Facts of the Case

This is a public-works tender dispute; GST is mentioned only once, in describing the total contract value plus applicable GST. Midland Engineering Contracting Company and other petitioners were successful bidders under Quality and Cost Based Selection (QCBS) tenders floated by the Kerala Water Authority (KWA), a method mandated for tenders above Rs. 5 crore per a Board Resolution dated 23.02.2021 (replacing the earlier Two Bids System under a 2016 Government Order). After being selected, the petitioners were directed, through communications including one dated 08.11.2021 modifying the QCBS score sheet formats, to reduce their quoted rates to conform to a 2016 Government Order provision on admissible tender excess (which capped acceptable rates to the lowest bidder's rate, PWD local market rates, or the Delhi Schedule of Rates with a 10% tolerance). The petitioners challenged these communications as an impermissible mid-process alteration of tender terms.

Issues Involved

  1. Whether the KWA could, after selecting a bidder under the QCBS system, compel that bidder to reduce its quoted rate by applying a Government Order framed for the earlier Two Bids System.
  2. Whether the rules of the tender, once set, could be deviated mid-way through the awarding process.

Petitioner's Arguments

  • The rules of the game, once begun, cannot be deviated at the time of awarding the work.
  • The impugned rate-reduction condition was based on a 2016 Government Order framed for the Two Bids System, which had been done away with by the Board's 2021 resolution adopting QCBS, making the old rate-capping condition inapplicable.
  • All petitioners were successful bidders and the course adopted by the Authority was contrary to the law of contract and beyond jurisdiction.

Respondent's Arguments

  • QCBS was only a method for selecting the tender, not for fixing the rate of the tender, and KWA remained bound to apply the 2016 Government Order's admissible-tender-excess criteria, including PWD manual conditions.
  • The rate quoted by the petitioner exceeded the Tender Probable Amount of Contract (TPAC); the tenderer always retained the liberty to accept or reject work if the offered amount was less than its quoted rate, and there was no compulsion on either side.
  • The tender conditions did not guarantee that work would be awarded to the top-ranked (L1) bidder strictly at its quoted rate, and there was no arbitrariness warranting interference under Article 226.

Court Order / Findings

  • The Court held it settled law that once the rules of business (the tender process) have started, they cannot be deviated mid-way at the choice of the accepting authority, after the rigmarole of technical and financial bid evaluation has already been undergone.
  • Directing the petitioner to reduce its quoted rate by applying the 2016 Government Order's Two Bids System condition — after selection under the different QCBS framework — was found to be not merely arbitrary but contumacious conduct on the part of the Authority.
  • The impugned condition in the communications requiring rate reduction was quashed, and the writ petitions were allowed.
  • A writ of mandamus was issued directing the respondents to issue fresh work orders to the petitioners at their quoted rates and to enter into supplemental agreements accordingly, within two months.

Important Clarification

GST is mentioned in this order only as part of the total contract value (quoted rate plus applicable GST) in describing the work orders — there is no GST ruling here. The substantive holding is a tender-law principle: once bidders are evaluated and selected under one set of published rules (QCBS), authorities cannot retroactively apply a different, superseded scheme's rate-capping condition to force a reduction in the awarded price.

Sections Involved

  • Article 226, Constitution of India — writ jurisdiction for judicial review of tender action.
  • No GST provision was interpreted; GST was referenced only as part of the total value of the works to be paid to the contractor.

Decision – In Favour of

Decided in favour of the petitioner, Midland Engineering Contracting Company (and connected petitioners); the writ petitions were allowed and fresh work orders at the quoted rates were directed.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No. 20836 of 2022 and connected WP(C) Nos. 13853/2022, 13873/2022, 13876/2022, 13946/2022, 13952/2022 and 13957/2022
Coram: Hon'ble Mr. Justice Amit Rawal
Date of Judgment: 15.09.2023

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