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Official Citation: 2023 SHC 1006
Court / Jurisdiction: Sindh High Court
Year of Decision: 2023
Decision Date: 2023-08-03
Parties: Nisar Ahmed Khan vs N.H.A. and others
Ruling Summary: This decision was rendered by the Sindh High Court on 2023-08-03, officially reported as 2023 SHC 1006. In this matter between Nisar Ahmed Khan and N.H.A. and others, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2023SHC1006
Court Name: Sindh High Court Judge(s): Yousuf Ali Sayeed, Muhammad Abdur Rahman Title: Nisar Ahmed Khan vs N.H.A. and others Case No.:C.P No. D-2779 of 2023, C.P No. D-2780 of 2023, C.P No. D-2781 of 2023, C.P
No. D-2782 of 2023 Date of Judgment:2023-08-03 Reported As: 2023 SHC 1006 Result: Petition Dismissed Judgment ORDER MOHAMMAD ABDUR RAHMAN, J: The Petitioners each maintain these Petitions under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 each challenging identical letters dated 29 May 2023 that have been issued by the Respondent No. 1, purportedly exercising its discretion to demand Bank Guarantees as opposed to Insurance Bonds from the Petitioners for securing the performance of their obligations to perform on various contracts. A. The Contracts 2. The Petitioners have, after participating in a competitive tender process that had been advertised by the Respondent No. 1, been awarded Letters of Acceptance (hereinafter referred to "LOA") to the following Contracts: S.NO.CONTRACT NO.WORK DESCRIPTION/ ROUTE/CHANGEDETAILS PM-2020-21-SS- 06Periodic maintenance (functional overlay) KM 140-160 (N- 55)NBC Sehwan -BoubakAwarded to Petitioner in CP No. 2779/2023 pursuant to LOA dated: 19-04-2023 RH-2015-16-SN-01Rehabilitation work Awarded to Petitioner in CP No. 2780/2023
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KM 320-330 (N-5) NBC More Sadujhapursuant to LOA dated: 19-04-2023 PM-2020-21-SS- 07Periodic maintenance (functional overlay) KM 160-180 (N- 55)NBC Ban Saeedabad KhudabadAwarded to Petitioner in CP No. 2781/2023 pursuant to LOA dated: 19-04-2023 PM-2015-16-SN- 03Periodic maintenance (Structural overlay) KM 320-335 (N-55) Larkana - RatoderoAwarded to Petitioner Hafeez Ullah Lehri ) in CP No. 2782/2023 pursuant to LOA dated: 19-04-2023 3. The LOA issued by the Respondent No. 1 to each of the Petitioners, contained the following stipulations: 2. Your bid, as defined above, together with this "Letter of Acceptance" thereof shall constitute a bidding contract between yourself and the National Highway Authority (hereinafter called "The Employer"). You will be required , however, to execute in due course , a Contract Agreement as per sample form included in Chapter "Forms". Of the Tender Documents in accordance with Clause mentioned in the Instructions to Bidders. 3. Attention is drawn towards Clause of the Instructions to Bidders whereby as precedent to commencement of work and not later than then day you sign the form contract agreement, you will be required to deposit with the Employer upon receipt of the Letter of Acceptance as per Clause IB- 32.1 and IB -33 for due performance of this contract as per clause 10.1 of the Special Stipulations of COC. 4. You are therefore required to attend the office of the Director (Cord) South Zone, NHA Karachi for submission of Performance Security along with non-judicial paper of Rs. 2000/- only for Contract Agreement within the stipulated time as mentioned above, failing which your bid shall be cancelled and NHA will proceed further accordingly." B. Standard Form Bidding Documents 4. It is common ground as between the Petitioners and the Respondent No. 1 that the terms of the Contract that would regulate the obligations as between the Petitioners and the Respondent No. 1 were, as per the terms of the tender, to be based upon "Standard Form Bidding Documents" that have been prepared by the Pakistan Engineering Council i.e. the Respondent No. 5 (hereinafter referred to as "PEC"). These "Standard Form Bidding Documents" that were prepared by the PEC were pursuant to a directive of the Executive Committee of the National Economic Council Been dated 12 November 2007 to be made applicable to the: procurement of engineering goods, works and services." The directives of the Executive Committee of the National Economic Council were inter alia implemented by two instruments: (i) a Notification dated 12 February 2008 issued by the "Government of Pakistan, Planning & Development Division, Planning Commission" giving directions to all "Federal, Provincial Departments/ Organizations and District Governments" to implement the decision of the Executive Committee of the National Economic Council; (ii) a Notification dated 11 July 2008, Gazetted under the heading of Statutory Notifications (SRO) in the Extraordinary Section of Part II of the Gazette of Pakistan dated 1 August 2008 under Section 27 of the Public Procurement Regulatory Authority Ordinance, 2002, entitled the Public Procurement
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Regulations 2008 whereby in Regulation 3 it was made mandatory on a procuring agency to follow the "Standard Form Bidding Documents" that had been prepared by the PEC. (i) Bid Security 5. In the "Standard Form Bidding Documents" that have been prepared by the PEC, a document entitled Instructions to Bidder (which are abbreviated to "IB" in that document) contain the following clauses which have also been referred to by the Respondent No. 1 in the LOA: ".....IB-15 Bid Security 15.1 Each bidder shall furnish, as part of his bid, a Bid Security in the amount stipulated in the Bidding Data in Pak Rupees or an equivalent amount in a freely convertible currency. 15.2 The Bid Security shall be, at the option of the bidder, in the form of Deposit at Call or a Bank Guarantee issued by a Scheduled Bank in Pakistan or from a foreign bank duly counter guaranteed by a Scheduled Bank in Pakistan or an insurance company having atleast AA rating from PACRA/JCR in favour of the Employer valid for a period 28 days beyond the Bid Validity date." As such at the time of making a bid the Petitioners were, at their option liable, to submit a "bid security" either in the form of "Deposit at Call" or a "Bank Guarantee" issued by a scheduled Bank in Pakistan or from a foreign Bank and which foreign Bank Guarantee was liable to be counter guaranteed by a scheduled Bank in Pakistan or from an Insurance Company having an AA rating. (ii) Performance Security 6. The guarantee given as "Bid Security" is not to be confused with a performance guarantee that are to be given by a successful bidder as "Performance Security" and which is to be given by the successful bidder, post the Letter of Acceptance being issued, to secure his performance of the contract. The requirement to provide such "Performance Security" are broadly outlined in IB- 32 and IB-33 which are reproduced hereinunder ".....IB.32 Performance Security 32. 1 The successful bidder shall furnish to the Employer a Performance Security in the form and the amount stipulated in the Bidding Data and the Conditions of Contract within a period of 28 days after the receipt of Letter of Acceptance. 32. 2 Failure of the successful bidder to comply with the requirements of Sub- Clause IB.32.1 or Clauses IB.33 or IB.35 shall constitute sufficient grounds for the annulment of the award and forfeiture of the Bid Security. IB. 33 Signing of Contract Agreement 33. 1 Within 14 days from the date of furnishing of acceptable Performance Security under the Conditions of Contract, the Employer will send the successful bidder the Contract Agreement in the form provided in the Bidding Documents, incorporating all agreements between the parties. 33. 2 The formal Agreement between the Employer and the successful bidder shall be executed within 14 days of the receipt of the Contract Agreement by the successful bidder from the Employer. " 7. As is apparent, once the Contract is awarded to a bidder, the successful bidder is obligated to provide a "Performance Security in the form and the amount stipulated in the "Bidding Data" and the "Conditions of Contract". Thereafter within 14 days from the date of the successful bidder furnishing an "acceptable Performance Security under the Conditions of Contract", the Contract Agreement would be forwarded to the successful bidder and the Contract would be executed within 14 days of the Contract Agreement being forwarded. 8. It is also apparent that while a reference is made to a "Performance Security" having to be provided by the successful bidder, the form of the Performance Security that has to be provided has not been mentioned in IB 32.1. The form of such a Performance Security is identified in IB-32.1 as to be detailed in the Bidding Documents" and the "Conditions of Contract" which are comprised
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within the "Standard Form Bidding Documents" that have been prepared by the PEC. In this regard, the Preface of the document entitled "Bidding Data" clarifies that: "... This section should be filled in by the Employer before issuance of the Bidding Documents.) The following specific data for the Works to be bidded shall complement, amend, or supplement the provisions in the Instructions to Bidders. Wherever there is a conflict, the provisions herein shall prevail over those in the Instructions to Bidders. [Instructions are provided, as needed, in italics.] Instructions to Bidders Clause Reference" (Emphasis is added) The clauses indicated in the document entitled "Bidding Data" are therefore to "complement, amend or supplement" the Instructions to the Bidders and as per the instructions are to be filled in the by the Employer i.e. the Respondent No. 1. Clause 32.1 of the document entitled "Bidding Data" which is therefore to be interpreted to "supplement" the ambiguity of IB 32.1 provides that: "..... 32.1 Standard form and amount of Performance Security acceptable to the Employer: [Select the kind of Performance Security (bank guarantee and / or bond), and indicate the amount. A bank guarantee can be conditional or unconditional on demand (Standard Form at PS-1 & 2). An amount equal to 10 percent of the Contract Price is commonly specified for bank guarantees, which %age should match with that stipulated in Appendix-A to Bid. A performance bond is an undertaking by an insurance company to complete the construction in the event of default by the Contractor, or to pay the amount of bond to the Employer.] (Emphasis is added) As per the instructions that are given in the document entitled the "Bidding Data", prima facie, the Respondent No. 1 is given a discretion to choose the form of the Performance Security that can be demanded i.e. a Bank Guarantee or a Performance Bond from an Insurance Company. In respect of each of the Contracts awarded to each of the Petitioners, the Respondent No. 1 had exercised its discretion and in the "Bidding Data" stated that: ".....32.1 (i) The successful bidder shall furnish the Employer a Performance Security in the form and the amount stated in clause 10.1 of the Conditions of Contract Part II & Appendix A in Bid within a period of 28 days after the receipt of Letter of Acceptance: (ii) However, if the quoted bid price is beyond 10% below the Engineer Estimate, the successful bidder shall have to provide additional performance security in the shape of Bank Guarantee only as stipulated in Appendix A to Bid." The Special Stipulations as contained in clause 10.1 of the Conditions of Contract Part II & Appendix A to the Bid as admitted by the Petitioners and the Respondent No. 1 read as under: "...... Performance Security shall be, at the option of the bidder, be in the form of either (a) bank guarantee from any scheduled bank in Pakistan or (b) bank guarantee from a bank located outside Pakistan duly countersigned by a Scheduled Bank in Pakistan only if the quoted /evaluated bid price is upto 10% of the Engineer Estimate (EE). For such bid, the Performance Security of an amount equal to 10% of the Contract Price stated in the Letter of Acceptance in the form of Bank Guarantee shall be acceptable No insurance guarantee will be acceptable. However, of the quoted bid price is further 10% below the EE, the bidder shall have to provide additional Performance Security in the shape of Bank Guarantee only for the balance lower percentage. For instance, if a bid price appears 15% below the EE, the bidder shall have to provide Performance Security in two parts as follows: (i) Performance Security (First Part) of an amount equal to 10% of the Contract price stated in Letter of Acceptance in the form of an option of the bidder, be in the form of either (a) bank guarantee
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from any scheduled bank in Pakistan or (b) Bank guarantee from a bank located outside of Pakistan duly counter guaranteed by a scheduled Bank in Pakistan." (ii) Performance Security (Second Part) of an amount equal to 5% of the Contract Price stated in the Letter of Acceptance in the form of either (a) bank guarantee or (b) bank guarantee from a bank located outside Pakistan duly counter guaranteed by a scheduled Bank in Pakistan" (Emphasis is added) It would seem that the Respondent No. 1 asserting its discretion under Clause 32.1 of the document entitled "Bidding Data" has demanded a Bank Guarantee from each of the Petitioners as Performance Security and have again exerted its discretion under Clause 32.1 of the document entitled "Bidding Data" specifically prohibiting the Petitioners from providing "Insurance Guarantees". The Respondent No. 1 has communicated this requirement to each of the Petitioners by letters each dated 29 May 2023 and which the Petitioners impugn in these Petitions. C. The Bidders Contentions as to the Discretion Exercised by the National Highway Authority in Demanding Bank Guarantees and Prohibiting the Provision of Insurance Guarantees 9. The Petitioners are each aggrieved by the discretion that has been exercised by the Respondent No. 1 in demanding Bank Guarantees as Performance Security from each of the Petitioners and prohibiting each of the Petitioners from providing Insurance Guarantees as Performance Security. 10. Mr. Muhammad Masood Khan, who appeared on behalf of the Petitioners has contended that: (i) each of the Petitioners has requested the Respondent No. 1 to accept an Insurance Guarantee as opposed to a Bank Guarantee as Performance Security; (ii) the plea was made by the Petitioners on the basis of: (a) a Notification dated 11 June 2007 issued by the Executive Committee of the National Economic Council (which was ratified by the Government of Pakistan by its notification dated 12 February 2008 and was also ratified in Regulation 3 of the Public Procurement Regulations 2008) which the Petitioners contends purportedly gives the discretion to the Petitioners to either provide a Bank Guarantee or an Insurance Guarantee as Performance Security; (b) unreported decisions of the High Court of Baluchistan each of which had directed the Respondent No. 1 to accept either Bank Guarantee or an Insurance Guarantee as Performance Security from a Bidder. (iii) the Respondent No. 1, in it's letter dated 29 May 2023, asserting its discretion under Clause 32.1 of the document entitled "Bidding Data" having demanded Bank Guarantees from each of the Petitioners as Performance Security and again by exerting the discretion under Clause 32.1 of the document entitled "Bidding Data", prohibiting the Petitioners from providing Insurance Guarantees has exercised such discretion "arbitrarily" and has discriminated as against the Petitioners as: (a) it must exercise such discretion in conformity with the Notification dated 11 June 2007 issued by the Executive Committee of the National Economic Council (which was ratified by the Government of Pakistan by its notification dated 12 February 2008 and in Regulation 3 of the Public Procurement Regulations 2008) and by failing to do so has exercised its discretion arbitrarily; and (b) in the past the Respondent No. 1 has accepted Insurance Guarantees from other bidders in other contracts and to not give the Petitioners same opportunity would be discriminatory. (c) in fact, the Respondent No. 1 has on 6 June 2022 issued a list of Insurance Companies whose Insurance Guarantees it will accept and once having issued such a notification it cannot prevent the Petitioners from providing an Insurance Guarantee from one of the Insurance Companies mentioned in that list. 11. Mr. Muhammad Masood Khan relied on the decision of the Supreme Court of Pakistan reported as Habibullah Energy and another vs. WAPDA[1] and a decision of this Court reported as Adam Sugar Mills Limited vs. Federation of Pakistan[2] to advance the proposition that this Court in its jurisdiction under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 can set
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aside decisions of public bodies that has made in an arbitrary manner. He also stated that while generally contractual obligations cannot be examined in the jurisdiction of this Court under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 the Supreme Court of Pakistan in the decision reported as Messrs Airport Support Services vs. The Airport Manager, Quaid e Azam International Airport, Karachi[3] has held that where the contract does not involve a detailed inquiry into or an examination of minute or controversial questions of fact, contractual obligations owed by a public body could be made subject to judicial review inter alia as being arbitrary or in discriminatory. In respect of what is to be examined to see whether an action would tantamount to being discriminatory he contended that it had been held by a Division Bench of this Court in a decision reported as M.Q.M and others vs. Province of Sindh[4] and a decision of the High Court of Lahore reported as Burewalla Textile Mills Limited vs. Enquiry Officer, War Risks Insurance, Punjab, N.W.F.P. and Federal Territory[5] that where no standards were provided by the public body in the exercise of discretion, the act on the part of the government body would amount to discrimination and be in violation of Article 25 of the Constitution of the Islamic Republic of Pakistan, 1973. He finally relied on various unreported decisions of the High Court of Baluchistan which decided as under: (i) Constitution Petition No. 757 of 2021 entitled Constructors Association of Pakistan vs. Government of Baluchistan held that Rule 29.1 of the Baluchistan Public Procurement Regulations, 2014 which had not included the right of a bidder to submit an "insurance guarantee" in the form of Pre-Bid Security as opposed to Performance Security should be amended to bring the same into conformity with the Standard Form of Bidding Documents (Civil Works) issued by the PEC; (ii) Constitution Petition No. 571 of 2023 entitled M.N. Construction Company vs. Government of Baluchistan and others which while relying on Constitution Petition No. 757 of 2021 entitled Constructors Association of Pakistan vs. Government of Baluchistan allowed the Petitioners to submit an "insurance guarantee" as Pre-Bid Security under the terms of the Standard Form of Bidding Documents (Civil Works) issued by the PEC; (iii) Constitution Petition No. 512 of 2023 entitled Latif & Brothers JV with MS. Costal Constructions Company vs. National Highway Authority and others and Constitution Petition No. 107 of 2023 entitled Baluchistan Government Contractors Association Baluchistan vs. National Highway Authority and others both of which are short orders and whereby the Respondents were directed to accept a 10% Performance Security in the form of an Insurance Guarantee/Bond for both "Bid Security" as well as for a "Performance Security". D. The National Highway Authorities Contentions as to the Discretion Exercised by it in Demanding Bank Guarantees and Prohibiting Insurance Guarantees 12. Mr. Touqeer Seehar, assisted by Mr. Hafeezullah argued that the discretion that was exercised by the Respondent No. 1 was not arbitrary nor discriminatory. He contended that while they accepted that the "Standard Form Bidding Documents" that were prepared by the PEC and which were pursuant to a directive of the Executive Committee of the National Economic Council dated 12 November 2007 to be made applicable to the "procurement of engineering goods, works and services" and which he also accepts have been ratified through a Notification dated 12 February 2008 issued by the "Government of Pakistan, Planning & Development Division, Planning Commission" and by Regulation 3 of the Public Procurement Regulations, 2008 were applicable to the contracts being considered in these Petitions. He further contended that the Respondent No. 1 has not only followed the terms of the "Standard Form Bidding Documents" that were prepared by the PEC but have fully implemented them and it is in fact the Petitioners who are misinterpreting these documents. He contended that while discretion did vest with the Petitioner, under clause IB 15.1 of the "Standard Form Bidding Documents" that were prepared by the PEC, to choose the form of a Pre-Bid Security, by contrast when it came to the provision of a Performance Security under
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IB-32.1 read with clause 10.1 of the Conditions of Contract Part II & Appendix A to the Bid, the discretion vested solely with the Respondent No. 1 and not with the Petitioners. He contended that the discretion exercised by the Respondent No. 1 in demanding a Bank Guarantee was neither arbitrary nor discriminatory as the practice of accepting Insurance Guarantees as Performance Security had resulted in litigation being instituted whenever the performance of the contract came into issue and whereby the security was injuncted, resulting in losses having to be sustained by the Respondent No. 1. This he contended was in contrast to the enforcement of Bank Guarantees where little or no litigation had occurred when the Respondent No. 1 attempted to enforce such security. This had led to a policy decision being made by the Respondent No. 1 whereby it had stopped accepting Insurance Guarantees and is only accepting Bank Guarantees as Performance Security. He concluded by stating that the decisions of the High Court of Baluchistan have been appealed by the Respondent No. 1 before the Supreme Court of Pakistan and need not be followed as they are not binding on this Court. The Assistant Attorney General adopted the arguments of Mr. Touqeer Seehar and each of the prayed that the Petitions may be dismissed. Neither Mr. Touqeer Seehar nor the Assistant Attorney General relied on any case law in support of their contentions. E. The Order of the Court on the Petitions (i) Maintainability 13. The jurisdiction of this Court to review contractual obligations, such as of the nature involved in these Petitions, is well settled. While, the jurisdiction of this Court under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 is a summary jurisdiction which does not generally allow for an order in the nature of a writ of mandamus to be issued to allow us to enforce contractual rights,[6] exceptions do exists to this general rule. These exceptions are limited to the situation where contractual obligations as between the petitioner and a government body are admitted and the jurisdiction of this court is invoked so as to enforce such an admitted obligation. Reliance in this regard can be placed on the decision of the Supreme Court of Pakistan in The State of Pakistan vs. Mehrajuddin [7] wherein it was held that:[8] "..... A right founded purely on private contract, however clear it might be, is not enforceable by mandamus. These statements regarding the nature of the writ of mandamus have been borrowed from a valuable monograph on the subject, entitled "Extraordinary Legal Remedies" by Ferris. (Thomas Law Book Company, U. S.) In Halsbury's Laws of England (Volume 11, Third Edition), the following statements of the relevant law are found. If public officials or a public body fail to perform any public duty with which they have been charged, an order of mandamus will lie to compel them to carry it out. In accordance with this principle a mandamus will issue to Government officials in their capacity as public officers exercising public duties which affect the rights of private persons. Such a mandamus might even issue to the Lords of the Treasury in their capacity as public officers invested by statute with public duties affecting the rights of private persons. An applicant for a mandamus must show that he has a legal right to the performance of a legal duty by the party against whom a mandamus is sought. The prosecutor must be clothed with a clear legal and equitable right to something which is properly the subject of a writ, as a legal right by virtue of a Act of Parliament. The order is only granted to compel the performance of a duty of a public nature." Similarly in The Chandpur Mills Limited vs. The District Magistrate Tippera and another[9] it was held that:[10] We cannot conceive that a writ of mandamus to carry out the requirement of such an enactment as section 7-B of the Act in question can possibly be issued on the basis of an inter pretation of several documents such as that which Mr. Fazal-ur-Rehman has attempted to place before us. A contract may sometimes be construed out of a number of documents in…
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