To, Dated: 12.11.

2021

Sh. Sudip Dutta,

Chief Engineer,

Headquarters Office,

Employees’ State Insurance Corporation,

(Ministry of Labour and Employment, Govt. of India)

Panchdeep Bhawan, C.I.G. Marg, New Delhi – 110002

Email: chief-engr@esic.nic.in

RE: Processing of final bill, closure of book account and returning of

Bank Guarantees submitted against Mobilization

advance/Performance bank guarantee for ESIC works-reg.

Sir,

We the undersigned are rendering this Legal Opinion in compliance with

your letter of instructions dated 06.09.2021, bearing Reference No. F. No.

CE/PS/2021- Outstanding Payments- PMD.

You have duly informed us that CBI, New Delhi registered an FIR No.

RC2182020A001 dated 06.08.2020 against various officials of ESIC for

by ESIC to various Government construction agencies/private

architectural consultants during the period of 2007-2009.

CBI also registered another FIR for the medical college Parippally project,

and seized payment files of A&E consultants/construction agencies.

In view of the above, the Legal Opinion of the undersigned was sought for

the following issues:

a. Whether ESIC can release the final bill payments to PSUs based on

approved estimate rates by ESIC with reference to signed agreements

and work done;

b. Whether ESIC can release the final A&E fees to A&E consultants

considering above based on signed contract;

c. Whether ESIC can release the bank guarantees as on date of agencies.

OPINION:

BACKGROUND

In the present matter, ESIC was responsible for awarding the

implementation of various projects to the PSUs and/or private sector

construction agencies.
In furtherance of the above, an advertisement in the form of a limited

tender enquiry was floated in 2 (two) newspapers by ESIC on 17.11.2007

inviting applications for empanelment of Architect Consultants for

construction of ESI Hospitals, Dispensaries, Offices, and Housing Facility.

The advertisement mentioned the following eligibility criteria:

“i. Have successfully provided Comprehensive services for at least

two similar works whose construction cost exceeds Rs. 20 Crores, in

the last five years;

ii. Average Annual Turnover in terms of Consultancy Fees earned in

the last three financial years ending March, 07, of at least Rs. 50 lacs.

Thus, the said objective was purported to be achieved by awarding the

contract by inviting limited open tender (advertisement), wherein all

those who meet the laid down specifications and criteria are able to

compete, to bring out the best offer -in terms of quality, aesthetics and

financial viability.

DUE PROCESS
1. The facts reflect that due process has been followed as ordinarily all

contracts by the Government or by an instrumentality of the State

should be granted only by public auction or by inviting tenders, after

advertising the same in some well-known newspaper having wide

circulation so that all eligible persons will have an opportunity to bid

in the bid and there is total transparency followed.

2. In the present matter, the essential requirement of maintaining

democracy has been achieved by publishing an advertisement on

17.11.2007 in two newspapers for invitation of empanelment of

eligible architect consultants for construction of ESI Hospitals,

Dispensaries, Offices and Housing facility.

3. Therefore, from the perusal of the facts, it is stated that endeavours

were made to find out if there are other experienced operators in the

field with equally good, if not better, reputation and track record. Since

the ESIC are repositories of public trust, and are dealing with a public

utility and public property, they acknowledged they were bound to

discharge the trust of the public in a transparent and prudent manner,

and dutifully acted so.

1. In response to the said advertisements, a total of 63 applications were

received. Further, in order to maintain utmost transparency and

fairness, a high-level committee in the form of a “scrutiny committee”

was constituted on 19.12.2007 by the then Director General Prabhat

Chandra Chaturvedi.

2. The said committee consisted of expert scrutinizers including Shri AK

Sinha, the then Director (Finance), Shri Rajiv Kumar, the then

Executive Engineer, and Shri J. Sarup, Consultant. Thus, it is stated that

this high-level committee was constituted by ESIC making its

independent endeavours to find out prospective companies for

empanelment.

3. No adverse presumption can be drawn against the doctrine of fairness

and transparency in the realm of awarding the contract works,

especially considering the fact that an expert scrutiny committee was

constituted specifically to consider and shortlist the best applicants.

recommendations were further sent to be approved by the then Chief

Engineer Shri P.R. Roy and the then Financial Commissioner Shri Rajiv

Dutt and finally approved by the then DG Shri PC Chaturvedi on

08.02.2008.

5. Two companies namely Skyline Architectural Consultant Pvt. Ltd. and

Sthapati Associates Pvt. Ltd. were recommended for empanelment as

Architect Consultants. The said two companies were believed to be the

only ones having maximum attention to the suitability, competence

and proven track record based on the eligibility criteria. Therefore,

they were given importance in awarding the projects.

6. Furthermore, owning to specific knowledge on the ongoing projects

and the proposal of Sh. V. Subramonian (the then JD(PMD)), the then

DG found it in the best interest of the projects to appoint two more

architect consultants namely M/s Hosmac India Pvt. Ltd. Gurgaon and

M/s Kapoor & Associates.

ELIGIBILITY
1. Identification of the companies for the purpose of award of the

contract in question was done on the basis of proven track record of

work done by companies for the past years. Since the companies had

been maintaining the construction work with efficiency and quality, on

which the scrutiny had expressed its satisfaction, it became the

obvious choice to perform the works under the present contract.

2. It is pertinent to note that the Hon’ble Apex Court in the case of

Raunaq International Ltd. v. I.V.R. Construction Ltd., 1999 (1) SCC

492, observed that,

“………the award of a contract, whether it is by a private party or

by a public body or the State, is essentially a commercial

transaction. In arriving at a commercial decision, considerations

which are of paramount importance are commercial

considerations, which would include, inter alia, the price at

which the party is willing to work, whether the goods or services

offered are of the requisite specifications and whether the person

tendering is of ability to deliver the goods or services as per

specifications.”
 3. It is stated that the award of the said contract was, thus, driven by the

objective of securing uncompromised quality, reliability and

consistency in service as well as the exigency to initiate the

construction on a priority basis.

4. In the present matter, in view of the above, it can be stated that the

contract has not been entered into by ignoring the procedure which

can be said to be basic in nature, and has been executed after an

objective consideration of different options available taking into

account the interest of the State and the public, hence, no questions

can be raised for selection of the PSUs made for entering into such

contract.

CONCLUSION

1. Based on the urgency of commencing the projects, the said allotments

were made on nomination basis instead of competitive tenders. The said

allotted architect consultants were the only applicants having the

required resources giving rise to the situation of single source

procurement, thereby leading to exceptional and inevitable

same can be substantiated from Circular no. 04/04/21 of the Central

Vigilance Commission which also includes reference to the allegedly

violated CVC Circular dated 05.07.2007.

2. Further, it can be derived from the facts that the 10% of consultancy fee

was given to the architectural consultants even before some of the tasks

were carried out to ensure best possible outcome of the intended tasks

and enjoy the benefit of trust with the said consultants.

3. Therefore, no favouritism or criminal conspiracy transpired between the

expert executives and the consultants as every action and decision was

taken in the best interest of the ongoing projects.

4. There is no evidence whatsoever to prove that the tasks for which the

said early payment was made were never completed or undertaken.

5. No element of favouritism or nepotism is evident in the facts of the

present matter. The purpose of awarding contract by limited tender

bids through open tender process for sustaining the competition.

6. In the present matter, the awarding of the contract to the companies is

not resulting in or damage to the public exchequer, because nowhere

does it specify in the CBI investigation that the work order was at a high

rate or that the work order despite being high was not incurred or spent

by the architectural contractors/ companies/ consultants.

7. In conclusion, it is not the case of the CBI that the awarded work was not

executed by the parties. The transactions arising out of the contract dated

21.01.2010 stands completed, and the contract has been executed to the

satisfaction of the parties privy to the same. Till date the PSUs’ have

incurred an expenditure as per the bills raised, thus, they are entitled to

be compensated for the expenditure incurred, provided that the

genuineness of the quotations and/or bills has been confirmed prior to

disbursement of the funds.

8. Further, in this regard, you need to urgently seek permission from the

authorized personnel to process payments to the contractors because as

per Clause 14.7(b) the contractors are entitled to receive financing

that is unpaid.

The relevant Clause is reiterated for your perusal hereinafter:

14.7(b) Amount which is due with respect to each

Timings of Payment interim payment shall be paid as follows:

i. 75% of the value of Interim Payment

Application within 7 working days.

ii. The balance amount due after checking of

the Application by the Employer within 20

working days.

9. Moreover, it is advised that such payment ought to be released only in

the event of obtaining permission from the authorized personnel, in

addition to obtaining the appropriate Bank Guarantee for the relevant

amount along with the undertaking to honour the same with the

appropriate applicable interest.

10. In any case, it is to be noted that as per the Contract, the contractors are

bound to cooperate with any investigation carried out/or to be carried

directions with respect to the work carried out. The relevant Clause is

reiterated herein:

“The Contractor shall be fully responsible for facilitating statutory

inspections/scrutiny by CTE/Other Govt. of India organization or authority

and shall comply with their observations and directions with respect to the

work carried out by him. All such observations and directions shall be

carried out and finally settled by the Contractor, if necessary, even after

completion of the work under the Contract.”

DISCLAIMER

This opinion is limited to matters of Indian Laws and Practices stated

herein and may not be read as extending by implication to any matters not

specifically referred to.

Nothing in this opinion should be taken as expressing an opinion in respect

of any representations or warranties or other information, or any other

confirmed herein.

This opinion is addressed to you solely for the benefit of ESIC alone and

may not be relied upon, used by, or shown to any other person or for any

other purpose.

We hereby opine and advise.

Yours faithfully, Encl:

Sh. _______________ 1. A copy of Raunaq

International Ltd. v. I.V.R.

Construction Ltd., 1999 (1) SCC

492

2. A copy of Circular No. 04/04/21

dated 06.04.2021