JUDGMENT
C.N. Ramachandran Nair, J.
1. The connected Writ Petitions are filed challenging the decision of the Kerala Water Authority to award contracts for construction of water storage tanks and allied works to additional 3rd respondent in W.P.(C) No. 34554/2006 and additional 6th respondent in W.P.(C) No. 34541/2006 on negotiated terms after rejecting the tenders called for in which petitioners were the lowest bidders in respect of some items of works. Before proceeding to decide the questions raised, facts leading to the dispute should be gone into and therefore, I narrate below the sequence of developments which led to filing of these writ petitions.
2. Government of India arranged massive loans from the Japan Bank for International Co-operation (JBIC) for funding drinking water projects in India. The loan amount availed was allotted to Kerala for setting up drinking water projects in Kerala. Government of Kerala identified five potable water scarcity areas in Kerala and entrusted the execution of the projects for supply of drinking water in these areas to the Kerala Water Authority (hereinafter called “the KWA”) which will benefit around 41 lakhs of people. The terms of the loan agreement provided for approval of all stages of award and execution of the projects by JBIC and the Government ensured proper implementation by constituting a supervisory body over KWA namely, the Empowered Committee with Chief Secretary to Government as it’s head. The funding agreement was signed in 1997 and International Consultant in terms of the loan agreement was appointed in the year 2003. The schedule for completion of the project was December 2004. However, on account of delay in finalisation of contracts mostly on account of protracted litigation in this court, Lok Ayukta etc., the Project could not advance any serious stage and time is now extended for commissioning of the Project till 2008. The total Project wad divided into five packages in which the 4th package is for construction of Service Reservoirs i.e. water tanks in the five areas namely, Trivandrum, Meenad, Cherthala, Kozhikode and Pattuvam. After estimating the expected cost of Project in the 4th package in the five locations at around Rs. 170 crores, the Kerala Water Authority invited tenders in two stages, one for pre-qualification on 21-06-2004 and the other for prize bid from qualified bidders received on 21-12-2004. Five tenders were received, one each for the five schemes. A company by name M/s. IVRCL was the lowest tenderer for four schemes i.e. Trivandrum, Meenad, Kozhikode and Pattuvam. Another company which is a Government of India undertaking namely Engineering Projects India Ltd. (EPDL) was the lowest tenderer the lowest tenderer for the Cherthala scheme. The total amount quoted for all the works together by these two bidders was Rs. 230.31 crores. However, KWA felt that the rates offered were very high when compared to cost estimated by them and therefore, the tender was cancelled with the approval of the Empowered Committee, and JBIC. In order to attract more contractors to quote for the work in the next tender, the Water Authority modified the works by reducing the storage tanks’ size by one third and each project was split two items of work. Accordingly, the ten items of the modified work i.e. two at each centre were retendered wherein the petitioners in W.P. 1695/2007 and W.P. 34538/2006 participated and happened to be the lowest bidders in one item each of the works. However, the petitioners in the other two W.Ps. have not participated and come out successfully in the second tender. Even after reduction of the project size by one third which should in the normal course lead to offer for a lower amount than the offers received in the first tender, the lowest amount offered by the tenders in the retender was Rs. 259 crores. In other words, when the project size was reduced by one third, the quotation given by the lowest tenderers together went up by an amount of Rs. 29 crores from the previous lowest quotation of Rs. 230 crores. The Water Authority therefore, recommended cancellation of the second tender also which was approved by the Empowered Committee and JBIC. Accordingly, the second tender called on 22-11-2005 was cancelled on 18-9-2006. Since the two successive tenders did not prove to be successful in awarding the contract and since the loan agreement with JBIC provides for negotiation with the lowest tenderers, the Water Authority with the approval of JBIC and the Empowered Committee negotiated with the lowest tenderers in the first tender namely, M/s. IVRCL and EPIL for reduction of bid amounts. During the course of progressive negotiation where the two lowest tenderers of first tender undertook to execute all the projects together at Rs. 194.28 crores, on of the tenderers filed complaint against negotiations being held for the award of contract. Therefore, without awarding the contracts on negotiated terms, the Water Authority called for a third tender on 20-11 -2006 wherein petitioners in these W.Ps. along with others participated. Even though W.P.(C) No. 32406/2006 was filed in this court by M/s. IVRCL against calling of third tender when negotiations with them and EPIL had reached advance stages, this court did not interfere but left KWA to award contract in accordance with law. Therefore, tenders received in third tender were opened where the lowest offers received for the total project was Rs. 226.11 crores which is Rs. 32 crores above the negotiated price agreed by the two contractors abovereferred. Therefore, Water Authority recommended for cancellation of third tender also and for award of contract in terms of the negotiated settlement to M/s. IVRCL for 8 items of work and to M/s. EPIL for 2 items of work. It is at this stage the petitioners approached this court challenging the proposed cancellation of third tender in which petitioners in the W.Ps. participated and each of them happened to be the lowest bidder atleast in one item and against proposal for award of contract on negotiated terms of IVRCL and EPIL. The interim orders granted by this court are to the effect that award of contracts will be subject to result of W.Ps. Counsel for KWA submitted that since the offer of IVRCL and EPIL was valid upto 31-12-2006, decision is taken to award contracts to them for the amountsabovereferred but execution of agreements are kept pending for decision in these W.Ps.
3. I heard Sri. K.L. Varghese and Sri. N.D. Premachandran counsel appearing for the petitioners, Standing Counsel Sri. Babu Varghese, appearing for the Kerala Water Authority and Sri. P. Benjamin Paul, Government Pleader appearing for the State. The first contention raised by the petitioners is that Water Authority is not free to cancel third tender and award contract by negotiating terms because of the judgment of this court in W.P.(C) No. 32406/2006. According to the petitioners, this court while disposing of the said W.P. did not quash the third tender notification and when the court said Water Authority will take decision for award of contract in accordance with law, it only means that contract has to be awarded based on the third tender and not through negotiation. Counsel for the Water Authority and the Government Pleader on the other hand contended that this court has not issued any specific direction to the Water Authority to award contract based on the third tender and all what is directed is to award the contract in accordance with law. On going through the judgment, I do not find any specific direction issued by this Court to Water Authority and all what is said in the judgment is that the award of contract should be in accordance with law and the contract should be awarded without any delay. Therefore, if the award of contract to IVRCL and to EPIL on negotiated terms is otherwise tenable which is considered below, it is not hit by the judgment of this Court abovereferred.
4. The next ground of challenge is that since the first tender was cancelled, the Water Authority is not entitled to negotiate with the lowest tenders in the first tender because according to the petitioners, this exercise will amount to whipping the dead horse to walk faster. According to the petitioners, the last tender is the valid tender and having called the tender, work has to be awarded to the lowest bidders in terms of the tender conditions. The question involves two aspects, one is legality and propriety of cancellation of the third tender in which all the petitioners have participated and each of them happened to be the lowest atleast in one item of work. If the cancellation of third tender is found to be in order, the second aspect of the question to be considered is whether the Water Authority is justified in awarding the contract on negotiated terms to IVRCL and EPIL with the approval of Empowered Committee and the loan funding agency namely, JBIC.
5. Various attempts by the Water Authority to award the contracts to lowest bidders based on tenders submitted on competitive basis were unsuccessful. Evaluation of prize bids have to be done with reference to the project cost estimated by the awarding agency. The first tender was rightly cancelled because the amount quoted was exorbitantly high compared to estimated cost. The offer received from tenders in the second attempt by the Water Authority was scandalous because when the project size was reduced by one third, lowest quotations went up by Rs. 29 crores over the offer received in first tender wherein the project size was one third higher. The first tender was cancelled on account of the exorbitantly high amount offered over the estimated project cost. The second tender was cancelled for the reason that inspite of reduction of project size by one third, lowest tender amount went up by Rs. 29 crores over the first tender offer which itself was rejected as high. The cancellation of first and second tenders have become final and petitioners have no challenge against the same. Even though tender conditions specifically authorise the Awarding Agency to cancel the tender without assigning any reason, I find the said provision is not resorted to, but cancellation of first and second tenders was based on logic and reason and was done to serve public interest; that is to reduce project cost funded through Government – borrowing. So far as challenge against cancellation of the third tender is concerned, this court has to first examine the circumstance under which third tender itself was called for. In fact after cancellation of first and second tenders. Water Authority initiated negotiation with the lowest tenderers in the first tender and negotiated price offered by IVRCL and EPIL were not offered by lowest tenderers in the first two tenders. In fact, third tender was called without finalising negotiated settlement only to make a last attempt to see whether there is any quotation below the amount under the negotiated offer so as to save project cost. Therefore, the third tender was made as an effort to dispel criticism against award of contract on negotiated terms and as a last chance to save on cost. However, unfortunately the offers received from the lowest bidders in the third tender including petitioners herein happened to be Rs. 226.11 crores which is around Rs. 32 crores more than the negotiated amount Rs. 194.28 crores. The third tender did not serve any purpose because the attempt of the Water Authority to reduce project cost failed as the lowest bid amount is more by Rs. 32 crores over the negotiated price. Clause 33(1) of the tender conditions authorise the awarding agency to cancel the contract without assigning any reason. In this case the price difference between the lowest bid amount and the negotiated amount is sufficient reason to cancel the third tender. The Supreme Court has in Air India Ltd. v. Cochin International Airports Ltd. and Ors. held that court should always keep the larger public interest in mind in order to decide whether it’s intervention is called for. Only when it comes to a conclusion that public interest requires, the court should intervene and not merely on the making out of a legal point. To my mind the main consideration in the award of contract should be the money consideration because the project is funded through Government borrowing from a Foreign Bank. Unlike other contracts, the award of contract herein is controlled by checking mechanisms which are the approvals required from Empowered Committee headed by Chief Secretary to Government and approval from the funding agency namely, JBIC. In fact the Foreign Bank which advanced the loan itself has put sufficient safeguards in the loan agreement to ensure that these funds are utilised for the purpose for which it is sanctioned. Right from the appointment of International Consultant and till award of contract there is meticulous supervision by them by way of approval without which Water Authority could not award contract. I find from the communications produced by Water Authority that the cancellation of contracts one after another, calling of fresh tenders and negotiation with the lowest bidders and award of contract are with concurrence from the funding agency namely, JBIC and the Empowered Committee which is headed by Chief Secretary. Complete transparency is achieved in the whole process of award of contract and I am of the view that the award of contract is beyond any shadow of doubt and is absolutely transparent protecting public interest. Counsel for the petitioners relied on decision of the Supreme Court in Ram and Syam Co. v. State of Haryana and Ors. where the Supreme Court held as follows:
Acceptance of an offer secretly made and sought to be substantiated on the allegations without the verification of their truth, which was not undertaken, would certainly amount to arbitrary action in the matter of distribution of State largesse which is impermissible.
However, on going through the judgment I find the case decided by the Supreme Court pertains to award of mining lease after rejecting the highest bid of a party in a secretive and clandestine manner by accepting a private offer by a competitive bidder. However, as already held, in this case the negotiations with the contractors were resorted to only because of the successive failure of Water Authority to award the contract based on competitive tenders received. Moreover, as already held, negotiation was conducted only with lowest bidders and the result of negotiation itself discloses that the purpose was to get the bid amount reduced which was ultimately achieved. Moreover, I have found the entire process was with prior approval and supervision of the funding agency JBIC and the Empowered Committee headed by Chief Secretary to Government. Therefore, I am unable to interfere with the procedure and product of negotiation in this case.
6. The next question raised is against denial of equal opportunity to the petitioners to negotiate with Water Authority along with other two contractors before award of contract. Counsel for the Water Authority contended that the negotiations were held only with lowest tenderers in the first tender because IVRCL happens to be the lowest tenderer in respect of 8 items of work and EPIL in respect of two items of work covering the entire project whereas three of the petitioners are lowest tenderers only in respect of one item each and the other petitioner in respect of two items of work which together account for only half the project. Moreover, the third tender itself was cancelled because the price quoted by petitioners and others was substantially higher, over the negotiated price offered by IVRCL and EPIL. I find negotiation for award of contract is permissible under Clause 32(4) of the loan agreement and negotiation was done by Water Authority with the approval of the Empowered Committee and JBIC. The norm followed for selecting the contractors for negotiation is also reasonable because the lowest tenderers in the first tender only were invited for negotiation and they came down substantially from the offers originally made by them and so long as the transaction is fair and reasonable, there is no justification for this court to interfere with the award of contract based on negotiated terms. It is to be noted that the IVRCL and EPIL insisted that terms of offered by them on negotiation will stand only upto 31-12-2006 and Water Authority would have run a big risk by giving equal opportunity to others like petitioners who participated in the third tender because if IVRCL and EPIL backed out on account of delay in confirmation of award of contracts which they were entitled, then the Water Authority would have been at the mercy of the other contractors like the petitioners and there is no guarantee that they would have quoted amounts lesser than the offers made by IVRCL and EPIL. In the circumstances, I find the award of contract to IVRCL and EPIL by the Kerala Water Authority approved by the Empowered Committee and the funding agency namely, JBIC, is perfectly in order, consistent with tender conditions and is no way arbitrary or illegal as alleged by the petitioners. These Writ Petitions are accordingly dismissed.