same. ii. Declare that there is no binding contract between the Petitioner and the 2nd respondent. iii. Issue a writ of mandamus directing the 2nd respondent to return to the Petitioner the Treasury Fixed Deposit of Rs. 2,18,127/- submitted towards Performance Security Deposit. iv. Pass such other writ order or direction as this

W.P.(C).No.15459/2021 4 hon'ble court may deem fit and proper. v. Award the costs of the Writ Petition.

W.P.(C).No.15459/2021 5 Trust [2021 (3) SCC 24] and the judgment dated 23.07.2021 in Civil Appeal No.4358 of 2016 in South Eastern Coalfields Ltd. and Others v. S.Kumar's Associates AKM (JV) [MANU/SC/0473/2021]. The counsel also relied on the judgment of the Apex Court in State of Madhya Pradesh and Others v. Firm Gobardhan Dass Kailash Nath [AIR 1973 SC 1164].

W.P.(C).No.15459/2021 6

W.P.(C).No.15459/2021 7 PAC. The accepted schedule of work is the same as given in the tender. GST at applicable rates will be paid extra. You are directed to attend this office with Kerala stamp paper worth Rs.200/- along with Performance Security Deposit of Rs.2,18,127/- (Rupees two lakhs eighteen thousand one hundred and twenty seven only), being 5% of the contract amount (at least 50% of this shall be in the form of Treasury Fixed Deposit and the rest in the form of Bank Guarantee from a Scheduled/Nationalized bank) and execute an agreement with KINFRA within 4 weeks on receipt of the work order. The validity of the Bank Guarantee shall be up to the expiry of defect liability period plus three months. You are also requested to submit a bank Guarantee for Rs.2,05,569/- (Rupees two lakhs five thousand five hundred and sixty nine only) towards Additional Performance Guarantee, as per G.O (P) No. 19/2016/Fin dated 03/02/2016, for executing the agreement. The date of commencement of the work shall be 10

th day from the date of Work Order or 7

th day from the date of receipt of Work Order whichever is earlier and the entire work shall be completed within 6 months. You are requested to take over the site and start the work forthwith as per the terms and conditions of the tender. (underlines supplied) All other terms and conditions as per the tender shall be binding on you. The rates quoted by you shall

W.P.(C).No.15459/2021 8 remain firm till the completion of the work. Please return a copy of this work order duly signed as a token of your acceptance. Thanking you, Yours faithfully, Managing Director.”

W.P.(C).No.15459/2021 9 between the petitioner and the 2nd respondent.

W.P.(C).No.15459/2021 10

Hence I request you to consider this as my final request for time extension and do the needful. Thanking you, Yours faithfully Pramod Sibi”

W.P.(C).No.15459/2021 11

W.P.(C).No.15459/2021 12

Parks

Ltd.,

Thiruvananthapuram- Termination Notice Ref:

W.P.(C).No.15459/2021 13 to the work order. You have promised to commence the work after furnishing the additional performance security and after executing the Agreement. Inspite of continuous contact from our officers you have not come forward to execute the Agreement. As per the work order the completion date of work is 22.08.2020. This was that you are not at all interested in executing the work. The delay in commencing the work has caused serious difficulties. You have given a final notice dated 28.10.2020 asking you to execute the agreement and commence the work within 10 days from the above letter indicating that if you fail to do so we would be constrained to cancel the work order and forfeit EMD and also work will be awarded to another agency at the risk and cost and any additional amount incurred in awarding the work to another agency will be recovered from the security by forfeiting fixed security deposit submitted by you. Clause 5 in General Conditions of Contract, it clearly states that "if the contractor commits default in the execution of work, KINFRA shall without prejudice to any other right or remedy available in law, be at liberty to cancel the work order & forfeit the performance guarantee absolutely". There is absolutely no response from you and we

therefore cancel the work order dated 14.02.2020 and will be carrying out the rectification work through another agency at your risk and cost. In that event any additional cost incurred by KINFRA will be

W.P.(C).No.15459/2021 14 recovered from the Security Deposit and EMD will be forfeited without further notice to you. Thanking you, Yours faithfully, Managing Director”

W.P.(C).No.15459/2021 15 and the 2nd respondent as far as the execution of the work is concerned. It is an admitted fact that, there is no work agreement executed between the petitioner and the 2nd respondent. It is true that in Ext.P2, it is stated that “please return a copy of this work order duly signed as a token of your acceptance” and thereafter the petitioner sent Ext R(2)(d). But R(2)(d) can’t be treated as an acceptance of an agreement to execute the work. At the maximum, it can be treated as an acceptance to perform the conditions in the work order like submission of Performance Security Deposit, Additional Performance guarantee and thereafter to execute the agreement itself. Therefore till an agreement to execute the work is entered between parties after performing the conditions in Ext.P2 work order, it can’t be said that there is a concluded contract.

“55. The trial court relied on Section 4 of the Contract Act, but completely overlooked Section 7. Section 7 of the Contract Act, 1872 is set out herein below for convenience:

W.P.(C).No.15459/2021 16 “7. Acceptance must be absolute.-In order to convert a proposal into a promise the acceptance must- (1) be absolute and unqualified; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.”

W.P.(C).No.15459/2021 17 the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place.

W.P.(C).No.15459/2021 18 appellant or of damages or any risk purchase at the cost of the appellant. The earnest deposit of the appellant is liable to be refunded.”

“19. We have already reproduced aforesaid the terms of the letter of award and what it mandated the Respondent to do. None of the mandates were fulfilled except that the Respondent mobilized the equipment at site, handing over of the site and the date of commencement of work was fixed vide letter dated 28.10.2009. Interestingly this letter has been addressed to the Sub Area Manager of the Appellant by the office of the Appellant. The Respondent, thus, neither submitted the Performance Security Deposit nor signed the Integrity Pact. Consequently, the work order was also not issued nor was the contract executed. Thus, the moot point would be whether mobilization at site by the Respondent would amount to a concluding contract inter se the parties. The answer to the same would be in the negative.”

“2. By a notice, dated August 27, 1953, the Chief

W.P.(C).No.15459/2021 19 Conservator of Forests invited tenders for the purchase of certain lac and lac products, the quantities whereof were set out therein. The conditions of sale, subject to which the said tenders were to be made, were as follows: x x x 5. 25 per cent of the purchase price shall be deposited in cash or G.C. notes immediately after the close of sale.-

W.P.(C).No.15459/2021 20 behalf of the Chief Conservator of Forests. Though the respondent-firm had to deposit 25 per cent of the aforesaid two amounts, it deposited two sums only, namely, Rs. 7000/- and Rs. 500/- and asked for a week's time to pay the balance of the said 25 per cent initial deposit. xxx xxx xxx

W.P.(C).No.15459/2021 21 paid within one month from the date of the purchase. If the person making the tender failed to pay the remaining balance of 75 per cent of the price, the State would be entitled to forfeit the initial deposit of 25 per cent and to resell the goods and recover the deficit, if any, from the purchaser. Conditions 5 and 6 were conditions of sale subject to which a tender could be validly accepted and sanctioned by the Chief Conservator. There was no proof, by way of anything in writing, to show that such a sanction was in fact given. There was equally no proof that the Chief Conservator had the authority to waive the conditions, subject to which only tenders could be validly accepted and sanctioned. In the absence of the initial deposit of 25 per cent of the purchase price having been made on the spot, the tenders could neither be validly accepted nor sanctioned by the Chief Conservator. In the absence of any authority to waive the said conditions, there was no valid acceptance or sanction of the said tenders. The true position, therefore, was that the offering of the said tenders by the respondent firm and their purported acceptance by the Forest authorities never ripened into a concluded contract. Further, the rules defined a forest contract and required that such a contract had to be in writing and in the prescribed form. It was contended that the prescribed form was such that such a contract could not fit in in any such form. That undoubtedly is so. But that only meant that the prescribed form would not apply, and would

W.P.(C).No.15459/2021 22 not mean that the rest of the rule requiring the contract to be in writing could not apply. It is not disputed that the contract in question was not in writing.

W.P.(C).No.15459/2021 23 82 of the Forest Act as arrears of land revenue. Condition 8 thus postulated that upon a tender being opened, but before it was accepted or sanctioned, the initial deposit was made by the would-be purchaser and upon such deposit having been made, the tender could be accepted and sanctioned resulting into a concluded contract and the person so making the tender would become the buyer of the goods. No rule or order was brought to our notice which permitted the Chief Conservator either to waive Condition 5 or to extend the time for making the initial deposit. Indeed, there could not be any such rule. The reason is that according to these conditions the balance of the price, that is, 75 per cent of the price remaining unpaid, had to be paid within one month and the goods had also to be taken delivery of and removed within that period. This can only happen if the initial deposit of 25 per cent was made on the spot and the tender was thereupon accepted and sanctioned on the spot. On such acceptance and sanction, the person whose fender was accepted would become the buyer, in whom property in goods would vest and who, therefore, would take delivery and pay the balance of the price within one month, and who in default of payment of the remaining 75 per cent of the price would become liable to lose the initial deposit of 25 per cent of the price deposited by him earlier when his tender was accepted.”

W.P.(C).No.15459/2021 24

W.P.(C).No.15459/2021 25 case will show that, in the letter of intent, it was requested to start the work with a stipulation that the detailed contract would be drawn up later. No such stipulation is there in Ext.P2 work order.

W.P.(C).No.15459/2021 26 guarantee absolutely. The said Performance Guarantee shall be a guarantee to execute all the works referred to in the tender documents upon the terms and conditions contained or referred to those in excess of that limit at the rates to be determined in accordance with the provision contained in Clause 12.2 and 12.3 of the tender form.”

W.P.(C).No.15459/2021 27 any other right or remedy, be at liberty to forfeit the said earnest money absolutely". In the present case, the additional performance guarantee/Bank Guarantee has not been submitted by the petitioner as prescribed by the 2nd respondent. In the said event, the remedy of the 2nd respondent is only to forfeit the EMD alone and not the security deposit. Hence the petitioner is entitled to get back the amounts already paid to the 2nd respondent towards the Security Deposit amount. The relevant extract of General Conditions of Contract which would have formed a part of the agreement, if signed is produced as Exhibit P4(a).”

W.P.(C).No.15459/2021 28 petitioner the treasury fixed deposit of Rs.2,18,127/-

submitted

towards

the performance security deposit, within three weeks from the date of receipt of a copy of this judgment. P.V.KUNHIKRISHNAN JV JUDGE

W.P.(C).No.15459/2021 29 APPENDIX OF WP(C) 15459/2021 PETITIONER EXHIBITS Exhibit P1 AOF THE TENDER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT Exhibit P2 AOF THE LETTER DATED 14-2- 2020 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER Exhibit P3 AOF THE TERMINATION NOTICE ISSUED BY THE 2ND RESPONDENT DATED 13- 01-2021 Exhibit P4 AOF THE RELEVANT PORTION OF THE GENERAL CONDITIONS OF CONTRACT (KINFRA 7/8) E-TENDER) Exhibit P4 AOF THE RELEVANT EXTRACT OF GENERAL CONDITIONS OF CONTRACT WHICH IS CLAIMED BY RESPONDENT NO. 2 TO BE APPLICABLE Exhibit P5 AOF THE LEGAL NOTICE DATED 26-2-2021 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT. Exhibit P6 AOF THE LEGAL REPLY NOTICE DATED 30-03-2021 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER. RESPONDENT EXHIBITS Exhibit R2(A)OF THE RELEVANT PAGES OF THE NOTICE INVITING TENDER DATED 25/11/2019 ISSUED BY THE KINFRA Exhibit R2(B)OF THE ITERM RATE BILL OF QUANTITIES (BOQ) ISSUED BY THE KINFRA Exhibit R2(C)OF THE ITEM RATE BOQ SUBMITTED BY THE PETITIONER Exhibit R2(D)OF THE LETTER DATED 23/02/2020 SENT BY THE PETITIONER TO THE 2ND RESPONDENT Exhibit R2(E)OF THE LETTER DATED 26/05/2020 ISSUED BY THE RESPONDENT NO.2 TO THE PETITIONER Exhibit R2(F)OF THE LETTER 09/11/2020 SENT BY THE PETITIONER TO 2ND RESPONDENT Exhibit R2(G)OF THE RELEVANT PAGES OF THE GENERAL CONDITIONS OF CONTRACT ISSUED

W.P.(C).No.15459/2021 30 BY KINFRA Exhibit R2(H)OF THE BOQ SUBMITTED BY THE CONTRACTOR SRI.K. UNNIKRISHNAN Exhibit R2(I)OF THE LETTER DATED 28/10/2020 SENT KINFRA TO THE WRIT PETITIONER. // P.A.to Judge