ABID AZIZ SHEIKH, J. This judgment will also decide writ petitions mentioned in Appendix of this Intra Court Appeal (ICA) as common questions of law and facts are involved in all these matters.
2. The legal question that requires our expression of opinion and determination is that whether additional performance security demanded under Para 26(A) of the General Directions for the guidance of the tenderers (General Directions) is violative of the rule 56 of the Punjab Procurement Rules, 2014 (Rules).
3. Because of the commonality of question of law mentioned above in all these matters, it is not necessary to narrate or advert to the facts in each one of these cases separately. However, to illustrate the factual mattress upon which these cases are founded, we narrate hereunder the facts of the instant ICA:-
4. The respondents Nos.2 and 3 in ICA (respondents) invited sealed bids from eligible construction contractors for four projects of construction and rehabilitation works of provincial roads highway through a tender notice. The last date for submission of bids was 01.03.2021. The appellant in this ICA obtained the bidding documents, which consist of General Directions. The appellant submitted its bids on 01.03.2021. The bid was accompanied by cash deposit receipt at 2% of the approved estimate as earnest money. The approved estimate of the project was Rs.51,20,83,000/- (approved estimate). However, the bid was submitted in the sum of Rs.45,43,13,870/- (bid amount). The appellant was found to be the lowest bidder for the project and was accordingly issued two letters dated 01.03.2021 under Para 26(A) of the General Directions. In one letter appellant was demanded to pay performance security of Rs.2,57,00,000/- and in second letter, additional performance security of Rs.5,77,70,000/- was demanded being difference between the bid amount and approved estimate. The appellant challenged the demand of impugned additional performance security amount of Rs.5,77,70,000/- being violative of Rule 56 of the Rules in W.P. No.17122/2021.
However, the said writ petition was disposed of on 12.03.2021 with direction to the Redressal Grievance Committee under rule 67 of the Rules to decide the objections of the appellant, but the respondents again repeated the impugned demand through letter dated 12.03.2021. As number of writ petitions were already pending on the above legal issue, therefore, the appellant also filed instant appeal which was clubbed with those writ petitions before this Division Bench for deciding the question of law raised therein.
5. The facts in all the other connected writ petitions (in Appendix A) are more or less the same. The petitioners in all these writ petitions are also aggrieved of the similar demand of additional performance security under Para 26(A) of the General Directions, being violative of rule 56 of the Rules. For convenience the word "appellants" used hereafter will also include all the petitioners in connected writ petitions and the word "respondents" will include the respondents in all connected writ petitions.
6. The learned counsel for the appellant in this ICA (Mian Muhammad Kashif, Advocate) submits that under rule 56 of the Rules, the performance guarantee cannot be more than 10% of the contract price, therefore, the impugned demand of additional performance security being beyond the limit of 10% of the bid amount is not sustainable. The learned counsel adds that the performance security and additional performance security are of the same species and therefore, merely because the word "additional performance security" has been used in the General Directions, the same cannot go beyond the limits prescribed under rule 56 of the Rules. It is further argued that change of nomenclature will not defeat the intent of legislation spelt out in rule 56 of the Rules. He submits that as rule 56 of the Rules specifically mentioned performance guarantee, therefore, any other kind of guarantee is excluded by necessary implication. Submits that Para 26(A) of the General Directions of the tender documents being in violation of rule 56 of the Rules is liable to be struck down. Learned counsel submits that demand of performance security vide letter dated 01.03.2021, besides additional performance security means that bid was accepted and appellant was the successful bidder.
7. Learned counsel for the petitioner in W.P. No.23960/2021 (Ch. Muhammad Ibraheem, Advocate) referred to letters dated 28.05.2014 and 03.06.2014 issued by respondents to submit that performance security and additional performance security are both for one and the same purpose to ensure security of work, therefore, both these securities cannot be treated differently. He therefore, argued that rule 56 of the Rules is equally applicable to both these kind of securities.
8. Mr. Riaz Karim Qureshi, Advocate (in W.P. No.21707/2021) submits that under Para 26(A) of the General Directions, the respondents could at best claim 5% to 10% of the difference between tender amount and estimated cost. However, the respondents have demanded more than 50% of the difference, which is even beyond scope of Para 26(A) of the General Directions.
9. The learned counsel for the petitioner in W.P. No.16822/2021, (Barrister Amar Saeed Sheikh) submits that vide letter dated 15.12.2020, the petitioner was directed to deposit additional performance security of Rs.75,55,913/- within period of 15 days. On failure to deposit additional performance security, the respondents issued fresh tender for the same work with closing date on 01.02.2021. Submits that petitioner being aggrieved filed W.P. No.6097/2021 which was disposed of on 29.01.2021 with direction to respondents to decide petitioner's application, if filed, before taking any adverse action. The learned counsel submits that instead of deciding petitioner's application, the contract was awarded to 3rd party on 02.03.2021. He submits that in this writ petition, the petitioner has challenged the work order issued in favour of 3rd party besides challenging the notice to deposit additional performance security.
10. The learned Law Officer on the other hand on behalf of respondents submits that performance security and additional performance security are two different types of guarantees obtained for different purposes. He submits that performance security of 5% of the contract amount is obtained from the successful bidders only where the bid amount is of Rs.50 Million and above as per General Directions, which is in line with rule 56 of the Rules. Submits that additional performance security is obtained from the lowest bidder as per Paras and 26(B) of the General Directions. Submits that Paras 26(A), and 15 in the General Directions were introduced through Finance Department's Notifications dated 06.04.2005 and 04.09.2012. He further submits that on similar issue, the learned Single Bench of this Court in W.P. No.58398/2020 vide judgment dated 09.02.2021 already held that rule 56 of the Rules is not attracted to additional performance security.
11. We have heard the learned counsel for the parties and perused the record with their able assistance. The baseline question which requires determination by this Court is that whether impugned demands of additional performance security under Para 26(A) of the General Directions are violative of rule 56 of the Rules. For convenience relevant Paras 26(A), 26(B), 15 and 30 of the General Directions are reproduced hereunder:- "26(A) In case the total tendered amount is less than 5% of the approved estimated (DNIT) amount, the lowest bidder will have to deposit additional performance security, from the Scheduled Bank ranging from 5% to 10% as under, within 15 days of issuance of notice or with in expiry period of bid, whichever is earlier.
TOTAL TENDERED AMOUNT BELOW CORRESPONDING ESTIMATED COSTADDITIONAL PERFORMANCE SECURITY.
5% 5% 6% 6% 7% 7% 8% 8% 9% 9% 10% 10% "26(B) Lowest evaluated bidder shall, within 15 days of receipt by him of a notice in this regard, furnish to the tender approving authority in cash, bank draft, cashier's cheque, payment order or bank guarantee (valid for three months beyond completion time/extended completion time) from any scheduled Bank of Pakistan, the amount to make up performance security and / or additional performance security where required and specified in the tender in item (h) of Memorandum of work. Should the lowest evaluated bidder refuse or fail for any reason to furnish performance security within the specified time, it should constitute a just cause for rejection of his tender and in the event of such rejection the entire earnest money shall be forfeited to government as compensation for such default."
"15 The lowest evaluated bidder will be required to furnish the performance security / additional Performance security (wherever required), enter into a contract and commence the work within the time specified in the memorandum of work. Should the lowest evaluated bidder refuse or fail for any reason to furnish the, performance / additional performance security, enter into contract or to commence the work within the time specified in the memorandum of work, it should constitute a just cause for rejection of his tender / annulment of award and in event of such rejection / annulment, the entire money shall be forfeited to Government; as compensation for such default."
"30. At the time, the Engineer-in-charge notifies acceptance of the tender to the tenderer, he will send the tenderer the form of agreements between the parties. Within 15 days of receipt of the form of agreement, the successful tenderer shall furnish the performance security (5% of the contract price) and sign the contract in the presence of the Engineer-in-charge."
For ease of reference, rule 56 of the Rules under Chapter VIII is also reproduced as under:- Chapter-VII: Acceptance of Bids and Award of Contracts.
"Rule 56. Performance guarantee.- Where needed and clearly expressed in the bidding documents, the procuring agency shall require the successful bidder to furnish a performance guarantee which shall not exceed ten percent of the contract amount."
12. The plain reading of Paras 26(A), 26(B) of the General Directions shows that the same relates to the deposit of performance security/additional performance security by the "lowest bidder", whereas rule 56 of the Rules relate to the furnishing of performance guarantee by the "successful bidder". Under Para 26(A) of the General Directions, in case the total tender amount is less than 5% of the approved estimated amount, then the lowest bidder will have to deposit additional performance security from the scheduled bank ranging from 5% to 10% (however, in some of the General Directions, the upper limit prescribed in Para 26(A) is more than 10%). Under Para 26(B) of the General Directions, should the lowest evaluated bidder refused or failed for any reason to furnishing the performance security/additional performance security within specified time, it should constitute a just cause for rejection of his tender and in the event of such rejection, the entire earnest money shall be forfeited. Similarly under Para 15, if the lowest bidder, who was required to furnish performance security or additional performance security to enter into contract, enters into contract and commences work but fails to furnish performance security, this will be a just cause to reject the tender and annulment of award.
13. The above Paras 26(A), 26(B) and 15 of the General Directions show that these are for furnishing of performance security or additional performance security by the lowest bidder in case the total tender amount is less than 5% of the estimated amount. However, once the lowest evaluated bid is accepted and lowest bidder becomes successful bidder only then Rule 56 of the Rules shall come into play. The terms "performance security" and "additional performance security" are used interchangeably in Paras 26(A), 26(B) and 15 of the General Directions. The test is not whether the demand is of performance security or additional performance security rather the test is that whether demand is from the lowest bidder or from a successful bidder. If the demand is from the lowest bidder, then whether it is performance security or additional performance security, the rule 56 of the Rules shall not apply, however, if the demand is from the successful bidder, then rule 56 of the Rules will apply regardless of the nomenclature used for the security.
14. Rule 56 of the Rules is not an over-riding provision rather it is subject to bidding documents.
Under rule 56 where it is needed and clearly expressed in bidding documents, the procuring agency shall require the successful bidder to furnish performance guarantee, however the successful bidder should not be required to furnish performance guarantee exceeding 10% of the contract amount. The perusal of Para 30 of the General Directions shows that same is relevant to rule 56 of the Rules and provided that successful tenderer shall furnish the performance security 5% of the contract amount.
15. The Rule 56 of the Rules is not applicable to performance guarantees or additional performance guarantees from the lowest evaluated bidders for the difference of tender amount or the estimated amount rather this rule is only applicable to successful bidders who have been awarded procurement contract and the contract amount is also determined. This interpretation of Rule 56 of the Rules is explicit not only from the fact that this rule is mentioned in Chapter VIII of the Rules, (which deals with "Acceptance of bids and Award of Contracts)" but also from the words "successful bidder" and "contract amount" mentioned in rule 56 of the Rules. Plain, natural and ordinary reading of rule 56 of the Rules show that said rules will only be applicable when the lowest bidder will become successful bidder and the contract amount will be determined.
16. It is elementary rule of construction that the Court called upon to interpret any provision and statute needs to ascertain the intention of law makers from the words used which may receive their literal, natural and ordinary meaning. This has been known as rule of litera legis. It is also settled principle of interpretation that where the words of statute are clear and unambiguous, the provision should be given its plain and normal meaning without adding or rejecting any words.
Departure from the literal rule, by making structural changes or substituted words in a clear statutory provision under the guise of interpretation will pose a great risk as the changes may not be what the legislature intended or desired. Following the above golden principles of interpretation of statute, there is no manner of doubt that by plain reading, rule 56 of the Rules is not applicable to performance security or additional performance security under Para 26(A), 26(B) or 15 of the General Directions. In this regard, reliance is placed on Waris Ali and 5 others v. The State (2017 SCMR 1572), Baz Muhammad Kakar and others v. Federation of Pakistan through Ministry of Law and Justice and others (PLD 2012 SC 923), Syed Mukhtar Hussain Shah v. Mst. Saba Imtiaz and others (PLD 2011 SC 260), Pakistan Sugar Mills Association (PSMA), Islamabad through Secretary General and authorized Attorney and 10 others v. Federation of Pakistan through Secretary Cabinet Division, Islamabad and 9 others (PLD 2021 Islamabad 55), Commissioner of Income Tax (Legal), Islamabad v. Messrs Askari Commercial Bank Limited, Rawalpindi (2018 PTD 1089 Islamabad) and Commissioner Inland Revenue v. Messrs Azgard Nine Ltd. (2015 PTD 1068 Lahore).
17. Learned counsel for the appellant vehemently argued that after submission of lowest bid, as appellant was required to furnish performance security, hence this will amount to acceptance of bid and consequently appellant has become successful bidder. We are afraid that this plea is misconceived. It is well settled that a bid made at the auction is in the nature of an offer which does not mature into contract at all till its acceptance. Chapter VIII of the Rules deals with acceptance of bids and contracts. Rule 55 of the Rules, which is provided under that Chapter reads as under:- "55. Acceptance of bids.-- Subject to these rules, the bidder with the lowest evaluated bid, if not in conflict with any other law, shall be awarded the procurement contract within the original or extended bid validity Period."
From bare reading of aforesaid rule, it is obvious that the award of contract is contingent upon acceptance of bid. Mere fact that a particular party is a lowest bidder would not ipso facto entitle him for the acceptance of his bid or award of the contract. The bids given in the auctions are offers made by prospective contractors to the procuring agency and only after acceptance of those bids, the acceptance of willing offers is made and the contract between the bidders and the procuring agency is concluded. There is no concluded contract till the bid is accepted.
18. There is difference between "lowest bidder" and "successful bidder". The successful bidder is a post acceptance of bid status of the bidder. Acceptance of bid leads to the stage where concluded contracts come into force either by signatures on the contracts or where signatures are not required by placing work orders to the bidders. However, mere lowest bid does not inevitably usher in its immediate acceptance unless the contract comes in force after examining that the bid satisfied all terms and conditions of the bidding document and not in conflict with any other law as provided in Rule 55 of the Rules. It is also relevant to note that under Rule 35 of the Rules, the procuring agency may reject all bids or proposals at any time prior to the acceptance of a bid or proposal. However where a bid is accepted and procurement contract is awarded, then rights are created in favour of a successful bidder under procurement contract. In this regard reliance is placed on Messrs Bio-Labs Private Ltd. v. Province of Punjab and others (PLD 2020 Lahore 565), Ahmad Shah v. District Council, Sargodha through Administrator, District Council, Sargodha (2003 MLD 1108), Babu Javed Ahmad, Tehsil Nazim and 2 others v. Abdul Hafeez (2005 YLR 1443) and Messrs Reliance Consultancy and Engineering Works Private Limited v. Federation of Pakistan and 2 others (2010 CLC 1046 Karachi).
19. The next question is that whether Paras 26(A), 26(B) and 15 are beyond the scope of the Rules. In this regard it is noted that Para 26(A) in the General Directions was introduced through notification dated 06.04.2005 by the Finance Department. Subsequently Para 26(B) and Para 15 were also incorporated in the tender documents vide notification dated 04.09.2012. Rule 25 of the Rules define bidding documents and under rule 25(6), until the standard bidding documents are specified under the regulations, the procuring agency may use bidding documents already in use of the procuring agency to the extent they are not inconsistent with the Rules. The said rule 25(6) shows that the General Directions including Paras 25(A), 25(B) and 15 which were already part of the bidding documents, could be applied by the procuring agency as long as they are not inconsistent with the Rules. This Court in preceding paragraphs has already noted that these paras in the General Directions are not inconsistent with Rule 56 of the Rules. The learned counsel for the appellants have also not referred to any other rule which specifically deal with performance security or additional performance security, in case the tender amount is less than the approved estimated amount and in conflict these paras.
20. It is also well settled that at the bidding stage, the tendering authorities are free to formulate any conditions of tenders unless the action of the tendering authority is found to be arbitrary, discriminatory or malicious. Once these General Directions including Paras 26(A), 26(B) and 15 are part of the bidding documents and the appellants have submitted their bids without objecting to these bidding document, the same will be binding on the appellants. While interpreting the documents, it is settled law, that when the document itself is unambiguous, then putting upon its language a speculative opinion or using surrounding circumstances in order 'to portray the instrument as different in nature is not permissible in law. In construing the bidding document, the words are to be taken in their literal, plain and ordinary meaning. In this regard reliance is placed on Mst. Ishrat Bano v. Noor Hussain and 2 others (2010 YLR 2452) and Province of the Punjab through the Secretary to Government of the Punjab, Communication and Works Department and another v. Malik Muhammad Ilyas and 2 others (1994 MLD 476).
21. There is no cavil with settled law that where the plain and ordinary meaning may lead to inconsistency with other expressions used in the document, then such plain and ordinary meaning can be modified to avoid absurdity or inconsistency. However, the plain and literal reading of Paras 26(A), 26(B), 15 and 30 of the General Directions shows that there is no absurdity or inconsistency in these paragraphs. Paras 26(A), 26(B) and 15 deal with performance security or additional performance security from the "lowest bidder" if the tender amount is less than 5% of the approved estimated amount, whereas Para 30 deals with performance security by the successful bidder @ 5% of the contract price once his bid has been accepted and the forms of agreement are sent to him.
22. Indeed Para 30 of General Directions is in pursuance to Rule 56 of the Rules, regarding performance security after the acceptance of the bid, which leaves no manner of doubt that no performance guarantee after the acceptance of the bid, can be claimed more than 10% of the "contract price" as ordained by Rule 56 of the Rules. But the additional performance security or performance security from the lowest bidder before his bid was accepted can be claimed as per General Directions circulated to the bidders. However, it is needless to observe that in case under Para 26(A) of the General Directions, the maximum additional performance security cannot be more than 10% of the difference between tender amount and estimated cost, then the procuring agencies are bound to follow the said paras in the General Directions and only in those cases where Para 26(A) in General Directions specifically provided for additional performance security more than 10%, the amount more than 10% could be demanded.
23. We have noted that in W.P. No.16822/2021, the petitioner besides challenging the additional performance security demand has also challenged the work order dated 02.03.2021 awarded to 3rd party in the constitutional petition. We are afraid that this challenge has no substance. It is not the case of the petitioner in said petition that the bid was accepted and the contract was awarded.
As said petitioner was merely the lowest bidder, the demand of additional performance security under Para 26(A) of the General Directions was justified and in case of failure, the procuring agency had the authority to reject the lowest bid and proceed for retendering. Therefore, the award of contract to 3rd party in subsequent tender is not hit by rule 56 of the Rules or any other provision of law.
24. In view of above discussion, this ICA along with writ petitions mentioned in Appendix A are disposed of in following terms:- ORDER OF THE COURT.
(i) Demand of additional performance security under Para 26(A) of the General Directions is not violative of rule 56 of the Rules.
(ii) In all those petitions/appeal, where the lowest bidder did not become successful bidder, the performance security or additional performance security under. Para 26(A) of the General Directions could be demanded in terms thereof and rule 56 of the Rules had no bearing on such performance/additional performance securities.
(iii) However, if the lower bidder acquired the status of a successful bidder, then performance security- or even additional performance security shall be governed by Rule 56 of the Rules and no payment of performance security or additional performance security could be demanded beyond the limit of 10% of the "contract price" prescribed in Rule 56 of the Rules.
(iv) In case no performance security or additional performance security as per Para 26(A) of the General Directions was provided by the lowest bidder, the procuring agency was within its right to reject the bid under Paras 15 and 26(B) of the General Directions read with rule 35 of the Rules.
APPENDIX A Sr.No.Case Number Title
1. W.P. No. 16822/2021M/S Al Ahsan & Co v. Province of Punjab and others 2.W.P. No. 23960/2021M/S Doughal & Company (Pvt.) Ltd. and others v. Province of Punjab and others
3. W.P. No. 21707/2021M/s. Muhammad Afzal v. Province of Punjab and others 4.W.P. No. 59098/2021M/s Arfa Hussain Enterprises and others v. Province of Punjab and others 5.W.P. No. 28778/2020 M/s Muhammad Aslam Contractors v. Province of Punjab and others 6.W.P. No. 30548/2020M/s Muhammad Aslam Contractors v. Province of Punjab and others
7. W.P. No. 9688/2021M/s Allied Construction Company and others v. Province of Punjab and others 8.W.P. No. 22588/2021M/s. Munawar and Brothers v. Province of Punjab and others
9. W.P. No. 3555/2021M/s Haroon Construction Company v. Province of Punjab and others 10.W.P. No. 25271/2021M/s Ch. Muhammad Sharif Khan and others v. Province of Punjab and others 11 W.P. No. 30127/2021M/s Arfa Hussain Enterprises v. Province of The Punjab and others 12.W.P. No. 33068/2021M/s Husnain Kareeman Co. and others v. Province of The Punjab and others 13.W.P. No. 35008/2021M/s Pervaiz Khalid v. Province of Punjab and others 14.W.P. No. 35773/2021M/s Ijaz Ahmad Nadeem & Co. and others v. Province of Punjab and others 15.W.P. No. 37603/2021M/s Zain Construction Company and others v. Province of Punjab and others 16.W.P. No. 39598/2021M/s Mashal Construction Company and others v. Province of Punjab and others
17. W.P. No. 42125/2021M/s Manj Traders and Builders and others v. Province of Punjab and others.
18.W.P. No. 43577/2021M/s Farooq Ahmad Chatha and others v. Province of Punjab and others 19.W.P. No. 46762/2021M/s Sheikh Iqbal Akhtar & Co., and others v. Province of Punjab and others 20.W.P. No. 51807/2021M/s Azeem Akbar v. Province of Punjab and others
21. W.P. No. 51992/2021M/s Ch. Farzand Ali & Co., and others v. Province of Punjab and others 22.W. P. No. 53229/2021M/s Muhammad Islam Chaudhry and others v. Province of Punjab and others 23.W.P. No. 55106/2021M/s Allied Constructions Co. and others v. Province of Punjab and others